Commercial Notes No. 3

No. 3
14 September 2001

Considering Employment Issues in Outsourcing

The increase in government and companies outsourcing non-core
work has resulted in a number of recent cases examining the
issue of employee entitlements and how they might be affected
by outsourcing. These cases fall into 2 categories:

  • claims that new outsourced providers of services are bound
    by awards and agreements previously binding on the government
    or company who outsourced the service, and
  • claims that actions to terminate the employment of workers
    previously performing duties that are now outsourced amount
    to conduct prohibited under section 298K of the Workplace
    Relations Act 1996 ('WRA').

Whether or not the first claim can succeed depends upon establishing
that a transmission of business has occurred from the person
outsourcing the service to the outsourced provider. The most
recent significant decision in this area is from the Full Federal
Court in Minister of State for Employment, Workplace Relations
and Small Business v CPSU [2001] FCA 316 (the Employment
National Case). In the Employment National Case, the
issue was whether the conditions of employment for employees
of the former CES and EAA were binding on Employment National
and its subsidiary. Employment National is a government owned
company formed to engage in a competitive tendering process
for the provision of services formerly supplied by the CES
and EAA.

In assessing whether Employment National was bound, the Court
at first instance held that:

  • the activities of the CES and EAA constituted a business
    within the provisions of the WRA
  • Employment National was a successor to the business
  • Employment National employees were doing substantially
    the same work as the former CES and EAA employees, and
  • the structural changes to the manner of delivering the
    services did not change the business so as to refute that
    a transmission of business had occurred.

On appeal the judgment was upheld by a majority.

By contrast in the case of Stellar Call Centres Pty Ltd
v CEPU [2001] FCA 106 the outsourced service provider
was providing telephone answering services to Telstra during
periods of high volume of telephone traffic. In assessing
whether Stellar was bound by the awards that were binding
on Telstra in relation to its employees, the Full Federal
Court considered whether the activities outsourced to Stellar
themselves formed a distinct part of a business. Because
the Court found that the outsourced activities were neither
the whole nor part of the business of Telstra, there was
no succession and Stellar did not become bound by Telstra
awards and certified agreements. The answering of calls by
Stellar simply facilitated the conduct of Telstra's business.
Telstra had not transmitted its business or a distinct part
of its business to Stellar, but only certain ancillary activities.

In the context of a government outsourcing process, consideration
should be given to whether a distinct part of a department's
business is being transferred, as was the case in the Employment
National Case or whether ancillary activities (that is,
activities that facilitate the conduct of the department's
business) are being outsourced as was the case in Stellar.

Transmission of business claims are made against the new outsourced
service provider and not against the government or private
sector entity that is outsourcing the services. However the
second category of claim is one made against the entity outsourcing
the services - an example of this type is the recent decision
of Greater Dandenong City Council v Australian Municipal
Clerical and Services Union [2001] FCA 349.

In a tender process the council compared a bid lodged by its
own staff to perform community care services against a bid
from a company. The company's price was significantly lower
than that tendered by the council's employees and there was
evidence that this was due to the better terms and conditions
under the award governing the council's employees. The union,
on behalf of the council employees made redundant as a result
of the outsourcing, claimed that the council's conduct in accepting
the company's tender amounted to conduct prohibited under section
298K of the WRA, because the decision to outsource was based
on the employees' entitlement to the benefit of an industrial
instrument.

Although the Court at first instance and the Court on appeal
both decided in favour of the Union, their reasons for doing
so are less straightforward. It would appear that it is possible
to draw a distinction between the motivating cause for conduct
and the circumstances underlying the conduct. In the Dandenong
case, two of the Judges on appeal held that the mere awarding
of a contract on the basis of a lower price does not support
an inference that the reason for the conduct was the entitlement
to the benefit of an industrial instrument. The outcome of
the Dandenong case may well have been different had
the council adduced more evidence of the reasons for their
decision.

It should also be noted in relation to claims that a transmission
of business has taken place that it is possible for an outsourced
provider to apply to the Australian Industrial Relations Commission
(AIRC) for an order that, although the outsourced provider
is a successor to the business, they are not bound by the award.
This is possible because section 149 of the WRA provides that
awards are binding on the successor to a business, subject
to an order of the AIRC. Such an order was gained by EDS
(Australia) Proprietary Limited in November 2000 after EDS
was found to be a successor to the IT business of a number
of private companies and government departments.

Generally speaking, clients should not make any representations
in the course of the tender process that the outsourcing of
the services will not amount to a transmission of business.
Tenderers should be encouraged to obtain their own legal advice
in this area. In evaluating tender responses, the focus should
be firmly on achieving value for money and on the assessment
of the tenders by reference to objective criteria. There should
not be a focus on terms and conditions of employment, on cheaper
labour costs or on the advantages of being released from obligations
under awards and certified agreements. Decision-makers should
always record the reasons for their outsourcing decisions on
the basis of the objective criteria used and should be prepared
to explain the processes and reasoning in court if necessary.

Contact for further information:

Linda Richardson
Deputy Government Solicitor

Tel: (02) 6253 7207
Fax: (02) 6253 7301
E-Mail: linda.richardson@ags.gov.au

Websites – Legal Implications
of Hyperlinking

Government departments and agencies should be aware of the
potential legal issues which may arise when developing their
websites. One such issue is hyperlinking.

This note concerns the potential liability of a website developer
for copyright infringement in respect of 'bare' hyperlinking
to the home page of a website and 'deep' linking to a subsidiary
page of a website both prior to and after the commencement
of the Copyright Amendment (Digital Agenda) Act 2000 (the
Digital Agenda Act) on 4 March 2001.

What is hyperlinking?

The Web is that part of the Internet which is characterised
by hyperlinking. 'Hyperlinks' are text or graphics on a website
that when 'clicked on' open or 'link' to other webpages. Each
webpage has its own unique electronic address which is called
its 'URL' or universal resource locator. For example, 'http://www.ags.gov.au'
is the URL of the AGS website.

In technical terms, when a hyperlink is 'clicked on' the user's
web browser (such as Internet Explorer or Netscape Navigator)
is directed to the 'linked' website or webpage by reference
to its URL which is contained in the underlying source code
of the hyperlink text. A copy of the 'linked' page is reproduced,
transmitted and stored temporarily in the Random Access Memory
(RAM) of the user's computer.

Pre-Digital Agenda Act

Prior to the commencement of the Digital Agenda Act on 4 March
2001, a website developer who created a hyperlink to another
site was arguably liable for 'authorising' any technical copyright
infringement of the end user who 'clicked on' the hyperlink.
This is because the website developer had, by creation of the
link, arguably 'sanctioned, approved or countenanced' the user's
temporary reproduction of the 'linked' website in the RAM of
the user's computer and had the ability to prevent any potential
infringement by removing the link.

In addition, following the decision in Telstra v APRA (1997)
IPR 294 and before the commencement of the Digital Agenda Act,
it was arguable that an Internet service provider (ISP) would
be directly liable for infringing the 'diffusion' right by
transmission of the linked website to the user's hard drive
via its facilities. In those circumstances, the website developer,
in creating the hyperlink, may also have been liable for authorising
any infringement of the diffusion right by the ISP.

However, a website developer was not liable for authorising
copyright infringement if it could be established that the
owner of the linked website had consented to the hyperlink
being made. In such circumstances, there would not be any primary
act of infringement and so there could be no corresponding
liability for authorisation.

Implied licence to link

There is a strong argument supporting the existence of an
implied licence to link to other websites because of the nature
of the Web. Website owners usually want their sites and any
advertising material appearing on them viewed by as many people
as possible. Indeed, it is questionable whether any purported
retraction of the implied licence to link to a website appearing
on that site would be effective because it would not have been
communicated to the user of the hyperlink.

The arguments in favour of an implied licence to link are
not necessarily supportable where, in contrast to 'bare' hyperlinking,
users are viewing a website 'out of context' as in the case
of 'deep' linking which bypasses the 'front page' of a website
as:

  • the front page often contains advertising material from
    which the website owner derives its revenue
  • the front page may contain important copyright, privacy
    and disclaimer statements, and
  • the origin and context of a web page retrieved by deep
    linking may be unclear to the user.

In short, bypassing the front page may seriously impact on
the ability of the website owner to control the user's 'experience'
of its website.

Impact of the Digital Agenda Act

The recent Digital Agenda Act amendments have clarified that
the temporary reproduction of a linked webpage as part of the
technical process of making or receiving a communication will
not infringe copyright under new sections 43A(1) and 111A(1).
However, it is important to note that this exemption does not
apply where the relevant communication is itself infringing
(that is, where the linked website contains infringing material)
under new sections 43A(2) and 111A(2).

In addition, ISPs will not now be directly liable for 'communicating
material to the public' (the new right introduced by the Digital
Agenda Act which replaces the broadcast and diffusion rights)
if they are not responsible for determining the content of
that material (new section 22(6)). It therefore follows that
in most cases of hyperlinking, the website developer will not
currently be liable for infringement by authorisation.

It should be noted that in the context of government departments
and agencies, section 183(1) of the Copyright Act 1968 also
provides that copyright is not infringed by the Commonwealth
or a State, or by a person authorised in writing by the Commonwealth
or a State by the doing of any acts comprised in the copyright
if the acts are done 'for the services of the Commonwealth
or State.'

Guidelines for government departments and agencies

The Digital Agenda Act has confirmed the legality of common
hyperlinking practices in many cases. It would seem that the
scope of the implied licence to hyperlink, most notably in
relation to 'deep' linking, is now largely irrelevant to the
issue of infringement; hyperlinking will not normally infringe
except where the linked website itself contains infringing
material.

Nevertheless, the following 'best practice' guidelines in
relation to hyperlinking are recommended for government departments
and agencies:

  • where possible an acknowledgement of the origin of the
    linked website should be provided
  • it would generally be acceptable to provide a hyperlink
    to the home page of another website
  • where a website owner has invited users to hyperlink to
    subsidiary pages of its website, it would generally be acceptable
    to do so
  • in other cases, the most advisable course would be to seek
    permission.

Contacts for further information:

Rachel Chua
Senior Lawyer

Tel: (02) 6253 7086
Fax: (02) 6253 7306
E-Mail: rachel.chua@ags.gov.au

Philip Crisp
Senior Executive Lawyer

Tel: (02) 6253 7159
Fax: (02) 6253 7306
E-Mail: philip.crisp@ags.gov.au

Moral Rights

The Copyright Amendment (Moral Rights) Act 2000 came
into effect on 21 December 2000. The Act inserted new Part
IX into the Copyright Act 1968 (the Act).

New Part IX introduces significant new rights for individual
creators of literary, dramatic, musical and artistic 'works'
(such as software, websites, photographs, maps, buildings,
and literary material including letters, papers, reports etc)
and films. Importantly, Part IX applies to works which are
created before and after 21 December 2000, and applies
to films created after that date.

The Act has significant implications for all Commonwealth
agencies where agencies deal with copyright material (whether
that material is created by their employees or contractors,
or by individuals who have no contractual or employment relationship
with the Commonwealth). Clients should also be careful of contracts
which seek warranties, indemnities or guarantees from the Commonwealth
relating to moral rights.

What are moral rights?

New Part IX introduced three moral rights for individual creators:

  • the right to be identified as the creator of a work or
    film
  • the right to object to anything that results in a 'distortion',
    'mutilation' or 'material alteration' of the creator's work
    or film that is prejudicial to their honour or reputation
  • the right not to have the work or film falsely attributed.

Moral rights are distinct from copyright rights (that is,
the right to reproduce, publish or communicate copyright material),
although they relate to the same material. Moral rights only
vest in individuals and are not transferable.

By contrast, copyright rights are personal property, and can
be licensed or assigned in whole or part. Under the Act, the
Commonwealth is deemed to be the owner of copyright material
created by it, or under its direction or control (for example,
by its employees), subject to an agreement to the contrary.

This means that, although the Commonwealth may be the copyright
owner in, say, a report, photograph, computer program or website,
moral rights will be retained by the individuals who created
that material.

Infringement of moral rights

Remedies for infringement

Remedies for infringement of moral rights include an injunction,
damages, declaration, an order for a public apology, and an
order that the derogatory treatment or false attribution be
removed or reversed. Part IX includes a number of factors that
may be taken into account by a court to determine the nature
of the remedy granted. These include whether the defendant
was aware, or ought reasonably to have been aware, of the creator's
moral rights; and the number, and categories, of people who
have seen or heard the work or film.

Exceptions to infringement

Part IX provides two exceptions to infringement of moral rights.
Accordingly, in any action for infringement against the Commonwealth,
two questions (corresponding to those exceptions) would be
relevant:

1. Was the act or omission 'reasonable'?

It is a defence to an action for infringement if the defendant
shows that the act in question was 'reasonable in all the circumstances',
taking into account a number of factors listed in the Act and
any other relevant factors. Notably, this defence does not
apply to the right against false attribution.

2. Did the author consent to the act or omission?

It is not an infringement of a creator's moral rights if the
relevant act or omission falls within the scope of a written
consent, given by the creator of the work or film. Part IX
provides differently framed provisions for consents in relation
to films, and consents in relation to works.

In the case of films, Part IX provides that a consent may
be given in relation to 'all or any acts or omissions occurring
before or after the consent is given'.

In the case of works, Part IX provides that a consent does
not have any effect unless it is 'genuinely' given in relation
to specified acts or works. In other words, a general
consent from an author to perform any acts in relation to all
works of the author may not be effective, as a rule. However
a general consent given by an employee to their employer will
be effective.

Impact on clients

Standard consent clauses - Commonwealth contracts

Careful consideration should be given to the terms of a consent
(if it is necessary) so that it can have full effect under
Part IX. Standard consent clauses can be incorporated into
particular standard-form contracts. Such clauses would need
to be carefully tailored to the nature of the standard-form
contract, and to conform to the requirements of the Act and
the nature of the relevant copyright material.

Contracts presented to the Commonwealth

Clients should be particularly careful where those contracting
with the Commonwealth require (for example, through the mechanism
of a warranty, indemnity or guarantee) the Commonwealth to
obtain consents from creators of Commonwealth copyright material.
Such a requirement may, in practice, be impossible or onerous
for the Commonwealth to meet. It may require an agency to seek
consents from every individual who has created, is creating,
or may in the future create material on, say, a website. In
some cases, the Commonwealth may be incapable of obtaining
such consents. Even if such consents are obtained, the relevant
terms of the contract may be of dubious effect. All of these
issues may arise, for example, in the case of a web-hosting
agreement.

Developing a policy on moral rights

Where a consent is not obtained, agencies will need to be
particularly conscious of creators' moral rights, and the issue
of what is 'reasonable' in relation to moral rights. Agencies
should consider developing a policy on moral rights - to set
out what the agency considers to be 'reasonable'. Such a policy
would provide more certainty to all users and creators of copyright
material. The policy could also be taken into account by a
court in any action for infringement of moral rights.

Contacts for further information:

Philip Crisp
Senior Executive Lawyer

Tel: (02) 6253 7159
Fax: (02) 6253 7306
E-Mail: philip.crisp@ags.gov.au

Paul Vermeesch
Senior Executive Lawyer

Tel: (02) 6253 7428
Fax: (02) 6253 7381
E-Mail: paul.vermeesch@ags.gov.au

Certification Trade Marks and the Commonwealth

Commonwealth departments and agencies may assume that the
law of trade marks is not relevant to them because they are
not generally engaged in trade. However, a special category
of trade marks known as 'certification marks' may be particularly
relevant to their operations where departments and agencies
are responsible for overseeing, promoting or establishing schemes
for certifying the standard, origin or some other characteristic
of goods or services.

An example of a certification trade mark overseen by the Commonwealth
is the Australian Made logo which was launched in the 1980s
to 'promote Australian made goods in local and export markets.'
The Australian Made logo consists of a kangaroo in a green
triangle and is probably the most recognised country of origin
logo in Australia. In order to qualify for use of the Australian
Made logo, it is necessary for traders to demonstrate that
a 'substantial transformation' of the product, resulting in
a new product occurred in Australia and that at least 50 per
cent of the cost of manufacturing the product was attributable
to manufacturing processes occurring in Australia.

What is a certification mark?

Under the Trade Marks Act 1995 (TMA), a certification
trade mark is a sign used or intended to distinguish goods
and services dealt with in the course of trade and certified
in relation to quality, accuracy or some other characteristic
including (in the case of goods) origin, material or mode of
manufacture from goods and services dealt with in the course
of trade and not so certified. By contrast, standard trade
marks are used to distinguish goods or services dealt with
or provided in the course of trade or services so dealt with
or provided by another person. In other words, certification
marks 'certify' characteristics of the goods and services provided
whereas standard trade marks denote the commercial origin of
goods and services.

Consistent with the differing purpose and function of certification
marks as compared with standard trade marks, certain provisions
of the TMA which apply to standard trade marks do not apply
to certification marks. Notably, an applicant for registration
of a certification mark need not themselves use or intend to
use the mark in the course of trade in relation to the goods
and/or services claimed, although they are entitled to do so.
By contrast with standard trade marks, certification marks
are generally used in the course of trade by approved users who
have satisfied the criteria laid down for use of the marks.

Requirements for registration

An applicant for registration of a certification mark is required
to file a copy of the rules which will govern use of the certification
mark. The rules must include provisions specifying:

  • the persons who may be approved for the purposes of certifying
    goods and/or services (approved certifiers)
  • the cases in which goods and services are to be certified
  • the conditions under which an approved user is to be allowed
    to use the certification trade mark in relation to goods
    or services
  • the use of the certification trade mark by the owner (if
    he or she intends to use it) and the approved user, and
  • the settlement of any dispute arising from a refusal to
    certify goods or services or to allow the use of the certification
    mark.

If the Trade Marks Office is satisfied that there are no grounds
for rejecting the application to register the certification
mark under the TMA, it must send the Australian Competition
and Consumer Commission (ACCC) a copy of the rules governing
use of the certification mark for its approval. The ACCC must
ensure that the certifier is competent to certify the goods
and/or services in respect of which the mark is to be registered,
that the rules are not detrimental to the public and that they
accord with the principles relating to restrictive trade practices,
unconscionable conduct, unfair practices, product safety and
product information under Parts IV, IVA and V of the Trade
Practices Act 1974.

Other certification marks

Other certification marks include:

  • the Woolmark which is used to denote garments, carpets
    and other products incorporating wool and meeting certain
    precise standards
  • the Standards Australia logo which indicates that
    goods or services comply with the relevant Australian Standards,
    and
  • the Label of Authenticity certification mark, established
    recently, which is used in relation to art or cultural products
    to show that such products are made, produced or created
    by an Aboriginal or Torres Strait Islander artist.

Contacts for further information:

Rachel Chua
Senior Lawyer

Tel: (02) 6253 7086
Fax: (02) 6253 7306
E-Mail: rachel.chua@ags.gov.au

Ken Pogson
Senior Executive Lawyer

Tel: (02) 6253 7242
Fax: (02) 6253 7333
E-Mail: ken.pogson@ags.gov.au

ISSN 1443-9549 (Print)
ISSN 2204-6550 (Online)

The material in these notes is provided for general information only and
should not be relied upon for the purpose of a particular matter. Please contact
AGS before any action or decision is taken on the basis of any of the material
in these notes.

Back to Commercial Notes Index