$5 million Adverse Action payout

$5 million Adverse Action payout

An employer who dismissed a manager who had complained of bullying has been ordered by the Federal Court to pay over $5 million in damages, fines and compensation.

Background

Mr R was employed as a senior executive for a publicly listed software company. His job was initially State Manager for Victoria, with a gross income, including bonuses, that grew from over $200,000 in 2006 to more than $800,000 a decade later as Regional General Manager.

For the greater part of his period of employment, Mr R was known to be very hardworking, committed and loyal, and regarded as a high performer.

Despite his strong work performance, however, various workplace matters brought him into conflict with other staff, and he subsequently came to feel he was being threatened, bullied, abused, and having his role undermined.

An accumulation of incidents, including a number of complaints and allegations made by sales staff, eventually led his CEO to terminate his employment in May 2016. Mr R was summarily dismissed with no forewarning that his employment was in jeopardy. At the termination meeting, he was asked to sign a deed of release to conclude his employment.

Adverse action claim

Mr R initiated a claim for adverse action in relation to his dismissal, claiming there were seven instances of him exercising his workplace rights by making complaints in relation to his employment. In particular, complaints of him having been bullied. Between February 2016 and May 2016, Mr R made seven different complaints to four different people, including the CEO, alleging bullying from senior executives in the form of having his role and responsibilities undermined, having his position threatened, and being verbally abused and sworn at in front of his colleagues. He argued that these complaints were individually or severally the reason for his dismissal or were included as a reason for that action and were in breach of sections 340 and 341 of the Fair Work Act.

Section 340 provides that an employee is protected from adverse action being taken against them for having or exercising a workplace right. Section 341 provides a wide definition of what constitutes and gives rise to a ‘workplace right’. That is a benefit, role or responsibility under a workplace-related law, instrument, process or proceeding, and explicitly includes employees who make complaints relating to their employment.

Mr R submitted that there had been no need for the level of urgency applied to his termination. There was no attempt to raise or resolve issues with him before he was dismissed, he was never given a chance to respond to the alleged complaints about his performance and behaviour, and there was no investigation into allegations against him.

The employer’s case was that Mr R was dismissed due to: the licence fees in the Victorian region (for which Mr R was responsible) not growing; concerns that had been raised by Mr R’s team, which was a “team in crisis”; and that Mr R had been unable to work well with three different managers within a two-year period.

The court was not persuaded that the Respondents were able to prove, on the balance of probabilities, that Mr R’s complaints about having been bullied, inter-alia by his two most recent direct reports, were not a substantial and operative reason for the CEO’s decision to terminate his employment.

The Judge was satisfied that Mr R’s exercise of his workplace rights became and was a substantial and operative factor in the CEO’s reasons for taking adverse action against him.

The company was ordered to pay the former manager $1,590,000 in damages for breach of contract, $2,825,000 for future economic loss, $756,410 in compensation for forgone share options and $10,000 in general damages. In addition, fines of $40,000 for the company and $7,000 for the CEO were imposed for contravention of the Fair Work Act. In total, the dismissal cost the company $5,228,410. The Judge said that but for it being the company’s first offence, its actions would have justified imposing a penalty close to the highest end of the scale, to deter others from taking similar actions.

Key lessons for employers:

Employers need to have a well-founded reason for dismissing an employee based on conduct or performance. Any complaints made by employees of bullying and which remain unresolved should be considered prior to termination and, where possible, brought to closure. The decision-maker must be able to, if need be, refute the claims that the decision was due to the employee exercising a workplace right.

This case highlights that significant damages may be awarded against employers, and senior executives, if they are found to have acted because of a prohibited reason and in breach of an employee’s workplace rights under the Fair Work Act.

CCER is hosting a webinar on Adverse Action on 25 November 2020. During the one-hour session, we’ll look at the practical steps you should take to reduce the risk of this happening to you. You can register by clicking here. We look forward to seeing you there.

 

For any members who would like further information or have any questions, please contact us on 9390 5255 or ccerenquiry@ccer.catholic.org.au.

CCER does not give legal advice and this should not be taken as such. 

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