The Trojan clause? Appeal court confirms the implied term of trust and confidence, but its content remains uncertain

In a split decision, the Full Court of the Federal Court has held that a term of ‘trust and confidence’ is implied into all employment contracts by law. However, significant uncertainty remains for employers attempting to determine what conduct will breach the implied term. Whilst the decision may be destined for an appeal to the High Court, employers should act now if they wish to expressly exclude this term from their contracts.

The decision at a glance

The majority, Justices Jacobson and Lander, found that the Commonwealth Bank breached an implied term of trust and confidence by not properly exploring the redeployment of one its executives, Mr Barker, before dismissing him for redundancy.

All of the Judges on appeal disagreed with Justice Besanko’s primary decision which had held that the company had breached the implied term by committing a serious breach of its redundancy policy. In this regard, the Court found that this could not be the case because the redundancy policy was not part of the employment contract and contained no benefits to which the employee was legally entitled.

The majority on appeal however went on to decide that the implied term exists and that the Bank breached the term by its conduct and omissions in the lead up to Mr Barker’s dismissal. This breach did not arise from a breach of the bank’s redundancy policy, but rather because the bank failed to do what the implied duty required in these circumstances.

Justice Jessop dissented and found that the implied term does not form part of the common law in Australia, and that the Bank’s failure to comply with its policies would not amount to a breach in any event.

Mr Barker was awarded $335,623.57 in damages for the loss of opportunity to be redeployed within the Bank.

Rationale for the implied term

The implied term in question is as follows:

The employer will not, without reasonable cause, conduct itself in a manner likely to destroy or seriously damage the relationship of confidence and trust between employer and employee.

It is agreed that the clause does not apply at the point of dismissal, but rather to conduct anterior to dismissal. A distinction which is sometimes difficult to draw.

The majority in this case held that this term is necessary for employment contracts and is consistent with the ‘contemporary view of the employment relationship’ which is about common interest rather than subordination.

As an alternative argument, the majority held that the contract and surrounding circumstances gave rise to an implied obligation of co-operation. In summary, because the contract contemplated redeployment, the Bank was obliged to take steps to afford Mr Barker the benefit of that process.

In stark contrast, Justice Jessop could find no necessity for the term, either in a strict sense or broad policy sense. Justice Jessop agreed that employees are entitled to have trust in their employer, for example, trust that the employer will provide a safe working environment and will not require an employee to perform an unlawful act, however stated this is reflected in other existing implied obligations.

His Honour also stated that the term would sidestep existing limits on common law and equitable remedies and overlap with the vast field of legislative regulation of the workplace.

What conduct does the implied term prevent?

The majority recognised that the duty created by the implied term is unclear given the ‘open-ended’ way the duty is expressed. In this regard, it was stated that the ‘content of the implied contractual duty must be moulded according to the nature of the relationship and the facts of the case’ and that that the precise duties required of an employer are ‘still being developed’.

In the present case, given that Mr Barker was a long-term employee of a large corporate employer, and that his contract contemplated redeployment as an alternative to dismissal, the majority held that the Bank was required ‘take positive steps to consult with Mr Barker about alternative positions and to give him the opportunity to apply for them.’ Instead, the Bank failed to make contact with Mr?Barker and this failure breached the implied term.

Justice Jessop was more critical of the practical limitations of the purported implied term. His Honour described the application of the implied term as like a ‘biological enzyme’ being utilised to achieve the desired outcome. In relation to the practical difficulties of the implied term, his Honour stated:

‘[T]he term is content-free and has the potential to act as a Trojan horse in the sense of revealing only after the event the specific prohibitions which it imports into the contract.’

Even assuming the existence of the implied term, Justice Jessop found that the Bank had not breached the term as Mr Barker had no reason to trust that the redundancy policy contained benefits to which he was entitled (given the express reservation in the policy that it was not contractual).

Implications for employers

Whilst the debate about the existence and scope of the implied term is likely to continue, employers should assume for the time being that the implied term exists and can result in significant contractual damages.

This case demonstrates that the real difficulty is determining what conduct may breach the term. Almost inevitably, attempts to explain the term resort to equally imprecise statements, for example, that the term require ‘fair treatment’ of employees and prevents employers from ‘abusing their powers’.

Interesting, this decision arguably provides less guidance than the decision at first instance given that the breach did not arise from the employer’s breach of policy – but rather because of a more general finding that the employer should have acted in a particular way in these circumstances.

In addition to being mindful of the general principles propounded by the implied term, employers should consider taking concrete steps to limit their scope for liability. Primarily, this will include ensuring that employment contracts expressly exclude the implied term and ensuring that appropriate qualifications are placed on any benefits referred to within company policies.

 

This article was written by Jonathan Wright, Director and Principal of Workdynamic Australia. The information in this article is for information purposes only and does not constitute legal advice. You should obtain specific advice relevant to your circumstances.

The Fair Work Commission has upheld the dismissal of an employee who attempted to solicit his employer’s clients via LinkedIn during his employment. The case is a useful reminder that employees have a fundamental obligation to act in the best interests of their employer.

The fateful email

Mr Pedley had been employed by PVH as a Senior Interior Designer for just under 2 years. During his employment, he had carried out private interior design work on his own behalf in addition to his work for his employer. PVH was aware of this, and allowed it to occur.

In January 2013, Mr Pedley sent a group email via LinkedIn to a number of recipients, including certain clients of PVH. The email indicated that Mr Pedley was looking to expand his personal interior design company into a full-time operation, and sought their support in doing so. It also stated that he would take on jobs of any size, and that:

One of the many benefits of working with a new company are (sic) that you get the operator’s prior big business experience at small business rates!

Later that day, PVH became aware of the email via a ‘concerned client’. Early the next morning, PVH summarily terminated Mr Pedley’s employment due to what it considered to be a serious breach of his contract of employment. Amongst other things, the contract included a clause which prohibited Mr Pedley from competing with PVH during his employment.

Decision to dismiss upheld

Mr Pedley subsequently brought an unfair dismissal claim, arguing that there was no valid reason for his dismissal, as his intention was to canvass small pieces of work which were of no interest to PVH.

The Commission upheld PVH’s decision to terminate Mr Pedley’s employment, and held that by sending the email, Mr Pedley had breached his fundamental employment obligations to PVH. In particular, by deliberately acting to solicit work from current clients of the company, Mr Pedley acted in clear breach of his obligation to put the interests of his employer before his own. His conduct was inconsistent with the continuation of his contract of employment and amounted to serious misconduct.

The Commission held that Mr Pedley had been informed of the reason for his termination, but agreed that he had not been given much of an opportunity to respond to PVH’s concerns. However, this was countered by the fact that Mr Pedley did not deny sending the email and the terms of the email were clear. Further, the directors of the company believed that nothing he could say would change their minds, and considered the most effective way to limit any damage to the company was to put an immediate end to his employment. The Commission also held that any explanation Mr Pedley may have proffered for sending the email would have been unlikely to change the directors’ minds.

The Commission also rejected Mr Pedley’s argument that by allowing him to work on small private jobs outside of work, PVH had waived any right to prevent him from soliciting clients during his employment. The Commission made clear that the obligation not to solicit clients during employment ‘goes without saying’, regardless of the absence of a clear express clause to this effect.

Implications for employers

Employers are entitled to take seriously any attempt by their employees to solicit clients. However, employers should also take care when permitting employees to carry out work on their own behalf in addition to their employment, and make clear the terms on which this is permitted to occur. Whilst the employer in this case was not found to have waived its right to prevent the employee from soliciting, this issue would be assessed on a case by case basis.

 

This article was written by Lauren Barel, Director and Principal of Workdynamic Australia. The information in this article is for information purposes only and does not constitute legal advice. You should obtain specific advice relevant to your circumstances.

A recent decision of the Fair Work Commission demonstrates that a flawed investigation can render a dismissal unfair. The failure to properly investigate led to the Fair Work Commission reinstating a long-serving Bluescope Steel employee, Michael Duncan, after finding that Bluescope’s operations manager had botched the investigation into a safety incident at the plant.

The incident, the investigation, and its outcome

The incident leading to the investigation related to allegations that Mr Duncan failed to respond to a safety alarm that went off while Mr Duncan was on his lunch break. The evidence showed that there was dispute between relevant employees about who was responsible for responding to the alarm.

Mr Landon Ronay, the Operations Manager, conducted what he described as a “detailed” investigation into the incident.

In a letter to Mr Duncan setting out the outcome of the investigation, Mr Ronay stated that he had found that:

• Mr Duncan had a responsibility to respond to the gas alarm as per the critical procedure;
• He knew that nobody else was in fact responding to the alarm;
• He did not make any attempts to respond to, or even check the alarm, and instead relied on assumptions as to the cause and severity of the alarm; and
• He mislead the investigation with his evidence.

Mr Duncan’s employment was then terminated without notice for serious misconduct.

Failure to properly investigate

Commissioner Bernie Riordan reviewed relevant case law and reinforced the principle that “it is important for an employer to make an appropriate level of enquiry in relation to the facts of a case before an employee is terminated.”

When Commission Bernie Riordan applied these principles in the current circumstances, he identified several key flaws in the investigation including that:

• Mr Ronay was not experienced enough in investigations of this type;
• Questions that should have been asked were not asked;
• Individuals were present at interviews when they should have been identified as being conflicted; and
• Conclusions were drawn from information that “appear[ed] to have no substance”.

Of critical importance was the decision of the investigator to accept the evidence of one employee (the employee Mr Duncan claimed should have responded to the alarm) over that of every other employee. Of the evidence of the first employee, Commissioner Riordan stated that the first employee’s comments were inconsistent, showed a poor recollection of events and discussions, demonstrated a “habit of fabricating facts” and were contrary to the views of other staff- including his supervisor.

Importantly, other employees who also did not respond to the alarm did not have their employment terminated. The investigator had also not involved Bluescope’s HR department in a timely way.

Taking the above factors into account, Commissioner Riordan determined that Bluescope did not have a “valid reason” for the termination of Mr Duncan’s employment. This was notwithstanding his finding that Mr Duncan had in fact failed to comply with critical safety procedures by not responding to the alarm.

Reinstatement

Considering Mr Duncan’s age, employment history and assurances from him that he would never again not respond to a safety alarm (even if he believed that it was not his responsibility) Commissioner Riordan ordered that Mr Duncan’s be reinstated to his former position, with continuity of service and payment of all lost salary.

As Mr Duncan’s employment had terminated on 3 May 2013, this equated to almost 6 months’ pay.

Implications

Even in circumstances where there is a valid reason for termination, a dismissal still may be unfair where the investigation into the facts leading to the dismissal is conducted improperly. In particular, this case exemplifies the importance of:

• Having an appropriately qualified investigator conduct any investigation and involving HR in a timely way;
• Ensuring that any conclusions reached are done on the basis of clear evidence;
• Ensuring that credibility assessments (in other words whose evidence to prefer) can be justified based on the evidence;
• Ensuring that the investigator is conscious of when it is necessary, for procedural fairness considerations, to go back to a witness to obtain their response to a point and to ensure that all witnesses are treated fairly.

 

This article was written by Jane Wright, Director and Principal of Workdynamic Australia. The information in this article is for information purposes only and does not constitute legal advice. You should obtain specific advice relevant to your circumstances.

A recent decision of the Fair Work Commission demonstrates that a flawed investigation can render a dismissal unfair. Notably, the Commission held that the dismissal was unfair even in circumstances where the employee was given an opportunity to respond and admitted to the misconduct.

The phone call

Mr Ryan was employed in a facilities management role at a youth detention centre in Victoria. In what he called an ‘act of stupidity’, he rang a radio station’s Rumour File segment, stating that the Department was going to put up razor wire at the Centre in order to ‘keep the inmates in’ as ‘they’ve been escaping a fair bit down here, in Melbourne’.

The Department subsequently terminated Mr Ryan’s employment for serious misconduct, and Mr Ryan brought an unfair dismissal claim.

The Commission held that the Department had a valid reason for terminating Mr Ryan’s employment, given that he disclosed confidential security information that he had obtained whilst undertaking his role. However, the Department was found to have ‘acted in a seriously procedurally unfair manner’ by failing to properly investigate a number of matters raised by Mr Ryan in the steps leading up to his dismissal.

Failure to properly investigate

Following the ill-fated telephone call, a meeting was arranged at which time Mr Ryan was given an opportunity to respond to the allegations against him. During this meeting, Mr Ryan admitted to making the call, and expressed remorse. He explained that his intention was to not to compromise security, and he was instead hoping that the call would lead to the installation of razor wire so that staff members and the public would not be at risk from further escapes.

Mr Ryan also raised a number of mitigating factors during the meeting, including that he was suffering stress due to his workload and as a result of a co-worker’s conduct towards him. He also stated that he had been profoundly affected by recent escapes from the centre and that he had been seeing a psychologist who had indicated that he was suffering from a breakdown and did not know what he was doing at the time of the call.

Following the meeting, the Department made attempts to obtain a report from Mr Ryan’s psychologist, however Mr Ryan would not consent to this. Aside from this, the Department did not investigate any of the other matters that Mr Ryan raised during the meeting. For example, the Department did not attempt to discuss these issues with his supervisor or check his personnel file. The Department considered that any further investigation was unnecessary given that Mr Ryan had admitted to making the call.

However, the Commission held that the Department had started an investigation when it put the allegations to Mr Ryan, and was required to complete this process by investigating the explanations that had been provided by him. This was required by the terms of the relevant disciplinary policy, and was also a matter of ‘common sense and procedural fairness’.

Lack of procedural fairness

Following the meeting with Mr Ryan, a submission was sent to the relevant delegate so that a determination could be made about Mr Ryan’s employment. Whilst the submission referred to the ‘stress’ that Mr Ryan was under at the time of the call, it did not mention any of the other mitigating factors that Mr Ryan had raised, nor did it include any of Mr Ryan’s explanations or the remorse that he had displayed. Mr Ryan was not given a copy of this submission, or told that he also had a right to submit material to the delegate. In finding this aspect of the process to also be procedurally unfair, the Commission stated,

As he had no knowledge of the Department’s view about the mitigating circumstances, how could Mr Ryan have responded fully and how could he have had a genuine opportunity to try and persuade the Department not to proceed to the foreshadowed ultimate penalty – the termination of his employment?

Taking into account Mr Ryan’s length of service, previously unblemished work record, genuine remorse and the clear lack of procedural fairness, the dismissal was found to be harsh. It was also accepted that Mr Ryan was having a ‘meltdown’ at the relevant time due to a range of work pressures.

Ruling out reinstatement, the Commission has asked for more information before making a determination as to compensation.

Implications

Even in circumstances where there is a valid reason for termination, a dismissal still may be unfair where the employee is not afforded procedural fairness.

In particular, this case exemplifies the importance of getting the investigative process right. Providing an employee with an opportunity to respond to allegations does not necessarily constitute the end of the investigation. If an employee provides further evidence at this stage of the process, it is critical that this information is further explored and taken into account when a final decision is made.

 

This article was written by Lauren Barel, Director and Principal of Workdynamic Australia. The information in this article is for information purposes only and does not constitute legal advice. You should obtain specific advice relevant to your circumstances.

New benchbook and case management model released

As detailed in previous newsletters, the Federal Government has introduced new anti-bullying laws which will come into effect as of 1 January 2014.

In order to assist with this new jurisdiction, the Fair Work Commission has released a benchbook to assist parties in lodging or responding to anti-bullying applications, which has been released as a draft for public consultation. Public comments can be submitted up until the end of December 2013.

The Commission has also released a case management model which summarises the procedures and associated functions to be adopted for the implementation of the new laws.

Draft benchbook

Because this jurisdiction has not yet commenced, the benchbook is based on decisions from other jurisdictions (primarily workers compensation, negligence and work, health and safety cases). The intention is to update the benchbook as appropriate once Australian cases are issued.

The benchbook sets out the basic mechanics of the new legislative provisions, including definitions of who is covered, what constitutes bullying behaviour, the process involved, the orders that can be made, the issue of costs and the appeal process.

Usefully, the benchbook also sets out a number of cases which demonstrate examples of conduct which have been found to constitute bullying. These cases derive from negligence and breach of contract claims, as well as work health and safety prosecutions.

The concept of ‘reasonable management action’ is also explored, with a summary of examples of conduct which may fall within this category based on prior case law (mostly based on workers compensation cases).

Case management model

The case management model sets out a number of comments about the new laws and the Commission’s role in managing the new jurisdiction. Some of the more pertinent comments include the following:

• Anti-bullying orders cannot be made by the Commission in respect of former workers (eg workers who have left their employment). This is because an order can only be made if there is a risk of continuing bullying to the individual.
• The Commission states that whilst it is difficult to predict the number of anti-bullying applications that will be made, it expects that there will be a significant number.
• The legislation requires that the Commission start dealing with an application within 14 days of it being lodged. This may occur by the Commission informing itself through inquiries or requiring the provision of information from the parties.
• Cases which indicate a significant risk to parties or working relationships will be prioritised.

In terms of process, the following steps will apply:

• Once an application is lodged, it will be checked by the Commission and served on the employer/principal in order to obtain a response.
• The individual whose conduct has prompted the application will also be given a chance to respond.
• The ‘anti-bullying team’ within the Commission will then prepare a report which outlines whether the matter involves any potential jurisdictional issues, the nature of the alleged conduct, whether it is suitable for mediation, the degree of urgency and any other relevant factors. This report is provided to the Panel Head who will make a decision as to the assignment of the application.
• The Panel Head then decides whether the matter will be assigned to a member and for what purpose (eg mediation or determination). The Panel Head may decide to hear and determine immediate preliminary issues (such as jurisdictional issues). The matter may also be assigned to a staff mediator if appropriate.
• Mediation will be voluntary and confidential, and will only be proposed in appropriate cases. Conciliation is another possibility, and parties may be compelled to attend a conciliation conference. Mediation and conciliation conferences will usually be conducted in private, and the identity of parties will not be disclosed at this stage of the process.
• Where applications do not settle following mediation or conciliation, they will be determined by an individual member of the Commission, unless the President decides to convene a Full Bench in relation to a specific matter.
• Hearings will be conducted in public, unless orders have been made for private hearings. Members do however have some discretion as to the level of detail that is disclosed in their decisions concerns the names of the parties and the evidence.

Workdynamic Australia specialises in conducting investigations into matters such as workplace bullying.

 

This article was written by Lauren Barel, Director and Principal of Workdynamic Australia. The information in this article is for information purposes only and does not constitute legal advice. You should obtain specific advice relevant to your circumstances.

In a case which emphasises the importance of employers preventing and properly responding to allegations of bullying and sexual harassment, the Supreme Court of Victoria[1] has awarded an employee in excess of $1.3 million as result of her employer’s negligence.

The decision considered a claim by Ms Kate Mathews against her employer.  Ms Mathews alleged she had sustained serious chronic psychiatric injury caused by the negligence of her employer in failing to provide her with a safe working environment; and that her employer was vicariously liable for the tortuous acts of its employees and subcontractors.

The alleged offensive behaviour

Ms Matthews worked as a labourer for just under two years. During this period, Ms Matthews alleged that she was subjected to numerous offensive remarks and conduct, including examples such as the following:

•  “You are a spastic, a bimbo”;
• “Get out. You are fucking useless”;
• “Kate, let’s put a pole in the yard and you can get it off”;
• “‘I had a great wank over you last night”;
• ‘CH’ said to Ms Mathews that he would like to throw her to the ground, ‘come all over her and then watch her lick it off;
• Ms Mathews announced that she was going to lunch. C H said to her ‘I am going to follow you home, rip your clothes off and rape you’;
• A subcontractor slapped Ms Mathews on her bottom.

Employer’s response to complaints

Ms Mathews argued that she was reluctant to complain to her foreman, as he was responsible for some of the offensive remarks. On occasions when Ms Mathews complained to the Area Manager, he said words to the effect of ‘leave it with me.’ however nothing appeared to have been done. Ms Mathews was moved to a different crew from September 2009 to June 2010 and then moved back to the original crew. Ms Mathews alleged that when she complained that she had been moved back to this crew, the foreman said ‘You will work with whoever I fucking tell you to work with.”

On 1 July 2010, Ms Mathews contacted who she believed to be Human Resources in relation to a threat of rape from ‘CH’. In response, the person who she reported this to invited her to “…come to my place in Warrandyte, and we will have a drink and talk about it”.  After this, she received a disturbing anonymous phone call. Ms Matthews has not worked since that date.

Employer’s admission of liability

The employer initially denied liability and alleged contributory negligence. However during the hearing, the company admitted negligence, and dropped its allegation of contributory negligence. The question of quantum was therefore the only issue to be determined.

Consideration of video evidence

The employer tendered three DVDs showing film of Ms Mathews taken covertly at different locations at different times. The employer argued that whilst Ms Mathews consistently presented to doctors in a distressed state, the films showed her to occasionally smile, engage with a shopkeeper, walk with her mother and talk on the telephone. The videos were also said to demonstrate that Ms Mathews was capable of sustained physical activities, specifically gardening and moving wheelbarrow-loads of wood around her house.

However Justice Forrest considered that caution must be exercised in evaluating such covertly recorded films in personal injury matters, particularly in cases related to psychiatric injury and stated that nothing could be inferred from the evidence.

Significant damages awarded

Justice Forrest found that Ms Mathews suffered chronic and significant psychiatric injuries that have and will continue to diminish the quality of her life. He also found that she suffered injury to her jaw (as a consequence of teeth grinding related to her psychiatric illness). It was determined that Ms Matthews had no capacity to work, and will not work again.

Justice Forrest assessed Ms Mathews’ general damages at $380,000. This amount included compensation for both her psychiatric injuries and her jaw injury. Ms Mathews was also awarded past economic loss of $283,942 and $696,085 for loss of future earning capacity until retirement age. This equated to a total payout of over $1.3 million.

Implications for employers

The significant damages awarded to Ms Mathews in compensation for her employer’s negligence, reflects the substantial impact that abuse, bullying and sexual harassment can have on an employee’s life. The case also highlights the risk faced by employers in failing to provide a safe work environment in terms of facing a time consuming and costly legal claim as well as embarrassing media coverage.

The decision has the potential to increase the likelihood of significant damages awarded in successful bullying and harassment cases. It is therefore critical for employers to have in place proper policies, procedures and systems to prevent and respond to workplace bullying and harassment – and for employers to properly implement such procedures.

The case highlights the importance of treating all complaints seriously and responding in an appropriate manner. Once an employer becomes aware of offending conduct, it must act to protect the employee from being subject to further offensive conduct. In matters involving serious allegations, it may be most appropriate to investigate the complaints internally or by engaging an expert external investigator.

 

[1] Mathews v Winslow Constructors (Vic) Pty Ltd [2015] VSC 728

 

This article was written by Sarah-Jayne Myers, Senior Associate of Workdynamic Australia. The information in this article is for information purposes only and does not constitute legal advice. You should obtain specific advice relevant to your circumstances.

 

When a redundancy isn’t a redundancy: How the courts look into the mind of decision makers

The recent decision of the Federal Court of Australia in National Tertiary Education Union and Bessant v Royal Melbourne Institute of Technology [2013] FCA 451 provides useful insights into how the courts will look into the mind of decision makers to ascertain the “true” and comprehensive reasons for any decision. It shows the importance of ensuring that clear and unequivocal evidence is given by a decision maker regarding the entire scope of the reasons for the decision.

Failing to ask the question?

Professor Bessant was dismissed from her position as a Professor of RMIT purportedly on the basis that her position was redundant. Professor Bessant claimed that there was no genuine redundancy and the dismissal amounted to taking “adverse action” against her for reasons that included the exercise or proposed exercise of her workplace rights. Professor Bessant also alleged a breach of RMIT’s enterprise agreement. The “workplace rights” alleged by Professor Bessant arose from the long and troubled history between the parties, including a number of complaints or enquiries Professor Bessant had made regarding RMIT. These complaints included allegations of bullying against the head of the relevant School, Professor Hayward and complaints regarding breaches of RMIT’s enterprise agreement.

Under the relevant provisions of the Fair Work Act 2009 (Cth), once an applicant has established the existence of adverse action and a workplace right, the onus shifts to the respondent (in this case RMIT) to establish that the reasons for the action did not include the prohibited reasons.

RMIT’s position was that the Vice-Chancellor of RMIT, Professor Gardner was the sole person responsible for the decision to dismiss Professor Bessant. While Professor Gardiner was called to give evidence, she was not asked and did not give evidence that any of the reasons alleged by Professor Bessant were not reasons for the decision.
RMIT took the view that it discharged its onus by Professor Gardner’s positive testimony regarding the reasons for the dismissal relating to financial reasons. However, Justice Gray found that this was insufficient where the reasons for dismissal may be manifold finding:

Even if the reasons advanced as actual reasons for the decision are accepted as such, the absence of evidence that there were no additional reasons, or that the actual reasons did not include the alleged proscribed reasons, will usually result in a failure to rebut the presumption.

Justice Gray went on to find that Professor Gardner’s evidence:

[was not] inconsistent with the possibility that Professor Gardner was motivated by reasons other than the purely financial ones she asserted.

This conclusion was strengthened by documents which listed that the reasons for the decision were “largely” or “primarily” financial and listed “central” reasons-opening the door to the conclusion that the other reasons related to the prohibited grounds asserted by Professor Bessant.

Redundancy as a tool to remove a troublesome employee?

Justice Gray found that the genesis of Professor Bessant’s dismissal arose from a decision of Professor Hayward that her position was “untenable” and there were two options to resolve this issue.

The documents prepared at the time showed that the position held by Professor Bessant was ‘targeted’ for redundancy, no criteria for determining what positions would be made redundant were developed, there was no information regarding how Professor Bessant was assessed in relation to any such criteria and a change in Professor Bessant’s role to a research only position was not properly taken into account. There was also what Justice Gray categorised as a “disturbing” absence of any contemporaneous account of the reasons of Professor Gardner for deciding that Professor Bessant’s position was redundant.

As a result Justice Gray determined that RMIT had failed to discharge its onus that the reasons for Professor Bessant’s dismissal did not include the prohibited reasons concluding that:

In effect, RMIT made use of its redundancy process to rid itself of an employee, who was considered to be troublesome, at least partly because she was prepared to exercise her workplace rights by making complaints about the behaviour of her immediate supervisor.

Justice Gray also found that the redundancy process breached RMIT’s enterprise agreement. RMIT was ordered to pay a total of $37,000 in penalties (payable to the NTEU) and to reinstate Professor Bessant with recognition of continuity of employment up to the date of reinstatement for the purposes of remuneration and other entitlements. No order was made in respect of costs.

Implications for employers

This case demonstrates the importance of properly documenting the reasons for any decision, ensuring that clear and comprehensive evidence is available if required. It also reminds employers of the dangers of using a targeted ‘redundancy’ program as an alternative to performance management.

 

 

This article is written by Jane Wright, Director and Principal of Workdynamic Australia. The information in this article is for information purposes only and does not constitute legal advice. You should obtain specific advice relevant to your circumstances.

Landmark decision heralds substantially increased general damages in discrimination cases

In a landmark ruling, the Full Court of the Federal Court has indicated that courts should acknowledge changed community standards and award higher compensation for general damages in discrimination claims. In this specific case, the Full Court increased the compensation for non-economic loss awarded to an employee arising from sexual harassment from $18,000 to $100,000.

The decision serves to reinforce the importance of preventing workplace discrimination and harassment.

The Original Decision

Last year, Justice Buchanan found that a female employee of Oracle had been sexually harassed by her male co-worker over a six month period in 2008. The employee claimed that the sexual harassment had caused her to resign from her employment and sought economic and non-economic damages.

The Court found that Oracle was vicariously liable for the conduct of its male employee and ordered the company to pay $18,000 for pain and suffering and loss of enjoyment of life. In this regard, it was held that Oracle had not taken ‘all reasonable steps’ to prevent the conduct.

At first instance, the Court rejected the claim for economic loss and found that there was no causal link between the harassment and the employee’s decision to resign from her employment and take a lower paid job.

The Appeal
The Full Court of the Federal Court (Justices Kenny, Besanko and Perram) upheld the employee’s appeal on both damages awards.

The key news for employers is that, in relation to non-economic loss, the Court found both that:

• the damages awarded at first instance fell within the normally accepted range for sexual harassment litigation (which was said to be between $12,000 – $20,000 – with greater amounts awarded only for more egregious cases); and
• the damages awarded were ‘manifestly inadequate’ and should be increased.

In reaching the decision, the Court signalled that community standards “now accord a higher value to compensation for pain and suffering and loss of enjoyment of life than before”.

While acknowledging that damages will be unique in each case, the Court pointed to several recent decisions outside the discrimination field where significant general damages were awarded, including:

• Willet v Vitoria – $250,000 awarded to a former Police officer for pain and suffering;
• Swan v Monash Law Book Co-operative – $300,000 awarded to an employee in general damages;
• Goldman Sachs JBWere Services Pty Limited v Nikolich – $80,000 in general damages;
• Walker v Citigroup – $100,000 in general damages.

In addition, the Full Court held that the sexual harassment suffered was a material cause for the employee’s decision to resign and awarded $30,000 in economic loss, which was calculated by reference to her loss of pay over a 3 year period.

The Court however rejected the argument that Oracle’s investigation of her complaint had caused her compensable losses.

This decision has the potential to, not only raise claimants’ expectations in relation to damages, but also increase the likelihood of significant damages awards in successful discrimination and harassment claims. It therefore reinforces the importance of employers taking all reasonably practicable steps to prevent these claims from arising. For example by:

• having in place up-to-date policies;
• conducting regular training; and
• properly and prompting investigating all complaints.

These actions will serve to both encourage workplace harmony and leave you best placed to defend any claims that may arise.

 

This article was written by Jonathan Wright, Director and Principal of Workdynamic Australia. The information in this article is for information purposes only and does not constitute legal advice. You should obtain specific advice relevant to your circumstances.

Adverse action: It’s not so much what you did, it’s why you did it

In the world of adverse action, the reasons for a decision are key. Two recent cases reinforce that Courts will focus on the subjective reasons for an employer’s actions – leading to results which may surprise.  Namely, while a plan to implement broad organisational change was unlawful, a decision to dismiss an employee for taking genuine sick leave, despite being harsh and unfair, was lawful.

National Tertiary Education Industry Union v Swinburne University of Technology (No 2) [2015] FCA 1080

In October this year, the Federal Court in the above case fined Swinburne University of Technology for taking adverse action against its teaching employees in circumstances where it had commenced planning reforms aimed at improving the overall financial viability of the University.  While such a decision would often be considered within the prerogative of the employer, the Court noted that:

 “Part of that plan (I accept, not the whole of it) included a consciousness that the entitlements of employees … could be adversely affected if the proposal went ahead. Indeed the cost savings and more favourable industrial landscape for Swinburne (especially at the expense of its casual and fixed-term employees) were motivating factors in the proposal.”

Accordingly, although the planned reforms were not carried out, the University’s actions in threatening to make, and taking steps towards implementing, decisions relating to the planned reform amounted to a threat to the employees’ workplace rights, including the diminution of security and continuation of their employment.

In her consideration of the facts, Judge Mortimer relied on the University’s commercial planning documents which included that the objectives of the change were to adjust existing employee entitlements.

Construction, Forestry, Mining and Energy Union v Anglo Coal (Dawson Services) Pty Ltd [2015] FCAFC 157

In this case, an employee who had his last minute application for annual leave rejected on operational grounds, said “Fine, I’m going to be sick anyway” and “I will get a medical certificate. You will find that very hard to challenge”.

The employee subsequently obtained a medical certificate and notified his employer he was taking personal/carer’s leave on the same dates he had initially sought as annual leave. After issuing a show cause letter and holding a meeting to discuss his conduct, the employer dismissed the employee for misconduct.

In dismissing the employee’s adverse action application, the primary Judge found that the employee had been dismissed because the employer did not believe he was sick on the days he was absent, and believed that he had been dishonest.  This was despite a finding that the employee had been genuinely sick on the days in question.

On appeal, the majority decision of the Federal Court upheld this ruling, confirming that the employer’s reason for the dismissal was the subjective belief that the employee had been dishonest, and not because he had exercised a workplace right.

In reaching this decision, the Court expressed concerns that the outcome was unjust, and noted that the applicant would have likely succeeded if he had instead pursued an ‘unfair dismissal’ application.   However, the majority of the Court found that the employer’s honest, albeit mistaken, belief was the real motivating factor for the dismissal, and that the application must therefore fail.

Lessons for employers

Employers must be mindful that the lawfulness of their conduct will not always be determined by whether their actions are reasonable or whether the outcome is fair.   These cases illustrate that a decision-maker’s subjective reasons will be jealously scrutinised.  A decision will be unlawful if, and only if, this analysis reveals that any adverse outcome is because of the existence, or exercise, of a workplace right.

 

This article was written by Jonathan Wright (Director and Principal) and Annette Tyrrell (Senior Associate). The information in this article is for information purposes only and does not constitute legal advice. You should obtain specific advice relevant to your circumstances.

A recent case of the Fair Work Commission provides some useful insight into the use of social media and its potential impact on the employment relationship.

The facts

The Applicant in this case (Mr Barry Harvey) was employed by the company in question as an Environment, Safety and Quality Manager. After approximately 11 months of service, the company terminated his employment for a range of performance and conduct issues, which included a refusal to report for duty, a failure to perform duties, a lack of responsiveness to internal clients and staff, a failure to follow a reasonable direction from his manager (Mr Cain) and lack of respect and use of inappropriate language directed at Mr Cain.

Mr Harvey subsequently brought an unfair dismissal claim, arguing that he had not been informed in any detail as to the reason for his dismissal, and was not given an opportunity to reply. Mr Harvey resisted the performance and conduct issues that had been raised by the company, and claimed that he had been bullied by Mr Cain.

The company provided evidence as to the history of Mr Harvey’s performance and conduct issues. Amongst several other things, the company adduced evidence to show that Mr Harvey had used his LinkedIn account to send threatening emails to a person who may have been his ex-partner. These emails made specific reference to Mr Harvey’s position at the company, and the name of his employer.

Unfair dismissal claim dismissed

Senior Deputy President Richards dismissed the unfair dismissal claim, and held the following (amongst other things):

• SDP Richards held that there was a valid reason for the dismissal, accepting much of the evidence put forward by the company. In particular, it was held that Mr Harvey showed no serious intention of responding positively to concerns that had been communicated to him about his performance and conduct, and remained defensive and aggressive. It was accepted that Mr Harvey was unable to conduct himself professionally, refused to participate in performance management processes and attempted to dictate the terms on which he would perform his work.
• On the other hand, SDP Richards accepted that Mr Harvey had not been expressly informed of the reasons for his dismissal prior to the termination taking effect. This was in circumstances where the detailed reasons for the dismissal were only notified to Mr Harvey in the letter that confirmed the termination of his employment.
• Because of point (2) above, Mr Harvey did not have an opportunity to respond to the reasons set out in the termination letter. It was accepted however that the reasons for the dismissal should not have come as a surprise given that there had been lengthy discussions about a range of matters during Mr Harvey’s employment.
• Mr Harvey was given ample opportunity to address the company’s concerns about his performance.

LinkedIn email

Of interest, SDP Richards made specific reference to the LinkedIn email that had been sent by Mr Harvey which was held to ‘reflect poorly on [Mr Harvey’s] judgement’. SDP Richards held that even though the email was sent from Mr Harvey’s personal email account, it essentially ‘advertised’ Mr Harvey’s role as an employee of the company, and expressly referred to his position and the company’s brand. Mr Harvey was described as being ‘profoundly naïve’ to have included this information in an offensive email, and he should have been ‘sufficiently conscious of the need to preserve the good name and reputation of his employer’.

Lessons learned

Given the ever diminishing divide between the professional and personal lives of employees, this is a useful finding for employers who are increasingly affected by the actions of employees whilst using social media in a personal capacity.

To further bolster the ability to rely on social media activities, employers should consider implementing a social media policy which outlines the circumstances in which social media activities may impact on the employment relationship.

 

 

This article was written by Lauren Barel, Director and Principal of Workdynamic Australia. The information in this article is for information purposes only and does not constitute legal advice. You should obtain specific advice relevant to your circumstances.