General Protections claims are on the rise post-pandemic… is your business at risk of a staggering compensation payout?
Increasing claims for general protections (adverse action) have been lodged with Fair Work; where there is found to be a case, the rulings impact business owners with huge fines awarded to employees.
Is your business at risk of a Fair Work claim with a potentially staggering compensation payout?
A record amount in damages was awarded to an employee who claimed he was bullied by senior executives. Here’s what you need to know.
As an employer, you need to note the record damages awarded by the Federal Court in October 2020. This case involved claims a manager was dismissed after making numerous complaints that he was bullied by the senior executives at an ASX-listed software company.
The case is also illustrate the importance of who the decision maker is when terminating an employee, as well as the care you should take in making legitimate and reasonable decisions about employees, particularly those who have made complaints.
What are the facts?
The applicant (Mr R) worked as the Victorian state manager for TechnologyOne, the first responder in this case. When Mr R commenced employment in July 2006, the company was relatively small. However, over time it grew significantly in terms of operations and revenue. By way of illustration, Mr R’s gross income in 2006/2007 was $208,932 and increased in the 2015/16 financial year to $845,128 (most of the remuneration increase was connected to incentive payments).
Mr R performed well during his employment; he was granted share options in 2013, 2014 and 2015, which was something not granted to any other state manager. He also received the distinct honour of receiving the Chairman’s Award in 2010, 2012, 2013 and 2014.
The second respondent in the case was the executive chairman and CEO of TechnologyOne (the CEO). The Court found the CEO was the sole decision maker in the matter of terminating Mr R and that he twice rejected professional HR advice that it would be unfair to dismiss Mr R on the basis of his complaints, outlined further below.
From late 2010, Mr R was experiencing problems in his personal life. He sought to “escape his pain in work”, according to the Court decision; increasing his already extensive working hours.
Mr R subsequently allegedly experienced bullying from senior executives at TechnologyOne by alleging his role and responsibilities were undermined; his position threatened and verbally abused and sworn at in front of his colleagues.
Between February 2016 and May 2016, Mr R made seven different complaints to four different people, including the CEO, relating to these instances of bullying. On 18 May 2016, Mr R’s employment was terminated summarily. The reason given by the CEO for Mr R’s termination was, among other things, that he was unable to get along with his previous three managers, concerns had been raised by Mr R’s team and revenue in Victoria (Mr R’s responsibility) was not growing.
What does the law say?
Mr R claimed he was dismissed for prohibited reasons, contrary to the general protection provision in the Fair Work Act. He claimed, among other things, that he:
- had exercised his workplace rights to make complaints of being bullied by his managers
- had proposed to exercise the workplace right to bring legal proceedings under a workplace law (the Fair Work Act)
- had proposed to exercise his contractual safety net, being the right to receive incentive payments in respect of certain TechnologyOne products sold in Victoria
- was entitled to receive those incentive payments
Mr R’s claim arose primarily from two sections of the Fair Work Act, being sections 340 and 341.
In summary, section 340 provides that an employee is protected from having adverse action taken against them, merely for having or exercising a workplace right. Section 341 provides a wide definition of what constitutes and gives rise to a “workplace right” – i.e. 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.
The Court found that TechnologyOne’s “Open Door Policy” (meaning all managers are capable of hearing employee complaints) and its “Workplace Bullying Policy” applied throughout Mr R’s employment. This provided an explicit basis for the Court to be satisfied that Mr R was “able to make a complaint… about his having been bullied in relation to his employment”.
Accordingly, the Court found Mr R was protected from adverse action because he made complaints.
In concluding its lengthy judgment, the Court also found Mr R’s seven complaints, made between February and May 2016, were a “substantial and operative factor” in the CEO’s reasons to terminate his employment. This was a breach of section 340 of the Fair Work Act, as described above.
What’s the damage?
As a result of all this, the Court ordered penalties and damages in excess of $5,200,000, including:
- $47,000 in penalties
- $756,410 plus interest for forgone share options
- $2,825,000 for future economic loss
- $1,590,000, plus interest, for breach of contract
- $10,000 for general damages
This payout amount may actually be a new record for this type of case in the Fair Work Division of the Federal Court.
The CEO was personally ordered to pay Mr R $7,000. It’s worth noting the Court made this order to achieve “effective deterrence” and CEOs in similar positions should resist the temptation “to stand with the bullies rather than the bullied”.
Akyra’s key takeaways
Some of the key learnings for you to take away from this case are:
- Consider the policies or processes that apply to the issues at play – have they been followed and fulfilled?
- Any decision to be taken against an employee should not be because or related to any workplace right that the employee has, such as the ability to make a complaint.
- Think carefully on who will make the decision regarding someone’s employment, including about workplace grievances and complaints. Ultimately the decision maker may need to not only justify their decision but the process resulting in whatever decision is made and action taken.
- The decision maker should have unambiguous, legitimate and reasonable reasons for their decision.
- The decision maker must be able to, if need be, refute the claims that the decision was in breach of a workplace right. In other words, the decision maker must be able to demonstrate that the decision was not made for a prohibited reason.
- 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 right under the Fair Work Act.
TechnologyOne has said that it plans to appeal against the decision and has “always believed that it has acted lawfully”. So watch this space! As you can see the onus of adverse action rests solely on the employer should an employee claim arise, with costly implications and if you get it wrong, as such it is best to ask for expert advice sooner rather than later.
NEED MORE INFORMATION?
Akyra can help your business to assist and support all your questions and concerns related to general protections claims. Please contact Akyra on 07 3204 8830 or book a free 30-minute consultation for an obligation-free conversation.
Disclaimer – Reliance on Content
The material distributed is general information only. The information supplied is not intended to be legal or other professional advice, nor should it be relied upon as such. You should seek legal or professional advice in relation to your specific situation.