Recent decisions of the Australian Industrial Relations Commission (Commission), the Federal Court of Australia (FCA) and anti-discrimination tribunals have upturned early predictions that
Work Choices would all but put an end to termination related litigation. The risks to employers have not abated.
Further, employers now face potential additional exposure to claims of unlawful termination, unlawful discrimination or breach of contract from employees who no longer fall within the unfair dismissal jurisdiction.
In this edition of LegalTalk we explain the implications for employers arising out of recent termination of employment cases.
Federal Court awards $515,000 in damages payouts to executive for breach of contract
In this case, which is subject to an appeal, the employee’s employment was terminated when the employer determined that the employee did not intend or was unable to return to work in the foreseeable future. The employee challenged the termination and claimed that there had been an unlawful termination (termination based on a discriminatory ground) and wrong termination (termination in breach of his contract of employment).
The breach of contract claim was based on the fact that the employee had, at the time he commenced employment, been provided with a set of policy documents entitled "Working With Us”. The employee claimed the policy documents constituted conditions of employment that the employer was bound to comply with.
Summary of facts found by trial judge
A dispute arose between the employee and his employer about the allocation of clients. The employee raised an informal concern. When, after 1 month, the matter was not resolved he lodged a formal complaint about the allocation. The formal complaint was poorly handled. For example, although the investigating officer interviewed relevant people, she did not take immediate steps to investigate factual conflicts in the accounts given by the people she interviewed.
When, 2 months later, the investigating officer wrote to the employee about her findings she sent the letter to an old address. When the employee finally received the correspondence he asked to have his grievance escalated. At this stage the employee was feeling pressured, unmotivated, depressed and suicidal. Over the next 12 months, while discussions continued about the issues complained about, there were a number of periods of sick leave (paid and unpaid). When the employee had used up all his leave the employer wrote to him about returning to work. When they were advised that a return to work would have adverse health consequences for the employee, they terminated his employment.
The importance of the Working With Us (WWU) policy
The WWU policy contained a number of chapters dealing with matters including "code of conduct”, "reward strategy” and "team support package”. It also dealt with harassment, integrity, support for career management, health and well-being and grievance handling.
The Court held that the WWU policy did more than set out directions which employees had to follow. It contained provisions "that purported to be promises made by [the employer] or that purported to grant specific entitlements to employees.” Importantly, the employee’s employment agreement provided that the employer would "expect” the employee "to comply” with the WWU policy.
The decision under appeal
The trial judge found that the employer’s handling of the employee’s complaint "was extremely inept.” It further found that the WWU policy was incorporated into the employee’s contract of employment and was legally binding on the employer. The court then went on to find that the employer had breached its own policies in important respects. Those breaches contributed to the employee’s ill health and caused him psychological damage. Consequently, the employee was compensated for the breach of contract leading to the psychological damage.
Employers are losing Commission decisions on redundancy even though it is now excluded from unfair dismissal laws
Early analysis of post Work Choices decision of the Commission indicates a determination to curtail the limiting of its jurisdiction to hear unfair dismissal cases when the reason for termination is "operational reasons”. Of the dismissals alleged to have been based on operational reasons, employees have won a majority of them.
In one case an employer decided to merge two functions into one. The Commission accepted that the restructure was genuine. However, the Commission emphasised that termination of employment does not automatically and logically follow a restructure. In this case the Commission found that the employee could have remained in employment on her current salary in a different position utilising her financial skills. It further found that the alternative position was not formulated or properly offered to the employee. Given the operational ability of the employer to maintain the employee in her employment, the Commission concluded that:
- restructure did not require termination of employment; and therefore
- the termination of employment was not for operational reasons.
In another case an employer made a decision to close, in its entirety, one of its businesses in a particular location. There was no suggestion that the closure was not factual or avoidable. Further, the evidence established that the employer had conducted an internal job search and determined that there were no available opportunities for redeployment of the business’ General Manager. Consequently, he was made redundant.
The General Manager then challenged the termination of his employment. He was a long standing employee and had accrued 6 months long service leave. He argued that, instead of having his employment terminated, he should have been entitled to take long service leave in the hope that a manager’s position might become available. The evidence further established that a temporary location manager position had recently been filled and that no lower status offers were offered to the General Manager.
Considering the above facts the Commission held that the termination of the General Manager’s employment was not for "genuine” operational reasons. This case is presently on appeal. The Federal Minister for Employment and Workplace Relations, Kevin Andrews, has also intervened in the proceedings on the side of the employer.
In a third recent redundancy case the Commission again decided that the termination of the employee’s employment was not for genuine operational reasons. In this case the Commission agreed that there had been a downturn in the employer’s business which necessitated a reduction in staff numbers at its Eastern Business Unit. The selection of staff to be made redundant was done based on their scoring on a skills matrix.
However, the employee won the right to continue with his unfair dismissal claim because the Commission found that the employer’s Western Business Unit was recruiting shortly after the termination of the employee’s employment. Consequently, the Commission found that there was no evidence that a redeployment exercise had been undertaken by the employer which, had it been undertaken, may not have resulted in the termination of the employee’s employment. The fact that the Eastern Business Unit and Western Business Unit were managed independently of each other was not considered relevant by the Commission.
Risks associated with internal grievance handling
The breach of contract decision (referred to above) clearly demonstrates the risks associated with an employer’s failure to follow its own grievance handling policy. The decision is subject to an appeal. However, at first instance the trial judge identified significant failings on behalf of the employer which included:
- excessive delay between the time when the complaint being received and a formal meeting with the complainant was organised (10 weeks)
- no consideration being given to standing down on pay employees accused of inappropriate behaviour
- one key witness not being contacted until 3 months after the complaint was received
- a failure to interview other relevant witnesses
- no-one being appointed to investigate alleged breaches of other policies, and
- tapes of conversations never being transcribed or listened to.
In a recent decision of the New South Wales Administrative Decisions Tribunal an employer was ordered to pay an employee $15,000 when her claim of racial discrimination was upheld. Central to the case was the fact that, although the employer had provided the employee with a copy of its grievance handling procedure, it had not complied with it.
In this case it was found that the employer failed to take seriously the employee’s complaint about a racial slur. It failed to properly investigate whether the words alleged were actually uttered. Instead it insisted that the employee accept an apology from the abusive employee (even though it was not genuinely made). Later, the employer appointed the abusive employee’s boyfriend as the supervisor of the complainant. The tribunal held that this appointment was inappropriate.
