Adverse action claim launched by HR manager who resigned due to potential personal liability for underpayments claims

In recent years there has been an increase in penalties ordered against directors, HR managers and others found vicariously liable for breaches of the Fair Work Act 2009 (Cth) (FWA). In a novel adverse action claim, an HR manager, Ms Oldfield, who resigned her position due to fears she would be vicariously liable for her employer’s breaches of the FWA, is claiming compensation for economic loss and ‘hurt and humiliation’.

The decision in Oldfield v One Stop Warehouse Pty Ltd [2020] FCCA 1865, concerned an application by the employer for summary dismissal, claiming that Ms Oldfield was barred from bringing her case before the Court and that the case had no real prospects of success.

In her application, Ms Oldfield argued that, in her position as HR manager, she identified and brought to the attention of the directors a range of employee underpayments. She claimed that the directors failed to act on the underpayments and, in doing so, injured her in her employment by exposing her to vicarious liability for underpayment claims. She also claimed that the directors took adverse action against her by reducing her duties. She said that her resignation was not a constructive dismissal but rather reasonable action for her to take in the circumstances to protect herself from injury. She argued that this protective action caused her to suffer economic loss.

Under section 370 of the FWA, an applicant will be precluded from bringing a general protections court application where they are first required to apply to the Fair Work Commission (FWC) to deal with a dispute. An applicant will be entitled to apply to the FWC where they have been dismissed, including where an employer takes adverse action against an employee leading to a constructive dismissal.

It was accepted by the Court that Ms Oldfield had not argued that her resignation was a constructive dismissal. Rather she chose to argue other instances of adverse action taken against her. This meant she was not precluded from bringing a general protections court application and could effectively bypass the FWC process.

Jarret J accepted Ms Oldfield’s reasonableness arguments, stating that her decision to resign could be considered reasonable in the circumstances. He went on to state that Ms Oldfield had made a reasonable argument that a causal link may exist between the adverse action taken against her and the loss suffered, rejecting the employer’s argument that there were no reasonable prospects of success.

However, it was noted that Ms Oldfield’s case was not without significant difficulty. For her to succeed, she would need to successfully plead and prove each of the FWA breaches that informed her conclusion that her employer was breaching the FWA. She would then have to establish, on the balance of probabilities, that she would be vicariously liable for the breaches. Otherwise there would be no causal link between the adverse action taken against her, her decision to resign and the following economic loss suffered.

Conclusion

The future of this matter will be an interesting test of ‘satellite litigation’, where an applicant must plead another case (underpayment) in order to prove their case (adverse action). This case acts as a warning for employers that acting on underpayments that have been identified is vitally important, otherwise there could be further consequences.