Employee wins almost $100,000 in compensation and penalties following unlawful adverse action by employer

Adverse action proceedings

In December 2021, the Federal Circuit and Family Court of Australia found that an employer had taken adverse action against an employee for a prohibited reason under the Fair Work Act 2009 (Cth).

Mr Stuart Lees was employed in 2014 by Asaleo Personal Care Pty Ltd as a sourcing manager. Mr Lees was regarded as a good and valuable employee until 2019, when part of the business was sold. On 14 July 2019, Mr Lees requested a formal redundancy. The General Manager denied this requested as Mr Lee’s job was not redundant despite three category members no longer reporting to him. Four months later, Mr Lees filed a stop bullying application in the Fair Work Commission alleging bullying by the Executive General Manager of Supply. This complaint was later settled at a conciliation conference.

Between 28 November 2019 and 21 February 2020, there was several complaints made regarding Mr Lees. These complaints by other managers and junior employees described Mr Lees’s conduct as arrogant, rude, belittling and unhelpful. On 3 March 2020, Asaleo meet with Mr Lees to discuss the concerns raised and provided him with a draft performance improvement plan for his input.

On 10 March 2020 Mr Lees rejected an invitation to further discuss the performance improvement plan and reiterated his request to be made redundant. Two days later, Asaleo advised Mr Lees that his employment had been terminated on the basis of misconduct for failing to participate in the performance improvement plan process. Mr Lees subsequently claimed that Asaleo had taken adverse action against him because he had exercised a workplace right to complain. Mr Lees further claimed that the company had breached his contract of employment by failing to undertake any performance reviews since 2018, and that made him ineligible for payment under the companies Short Term Incentive Plan, which could have been up to 20% of his annual salary.

The Court held that Asaleo had contravened section 340 of the Fair Work Act 2009 (Cth) by taking adverse action against Mr Lees for a prohibited reason by, first, presenting Mr Lees with a performance improvement plan on 3 March 2020, and second, by dismissing him eight days later on 11 March 2020. Further, Asaleo was found to have breached its contract of employment with Mr Lees for failing to conduct formal annual performance reviews after August 2016.

Compensation

The parties agreed that Mr Lees suffered economic loss of $22,552.80, which Asaleo agreed to pay together with interest amounting to $2,002.44. However, Mr Lees also claimed compensation for non-economic loss in the amount of $20,000 due to the severe impact that the dismissal had on his mental health and wellbeing.

This was supported by a doctor’s letter, which indicated Mr Lees was experiencing sleep disturbance, irritability, and ruminating thoughts due to bullying in the workplace, and fear he was being forced out of his role. It did not appear that Mr Lees attended his general practitioner alleging to feel unwell from his treatment at work around March 2020 when the bullying complaint was made. Accordingly, the medical evidence could not support Mr Lees’s claims.

However, medical evidence is not necessary to support a claim for compensation for distress, hurt or anxiety as a result of adverse action. Mr Lees was not cross examined on whether he actually suffered from the alleged symptoms. Accordingly, the Court accepted that he did and awarded $7,500 in compensation for non-economic loss along with interest amounting to $666.82.

Penalty determination

Mr Lees sought for penalties to be imposed on Asaleo for their two contraventions of the Fair Work Act 2009 (Cth). The maximum penalty for a corporation under the Act is $63,000 per contravention. In determining the amount to be awarded, the Court considered whether the contraventions should be dealt with independently and whether the penalties were appropriate and proportionate to the conduct viewed as a whole.

It was found that the contraventions should be considered separately, because the dismissal was contingent on how Mr Lees responded to the performance improvement plan. This, in addition to the fact that the dismissal occurred a week after the first contravention, lead Judge Riley to believe that this was not a single course of conduct.

Judge Riley considered that the breaches were deliberate, involved senior management, and that Asaleo had showed no contrition. It was found to be of relevance that the dismissal would remain on the applicant’s CV, which would likely negatively impact his future job prospects. Given these circumstances, Judge Riley believed specific deterrence was necessary.

Taking into consideration the fact that the dismissal was substantially worse conduct than the presentation of the performance plan, the appropriate penalty was considered to be 35% of the maximum for presenting Mr Lees with the performance improvement plan, and 70% of the maximum for his dismissal, totalling $66,150.

Damages for breach

Judge Riley found that failure to provide Mr Lees with formal performance reviews was only a technical breach of the employment contract. Given that there was no issue with the Mr Lees’s performance until shortly before dismissal, and that he had been given promotions and pay rises, Judge Riley was not satisfied there had been any loss from the breach warranting an award of damages.

Conclusion

Ultimately Asaleo’s conduct in taking adverse action to unlawfully dismiss Mr Lees after his refusal to complete his performance improvement plan resulted in orders to pay a total of $98,872.06 in compensation and pecuniary penalties. This case serves as a timely reminder of the risks associated with taking unlawful adverse action against an employee.