Work­place lia­bil­i­ty in unex­pect­ed places

In brief

In this arti­cle we look at two recent cas­es where employ­ers face penal­ties in cir­cum­stances which high­light the need for employ­ers and man­agers to be vig­i­lant in the workplace.

In the first case, a com­pa­ny was held liable for the actions of one of its employ­ees who racial­ly abused a co-work­er. In the sec­ond case, an HR man­ag­er was ordered to pay a penal­ty when she was per­son­al­ly held respon­si­ble for an employ­ee not being giv­en the cor­rect notice payment.

Muruge­su v Aus­tralian Postal Cor­po­ra­tion & Anor [2015] FCCA 2852

The appli­cant in this mat­ter (Mr Muruge­su) brought a claim against Aus­tralia Post and one of its employ­ees (Mr Boyle) under the Racial Dis­crim­i­na­tion Act 1975 and the Aus­tralian Human Rights Com­mis­sion Act 1986.

The claim against Mr Boyle was that he had sub­ject­ed the appli­cant to var­i­ous forms of racial abuse (main­ly name calling).

The claim against Aus­tralia Post includ­ed a claim that it should be held vic­ar­i­ous­ly liable for the actions of Mr Boyle, as pro­vid­ed for under s 18A of the Racial Dis­crim­i­na­tion Act 1975

Aus­tralia Post defend­ed this aspect of the claim on the basis it took all rea­son­able steps to pre­vent Mr Boyle from doing any act that might amount to unlaw­ful dis­crim­i­na­tion (a defence under s.18A(2) of the Racial Dis­crim­i­na­tion Act 1975).

In par­tic­u­lar, Aus­tralia Post assert­ed that it imple­ment­ed for all staff, includ­ing Mr Boyle, fre­quent train­ing in rela­tion to its detailed harass­ment and dis­crim­i­na­tion policies.

How­ev­er, although the Court found that Aus­tralia Post’s actions in respect of train­ing staff were exem­plary”, its fail­ure to ade­quate­ly inves­ti­gate Mr Muruge­su’s com­plaints ren­dered it liable for Mr Boyle’s actions. In this regard Judge Bur­chardt said this:

258. The train­ing regimes set up by the first respon­dent appear to me to be exem­plary. There is a process where­by leaflets are sent in payslips (as Mr Muruge­su him­self acknowl­edged) and are fol­lowed up by what are called tool­box talks. These talks are not brief; they go for about 20 min­utes to half an hour.

259. The offi­cial posi­tion tak­en by Aus­tralia Post is whol­ly exem­plary. The code of con­duct and oth­er doc­u­ments exhib­it­ed to the Court show that, on its face, the first respon­dent is whol­ly opposed to any form of racial or oth­er unlaw­ful harass­ment in employ­ment.

260. The dif­fi­cul­ty, how­ev­er, is that it is one thing to have these poli­cies, no doubt sin­cere­ly embraced by the man­age­ment of the first respon­dent, but it is anoth­er to enforce them.

261. While the train­ing and edu­ca­tion­al side of things can­not in my view on the evi­dence be the sub­ject of crit­i­cism, what is stark­ly lack­ing is an effec­tive response on the occa­sions when alle­ga­tions of racist con­duct were raised.”

The rem­e­dy the Court may order will be the sub­ject of a fur­ther hear­ing and could involve a com­pen­sa­tion order. The case is a use­ful reminder that although it is impor­tant to have harass­ment and dis­crim­i­na­tion poli­cies in the work­place and to appro­pri­ate­ly train staff, this alone will not be enough to pro­tect employ­ers against claims result­ing from a fail­ure to prop­er­ly inves­ti­gate and address com­plaints of harass­ment or dis­crim­i­na­tion. In oth­er words, employ­ers must ensure they fol­low their own harass­ment and dis­crim­i­na­tion poli­cies!

Cerin v ACI Oper­a­tions Pty LTd & Ors [2015] FCCA 2762

The sec­ond case is note­wor­thy as it involved an HR man­ag­er being held per­son­al­ly liable when an incor­rect notice pay­ment was made to a staff member.

The case involved the ter­mi­na­tion of employ­ment of a staff mem­ber fol­low­ing a peri­od where he had been pro­vid­ed with mod­i­fied duties after sus­tain­ing a work­place injury.

Sec­tion 58B(1) of Work­ers Reha­bil­i­ta­tion and Com­pen­sa­tion Act 1986 (SA) impos­es a duty on employ­ers to pro­vide suit­able employ­ment” for injured work­ers (ie mod­i­fied duties), but there is an excep­tion to the duty where it is not rea­son­ably prac­ti­ca­ble” to do so.

The work­er was injured at work in 2009 fol­low­ing which he was giv­en var­i­ous mod­i­fied duties. In 2011 he was giv­en a new writ­ten employ­ment con­tract which altered his orig­i­nal role, tak­ing into account his reduced capac­i­ty to per­form duties. He ver­bal­ly accept­ed the new contract.

In Octo­ber 2012, after receiv­ing advice from Work­Cov­er SA that it was no longer oblig­ed to pro­vide the employ­ee with work under the Work­ers Reha­bil­i­ta­tion and Com­pen­sa­tion Act 1986 (SA), the employ­er wrote to the work­er advis­ing that his employ­ment would ter­mi­nate on 12 Novem­ber 2012. In effect this pro­vid­ed him with 4 weeks and 3 days’ notice.

The Work­ers Reha­bil­i­ta­tion and Com­pen­sa­tion Act 1986 (SA) pro­vides that if a work­er has suf­fered a com­pens­able injury, the employer…must not ter­mi­nate the work­er’s employ­ment with­out first giv­ing the Cor­po­ra­tion and the work­er at least 28 days’ notice of the pro­posed ter­mi­na­tion” (our emphasis).

How­ev­er, the Fair Work Act 2009 pro­vides that an employ­ee with the work­er’s length of ser­vice and age should be giv­en 5 weeks’ notice.

The work­er brought a claim under the Fair Work Act 2009 on the basis that his notice peri­od had been two days short (amount­ing to a short­fall of about $180). He also asked that penal­ties should be imposed against the employ­er and its HR Manager.

The Fair Work Act 2009 (sec­tion 550) pro­vides that an indi­vid­ual can be penalised for being involved” in a con­tra­ven­tion of cer­tain pro­vi­sions of the Act.

The employ­er’s defence to the claim was that it had not ter­mi­nat­ed the employ­ee’s con­tract itself, but rather it had been ter­mi­nat­ed at law under the doc­trine of frus­tra­tion. In oth­er words because the employ­ee could no longer car­ry out the require­ments of his ini­tial role with the com­pa­ny (due to his injury), his employ­ment con­tract could no longer be per­formed and should be held to have been ter­mi­nat­ed under the doc­trine of frus­tra­tion. If the con­tract was ter­mi­nat­ed oth­er than by the actions of the employ­er, there is no require­ment for them to pro­vide any notice. The claim should there­fore be dismissed.

The court did not agree that the con­tract had been ter­mi­nat­ed under the doc­trine of frus­tra­tion. It found that the employ­er had entered into a new employ­ment con­tract in 2011 that recog­nised the lim­i­ta­tions of the work­er’s capac­i­ty to work, and had been hap­py to recog­nise that con­tract as valid” for some 16 months pri­or to the ter­mi­na­tion of employment.

Fur­ther­more, Judge Simp­son found that:

The very fact that ACI had [the HR man­ag­er] deliv­er the let­ter… advis­ing the [employ­ee] that his employ­ment would be ter­mi­nat­ed… leads me to believe that ACI believed that there was a con­tract of employ­ment in place…..If it had already been ter­mi­nat­ed by the doc­trine of frus­tra­tion, there would be no need for a let­ter advis­ing of ter­mi­na­tion some time in the future.” 

Accord­ing­ly, as it had been the employ­er who had ter­mi­nat­ed the con­tract, the work­er was enti­tled to notice in accor­dance with the Fair Work Act 2009.

The court made this deci­sion in June 2015, but has only recent­ly hand­ed down its judg­ment in a sep­a­rate hear­ing that dealt with the penal­ties to be imposed.

In this hear­ing the court found that both the employ­er and its HR Man­ag­er knew about the min­i­mum notice pro­vi­sion in the Fair Work Act 2009 and that nei­ther could pro­vide any sat­is­fac­to­ry expla­na­tion for the fail­ure to pro­vide the required notice. Regard­ing the actions of the employ­er it said:

It would seem that the [employ­er] argues that the author­i­ty to ter­mi­nate the [employ­ee’s] employ­ment was giv­en to them by the Work­ers Com­pen­sa­tion Author­i­ty and that this author­i­ty some­how excused them from com­ply­ing with the FW Act pro­vi­sions. It did not. In its Out­line of Sub­mis­sions, the [employ­er] ignores the fact that it was oblig­ed to com­ply with the pro­vi­sions of the FW Act.”

The court also took account of the fact that the employ­er was a large organ­i­sa­tion and had been penalised for breach­es of the Fair Work Act 2009 pre­vi­ous­ly. Accord­ing­ly the court found that the con­tra­ven­tion was in the mid­dle range of seri­ous­ness for con­tra­ven­tions of this kind” and ordered ACI to pay $20,400.00 in penal­ties to the employ­ee (rep­re­sent­ing 40% of the max­i­mum penal­ty it could order under the Fair Work Act 2009 with respect to corporations).

Whilst penal­ties against employ­ers for breach­es of the Fair Work Act 2009 are not uncom­mon, more inter­est­ing was the deci­sion to per­son­al­ly fine the HR Man­ag­er. Under cross-exam­i­na­tion, the HR Man­ag­er admit­ted to know­ing about the notice require­ments in the Fair Work Act 2009, and con­firmed that she was giv­en author­i­ty to decide notice pay­ments on behalf of the employ­er. The court found that she could pro­vide no sat­is­fac­to­ry expla­na­tion for fail­ing to pro­vide the cor­rect notice.

The Judge there­fore found that the breach could not be described as a pro­ce­dur­al and not a delib­er­ate fail­ure”. It was there­fore appro­pri­ate that she be penalised. It ordered her to pay $1,020 rep­re­sent­ing 10% of the max­i­mum penal­ty it could award with respect to individuals.

The deci­sion is a use­ful reminder to employ­ers and those in the HR pro­fes­sion of the need to get things right” when it comes to pay­ing employ­ee enti­tle­ments, oth­er­wise both the busi­ness and its deci­sion-mak­ers may be exposed to penal­ties. As the court said in this case: The penal­ty that I pro­pose to make will be a warn­ing to employ­ers of the need to com­ply with the leg­is­la­tion to the let­ter.

What is par­tic­u­lar­ly inter­est­ing about this case is that the court was pre­pared to order the pay­ment of sig­nif­i­cant penal­ties even though the loss the employ­ee suf­fered was min­i­mal (c. $180). The court also does not appear to have attached much weight to the inter­play between the dif­fer­ing notice pro­vi­sions under the Work­ers Com­pen­sa­tion’ and Fair Work leg­is­la­tion.

In Con­clu­sion

The above two deci­sions include valu­able lessons for employ­ers including:

  • Employ­ers may have the best work­place poli­cies but if they do not active­ly fol­low them, those poli­cies will be of lit­tle utility;
  • Employ­ers can be held respon­si­ble for the dis­crim­i­na­to­ry or harass­ing behav­iour of their staff;
  • Indi­vid­u­als who make deci­sions affect­ing employ­ee enti­tle­ments may be per­son­al­ly called to account where their deci­sions can­not be justified.