Australia: Pecuniary penalties imposed on small business employer for adverse action taken against unwell employee

Last Updated: 6 May 2014
Article by Sarah Hedger

In brief - Employer fires employee after finding out he had cancer

A decision of the Federal Court in early March 2014 has seen penalties in the amount of approximately $41,000 being issued against a small business for contraventions of the Fair Work Act 2009 (Cth) ("FW Act") for terminating the employment of a spray painter who was suffering from blood cancer.

Employee dismissed without notice or payment in lieu of notice

In May 2013, in the case Fair Work Ombudsman v AJR Nominees Pty Ltd (No 2) [2014] FCA 128, the Federal Court heard a general protections claim lodged by an employee against his former employer for terminating his employment after finding out that he was suffering from blood cancer. The employee's services were terminated without notice or payment in lieu of notice and he was also not provided with his accrued sick (personal) leave entitlements which were in excess of 500 hours.

The employee had worked as a spray painter for a small panel beating service.

The employee claimed that his employer put pressure on him to resign for two months after he informed the company of his medical condition. Ultimately, he claimed that he was dismissed following a heated argument with the company director.

Employer claims that employee resigned voluntarily

The company director claimed that the employee had resigned voluntarily after their argument, and further claimed that he had sent text messages following the event informing the employee: "thanks for your short notice, however, you owe me two weeks for the notice" followed by a subsequent text saying "there is nothing to talk about, you gave me notice and you own (sic) me two weeks' notice".

Court finds that employer attempted to coerce employee into resigning

Ultimately the court found that the employer had breached the FW Act by taking adverse action against the employee and further found that the employer had failed to adhere to standards recorded in the National Employment Standards (NES).

The court held that there is a clear distinction between deliberate conduct and mere inadvertence in respect of these matters and found that the employer had clearly attempted to coerce the employee into resigning and his actions were not based on any sort of misapprehension about the application of the law.

Employer's attempt to avoid paying employee his accumulated personal leave

As a result the Federal Court handed down in February 2014 pecuniary penalties to be applied to the employer due to the breach of the FW Act.

The court concluded that there would have been no mistake on the part of the employer as to the legal consequences of his conduct in this case and that he had sought to ensure the employee resigned in order to avoid paying out his accumulated personal leave.

Factors considered in determining whether penalty would be applied

In determining whether a penalty for the contraventions of the FW Act would be applied, the court had regard to a number of factors, in particular the following:

  • the nature and extent of the conduct which led to the contraventions is important
  • the extent of loss or damage sustained by the employee due to the contravention
  • the size of the business enterprise involved
  • whether the contraventions were deliberate
  • whether there was some sort of corrective action taken by the employer
  • whether the employer had exhibited contrition in regard to the actions

Belated apology not a mitigating factor

The employer had attempted to send an apology letter to the employee several months after the termination had occurred whilst proceedings were on foot.

In the court's view, the apology was given too late to constitute a mitigating factor.

Employer found guilty of serious contravention

Whilst the coercion was not successful and the employee was able to resist the pressure to resign, it was considered to be an inappropriate action and a serious contravention to dismiss a longstanding employee with blood cancer in order to avoid paying him his sick leave entitlements.

Court rejects employer's application to suspend penalties

The court subsequently ordered that the amount of $41,500 be paid by the employer to the Consolidated Revenue Fund of the Commonwealth within 90 days of the judgment being handed down.

In doing so the court rejected an application by the employer for the penalties to be suspended, noting that this would be contrary to the purpose of penalties which is to deter such conduct in the future.

Potential for penalties against companies and individual directors

This decision is important for employers to remain mindful that there is the potential for serious repercussions for contraventions of the FW Act and the National Employment Standards.

Employers should be wary that adverse action and unfair dismissal of an employee may not only result in a payout for the employee, but could also result in penalties against the company and individual directors personally.

Implications for employers: treat your employees fairly

It is important to ensure that employees are afforded the appropriate workplace rights and statutory entitlements flowing from their rights.

We recommend that employers consider the following factors flowing from this decision:

  • Where there is a degree of uncertainty as to whether an employee has been terminated or has resigned, we recommend that you obtain a written letter of resignation or provide the employee with written confirmation of a verbal notice of resignation provided.
  • Ensure that employees are provided with their statutory or contractual entitlement to notice of termination or a payment in lieu of notice when terminating the employment relationship.
  • Ensure that employees are treated respectfully and are not discriminated against on the basis of disability, disease or any other prohibited ground.
  • Ensure that you have a code of conduct setting out the company's expectations of workplace conduct.
  • Ensure that your business has appropriate work health and safety, discrimination and harassment policies and that all staff are regularly trained on such policies.

Sarah Hedger
Key Contact:
Kristen Lopes
Workplace relations
CBP Lawyers

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Sarah Hedger
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