Australia: 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.

For more information, please contact:

Richard Ottley, Partner
Phone: +61 2 9233 5544
Email: rbo@swaab.com.au

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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