This article is part of a regular newsletter. If you wish to receive the newsletter providing information on the latest employee relations news and trends click here and use the “contact us” tab.
My business grows by referrals. I would appreciate it if you would pass my details on to your colleagues, clients or associates who could benefit from my skill set. Defending/Preventing unfair dismissals, policies and procedures, contracts of employment, codes of conduct and more…
This decision has a lot of “wow” factor – not only in terms of the financial cost to the company, but the importance of dealing with issues front-on, including complaints of bullying (in this case 7), the exacerbation of an (unknown to company) mental health condition, monitoring workloads, and the importance of the contract of employment being right first time.
Remembering that the onus is on the employer (within reason) to prove it did nothing wrong (ie the “reverse onus of proof”).Further the “bully” was personally fined $8,000.
Please also note that I have “glossed over” a number of issues due the length of the decision.
Further noting that there is NO income limit for an adverse action claim (and whilst not pertaining to this case, no minimum employment period).
To get this out of the way first, the penalties were made up of:
- Fines of $40,000 to the company and $7,000 for the “bully”.
- The company was ordered to pay the applicant:
- $756,410.00 as compensation in respect of his forgone share options;
- $2,825,000.00 as compensation for his future economic loss.
- $10,000.00 for general damages.
- Damages for breach of contract of $1,590,000.00.
The Fair Work Act 2009 provides for the maximum penalty for a single contravention by the company is $54,000.00 and for the boss $10,800.00. The seven contraventions involving the making of complaints must be grouped together as one contravention for the purpose of assessing penalties.
The applicant in this matter was employed at a publicly listed enterprise software company as State Manager for Victoria on 3 July 2006 until his dismissal 18 May 2016.
At the time of employment, the company was very small and became “very large” due (in part) the good efforts of the applicant.
The company’s reason provided for the dismissal (which was rejected by the court) was poor performance.
However, the applicant (via his QC and assisting counsel) that he was dismissed unlawfully for “making a workplace a complaint”, contrary to s 340 of the Fair Work Act:
- Seven instances of his exercising his workplace rights by making complaints in relation to his employment: in particular, complaints as to his having been bullied (ie marginalising him, stopping him from attending meetings with clients and preventing him from doing his job);
- His proposed exercise of his right to bring legal proceedings under a workplace law;
- His proposed exercise of a safety net contractual entitlement; and
- His having a safety net contractual entitlement.
The court noting that the applicant’s legal team did not press claims that he had been dismissed for other reasons (being his taking sick leave; being temporarily absent from work; and having a mental disability).
Show me the money
With the growth of the company, so was the applicant’s salary with his gross income increasing from $208,932.00 in the 2006/07 financial year to $845,128.00 in the 2015/16 financial year. Most of that increase was attributable to incentive payments; with his base salary increase only from $165,000.00 to $192,000.00 during the same period. He was also provided with share options in 2013, 2014 and 2015.
Personal crisis and ongoing Depression (work/life balance)
Whilst financially things were going very well, in the background he was working very long hours to the detriment of his home life: in September 2010, his 14-year-old daughter became ill with Kawasaki disease, requiring open-heart surgery in January 2011. He did not go to the hospital with her at that time. He had thought it vital to finalise an important deal on behalf of the company before the end of the company’s financial year. This not only left the applicant with feelings of guilt, but directly attributed to chronic depression.
Ironically, the applicant found solace in attending work to “escape the pain”. This also made worse his relationships with his family. In the words of the court:
“[The applicant] identified his feelings of guilt as stemming from his inappropriately having prioritised his work for [the company] over his daughter’s life and health. It is therefore perhaps cruelly ironic that [the applicant’s] evidence is that in order to avoid that distress, work became the one safe place where he could “escape”. He therefore increased his already long working hours.
“Outside of work however, [the applicant] could not escape his grief. He became emotionally closed off from his wife. Predictably, that gave rise to tensions within their marriage. [the applicant] gave evidence [as did an expert witness], which I accept, that at various times the marital relationship had been on the verge of breaking down. The applicant] also experienced repeated thoughts of suicide. On at least one occasion he had taken steps, ultimately not implemented, directed towards that end”.
The company was unaware of the extent of the applicant’s distress
Apart from confirming to his work colleagues from time to time that he remained concerned about his daughter’s health, the applicant was careful not to reveal to anyone at the company the depth of his private turmoil. Being able to focus on the practical problems of work without anyone at the company knowing about his damaged condition allowed him to hide in his safe place, numb to his grief and pain.
Also causing the applicant distress, was separate legal proceedings that he and his daughter were then bringing in which each had claimed damages on the basis that certain medical practitioners who were alleged to have misdiagnosed her had been negligent.
4 November 2015, the applicant saw a psychiatrist, who testified that the applicant confided:
“They [the company] don’t know about my suicidal tendencies but I’ve been told in the past four years that I could have done better. I haven’t been performance managed yet but I have to work longer hours because I get absolutely distracted about my daughter. I’m not efficient. Severe concentration problems. I forget things and I send the wrong emails to people, repeatedly getting into trouble with my boss because I misjudge situations”.
“As a result of his dismissal he suffered a profound mental breakdown. Whether his dismissal caused that breakdown, or whether it was merely a manifestation of his earlier depressive disorder from which he had continued to suffer after his daughter’s illness, is the subject of contested expert evidence to be discussed later. It is however not in dispute that after he was dismissed [the applicant] became, and remains, incapable of ever working again”. [My emphasis].
The applicant’s performance at work does not materially decline notwithstanding his (later diagnosed) depressive disorder
The court did not accept that the applicant’s long established, and only later diagnosed, depressive disorder caused a material decline in his performance at work, citing the performance bonuses provided to the applicant. He also received the “Chairman’s Award” in of 2012, 2013 and 2014.
Serial Complainer = exercising a workplace right
He was always astute to ensure that his contribution to the success of the company be rewarded in monetary terms; to the extent that his boss describing the applicant as being a constant complainer:
“[The applicant] complained from the day he started at [the company]. He complained from day one that the salary that we had offered him and that he had agreed was not enough and I had to change it. He complained about options. He complained about staff. He complained so much. You will see it through all the papers, and the last three or four months … I couldn’t care less about a complaint. All I cared about is his ability to perform, number 1, and number 2, that his behaviours were acceptable. But his complaints were totally irrelevant to the whole thing. And if Behnam had been the right person, he would still be there”.
The court commenting:
“As [the applicant’s boss] evidence implies, I am entitled to be satisfied that had [the applicant] not been a strong performer he would have been given very short shrift. Instead, I infer that [his boss] yielded to [the applicant’s] demands for additional financial rewards because he was a strong performer whose services he wished to retain”.
“I am satisfied that [the company’s] “Open Door Policy” and its “Workplace Bullying Policy” …are not disputed to have been applicable at the relevant time. They provide an explicit basis for the Court to be satisfied that [the applicant] was “able to make a complaint” as he claims he did, inter-alia, about his having been bullied in relation to his employment”.
The court adding:
“The same applies with respect to any complaint [the applicant] made in good faith regarding his contractual entitlements…I respectfully adopt the reasoning of Rangiah and Charlesworth JJ in PIA Mortgage Services Pty Ltd v King  FCAFC 15 at -:
‘Under the general law, an employee has a right to sue his or her employer for an alleged breach of the contract of employment. A suit may be regarded as the ultimate form of complaint. Accordingly, in our opinion, an employee is “able to make a complaint” about his or her employer’s alleged breach of the contract of employment. That ability is “underpinned by” (to use Dodds-Streeton J’s expression in Shea) the right to sue, and extends to making a verbal or written complaint to the employer about an alleged breach of the contract.
‘Further, an employee who alleges that his or her employer has contravened a statutory provision relating to the employment is “able to make a complaint” within s 341(1)(c)(ii) of the FW Act. That right or entitlement derives from the statutory provision alleged to have been contravened. The ability encompasses making a complaint to the employer or an appropriate authority about the alleged contravention, whether or not the statute directly provides a right to sue or make a complaint’”.
The court ultimately finding that the applicant did exercise a workplace right by complaining about his being bullied by one or more other employees of the company or about his safety net contractual entitlements.
The applicant had complained of bullying to the HR department, however the fact that he did not formalise the complaint, it was telling that the HR person who met with the applicant “conceded in their conversation that the conduct he had described to her was unacceptable”.
The court, as previously mentioned, was satisfied that it can make orders compensating the Applicant for loss that he has suffered because of the Respondents’ contravention of the Fair Work Act, finding that there was a clear “causal connection” between that contravention and the various forms of loss suffered by the applicant. These being described in detail as:
- Forgone share options;
- Future economic loss:
“At common law, damages are payable to compensate a person for a loss of future earning capacity where that loss of capacity is caused by reason of an injury which in turn has been caused by the wrongdoer’s negligent act or omission, and the diminution of earning capacity is or may be productive of financial loss: Graham v Baker  HCA 48; 106 CLR 340 at 347.
“Also at common law, the fact that a plaintiff may be predisposed to an injury caused by tortious conduct does not reduce his damages; the tortfeasor must take an injured person as he finds him or her. As Dixon CJ put it in Watts v Rake  HCA 58; 108 CLR 158 at 160:
‘If the injury proves more serious in its incidents and its consequences because of the injured man’s condition, that does nothing but increase the damages the defendant must pay. To sever the remaining leg of a one-legged man or put out the eye of a one-eyed man is to do a far more serious injury than it would have been had the injured man possessed two legs or two eyes. But for the seriousness of the injury the defendant must pay’.
“I am satisfied…that in circumstances in which:
- a person’s capacity to have continued in remunerative employment has been demonstrated over approximately half a decade, notwithstanding their suffering from a depressive disorder; and
- where expert psychiatrists uniformly opine that the person’s dismissal for a prohibited reason has caused a significant aggravation of their pre-existing depressive disorder, with the consequence that they have lost their capacity to work and have a poor prognosis of ever regaining any capacity for remunerative employment in a position for which they would be otherwise qualified;
- the Court is entitled, within the meaning of s 545 of the Fair Work Act, to consider it appropriate to make an order compensating that person for the economic loss he or she has suffered: without any reduction by reason of the person having the pre-existing condition which their unlawful dismissal has aggravated.
- General damages
“At common law damages are payable for pain and suffering, which includes physical pain; mental illness or anguish; loss of enjoyment of life; and loss of the amenities of life.
“Loss of amenities” refers to the destruction or diminution of a faculty or skill that causes “the deprivation of the ability to participate in normal activities and thus to enjoy life to the full and to take full advantage of the opportunities that otherwise it might offer”: Teubner v Humble  HCA 11; 108 CLR 491 at 506 per Windeyer J. Such damages are awarded once and for all. If the damage is or may be permanent, then it has to be assessed for the duration of the applicant’s life. While it is “impossible precisely to translate pain and suffering and the loss of enjoyment of life into money values”, and no amount of money will restore an applicant to her pre-injury position, that is the purpose of an award of such damages. That means that an attempt must be made to assess a reasonable sum, having regard as far as possible to the prevailing standards of the community: O’Brien v Dunsdon (1965) 39 ALJR 78.
“Notwithstanding, there is no “tariff” on damages for pain and suffering. In Planet Fisheries Pty Ltd v La Rosa  HCA 62; 119 CLR 118 (Planet Fisheries) per Barwick CJ, Kitto and Menzies JJ observed at 125:
‘The judgment of a Court awarding damages is not to be overborne by what other minds have judged right and proper for other situations. It may be granted that a judge who is making such an assessment will be aware of and give weight to current general ideas of fairness and moderation. But …[t]he awareness must be a product of general experience and not formed ad hoc by a process of considering particular cases and endeavouring, necessarily unsuccessfully, to allow for differences between the circumstances of those cases and the circumstances of the case in hand’.
“However, I am satisfied [the applicant] is entitled to more than a nominal award in that regard. His dismissal for a prohibited reason was effected only after when, against his doctor’s advice, the applicant] had accepted [his boss’s] request that he to travel to Brisbane in order to attend a meeting for which [his boss]…”
“[His boss’s] representations to [the applicant] to that effect were knowingly false and deceptive. [The applicant’s] termination as then followed in consequence was accompanied within the hour by a company-wide announcement. [The applicant] was instructed not to go back to his office to collect his personal possessions; they would be sent on to him. I am satisfied that those unfortunate events added a not insignificant quantum of humiliation to the predictable shock and hurt that [the applicant] would have suffered simply by reason of the fact of his unlawful termination. I am satisfied that such humiliation became an element in his suicidal ideation immediately following that event.
“I will award [the applicant] $10,000.00 as compensation in the nature of general damages, having regard to the hurt and humiliation he was forced to suffer in consequence of the manner of his unlawful dismissal”.
- Special damages
“…[the applicant] seeks compensation for incurred and future medical expenses from May 2016 to September 2020. He claims $50,000.00 as an approximation of that loss. However, [the applicant] has led no evidence which would entitle me to make any findings as to such claimed special damages. For that reason, I decline to make an order for compensation in those regards”.
This is VERY instructive for practitioners of IR/ER/HR.
The court then turned its attention to the breach of (employment) contract claim:
“In Equuscorp Pty Ltd v Glengallan Investments Pty Ltd  HCA 55; 218 CLR 471, Gleeson CJ, McHugh, Kirby Hayne and Callinan JJ stated (at ) “the ‘general test of objectivity [that] is of pervasive influence in the law of contract’” dictates that “[t]he legal rights and obligations of the parties turn upon what their words and conduct would be reasonably understood to convey, not upon actual beliefs or intentions”.
“That conclusion was restated in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd  HCA 52; 219 CLR 165 at , per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ . In referring to Ermogenous v Greek Orthodox Community of SA Inc  HCA 8; 209 CLR 95 (at ), their Honours said:
‘Although the word ‘intention’ is used in this context, it is used in the same sense as it is used in other contractual contexts. It describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened. It is not a search for the uncommunicated subjective motives or intentions of the parties’.
“Their Honours continued (at ):
This Court, in Pacific Carriers Ltd v BNP Paribas [(2004) 218 CLR 451], has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement”. (Emphasis added)
“Neither party has advanced submissions as to costs. That may simply be because s 570 of the Fair Work Act precludes, save in limited instances, a Court awarding costs in a matter litigated pursuant to that Act. The cases – to which I have only given limited attention – suggest that it is also at least arguable that that prohibition extends to an award of costs with respect to any associated claims, such as the applicant brought in contract in these proceedings (Stanley v Service to Youth Council Inc (No 3)  FCA 716; 225 FCR 357, Melbourne Stadiums Ltd v Sautner  FCAFC 20; 229 FCR 221, Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd  FCA 987).
“Having regard to the above, I will make no order as to costs but will provide for the opportunity for the parties to file submissions if they are advised that they should be entitled to an award of costs”.