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Employment Update – November 2017 – Pregnant employee made redundant awarded compensation and penalties

A recent decision of Judge Vasta of the Federal Circuit Court reiterates the need for a careful and considered approach in making decisions involving pregnant employees.

In this decision it seems that in trying to do what it thought was the right thing, the employer inadvertently (and perhaps ignorantly) fell foul of laws put in place to protect pregnant employees.

Background

The Applicant worked for a prominent public company that operates in the gas industry.  There was no dispute that the Applicant was good at her job.

It is also important to note that the Respondent company had a couple of relevant policies in this particular case, being a Leaving Policy, that dealt with redundancies and provided some safeguards to employees whose positions were made redundant. They then had a paid parental leave policy  that entitled the Applicant to 21 weeks’ pay at her full salary – a significant benefit to her.

Relevantly, the Applicant discovered that she was pregnant in March 2015, and advised the Respondent company appropriately.  In August 2015, she had discussions with her direct manager (‘Manager’) about arrangements for her maternity leave, and the Applicant advised that she hoped to work for the entire term of her pregnancy and that she would finish work on 27 November.

However, the Applicant later became aware of some health complications that meant that she had a high-risk pregnancy.  As a result, she made the decision that she would take annual leave from 6 November, and then use her paid parental leave entitlements after that.

Judge Vasta noted that there was some anxiety on the part of the Applicant as to what would happen when she left, particular with respect to continuity of particular projects that she was working on.  There also appears to have been a number of discussions about how matters would be handled in the Applicant’s absence.

In September 2015, an email was sent out to all employees referencing changes to roles and foreshadowing that as part of a change to processes in the business, some roles would no longer be required at all.  This email was followed by a full review of the Applicant’s division by the General Manager and review team.  As part of the review, it was identified that the Applicant’s customer base was the smallest in Australia.

On 28 September, the Applicant confirmed with her direct manager that 6 November would be her last day at work, and she confirmed she was anxious about being replaced during her absence.  The manager told the Applicant that he would keep her informed of any decisions.  Two days later, another email was sent out to all staff that flagged a reduction in the Applicant’s division by 5-10% over a 12 month period.  The Applicant gave evidence that she did not think her position would be targeted for redundancy given her good performance.  However, the Applicant did make enquiries about who her replacement would be during her maternity leave period.

In late October, the team reviewing the business made a decision that there would be 8 redundancies in the Applicant’s division, including the role of the Applicant.  On 26 October, the Manager communicated with the Applicant and said that they would discuss the maternity leave handover in the following week.  The next day he arranged a teleconference with the Applicant and another employee, who held the same position as the Applicant in the nearest geographical region, and announced that employee would be taking over the Applicant’s role whilst she was on maternity leave.

Judge Vasta noted that this teleconference was interesting given that at that point there had been discussions that the same employee would in fact take over the Applicant’s position on a permanent basis.  Of course, neither the Applicant nor the replacement employee were aware of such discussions.

A meeting was then arranged between the Applicant, the Manager and the replacement employee.  When the Applicant enquired as to the reason for the meeting, she was told it was to discuss arrangements for the maternity leave handover.

At the meeting on 4 November,  the National Executive Manager also attended (without notice to the Applicant).  At the meeting the Applicant was informed that her position was being made redundant.  The Applicant was reassured that this was not a performance related decision.  The Applicant gave evidence that she asked whether it was because she was pregnant and this was denied and she was told it was for cost cutting reasons.

Claim

The Applicant subsequently made a general protections claim, arguing that there was no business case supporting the redundancy of her position.  She claimed that the redundancy was effected because she was about to take maternity leave and so the Respondent company did not have to pay her paid parental leave entitlements.  She claimed that she had been discriminated against because she was female and because of her pregnancy.

Key Aspects of the Decision

It should be noted that the Applicant named both the Manager and the National Executive Manager as Respondent’s to her claim.  The Respondent company argued that the General Manager was the sole decision maker, and this was accepted by Judge Vasta.  Judge Vasta noted that the General Manager may have relied upon information provided to him by the Manager and the National Executive Manager, but ultimately the General Manager made the decision.

Judge Vasta also accepted the Respondent’s evidence that the redundancy was genuine, and that the Respondents’ had discharged their onus to prove that the reason the decision was taken was a business decision and not a decision made because the Applicant was pregnant.  Judge Vasta also noted that the duties that the Applicant formerly performed were still being performed by the replacement employee who had been handed her duties at the time of the redundancy.

Judge Vasta noted that there was significant evidence to the effect that the Manager knew the redundancy had to occur, but did not want it to occur until February 2016, after the Applicant’s child was born.  However, Judge Vasta noted that this option was not ‘palatable’ to the General Manager.  Judge Vasta noted that when questioned about the reasons for the decision, the General Manager denied that the Applicant’s pregnancy played any role in the decision, and claimed that the only factors that influenced the decision were the size of the accounts of the Applicant compared to the accounts held by the replacement employee and that the replacement employee had been with the company for fifteen years, as opposed to the Applicant’s nearly three years of service.

Judge Vasta then turned to consider the timing of the redundancy, which was a significant issue in the context of this decision.

Judge Vasta accepted the evidence of the General Manager that because of the ‘indecent haste’ in which the redundancy had occurred, the Respondent had not observed its own policy that discussed what would occur in redundancy situations.  Judge Vasta noted that because the Applicant’s redundancy date had been brought forward, the Applicant had not received the safeguards of the policy, nor could she rely on the return to work protections afforded to an employee who is on parental leave as provided for in the Fair Work Act 2009.  This meant that the bringing forward of her redundancy to 4 November (as opposed to it occurring with the other redundancies on 12 November), was adverse action.

Judge Vasta noted the General Manager’s frank evidence regarding why the redundancy had been brought forward, and that it occurred because the Applicant was pregnant and had applied for and been granted maternity leave. The General Manager admitted he was aware of the pregnancy and did not want to cause her any more stress than necessary.  Notwithstanding that the General Manager made the decision to bring the Applicant’s redundancy forward because she was pregnant and going on maternity leave,  Judge Vasta said “I do not find that this decision as to timing was made because [the General Manager] was discriminating against the Applicant; in fact, he was doing his best (as incompetent as it may seem in hindsight) to ensure that the Applicant was treated well.”

The Respondent company was ultimately found to be in breach of the general protection provisions, however the Manager and the National Executive Manager were not found to be accessorily liable given that it was clearly the General Manager’s decision to make the Applicant redundant at the time that the Respondent did.

In the more recent decision on compensation and penalty, Judge Vasta found that had the Applicant’s role been made redundant on 12 November as envisaged, then she would have been entitled to be paid out 21 weeks of paid maternity leave, amounting to $36,029.91.  This amount, less $11,826 that she received as a paid parental leave benefit from the Federal Government, was awarded to the Applicant under economic loss head of damage.

The Applicant was then awarded $9,000 in compensation for hurt and humiliation suffered in the process of the redundancy, with Judge Vasta commenting that the manner in which the Applicant was informed of the redundancy was ‘extremely poor’.

Further, in relation to the Respondent’s breach of the Fair Work Act general protection provisions, Judge Vasta stated:

The First Respondent acted genuinely and with what  it thought were the best interests of the Applicant in the given situation.  In hindsight, such actions can be seen as incompetent, ignorant and patronising.  But it was not a deliberate attempt to derive the Applicant of her rights under the FW Act.“

Despite this empathy with the Respondent’s mindset at the time, Judge Vasta determined that a penalty was warranted and ordered that the Respondent pay a $20,000 penalty in light of its breach of the Act.

Judge Vasta also determined that the penalty should be paid to the Applicant, as opposed to the community at large.

Lessons for employers

In this decision, the Respondent company tried to ‘ease the pain’ of the Applicant by bringing her redundancy forward so that it could take effect before her maternity leave was due to commence.  The evidence suggested that this decision was made to lessen the effect or stress of the decision on the Applicant.  However, by bring the redundancy forward, the Respondent clearly took adverse action against the Applicant because she exercised a workplace right (being that she applied for and was granted maternity leave).

By bringing the redundancy forward, the Employer also failed to consider the impact this would have on the employee’s entitlement to protections under its redundancy policies and also the return to work protections in the Act.

It did not matter that the Respondent took this action with the best of intentions, because the fact remains that the action constituted a breach of the Act.

Handling pregnant employees, or employees returning from parental leave can be complex for employers.  There are various pieces of legislation that provide protection to employees in these circumstances, and employers need to understand the full gambit of their obligations to such employees.

It is critical that employers understand their risks under the general protection provisions and applicable discrimination legislation before they take any adverse steps against a pregnant employee, or an employee that is returning from parental leave.  Employers should also consider the protections afforded to employees on parental leave under the Act, and should consider the effects of their decision on those protections as they relate to the affected employee.  Aitken Legal strongly recommends obtaining legal advice early on in the decision making process, and prior to engaging in any discussions with the pregnant/returning employee about decisions to be taken relative to their position.

Chris Campbell, Legal Director