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Significant penalty for adverse action claim against cancer victim

The Federal Court of Australia has penalised an employer and its director a total of $41,500 following the finding that the employer had taken adverse action against one its employees.

Fair Work Ombudsman v AJR Nominees Pty Ltd & Minniti (No 1)

In the substantive matter, the Federal Court heard that the employee, who had been employed for over 9 years, was diagnosed with a form of blood cancer in December 2010.  The day after receiving his diagnosis, the employee informed the employer’s director of his now known medical condition.

At hearing, the employee maintained that from the day he told the director of his condition until the day his employment ended on 3 February 2011, the director undertook a course of conduct designed to pressure the employee to resign from his employment.  Of relevance in this matter was that over his 9 years’ of service, the employee had accumulated some 500 hours of personal leave.

As an example of the course of conduct undertaken by the director, the employee alleged that the director told him that if he resigned, that the director would pay all the money owed to the employee.  The director also offered to write his resignation out for him, or have his wife assist the employee to write it.  The employee alleged that the director then began insisting that he resign, to which the employee indicated that the director should sack him if he wanted him to leave.  The following week, the director then phoned the employee and demanded his resignation to which the employee again refused.

The employment relationship came to an end on 3 February 2011 following a meeting between the employee and the director.  During the meeting an argument ensued and at the conclusion of the argument, the employee was terminated.  At the hearing, it was the director’s position that the employee had resigned of his own volition; however Justice Gilmour rejected the director’s evidence in that regard.  Gilmour J found that not only did the employee not resign as asserted by the director, but that the director accused him of ‘making up’ the illness and threatened to physically remove him from the premises.

Justice Gilmour subsequently found that the employer and the director took adverse action against the employee, being that he terminated the employee’s employment, following the employee’s attempt to exercise his workplace right to take personal leave, and to prevent him from accessing that accrued entitlement.

In addition, Justice Gilmour found that the employer had:

Contravened the National Employment Standards (NES) in terminating the employee without providing the minimum period of notice of termination, or payment in lieu of notice;

  • contravened the NES by failing to pay the employee his untaken accrued annual leave; and
  • taken action against the employee with the intent to coerce him not exercise his workplace right in relation to leave.

The director was also found to have been involved in each of the contraventions and was taken to have contravened the relevant provisions personally.

At this initial hearing, Justice Gilmour opted to leave the question of penalties to be decided upon further submissions from the parties.  However, Justice Gilmour awarded the employee $14,991.13 in damages which comprised the employee’s entitlement to notice of termination and his accrued personal leave as at the date of termination.

Fair Work Ombudsman v AJR Nominees Pty Ltd & Minniti (No 2)

In the second instalment of this matter, Justice Gilmour called upon the parties to make submissions as to what penalty was appropriate given the previously held contraventions of the Act.

Justice Gilmour considered the impact of the contraventions on the employee.  Whilst in the intervening period between hearings, the employee had been paid the awarded compensation, Justice Gilmour considered that it had “been an arduous journey for him through the offices of the FWO…”

Justice Gilmour also noted that the employee was “was coerced and then dismissed at a time when he was most vulnerable…” and “it was particularly upsetting for [the employee] to be accused of malingering by [the director].”  Most significant was Justice Gilmour’s comments that:

“[The employee] suffered financially at the time when he was confronting his serious medical condition. He was about to start chemotherapy. Instead of receiving several months of sick pay that he had accumulated over 9 years of employment, he was dismissed by his employer and paid nothing – not even accrued annual leave (which was payable whether [the employee] had resigned or was terminated). There was no termination pay in lieu of notice, because [the director] wanted to maintain the facade of resignation rather than dismissal. [The employee] had to rely on Centrelink.”

Justice Gilmour noted that the character of the director had been supported by a number of positive references tendered in this matter, but that they needed to be ‘tempered significantly’ by his prior convictions and the conduct of the employer’s evidence in the substantive matter.  Justice Gilmour considered the deliberate nature of the director’s conduct, being that the director was aware that the employer owed the employee some 500 hours of personal leave, and that his actions in attempting to force the employee to resign were nothing less than deliberate attempt to avoid paying those entitlements.

The director did express some remorse and contrition, in that he apologised to the employee for his conduct and he also apologised to the Court for his conduct before and during the trial.  Justice Gilmour accepted that the director was contrite, but that the contrition was proffered very late in the course of the proceedings.

His Honour also considered the adverse publicity associated with the substantive matter and whether it could be considered a mitigating factor in relation to the extent of any penalty to be imposed, stating:

“There has been adverse media coverage of this case which I accept will have had some negative impact on the respondents both commercially and personally. I do not regard this as a mitigating factor. It is a common incident of the kind of unlawful conduct involved in this case … A statutory function of the applicant is to promote compliance with the Act. Publicity of penalty proceedings is intended to deter others from contravening workplace laws.”

In considering the issue of deterrence, Justice Gilmour decided that the genuine contrition shown by the director meant that specific deterrence, being punishment to deter the contraveners from re-offending, was not required in this case.  However, His Honour did make some remarks about the need for general deterrence in this matter:

“General deterrence is directed to ensuring that the penalty will act as a deterrent to others who might be likely to act unlawfully. The penalty should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like-minded persons. If it does not demonstrate an appropriate assessment of the seriousness of the offending, the penalty will not operate to deter others from contravening…The respondents’ conduct in this matter, in dismissing an employee experiencing a serious illness in order to avoid paying his entitlement to personal leave, was objectively serious, and warrants a significant deterrent penalty.”

Taking into account these considerations amongst other factors, Justice Gilmour resolved to impose a civil penalty totalling $35,000 against the employer, with a further $6,500 imposed upon the director.

Implications for employers

This decision and the subsequent penalties imposed, serve as an important reminder that the adverse action provisions remain a widely used avenue for recourse by employees.  They are uncapped compensation provisions and come with the additional threat of civil penalties, which can be as high as $51,000 per offence for corporations and $10,200 for individuals.

This case also serves as a reminder as to the delicate nature of dealing with an employee who is suffering from an injury or medical condition and is unable to work as a result.  Where employers are experiencing difficulties with an ill or injured employee, we strongly recommend that you take legal advice before taking any action that may put you at risk of contravening applicable laws.

Mark Bunch, Partner