This adverse action appeal decision remains a stark reminder for employers and HR of the importance of having proper processes in place for managing employees and bullying complaints.
An appeal to overturn a decision awarding a record amount in damages to a former employee of an ASX-listed software company has been allowed, with a new trial ordered, finding the primary judge failed to provide adequate reasons for the decision and did not address all the evidence.
Last year, the employee had successfully claimed that TechnologyOne Ltd had taken adverse action against him when it dismissed him after he’d made complaints about being bullied by the CEO and other high-level management staff.
The initial decision resulted in a $5.2 million payout to the former executive in compensation and general damages.
However, the employee then initiated his own cross-appeal, claiming the multi-million payout was “manifestly inadequate” (keep in mind, this was the largest court-ordered payout on record for this type of claim!).
The Federal Court has since overturned the case and ordered a retrial, the date of which is yet to be determined.
Commenting on the matter in a press release, TechnologyOne’s CEO, Edward Chung, and Executive Chair, Adrian Di Marco said: “We are pleased that the original judgment in this case has been overturned… as has been previously reported in the press, this was a senior executive earning close to $1 million per year, who no longer had the confidence of the board and his fellow executives and against whom serious allegations had been raised by staff, and we took action to address [this] in 2016.”
The key takeaways from the appeal
In its decision delivered on 5 August 2021, the Full Court found that the judge in the earlier case had not provided adequate reasons for his decision and that he didn’t properly consider the evidence before the Court.
It was also found that he had potentially miscalculated the employee’s contractual entitlements in determining the payout.
A new trial was necessary to “evaluate the nature of the complaints and the circumstances in which they were made”.
To summarise, it was found that the judge also failed to:
- Answer the essential question of whether TechnologyOne had established that it had not taken adverse action (the employee’s dismissal) in contravention of the Fair Work Act.
- Consider evidence put forward by TechnologyOne (which pre-dated any bullying complaints by the employee) as the true reason for the employee’s dismissal, including evidence that:
- the employee’s performance had been dropping with respect to reaching financial targets;
- there was poor team culture within the team managed by the employee; and
- the employee had poor relationships with his direct managers.
- Properly consider whether the complaints made by the employee were a substantial or operative factor in the CEO’s decision to terminate the employee’s employment.
- Correctly quantify the amount owed to the employee under his contract of employment in respect of incentive payments.
(If you’re looking for a legal refresher on what constitutes an adverse action claim, you can find that here).
The evidence put forward by TechnologyOne to substantiate its reasons for dismissal included a series of emails dating back as far as 2014.
The emails were between the CEO and the employee, and raised issues with the employee’s refusal to take responsibility for financial forecast failings and poor management of his team, including serious allegations that the employee was bullying members of his own team.
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How did the adverse action claim eventuate?
If you missed HRM’s 2020 coverage on the original case, here’s a quick refresher (or you can view the full article here).
The employee had been working as a senior manager for TechnologyOne for almost a decade between 2006 and 2016. He was generously paid for his role and experience, with his gross income increasing from over $200,000 to over $800,000 during his employment, thanks to the company’s senior manager incentive payment scheme.
In the last few years of his tenure, his personal life and relationships with other managers began to suffer.
The breakdown resulted in the employee making a number of complaints that he was allegedly being bullied by senior executives at the company. He claimed he was being undermined in his role, that his position was threatened, and that he was verbally abused and sworn at in front of other staff.
The employee claimed he was experiencing increasing marginalisation within TechnologyOne as his complaints continued to go without investigation by HR, according to him.
In 2016, he was summarily dismissed by the company’s CEO on the ground that the CEO had “lost faith that he was the right person to grow the business”.
In 2020, the employee commenced proceedings in the Federal Court against TechnologyOne and its CEO personally, claiming adverse action had been taken against him because of his complaints.
In turn, it was argued by TechnologyOne and the CEO that the employee was dismissed because his performance had deteriorated, with the defendants maintaining that he had not been bullied.
In the original case, the Court accepted that the employee had made bullying complaints. The Court rejected the CEO’s reason for the employee’s dismissal and TechnologyOne had no evidence to prove that the employee’s dismissal was not motivated by his bullying complaints.
TechnologyOne and the CEO received penalties of $40,000 and $7,000 respectively for breaching adverse action provisions under the Fair Work Act.
The employee was awarded $5.2 million in compensation for foregone share options, breach of contract, future economic loss, general damages, and bonus payments.
This decision was appealed by TechnologyOne and the CEO, with the employee making a cross-appeal in January this year, claiming the primary judge should have awarded him more in compensation, as the judgment was incorrect in assessing his future loss of earnings on the basis the claim was confined to 30 September 2020 and should be extended to a future retirement in 2027.
Why is this important for HR?
As if employers weren’t busy enough managing employees remotely and in challenging circumstances, this case provides a timely reminder of the care employers and HR practitioners should take when handling employee complaints and dismissals, especially when it comes to evidencing processes and decision-making.
To ensure best practice:
- Develop tailored training for HR and senior management teams to prevent, identify and respond to workplace bullying, avoid unreasonable behaviour and manage psychological risks and workplace culture.
- Review your bullying policy and complaints processes to ensure your business has a thorough structure in place for processing and addressing employee complaints.
- Establish methods for recording the decision-making processes of those responsible for terminating employees. A decision-maker may later need to justify, with evidence, that their decision was for genuine reasons.
- Keep clear records and retain any information or correspondence relating to employee performance, culture and management issues. In this particular case, the emails that corroborated the CEO’s reasons for the employee’s dismissal played a key role.
What happens next?
We can expect to see a re-trial of the case early to mid-next year in the Federal Court. The extent to which the outcome will be different remains to be seen. There is still every chance the Court may reach a similar finding to the first decision, or perhaps award even more in compensation, once all the evidence is considered as part of the new trial. Watch this space.
Aaron Goonrey is Partner and Bianca Banchetti is a Lawyer in the Workplace Relations & Safety team at Lander & Rogers. Emma Dann, law graduate, also contributed to this article.