Adverse action: could you be personally liable?

September 29, 2015

The Informant: Issue 9

HR Managers are frequently called upon to implement a range of business decisions likely to impact employees. From restructures to performance management, recruitment to termination, ultimate decision making authority is often passed ‘down the line’ for the HR Manager to action.

When this occurs without incident it could be a sign of good management, but what happens if the HR Manager knows the decision will contravene the Fair Work Act or other workplace laws and presses ahead regardless? Worse yet, what if the HR Manager has no idea that the conduct is unlawful and simply follows the directions of senior management?

A recent case in the Federal Circuit Court has highlighted the personal risk HR practitioners may face in implementing everyday business decisions with two former HR Managers being fined $3,500 each after it was found that they had engaged in adverse action against an employee who had exercised his right to freedom of association.

Background

The case was initiated by the Director of the Fair Work Building Industry Inspectorate amidst allegations that the employer and three of its managers had taken adverse action against a former employee.

In September 2008, the employee was engaged as a construction worker on a project for the employer and his employment was initially covered by an enterprise agreement. At the employee’s request, he was subsequently appointed to the position of Safety Officer, which attracted the payment of an annual salary. As a result, the employee ceased to be covered by the enterprise agreement. When the project came to an end, the employee was reassigned to another work site, however he continued to be employed in the role of Safety Officer and was paid the same salary.

These employment arrangements continued until February 2010 when the local union delegate became aware that the employee had cancelled his union membership. The delegate subsequently made a complaint to representatives of the employer regarding the employee’s union status and the apparent lack of consultation with the union prior to the employee’s appointment to a salaried position.

Following the complaint, a meeting was held between the employer’s Operations Manager and two of its HR/ER Managers. During this meeting, a decision was made to change the employee’s status from a salaried employee to a wage-based employee subject to the terms of a new employment contract. The employee was asked to attend a meeting where he was presented with documents requiring him to resign from his position as Safety Officer. He was then provided with a termination record and was re-engaged under the employer’s enterprise agreement.

The decision

Following a hearing of the case in November 2013, Judge Manousaridis of the Federal Circuit Court found the employer had taken adverse action against the employee even though the employee was financially better off under the terms of the enterprise agreement.

The Court held that the ER and HR Managers had been involved in the contravention after acting on directions from the Operations Manager, despite having ‘a choice [as senior members of the business] of not implementing the decision’¹. In doing so, the Managers contravened s346 of the Act, and were found to have taken adverse action against the employee for the ‘substantial and operative factor’² of his decision to relinquish his union membership.

In determining the HR and ER Managers’ penalty in August 2015, the Court observed that the employee was particularly vulnerable as a result of his ‘shyness, limited education and lack of understanding’³ of his employment situation. While the employee had not suffered any financial detriment, the contravention of the Act was found to have occurred knowingly and deliberately in order to convince the employee to abandon his employment contract and coerce him into signing another. The Managers were therefore personally liable under section 550 of the Act (which imposes liability on any person ‘involved’ in a contravention of the Act) as they had participated in the unlawful conduct.

In imposing a penalty of $3,500 against each of the Managers, the Court indicated its intention to send a message of “general deterrence to deter persons in subordinate positions from complying with directions from [their] superiors to engage in conduct that may involve contraventions of the [Act]”⁴. The employer was also fined $25,000 for engaging in ‘deliberate and concerted’⁵ conduct with a vulnerable employee which was, according to the Court, serious enough to warrant a higher penalty.

What does this decision mean for you?

While section 550 of the Act has not frequently been used to prosecute individuals involved in a breach of the Act, it certainly is a developing area of the law which has the potential to expose HR practitioners and other managers, to personal liability for penalties of up to $10,200 per offence. Care must be taken when making and implementing any decision that results, knowingly or unknowingly, in a contravention of the Act and you should seek further advice if you are unsure about the implications of the decision you are about to implement.

Are you concerned about your personal liability when making important decisions in your HR role? Would you like to discuss how you can mitigate your personal risk when terminating employees? Please call us on (02) 9922 5188 or email us at info@fcbgroup.com.au.

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1 Director of the Fair Work Building Industry Inspectorate v Baulderstone Pty Ltd & Ors [2015] FCCA 2129 at 58

2 Director of the Fair Work Building Industry Inspectorate v Baulderstone Pty Ltd & Ors [2014] FCCA 721 at 42

3 Director of the Fair Work Building Industry Inspectorate v Baulderstone Pty Ltd & Ors [2015] FCCA 2129 at 25

4Director of the Fair Work Building Industry Inspectorate v Baulderstone Pty Ltd & Ors [2015] FCCA 2129 at 58

5 Director of the Fair Work Building Industry Inspectorate v Baulderstone Pty Ltd & Ors [2015] FCCA 2129 at 15