Making an employee redundant whilst on parental leave

August 16, 2018 11:18 am

This case shows that whilst there was a genuine redundancy, the employer’s decision to rush the make the employee redundant earlier, without the proper advice and guidance from its HR department, led to a finding of adverse action. “Blissfully unware” of the employer’s obligations under the Fair Work Act 2009 (FW Act) and its “indecent haste” led the Federal Circuit Court to award an employee $54,842.99 in damages, in addition to what the Applicant was already paid out by the Respondent company on termination, for economic loss, pecuniary damages and hurt, suffering and humiliation. 

FACTS

The Applicant began working with the Employer in March 2013. Some 2 years later, in March 2015, the Applicant discovered that she was pregnant. She informed her superiors at the Respondent company at the appropriate time and her leave was eventually approved to begin on 6 November 2015. On 4 November 2015, the Applicant’s employment was terminated.
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The Respondent company claimed that the termination was as a result of a redundancy whereas the Applicant claimed adverse action because the she was pregnant and was about to take parental leave. The Applicant has made this claim pursuant to s.361 of the FW Act which obliged the Respondent company to prove that they did not take the adverse action because of this prohibited reason.

HELD:

The Applicant had a workplace right to take maternity leave and she exercise that right. The dismissal of the Applicant was held to be adverse action.

Did the Respondent discharge the onus to prove that the adverse action was not taken for a prohibited for a prohibited reason?

Mr Newnham, the General Manager and ultimate decision maker gave clear and unequivocal evidence as to what his reasons were for making the decisions that he did. Consistent with what the High Court said in Barclay [1], his evidence would have been sufficient to discharge the onus.

However, Judge Vasta considered the timing of the date when the termination was to take effect as also being relevant based on the claim pleaded by the Applicant.

The evidence made it very clear that there was a timeline for the redundancies to be made. There were to be 8 redundancies made nationwide (2 of these in Queensland, including the Applicant) and all redundancies would occur on 12 November 2015. Both Mr Newnham and the Second Respondent said that if the Applicant were to be made redundant on this day, this would mean that she would have had to be brought back from her maternity leave to be told. Neither of them felt that this was in the best interests of the Applicant and that it would be better for this to occur before the Applicant went on maternity leave. Both Mr Newnham and the Second Respondent were, however, blissfully unaware of the “return to work guarantee” provided for under section 84 of the FW Act.

If the redundancy was carried out on 12 November 2015, as was the case with the other 7 redundancies, the Respondent company would have been in breach of section 84.

There was a great rush to have the redundancy occur on 4 November 2015. Because of the “indecent haste” with which this redundancy occurred, the policy of the Respondent company was not observed.

Notwithstanding that Judge Vasta found that there was a business case for the redundancy of the Applicant, it was a redundancy that should have been made on 12 November 2015. Such a date would have enabled the policy of the Respondent company to have been put into effect. There is no evidence that the policy was not put into effect in respect of the other 7 redundant employees.

There are a number of other consequences for the Applicant because of the date of her redundancy was brought forward. This meant that the Applicant did have the benefit of the safeguards of the redundancy policy of the Respondent company. More importantly, it meant that she could not rely upon the protection of s.84 of the FW Act. These consequences amount to the Respondent company “altering the position of the Applicant to the Applicant’s prejudice” as such is defined in s.342 of the FW Act. The bringing forward of the date of redundancy was held to be adverse action and a breach of s.340 of the FW Act.

Key considerations for Employers:

  1. An employer is entitled to terminate the employment of an employee on parental leave as long as the termination is for a genuine reason
    • Business decisions are made every day and there will always be others who have a contrary opinion.
    • In this case, whilst there was a genuine redundancy, the Judge found that the Applicant should have been made redundant by the Respondent company on 12 November 2016. By bringing forward the date by 8 days, she was deprived of her right to paid leave and this was a prohibited reason.
  2. Watch the paper trail
    • Employers need to be mindful that documentary evidence about restructures and redundancies can later become discoverable in litigation, notwithstanding the confidentiality and commercial sensitivity claimed over such documents. An option to protect confidentiality is to create such documents under legal professional privilege in anticipation of litigation by instructing external lawyers, especially where decisions involve complex legal issues or likely to be challenged. Employers need to be aware that commercially sensitive documents can also be the subject be the subject of notices to produce or discovery – even involving third party contracts if the content of such documents were relied on to terminate an employee’s employment.
    • In this case, the Second Respondent signed a confidentiality 20 October 2015 to the effect that he could not divulge what was occurring in these discussions. This was important because when one looks at the email correspondence between the Applicant and the Second Respondent from this day onwards, it was obvious that the Second Respondent had been less than frank with the Applicant. 
  3. Are there multiple decision makers involved?
    • Employers need to be aware of the “decision making chain” and their applicable internal delegations of authorities/ approval matrix, where recommendations and/or endorsements can be made along the way for prohibited reasons thereby influencing or tainting the final decision
    • In this case, the Applicant joined the Second and Third Respondents as parties to the litigation and claimed that they were the decision makers and accessories (in liability).
    • The Judge held that the Second and Third Respondents superior Mr Newnham was the ultimate decision maker and found no accessorial liability.    Whilst the general manager (the Second and Third Respondents’ superior) was held to be the ultimate decision maker in this case, email correspondence etc can be discoverable and show the involvement of others in making a decision. 
  4.  Has the employer complied with legislation and its own policies?
    • The Respondent company had policies setting out extensive consultation and notification requirements, which it did not comply with. The managers charged with the restructuring were “blissfully” unaware of the company’s statutory obligations in relation to parental leave.  The Court was highly critical of the employer’s failure to obtain proper advice from its HR department. Whilst Judge Vasta found that the Respondent may have acted genuinely– he held that with the benefit of hindsight – such actions could be seen as “incompetent, ignorant and patronising”.
    • It was the employer’s evidence that the bringing forward of the date of redundancy was to prevent the situation where the employee would have to been brought back from her maternity leave to be told she was being made redundant.  Whilst the upper management acted genuinely and with what they thought were the best interests of the Applicant in the given situation,  it led to an adverse finding that the date of her redundancy was brought forward by 8 days because of a prohibited reason.
    • Pecuniary damages and damages for hurt, suffering and humiliation were awarded.

[1] Board of Bendigo Regional Institute of Technical and Further Education v Barclay (2012) 248 CLR 500 [45]

See Power v BOC Pty Ltd [2017] FCCA 1868 (1st Decision re adverse action) and Power v BOC Pty Ltd [2017] FCCA 2387 (2nd Decision re award of damages)

For further information, please contact Serena Billing, Director on 0438197331.

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