Focus: Workplace Relations
10 August 2012
In this issue: we look at a Federal Court decision upholding a finding that adverse action had been taken against an aircraft engineer who made a complaint about his entitlements; an employee receiving workers' compensation for a psychological injury suffered after a negative mid-year review; the Queensland Court of Appeal restraining a salesperson from performing duties for a competitor; and the Federal Court having held that a payment in lieu of notice was consideration for a former CEO agreeing to hold office and, as such, fell within the exception under section 200F(2) of Part 2D.2 of the Corporations Act 2001 (Cth).
- Full Court upholds Qantas adverse action decision
- Workers' compensation following negative performance review
- Court imposes 28-day restraint on insurance sales employee
- Payment in lieu of notice consideration for CEO holding office
In brief: A Full Court of the Federal Court has upheld a Federal Magistrate's decision finding that Qantas had engaged in adverse action against an aircraft engineer who had made a complaint about his entitlements following an overseas posting. Senior Associate Stacey Van der Meulen reports.
How does it affect you?
- It is not necessary that an employer's action single out the employee who has exercised a workplace right in order for it to be adverse. It may be adverse if the employee is one of a group of people that it impacts on.
- An employer's action will be adverse if it alters the employee's position to their prejudice.
- An employee's position will be altered to their prejudice if there is an adverse effect on, or deterioration in, the advantages they enjoyed. This may occur even though an employee suffers no loss or infringement of a legal right. For example, action that reduces an employee's status in relation to their colleagues and upsets them can be adverse action.
Mr Murray was a licensed aircraft maintenance engineer (LAME) employed by Qantas. He was based in Brisbane and a member of the Australian Licensed Aircraft Engineers Association (the ALAEA). Mr Murray was posted to Japan from 4 December 2009 to 16 January 2010. As a result of the hours he worked during that posting, he made a claim for additional payment from Qantas.
Mr Cawthorne, a Qantas employee, was responsible for supporting Australian-based LAMEs posted overseas. It was alleged that, during discussions between Mr Murray and Mr Cawthorne about his claim for additional payment, Mr Cawthorne threatened to withhold future overseas postings from Mr Murray. Two of Mr Murray's colleagues overheard that conversation.
When Mr Cawthorne rejected Mr Murray's claim, Mr Murray initiated the dispute resolution process available under his enterprise bargaining agreement. The next day, Qantas decided to suspend all overseas postings for LAMEs out of Brisbane.
Not long after, Mr Murray unsuccessfully applied for a promotion. He received email notification that he was to have a second interview for the position, but that invitation was later withdrawn, on the basis it had been offered by mistake.
The ALAEA filed an application in the Federal Magistrates Court against Qantas and Mr Cawthorne, alleging that they took adverse action against Mr Murray, having done so with the intent of coercing him into not exercising his workplace rights, in breach of sections 340 and 343 of the Fair Work Act 2009 (Cth) (the Act).1
About a week later, Qantas lifted the suspension of overseas postings for Brisbane LAMEs.
Relevantly, s340 of the Act prohibits adverse action being taken against a person because they have a workplace right, or have exercised or proposed to exercise a workplace right, or to prevent them from exercising a workplace right. Adverse action is taken if an employer dismisses the employee, injures them in their employment, alters their position to their prejudice, or discriminates between them and other employees.
The ALAEA's claim that Mr Cawthorne's verbal abuse during his conversation with Mr Murray constituted adverse action was rejected on the basis that the conversation did not amount to verbal abuse.
However, the Federal Magistrate found that Qantas's decision to suspend overseas postings injured Mr Murray in his employment, even though he was unlikely to be called again during the period in which the suspension operated.
It was also found that Qantas had made an error when inviting Mr Murray for a second-round interview in relation to his application for a job promotion and, on this basis, the claim was rejected.
Section 343 of the Act prohibits coercion. Relevantly, a person must not take, or threaten to take, any action against another person with the intent to coerce them not to exercise a workplace right.
The Federal Magistrate found Qantas's action in suspending overseas postings was intended merely as a slap on the wrist for what had occurred, rather than being an activity intended to prevent Mr Murray from continuing his claim and, on this basis, the conduct did not constitute coercion under the Act.
The appeal decision
Qantas and Mr Cawthorne appealed aspects of the Federal Magistrate's decision.2
The Full Court upheld the adverse action and coercion findings, agreeing with the Federal Magistrate's reasoning.
The Full Court varied the Federal Magistrate's declarations so that they specified the Act's contraventions in more detail, but otherwise dismissed the appeal. The matter was remitted to the Federal Magistrate, for determination of penalty.
In brief: In a recent Administrative Appeals Tribunal of Australia decision, an employer was required to compensate an employee for a psychological injury they suffered following a negative mid-year review. Partner Tim Frost and Lawyer Kelly Lloyd report.
How does it affect you?
- Employees cannot generally make workers' compensation claims for psychological injuries suffered as a result of reasonable administrative action (sometimes referred to as reasonable management action).
- In the federal workers' compensation system, the reasonable administrative action exclusion may not apply if an employee suffers a psychological injury following a review meeting that is not part of a standard employee appraisal process.
- Employers should always take care when preparing for, and conducting, performance review meetings to ensure that employees are treated reasonably, and given a fair opportunity to consider and respond to comments and feedback.
Mr Beasley, a lawyer employed by the Australian National University (the ANU), made a workers' compensation claim for anxiety and depression he claimed to have suffered as a result of bullying and harassment by his supervisors from 2006 to 2009.
During that time, conflict arose between Mr Beasley and his supervisors regarding the classification of his role at the ANU, where he was a senior employment strategies adviser. He insisted that his role involved giving legal advice. However, Mr Beasley's supervisors regarded him as a senior human resources consultant with a legal background.
In August 2009, Mr Beasley met with his supervisors as part of a mid-year review. During the review, he was handed a client evaluation form that was critical of him in areas that he regarded as the ones most relevant to his role: that is the clarity, timeliness and quality of his advice. Mr Beasley had not seen the evaluation before the meeting. The evaluation form had not been prepared specifically for his performance appraisal, but was part of feedback that senior managers sought regarding work done by the Human Resources division of which Mr Beasley was a part. A follow-up meeting was scheduled for 27 August 2009.
Mr Beasley considered the evaluation to be inaccurate. He responded to it during the meeting on 27 August 2009, claiming that he had been 'bullied, harassed, unappreciated, and belittled' throughout his employment with the ANU.
Mr Beasley was diagnosed with a major depressive disorder and did not return to work. The ANU conceded that he suffered from a work-related psychological condition, but argued that the injury resulted from reasonable administrative action it had taken.3
The tribunal held that Mr Beasley's injuries were a result of the August meetings; not a result of earlier conflicts about his role. This meant that the key issue for determination was whether the mid-year review meetings, including the use of the evaluation form, were reasonable administrative action.
The tribunal concluded that the August meetings were not reasonable administrative action and ordered that the employee receive workers' compensation for his injuries. This decision was based on two key findings:
- the August meetings were not part of the ANU's employee appraisal process. The purpose of the non-compulsory mid-year reviews ANU offered were to provide feedback, not to appraise performance. Performance appraisals were to take place in the end-of-year review; and
- even if the mid-year review was administrative action, the meeting was not conducted in a reasonable manner. The tribunal considered that the client evaluation should have been presented as part of a separate process, rather than being a casual reference during a mid-year review. It concluded that while reasonable action does not have to be perfect, it has to be tolerable and fair (and the process that the ANU adopted was found not to be).
In brief: The Supreme Court of Queensland recently granted a limited injunction to restrain a senior salesperson from performing duties for a competitor for the final 28 days of a 12-month restraint, even though they had been employed by the competitor for the majority of the preceding restraint period. Lawyer Emma Reilly reports.
How does it affect you?
- An employer may seek to enforce a post-employment restraint against a former employee at any time during the restraint period.
- An employer can avoid uncertainty about the commencement date of a post-employment restraint by clearly outlining to departing employees their last date of employment and the commencement date and scope of any post-employment obligations.
- An employee who is directed to take garden leave (ie to stay home and not perform their duties) during their notice period will continue to be employed during this period, and should receive their usual salary and other entitlements in the normal way, not at the start of their garden leave.
Ms Tokody commenced employment with AGA, an insurer, in 2000 and was ultimately promoted to the position of Director, Sales and Distribution, Australia and Asia Pacific. During her employment, she was well remunerated and had frequent direct contact with AGA's key clients. She developed a deep insight into those clients' contracts, including how profitable their business was to AGA.
Ms Tokody's employment contract contained a 12-month post-employment restraint that prevented her from (among other things) working in Australia in a business substantially similar to, or in competition with, AGA's business.
Ms Tokody resigned her employment with AGA in July 2011. After a three-month period during which AGA claimed Ms Tokody was on garden leave (discussed further below), she commenced employment with one of AGA's competitors, Cover-More Travel, on 24 October 2011.
In early 2012, AGA commenced proceedings in the Supreme Court of Queensland, seeking an injunction to enforce Ms Tokody's restraint clause.4 Two issues were in dispute:
- when Ms Tokody's employment came to an end (ie when the 12-month restraint period commenced); and
- whether the restraint was unenforceable.
When did Ms Tokody's employment come to an end?
AGA said that Ms Tokody's employment came to an end, and the 12-month restraint period commenced, on 22 October 2011. It claimed that from July 2011 until October 2011, she was on garden leave, following her resignation. AGA pointed to the fact that Ms Tokody did not start work with Cover-More until 24 October 2012 and recorded her employment with AGA on her 'LinkedIn' profile as ending in October 2011.
Ms Tokody argued that her employment had ended in July 2012. She said that AGA had paid her in lieu of notice, which was permitted under her employment contract. She said that her view was consistent with the way AGA had treated her after her resignation (eg by requiring her to do an immediate handover, give back company property, and by paying her three months' pay plus her other accrued entitlements in July 2011).
The court concluded that Ms Tokody's employment had been brought to an end in July 2012.
The restraint's enforceability
The court found that Ms Tokody had developed strong relationships with AGA's key clients, such that (at least in some cases) there was a potential for those clients to reconsider their insurance provider as a result of her change in employment. In assessing the length of the restraint, the court said, it was necessary to consider the time it would take for the advantages that had accrued to her as a result of her customer connections and knowledge of confidential information to diminish to a point where they were no longer worthy of a restraint's protection. In this regard, the court said, Ms Tokody's knowledge of, and personal connection with, AGA's clients would give her an advantage that would last more than 12 months.
The court ruled that Ms Tokody's 12 month restraint was reasonable and granted an injunction to restrain her from performing any duties for Cover-More, even though there were only 28 days of the restraint left to run. However, the court did not require Ms Tokody to leave her employment with Cover-More during the 28-day period.
In brief: The Federal Court has held that a payment in lieu of notice was consideration for a former CEO agreeing to hold office and, as such, fell within the exception under s200F(2) of Part 2D.2 of the Corporations Act 2001 (Cth). Senior Associate Veronica Siow and Lawyer Michelle Metham report.
How does it affect you?
- Part 2D.2 of the Corporations Act requires shareholder approval before a company may give certain benefits to an executive in connection with their retirement (including termination) from office (ie a termination benefit).
- Shareholder approval is not required for termination benefits given under the executive's employment contract as consideration for them agreeing to hold their position, so long as the value of all the termination benefits given to them is less than the limit the Act prescribes (this is normally equivalent to approximately one year of the executive's annual base salary).
- A payment in lieu of notice is a termination benefit, but may form part of the consideration for the executive agreeing to hold that position (and therefore require approval only if the sum of the termination benefit exceeds the statutory cap).
Mr White was the CEO of Forest Enterprises Australia Limited (FEA). He had been employed under various contracts since he commenced employment in 2003, but his most recent employment contract was dated July 2009.
In April 2010, Mr White's employment was terminated without notice, following the appointment of receivers to FEA. The receivers asserted that Part 2D.2 of the Corporations Act prohibited their making a payment in lieu of notice to him unless the shareholders' approval had been obtained.
Mr White contended that the payment in lieu of notice did not require shareholder approval, because it fell within the exception contained in s200F of the Act. That is, since:
- the payment would be made under a contract between the parties as consideration for Mr White agreeing to hold office; and
- the payment, when added to the value of all other termination benefits given to him, fell within the statutory threshold for which shareholder approval was not required.
The Federal Court decided that the payment in lieu of notice was a benefit given to Mr White in connection with his retirement from office.5 The court then considered whether a payment in lieu fell within the exception contained in s200F.
The receivers argued that the 2009 employment contract, which provided for a payment in lieu of notice, could not form part of Mr White's consideration for agreeing to hold the office of CEO, as he had been employed in that role since 2003. However, the court rejected this argument, holding that:
- 'consideration' under s200F meant consideration given 'from time to time'; and
- the payment in lieu of notice under the 2009 employment contract was consideration for Mr White holding the position of director at that time.
The court found that the payment in lieu of notice, together with all other termination benefits that Mr White claimed, would not exceed the statutory threshold set by s200F. Therefore, he was entitled to the payment in lieu of notice without shareholder approval.
- Australian Licensed Aircraft Engineers Association v Qantas Airways Ltd & Anor  FMCA 58 (11 February 2011).
- Qantas Airways Limited v Australian Licensed Aircraft Engineers Association  FCAFC 63 (4 May 2012).
- Beasley and Comcare  AATA 411 (3 July 2012).
- AGA Assistance Australia Pty Ltd v Tokody  QSC 176 (25 June 2012).
- White v Norman; In the Matter of Forest Enterprises Australia Limited (Receivers and Managers Appointed ) (in Administration)  FCA 33 (2 February 2012).
- Tim FrostPartner,
Ph: +61 2 9230 4930
- Peter ArthurPartner,
Ph: +61 2 9230 4728
- Jamie WellsPartner,
Ph: +61 7 3334 3268
- Simon DewberryPartner,
Ph: +61 3 9613 8110