The $5.2 million question: employer hit with record adverse action order

The Federal Court has handed down what may well be the largest payout ever in an adverse action claim under the Fair Work Act 2009 (Cth) (FW Act), finding that a senior employee was dismissed for making complaints about bullying.

Importantly, the case demonstrates the power of the reverse onus of proof in adverse action claims, with the court finding that the FW Act created a presumption the employer had acted for an improper purpose, and the employer had not proved otherwise.

Roohizadegan v TechnologyOne Limited (No 2) [2020] FCA 1407

 

Ready Players One, Two and Three

The applicant in this case, Mr Roohizadegan, was employed by TechnologyOne Limited (TechOne) as the company’s State Manager for Victoria in 2006.

The bulk of Mr Roohizadegan’s remuneration was in the form of incentive payments – in the 2015/16 financial year he was paid a total of $845,128.00, despite a base salary of only $192,000.00. Mr Roohizadegan’s performance was also rewarded with share options in 2013 and 2015.

TechOne asserted that up until 2014, Mr Roohizadegan’s performance had been highly beneficial to the business. Around 2014, however, the chairman of TechOne began to have doubts that Mr Roohizadegan was the right person to “take the business forward”.

In 2016, a number of issues had been brought to the fore in relation to Mr Roohizadegan’s performance, namely that:

  • licence fees in the region under his supervision were not growing;
  • concerns had been raised by Mr Roohizadegan’s team, which was described as a “team in crisis”; and
  • Mr Roohizadegan had been unable to work well with three different managers in a two-year period.

There were also several allegations levelled against Mr Roohizadegan relating to his interactions with employees and executives of TechOne.

On 18 May 2016 the chairman terminated Mr Roohizadegan’s employment for reasons of poor conduct alleged against him.

 

A glitch in the matrix

The issue that presented itself for TechOne in this case was that, between 3 February 2016 and 15 May 2016, Mr Roohizadegan had made seven complaints of bullying against his superiors.

The court, and TechOne, accepted that these were “complaints or inquiries in relation to (Mr Roohizadegan’s) employment” and therefore a “workplace right” within the meaning of the FW Act.

TechOne argued that the chairman had made the decision to terminate Mr Roohizadegan’s employment on 26 April 2016, before he became aware of the breadth of those complaints; after that point, so ran the case for TechOne, the question was merely one of timing.

The court, however, was not convinced of this argument, as the evidence of the chairman himself, and others, indicated that the chairman was attempting to reach a “win-win” scenario in which Mr Roohizadegan’s employment could continue, up until approximately 12 May 2016.

However, on 12 May 2016 a further incident, generating a further bullying complaint from Mr Roohizadegan, occurred, at which point the court found that the chairman decided to abandon his efforts to salvage Mr Roohizadegan’s employment and follow through with the decision to dismiss him.

 

The statutory presumption

Under the Fair Work Act 2009 (Cth), in order to succeed in an adverse action claim such as that brought by Mr Roohizadegan, the applicant (generally, the employee) need only establish a prima facie case that:

  • they had been the subject of adverse action (such as dismissal);
  • they had exercised a workplace right (such as making a complaint or inquiry about their employment); and
  • that the adverse action was because of their exercise of the workplace right.

Because the mind of a decision maker can be hard for an applicant to establish, the FW Act creates a statutory presumption that the adverse action was taken, in whole or in part, because of the reasons alleged.

It then falls on the respondent (the employer and, usually, the individual decision maker) to disprove this presumption.

Importantly, the statutory presumption means that the employer does not need to prove what was in their mind; instead, they need to prove what was not in their mind when making a particular decision to take adverse action.

 

What went wrong for the employer?

TechOne’s case rested on two essentially two propositions:

  • that the chairman was the sole decision maker in relation to Mr Roohizadegan’s dismissal; and
  • the decision to terminate Mr Roohizadegan’s dismissal was made at a meeting of TechOne’s executive team on 26 April 2016.

As might be appreciated, there is a natural tension between the chairman being the sole decision maker, and the decision being made in the forum of a meeting.

It also did not assist TechOne that the court found the chairman to be a non-credible witness, which meant that the court treated much of the chairman’s evidence with a hefty grain of salt and instead turned to other witnesses to determine what his decision-making process was.

This included cross-examination of TechOne’s witnesses by Mr Roohizadegan’s legal representatives, resulting in what the court described as “excruciatingly humiliating” concessions by some of those witnesses, including TechOne’s human resources manager.

The reason given for Mr Roohizadegan’s dismissal – the various complaints made against him by his direct reports – was relied on by TechOne as being the “true” reason for dismissal. However, this was undermined by evidence that the chairman had doubts about whether TechOne could in fact terminate him on this basis, with the court ultimately finding that at the time of dismissal the chairman had “no actual belief in the truth” of those complaints.

This consequently led the court to reject the chairman’s assertion that Mr Roohizadegan was dismissed because of the complaints against him, and there was no other evidence to support the chairman’s assertion.

The court therefore ultimately concluded that TechOne had terminated Mr Roohizadegan’s employment because of his exercise of a workplace right.

 

The size of compensation

The compensation awarded to Mr Roohizadegan is truly exceptional, and reflected the various elements of his remuneration package lost because of his dismissal.

The pecuniary penalties awarded amounted only to $47,000, divided between TechOne ($40,000) and the chairman ($7,000).

Beyond this, the compensation awarded included:

  • $756,410 as compensation for foregone share options;
  • $2,825,000 as compensation for future economic loss;
  • $10,000 as general damages; and
  • $1,590,000 for an associated claim for breach of contract.

Mr Roohizadegan was also awarded pre-judgement interest on this amount, to be determined at a later date.

 

Three critical lessons for employers

This case should serve to remind employers of three critical facts.

First, actions under the FW Act are not limited to lower-level employees; while senior executives may, by virtue of their salary, be precluded from bringing an unfair dismissal claim, this is no bar to those persons accessing the adverse action provisions of the Act. This also means that significant compensation payments can flow from unsuccessfully defended actions.

Second, this case demonstrates the power of the statutory presumption in adverse action cases. Mr Roohizadegan did not prove that he was dismissed for a prohibited reason; TechOne failed to prove that he wasn’t. Having sufficient credible evidence to rebut the statutory presumption is crucial for employers to effectively defend such cases.

Finally, the court noted in passing that there may have been, objectively, a valid reason for the termination of Mr Roohizadegan’s employment; as the complaints against him were never investigated, this will never be known. However, in the context of an adverse action claim, this is irrelevant – it is enough that the adverse action is motivated, even in part, by the prohibited reason.

If your business has any questions or concerns arising out of the matters discussed in this article, or if you would like to know more, please contact NRA Legal on 1800 572 679.