Strictly speaking, it is not unlawful to make an employee redundant whilst they are on parental leave. However, employers may find themselves in hot water following a redundancy if the employer’s reasons for doing so are found by a Court to be:

  • because the employee exercised a workplace right (e.g. the right to take parental leave or request flexible working arrangements); or
  • based on a prohibited ground of discrimination (e.g. family responsibilities).

In this article, we:

  • examine the recent Federal Circuit Court decision in Heraud v Roy Morgan Research Ltd [2016] FCCA 185 (Roy Morgan) where an employer was found to have engaged in adverse action when it made an employee’s position redundant whilst they were on parental leave;
  • consider another recent decision that came to the opposite conclusion in similar circumstances; and
  • discuss some practical tips to keep your organisation out of the ‘parent trap’.

BACKGROUND - ADVERSE ACTION IN A NUTSHELL

Under Part 3-1 of the Fair Work Act (FW Act), an employee may be protected from dismissal or for any other adverse action, such as a demotion or selection for redundancy, if they are able successfully to argue that a reason for the action was:

  • because they exercised (or proposed to exercise) a 'workplace right' [1] (e.g. the right to take parental leave); or
  • because of a 'prohibited attribute' (e.g. pregnancy).

The case law in this area has confirmed that:

  • the ‘workplace right’ or ‘prohibited attribute’ does not have to be ‘the main’ or only reason for a claim to succeed, it just needs to be one of the reasons;[2] and
  • where an employee has established that they suffered some form of adverse action (and they allege that a reason for this was the exercise of a workplace right) the employer bears the onus of proving to the court that the exercise of that workplace right was not the reason, or one of the reasons, for the alleged ‘adverse’ action.[3]

THE FACTS OF ROY MORGAN

  • Ms Heraud was the National Operations Director for Roy Morgan.
  • In September 2013, Ms Heraud took 39 weeks’ maternity leave and was due to return to her job in July 2014. 
  • Between December 2013 and January 2014, Roy Morgan suffered a significant decrease in revenue due to the loss of major clients and the entry of a new direct competitor into the market.
  • On 5 May 2014, the employer advised Ms Heraud that an appropriate redeployment option for her was within the newly created Research Centre.
  • On 7 May 2014, Ms Heraud emailed her request for flexible working arrangements (FWA) to her employer.
  • The HR Director then prepared a redundancy proposal in the first half of May 2014, recommending that the employee’s position be made redundant and that the proposed date for the redundancy be brought forward:

    It is proposed that the role is made redundant at the end of July 2014.  However, (the Applicant) has requested a FWA to commence 2 July 2014 with a RTW proposal of 20 hours p/wk. Given this, it is most sensible to maintain Euan [the maternity leave replacement employee] in the role in an acting capacity and to make the role redundant now, so that we can discuss redeployment opportunities with [the applicant] that might best suit her FWA request. [Court’s emphasis].[4]
  • On 20 May 2014, Roy Morgan informed Ms Heraud that the Research Centre positions would no longer be offered to her and that her role would be formally made redundant.
  • On 27 May 2014, Roy Morgan responded to Ms Heraud’s request for FWA stating that Roy Morgan would not be able to approve the request, as it did not know which role she may or may not be undertaking.
  • On 27 June 2014, Ms Heraud’s employment was terminated.

THE EMPLOYEE CLAIMS

Ms Heraud made an application under Part 3-1 of the FW Act alleging seven different forms of adverse action by Roy Morgan. These included that it had engaged in adverse action (e.g. failing to consult with her, not returning her to her role and terminating her employment), because of prohibited reasons/workplace rights (e.g. family responsibilities, pregnancy and the right to request parental leave/FWA).

THE COURT’S DECISION

The Federal Circuit Court held that the employer engaged in adverse action in relation to three of the seven allegations, namely:

  • in deciding not to return the employee to her pre-parental leave position;
  • in deciding not to make any research positions available (after creating an expectation that the employee would be redeployed); and
  • in terminating the employee’s employment for the reason (or reasons including that) she had requested FWA.

The Court expressly noted that:

  • the HR Director and General Manager of Operations were no longer employed by Roy Morgan (noting that the hearing was heard over one year after Ms Heraud’s employment was terminated);
  • Roy Morgan provided no explanation as to why both decision-makers were not called to give evidence;
  • Roy Morgan provided no other evidence in relation to the decisions made by the relevant parties; and
  • the absence of any evidence in relation to those decisions meant that Roy Morgan had failed to discharge the reverse onus.

The matter is listed for a further hearing in April 2016 when the appropriate penalty and relief will be determined.

THE COFFEE PROJECT CASE

Of course, not all claims related to an employee’s parental status will succeed, as is evidenced by the decision in Scullin v Coffee Projects (Australia) Pty Ltd [2015] FCCA 1514 (Coffee Projects).

THE FACTS

In Coffee Products:

  • In 2012-13 Mr Scullin took 12 months’ unpaid leave to care for his newborn twins.
  • Mr Scullin mistakenly took unpaid leave rather than parental leave because Coffee Projects’ Parental Leave Policy stated that to take parental leave, he had to be ‘the child’s primary care giver’ (compared to the FW Act requirement that the employee ‘has or will have a responsibility for the care of the child’).
  • Following Mr Scullin’s return from unpaid leave he was advised that he could continue to be engaged by Coffee Projects, but only on a part-time/casual basis.

THE CLAIMS

Mr Scullin made a number of claims against his employer, including alleging that the change to his role (to part time/casual) constituted adverse action, and that Coffee Projects had breached the National Employment Standards under the FW Act by not providing him with unpaid parental leave and failing to return him to his pre-leave position.

THE DECISION

Unlike Roy Morgan, in Coffee Projects the employer was able to:

  • discharge the reverse onus by requiring the HR Advisor and other decision-makers to provide evidence and be cross-examined in Court as to why the relevant decisions were made; and
  • satisfy the Court that the reasons for the decision to change Mr Scullin’s employment to part time, was not because the employee exercised his workplace right to take parental leave but because of a misunderstanding as to entitlements and a misapprehension that a new contract needed to be issued.

Notably, while Coffee Projects was not found to have engaged in adverse action, it was found to have breached section 83 of the FW Act by failing to recognise Mr Scullins’ entitlement to unpaid parental leave and to return him to the same position following his return from ‘parental leave’.  Mr Scullin was awarded almost $170,000 to compensate for these failures.

PRACTICAL MATTERS

Whether you will win or lose an adverse action case will depend on the evidence of your decision-makers

The Roy Morgan and Coffee Projects decisions clearly demonstrate the importance of careful selection of decision-makers and ensuring that you have substantial evidence from them and/or their contact details if/when they leave your organisation.

Make sure your policies are up to date

Coffee Projects also serves as a timely reminder that it is important to ensure that your policies and procedures have been updated to reflect the current state of the law.

CORRS’ TIPS TO AVOID ADVERSE ACTION EXPOSURES

To discharge the reverse onus and defend adverse action claims:

  • Prepare for the decision-making process
    • Carefully select your decision-makers
    • Make sure your decision-makers are aware of their obligations and responsibilities and your organisation’s potential liabilities
    • Make sure your decision-makers take notes of meetings/record the reasons for their decisions
    • Where possible, limit the number of decision-makers
  • Manage the claim
    • Collate the evidence  early (i.e. obtain evidence as soon as the claim comes in)
    • Keep in contact with decision-makers and other potential witnesses to ensure that you can get access to them if you need to later on