This decision of the Full Federal Court confirms the first instance decision in Ramos v Good Samaritan Industries (No 2) [2011] FMCA 341 (reported in our October 2011 Workplace (e)ssentials bulletin) and emphasises that, for prohibited adverse action as defined in the Fair Work Act 2009 (Cth) (FW Act) to be found to have occurred, there must be a causal relationship between exercise of a workplace right and the adverse action taken.

Implications for employers

This decision makes it clear that an employee making a complaint (or exercising any other workplace right) does not prevent an employer undertaking reasonable and lawful performance management and/or disciplinary action, so long as the employer is able to provide satisfactory evidence that its actions were not taken because the employee made the complaint.

Background: the law

Relevantly for present purposes, section 340 of the FW Act makes it unlawful for an employer to take adverse action (such as termination of employment, injury in employment, altering an employee’s position to his or her prejudice or discriminating between employees) against an employee because the employee has exercised, or proposes to exercise, a “workplace right”.

Among other things, a “workplace right” includes the ability of an employee to make a complaint to the employer in relation to his or her employment.

A reverse onus of proof exists where an adverse action claim is made. That is, where the employee can demonstrate the presence of both a workplace right and adverse action, it is up to the employer to prove that there is no causal relationship between the two.

The High Court’s decision in Board of Bendigo Regional Institute of Technical and Further Education v Barclay [2010] HCA 32 makes it clear that where an employer gives evidence that the reason for the taking of the adverse action was not motivated by the workplace right and that evidence is accepted as reliable, this will be sufficient to discharge the employer’s onus proof.

Background: facts

From June 2009, Mr Ramos was employed by Good Samaritan Industries (GSI) as a store manager.

In March 2010, Mr Ramos’ performance was questioned in various respects by his managers, Ms Cameron and Mr Gordon. Among other things, he was questioned as to the poor sales performance of the Dianella store, for which he was responsible.

On 6 April 2010, Mr Ramos made a complaint to GSI in relation to Ms Cameron and Mr Gordon’s conduct. The matter was investigated. On 23 April, Mr Knowles of GSI advised Mr Ramos that it essentially rejected the complaint against Mr Gordon and Ms Cameron. He also noted that there continued to be various problems with Mr Ramos’ performance, which issue was further discussed at a subsequent meeting on 29 April.

In May 2010, there was dispute between the parties as to Mr Ramos’ performance, his leave, his claims for expense reimbursement and whether he should be relocated to another store. Ultimately, Mr Ramos remained at Dianella but under closer supervision of a new manager, Ms Wilson.

In June 2010, two other Dianella store employees submitted to GSI formal complaints against Mr Ramos. The complaints made a number of allegations of misconduct, including the use of profane language towards other employees. Mr Ramos was suspended from his employment on full pay, while an investigation was conducted into the complaint.

On 16 June 2010, Mr Ramos was advised that some of the complaints were found to be substantiated. GSI issued a written final warning to Mr Ramos with respect to his conduct and performance.

Mr Ramos subsequently became ill and underwent surgery. There was some dispute between the parties as to the leave Mr Ramos was able to take in connection with his absence from work.

On 22 July 2010, Mr Ramos gave GSI four weeks’ notice of his intention to resign, citing “unbearable workplace conditions”. GSI accepted his resignation and paid Mr Ramos in lieu of the notice, together with his accrued entitlements.

After ceasing his employment with GSI, Mr Ramos filed a claim against GSI, arguing that GSI had taken prohibited adverse action against him because he had exercised his workplace right to make the 6 April 2010 complaint. The alleged adverse action included:

  • threatening him with disciplinary action without any sufficient reason;
  • demoting him from a level 1 store to a level 3 store, which was in a less convenient location; and
  • requiring him to sign a performance management contract in order for him to retain his position of employment as a store manager.

Mr Ramos claimed that that the cessation of his employment with GSI was in fact a constructive dismissal, as GSI’s conduct had left him no option but to resign.

Decision at first instance: Federal Magistrates Court (FMC)

At first instance, Federal Magistrate Driver found that:

  • Mr Ramos was exercising a workplace right when he made the 6 April 2010 complaint;
  • however, GSI’s conduct (including warnings about possible disciplinary action and requests to sign a performance management agreement) did not amount to adverse action against Mr Ramos. The only adverse action taken by GSI was a decision to suspend Mr Ramos on full pay whilst allegations of misconduct were investigated; and
  • on the evidence, any adverse action that was taken against Mr Ramos was taken because of GSI’s concerns regarding his performance, not because Mr Ramos had made the 6 April 2010 complaint. Accordingly, the adverse action was not unlawful.

Federal Magistrate Driver also rejected Mr Ramos’ submissions that GSI’s investigations of his complaint constituted discrimination. He concluded that GSI had not constructively dismissed Mr Ramos, as its conduct was not such that Mr Ramos had “no option but to resign”.

Decision on appeal: Federal Court

Before Justice Barker of the Federal Court, relevant personnel from GSI again gave direct evidence to the effect that the steps taken by them in relation to Mr Ramos’ employment were taken due to concerns regarding Mr Ramos’ performance, not because Mr Ramos had made the 6 April 2010 complaint. No other evidence contradicted this.

Accordingly, Justice Barker upheld Federal Magistrate Driver’s decision, concluding that:

  • Mr Ramos was exercising a workplace right when he made his complaint;
  • a constructive dismissal can be an adverse action. However, not every constructive dismissal is necessarily a prohibited adverse action in breach of section 340;
  • each of the close supervision by Ms Wilson, the suspension while his co-workers’ complaints in June 2010 were investigated, the way the subsequent inquiry was conducted and the unwillingness of GSI to maintain Mr Ramos’ pay when his sick leave was exhausted, may be argued to constitute alteration of Mr Ramos’ position to his prejudice;
  • however, on the evidence, none of the real or putative adverse actions were taken because of Mr Ramos’ complaint:
    • there can be “little doubt” that GSI had real concerns about Mr Ramos’ performance - “none of the alleged adverse actions is shown to have occurred by reason of or on account of the existence or exercise of the appellant’s workplace right to make a complaint … the alleged adverse actions and the ultimate decision of the appellant to resign from his employment arose out of legitimate management and workplace issues to which the respondent was entitled, if not obliged, to respond”. The evidence does not support any other conclusion;
    • it is an error to presume that the fact that an employee has a workplace right to complain to his or her employer, and in fact exercised that right, was necessarily a factor that had something to do with adverse action taken in relation to that person’s employment; and
  • further, Mr Ramos had not been constructively dismissed. His subjective assessment is not “the benchmark for the determination of whether he was constructively dismissed. It is by no means clear that he had no other option but to quit his employment”.