A recent Federal Court decision upheld that performance management arising out of legitimate concerns and motivated by good management outcomes does not amount to adverse action.

Justice Barker in Ramos v Good Samaritan Industries [2013] FCA 30 upheld an earlier decision of Federal Magistrate Driver which found that an employer did not taken adverse action against an employee as a result of legitimate performance management actions, taken after the employee exercised a workplace right to make a complaint about two of his managers.

The decision of the Federal Court reinforces that:

  • not all adverse action taken against an employee is unlawful;
  • legitimate performance management can still be implemented where an employee has exercised a workplace right; and
  • keeping detailed records which demonstrate that any performance management is only based on an employee's poor performance is vital in successfully defending an adverse action claim.

Facts

Agustin Ramos, the appellant, was employed by Good Samaritan Industries, an agency of the Uniting Church in Australia, as a store manager of its Dianella store in Western Australia which sold recycled clothing and other goods.

Nine months after commencing employment with Good Samaritan Industries, Ramos attended a store managers’ meeting on 30 March 2010. During a role play by the store managers, the divisional manager interjected when Ramos called someone "darl" as said "if you called me darl, I would find that highly offensive".

The next day, on 31 March 2010, a meeting was held between the retail operations manager and Ramos to discuss why the Dianella store sales figures were below budget.

Nearly a week later, on 6 April 2010, Ramos sent a letter to the manager of human resources stating that he felt mistreated by both the divisional manager and the retail operations manager during the meetings on 30 and 31 March 2010, and that they had shown him a "total lack of respect", and that he was highly offended.

Following a meeting between Ramos and the CEO, the CEO wrote to Ramos on 23 April 2010 and stated that the matter had been investigated and outlined the outcome of those investigations.

Numerous correspondence between Ramon and the CEO followed leading to the CEO on 3 May 2010 stating that "[Ramos's] position on this and [his] dismissive attitude towards the budget provide[d] [him] with little confidence that this [could] be achieved at Dianella", and that he had decided that Ramos should be transferred to the Armadale store. This was said to be beneficial to Ramos as the role has a different operations manager and it represented a clear opportunity to start fresh.

The transfer never eventuated as it was arranged for a different operations manager to work with Ramos and the Dianella store. Ramos was, however, required to sign a performance management framework agreement.

In early June 2010, written complaints against Ramos were made by two full time employees at the Dianella store. The CEO notified Ramos of the complaints and suspended him from work on full pay whilst an investigation was conducted into the complaints.

On 16 June 2010, the CEO wrote to Ramos stating that the respondent had "fully investigated the facts surrounding these matters" and that some of the complains can be substantiated. The CEO stated that Ramos's actions breached the employer's code of conduct and that the letter constituted a final warning.

On 22 July 2010, while on leave, Ramos resigned and gave four weeks' notice. The letter stated:

"This decision has come as a direct result of the unbearable workplace conditions and pressures that I have experienced and endured which you have imposed upon me in my position as Dianella Store Manager during these past months."

Submissions

Ramos had submitted that on 6 April 2010 he had made a complaint against the employer's divisional manager and the retail operations manager to whom he reported, and that all adverse action taken by the employer against him was taken because of that complaint.

Ramos claimed that, by the actions of the CEO, the employer had taken adverse action against him by, amongst other things:

  • threatening him with disciplinary action, including dismissal, without any or any sufficient reason;
  • discriminating against him by choosing to side with the other employees;
  • requiring him to sign a performance management framework contract in order for him to retain his position of employment as the Dianella Store Manager; and
  • suspending him from his employment without any or any sufficient reason and/or without affording him natural justice in relation to the complaint.

Ramos further claimed that the actions referred to above further, or alternatively, constituted a constructive dismissal, by forcing or giving him strong inducement to resign his employment. This constructive dismissal was itself adverse action contrary to the Fair Work Act 2009.

In response, the employer submitted that the various actions taken against Ramos, in all the circumstances, would have been the same had the 6 April 2010 complaint not be made.

The employer said that there were ongoing problems with the store prior to the complaint. Indeed, these matters having been raised with Ramos on 31 March 2010 or earlier. While these matters may not have been major issues that resulted in formal disciplinary inquiries, there was nonetheless a concern about Ramos's performance before the complaint was made.

The employer submitted that every single action taken had a justifiable basis and Ramos's decision to resign was not a constructive dismissal.

Decision at first instance

At first instance, Driver FM found that the employer did not engage in adverse action against Ramos, and in relation to the action taken against him held, in summary, that:

  • the statement about possible future disciplinary action was not a threat in terms necessary to constitute adverse action;
  • the investigation of Ramos's complaint did not constitute discrimination;
  • the request to sign the performance management framework did not constitute adverse action, and it was accepted that there were ongoing problems with Ramos's performance; and
  • while suspension on pay pending an investigation of allegations made may constitute adverse action because benefits of working are not limited to being paid, in this instance, no decision on the validity of the complaints was made at the time of the suspension and the complaints were referred for investigation.

Furthermore, the Federal Magistrate did not find that Ramos was constructively dismissed under the Fair Work Act, which states that "the person has resigned from his or her employment, but was forced to do so because of conduct, or a course of conduct, engaged in by his or her employer".

His Honour found that at the time of Ramos's resignation on 22 July 2010, the employer had not acted in a manner that could be described as leaving Ramos with no option but to resign, as the employer had legitimate concerns about the performance of the Dianella store, the performance of Ramos as store manager and his conduct as an employee in relation to other employees and the policies of the employer.

Appeal

On appeal, Ramos submitted that the decision of Driver FM was materially affected by errors of fact and law.

Justice Barker upheld the decision at first instance finding that there can be little doubt that the employer had real concerns about Ramos's performance. Furthermore, each of the steps of Ramos complains had "a real management justification" and "when that complaint was made it was appropriately looked into. One would expect no less from a[n] employer".

His Honour found that the fact that the employer, through the CEO, chose to put in place a closer supervisory program, does not of itself prove that this action was done because Ramos had made the complaint. On the evidence presented, there is no basis upon which the Court could or should draw the inference that at material times the employer had decided to "squeeze" Ramos out of his employment because he had made the complaint on 6 April 2010. Rather, the steps taken by the employer were taken to achieve "good management outcomes".

Although his Honour was somewhat critical of the investigation implemented by the employer in early June following complaints made by two employees working under Ramos, finding that the investigation "[did] not fit the judicial model of a fair hearing", his Honour found that nothing in the work done by the investigator suggested that she was at any time motivated to conduct her investigation, or did so, because Ramos had made his earlier complaint on 6 April 2010.

With respect to the issue of constructive dismissal, his Honour found that it was by no means clear that Ramos had no other option but to quit his employment. He could have returned to work and continued to deal with his employment situation through discussions with the CEO. Indeed, the correspondence showed that the CEO was expecting Ramos to resume work and to engage in such discussions with him.

Accordingly, his Honour found that it was open to the Driver FM to find as he did that all the alleged adverse actions arose out of legitimate management and workplace issues to which the employer was entitled, if not obliged, to respond. No appellable error has been identified.

This article was first published in the Law Society Journal, April 2013