General protection claims (otherwise known as adverse action claims) are increasingly becoming the 'go to' weapon of choice for disgruntled employees looking to challenge a decision of their employer or former employer.

In one of the biggest damages awards since the introduction of the Fair Work Act 2009 (Cth) (FW Act), the Federal Court of Australia earlier this year exercised its broad remedial powers to their fullest by awarding compensation of $2.8 million to a former employee who suffered a serious psychiatric injury at work, after being subjected to unlawful harassment and adverse action. 1

While the Court heard multiple causes of action pursued by the complainant in the Leggett case, for the purposes of this discussion, Damon King, Special Counsel and Shannon Young, Associate, will focus on the principal complaint of adverse action, including how the Court ultimately resolved an important constitutional question, relating to competing federal and state legislation regulating compensation for a workplace injury.

Key takeaways

Key learnings for employers which can be taken from the Leggett case are as follows:

  • Complaints made against a supervisor or manager should always be taken seriously regardless of their context and those persons normally quarantined from any performance management or disciplinary process involving the complainant.
  • Failure to adequately document disciplinary and performance management processes may unnecessarily expose an employer to a general protections claim alleging unlawful adverse action, with such a claim being difficult to disprove in the absence of contemporaneous evidence establishing a legitimate reason for taking action detrimental to a person’s employment.
  • A successful general protections claim can expose an employer to orders of compensation for past and future loss of earnings and general damages for pain and suffering, hurt, humiliation and stress. 2 Substantial damages are likely to be awarded in circumstances where an employee has suffered serious psychiatric injuries because of the impugned conduct.
  • Injury thresholds and compensation caps which would otherwise apply to state-based workers’ compensation insurance schemes, do not constrain the Court’s power to award uncapped compensatory damages under the FW Act.
  • Employers in states with restricted access to common law damages schemes should consider obtaining employment practices liability (EPL) insurance to complement their workers’ compensation insurance policy. If they already have EPL insurance, employers should review the indemnity caps in their policy with their broker to ensure that they are adequately insured for psychiatric injury.

General protections for exercising workplace rights

Part 3-1 of the FW Act contains various types of general protections given to employees, shielding those persons from ‘adverse action’ being taken by, or on behalf of their employer.

Adverse action is broadly defined and essentially includes any action taken or threatened by a person which injures another person in their employment. This can include dismissal or the alteration of the terms of a person’s employment to their detriment.

As mentioned above, there are various general protections from adverse action. In practice, the general protection of broadest application which is commonly used to pursue a remedy is the protection in relation to the exercise or proposed exercise of a person’s workplace rights. In that regard, the workplace right predominantly utilised is the right to make a complaint or inquiry in relation to the person’s employment, which is the scenario featured in the Leggett case (see our discussion further below).

Broader coverage and strategic advantages of general protections claims

General protection claims have major advantages over other types of industrial claims:

  • Firstly, unlike unfair dismissal claims which can only be brought by an individual whose employment has been terminated, general protection claims are also available to individuals who are still employed, and regardless of how much they earn (there is no exclusion for employees who are deemed high income earners).
  • Secondly, there is no limit to the amount of compensation which can be awarded to a successful complainant (unlike claims for unfair dismissal which are capped at 6 months loss of earnings).
  • Thirdly, a reverse onus of proof applies, which is where the Court will presume that the alleged unlawful action was taken for the reason/s alleged by the complainant, and the employer must prove otherwise on the balance of probability, to avoid civil liability. This can only be achieved by the employer’s decision maker being called to give evidence and subjected to cross-examination in relation to the reasons given for their decision.

Leggett case – the facts

Ms Leggett was a longstanding employee who began her employment with the Hawkesbury Race Club (Club) in 1991 and quickly became the Senior Marketing and Sponsorship Manager.

In May 2016, a new CEO commenced with the Club. Almost immediately, Ms Leggett claimed the CEO exercised an overbearing management style, taking away her ability to perform her day-to-day duties and tasks. After months of micromanagement and uncomfortable interactions, Ms Leggett made a complaint about the CEO’s behaviour to him directly via email and requested that her complaint be referred to the Club’s Board. In response the CEO directed Ms Leggett to attend a meeting to “discuss her work performance”. Following this email exchange, Ms Leggett sent a medical certificate to the CEO, stating she was unfit for work due to stress. Ms Leggett was subsequently diagnosed with a permanent psychiatric injury, leaving her permanently incapacitated and unable to work.

Leggett case – the decision

The Court had to consider multiple complex legal issues in the Leggett case, including for present purposes:

  • Whether the CEO’s email was ‘adverse action’ taken because of Ms Leggett exercising her workplace right to make a complaint in relation to her employment?
  • If so, whether that adverse action injured Ms Leggett in her employment and thereby caused a permanent psychiatric injury incapacitating her from further work?
  • Whether the monetary caps under the NSW workers’ compensation scheme could limit or regulate the damages the Federal Court could award under the FW Act?

Ultimately, the Court found in favour of Ms Leggett on all three questions.

Summary

The prospect of a general protections claim being made should always be considered and proactively managed by an employer when planning or implementing a workplace process that has the potential to detrimentally impact upon a person’s employment.

We are seeing a growing trend whereby general protections claims are being made in conjunction with other types of industrial claims, such as those able to be made under the Corporations Act 2001 (Cth) protecting whistleblowers from victimisation. For more information regarding whistleblowing in Australia, please view our recent publications on ASIC and case developments and trends in whistleblower complaints and activities.

Our Workplace and Employment team at HopgoodGanim are well positioned to provide legal expertise in relation to managing general protections risks and claims and across wider employment, industrial relations and workplace health and safety matters. Our team can advise individuals and businesses about compliance with regulation, optimising workforce engagement and outcomes, and managing and containing exposure to possible disputes or litigation.