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A Loss of Trust in Employment Contracts

Monday, 14 January 2019

For an employer, terminating the employment of an employee who has made an internal or external complaint attracts significant risk of the employee making a general protections claim under the Fair Work Act.  This is so even if the employee’s complaint was unfounded. 

There is a significant risk that an employee dismissed in such circumstances may allege that the dismissal was not for a valid reason but was because the employee made the complaint

However, if the employer focuses on what the complaint may indicate about the employee-employer relationship, this may provide grounds for disciplinary action, even dismissal, in appropriate circumstances. 

What happens when an employee takes action that means the relationship of trust between the employee and employer is lost?

Hickey Lawyers partner, Scott Eustace, comments on a recent matter where the employment relationship potentially broke down because:

  • the employee made an allegation of misconduct against another employee when that allegation was ultimately proved to be unfounded.

If allegations of misconduct by a fellow employee are of a serious nature, the employer can expend a significant amount of resources investigating the allegations; often engaging an external consultant and/or lawyer to do so. In addition to the direct cost associated with an investigation, resources are diverted away from the core business of the employer and this can cause significant loss.

If an employee is legitimately exercising a workplace right by making a complaint, then the employer cannot take adverse action (including dismissal) against the employee. But if the complaint is determined to be unfounded, where does one draw the line between exercising a workplace right and unnecessarily causing loss to the employer?

Some Federal Court decisions over the past few years have had something to say about this.

In Shea v. TRUenergy Services Pty Ltd (No 6) a number of complaints were made by an employee regarding alleged sexual harassment by another employee and then regarding the response to the principal allegations.

The employer dismissed the employee on the grounds of redundancy. The employee disputed that this was a case of genuine redundancy and brought a general protections application under the Fair Work Act 2009 alleging that the employer had taken adverse action against her in the form of dismissing her because she had made the complaints.

Justice Dodds-Streeton concluded relevantly for present purposes:

  1. the accusation must be genuinely held or considered valid by the complainant;

  2. the grievance, finding of fault or accusation need not be substantiated, proved or ultimately established, but the exercise of the workplace right constituted by the making of the complaint must be in good faith and for a proper purpose;

  3. the proper purpose of making a complaint is giving notification of the accusation so that it may be, at least, received and, where appropriate, investigated or redressed. If a grievance or accusation is communicated in order to achieve some extraneous purpose unrelated to its notification, investigation or redress, it is not a complaint made in good faith for a proper purpose and is not within the ambit of s 341(1)(c)(ii);

However, on appeal, the Full Court of the Federal Court expressed doubts about Justice Dodds-Streeton’s conclusions. In particular the Full Court (while not deciding the matter, it being unnecessary because of other findings) expressed the view that “considerable care needs to be exercised before implying into s.341 any constraint” that requires a complaint to be a “genuine” complaint.

The general approach subsequent to Shea has been that a complaint need not be a “genuine” complaint to be afforded protection.  

The potentially unsatisfactory outcome for employers resulting from this approach has resulted in the Courts making fine distinctions as the following cases demonstrate:

  • Wilson v. Victorian Aboriginal Health Service Co-operative Limited – Riley J found that the unsubstantiated complaints constituted the exercise of a workplace right, but that the complaints destroyed any possibility of a viable working relationship with senior management. It was the destruction of the relationship that was the reason for the dismissal, not the complaint itself.

  • Mikulic v. Ecolab Pty Ltd – Similar to the findings in Wilson, Cameron J decided that the complaints were an exercise of a workplace right, but the complaint evidenced an inability on the part of Mikulic to work as a member of a team and that the employer had lost trust and confidence in Mikulic. Cameron J found that it was for these reasons that Mikulic was dismissed, not because she made the complaint.

  • Morley v. Monza Imports Australia Pty Ltd – Riethmuller J held that the dismissal (for serious misconduct) was because of the complainant’s harassment and intimidation of other staff during the investigation and her inability to engage with the employer on the outcome of the investigation. The dismissal was not a result of the various complaints per se.

Although it is unsettled as to whether a complaint must be “genuine” for the complainant to be afforded the protection of the Fair Work Act, the Courts have generally approached matters on the basis that the complaint need not be “genuine”. The Courts have instead focussed on the surrounding circumstances and whether an unfounded complaint indicates, for example, a breakdown in the employment relationship or the inability to work in a team.

Dismissing an employee who has made a complaint, even an unfounded complaint, attracts significant risk. However, a focus by the employer on what the complaint may indicate in relation to the employer-employee relationship may give some grounds for disciplinary action, even dismissal, in appropriate circumstances.  

Maybe Billy Joel was right when he said, “it’s always been a matter of trust”.

For advice or information on employment law, contact partner, Scott Eustace, at eustaces@hickeylawyers.com.au.

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