$200k Adverse Action Payout

A former Rotary International (Rotary) employee has been awarded $205,000 by the Federal Circuit Court for his premature dismissal.

This decision provides an expensive reminder that employers must be cautious not to “manufacture” or speed up a dismissal, especially when there is a complaint involved or if the employee is close to retirement age.

The Complaint

A 61-year-old office manager was placed on a four month Performance Improvement Plan (PIP) in October 2016. The PIP contained four performance objectives.

Several weeks after the implementation of the PIP, the employee lodged an official bullying complaint regarding the management of his PIP. The employee believed the PIP was a “cover” for already formed conclusions of unsatisfactory performance and would likely result in the termination of his employment.

In February and March 2017, Rotary confirmed that the employee had completed three of the four PIP objectives satisfactorily. However, in April 2017, the employee was asked to immediately leave the office on the basis that he had failed to meet one of the four PIP objectives.

The employee lodged a General Protections Application in the Federal Circuit Court. Rotary immediately commenced enquiries into the employee’s leave records, email account and attendance at work.

Rotary then claimed that the employee had breached an “obligation of confidence” by communicating with a Regional Director responsible for the International Office and had failed to ensure the accuracy of leave records within the payroll system. Rotary then issued the employee with a further show cause letter. The employee failed to attend a Skype meeting to respond to the show cause letter and was dismissed in June 2017.

The Court’s decision – “set up to fail”

Judge Rolf Driver found that Rotary failed to provide adequate reasons for the employee’s termination stating there was “a change of attitude on the part of the responsible persons in Rotary” following the bullying complaint and commencement of the court proceedings. Further, Judge Driver noted that the claimed breach of “confidence” had an “air of artificiality to it” and considered the leave issue to be a “storm in a teacup”.

The Court also criticised Rotary’s management of the PIP stating, “the goalposts of the PIP themselves changed following the commencement of proceedings” causing the employee to be “from that point, set up to fail”.

Damages – consideration of age and length of time unemployed

In calculating the $205,000 damages award, Judge Driver considered the employee’s 11 years of service, his age and the effect his age had on his ability to gain new employment, that resulted in a two-year unemployment period following his termination from Rotary.

Judge Driver stated that “had the employment been persevered with, it would have continued until at least the end of 2017 and there would not have been any period of unemployment”. Further, had Rotary negotiated an exit plan with the employee it is more likely that he would have found “equivalent and suitable employment… (without) a period of unemployment”.

Lessons to Learn

Employers must ensure that they have a valid reason to dismiss an employee, and follow due process, especially when there is a complaint involved.

When implementing and managing PIPs, employers should follow clear and transparent processes to avoid miscommunication between themselves and employees. Finally, age is likely to be a key consideration of the Court when awarding damages in adverse action claims.

If you have any queries on implementing PIP’s or the due process surrounding the termination of employees, please do not hesitate to contact Nick Stevens, Jane Murray or Angharad Owens-Strauss.

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