Beware: Unlawful Adverse Action against Employee Proves Costly

The Federal Circuit Court of Australia in Cai v Tiy Loy & Co Ltd (No. 3) [2016] FCCA 675 ordered Tiy Loy & Co Ltd (“Tiy Loy”) to pay more than $400,000 in compensation and penalties of more than $50,000 for unlawful adverse action against its employee, Mr Ree Bin Cai. This recent decision reinforces the willingness of the courts to impose harsh penalties on employers who unfavourably alter an employee’s position in response to the employee exercising a workplace right.

Between 1994 to late 2012, Mr Cai was employed by Tiy Loy as a full-time tea attendant. In early 2012 Mr Cai sustained a leg injury and his subsequent claim for workers’ compensation claim was accepted by Tiy Loy’s insurer (“the Insurance Claim”). Tiy Loy was required to implement an Injury Management Plan for Mr Cai as part of the Insurance Claim.

Judge Manousaridis found that, in breach of section 340(1) of the FW Act, Tiy Loy took adverse action against Mr Cai by altering Mr Cai’s employment from full-time to part-time, therefore unilaterally altering “the terms of Mr Cai’s contract of employment in a fundamental way“. Judge Manousaridis found that Tiy Loy took the adverse action in order to offset the expected additional costs that would occur as a result of the Insurance Claim.

In addition, Judge Manousaridis found that Tiy Loy had systematically and significantly underpaid Mr Cai the amount that he was entitled as a tea attendant under the relevant Awards and the FW Act. These contraventions, in addition to the unlawful adverse action, were found to warrant the significant penalty imposed on Tiy Loy, irrespective of any ignorance of the law on the part of Tiy Loy.

This case demonstrates the significant risks of substantial penalties and orders for compensation being imposed on an employer for breaches of the FW Act.

If you would like more information about the potential legal implications of adverse action and how to minimise legal risks, please contact Nick Stevens, Megan Cant or Jane Murray.

Published May 2016