HR Managers Liable For Adverse Action

Almost on a daily basis, HR and employee relations advisors in large organisations are likely to be involved in making significant employment-related decisions affecting employees, or alternatively, assisting managers to do so. HR advisors should be aware that they may be personally liable for participating in decisions that result in conduct that contravenes the Fair Work Act 2009 (Cth) (the Fair Work Act). A recent case in the Federal Circuit Court serves as a salient reminder of the risks for HR advisors in these scenarios – see Director of the Fair Work Building Industry Inspectorate v Baulderstone Pty Ltd & Ors [2014] FCCA 721 (10 April 2014).

Background

In 2008, Baulderstone Pty Ltd (Baulderstone) engaged an employee as a construction worker on a particular project known as the EBB Project. His employment was covered by an enterprise bargaining agreement that applied to the company’s construction work in the ACT. The employee subsequently made inquiries with a project site manager as to whether he could “go on salary”. Baulderstone agreed to this request and the employee was engaged as a safety officer under this arrangement. When the EBB Project came to an end, the employee was transferred to another project, the SA3 Project. His employment status as a safety officer and a salaried employee remained the same.

Soon after he commenced at the SA3 Project, the employee decided to cancel his membership with the CFMEU. The Court heard that when the CFMEU delegate for the ACT heard that the employee had cancelled his membership, he confronted the employee about it and queried whether he was allowed to work on the SA3 Project as a non-union member. The CFMEU delegate subsequently complained to the SA3 Project Manager. The matter was eventually escalated to the Human Resources Manager and the Employee Relations Manager (the HR Managers). A meeting was then held between the HR Managers and the NSW/ACT Operations Manager. At that meeting, the Operations Manager made the decision to change the employee’s employment status.

Shortly afterwards, the HR Managers and the Project Manager met with the employee and informed him that there was a problem with the employee being on salary and performing the role of safety officer at the SA3 Project. The employee was presented with three documents for his signature:

• a resignation from his safety officer salaried position;
• a termination record; and
• a form that re-engaged him as a construction worker under the relevant enterprise bargaining agreement.

The employee signed the documents.

The Director of the Fair Work Building Industry Inspectorate (the Director) claimed that by changing the employee’s employment status, Baulderstone had engaged in unlawful adverse action. The Director claimed that, in contravention of s 346 of the Fair Work Act, the adverse action had been taken against the employee because he had ceased to be a member of an industrial association.

The Director also claimed that the HR Managers and the Project Manager had contravened s 346 because they were "involved" in the contravention. Section 550 of the Fair Work Act provides that a person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision. Importantly, an individual may still be liable even if they did not appreciate that the conduct was unlawful. It is enough that they knew about the proscribed reason and participated in the decision-making process.

The Hearing

Justice Manousaridis held that requiring the employee to change his employment status amounted to adverse action, even though the evidence suggested that the change in status did not make him worse off financially. His Honour confirmed that:

The onus was then on Baulderstone to prove that the employee’s union membership had not been a reason for the decision to change his employment status.

During the course of hearing the evidence, his Honour found the employee to be an honest and careful witness and the HR Managers not to be reliable witnesses. There was evidence to show that the employee’s membership status with the CFMEU had been brought to the attention of the Operations Manager and that it had been discussed at the meeting with the HR Managers. Crucially, the company did not call the Operations Manager to give evidence about the reasons for his decision. As a result, his Honour concluded that the company had not discharged its burden of proof. Even if the court accepted the evidence of the HR Managers regarding what had been said at the meeting, the possibility that the prohibited reason was a factor in the Operations Manager’s decision could not be excluded.

On the issue of the managers’ involvement in the contravention, his Honour held that it was necessary for the Director to prove on the balance of probabilities that each manager had participated in the adverse action and that they each knew that “a substantial and operative factor” in the reason or reasons for the adverse action was the status of the employee’s union membership. His Honour was satisfied on the evidence that the three managers had participated in the adverse action by being actively involved in the meeting at which the employee signed the relevant documents. However, only the HR Managers could be said to have had knowledge of the proscribed purpose for the adverse action. The issues that were raised by the CFMEU delegate’s complaint had not been managed by the Project Manager and he had not been present at the meeting with the Operations Manager when the decision to change the employee’s status had been made.

In addition to the adverse action claim, the Director claimed that the managers (and, through them, Baulderstone) had knowingly or recklessly made false or misleading statements about the employee’s workplace rights, in contravention of s 345 of the Fair Work Act. Justice Manousaridis concluded that the HR Managers did make false and misleading representations to the employee at the meeting in which he signed the documents, but his Honour was not satisfied that they made these representations intentionally or recklessly.

His Honour reserved his decision with regards to penalties and costs for a later date.

Implications for Employers

An individual can be personally liable for his or her involvement in contraventions of the Fair Work Act, regardless of whether the individual is aware of the unlawfulness of the conduct to which they are an accessory.

Employers should exercise caution when making decisions to change the employment status of an employee without a proper consultation process. Changes to an employee’s employment status may be regarded as adverse action even where the change results in no financial detriment to the employee.

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Article from justitia.com.au