Employer to pay millions of dollars after employee's life 'destroyed'
by Kyle Scott, Director and Brittany Virgili, Associate - Australian Business Lawyers & Advisors
The Federal Court has ordered an employer to pay out a staggering $2.8 million to an employee who had her life “destroyed” after being subjected “increasingly intense” bullying and intimidating behaviour by the CEO.
The employee was a longstanding senior employee who had enjoyed a good working relationship with the organisation’s former CEO. However, the employee’s psychiatric health was found to have “progressively eroded” by the actions of an incoming CEO, who was described by the Court as having an “overbearing and controlling” micromanagement style.
Following an incident described as “the last straw” where the CEO publicly yelled at the employee, the employee emailed the CEO outlining her concerns and requesting he relay those concerns to the Board to resolve. The CEO’s email response, which was copied to the company accountant and functions manager, ignored the contents of the employee’s previous email and simply instructed her to meet with him to discuss her work performance and to “bring a support person if you wish”. Upon receipt of this email, the Court heard the employee “felt even more distressed, emotionally drained and began vomiting”. She subsequently obtained a medical certificate indicating she was unfit to work for the next week due to stress. Later that day, the CEO was found to be “gloating” when he forwarded the medical certificate to a third party with the comment “dropping like flies”. In another external email, the CEO said the employee “pulled the ‘stress leave’ certificate” to avoid meeting with him.
The organisational response to the grievance was also found lacking. The Court heard the employee had raised concerns about the CEO’s behaviour and the significant impact it was having on her (including her inability to eat or sleep) on multiple occasions to different directors, however the organisation characterised these interactions as the employee merely having “a conversational whinge”.
The Court found that the Board essentially “left everything to” the CEO to deal with the complaint, including delegating authority to him to “handle the negotiation of the approach by [the employee] to resign”. The CEO’s conduct was then compounded by a decision to withhold entitlements owed to the employee in order to use as “bargaining chips” in the grievance.
Ultimately, the Court held the organisation had breached its obligation to take all reasonable steps to provide the employee with a safe system of work and to take reasonable care to prevent her being exposed to the risk of psychiatric injury at work. The Court found that the CEO’s conduct caused the employee to develop “a very serious psychiatric illness that may never be cured or ameliorated to any significant degree”.
That finding was based on expert evidence that concluded that the employee “cannot work and… is permanently incapacitated from doing so” due to the chief executive’s and the organisation’s conduct.
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The organisation was ordered to pay $2.8 million to the employee, which comprised of $1.7 million in compensation ($214,250 for pain and suffering, $1,169,048 for past economic loss, $869,745 for future economic loss and $78,980 in interest), $24,233 for breach of contract damages, $160,000 in civil penalties, and $300,000 in costs, with the amount then reduced for workers compensation payments already made to the employee.
This case provides a stark reminder of the importance of monitoring standards of behaviour in the workplace, having proper complaint procedures in place, and being conscious of risks to workers’ mental health.
This case is a good example of the growing trend of Courts to order significant compensation orders in employment litigation where the circumstances warrant it, and the potential implications for businesses when they get things wrong.
It is also important to note that compensation orders are not solely dependent on the seriousness of the conduct, but rather also take into account the impact such conduct has on the worker. This can lead to significant compensation orders where the conduct causes significant psychological injury and impacts the individual’s capacity to work into the future.
For information on training your staff and developing an effective workplace policy and procedure in relation to bullying and harassment, visit ablawyers.com.au.