Employer ordered to pay $1.7 million in compensation to bullied manager

The former marketing manager of the Hawkesbury Racing Club (the Club) has been awarded a substantial payout after it was found that the Chief Executive Officer (CEO) had ‘effectively destroyed her life’ by bullying and harassing her to the point she was diagnosed with a significant depressive disorder which left her unable to work.

In the decisions of Leggett v Hawkesbury Race Club Limited (No 3) [2021] FCA 1658 and Leggett v Hawkesbury Race Club Limited (No 4) [2022] FCA 622, Rares J of the Federal Court of Australia held that the Club was liable to pay compensation for a number of breaches under the Fair Work Act 2009 (Cth) (FW Act). This compensation was not capped by operation of the Workers Compensation Act 1987 (NSW) (WC Act).

Facts

Mrs Leggett was engaged as the Club’s sponsorship and marketing manager in January 1991. She was paid an annual retainer and commissions on the sponsorships she arranged.

In 2016, the Club appointed a new CEO, Mr Rudolph, who formed the view that Mrs Leggett was earning ‘too much money’ compared to his own salary or the salaries of marketing managers at other racing clubs. He began to micromanage Mrs Leggett and the expenses she incurred. Mrs Leggett felt that she was not trusted despite 25 successful years working for the Club. She was anxious and emotional and reported difficulty sleeping. She reported these issues to Mr Rudolph and to several members of the Club’s Board but Mr Rudolph’s conduct was never formally addressed.

In September 2016, in front of an important sponsor, Mrs Leggett remarked that she had never been to the starting barriers for a race because she was responsible for issuing sashes at the end of the race, to which Mr Rudolph replied to the effect of, ‘Oh really? You can go whenever you want.’ Several weeks later, Mrs Leggett was invited by the Club’s starter to attend the barriers and indicated she would be back in good time to attend to the sashes. Shortly after she arrived at the barriers, Mr Rudolph rang her and ordered her back to the office, which left Mrs Leggett feeling humiliated and embarrassed. This was the ‘final straw.’ Mrs Leggett emailed Mr Rudolph and indicated that his behaviour and his questioning of her activities made her feel that they were ‘reaching an untenable situation which needs to be resolved’ (the 9 October Email). She asked for her complaint to be raised with the Board, to which Mr Rudolph replied, ‘Please meet me in my office… to discuss your work performance’ (the 10 October Email). Mr Rudolph’s reply made Mrs Leggett feel even more distressed and she commenced taking sick leave.

While Mrs Leggett was on sick leave, the Club displayed no concern for her welfare and Mr Rudolph indicated that Mrs Leggett was ‘pulling the sick leave certificate’ to avoid discussing her performance. Mr Rudolph boasted that Mrs Leggett was ‘dropping like flies.’ The Club withheld Mrs Leggett’s commissions and paid her base salary only. The Club told its staff and sponsors that Mrs Leggett would not be returning to work. Eventually, Mrs Leggett advised the Club that this conduct evinced an intention not to be bound by the contract of employment and accepted the Club’s repudiation of her employment contract. She was not paid her outstanding commissions, long service leave or annual leave.

Mrs Leggett commenced proceedings against the Club in which she asserted that:

• Mr Rudolph issuing the 10 October Email and causing the club to withhold her entitlements constituted adverse actions in the meaning of the FW Act. These adverse actions were taken because Mrs Leggett had exercised her workplace rights to make the complaint in the 9 October Email and to take sick leave (the General Protections Claims);

• She was entitled to damages for the Club’s breach of contract in repudiating the employment agreement (the Breach of Contract claim); and

• The Club had been negligent in failing to protect her from the risk of psychiatric injury (the Negligence Claim).

Importantly, prior to these matters being heard, Mrs Leggett was awarded compensation by a senior arbitrator of the Workers Compensation Commission who made a determination under the WC Act after finding that Mr Rudolph had caused Mrs Leggett’s psychiatric injury.

Decision

General Protections Claims

Importantly, in general protection claims there is a ‘reverse onus of proof.’ This means the person making the allegation does not have an onus to prove adverse action was taken for a particular reason. Essentially, the respondent is required to prove the allegation is not true.

The Club submitted that while its actions could constitute adverse actions, those actions were not taken because Mrs Leggett exercised workplace rights. It argued that the 10 October Email was issued to acknowledge and explore Mrs Leggett’s concerns, and that it genuinely believed it was not required to pay Mrs Leggett her entitlements.

Rates J was highly critical of the Club’s submissions. He noted that the Club had acted ‘contemptuously’ in response to Mrs Leggett’s claims and her taking of sick leave, without any concern for her welfare, indicating they had no intention of exploring her concerns. He found that Mr Rudolph purposely arranged for Mrs Leggett’s entitlements to be withheld because he considered them ‘bargaining chips’ in attempting to arrange her departure from the Club. Therefore, Rares J found that the Club failed to prove that Mr Rudolph had engaged in the adverse actions for any reason other than that Mrs Leggett had exercised her workplace rights.

Breach of Contract Claim

Rares J agreed that, in withholding Mrs Leggett’s commissions with no reason to be ‘sorted out in due course’, the Club evinced an intention to not be bound by the contract which constituted a repudiation of the contract. The quantum of damages was to be assessed taking into account Mrs Leggett’s psychiatric injury and the workers’ compensation claim she had already made.

Negligence Claim

The Club submitted that Mrs Leggett gave no indication which would have indicated to a reasonable employer that she was at risk of developing a psychiatric injury until her breakdown on 9 October 2016. She had not made a formal complaint.

However, Mrs Leggett had indicated to Mr Rudolph she was losing sleep and constantly thinking about the issues he was raising. She also conveyed to members of the Board that she was constantly crying, stressed and unable to sleep. Her descriptions and displays of emotion would have conveyed to any reasonable director in the position of the Club’s directors that she perceived she was being bullied and that it was creating a foreseeable risk of psychiatric injury if it continued. Indeed, in Rares J’s view, Mr Rudolph’s conduct was intentionally severe to force Mrs Leggett out of her position. Therefore, Rares J held that the Club was liable in negligence and in breach of its obligation to take reasonable care to prevent her suffering a reasonably foreseeable risk of psychiatric injury.

Quantum of Damages

Having upheld all of Mrs Leggett’s claims, Rares J deemed that Mrs Leggett was entitled to payment of her unpaid entitlements, damages for the Club’s negligence, and compensation for its contraventions of the FW Act. However, the parties disagreed on the quantum to be paid to Mrs Leggett due to the interaction between the FW Act and the WC Act, under which Mrs Leggett had already received compensation and which includes caps on compensation payable.

The Club asserted that the quantum of damages ordered under the FW Act should be reduced due to the cap on compensation imposed by the WC Act, as the compensation payable to Mrs Leggett was essentially work injury damages already covered by the WC Act. Rares J held that as state legislation, the WC Act was inoperative to the extent it was inconsistent with the FW Act, a Commonwealth law. Therefore, the WC Act did not limit compensation payable pursuant to the FW Act.

Rares J then acknowledged that Mrs Leggett had already received worker’s compensation for the permanent impairment caused by Mr Rudolph’s bullying of her for the period May 2016 to October 2016. Even though the cap on compensation under the WC Act did not apply, Rares J held that the award of worker’s compensation is a relevant consideration in assessing and calculating the loss suffered by Mrs Leggett. In effect, it was appropriate to deduct the worker’s compensation previously paid from the compensation awarded due to the Club’s breaches of the FW Act.

Ultimately, the Club was ordered to pay Mrs Leggett $1,770,510 (inclusive of interest) for its breaches of the FW Act including the General Protections Claims and its failure to pay her commissions, annual leave and long service leave. This sum was calculated after taking into account the compensation already paid. Penalties totalling $160,650 and costs of $300,000 were also awarded.

Take Home Messages

Employers must closely monitor the psychological health and wellbeing of their employees and take allegations of bullying in the workplace very seriously, to minimise the risk of employees developing psychological health issues at work.

This is also a reminder that employees who have been injured at work are not just limited to making worker’s compensation claims. It is possible that employees who have been injured at work may consider the provisions of the FW Act to determine whether they may be entitled to greater compensation.

For more specific information on any of the material contained in this article please contact Lincoln Smith on +61 8 8210 1203 or lsmith@normans.com.au, Ganesh Krishnan on + 61 8217 1395 or gkrishnan@normans.com.au or Annabelle Narayan on +61 8 8210 1292 or anarayan@normans.com.au