Significant damages awarded to a bullied worker under Fair Work Act

In a recent series of decisions before the Federal Court of Australia, a long-serving employee who had been harassed and bullied by the company’s CEO successfully obtained a very significant order for compensation for breaches of the Fair Work Act 2009 (Cth) (FW Act), after the Court held that it was not confined by the restrictions imposed on a claim by the employee for the same events under state workers compensation laws.

The Federal Court decisions

This article examines the decisions of Justice Rares of the Federal Court who had to consider, amongst a number of complex issues:

• whether the conduct of a CEO which caused a former employee to suffer significant depressive disorder with anxiety that left her unemployable since 2016 (Leggett v Club (No 1)¹ was a breach of the FW Act referred to as the First Decision)
• whether the Workers Compensation Act 1987 (NSW) (WC Act) could operate to regulate the amount of damages payable to the former employee because the employer contravened the FW Act (Leggett v Club (No 2)² referred to as the Second Decision), (together, the Leggett Decisions). 

The Leggett Decisions

The First Decision

Mr Rudolph commenced employment with the Club Hawkesbury Race Club (Club) in May 2016 as CEO. At that point in time, Ms Leggett was in a senior position and had worked at the Club for over 20 years in a sponsorship and marketing role.

From the very beginning of Mr Rudolph’s employment, it was alleged that he began to micromanage, bully and harass Ms Leggett. Mr Rudolph’s conduct towards Ms Leggett was said to have included:

1. interrogating her over her duties and responsibilities and expenses she incurred during her employment
2. restricting her autonomy and authority to perform her role. By way of example, Mr Rudolph took away Ms Leggett’s ability to make decisions, including her authority to approve $165 to paint a sign. In response to this instance of micromanaging, Ms Leggett gave evidence saying that “how I wasn’t to do anything myself – virtually not think for myself… I had to ask him for every approval of a sign to be painted…everything that I would normally do within the parameters of my job were taken from me”
3. humiliating and embarrassing her in front of other workers. On one occasion, Ms Leggett felt humiliated because Mr Rudolph discussed her contractual arrangement in front of another employee
4. setting substantial tasks with unrealistic deadlines.

The Court heard evidence that Mr Rudolph’s behaviour was demeaning towards Mrs Leggett and that his intention was to force Ms Leggett out of her position by making her job unbearable to perform.

During her employment, Ms Leggett made several complaints about Mr Rudolph micromanaging her, and how his conduct was affecting her psychiatric wellbeing. Despite Ms Leggett’s cry for help, both Mr Rudolph and the Club’s directors dismissed her complaints.

On 9 October 2016, Ms Leggett sent an email to Mr Rudolph making a further complaint that she has, “… felt down trodden, excluded and questioned unreasonably as I carry out my duties as Sponsorship and Marketing Manager. I feel like we are reaching an untenable situation which needs to be resolved.” In response to this complaint, Mr Rudolph sent an email inviting Ms Leggett to a meeting to discuss her “work performance” (October Incident). Ms Leggett did not attend this meeting as she commenced a period of sick leave later that day.

Following the October Incident, Ms Leggett was rendered unfit for work and subsequently diagnosed with major depressive disorder with anxiety. Ms Leggett made a successful claim under the WC Act alleging that she suffered a workplace injury in 2016 (referring to the specific conduct that occurred that year) and received compensation for weekly benefits and medical expenses. Ms Leggett also brought a claim in the NSW Workers Compensation Commission for a lump sum compensation.

Ms Leggett also made an adverse action claim in the Federal Court of Australia under the FW Act, alleging that the bullying conduct of the Club was adverse action which injured her in her employment and led to the termination of her employment. This claim was separate from the WC Act claim, although it related to similar factual matters and also sought compensation.

At the Federal Court hearing, Drs John Roberts and Brian Parsonage provided an expert psychiatrist report supporting Ms Leggett’s injury – they described the October Incident as her “last straw”.

His Honour accepted that Ms Leggett was injured in her employment and that she should be entitled to compensation, finding that the Club had completely “shut its eyes” to the problem. The Club was ultimately found to have breached its duty of care owed to Ms Leggett by failing to take reasonable care to prevent her from being exposed to the risk of psychiatric injury. His Honour also noted, “the Club’s conduct, through Mr Rudolph, effectively destroyed Mrs Leggett’s life”.

One of the questions that His Honour needed to consider was how and in what manner should Ms Leggett’s entitlement to compensation be assessed, given the past statutory compensation, including the lump sum compensation, already paid to Ms Leggett under the WC Act.

The Second Decision

During the case management of the First Decision, a constitutional issue emerged as to whether the provision of the WC Act could regulate the assessment of Ms Leggett’s claim for compensation under the FW Act.

The Club argued that if Ms Leggett recovered compensation under the FW Act, that recovery would be a recovery of damages in respect of an injury that it, as an employer, is liable to pay compensation under the WC Act. Accordingly, the Club sought orders that Ms Leggett’s work injury damages claim be dismissed to avoid her being doubly compensated for the same injury. His Honour dismissed the Club’s argument on this issue, finding that, amongst other things that:

1. the Parliament intended that the FW Act apply to the exclusion of any state or territory industrial law which, provides for rights and remedies connected with the conduct that adversely affects an employee in their employment [34]
2. the main purpose of Part 5 of the WC Act is to provide for, and limit, rights and remedies applying to employment generally for recovery of damages, and it does so by limiting the scope of what damages can be recovered and their quantum [35]
3. accordingly, the provisions of Part 5 of the WC Act have no operation in relation to the assessment of compensation for any loss that Mrs Leggett suffered as a result of the Club’s contraventions, the subject of the findings on the first and second section 340 claims at [137]–[163] and [208]–[219] in the First Decision [39].

On that basis, His Honour concluded that Ms Leggett’s claim under the FW Act should be assessed undr the unlimited general common law rules, and was not subject to the restrictive terms of the WC Act.

His Honour considered Ms Leggett’s losses arising from the October 2016 injury for breaches of the FW Act. His Honour accepted that Ms Leggett could not return to employment due to the injury and pursuant to the FW Act and awarded economic and non-economic damages. However, His Honour agreed that Ms Leggett should not be doubly compensated for the same injury. Given that Ms Leggett had already received significant compensation under the workers compensation scheme for a similar injury, His Honour, where he considered appropriate, reduced the compensation payable under the adverse action claim to take into account compensation already received under the WC Act.

Key takeaways

The Leggett Decisions demonstrate that an employee can obtain uncapped payments of compensation under the Fair Work Act, even though the injuries may be the same or similar to those addressed under claims pursuant to state workers compensation schemes.

The Decisions also highlights the importance for employers to properly deal with complaints raised by its employees, failing which significant claims for compensation can be awarded if total incapacity arises from the contravention.

If you have any questions or need assistance with an employment law issue, please contact us below or get in touch with our team here.

Authors: Michael Selinger, Sladjana Skoric & Olivia Lawrence

¹ Leggett v Hawkesbury Race Club Ltd (No 3) [2021] FCA 1658.
² Leggett v Hawkesbury Race Club Ltd (No 4) [2022] FCA 622.

Disclaimer
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Michael Selinger

Sladjana Skoric, Olivia Lawrence

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