Record damages awarded to NSW employee for wrongful termination: what can we learn?

Eden Elliott - Friday, October 30, 2020

Case study prepared by WISE Workplace State Manager NSW, Tracey Bosnich 

Image: unfair dismissal

Most of us may believe that if a contract is not signed, it is not legally enforceable. On 10 September 2020, the NSW Supreme Court handed down a significant decision, awarding record damages to an employee for termination of employment and amongst other findings, providing grounds upon which an unsigned contract may be held to be legally enforceable and take precedent over a signed contract.

Background

Ms Melinda Roderick (“Roderick”), the Executive Director of Washington H. Soul Pattinson & Company Ltd (“WHSP”) had been employed since 2006,  when Roderick commenced in the role of Chief Financial Director. She was appointed as Finance Director in 2014, till 12 April 2018, when she was terminated without notice. More notably, Roderick was the only female on the Board and was the second most senior employee in the company.

On 10 September 2020, Roderick was awarded record damages in the amount of $1.105 million. The case was litigated on the issues of termination of employment without warning, failure to give reasonable notice of termination, and failure to pay both short term and long-term incentive entitlements.

Original Signed Contract v Unsigned Contract

Roderick's terms and conditions of employment were originally set out in the 2006 contract ("the original contract"). However, following Roderick becoming the Finance Director in 2014, a draft ‘new contract’ was made in 2015, but was never signed. WHSP argued the original contract prevailed. 

Roderick submitted that when she became the Finance Director, the original contract was discharged. The Court noted that there was a significant change in her role tasks, obligations and duties and that the original contract could not have appropriately been applied in the circumstances, especially where the original contract ‘did not contain a clause specifying that it would remain in force, even if the duties are altered’. It was noted that under the new contract Roderick's responsibilities had significantly increased, in that she became the director of 12 companies. 

Despite the new contract being unsigned, the Court found that the implied intention was for her original contract to be discharged and for the parties to be bound by the new contract. Therefore, the terms and conditions of the unsigned new contract were found to apply and took precedent over the signed 2006 contract.

Calculation of termination payment 

WHSP calculated Roderick’s termination payment based on the signed original contract. Accordingly, Roderick was only paid three months’ of her old salary, in lieu of notice, which was expressly stipulated as the notice period in the original contract.

Roderick’s claim for damages was made in accordance with the notice period expressly stipulated in the new unsigned 2015 contract, being 24 months; and for payment of an amount representing her incentive entitlements under both the long-term and short-term incentive plan and scheme, included in the new contract.

Key issues litigated with respect to damages

There were five issues litigated: whether the original 2006 contract containing the express term of three months' notice applied; if the new unsigned contract applied, what was the implied period of notice; the notice period Roderick should have actually been given; determination of whether Roderick was eligible for entitlements pursuant to the short term and long-term incentives; and the reason for her termination.

Implied Notice and Incentive Bonuses

WHSP argued the original contract provided an express term of a three-month notice period.  As they did not give three months' notice, WHSP paid Roderick an amount in lieu of the three months’ notice and therefore argued they were not in breach of contract.  Roderick argued she was entitled to 24 months’ notice in accordance with the unsigned 2015 contract.

Once the Court established that the original contract no longer applied, it had to determine, what the ‘implied reasonable notice term’ should be. The Supreme Court did not uphold the 24 months’ notice period in the new contract, but determined that Roderick was entitled to 12 months' notice.

Roderick argued the new contract entitled her to the incentives. WHSP argued it was not obliged to pay the incentives as payment was discretionary and dependent on performance, and that Roderick was terminated for ‘poor performance’,  had not worked the full year and was no longer employed. WHSP further submitted that Roderick was terminated prior to the assessment of these incentive benefits.

The Court stated any "decision as to payment is only discretionary in the sense of assessing [Roderick's] performance against the KPIs". The Court stipulated that was an implied contractual obligation to "exercise any discretion conformably with the purpose of the scheme and not to choose arbitrarily or capriciously or unreasonably to not pay money, irrespective of whether the agreed parameters had been achieved". The argument to not pay Roderick as the employment ended "only a matter of days before the end of the relevant financial year would be quite unreasonable and arbitrary".

Reason for termination

The termination letter stated that Roderick was "not the right fit". Roderick argued that she was terminated without explanation. WHSP then subsequently submitted during the litigation, that Roderick was actually terminated for “poor performance”.

The Court noted that it was a "curious feature" that there was not a single document noting an issue with Roderick's performance, including the termination letter itself. It did not accept that Roderick had performed poorly,  but more so "that it (WHSP) could do better in terms of value for its money" given that a day after terminating Roderick, WHSP hired a new CFO on a lower salary. Further, the new CFO had no position on the board and reported to the chief executive, which the Court noted "would have saved [WHSP] a considerable sum".

Key lessons

This case illustrates the following important points for employers:

  • employers should be aware of the terms of their employment contracts;
  • employers should ensure the contract is executed by all the parties;
  • where an employee’s role title, duties and obligations are changed, the Court will look into the ‘intention of the parties to be bound by that contract’ as well as any alteration of responsibilities and duties, to determine when there is a signed contract and an unsigned contract, which contract will apply.

The dangers of wrongful termination for employers are significant – in this case, to the tune of over a million dollars. Employers should always be cautious when ending employment contracts, particularly if the termination involves role changes, very senior employees, complaints, disputes, poor performance or particularly wrongdoing, to ensure termination processes are both compliant and procedurally fair. 

WISE Workplace offers consultancy support with HR and dispute resolution matters to assist employers in meeting these obligations.  If you are seeking advice on the proper way to resolve an internal workplace dispute, contact us today.

Whistleblowing in 2020: Is Your Organisation Ready?

Vince Scopelliti - Thursday, January 23, 2020

The concept of whistleblowing was once frowned upon, or at the very least looked upon with trepidation. However, in recent years, the value of promoting whistleblowing as an acceptable way to improve corporate regulatory compliance and culture has been demonstrated. In this changing landscape, organisations are embracing whistleblowing - and many also have new obligations to comply with. 

Is your organisation ready for whistleblowing in 2020? Let's look at who can be a whistleblower; who is authorised to receive disclosures; and which organisations must have a whistleblower platform in place. 

What is whistleblowing?

Whistleblowers are individuals with some connection to an organisation, who choose to report corporate misconduct or illegal activities. 

Legislation, including new legislation which came into force on 1 July 2019, provides extended rights and protections to whistleblowers. Ultimately, the intent of the legislation is to ensure that whistleblowers are protected against reprisals, legal action, or general detriment, such as disciplinary action taken by the employer. 

Whistleblower protection may be afforded to various categories of people, including: 

  • Current employees of a company (or a related company)
  • The spouses or relatives of employees 
  • Officers of a company 
  • Contractors who have dealt with the company (potentially including volunteers)
  • General associates of the company

Whistleblowing also includes public interest disclosures. An example of a public interest disclosure might be an employee making a report about a bank which has been consistently charging members fees for no service. These apply in circumstances where a previous report has been made to ASIC or APRA and not actioned within 90 days, and the whistleblower is of the view that the information is of such importance to the public interest that it would be worthwhile reporting concerns to a journalist or a parliamentarian. 

Alternatively, emergency disclosures may be made if concerned parties have reasonable grounds to believe that the matters to be reported concern substantial or imminent danger to health and safety of people or the environment. 

how the disclosure process works

Disclosure about misconduct may be made anonymously, but must be reported to a specific group of people, including: 

  • Directors, company officers or senior managers
  • Auditors of the company 
  • Actuaries associated with the company 
  • A person specifically authorised to receive disclosures (generally a Human Resources officer) 
  • Regulatory authorities such as ASIC or APRA
  • Legal practitioners

Concerns can be reported internally using pre-determined organisational systems such as phone or online reporting. At the very least, an organisation should publish its whistleblowing policy and identify the people who are entitled to receive reports. 

Within a company, those authorised to receive disclosures must act on disclosures by investigating and protecting whistleblowers. 

WHY IS A WHISTLEBLOWING PLATFORM IMPORTANT?

The new legislation means that all public companies, large proprietary companies and corporate trustees of superannuation funds must have a whistleblower policy from January 1, 2020. Large proprietary companies are classed as those that have a consolidated annual revenue of at least $25 million, consolidated gross assets of at least $12.5 million or at least 50 employees.  

In addition to the legislative requirements, there are reasons why all organisations should have a strong platform for whistleblowing. 

These include increasing public and employee confidence in the desire of the organisation to “do the right thing”, and ensuring that senior personnel are safe in the knowledge that, if anybody is committing wrongdoing, staff and related persons can be confident to report those matters without fear of reprisals. 

One of the most effective ways to deal with whistleblowers is to set up an external hotline. This means that reports can be made anonymously. People can avoid potential embarrassment or concerns about making a report in circumstances where they potentially see the people whose conduct they are reporting on a daily basis.

WISE is a leading provider of whistleblowing services in Australia, offering organisations a secure service known as ‘Grapevine’ for staff to report concerns. 

Grapevine allows for anonymous reporting via phone call or online report. Reporters are enabled to provide supporting evidence, and can also choose whether to remain anonymous or leave their contact details. Each report is assigned a case number so it can be tracked throughout the whistleblowing and assessment process. Reports are reviewed by a highly trained and experienced team, and the organisation's nominated contact person is notified within 24 hours. Updates are available online. Depending on the level of service, the Grapevine team can also follow up and take action according to an organisation's whistleblower policy.

For more information on complying with whistleblower legislation, please download our free whistleblowing whitepaper which can answer your questions regarding the changes. If you would like an obligation-free cost estimate to implement a confidential hotline in your workplace, contact us here.

What Should You Include in a Whistleblower Policy?

Vince Scopelliti - Wednesday, June 05, 2019

Whistleblower protections have been top of mind for many Australian organisations recently, following a number of changes to the law. 

The Treasury Laws Amendment (Enhancing Whistle-Blower Protections) Bill 2017 is due to come into effect from July 2019.

This will result in significant changes to the way whistleblowers are to be treated under a raft of existing legislation, including the Corporations Act 2001 (Cth), the Banking Act 1959 (Cth) and the Superannuation Industry (Supervision) Act 1993 (Cth).

One of the key changes is the need for organisations to have policies in place around whistleblower procedures and protections. 

So what are some of the key changes to the law, and what should your whistleblower policy include? 

the key changes to the law

A number of changes will take effect under the new legislation, including: 

  • The expansion of the definition of 'whistleblowers' to include relatives, dependants, their spouses, former employees and former associates.
  • Excluding personal work-related grievances from conduct that is otherwise deemed to be reportable.
  • Enhancing protections for whistleblowers. This includes increased anonymity, more significant penalties for revealing identities of whistleblowers and facilitating the ability for whistleblowers to seek compensation or redress in situations where they have been victimised. 
  • Limiting the persons in a business who are entitled to receive disclosures, but permitting externalisation of whistleblowing to the media and/or parliamentarians in circumstances where the disclosure may be a matter of public interest or emergency. 
  • Requiring public and large proprietary companies (defined as companies with consolidated revenue of at least $25 million, consolidated gross assets of at least $12.5 million or at least 50 employees) to have a detailed and compliant whistleblower policy in place. 

defining conduct to be reported

The intention of the legislation is to protect people who: 

  • Report misconduct or 'an improper state of affairs or circumstances' in situations where the whistleblower has reasonable grounds to suspect that the misconduct has occurred. This is generally expected to cover 'unethical' conduct. 
  • Believe an offence has been committed under legislation whose supervision comes under the purview of the watchdogs APRA or ASIC.
  • Report behaviours which 'represent a danger to the public or financial system' or otherwise relate to a civil or criminal offence which could result in imprisonment for a period of at least one year. 

explaining the process

In the event that a staff member wishes to make a disclosure, it is essential that it is only made to the appropriate category of person. Internally, this includes officers of the company, a person authorised by the company to receive 'protected disclosures' (such as an HR representative) or a senior manager of the whistleblower, who is an employee of the company. Companies can facilitate disclosure by implementing a mechanism for staff members to report online or over the phone. 

External disclosures can be made to ASIC/APRA, auditors or actuaries reviewing the company, lawyers or journalists or parliamentarians where public interest would be met by making the disclosure.

Whistleblowers are entitled to retain anonymity. However, the information does not need to remain confidential, as long as it can be demonstrated that:

  • The information requires investigation.
  • Reasonable steps have been taken to maintain the anonymity of the whistleblower in conducting such an investigation. 

protections for whistleblowers

The new legislation sets out a number of strengthened protections for whistleblowers.

  • Immunity against civil, criminal, administrative or disciplinary action.
  • An inability to enforce contractual remedies against a party making the disclosure.
  • An inability to admit information provided by a whistleblower into evidence in proceedings against them (unless those proceedings are pursued because of the falsity of the information). 
  • Protection against victimising conduct (such as dismissal, demotion, discrimination or similar).
  • Increased anonymity protection through strict liability criminal offences for revealing identities of whistleblowers
  • Significant monetary penalties applicable to person(s) who reveal the identities. 

What to include in a whistleblower policy?

Organisations who are required to have a whistleblower policy must ensure that it covers off key points, including: 

  • What protections the employee can expect to receive.
  • Details on how those protections will work in practice.
  • Specific information on how a disclosure can be made.
  • Details on how disclosures will be investigated.
  • How the policy will be transparently implemented. 

The policy should be communicated to all staff, from the CEO down. It should be made available where all staff members can easily access it, for example posted on an intranet. 

It is clear that the content and nature of a whistleblower policy are key to appropriately implementing the legislation. To assist our clients in understanding the looming changes and preparing, we have published a white paper, which is available on our website for free download.

We also provide our industry-leading Grapevine Confidential Whistleblower Hotline, which is staffed 24 hours a day, 7 days a week. Grapevine provides employees with the opportunity to make anonymous complaints to trusted and experienced operators.

Whistleblower Changes - Getting Your Policies Right

Vince Scopelliti - Wednesday, January 16, 2019

With the new changes to whistleblower legislation soon to be debated and enacted, it's essential to assess whether or not your business is compliant. An important part of ensuring compliance with the changes lies in the development of robust policies to protect whistleblowers. The Human Resources function has a central role in preparing staff for the new approach to whistleblowing in the workplace. 

We examine best-practice policy development for the support of whistleblowers in the workplace, including compliance hazards to watch out for as the new legislation takes effect. 

recapping the changes

We have previously examined the architecture of the new regime, due to be enacted in early 2019. The proposed changes to legislation emphasise the need to not only protect workplace whistleblowers when they speak up, but to penalise organisations that fail to provide protection from harm. As part of these new requirements, whistleblower policies must be current, workable and robust. Tokenist policies and procedures that fail to effectively protect whistleblowers are no longer acceptable. 

how can hr guide the process

The most important focus for Human Resources departments will be the development and maintenance of a whistleblower-friendly culture: This is a good news story, the government has recognised the importance of whistleblowers in the fight against corporate wrongdoing and has acted in a positive way to encourage and support this practice. 

In developing quality training, in-house publicity, policies and procedures, HR needs to ensure that they guide staff and management towards a more supportive and knowledgeable stance in relation to whistleblower protections. 

best-practice in policy design - are you compliant? 

In view of the legislative changes due to be delivered, organisations are clearly required to 'get their house in order' when it comes to the development and maintenance of appropriate policy instruments. It is not sufficient for example to have policies that merely provide lip service to the ideal of whistleblower protections. 

There must be clear and user-friendly mechanisms for anonymous reporting and disclosure - even if there is a mere suspicion of corruption, graft, fraud or other foul play in the organisation. 

Importantly, it is no longer necessary to approach a direct supervisor to report an issue - the new legislation reflects a growing understanding that ostracism and discrimination can and does occur if a whistleblower is limited in terms of reporting mechanisms. 

Now is the time to examine your organisation's policies around whistleblower protection, to establish if they comply with the widened scope of the new legislation.

compliance hazards to watch out for

In developing the mechanisms to protect whistleblowers, there are a number of potential pitfalls to be aware of. Firstly, organisations can be liable if they fail to prevent harm to a whistleblower as a result of workplace reprisal. Reporting structures must be watertight in terms of anonymity and discretion. The smallest leak can lead to significant emotional and career harm for those brave enough to blow the whistle. 

A second related hazard is policies that are too general to be of any real use to potential whistleblowers. Policy documents should clearly and distinctly answer the 'what, how, who, when' of whistleblowing; when time is of the essence, it is important that staff can act immediately with their concerns. Further, whistleblower policies and training should explain clearly to all staff the repercussions for any harm caused to a whistleblower due to their disclosure. The key is a strong culture, where encouragement and protection of whistleblowers is a core element of business-as-usual.

how WISE's grapevine hotline can help

WISE is well versed in the changes of the whistleblowing legislation, and has recently published a whitepaper that can help answer all your questions regarding these changes. In addition, we have a whistleblower hotline, known as Grapevine, which has been running since 2016. The service is entirely professional and anonymous, and available 24/7 to concerned whistleblowers.

If you would like to know more or would like a cost estimate to implement our confidential hotline in your workplace, contact WISE now. By including the Grapevine Whistleblower Service in your whistleblower policy framework, your organisation can go a long way to fulfilling its requirements under the new legislation.

Protecting Whistleblowers: Are You Ready for the Changes?

Vince Scopelliti - Wednesday, December 05, 2018

With new whistleblower protections to take effect in early 2019, it is essential that organisations understand the broad legislative changes to the Corporations Act 2001 due to be debated in Parliament. In addition to the requirement for formal mechanisms and strategies to protect and assist whistleblowers, both public and large private corporations will need to be able to 'spread the word' to staff in a practical way. 

Successfully embedding the changes to whistleblower protections into your organisation requires clear understanding, action and communication. With 2019 just around the corner, the time is right to ensure that you have all the information that you need to meet the new obligations.

WHat is the definition of a 'whistleblower'? 

Blowing a whistle has always been a common method for citizens to warn others of significant problems such as overcrowding, bad sportsmanship or dangerous waters. Whistleblowing has nevertheless developed some negative connotations in the corporate world. 

Despite the need to guard against corruption and corporate wrongdoing, corporations have in the past done little to actively protect those who speak up from being harmed. The new regime, due to be enacted in early 2019, includes compensation for any whistleblower who suffers statutorily-defined 'detriment'. 

No longer will the definition of whistle blower be restricted to current employees: past and present contractors, workers, suppliers, family members and many other stakeholders can rely upon the new protections.

who the changes apply to 

The proposed changes to the Corporations Act 2001 will effectively ensure that large employers provide the incentive, means and protection for individuals to blow the whistle when corporate wrongdoing is suspected. The changes formalise the legal protections that have been available in a relatively piecemeal manner across time. 

The new regime will mandate that all Australian public companies, large proprietary companies, and registerable superannuation entities will have compliant whistleblower policies in place by early 2019. Further, it will be necessary to demonstrate that stakeholders can safely and anonymously exercise their right to blow the whistle on corrupt practices. 

reach of the new bill

The demands on corporations flowing from the changes to whistleblower laws via the Treasury Laws Amendment (Enhancing Whistle-blower Protections) Bill 2017 can certainly seem daunting. As an example, the new Bill requires that corporations provide clear, comprehensive and anonymous pathways for any staff or stakeholders who wish to report suspected wrongdoing. 

This includes demonstrating that policies and procedures designed to promote and protect whistleblowing are accessible by all stakeholders. Further, access to an anonymous helpline is crucial to ensure that parties can talk freely about any suspicions of wrongdoing. 

The reach of the new Bill includes the ability to look at past corruption and in some cases to award damages to workers or others who have suffered detriment in the past as the result of blowing the whistle.

next steps? 

In the short time remaining between now and when the new whistleblower changes come into being, it is essential that all relevant organisations audit their current practices relevant to the new Bill. To assist our clients in understanding the proposed changes, we have published a white paper, which is available for free download. 

One core offering that we provide is our industry-leading Grapevine Confidential Whistleblower Hotline. Staffed 24 hours a day, 7 days a week, Grapevine provides employees with the opportunity to make anonymous complaints to trusted and experienced operators. 

WISE has provided Grapevine since 2016, and the hotline enhances the way our clients manage their business, but also allows them be legally compliant with the new regulations. January 2019 is fast approaching. If you would like any additional information or an obligation free proposal, contact WISE today!