In the crossfire: poor management of multiple complaints = record-breaking $5.2m in damages, compensation and penalties

By Hedy Cray, Laura Hillman
26 Nov 2020
Employers must take seriously and address employee workplace complaints in accordance with its policies and procedures, and any dismissal (or other negative action being taken towards an employee) is clearly disconnected from any complaints they may have made.

In a decision reinforcing the importance of addressing and managing a separation of employee complaints on 2 October 2020, the Federal Court has ordered TechnologyOne Limited to pay more than $5.2m in damages, compensation and penalties following finding the dismissal of an employee who had made bullying complaints was adverse action.

The bullying complaints

The employee, Mr Roohizadegan, was employed with Technology One, an ASX listed company, since 2006 in a senior role as State Manager for Victoria Mr Roohizadegan was with the company as it grew from 377 employees to about 1000 employees in 2016. Mr Roohizadegan was summarily dismissed on 18 May 2016. At the time of his dismissal, Mr Roohizadegan's salary was $192,000 plus incentives bringing his gross annual income to $845,128.00.

Mr Roohizadegan over the course of his employment made a range of complaints to his employer. He was a serial complaint maker. In a decision spanning over 300 pages, Justice Kerr described Mr Roohizadegan as a "serial complainer from the moment of his appointment in respect of his remuneration and his entitlements".

In addition to complaints about his remuneration and entitlements, over three months, in February to mid-May 2016, Mr Roohizadegan made 7 complaints of bullying against a number of other senior employees. The complaints included allegations of bullying, through emails, Mr Roohizadegan being asked to not attend a meeting with a client that he believed he should attend, decisions he said were made "behind his back", and that he was allegedly sworn at during discussions.

While Mr Roohizadegan was successful in his role, his manner of communication in the workplace allegedly also impacted on other sales staff. Consequently, during the same period, on 18 and 19 April 2016, several sales staff met with HR Business Partner, Ms Gibbons, to make their own complaints of bullying against Mr Roohizadegan's conduct, though the nature of the complaints is not described in the judgement.

On 20 April 2016, Ms Gibbons met with Mr Roohizadegan. Ms Gibbons did not inform him that he had been the subject of complaints. Mr Roohizadegan, however, informed Ms Gibbons of his concerns. This included that he was being marginalised by another senior employee and that he was considering taking legal action against the employee.

How did the employer respond?

Following that meeting, Ms Gibbons sent Mr Roohizadegan an email including a link to Technology One's bullying policy. On 24 April 2016, Ms Gibbons sent an email to the HR Director, Ms Carr, to inform her about the complaints made against Mr Roohizadegan by the sales staff. That email also explained that Mr Roohizadegan had told her that he was considering making a bullying claim and taking legal action against another staff member.

Ms Carr, the following day, forwarded Ms Gibbons' email to the Chief Executive Officer, Adrian De Marco, who said he was "flabbergasted" at the number of sales employees making complaints against Mr Roohizadegan and decided that Mr Roohizadegan "had to go".

The next day, the CEO actioned this when he met with the executive team, including the Operating Officer Sales and Marketing who was the subject of some of Mr Roohizadegan's complaints made to the CEO. At the meeting, Ms Carr's email was discussed. Despite Ms Carr advising that TechnologyOne should investigate the complaints made against Mr Roohizadegan and should not take action on the basis of allegations alone, the CEO confirmed he did not want to investigate and that dismissal was to occur after Mr Roohizadegan concluded a financially significant deal for the company.

On 3 May 2016, the executive team met again to discuss Mr Roohizadegan. At that meeting, Ms Carr repeated that the allegations should be investigated. This didn’t occur.

Mr Roohizadegan continued to make complaints, including further complaints against the Operating Officer Sales and Marketing.

On 16 May 2016, the CEO emailed Mr Roohizadegan to advise that Mr Roohizadegan's complaint against the Operating Officer Sales and Marketing would be investigated and sends Mr Roohizadegan an invitation for a meeting on 18 May 2016.

On 18 May 2016, the CEO, Ms Carr and the Chief Operating Officer met with Mr Roohizadegan. Despite Mr Roohizadegan previously being given excellent performance ratings, Mr Roohizadegan's employment was terminated without notice. The judgement doesn’t explain what, if any reasons, were provided to Mr Roohizadegan. At the time of being informed of the dismissal, Mr Roohizadegan was given a deed of release and was informed that it was non-negotiable. One hour later, the CEO emailed all TechnologyOne's staff to advise them that Mr Roohizadegan's employment was terminated.

Following his dismissal, Mr Roohizadegan, had a mental breakdown. Unknown to TechnologyOne, Mr Roohizadegan had pre-existing mental illness since 2010 which was unrelated to his work, but resulting in him being incapable of working again.

Mr Roohizadegan made an adverse action claim to the Fair Work Commission that proceeded to hearing in the Federal Court.

The Federal Court decision

The litigation was extensive. The Hearing of the application took 14 days with over 20 witnesses, including Mr Roohizadegan, giving evidence in addition to expert witnesses. Many of the critical events giving rise to Mr Roohizadegan's dismissal and the proceedings were undocumented. This includes that Ms Gibbons made no notes of the meeting with the sales staff who made complaints.

Justice Kerr found that at the time the CEO made the decision to dismiss Mr Roohizadegan, he knew of all 7 of Mr Roohizadegan's complaints. Justice Kerr found that TechnologyOne did not discharge their presumption onus that adverse actions taken against Mr Roohizadegan were because he exercised on 7 occasions a workplace right.

In addition to finding that Technology One had engaged in unlawful or adverse action, Justice Kerr also found that the CEO was accessorily liable for Technology One's breach.

Given the evidence of Mr Roohizadegan's health and personal breakdown, making the largest order in Australia for adverse action, Justice Kerr ordered that TechnologyOne pay:

  • a penalty of $40,000;
  • $756,410 as compensation for foregone share options;
  • $2,825,000 as compensation for future economic loss;
  • $10,000 as general damages;
  • $1,590,000 as damages for breach of contract.

In criticising the CEO for twice rejecting HR advice that terminating Mr Roohizadegan's employment would be unfair, and choosing to "stand with the bullies rather than the bullied", the CEO was also ordered to personally pay a penalty of $7,000 for accessorial liability.

Lessons for employers

This case has many lessons for employers. It is a sobering reminder that adverse action compensation and damages are not capped under the Fair Work Act 2009. Here, a senior employee, earning almost $200K base salary and incentives, was unable to return to work, due to incapacity accepted by the Court, resulted in demonstrate future economic loss of almost $3 million. This accounts for a large portion of the compensation, but even without the economic loss, compensation for breach of contract and other compensation damages were significant.

The case reinforces engaging in adverse action can be very costly, not only in compensation damages and penalties that may be ordered, but also the cost and time involved in the proceedings, which took some 4 years, but also the impact on reputation.

The case also valuably highlights the impact of serial complainants and cross-claims, namely where there are entrenched or toxic issues in a workplace where factions each make complaints against each other. While the case identifies that the employer was overwhelmed by the number of complaints both from and against Mr Roohizadegan, it was not enough to merely remove one of the parties from the workplace, tempting as the Court outlined it may have been. The CEO failed to take HR advice and did not take the complaints seriously, acting on untested allegations and, to Mr Roohizadegan's detriment, by not investigating the matters.

This is often the outcome, irrespective of how deserving or non-deserving complaints may be. Due process will need to occur first.

It is important that employers take seriously and address employee workplace complaints in accordance with the employer's policies and procedures and that any dismissal (or other negative action being taken towards an employee) is clearly disconnected from any complaints they may have made. In achieving this, it is crucial that complaints and other separate processes are documented.

When considering termination of employment, in particular as a result of allegations that have not been considered and tested, procedural fairness should be afforded before a decision is made.

Taking advice, whether from Human Resources or Legal, can support and guide a process. However, where advice is not followed, a clear operational reason should be demonstrated and documented about the reasons for doing so.

TechnologyOne has appealed the decision and Mr Roohizadegan has filed a cross-appeal.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.