Legal Update

Harmers Assists in Obtaining Landmark Award of $5.2 Million in Damages for Adverse Action and Breach of Contract

Authors: Amy Zhang, Amy Sutherland, & Hannah Lawson

In the recent decision of Roohizadegan v TechnologyOne Limited (No 2) [2020] FCA 1407, the Federal Court of Australia awarded a senior employee of the ASX-listed software company, TechnologyOne, more than $5.2 million in damages (plus interest) under the general protections provisions of the Fair Work Act 2009 (Cth) (‘Fair Work Act’) and for breach of contract in relation to the payment of incentives.

This landmark award of damages for adverse action under the Fair Work Act is a timely reminder to employers and senior management of the importance of properly investigating complaints, and ensuring any termination process is carefully and fairly managed. It is also a reminder of the care that needs to be taken when drafting contracts of employment, particularly when it comes to incentive payments.

In finding that the respondents had contravened the general protections provisions of the Fair Work Act, Justice Kerr found that the applicant employee, Mr Roohizadegan, represented by Harmers Workplace Lawyers, was sacked after he made seven separate complaints that he was being bullied in the workplace. The respondents argued that the applicant was fired because of competing allegations made by various employees about Mr Roohizadegan but, notably, the company had failed to conduct an internal investigation in relation those allegations before terminating Mr Roohizadegan’s employment. In this regard, Justice Kerr was scathing of the then CEO, Mr Di Marco, and his decision to twice reject “professional HR advice that it would be unfair to dismiss Mr Roohizadegan on the basis of mere allegations”.

The Court accepted the argument by TechnologyOne that Mr Di Marco was the sole decision maker in relation to the termination of Mr Roohizadegan’s employment. However, Justice Kerr determined that the respondents failed to discharge the onus of proving that the complaints, being exercises of the applicant’s “workplace rights”, were not a reason for the termination of his employment. This meant that TechnologyOne was found to have taken “adverse action” against the applicant in contravention of the general protections provisions of the Fair Work Act.

The Court awarded Mr Roohizadegan $10,000 in general damages, $756,410 in damages for past economic loss as compensation in respect of the applicant’s forgone share options, and $2,825,000 in damages for future earning capacity, as well as $1,590,000.00 for breach of contract. With the additional $40,000 in penalties awarded against TechnologyOne and $7,000 awarded against Mr Di Marco personally under the Fair Work Act, both to be paid to the applicant, the final sum totalled $5,228,410, not including interest.

Of note for employers are comments made by the Court in its consideration of penalties against the company and Mr Di Marco. Justice Kerr determined that a “penalty towards the higher end of the scale”’ was appropriate for Mr Di Marco, concluding that “[t]o achieve effective deterrence, CEOs in like positions need to know that such temptations [to reject professional HR advice] as he faced are to be resisted: and that there will be a not insubstantial price for failing to do so”.

In light of Justice Kerr’s scathing remarks about the credibility of Mr Di Marco and members of TechnologyOne’s executive team, employers should be mindful of the reputational damage that may be suffered for failing to take appropriate steps to comply with the Fair Work Act.

A decision regarding costs is to follow after submissions from the parties.

For more information or if you require advice and assistance regarding the above, please contact our Harmers team on +61 2 9267 4322.