Large multinational implicated in adverse action breaches in Australia

By Kristy Peacock Smith, Leila Moddel, Joel DiQual

05-2019

In an unfortunate lesson for local and international companies alike, the decisions of Keenan v Cummins South Pacific Pty Ltd [2018][1] ("Keenan No. 1") and Keenan v Cummins South Pacific Pty Ltd (No. 2) [2019][2] ("Keenan No. 2") serve as a powerful message about the view Australian courts are taking in relation to non-compliance with Australian legislation, irrespective of where senior managers and decision-makers are located.

Keenan No. 1 required the Federal Circuit Court of Australia to consider whether the employer was liable for taking adverse action against an employee with over 34 years of service. Having determined liability, Keenan No. 2 was the decision on liability and the associated orders, which included reinstatement and back payment of wages totalling some AUD1 million.

Summary of facts

Mr Keenan commenced employment in September 1981 as a technical engineer, initially with Cummins Darlington of the United Kingdom, a subsidiary of Cummins Inc. He remained in employment for some 34 years, although he was transferred between different subsidiaries of Cummins Inc. over that period.

The matters subject to the adverse actions proceedings commenced shortly after Mr Keenan relocated to Australia, to work as a regional leader for Cummins South Pacific Pty Ltd., in Box Hill, Victoria. 

Mr Keenan encountered challenging internal relationships, both in Australia and abroad, including with the local HR leader, Global Line HR, and Global Operations Leader.

Prior to the termination of his employment, Mr Keenan made five complaints, i.e. five times he exercised his workplace right to make a complaint in relation to this employment. Alongside Mr Keenan's complaints, he was subject to a performance improvement plan (PIP), an ethics investigation, a proposed dismissal and a suspension, all alleged by Mr Keenan to be separate instances of adverse actions taken against him.

His Honour Justice Wilson QC was scathing of the conduct by the employer and the evidence given by a number of employees. Of note is the following passage from Keenan No. 1:

"Perfectly appropriately, Mr Keenan was attempting to raise with his superiors issues that bore directly upon [his inferior]'s propriety and honesty, having regard to Mr Keenan’s characterisation of [her] conduct of making false accusations against him. Mr Keenan was right to bring that to the attention of his superiors. By way of response, Mr Keenan’s superiors told him to self-reflect. They fobbed him off. They refused to entertain his approach. They sloughed off his concerns in a perfunctory and dismissive manner. They told Mr Keenan he needed to examine his behaviour. They were entirely resistant to his concerns. They showed poor leadership by their disdain for his concerns. They reacted badly".

Did adverse action take place?

His Honour Justice Wilson QC found the employer had engaged in six instances of adverse action including:

  • placing Mr Keenan on the PIP;
  • making allegations against Mr Keenan in relation to his involvement with another employee subject to an ethics case;
  • initiating an ethics case against him;
  • issuing him a show cause letter proposing to terminate his employment;
  • suspending and subsequently dismissing Mr Keenan;
  • unlawfully terminating Mr Keenan's employment while he was temporarily absent due to illness.

    Decision on liability

    In Keenan No. 2, His Honour Justice Wilson QC held that Mr Keenan:

  • must be reinstated to the position he held with his employer prior to the unlawful termination;
  • must be back-paid for the salary he was not paid as a result of the unlawful conduct;
  • must be paid superannuation in relation to the back-pay amount;
  • was entitled to long service leave for the full length of his service, including with related entities, whether in Australia or overseas; and
  • was entitled to AUD20,000 in damages for hurt and humiliation.

    The employer was also penalised for contraventions of the Fair Work Act 2009 (Cth) ("Act") at the upper limit, being AUD45,000.

    When faced with the decision as to whether reinstatement would be appropriate on the basis that Mr Keenan would have to report to the same person, a Ms Beaulieu, His Honour stated that "the respondent's conduct was found to be unlawful. Ms Beaulieu was personally deeply involved in a great deal of that unlawful conduct. Her behaviour hereafter must comply with good corporate governance according to Australian law as well as proper behaviour according specifically to the Fair Work Act. She has no choice in the matter".

    Takeaways for employers

  • Compliance with the Act is a mandatory legal requirement for all roles within an organisation, whether that person sits in Australia or overseas, in relation to the administration of terms of employment to employees that are covered by the Act.
  • Courts will order reinstatement, even where there is evidence that relationships are extremely fractured.
  • Back-pay liability can be significant; in particular if it is awarded for a period between termination and the decision on liability. Before Keenan No. 2, Mr Keenan could not find permanent work; he worked as an Uber driver and whilst he tried to mitigate his loss, this mitigation did not amount to any significant pay.
  • Courts in Victoria take a broad view about service with related entities, including overseas service, for the purpose of an entitlement to long service leave.


[1] FCCA 2600

[2] FCCA 523