• Dangers of Unilaterally Altering the Position of an Employee Who Exercises a Workplace Right: Federal Circuit Court Orders Significant Payout in Tiy Loy decisions
  • May 31, 2016 | Author: Adam Salter
  • Law Firm: Jones Day - Sydney, New South Wales Office
  • In the Cai v Tiy Loy & Co Ltd decisions, the Federal Circuit Court imposed significant compensation orders and penalties on an employer that moved an employee to a part-time role because the employee sought to exercise his right to access a workers' compensation scheme. The decisions serve as a warning to employers that deciding to unilaterally alter an employee's position because that employee seeks to exercise a workplace right can have serious consequences should the employee bring an adverse action claim.

    Factual Background. Mr Cai was employed by Tiy Loy & Co Ltd ("Tiy Loy"), a company formed to provide a meeting place for immigrants from the province of Guangdong to play mahjong. Mr Cai worked 90 hours per week and often stayed overnight at Tiy Loy's premises after performing tasks into the evening, including general maintenance and serving tea.

    In January 2012, while walking up the stairs after placing the rubbish outside, Mr Cai fractured his left ankle. Tiy Loy later submitted a workers' compensation claim, and Mr Cai's treating doctor certified that Mr Cai had restricted work capabilities and could work only 40 hours per week.

    Tiy Loy claimed that in June 2012, due to a downturn in its revenue, it decided to move Mr Cai from a six-day-per-week full-time position to a three-day-per-week part-time position. However, Mr Cai argued that the decision to alter his employment was made due to his workers' compensation claim. Mr Cai informed Tiy Loy that he had decided to resign because he was not prepared to work part time. Mr Cai claimed that Tiy Loy took adverse action against him in altering his position to part time because he had exercised a workplace right to access benefits under the Workplace Injury Management and Workers Compensation Act 1998 (NSW).

    Legal Background. Section 340(1) of the Fair Work Act 2009 (Cth) ("FWA") states that "[a] person must not take adverse action against another person (a) because the other person (i) has a workplace right; or (ii) has, or has not, exercised a workplace right...". Section 341 of the FWA defines "workplace right" broadly to include an entitlement to a benefit under a workplace law. According to section 342(1) of the FWA, an employer takes adverse action against an employee if the employer (i) "dismisses the employee", (ii) "injures the employee in his or her employment", (iii) "alters the position of the employee to the employee's prejudice" or (iv) "discriminates between the employee and other employees of the employer".

    Decision. Judge Manousardis found that Tiy Loy's conduct in altering Mr Cai's employment from full time to part time constituted adverse action, because Tiy Loy effectively dismissed Mr Cai when it "purported unilaterally to alter the terms of Mr Cai's contract of employment in a fundamental way". Mr Cai had a "workplace right" because an entitlement to a benefit under workers' compensation law is an entitlement to a benefit under a workplace law. Judge Manousardis also found that Tiy Loy contravened section 340 of the FWA. Tiy Loy took the adverse action because Mr Cai exercised his workplace right. From the circumstances, "it could reasonably be inferred that Tiy Loy decided to alter Mr Cai's employment because it desired to reduce or eliminate costs it expected it would incur" to manage Mr Cai's injury in accordance with the workers' compensation scheme.

    In addition to the prohibited adverse action, Judge Manousardis found that Tiy Loy failed to pay Mr Cai the penalty rates and leave loading which Mr Cai was entitled to receive as a "tea attendant" within the meaning of the Miscellaneous Award 2010. Based on the findings made by Judge Manousardis, the parties agreed that Tiy Loy should pay Mr Cai $415,698.55 in compensation, including interest. Judge Manousardis also imposed $53,500 in penalties on Tiy Loy for the contraventions. Pursuant to the court's power to order that a penalty be paid to the Commonwealth or a particular person, Judge Manousardis ordered that Tiy Loy should pay the penalties directly to Mr Cai.

    Lessons for Employers. Any attempt by an employer to alter an employee's position, such as changing an employee's working hours or role, should be approached with caution. Where the action was taken because the employee exercised a workplace right, it could amount to adverse action that contravenes section 340 of the FWA. Employers need to have alternative, sound and legitimate reasons to take adverse action against an employee. The Cai v Tiy Loy decisions illustrate the broad powers of the courts to impose both compensation orders and penalties on employers that fail to comply with their obligations. This can result in significant payouts being made to an employee that was the victim of the contravention. In this instance, Judge Manousardis's decision to order that Tiy Loy pay penalties directly to Mr Cai also highlights the financial incentive employees have to seek the imposition of penalties in addition to compensation.