Whistleblowers and the adverse action regime under the Fair Work Act 2009 (Cth)

The adverse action provisions in Pt 3-1 of the Fair Work Act 2009 (Cth) (FW Act) prohibit employers from taking action to the prejudice of employees for certain prescribed reasons. One of those reasons is found in section 341(1)(c)(ii), that is, where the employee “is able to make a complaint or inquiry … in relation to his or her employment”. An employer who takes adverse action against an employee because of such a complaint or inquiry is liable for breach of a civil remedy provision under the FW Act.

Section 341(i)(c)(ii) is worded broadly and to date, its interpretation by the courts has been inconsistent. Courts have disagreed as to a couple of key questions. First, does the complaint or inquiry need to be for the vindication of a contractual or statutory right belonging the employee? Second, can the complaint or inquiry be in relation to the circumstances of someone else’s employment? These are important questions which could have wide-ranging implications for the relationship between employers and employees.

More specifically, if the complaint or inquiry must be for the vindication of a statutory or contractual right belonging to the complainant-employee, then it would seem that whistleblowers are not protected by the adverse action regime. By definition, whistleblowers may seek to complain about circumstances that they have observed but which may not directly affect them.

The opposing viewpoints are illustrated by two recent Federal Court decisions, Shea v TRUenergy Services Pty Ltd (No 6) ^[1] and Walsh v Greater Metropolitan Cemetery Trust (No. 2).^[2] In the former case, a restricted interpretation was given to section  341(1)(c)(iii); in the latter case, a broader interpretation was provided.

Shea v TRUenergy Services Pty Ltd

Facts

The defendant, TRUenergy Services Pty Ltd, was the employing entity within the Energy Australia corporate group, a large producer and retailer of electricity.

The plaintiff, Kate Shea, was employed by TRUenergy as the Director of Corporate Affairs and engaged under the terms and conditions of a contract of employment dated 8 December 2006. In this role, Ms Shea was responsible for managing the business’s marketing and branding strategy.

Ms Shea alleged that she was the victim of sexual harassment by the Chief Financial Officer (CFO). Following a company dinner in Hong Kong in February 2010, Ms Shea alleged that the CFO and other employees proceeded to a nearby Club. During the course of the evening, Ms Shea alleged that the CFO stroked her neck, hair and thigh, all without her consent.

On 24 February 2010, Ms Shea reported the incident to Mr David Purvis, TRUenergy’s Human Resources Director. In April 2011, Ms Shea said that she also complained about the incident to the Managing Director. Further complaints were made by Ms Shea in relation to the conduct of an external investigation by a private law firm which looked into the veracity of her allegations.

Ms Shea’s employment ended on 6 February 2012, ostensibly, because of the redundancy of her role. Ms Shea alleged that the real reason for the termination was one or more of the complaints that she made. Ms Shea argued that her complaints fell within the scope of section  341(1)(c)(ii).

Legal ruling and reasoning

Ultimately, Dodds-Streeton J ruled that the redundancy was genuine and not because of a prohibited reason. Although it was not necessary to the decision, her Honour considered the scope of section  341(1)(c)(ii) and what exactly is meant by the words, “is able to make a complaint or inquiry … in relation to his or her employment”.

Her Honour made two important rulings.

(a) Vindication of contractual or statutory right

First, the complaint or inquiry must be for the vindication of a contractual or statutory right:

"In my opinion, the requirement that the complaint be one that the employee ‘is able to make’ in relation to his or her employment suggests that there are complaints which the employee is not able to make in relation to his or her employment. The ability to make a complaint does not arise simply because the complainant is an employee of the employer. Rather, it must be underpinned by an entitlement or right. The course of such entitlement would include, even if it is not limited to, an instrument, such as a contract of employment, award or legislation." ^[3] (emphasis added)

On the facts, Ms Shea’s complaints satisfied this condition. Ms Shea’s contract of employment referred to and incorporated TRUenergy’s employment policies as a term of the contract. At all relevant times, TRUenergy’s Grievance Policy and Equal Opportunity Policy applied as contractual documents.

The Equal Opportunity Policy, amongst other things, prohibited various forms of bullying and harassment. Accordingly, Ms Shea’s complaints about the alleged sexual harassment that she suffered, were sourced in the Equal Opportunity Policy.

The terms of the Grievance Policy required that any investigation into allegations of impropriety in the workplace be conducted fairly and with due process. Accordingly, Ms Shea’s complaints about the external investigation that was conducted in relation to her complaints, were in substance, an attempt to vindicate her contractual rights.

(b) Nexus of complaint to employment

The second important ruling of Dodds-Streeton J was that the complaint or inquiry must have a nexus to the complainant’s employment, whether direct or indirect. ^[4] Without providing a detailed explanation of how close a connection is required, Dodds-Streeton J pointed out that some complaints might be considered to fall outside section  341(1)(c)(ii) because they relate to other employees. Her Honour referred to the following example:

"There can be no sufficient nexus between a complainant’s employment and mere rumours or baseless accusations of misconduct towards other persons in the workplace, which have come to the complainant’s attention." ^[5]

Although the existence of a “sufficient nexus” can only be determined on the facts of each case and it is difficult to establish an all-encompassing definition, the comment of Dodds-Streeton J suggests that whistleblowers (that is, employees complaining about malpractice that they have observed in the workplace but not necessarily affecting their employment) might not be protected from adverse action.

Shortly after the decision, the judgement in Walsh v Greater Metropolitan Cemetery Trust (No. 2) was delivered. Bromberg J voiced a different opinion to Dodds-Streeton J on the ambit of section  341(1)(c)(ii).

Walsh v Greater Metropolitan Cemetery Trust

Background and facts

Greater Metropolitan Cemetery Trust (GMCT) operated 21 cemeteries across Melbourne and provided a number of associated services including burial, cremation and memorial. Ms Walsh was employed by GMCT as Client Services Manager. Her contract of employment commenced on 24 September 2012 and included a six-month probationary period.

On 7 and 12 March 2013, Ms Walsh made complaints in the course of a meeting with GMCT’s human resources representatives. The complaints related (amongst other things) to the conduct of a particular memorial service and perceived misconduct by another GMCT employee, Ms Butler. In short, the complaints were that: ^[6]

(a) Insufficient staff had been allocated to a Greek-Orthodox memorial service, giving rise to workplace safety risks;

(b) Alsco, a linen supplier to GMCT, was providing a sub-quality product;

(c) Ms Butler should have excluded herself from dealings involving Alsco on the basis of an apparent conflict of interest: Ms Butler’s daughter worked for Alsco; and

(d) Ms Butler had behaved inappropriately towards Ms Walsh by undermining her in front of fellow staff.

Ms Walsh’s employment was terminated on 20 March 2013, that is, during the six-month probationary period. The letter of termination cited performance issues as the reason for termination.

Ms Walsh asserted that the complaints she made on 7 and 12 March 2013 were operative reasons for her termination. Ms Walsh argued that each of the complaints fell within the ambit of section  341(1)(c)(ii).

Ruling and reasons of Federal Court

Justice Bromberg found that the complaints were not the reasons for termination of Ms Walsh’s employment.^[7] The decision to terminate was ultimately made by GMCT’s Chief Executive Officer, whose evidence regarding the performance issues was accepted by the court.

Although it was not necessary to the decision, Bromberg J also considered GMCT’s contention that the complaints were not in relation to Ms Walsh’s employment (because they concerned the conduct of another employee and GMCT’s business operations in a general sense) and therefore did not amount to the exercise of a workplace right under section  341(1)(c)(ii).

Justice Bromberg rejected the notion that the complaints were not in relation to Ms Walsh, giving section  341(1)(c)(ii) a wide construction:

"The words “in relation to” are words of wide import. The use of that phrase in section 341(1)(c)(ii) identifies that a relationship between the subject matter of the complaint and the complainant’s employment is required. The nature of that relationship need not be direct and may be indirect."^[8]

This is consistent with the decision of Dodds-Streeton J in Shea that the complaint or inquiry must have some connection with the complainant’s employment, whether direct or indirect. However, the fact that Bromberg J found Ms Walsh’s complaints to fall within the terms of section  341(1)(c)(ii) suggests that, in the view of Bromberg J, the complaint need not seek the vindication of a contractual or statutory right. Clearly, none of Ms Walsh’s complaints alleged that her contractual or statutory rights had been breached.

For instance, Bromberg J found that the complaint regarding Ms Butler’s involvement with Alsco amounted to a complaint under section  341(1)(c)(ii).^[9] No statutory or contractual right of Ms Walsh was engaged by this particular complaint.

Justice Bromberg’s reasoning suggests that a complaint, for the purposes of section  341(1)(c)(ii), need not seek validation of a contractual or statutory right provided there is some connection (whether direct or indirect) to the employee’s employment. This provides some scope for the protection of whistleblowers, but on the flip side, it may also give rise to a risk of abuse: poorly performing employees could make spurious and unfounded complaints in a bid to hinder management processes. It is not too difficult to imagine a situation in which an employee draws an imagined connection between a complaint or inquiry and potential disciplinary action, in a bid to impede that action.

This was alluded to in Ramos v Good Samaritan Industries, ^[10] where the full Federal Court considered section  341(1)(c)(ii) and described how an employee, who raises general management issues by way of complaint, can be considered to be a “difficult employee”, that is, an employee who unjustifiably stands in the way of business operations.^[11]

Conclusion: inconsistencies and gaps in the law

Parliament’s intention in enacting section  341(1)(c)(ii) was to broaden the protection given to employees who make complaints or inquiries.^[12] The predecessors to section  341(1)(c)(ii), sections 659(2)(e) and 793(1)(j) of the Workplace Relations Act 1996 (Cth), did not protect employees who made complaints or inquiries to their employers; under the predecessor provisions, the complaint or inquiry needed to be directed to some formal body.

Section 341(1)(c)(ii) is clearly broader in scope than its predecessors, but the diverging approaches to its interpretation in case law has given rise to confusion. It will be interesting to see how this confusion is resolved. In considering possible approaches, it is important to take note of the existing statutory protections for whistleblowers in Australia.

The existing legal framework in Australia includes some statute-based protections for whistleblowers who report misconduct in particular contexts:

• The Public Interest Disclosure Act 2013 (Cth) provides protection to public sector employees who report suspected contraventions of the law within the Australian public service.
• Part 9.4AAA of the Corporations Act 2001 (Cth) protects particular persons with a relationship to a corporation who report a contravention of the Corporations Act 2001 (Cth).

These protections apply within a narrowly-defined context — the public service and compliance with the Corporations Act 2001 (Cth). A general protection for whistleblowers, covering all complaints in the context of the employment relationship, is therefore absent.

In light of this “gap” in the statutory landscape, it is arguable that section  341(1)(c)(ii) should extend to complaints or inquiries in the broader sense — as suggested in Walsh — not just to those complaints which seek to vindicate the employee’s contractual or statutory rights. This would promote democracy and freedom of expression within the workplace, which can be important to encouraging innovation.

At the same time, the prospect of frivolous and vexatious complaints must be considered as well. There is a risk that poorly performing employees could exploit a broad whistleblower protection to shield themselves from reasonable performance management. To address this risk some check is needed. It is suggested that in order to fall within section  341(1)(c)(ii) the complaint or inquiry must be made in good faith and supported by reasonable grounds. This is similar to the exception used in Pt 9.4AAA of the Corporations Act 2001 (Cth).

Recently, the interpretation of section  341(1)(c)(ii) was considered in Evans v Trilab Pty Ltd ^[13] where the Federal Circuit Court considered an employer’s application for summary dismissal, upon the ground that the complaints or inquiries were not sourced in a contractual or statutory right and were not in relation to the employee’s employment. Judge Antoni Lucev referred to the competing decisions and found that the employee had an arguable case in light of the decisions where section 341(1)(c)(ii) has been given a broad interpretation, such as Walsh. The matter will now proceed to a full hearing. It is hoped that this case, or some other, will resolve the ongoing debate as to section 341(1)(c)(ii).

This article was first published in the Employment Law Bulletin, Vol 21 No 1, February 2015