The Employer Strikes Back

May 31, 2015 / Employment, Workplace Relations & Safety

Taking action against errant employees

Most employers who suffer loss as a result of the wrongful actions of an employee take the loss on the chin and if the employee suffers anything at all it’s the loss of a job.  In Amponsem v Laundy (Exhibition) Pty Ltd [2014] FCCA 2206 the employer struck back after an employee who was fired for serious misconduct tried to sue.

Mr Amponsem was head chef in his employer’s hotel and he used that position to acquire produce via his wife’s company without informing his employer of the potential conflict.  The deal was struck on terms more beneficial to the chef’s wife than his employer.  When the employer discovered this breach of the chef’s duty of good faith it summarily dismissed him and refused to pay his accrued entitlements on the basis that he had dishonestly caused the business to suffer loss.

Mr Amponsem commenced proceedings under the Fair Work Act 2009 to recover his unpaid accrued annual leave.  Unusually, the employer went on the offensive and filed a cross-claim of more than ten times the value of the employee’s claim.  The employer claimed that the head chef had breached both contractual and equitable duties of good faith to his employer but Mr Amposem argued that section 90 of the Fair Work Act does not allow an employer to withhold employee entitlements.

Judge Manousaridis noted that Federal Circuit Court Rules allow the Court, in the event of a successful cross-claim, to give one judgement for the balance of the two claims.  Mr Amponsem’s claim for unpaid leave was recognised, but deducted from the total amount of compensation he owed his employer, leaving a balance of $73,000 to be paid to his former boss.

Although the employer in this instance appears to have done quite well, before taking a similar approach to claims by wayward employees there are some cautionary issues to consider:

1. Judge Manousaridis was clearly aware that the Court had jurisdiction to fine Laundy for its breach of the Fair Work Act.  Although the Court chose not to do so on this occasion, such penalties are not without precedent.  Maximum fines for non-payment of annual leave entitlements are currently $51,000 for a company and $10,200 for an individual;
2. Keeping in mind the accessorial liability provisions of the Fair Work Act, penalty and compensation orders may be pursued against those knowingly involved in a contravention – not just the legal employer;
3. Laundy did not succeed in every aspect of its claim – an employer will require evidence to prove an employee’s breach of contractual and equitable duties in order to successfully cross-claim;
4. Legal costs are generally not recoverable for proceedings brought under the Fair Work Act; and
5. Receiving judgement is one thing – recovering compensation from an employee is another.  Does the worker have funds to pay a judgement debt?

Accordingly, we recommend that employers take legal advice prior to withholding payments from employees and when considering the pros and cons of filing a cross-claim against an errant employee.

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This communication provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Should you wish to discuss any matter raised in this report, or what it means for you, your business or your clients' businesses, please feel free to contact us.