A CEO mistake in dismissing a Senior Executive led to a $5.2 Million payout

The workplace is going through numerous change, and dismissal of staff members especially more senior staff and more highly paid employees is highly likely.  As rent relief, JobKeeper and Government funding start to end we will start to see a number of organisations make major decisions around executive teams, management and staff. Get these decisions wrong and it could cost a company $5.2 Million! 

$5.2 Million! How did this happen? 

In the Federal court of Australia matter of Roohizadegan v TechnologyOne Limited [2020] a top performer who received share options and chairman awards was found to have been dismissed unfairly.  In this case, the employee was a state manager who had an incredible senior management track record.  However, he also started experiencing problems in his personal life which led to him working longer hours.  At around this stage the employee alleges he was the victim of bullying including:  

  • Being marginalised and left out of meetings 
  • Undermined 
  • Sworn at 
  • General intimidation  

The employee raised concerns about the alleged bullying and the miscalcuation of his incentives.  Unfortunately,` the company took a risk filled approach by terminating the employee’s employment on the basis of counter allegations made against him and other very curious reasons: 

  • Letting it be known that he was going to make a complaint 
  • Poor communication with other employees 
  • Not following the correct process for raising concerns  
  • Negative seek reviews about his interview style 

What happened? 

The employee filed a general protections claim successfully arguing that adverse action had taken place against him because he exercised workplace rights. The Court ordered the company to pay the employee due to a breach of general protections: 

  • $2,825,000.00 for his future economic loss, 
  • $756,410 to compensate for share options, 
  • $1,590,000 in damages for contractual breaches, 
  • $10,000 in general damages, and 
  • $47,000 in penalties. 

The Court also found the Executive Chairman accessorily liable and fined him $7,000 on the basis that he 

“twice rejected professional HR advice that it would be unfair to dismiss Mr Roohizadegan on the basis of mere allegations. In the end, in Mr Roohizadegan’s instance his choice was to stand with the bullies rather than the bullied. To achieve effective deterrence, CEOs in like positions need to know that such temptations as he faced are to be resisted: and that there will be a not insubstantial price for failing to do so.” 

Employer and CEO lesson 1 – Undertake an investigation prior to dismissal 

Executive and senior manager dismissal should be treated very carefully. Dismissal attracts a myriad of risks at this level including: 

  • Breach of contract  
  • Discrimination 
  • General Protections 

General Protections in particular can lead to a mix of damages, penalties and future economic loss.  In particular, consideration should be given to the potential payout for future economic loss in a COVID-19 and pandemic busines environment.   

If complaints are made undertake an investigation.  Preferably this should be done by a law firm so it attracts legal professional privilege (or at least arguably could).  it is normal for there to be counter claims – those claims should not be taken on face value but also properly investigated.  This reduces risk. This reduces liability. This will lead to a much better argument of natural justice and procedural fairness.  

Employer and CEO lesson 2 – get advice and strongly consider it 

The CEO in this case ignored the HR advice to his peril.  Be it he had a decision he wanted to make, maybe for a myriad of reasons.  However he didn’t ask a fundamental question – will my actions, the documents prepared and the process undertaken when scrutinised by a Court or Commission be found to be legally arguable and sound? 

In this case – it wasn’t.  

When obtaining advice a law firm should be asked: 

  • The current position of the Company 
  • The risk to the company 
  • The liability and potential liability of the company 
  • The law in regards to the issues 
  • What steps should be taken 
  • What is recommended and strategy to deal with the issue 
  • What are the future ramifications including discussion around worst case scenarios and quantum 

CEOs have a tough job when it come to staff – we are here to ease that burden and help you sleep at night.  NB Lawyers – Lawyers for Employers undertake and offer an obligation free consultation.  Reach out via service@nb-lawyers.com.au or +61 (07) 3876 5111 to book an appointment.  

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Written By  

Jonathan Mamaril  

Director 

NB Lawyers – Lawyers for Employers  

jonathanm@nb-lawyers.com.au  

+61 (07) 3876 5111  

Jonathan Mamaril leads a team of handpicked experts in the areas of employment law and commercial law at NB Lawyers – Lawyers for Employers who focus on educating clients to avoid headaches, provide advice on issues before they fester and when action needs to be taken and there is a problem mitigate risk and liability. With a core value of helping first and providing practical advice, Jonathan is a sought after advisor to a number of Employers and as a speaker for forums and seminars where his expertise is invaluable as a leader in this area as a lawyer for employers.  

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