Small Business Termination – Pregnant employees and Risk
Small Business Employers time and time again must battle many elements to their business, cash flow, investors, marketing, leases and product/service development. Government in a very limited
way have built in safe guards for small business owners in employment legislation however those protections only go so far in relation to termination of employment.
The Federal Circuit Court case of Sagona v Piccoli Investments is an apt reminder of the price a small business can pay – and in particular how not to react to an employee announcing their pregnancy.
Sagona v Piccoli Investments
Ms Sagona was a salaried photographer and salesperson with Piccoli Photography, a small business based out of Melbourne. Ms Sagona had been employed for 12 years, the last 10 as a photographer. In August 2012, she announced she was pregnant. Four weeks later she resigned, alleging constructive dismissal.
After announcing her pregnancy Ms Sagona was allegedly told that she could not do photo shoots or have sales appointments beyond a time because it was not a ‘good look’ for customers to see a pregnant woman in the business. The business owners denied this.
Subsequently, the business decided that Ms Sagona should work longer hours.
The employers also:
- demanded that Ms Sagona sign a “variation” to her contract, making her remuneration and ongoing employment contingent on the meeting of unattainable sales targets;
- required her to work additional hours;
- suggested that a return to part-time work after the conclusion of her maternity leave would not be “workable”.
Ms Sagona resigned, claiming that she had been constructively dismissed (i.e. forced to quit) by the business’ conduct.
Held: The Court found that the business had taken “adverse action” against Ms Sagona by dismissing her. While the employer had raised concerns about Ms Sagona’s safety (such as working outdoors on long shoots and carrying heavy equipment), the Court noted that:
The business had never sought to obtain a medical opinion on Ms Sagona’s fitness to undertake her regular duties. This meant that any judgement by the business that Ms Sagona was unable to perform the inherent requirements of her role as a result of the pregnancy, was “not based on objective evidence”
The employer’s actions were taken “without reference” to sections 73 and 81 of the Fair Work Act 2009 (Cth). Importantly, these provisions govern the circumstances in which an employer can direct a pregnant employee to take unpaid parental leave, and transfer of a pregnant employee to a safe job, respectively. Both sections provide employers with the ability to request medical evidence of fitness for work and/or fitness to continue in the employee’s position for a particular period.
The damages award in this case was considerable, including $164,079 for economic loss and $10,000 for distress, hurt and humiliation. In addition, the Court considered:
The need to discourage employers from demanding award-free employees work “all hours necessary”; and
The importance for women to continue in employment during pregnancy and continue in their careers after having a child
The Court awarded penalties of $45,000 to be paid by the business and $8,000 to be paid by each of the two individual owners as a result of the above considerations.
The Significance of this case for small businesses
This case is important because of the damages alone, which is one of the higher monetary awards for discriminatory conduct. But there are three other important aspects:
The first is that Ms Sagona sought penalties (as she is entitled to do) and that the Court decided that those penalties should be paid to her personally – rather than as consolidated Revenue. Those penalties totalled $61,000.
The second is the fact that the business owners were personal defendants, as persons knowingly involved in the contraventions. Not only did they have penalties imposed against them, but they were jointly ordered to pay the compensation along with the business.
It is important to note that it is increasingly more common for managers and business owners to be joined as personal defendants and if they are found liable, to have penalties imposed on them personally. This is true for prosecutions by the Fair Work Ombudsman as well and extends to other types of contraventions such as for a breach of the National Employment Standards or industrial instruments.
The third is that the defendants claimed that the business was small and in financial difficulty. However, this was not deemed a valid excuse by the court in determining the penalty.
It is vital for small business employers to be wary of General Protections matters and to be aware that they can also be joined as personal defendants if found liable for contravention.