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As many business owners still struggle to see the value in a Management Liability policy, we wanted to share a recent Employment Practices Liability claim which should bring to light why this particular area of such a policy is important in this ever litigious society we live in.

Recently, a decision was made by the Federal Court to award an unfairly dismissed employee $614,000 in compensation. The Court found that their employer deemed them to be a “difficult employee” and subsequently terminated her for that reason.

An employee, who was described in an internal email as being a “difficult individual” and “poisonous to the team environment”, has recently been awarded $614,000 by the Federal Circuit Court of Australia.

The case, like others before it, highlights the significant – but commonly unseen – risk associated with taking an adverse action against an employee because they make a ‘complaint’.
The employee alleges that they had been selected for the redundancy because they had been identified as being a difficult individual.

The Court accepted that the employer was motivated by the desire to remove the employee from the workplace because of her previous complaints.

Employers exposed with complaint cases:

These cases show how easy it can be for an employer to be exposed to an adverse action claim. Employees who are seen as uncooperative, complaining or not fitting-in with the culture of an organisation can often find themselves on the receiving end of disciplinary action or termination. Their employers are often not even aware of the risk they are taking in moving against the ‘difficult employee’.

Seemingly there is a very broad interpretation to the meaning of “complaint” in the adverse action provisions of the Fair Work Act. This particular case demonstrates that an employer is likely to contravene the adverse action provisions of the Act if the employee’s history of complaining forms part of the reason for termination – even when an employer is acting for legitimate reasons, like a restructure.

Cases do not always start and end at the Fair Work Commission and this is where an Employment Practices Liability (EPL) or Management Liability (ML) Insurance can be such an important part to an Insurance program.

Other risks that come to mind under an EPL loss cover include; claims of Harassment, Bullying, Racial or Sexual Discrimination.

40% of FWC claims are for unfair dismissal.

Please contact us if you would like to understand more about the type of protection a Management Liability policy can provide or to discuss your current levels of cover.

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