More hurdles for employers as racing club saddled with massive damages award

In a record-breaking judgment, the Federal Court has delivered an eye-watering compensation award of over $2.2 million to an employee arising out of a general protections (adverse action) claim.

The case, Leggett v Hawkesbury Race Club (No 3) [2021] FCA 1658, confirms that stress or angst over workplace interactions can result in genuine serious psychological injury, exposing employers to massive damages claims. It is also likely to encourage more adverse action claims due to the uncapped compensation of that jurisdiction.

What happened

Ms Leggett had been employed for 25 years at the Club as a marketing and sponsorship manager earning an annual salary of close to $180,000 before the arrival of a new CEO in 2016.

Within a short period of time, the new CEO was in constant dispute with Ms Leggett over her work duties and contractual entitlements. She complained about this treatment and told the Club about her distress before finally resigning from the Club some months later. At the time, she was devastated by the experience and was ‘destroyed’.

Justice Rares found that Ms Leggett had been subjected to intolerable bullying conduct and that the Club, through its CEO, had engaged in unacceptable conduct including overbearing micromanagement and unreasonable behaviours. Some of these behaviours included questioning trivial expenses, setting unrealistic deadlines, questioning Ms Leggett’s integrity and disputing and delaying payment of contractual entitlements such as bonuses, commission and statutory leave entitlements.

In separate workers compensation proceedings, medical experts had previously agreed that Ms Leggett had suffered a serious psychiatric injury which permanently incapacitated her from working. This evidence and findings were relied upon in the Federal Court, which found that the mistreatment constituted adverse action after Ms Leggett had made complaints about the CEO’s conduct.

The Club was ordered to pay $2.25 million, the bulk of which was compensation of $1.77 million under the Fair Work Act 2009 (Cth) (FW Act):

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‍* The judgment of the Court does not reveal the reasoning for the costs order, which is rare in FW Act matters, however it probably reflects costs applications based on Offers of Compromise. We can update on this issue as more information becomes available.

The amount of compensation awarded by the Court far outstripped any previous judgments, but was significantly influenced by the fact that Ms Leggett had been unable to work for a period of almost five years before judgment and continues to be incapacitated for work. This loss of income (past and future – approximately $2 million) formed the majority of the loss that she claimed.

The award also took into account workers compensation payments of close to $560,000 received by Ms Leggett since her resignation. In addressing this component of compensation, the judgment also raised an interesting question about the interaction between the NSW workers compensation legislation (which provides a cap on payments and does not include pain and suffering) and the FW Act’s uncapped compensation jurisdiction.

Practical Considerations

This case confirmed that stress or angst over workplace interactions, even between mature and experienced senior management employees, can still result in genuine serious psychological injury for a victim, resulting in serious compensable impairment.

Mental health protocols and management responses need to be carefully considered once an employee puts such concerns on the agenda. Are the systems and processes in place robust enough to respond to such disputes or complaints and to allow for appropriate oversight and intervention even where complaints are made against senior managers?

The outcome in this case may also encourage even more applicants to allege adverse action, rather than alternative legal claims, such as unfair dismissal.

The case also illustrates how the conduct of workers compensation proceedings (where insurers may make concessions or admit claims; and employers have little input) may prejudice employers in defending later FW Act matters.

Please contact our Employment, Workplace Relations & Safety team if you have any questions about adverse action claims.

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