A recent case handed down by the Federal Circuit Court has important take-outs for anyone involved in employing or dismissing staff – including managers, owners and HR teams.

Two business owners were ordered to pay, between them, $174,000 in compensation and $61,000 in penalties for unfairly dismissing a pregnant employee.

Here are five lessons from the case:

  1. Individual employees can be liable for penalties: Legislation allows for penalties against a person who is involved in a contravention of the Fair Work Act. The Court said that "to establish the contravention it is only necessary to show that the Respondents knowingly participated in the activity which constituted the contraventions." If you are involved in an unlawful dismissal of a staff member and you are prosecuted by the Fair Work Ombudsman, you will be at risk of being personally liable for civil penalties. In this case, the individuals involved were fined $8,000 each.
  2. Size of the business has little impact on penalties: The Court can take into account the size of the business when awarding penalties. However, in this case, the fact that the business was small (with two owners and two employees) had little bearing on the penalties and compensation compared to the nature of the contraventions and the lack of remorse from the perpetrators.
  3. The victim" is entitled to the penalties: Under the Fair Work Regime, the person disadvantaged by the contravention receives the amount from the penalty amounts personally. In other regulatory regimes, penalties end up as government revenue.
  4. The Court can award compensation for unfair dismissal: In this case, the Court took into account loss of future income, medical expenses, and distress, hurt and humiliation when calculating compensation.
  5. "Forced" resignation can amount to unfair dismissal: On finding out about the employee's pregnancy, her employers reduced her pay and increased her hours. The applicant resigned. The Fair Work Act contemplates the situation where an employee is "forced" to resign because of the employer's conduct. This concept is often termed "constructive dismissal". The Court found that this situation amounted to such a forced resignation and that the employee was unfairly dismissed.

The case was Sagona v R & C Piccoli Investments Pty Ltd & Ors [2014] FCCA 875 (30 April 2014).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.