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Former Cummins employee reinstated with $1.1M Backpay

employee reinstated
A former Cummins senior manager was reinstated and paid >$1M in lost wages

Following a recent Federal Court decision, global engine manufacturer Cummins Group was forced to reinstate a 34-year senior employee who it had sacked three years ago; and pay him A$1.1 million in back pay. The company also could not take any action against the employee once he was back in the office.

The former Cummins employee was forced to work as an Uber driver on $15,000 a year after he lost his $198,000 job in 2015 due to perceived “performance issues”.

This decision reminds employers that taking unlawful action has significant consequences, as the court finally held that reinstatement is not impossible just because:

  • someone else has taken the employee’s position;
  • it is embarrassing for the company to reinstate the employee; or
  • there are difficult relationships that would need to be managed.

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Facts surrounding the case

The reinstated employee (Keenan) was a senior leader in the Cummins Group. He had 34 years of service and earned a significant salary. During his employment, Keenan had made several complaints about the human resources leader, Ms Baldota. For example, Keenan had complained that he had been facing difficulties with Baldota as a consequence of her quality of work and interaction with an attitude towards other employees. It is safe to say they had an untenable working relationship and that Keenan got involved in office politics.

As a result of the complaints, Keenan:

  • had been placed on a performance improvement plan (PIP);
  • had an ethics case brought against him; and
  • had been asked to show cause as to why his employment should not be terminated.

Inevitably, Keenan was terminated for performance issues, which resulted in him becoming an Uber driver receiving around A$15,000 a year.

The court found that the PIP, ethics case and termination of employment had all constituted adverse action – and were unlawful pursuant to the Fair Work Act 2009 (Cth).

Following the first case, there was a second case about the penalties and remedies to be awarded to Keenan. The Cummins Group strongly argued against having Keenan reinstated (which is the primary remedy for an adverse action claim). In so doing, it argued, among other things, that:

  • subsequent to Keenan’s departure, someone else had taken over the role that he had previously occupied; therefore, it would be unfair to require the Cummins Group to dismiss that employee;
  • no other vacancies existed within the Cummins Group for Kennan;
  • his reinstatement would disrupt the Cummins Group given that Keenan would likely retire in four years;
  • it would be “inappropriate and embarrassing” to reinstate Keenan to a leadership role because of unfavourable evidence in the trial on liability and because he has been out of leadership roles for three years; and
  • while there may have been limited publicity of the trial to date, the court should be realistic about the prospect that, if Keenan were to be reinstated, the facts found in the judgment would come out.

All of these arguments were rejected. The court held that:

it must not be overlooked that Mr Keenan’s loss of employment was the consequence of the respondent’s unlawful conduct. It ill behoves the respondent to mount an array of arguments to the effect that the respondent’s own internal organisation of its own staff is such as to prevent the court from reinstating Mr Keenan to the position he would still occupy had the respondent not engaged in the prohibited conduct.

Comments

Employers must be aware of the dangers of unlawfully terminating an employee, particularly given that the employee may be reinstated into their position should it be held that they had suffered adverse action (as Keenan did). His honour made it clear that if Keenan were to be reinstated “If she [being Baldota] behaves inappropriately hereafter she may well expose herself to the consequences set out in the Fair Work Act”.

Practically speaking, Keenan is now untouchable – should any negative or adverse decision be made in relation to his employment, he has several available avenues to pursue.

Therefore, employers must be aware of such consequences and remember that a court can, and if necessary will, order an employee to be reinstated following termination, among other things.

To avoid similar situations when trying to manage office politics at work, it is recommended that employers:

  • deal with grievances when they arise, as a failure to do so will inevitably lead to a much bigger problem;
  • make themselves aware of any bias they may have when addressing inquiries or complaints;
  • ensure that they have a transparent and reasoned procedure for dealing with unsatisfactory or unreasonable performance; and
  • ensure that the performance being managed can objectively be determined to be unsatisfactory or unreasonable.

Keenan v Cummins South Pacific Pty Ltd (No 2) [2019] FCCA 523 (6 March 2019)

Article courtesy of Lander & Rogers Aaron Goonrey, Justine Krajewski

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