Category Archives: Employment case law

Employment case law

Telstra Corporation Limited v Minister for Communications, Information Technology and the Arts.

The topic of legal professional privilege and In House counsel, has since been revisited in 2007, by Telstra Corporation Limited v Minister for Communications, Information Technology and the Arts
In this case, there was litigation brought by Telstra against the Minister. As part of a preliminary discovery process, the Minister sought access to certain Telstra documents the subject of its Notice to Produce. Telstra claimed the documents were privileged on the basis that either the author or recipient of the claimed documents
was an internal legal adviser to Telstra and the documents and communications were made for the purpose of providing legal advice.

Findings

Justice Graham held that Telstra had not done enough to satisfy the Court that the documents were privileged and ordered full disclosure of the documents. He noted there was no evidence before the Court going to the independence of the internal legal advisers involved in the communications and it was not enough for
Telstra to simply state that the documents were privileged. His Honour however, did note that it has been accepted that in some circumstances legal advice may be accompanied by advice of another kind which can be separated from it. In such circumstances, only the legal advice will be privileged. However, if the legal advice contains extraneous matter which cannot be separated from it, the legal advice will not lose its privilege for that reason.

Telstra Corp is another example in a string of recent cases in which the Courts have emphasised the importance of adducing sufficient evidence to properly make out claims for legal professional privilege, particularly where in-house counsel are involved, including Sydney Airports Corporation Ltd v Singapore Airlines Ltd & Qantas Airways Ltd and Seven Network Ltd v News Ltd.

Conclusion

The tests are:

• Independence of the advice;
• Separation of the advice from other corporate functions;
• Capacity of the advice (whether or not made by a lawyer and whilst performing as a lawyer – usually indicatedby possession of a practicing certificate);
• Dominant purpose of the advice – as legal adviser, or corporate manager?

Employment case law

Walker v Citigroup Global Markets

The case of Walker is a significant and costly illustration of the liability that a company may expose itself to when it allows its officers to make careless or unprincipled representations during employment negotiations, in order to entice an individual to enter into the employment arrangement.

Walker was recruited by NatWest to take up the position of Senior Research Analyst in their Equities division (at the time the relevant defendant company was NatWest, the shares in which were later acquired by Citigroup). Walker was at the time employed at ABN AMRO, and he was expecting to receive a substantial bonus payment very soon. However, Walker and NatWest commenced protracted negotiation over the terms of his prospective employment. Simultaneously, there was some discussion over the timing of his resignation from the ABN AMRO role, as he was
anxious not to miss out on the bonus payment.

The letter of offer which NatWest sent to Walker referred to a document entitled ‘Executive Conditions of Employment’,
with the proviso that both the letter and the conditions “will form part of your terms and conditions of employment” but it wasn’t attached to that version of the letter. One of the ‘conditions’ was that either party could terminate the employment contract on one month’s notice.

During the negotiation process, NatWest officers made representations to Walker respecting his salary, guaranteed
minimum bonus payments, length of secure employment, and promotion prospects within the company. Soon after these representations were made Walker signed and returned his letter of offer, and was of the understanding that an employment contract had come into existence to which NatWest and himself were parties.
At some point in the process, however, NatWest’s Head of Research decided that employing Walker was no longer an attractive option, but at the same time encouraged him to negotiate a redundancy agreement with ABN AMRO, thereby allowing him to ‘burn his bridges’ with his former employer.

Walker was then told that the NatWest position was no longer available and that there was no contract in existence between them, as he had failed to sign and return all the documentation attached to the letter of offer. This was followed by a letter from NatWest withdrawing its offer of employment. Ultimately, Walker was informed that no position was available and that NatWest completely denied any contractual liability to him. Walker brought an action against the respondent in the Federal Court, claiming that NatWest had breached a valid contract and engaged in misleading and deceptive conduct by its behaviour towards him, which constituted a breach of sections 52 and 53B of the Trade Practices Act.

The primary judge found that a valid employment contract did come into existence and that the letter withdrawing NatWest’s offer was “plainly incorrect and misleading” and constituted a repudiation of this contract. However, the termination clause in the contract only entitled Walker to damages equal to one months’ notice of termination. The breaches of the Trade Practices Act also succeeded, as the primary judge held that NatWest’s representations were misleading, and Walker relied upon them to his detriment.

On appeal, Walker argued that representations made to him during negotiations formed part of the employment contract and the quantum of damages should account for these contractual breaches. The unprincipled behaviour of NatWest officers in encouraging him to end his career at ABN AMRO, in the knowledge that NatWest was no longer interested in employing him, Walker argued, should also be reflected in the quantum of damages awarded.

The Full Court held that although the ‘Executive Conditions’ were contractual terms, to interpret the termination clause literally would negate the representations made at the same time, which would be “an unlikely result in view of the surrounding circumstances and the purpose and object of the transaction, namely, the recruiting of a high level and high profile employee then in other employment.”

If the termination clause were read alongside the representation concerning employment into the next calendar year, then the clause would not become operative until the end of the next calendar year. Additionally, given the skill and experience of Walker, it was very probable that he would have continued to perform competently beyond the next calendar year. Consequently, damages awarded for breach of contract should be increased. The court accepted Walker’s proposal that damages awarded for contractual breach should equal the total earnings (including bonuses) of a NatWest employee of equal rank during the five years after the breach had been committed, minus 25% for contingencies.

The court avoided ‘double recovery’ for Walker’s economic loss by awarding no damages for the established breaches of the Trade Practices Act. But they increased the general damages component from $5,000 to $100,000, in compensation for the “serious long term effects” upon Walker’s personal life resulting from NatWest’s unethical behaviour. The total damages award came to more than $7,500,000.

Conclusion

In other jurisdictions – Canada, the United Kingdom – the courts have long since filled the vacuum created by Governments
“privatising” or “liberalising”, or “de-regulating” the employment relationship. That ideology now prevails in Australia on both sides. Apart from it underlining yet one more indication of the declining role of government (a shrinking public service and incremental privatisation of Government tasks) it removes protection for individuals.

People do not just accept their lot any more, though, and so increasingly look to the courts for judicial protection. The cases described above, when read in conjunction with other principles both home grown and imported, show that the needed protection is very much available. The future is the evaporation of Australia’s unique system of industrial arbitration. The future is the replacement of that ex-system by the rule of law in the Courts.

Employment case law

Nikolich v Goldman Sachs JB Were Services Pty Ltd

Nikolich worked as an investment advisor for Goldman Sachs in their Canberra office. Goldman Sachs decided to implement a new ‘partnership’ method of client management, which was touted as having the definite potential to increase the business efficiency and earning capacity of the office.

The new method consisted of several investment advisors forming a partnership in which they pooled their clients and shared client work. Any partner who exited the partnership had to leave their clients behind.

Nikolich formed such a partnership with two other advisors. When one partner resigned and exited the partnership, Nikolich’s supervisor transferred the highest-revenue clients from Nikolich’s partnership to his own partnership. When Nikolich voiced his disquiet with this transfer, the supervisor informed him that he was “greed[y]”, “lazy” and “whinging”, and began to behave in an intimidating and threatening manner.

Nikolich eventually made a written complaint to Goldman Sachs’ Human Resources department. Following several meetings with the applicant, the only action that HR took was to discuss Nikolich’s complaint with the supervisor in question. Nikolich had informed HR that he was feeling unwell and was very stressed, and hated to encounter his supervisor at work. HR advised him to take some time off, or to utilise the company’s employee counselling service.

When Nikolich was informed that the outcome of his complaint was that the supervisor would be moved from the Canberra office, he tried to take the complaint further, claiming that he was now “suicidal” as a result of the harassment he had suffered and that he had now lost an estimated $300,000 in client revenue due to the unjust client reallocation.

He asked for monetary compensation. Goldman Sachs refused to compensate him for any loss in revenue and asked him to resume his normal duties. When Nikolich refused, the respondent terminated his employment. Nikolich brought an action against his former employer in the Federal Court, seeking damages and compensation.
He based his claim upon several causes of action, one of them being founded on a breach of the terms of his employment contract by the respondent. He argued that the provisions of the respondent’s policy manual, a 119 page document entitled “Working With Us” that was provided to him at the same time as the letter of offer, concerning company policies on workplace health and safety, freedom from harassment and concerns or grievances, was part
of his employment contract.

As he was employed as an investment advisor, the vast majority of his remuneration was earned in the form of incentive payments for client work, and therefore his remuneration was largely determined
by the quality of clients that he handled for the respondent.
The Federal Court found that the respondent had no objective procedure concerning client allocation when it obviously
needed one, and that the respondent’s human resources officers were inadequate in their handling of the applicant’s complaint. Turning to the policy manual, the court considered the question of whether the language used constituted ‘lawful and reasonable directions’ or were in fact promises that were binding on both employer and employee?

Wilcox J found that the policy manual was not merely a set of directions to employees. He concluded that the WWU document bound not only the employees of Goldman Sachs, but also Goldman Sachs itself, relying on an earlier decision of the Full Federal Court in which the majority held that a ‘Human Resources Policies and Procedures Manual’ bound an employer such that an ex-employee was entitled to receive the redundancy benefits set out in
the employer’s Manual. The Court found that the relevant provisions of the manual were indeed promises that formed express terms of the applicant’s employment contract.

The circumstances surrounding the delivery of the manual to the applicant such that it accompanied the letter of offer, and the promissory language used within the manual itself (e.g. “We will take every practicable step…”), meant that the provisions of the manual were contractual in nature and were, by their very nature, express terms in Nikolich’s contract. Wilcox J noted that if the policy manual did not bind the respondent in any way, then “those of its provisions that constitute promises by GSJBWS, or which purport to confer entitlements, are misleading…”

Wilcox J found that the respondent knew from the time of Nikolich’s complaint that he was in an extremely distressed state, and was obliged to work in the same office as an intimidating and hostile supervisor. He considered that the respondent’s policy manual created a legally enforceable obligation on the respondent to “take every practicable step to provide and maintain a safe and healthy work environment” and to conduct a proper and timely enquiry
into the applicant’s complaint. The respondent breached that obligation, and consequently, Nikolich was entitled to recover damages for the psychological distress caused by that breach. Over half a million dollars was awarded to the applicant, and comprised compensation for past loss of earnings (by far the greatest component of the award), loss of future earnings, and damages for Nikolich’s pain and suffering.

Goldman Sachs appealed to the Full Federal Court. The majority dismissed the appeal and upheld the decision of Wilcox J, but they came to different conclusions regarding the interpretation of the policy manual provisions. Black CJ and Marshall J held that only the provision relating to employee ‘Health and Safety’ was a contractually binding term of Nikolich’s contract; the ‘Harassment’ and ‘Grievance’ sections of the policy manual were expressed in such
a way that it could not be held that they were “promissory in nature”, as they were couched in aspirational rather than promissory language – the employer would “strive” to achieve certain things, rather than simply “do” them.

The breach of the ‘Health and Safety’ policy, which was constituted by the negligent manner in which the HR department had handled Nikolich’s complaint, was confirmed by the majority to have caused the damage to Nikolich. That document was “prescriptive”, requiring certain standards that were not met by the conduct of Goldman Sachs. Thus the Nikolich appeal confirmed the distinction between “aspirational” and ”prescriptive” policies: corporate aspirations are not contractual; “declarations of intent” are. If Goldman Sachs had not worded its ‘Health and Safety’ provision in the ‘language of obligation’, it would, following the reasoning of the Full Court, not be liable to pay Nikolich damages of over half a million dollars for breach of that obligation.