Dentist loses Federal Court matter alleging adverse action and breach of contract against health fund

Workplace Directions

Avenia v Railway & Transport Health Fund Ltd [2017] FCA 859

Background

On 27 September 2016, Dr Avenia was employed, initially part-time, by the Railway & Transport Health Fund Ltd (the Fund) as its Principal Dentist, overseeing its Sydney and Brisbane dental practices. Dr Avenia was subject to a second full-time employment contract with a probationary period ending 14 March 2017. The Fund also purchased equipment and a customer list from the dental practice Dr Avenia formerly operated under an Asset Purchase Agreement executed on 5 November 2016.

There were issues from the beginning regarding Dr Avenia’s workplace behaviour and conduct with the employees he supervised. As a result, there were conversations between Dr Avenia and his superior, the Fund’s Chief Operating Officer, regarding
Dr Avenia’s communication. The workplace discontent with Dr Avenia culminated in a grievance being made against him in writing on 25 January 2017, which caused the Fund to undertake some preliminary enquiries with staff and to then raise issues with Dr Avenia. The Fund suspended Dr Avenia on full pay pending a meeting with him scheduled for a couple of days later at which he could provide a preliminary response.

However, Dr Avenia never returned to work and did not attend any of the three meetings proposed by the Fund. Due to this and an attempt by Dr Avenia to redirect postal mail away from the Fund to his own address, on 7 March 2017 the Fund provided show cause correspondence to Dr Avenia asking why it should not terminate his employment.

Interim injunction sought by dentist and granted

On 10 March 2017, Dr Avenia sought and obtained an ex parte interim injunction from Justice Katzmann of the Federal Court of Australia preventing the Fund from terminating his employment, on the basis the Fund was about to subject him to adverse action in contravention of the Fair Work Act 2009 (Cth).

At that time, Dr Avenia was within his six month probationary period having only recently joined the Fund following 32 years in his own dental practice. Following the granting of the injunction, a rapid legal battle of just over four months ensued, resulting in a judgment delivered by the newly appointed Justice Lee on 4 August 2017.

Judgment of Justice Lee

Justice Lee delivered a lengthy decision in this matter in which he observed the early work emails sent by Dr Avenia on his first day in Brisbane in late 2016 as problematic in tone. Further, there were cultural clashes between Dr Avenia and the team of employees. A specific written grievance against Dr Avenia on 25 January 2017 by a team member precipitated events; this employee was so aggrieved she had kept an incident diary concerning Dr Avenia.

These events were followed by a flurry of legal correspondence from Dr Avenia’s lawyers, some of which was aggressive, confrontational and containing a large number of oppressive requests, according to Justice Lee. Legal proceedings were commenced by Dr Avenia against the Fund shortly thereafter in which he obtained the interim injunction.

No adverse action found

On 5 May 2017, the injunction was discharged during the proceedings by Justice Lee and the Fund then promptly terminated Dr Avenia’s employment for serious misconduct. The serious misconduct was failure to comply with lawful directions to attend meetings and attempting to redirect postal mail away from the Fund’s Brisbane premises without authority.

His Honour concluded the Fund was not motivated in its suspension by any complaints or enquiries made by Dr Avenia. That is, there was no adverse action in breach of the Fair Work Act 2009 (Cth).

Suspension

His Honour noted that Dr Avenia’s written employment contract did not contain any provision for paid suspension. As a result, Justice Lee had to determine whether at common law the Fund had the ability to suspend Dr Avenia. His Honour concluded the ability of employers to issue reasonable and lawful directions could support a suspension at common law.

In the immediate circumstances of this case, the bullying grievances raised against
Dr Avenia meant the Fund had an obligation to investigate those and a duty to provide a safe place of work to its employees both in contract and under work health and safety legislation. This made the direction not to attend work reasonable in the circumstances, even when the Fund had only initiated an informal fact finding process.

Other issues

Dr Avenia also raised claims of breach of contract of employment (pertaining largely to acting in bad faith) in the proceedings, which his Honour dismissed. His Honour observed that if the Fund had wished to terminate Dr Avenia, it was incredibly easy to do so in his probation and yet it did not, demonstrating there was no dishonest scheme by the Fund to terminate Dr Avenia’s employment. Indeed, his Honour considered that Dr Avenia’s refusal to attend meetings to discuss the allegations made against him was a repudiation of the contract.

There was also a dispute between the parties regarding payment to be made to
Dr Avenia under an Asset Purchase Agreement in which a patient list from his former practice was provided to the Fund.

Final outcome?

Final orders have not been made and the parties are to attend mediation to resolve outstanding matters. The Fund is able to pursue an undertaking as to damages given by Dr Avenia in obtaining the interim injunction in March 2017, which was discharged some eight weeks later by Justice Lee. Dr Avenia has indicated he may appeal the decision.

Lessons

Every so often, employers will be subjected to early adversarial intervention by lawyers representing employees. The Fund in this instance maintained its position that it was reasonable to act upon the conduct of Dr Avenia and seek to discuss the same with him. Fortunately, none of the legal flourishes of Dr Avenia’s lawyers obscured the reasonableness of an employer seeking to discuss issues with its employee.

Importantly, the decision provides further clarity of the common law ability to suspend an employee in the absence of a written contractual term empowering employers to do the same.

This short but intensive legal battle demonstrates the vital importance of recruitment and the relative ease with which interim injunctions can be sought and obtained by employees at times. As always, we recommend employers seek legal advice when dealing with conduct issues pertaining to employees, even when the employee is within probation.

Moray & Agnew Lawyers acted for the Respondent, Railway & Transport Health Fund Ltd, in the above proceedings.

Authored by Laura Sowden, Senior Associate, Sydney


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