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On 11 October 2019, the Court gave Judgment in favour of ousted CEO, Mr Stephen Lake, when the board declined to renew his contract. Lake was awarded $2,225,205.04 for his wrongful termination, plus interest.
The Case
Some might be wondering – how did Lake receive such a high award for effectively, an unfair dismissal when the maximum remedy prescribed by the Fair Work Act 2009 is $74,350?
By pursing a claim for breach of contract in the Supreme Court of Queensland, the Court found:
- Wrongful termination of employment;
- Payment of performance rights, ie a bonus payment, which was to vest and be paid to Lake almost immediately; and
- Underpayment by GBST of Lake’s entitlements, such as annual and long service leave.
In addition, Lake claimed damages for misleading and deceptive conduct under the Australian Consumer Law.
Lake’s employer, GBST, purported to terminate Lake’s employment in November 2015 for breach of its share trading policy as well as causing one of its subsidiary companies, GBST Hong Kong Limited, to enter a lease.
However, his Honour Douglas J. found Lake’s employment was wrongfully terminated. Lake’s actions did not warrant summary dismissal and did not justify GBST terminating the contract.
Lake hits jackpot
If it doesn’t seem to add up, here’s exactly why Lake hit the ‘Wrongful termination jackpot’:
- Only one month prior to his termination, Lake had been offered a generous separation package including 12 months’ salary and 6 months rental payment. · This set the bar for the expectation of what Lake would be entitled to receive if his employment was not terminated unlawfully;
- Lake had consulted a board member about the share trading transactions before they were completed. The board member failed to disclose this contact, which was directly relevant to whether GBST’s actions were lawful.
- Lake would have received a share entitlement for $1,460,708, subject to board approval, had he not been terminated. These were found to be lawful entitlements that were taken from him by the unlawful termination of his employment. He was entitled to recover that loss.
- Lake had accrued $121,397.04 in entitlements (such as annual leave and long service leave) prior to termination which were not paid out to him.
To read the full case, visit Lake v GBST Holdings Limited [2019] QSC 253
Conclusion
The case follows a similarly substantial award in Ridd v James Cook University where the Federal Court awarded $1.2M to a “climate sceptic” professor who the Court had found was wrongfully terminated for speaking out publicly against the University. In that case the Court held that substantial compensation for past and future loss of earnings was warranted as Professor Ridd had been unable to obtain suitable alternative employment, and was unlikely to do so in the future.
Although these cases highlight groundbreaking awards for damages, these decisions won’t affect the typical worker.
However, they are an important reminder to employers of the need to be particularly careful when terminating senior employees. A failure to terminate the contract of employment properly can expose the employer to claims far in excess of a simple calculation of a few months’ loss of earnings. The long term or special disadvantage a high income earner may suffer as a result of losing a well paid, unique or high profile position may be compensated by large damages’ awards. Any attempt to terminate an employee to avoid liability for bonus payments is also likely to be viewed particularly harshly and encourage Courts to be generous to plaintiffs.
If you think you’ve been wrongfully terminated, or are managing the exit of a senior employee from your business, contact Stephanie Philippou (stephanie.philippou@btlawyers.com.au) or Bruce Thomas (bruce.thomas@btlawyers.com.au) or call 3211 2233.
