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Poor Investigation of a Complaint can equate to a breach of the Contract of Employment

Breach of Contract

Case: Romero v Farstad Shipping (Indian Pacific) Pty Ltd [2014]FCAFC 177


A shipping company breached an employed officer's contract of employment and failed to follow its own discrimination policy when it conducted a defective investigation into alleged bullying by her senior officer, a full Federal Court has determined.  Chief Justice James Allsop, Justice Stephen Rares and Justice Neil Mc Kerracher held that the officer's employment contract incorporated the employer, Farstad Shipping (Indian Pacific) Pty Ltd's, workplace harassment and discrimination policy.

In their judgement they said that the company had contravened the policy by treating an email from the officer as a formal complaint and combining it with separate allegations from the ship's captain about her competency.  The employer argued that the policy was no more than a set of directions for handling workplace harassment and discrimination matters.

However the court said that the officer's letter of engagement stipulated that the company's policies were to be "observed at all times", and that the discrimination policy set out what the employer was required to do on receiving a complaint.  It's clear that the company expected there would be "mutual obligations" and "in return for the employee complying with the terms of the Policy, the employer gives a responsive assurance that complaints of non-compliance by other employees will be treated in a certain way," the full court said.  “While some parts of the Policy may have been aspirational and some parts directive, the employer's obligations in relation to dealing with serious complaints of sex discrimination and bullying were contractual promises given in exchange for employees being obliged to comply with the behavioural requirements imposed on employees by the Policy," the Full Bench said.

The Facts

Following a 12 day voyage in 2011, the employee sent the company's General Manager and HR Office an email alleging that the captain was guilty of' "targeted bullying" of her from the start of the trip. The email did not refer to the employer's employment policies. The company treated the officer's email as a formal complaint under the policy and summoned her to an interview during which it asked her a number of questions relating to her competency. The employer's investigation report put the dispute down to a "clash of personalities and communication styles" and rejected the officer's claims.


But the Full Federal Court said the employer had breached its policy in a number of respects, including:

The Full Federal Bench said the employers  interview of the officer was of "serious concern", likening it to an ambush, and said that the company had "strangely" interviewed the captain first. It said the employer's HR Office had not analysed detailed allegations from the officer before interviewing the captain, and did not interview a number of potential witnesses. The officer's notes of her interview were also "substantially more detailed" than the company's, the court noted.

The Full Federal Court concluded that lumping the officer's concerns about the captain with his complaints against her caused "major difficulties" and that the "two lines of inquiry should have been kept separate". It was appropriate for the company to pursue the captain's challenges about the employees competency, but in doing so, there were procedures designed by the enterprise agreement which were to be followed.

The investigation did not achieve an appropriate standard as promised in the contract, no formal complaint was actually lodged, but the standard applicable under the Policy were not met. The Policy, and thus the contract, was therefore breached by the employer.

The bench referred the issue of damages and whether the company had repudiated the officer's contract of employment to a single judge of the Federal Court.