February 2018

A broken system: general pains for employers with adverse action claims

Many businesses have had to deal with the cost, disruption and trouble caused by a claim that the business has allegedly taken adverse action against an employee because the employee exercised a workplace right or had a protected attribute.

Experience tells us that often the claim is made before or during a disciplinary or performance management process. Invariably, the claim is made because the employee is unable or unwilling to accept or acknowledge their own failings and contribution to their current circumstances.  Rather than accept the situation, or respond constructively, the employee alleges the action must have been taken because of some unlawful motives.  The employment relationship becomes strained.

This was the case in Celand v Skycity Adelaide Pty Ltd [2016] FCCA 399, where the Court found it was the employee's "perception" and her own increased dissatisfaction with events that led her to believe she had been wronged.  Ms Celand was not a dishonest person but "determined to leave her employment, on the best possible terms she could secure". This led to Ms Celand resigning, alleging 'constructive dismissal' and seeking compensation.

Skycity, like many employers, successfully defended Ms Celand's general protections claim under Part 3-1 of the Fair Work Act 2009.  After a five day hearing, Skycity secured an order that Ms Celand pay its legal costs fixed in an amount of $30,711.00 (a fraction of Skycity's actual legal costs).

What is striking about Ms Celand's case is not that she lost.  Statistics show that many employees do not succeed in their adverse action claims.

The case is interesting for the recent appeal decision of the Full Federal Court in Celand v Skycity Adelaide Pty Ltd [2017] FCAFC 222 (21 December 2017).  The decision illustrates that the general protection provisions in the FW Act are broken, riddled by critical defects.  The provisions need urgent amendments to restore balance for all parties.

General protection provisions - in summary

Under the FW Act, an employee has certain workplace rights, including the right to make a complaint in relation to their employment.  Also, the FW Act protects certain attributes of employees, like sex, race, disability, sexuality etc.

It is unlawful for an employer to take adverse action (including dismissal or other detrimental action) against an employee because they exercise a workplace right or have a protected attribute.

The reverse onus feature

It has been a long standing feature of the general protection provisions that the employer must prove it did not take adverse action for unlawful reasons.  Such a provision is fair given it is the employer that knows the reason or reasons for its decision.

Often the employer tells the employee why it acted in a particular way.  The reason is often consistent with the objective facts.  The employee however refuses to accept the decision (and their own failings and contribution to their current circumstances) and pursues their claim with litigation.

Therein lies the problem.  The system operates in a manner that does not encourage or require objectivity by applicant employees.  Litigation can also be used to harass an employer into settling the claim, even if the claim has no merit.

"You must have acted unlawfully"

As alluded to above, a problem arises due to the fact that the employee, even when told the lawful reason for the action taken, can maintain the allegation that the action was taken for an unlawful reason.

The legal debate has been whether the employee needs to demonstrate some objective facts for the assertion of unlawful action or a mere allegation is enough to make the claim (and require the employer to discharge the reverse onus).  

Bromberg J of the Full Court observed that the reverse onus provision "is only engaged "if ... it is alleged" that the action was taken for "a particular reason or with a particular intent"". An employee need not establish a connection between the alleged adverse action and a prohibited reason.

The effect of the FW Act provisions is that the decision-maker, often a very senior employee, will need to give evidence in the proceedings.  The mere allegation of being motivated by an unlawful reason is enough for an employee to maintain their claim, even if the real reasons have been revealed and the circumstances point to other reasons for the action.

Costs are rare

There is nothing like the risk of a cost order to focus the mind and require some objectivity from an applicant.

Unfortunately, s 570 of the FW Act only allows costs in limited defined circumstances such as:

  • if proceedings are commenced vexatiously or without reasonable cause; or
  • if a party's unreasonable act or omissions causes another party to incur costs.

In Ms Celand's case, Skycity offered her $7,000 to settle the claim - a "walk away" offer, the Full Court said. The Court at first instance said the rejection of this offer was unreasonable.

Justices Bromberg and Logan of the Full Court disagreed with the costs order.  Skycity conceded the proceedings were not instituted without reasonable cause.  There was therefore a tension in then saying the rejection of a walk away offer was an unreasonable act.  At the time of the offer, Ms Celand had (at some expense) prepared her case.

Bromberg J observed that under s 570 of the FW Act "a high standard of unreasonableness is to be adopted", having regard to the need to promote access to justice.

As most general protection cases turn on the acceptance of the decision-maker's evidence, rarely will the occasion to award costs arise.  

As can be seen, the cost provisions are hollow.  The employee has little to lose and everything to gain. The system is flawed as it encourages and protects unmeritorious claims.

Objectivity is needed

"All seems jaundiced to a jaundiced eyed", Justice Logan commented on the wisdom of this adage. Therein lies a problem for employers when perspective is lost by a disgruntled employee.

The system gives too much preference to promoting access to the system without regard for the cost, disruption and trouble for employers.  The system does not encourage nor require employees to consider their position with some objectivity.

Sure, the Fair Work Commission can (after conciliation) issue a certificate saying the claim has no reasonable prospects of success; but that rarely occurs.  And even then, the employee can still pursue their claim to court without fear.

It seems entirely sensible in a balanced system to require an applicant employee to:

  • prove some objective facts of causation to warrant the making of the allegation of unlawful conduct (particularly when the employer exposes its reasons); and
  • be exposed to the risk of costs if they refuse a settlement offer that exceeds the likely merit of their claim.

The mere making of a complaint or possessing a protected attribute should not itself promote or sustain the making and maintaining of a claim.  Having no risk in pursuing a claim also exposes the employee to their own cost and the detriment in not 'moving on'.  It also has the potential to burden the judicial system.

A fairer approach for all parties would be a system that builds in objectivity and rigour.  

Author: James Mattson