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Moir, Matthew --- "Adverse action and general protection claims: recent developments" [2016] PrecedentAULA 47; (2016) 135 Precedent 34


ADVERSE ACTION AND GENERAL PROTECTION CLAIMS: RECENT DEVELOPMENTS

By Matthew Moir

Adverse action claims (sometimes called ‘general protection claims’) are a growing part of employment law. The number of claims continues to rise by around 15 per cent each year. The cases demonstrate some particularly important developments in adverse action litigation in recent years.

The developments and trends highlighted in this article are:

1. That an employee’s ability to exercise the important statutory right to make a ‘complaint’ is proving particularly important in adverse action claims.

2. That the courts are taking a somewhat strict approach to the question of whether there is a sufficient connection between the adverse action and the protected right or attribute, although this approach is not universally adopted in the decisions.

3. That compensation is being awarded for humiliation and distress as well as economic loss. This development has the potential to inflate compensation claims.

4. That the courts are routinely ordering that penalties be paid to successful claimants (in addition to compensation). This is having the overall effect of assisting claimants to defray their legal costs, even though the general rule in adverse action litigation is that each party should bear its own costs.

5. That the courts are invoking the statutory provisions dealing with accessorial liability to require that individuals, such as company directors and human resources managers, pay compensation and penalties. This is proving important in cases where claimants fear that the corporate employer might go into liquidation, or be unable to meet a compensation order.

6. That the prospect of costs being awarded against unmeritorious claimants, including on an indemnity basis, cannot be underestimated.

Before addressing these matters, some background is useful.

ELEMENTS OF THE ACTION

The general protection provisions found in Part 3-1 of the Fair Work Act 2009 (Cth) (the Act) are intended to protect employees (and others) from an employer taking adverse action against them for reasons set out in the legislation.

Some of these reasons (for example, race, sex, union membership, political opinion) have existed in industrial legislation for many decades. The Act expanded those reasons to include adverse action taken by an employer because an employee has a ‘workplace right’ or has exercised or proposes to exercise such a right.[1] ‘Workplace right’ is defined in s341(1)(c) to include the right of an employee to make a complaint relating to his or her employment.

Adverse actions taken against an employee include dismissing the person, changing the person’s job to their detriment, and treating the person differently than others.

Recent cases establish the following elements to a claim based on adverse action:

• First – the applicant must prove that a person took adverse action against the applicant.

• Second – it must be established that the relevant workplace right or attribute was ‘a substantial and operative’ reason for the decision to take the adverse action.[2]

• Third – s361 of the Act creates a statutory presumption that adverse action was taken for a proscribed reason unless proven otherwise.[3] If the respondent can show that it was not taken for such a reason, it is deemed that no actionable adverse action has been taken.

• Fourth – if there is a finding of adverse action, the applicant must prove that loss or damage has been suffered in order to obtain a remedy under s545.

The federal courts have concurrent jurisdiction to hear and determine an adverse action claim – usually after the claim is conciliated before the Fair Work Commission. As illustrated below, the court’s function is not to enquire into whether the employee was unfairly dismissed or entitled to feel hard done by.

PROTECTION OF COMPLAINT-MAKING

One notable aspect of recent adverse action litigation has been disputes about whether an employer engaged in adverse action because an employee exercised his or her workplace right to complain.

Such disputes have frequently involved matters which were not litigated before the inclusion of s341(1)(c) in the Act. Traditionally, these matters were left to be resolved through an employer’s grievance procedures – including complaints about workplace bullying, internal conflict, unrealistic deadlines and excessive workloads.

Complaints in the workplace can nowadays cover a wide range of issues and arise in many ways. For instance, complaints may be:

• true or untrue;

• trivial or serious;

• based on a person’s subjective perception rather than reality;

• genuine or made for an ulterior purpose;

• purely personal about a work colleague and not related to employment; or

• communicated informally (for example, in person or email) or more formally (for example, by letter).

Recently, the Federal Court has made clear that a finding of adverse action by reference to a complaint does not depend on the truth or substantiation of the subject matter of the complaint, but rather on the fact that it was made: ‘Were it otherwise, the protection afforded by the provision would be largely illusory, as persons would be vulnerable to retribution for making a complaint unless, and perhaps until, their case could subsequently, by some unspecified means, be proved or found valid.’[4]

This is an important distinction, because it renders actual proof of the complaint (and any related factual controversy over its substance) legally irrelevant during the trial. What is important is that:

• the complaint conveyed a grievance or accusation;

• the substance of the complaint was communicated (either expressly or implicitly) to the employer or an external authority; and

• the complaint was something more than an observation, or a mere request for assistance.[5]

In Ratnayake v Greenwood Manor Pty Ltd, the court held that ‘an implicit but clear complaint’ is sufficient for the purposes of the Act.[6] There, the applicant relevantly made an implicit but clear complaint under s341(1)(c) when he called his manager a racist and a liar when informed his working hours would be reduced, and again when he accepted the reduced hours in writing ‘under strong protest’.

In another case, Shea v TRUenergy Services Pty Ltd, it was found that the remark made by an executive level employee when she was handed her termination letter, ‘You can’t do this – it is unlawful’, was not a complaint; it was simply an assertion or observation. Dodds-Streeton J further held that several of the complaints relied on by the employee were not within the scope of s341(1)(c), because they were not ‘genuinely held’ or they were ‘made for an improper purpose’.[7] On appeal, however, the Full Federal Court doubted, perhaps correctly, the relevance of these criteria and left this question open.[8]

A complaint to the employer under s341(1)(c)(ii) must be ‘in relation to the [person’s] employment’. Differing judicial views have been expressed about the scope of this phrase. In Rowland v Alfred Health, Marshall ACJ determined that a complaint made by a doctor about the competency of a colleague and the reassignment of a patient by that colleague away from the doctor was essentially a complaint about the colleague and not relating to the applicant’s employment.[9] However, in Walsh v Greater Metropolitan Cemeteries Trust, Bromberg J rejected this narrow approach and determined that the applicant’s raising of a probity issue in relation to a contract with a supplier whose services she managed was a complaint in relation to her employment, because her failure to report suspected wrongdoing had the potential to reflect badly upon her.[10]

The Act makes clear that an employee’s ability to freely exercise the statutory right to make a complaint is important. For this reason, I think it is both likely and preferable that the courts will continue to take a broad, non-technical approach to the question of what constitutes a relevant complaint. As suggested by Walsh, this may provide an important avenue of redress for corporate ‘whistleblowers’ into the future.

SUFFICIENT CONNECTION

The earlier authorities took a very expansive view on whether an employer has taken the adverse action for a forbidden reason. Then in Board of Bendigo Regional Institute of TAFE v Barclay,[11] the High Court held that this issue does not involve an objective exercise in causation, let alone an enquiry into the ‘unconscious’ of the employer. Rather, the enquiry involves a different exercise: why did the employer act as it did? This is a question of fact.

The High Court restated in CFMEU v BHP Coal Pty Ltd that ‘the enquiry involves a search for the reasoning actually employed by [the decision-maker]’.[12] Taking into account the reverse onus on the employer created by s361, the enquiry would usually require the giving of direct evidence by the decision-maker as to his or her reasons, although: ‘The court is not obliged to accept such evidence. It may be unreliable for a number of reasons.’[13]

Subsequently, the courts have shown a willingness to carefully assess the evidence given about an employer’s reasoning process and not treat it as conclusive. For example, in Anderson v BNP Paribas Securities Services the various decision-makers gave evidence that the employee was dismissed before the end of his probationary period as he was not performing to the level required.[14] However, Driver FCCJ found that the decision to dismiss was partly in response to a complaint made by the employee about his supervisor and the work culture in his team. Therefore, the employer had contravened s340.

The approach outlined by the High Court is not without some difficulties, especially for potential applicants. This is illustrated by the subsequent decision of the Full Federal Court in CFMEU v Endeavour Coal Pty Ltd.[15] There, the employer made adverse changes to an employee’s weekly roster due to his absences from work. During most of those absences, the employee was taking permissible personal/carer’s leave under an enterprise agreement. The majority of the Full Court drew a distinction between the act done (in this case, the taking of leave) and the thinking of the decision-maker with respect to that act. The majority upheld the primary judge’s decision that the roster changes were made because the employee’s attendance was ‘unpredictable’, rather than because he had exercised a workplace right to take personal/carer’s leave.

There is something counter-intuitive in this result. It seems odd that an employee who is adversely treated due to his absence from work is not protected when his absence is explained by the fact that he is taking personal/carer’s leave (or any other form of authorised leave). The dissenting judgment of Bromberg J might prove attractive in other cases.

PERSONAL DISTRESS

The orthodox argument that compensation for loss of employment cannot include any sum for distress and humiliation[16] does not apply in this area. Indeed, it is becoming increasingly common for the courts to include a component for distress in a compensation order made under s545.[17]

As far as adverse action claims are concerned, it appears that Burazin v Blacktown City Guardian Pty Ltd continues to have force.[18] Thus it may not be sufficient to complain of the type of distress that ordinarily accompanies most terminations. Rather, the court will require some evidential basis to include a component, although not necessarily medical evidence.

In Flavel v ProRail Services Pty Ltd, Perram J made an award for distress having regard to several factors, including that the dismissal meeting occurred without prior notice and in the absence of a support person, and the applicant’s mental condition deteriorated after his dismissal.[19]

To date, awards for distress in adverse action cases have been very modest (usually around $7,500).

It may be that cases outside adverse action show the way in this area. In 2014, the Full Federal Court in Richardson v Oracle Corporation Australia Pty Ltd found that community standards demanded higher compensation for non-economic loss in sexual harassment cases.[20] The employee’s award for distress and humiliation was increased from $18,000 to $100,000. Since Oracle, larger amounts of general damages have been awarded.

PENALTIES

The Act makes it plain that a court can order penalties ‘in addition’ to a s545 compensation order.[21] Those civil penalties can be significant – currently up to $54,000 for each contravention by a corporation. In addition, the Full Federal Court has recently stated that this power is ordinarily to be exercised by awarding any penalty to the successful applicant.[22] While these factors clearly operate as an incentive to bring such proceedings, they also make it more likely that the adverse action provisions ‘will be more than mere words on a statute book’.[23]

In Sayed v CFMEU, the primary judge determined a penalty of $45,000 and directed that it be paid into consolidated revenue. Mortimer J found that paying the penalty to the applicant would deliver him an inappropriate ‘windfall’, given he was awarded a lesser amount of compensation ($37,000 in lost earnings and $3,000 for distress). On appeal, however, the Full Court ordered that the penalty be paid to the applicant and eschewed the notion that an applicant would profit from a penalty.[24]

It seems to follow from the Full Court’s decision that the amount of a compensation order should not control either the quantum of the penalty awarded or its payment to the successful applicant. It would also be strictly irrelevant whether or not the applicant has incurred legal costs.

The (now confirmed) usual order as to payment of a penalty will doubtlessly be welcome to an applicant who incurs considerable time, expense, lost opportunity and/or risk to their career in running the litigation.

PIERCING THE CORPORATE VEIL

Section 550(1) of the Act provides that a person who is ‘involved in’ a contravention of a civil remedy provision (for example, an adverse action provision) is taken to have contravened that provision. The test is whether the individual is ‘linked in purpose with the perpetrators’.[25] Usually, this will require some knowledge on the part of the individual that the employer’s conduct was motivated by a proscribed reason.

Section 545(2)(b) also provides that, in relation to a contravening party, the court ‘may make any order the court considers appropriate’, including a compensation order.

To date, ss545(2)(b) and 550 have been used in combination to look through corporate structures and assign liability for adverse action to individual directors and managers. This is of particular importance for employees of insolvent employers who have no other avenues of redress.

In Roberts v A1 Scaffold Group Pty Ltd,[26] the court upheld an adverse action claim against a corporate employer which was part of a ‘phoenixing’ arrangement. Both the company and its director who took the adverse action (by dismissing the worker after he complained about his entitlements) were held jointly and severally liable to pay compensation. The director was also ordered to pay a penalty.

In another case, two senior managers were found to be involved in their employer’s contravention when they changed a worker’s employment conditions after he resigned his union membership. Although the worker did not suffer any loss warranting compensation, the two managers were each ordered to pay a penalty of $3,500.[27]

Although the Explanatory Memorandum says that a director should not be held personally liable for a company’s contravention,[28] the broad terms of s545 paint a different picture as outlined by the recent cases.

COSTS

It is easy to make a complaint. This may explain why the courts have been prepared to make costs orders against those applicants whose complaints (or the making of them) have proven to be without proper foundation.

Section 570 sets out a general rule – a person must bear their own costs – and then provides an exception to that general rule in limited circumstances. Most of those circumstances will rarely be made out – for example, that the applicant’s case was vexatious or completely bereft of any reasonable cause.

However, those circumstances also include those where the court is satisfied that a party’s ‘unreasonable act or omission caused the other party to incur costs’. This exception has now been invoked in complaint-based cases. For example, in Shea v EnergyAustralia Services Pty Ltd, Jessup J ordered that the applicant pay the costs of defending certain baseless allegations of sexual impropriety pursued by her during the proceeding on an indemnity basis.[29] In Shamir v Australian Taxation Office,[30] Pagone J found that the applicant’s pleadings as to a bullying complaint were defective and made an order for costs after the application was discontinued.

Recently it has been said that ‘the discretion conferred on the court, by s570(2), must be exercised cautiously and only in a clear case’.[31] Nevertheless, the clear judicial trend is not to baulk at the prospect of awarding costs if the circumstances warrant it.

CONCLUSION

The cumulative effect of these developments is that employees are receiving compensatory amounts considerably higher than they would obtain through other avenues, such as unfair dismissal claims. These are important developments in employment law – especially if the benefits can flow through to low-paid workers with limited capacity to litigate their claims.

Matthew Moir is a barrister practising in employment and industrial law from Sir Owen Dixon Chambers in Sydney. PHONE (02) 8076 6655 EMAIL mmoir@sirowendixon.com.au


[1] Fair Work Act, s340(1)(a).

[2] Board of Bendigo Regional Institute of TAFE v Barclay [2012] HCA 32; (2012) 248 CLR 500 at 522-3, 535.

[3] CFMEU v BHP Coal Pty Ltd [2015] FCAFC 25 at [187]- [194].

[4] Shea v TRUenergy Services Pty Ltd [2014] FCA 271 at [619].

[5] Hill v Compass Ten Pty Ltd [2012] FCA 761 at [48].

[6] [2012] FMCA 350 at [117].

[7] Shea, see note 4 above, at [29]-[31].

[8] Shea v EnergyAustralia Services Pty Ltd [2014] FCAFC 167.

[9] [2014] FCA 2 at [37]- [38].

[10] [2014] FCA 456 at [41]- [44].

[11] [2012] HCA 32; (2012) 248 CLR 500.

[12] [2014] HCA 41 at [6].

[13] Ibid at [8], citing Barclay at [45].

[14] [2015] FCCA 2231.

[15] [2015] FCAFC 76.

[16] See Addis v Gramophone Co Ltd [1909] AC 488.

[17] For example, ALAEA v IASA [2011] FCA 333 at [442]- [450].

[18] [1996] IRCA 371; (1996) 142 ALR 144.

[19] RailPro Services Pty Ltd v Flavel [2015] FCA 504 at [179].

[20] [2014] FCAFC 82.

[21] Fair Work Act, s546(5).

[22] Sayed v CFMEU [2016] FCAFC 4 at [101].

[23] Ibid, citing Murrihy v Betezy.com.au Pty Ltd [2013] FCA 1146 at [119].

[24] Ibid.

[25] CFMEU v McCorkell Constructions Pty Ltd [2013] FCA 446 at [282]- [290].

[26] [2015] FCCA 2249; [2015] FCCA 422.

[27] Director of FWBII v Baulderstone Pty Ltd [2014] FCCA 721; [2015] FCCA 2129.

[28] Explanatory Memorandum, Fair Work Bill 2009 (Cth) at [2177].

[29] [2014] FCA 1091.

[30] [2015] FCA 1463.

[31] Tsapatolis v Fuji Xerox Australia Ltd [2015] FCA 514 at [11].


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