Australia: Adverse action decisions provide clarity to employers

New adverse action decisions provide clarity to employers


Two recent adverse action decisions provide clarity to employers about the operation of the new types of claims available under the Fair Work Act 2009 (the Act).

What are adverse action and workplace rights?

Adverse action is defined in a table at section 342 which sets out the type of conduct which will be adverse action. Adverse action can be taken by:

  1. an employee against his or her employer
  2. an employer against an employee (or prospective employee)
  3. an independent contractor against a principal
  4. a principal against an independent contractor
  5. a person against an industrial association.

Adverse action claims will usually be made by employees in relation to the alleged adverse actions taken by employers which include termination of employment; or injuries to the employee in his or her employment; or altering the position of the employee to the employee's prejudice; or discriminating between the employee and other employees of the employer.

The Act also creates a new "right" which can not be the subject of adverse action, called workplace rights, which can be broadly described as employment entitlements and the freedom to exercise and enforce those entitlements.

A person has a workplace right if the person:

  • is entitled to the benefit of or has a role or responsibility under a workplace law, a workplace instrument or an order made by an industrial body such as an entitlement to paid sick leave
  • is able to initiate or participate in a process or proceeding under a workplace law or a workplace instrument including a conference or hearing at FWA or a court proceeding under a workplace law, or
  • is able to make a complaint or inquiry to a person or body with a capacity under a workplace law to seek compliance with a law or industrial instrument or if that person is an employee, in relation to his or her employment, such as an internal grievance for a bullying complaint.

What do the cases say?

Automotive Food Metals Engineering Printing and Kindred Industries Union v Philips Engineering Australia Pty (Phillips) [2010] FCA 611 (15 June 2010)

In the Philips Engineering Case the AMWU made an application to the Federal Court for an interim order under the Act that an employee whose employment had been terminated by Phillips (the affected employee) be reinstated to his position. Phillips had terminated employment on the basis of redundancy.

The union, on behalf of the affected employee, argued that Phillips had engaged in adverse action by terminating the affected employee's employment because of the affected employee's union activities and not for the reason given to him, which was that his position was redundant.

The union activities were that the employee had represented workmates at Phillips in their attempt to negotiate a new industrial agreement with Phillips and because the affected employee had "called in" the AMWU when negotiations had halted. In seeking the order of reinstatement, the AMWU was required to demonstrate that there was a serious question to be tried and that the balance of convenience and justice favoured making the preliminary order of re-instatement.

The Court agreed to make the order to reinstate the employee until the substantive claim could be heard on the basis that the evidence indicated that the redundancy was a "smokescreen" for the real reasons for termination, which were the employee's union activities. The court also found that the balance of convenience and justice favoured reinstating the affected employee who until recently "had a satisfactory work history with Phillips and the company appears to have sufficient work to justify his ongoing employment."

The court also considered that:

"the alleged contravention in the present case is serious and Mr Nobbs needs employment to support his ongoing commitments. Times are difficult in Australia at the moment and I doubt that damages ultimately will prove to be an adequate remedy."

The Phillips case demonstrates that in adverse action claims where it appears that a breach has occurred, particularly where termination of employment has occurred or is likely to occur, the Courts are likely to order re-instatement or make orders to stop a termination of employment occurring until the substantive application can be heard.

Employers need to be very careful in terminations of employment, disciplinary matters, transfers, demotions and changes in terms and conditions of employment to ensure that these are undertaken transparently, fairly and reasonably and not in response to an employee exercising a workplace or industrial right.

Construction Forestry Mining and Energy Union v BHP Coal Pty Ltd [2010] FCA 590 (11 June 2010)

In the BHP Coal case the CFMEU claimed that BHP Coal breached an enterprise agreement provision and the Fair Work Act's adverse action provisions.

The CFMEU's adverse action claim was that a disciplinary meeting called by BHP Coal was pursuant to a clause in the relevant collective agreement and CFMEU member (Lohmann) was entitled to insist on the participation at the meeting of only himself, his representative, and his supervisor or department manager/superintendent. The CFMEU claimed that this entitlement was a workplace right.

The CFMEU also claimed that BHP Coal had engaged in adverse action towards Lohmann by threatening to dismiss him or otherwise injure him in his employment or alter his position to his prejudice if he did not participate in the disciplinary meeting with the presence of a BHP Coal human resources staff member.

The adverse action claimed by the CFMEU included statements by a manager present at the meeting who encouraged Lohmann to get alternative representation on the basis that the CFMEU's advice that he not participate in the disciplinary process was not in his best interests.

The relevant collective agreement set out a disciplinary process. As a result of a dispute between the CFMEU and BHP Coal about who could attend the disciplinary meeting, and particularly whether BHP Coal was permitted to have an HR advisor present under the terms of the clause, Lohmann and the his union representative walked out of the meeting and refused to attend subsequent meetings.

BHP Coal subsequently terminated the employment of Lohmann for serious misconduct arising from the issues which were the subject of the disciplinary meetings. On the adverse action argument, the Court found that nothing the employer or its managers had done constituted an injury or a threat to injure Lohmann because of Lohmann's exercise of his workplace rights.

The Court particularly looked at the comments made by the manager to Lohmann about getting alternative representation and found that this did not constitute an injury or threat to injure Lohmann and was not therefore adverse action.

Recommendations for employers

Adverse action claims made by employees and unions are increasing and employers are at risk of possible claims as an alternative to unfair dismissal claims (where the compensation is capped) or discrimination claims.

We recommend that employers take the following steps to ensure that they are adverse action claim ready:

  • make sure decisions are transparent, fair and reasonable and not for some other reason related to the employee's workplace rights or industrial activities
  • ensure that managers understand the new general protection provisions and this is reflected in training and procedures
  • have appropriate processes for managing complaints, including managing corporate memory because adverse action claims that are not in relation to termination of employment can be commenced within six years of the event
  • establish a system of flags for special management of high risk issues or staff members, so that grievances can be dealt with internally rather than employees making claims to external tribunals and courts.

Despite the new laws in relation to adverse action, employers should take disciplinary action where appropriate, provided that that action is initiated on a bona fide basis and in accordance with any procedural rules, and not the basis of the employee's affiliation with a union.

Norton Rose Australia can assist you with training and advice on possible adverse action claims and to assist you to manage your legal risks.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Jason Noakes
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