Australia: To what extent can an employee pursue a meritless claim?

The breakdown of an employment relationship can often leave a sour taste in both parties' mouths.  In the most serious cases, an employee on their way out can be motivated to inflict as much pain and suffering on the business, and those who represent it, as possible.

Although an aggrieved employee is most certainly entitled to pursue their rights to the fullest extent permitted under law, there are two questions that often come to mind:  

  1. To what extent can an employee pursue a claim when it either lacks merit, or is vexatious and has been lodged purely to spite the employer?
  2. Is there any form of recourse that an employer can take in circumstances where they have been forced to defend themselves in this type of matter?

The Fair Work jurisdiction is a no cost jurisdiction, meaning that each party to a matter must bear its own costs in either bringing or defending a claim.  With this said, the Fair Work Commission does have discretionary powers to make costs orders against parties to a proceeding. 

Under s 611 of the Fair Work Act 2009 (Cth), the Fair Work Commission can order a party to bear some, or all of the costs incurred by the other person in relation to an application if it is satisfied that either:

  1. the applicant made the application vexatiously or without reasonable cause; or that
  2. it should have been reasonably apparent to the applicant that the application had no reasonable prospect of success.

In addition to this, the Fair Work Commission has the power under s 401 of the Fair Work Act 2009 (Cth) to make an order for costs against lawyers and paid agents if it is satisfied that the representative caused those costs to be incurred because:

  1. the representative encouraged the person to start, continue or respond to the matter where it should have been reasonably apparent that the person had no reasonable prospect of success in the matter; or 
  2. of an unreasonable act or omission of the representative in connection with the conduct or continuation of the matter.

Section 400A of the Fair Work Act 2009 (Cth) also contains a broad power to order costs against parties.

Orders for costs are rarely made, although in the case of Charles Parletta Real Estate Pty Ltd v Ms Maria D'Ortenzio & Mr Nicola Minicozzi [2018], the Fair Work Commission did order an employee to pay the employer's legal costs on the basis that the employee's unfair dismissal claim had been made vexatiously, and that it had no reasonable prospects of success. 

Ms D'Ortenzio was a long-standing employee of Charles Parletta Real Estate (formerly LJ Hooker Glynde) ('CPRE') who had, over years of employment, made her way through the ranks to become a full-time Senior Property Manager.  

In 2017, the business terminated Ms D'Ortenzio's employment on the basis that she had:

  • made several allegations against Mr Parletta (the owner) pertaining to improper conduct;
  • communicated to financial institutions that there was impending litigation against the business;
  • failed to disclose the true nature of transactions whilst performing sales duties on behalf of Mr Minicozzi - actions which in turn denied the LJ Hooker franchisor of a contractual benefit; and
  • demonstrated a number of deficiencies as identified in CPRE's HR Report.

Ms D'Ortenzio claimed that there was no valid reason for termination and that she had therefore been unfairly dismissed.

The Fair Work Commission found that Ms D'Ortenzio's "...motive, and predominant purpose in instituting [the] proceedings were to seek revenge against Mr Parletta" and to "...inflict as much damage on Mr Parletta as possible".  

Further, Commissioner Platt stated:

"I find that Ms D'Ortenzio's conduct in continuing the matter in light of the knowledge of her conduct was unreasonable and that it should have been easily discernible to an objective person in Ms D'Ortenzio's position.  Ms D'Ortenzio should have realised that her case had no prospects of success after reviewing CPRE's material filed on 19 October 2017.  I find that the continued prosecution of the matter post-23 October 2017...was an unreasonable act in connection with the conduct and continuation of the matter."

The threshold of proving that an application is vexatious or malicious is no easy feat.  As has been made clear in the case of Charles Parletta Real Estate Pty Ltd v Ms Maria D'Ortenzio & Mr Nicola Minicozzi [2018], an employee who is motivated by the idea of 'making their employer pay' or 'taking their employer down at all costs' does risk having cost orders made against them.

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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