"Adverse Action" - the sleeping giant in the new era of Fair Work

With effect from 1 July 2009, new “adverse action” provisions were introduced under the Fair Work Act 2009 (Cth) (“FW Act”).  These provisions are available to all persons falling under the jurisdiction of the FW Act irrespective of award coverage or annual salary.  Aiming to protect freedom of association and other workplace rights, these provisions are far reaching and apply not only to employer/employee relationships but also to independent contractors.  With a recent decision on 25 November 2009 allowing the provisions to be used ‘pre-emptively’, all employers need to be aware of the possible implications for their businesses.

What are the adverse action provisions?

Under Part 3-1 of the FW Act, persons are afforded protection in relation to ‘workplace rights’.  On a basic level, a person (including a corporation) cannot take adverse action against another person because that other person has a workplace right, has or has not exercised a workplace right, or proposes to, or not to, exercise a workplace right at any time.

The definition of workplace rights is broad and includes where a person:

• is entitled to the benefit of;

• is able to initiate or participate in processes or proceedings under; or

• is able to make a complaint or inquiry to seek compliance with,

a workplace law or workplace instrument (which includes anti-discrimination legislation, Modern Awards or contracts of employment).

For example, where an employer takes adverse action (which includes dismissal, discrimination or otherwise injuring or altering the position of the person in their employment) against an employee who lodges a complaint about treatment by a manager that employer may be in breach of the FW Act.  Demoting or changing the role of a person may also constitute adverse action for the purposes of the FW Act.

In addition, adverse action cannot be taken against a person because that person has engaged in a lawful industrial activity (for example, union membership).  This is relevant to the first adverse action decision by the Federal Court of Australia and discussed below.

Burden of Proof and Possible Remedies

A claim by a person under the adverse action provisions will succeed where it can be demonstrated that the workplace right was just “one” reason for the action – there is no requirement that it be the sole or dominant reason for the person taking the adverse action.  There is also a reverse onus of proof in that it is up to the employer or other offending person to show that they did not take the action for one of the prohibited reasons in the FW Act.  This places a heavy burden on employers or other persons alleged to have committed the adverse action.

By way of example, where an employee who has been terminated alleges that the termination was a result of the employee making a complaint to HR regarding possible discrimination, the employer must show that the termination had, on the balance of probabilities, nothing to do with this complaint.  If this cannot be shown then the employee will succeed in their claim.

Where a person is successful in bringing a claim under the adverse action provisions, possible remedies include:

• uncapped compensation;

• fines of up to $33,000;

• injunctions preventing the adverse action;

• reinstatement of the person (if the adverse action was dismissal); or

• any other order the courts see fit.

Not just employers and employees

In defining “adverse action”, section 342 of the FW Act refers to a table of examples of when a person is deemed to have taken adverse action against another person.  Items 3, 4 and 6 of that table deal with independent contractors and include where a principal takes adverse action (such as dismissal) against either an independent contractor (corporation or individual) or a corporation or individual employed or engaged by that independent contractor.  This would include where a principal wants to terminate the services of a person engaged by the independent contractor in order to replace them with someone else.

Importantly, there appears to be an anomaly with who can make a claim under the adverse action provisions.  This is because independent contractors are not specified as able to bring a claim, instead the term “an employee” is used (in addition to employee organisations and Inspectors).  However, based on the intention of the FW Act to provide increased rights to individuals and other persons, it is highly probable that Fair Work Australia or the courts would interpret the ability to claim widely and include independent contractors.  Until an adverse action claim is brought by an independent contractor for the first time this issue will not be conclusively resolved.

Pre-emptive strike - Jones v Queensland Tertiary Admissions Centre Limited [2009] FCA 1382 (25 November 2009)

In the first case dealing with adverse action under the FW Act, Justice Collier of the Federal Court of Australia granted an interlocutory injunction on behalf of a CEO restraining the employer (Queensland Tertiary Admissions Centre Ltd or “QTAC”) from:

• taking action in relation to numerous complaints made against the CEO; and

• terminating the CEO’s employment,

until all matters are resolved in the final hearing on 1 February 2010.

 

Facts

Ms Jones is currently employed as CEO of QTAC on a fixed term contract set to expire in 2012 and has held this role for 7 years.  In July of this year Ms Jones participated in enterprise bargaining negotiations on behalf of QTAC with the Australian Services Union (“ASU”).  Ms Jones was then subject to an investigation initiated by QTAC following various named and anonymous complaints by employees and the ASU after this bargaining period.  However, Ms Jones alleged that the investigation was improper and was concerned about the possible termination of her employment by QTAC as a result.  Accordingly, on 16 November 2009 Ms Jones sought both permanent and interlocutory relief against QTAC.

 

Serious question to be tried

In order to succeed in obtaining an interlocutory injunction, a plaintiff (in this case, Ms Jones) must show that:

• there is a serious question to be tried regarding the plaintiff’s entitlement to relief;

• damages are not an adequate remedy; and

• the balance of convenience favours the granting of the interlocutory injunction.

 

Ms Jones’ submissions

Ms Jones alleged that QTAC had contravened s340(1) of the FW Act by taking adverse action against her due to her having a workplace right.  The relevant workplace rights were either her role/responsibility in negotiating the Enterprise Agreement with the ASU on behalf of QTAC or alternatively her participation in the process as a bargaining representative for QTAC.  Ms Jones submitted that the relevant adverse action included the commissioning of the “Report on Grievances against CEO, QTAC, Prepared for Chair of QTAC” prepared by a third party (Carol Watson) on 28 September 2009 and threatening to terminate or otherwise discipline her in a letter dated 29 October 2009 due to this report and the complaints.

 

Held

Justice Collier agreed with Ms Jones and held that, although whether Ms Jones had a workplace right as a bargaining representative is a matter to be determined in the final proceedings, the claim constituted a serious issue to be tried with a sufficient likelihood of success.  In particular, when dealing with the claim that adverse action was proposed to be taken regarding the threat to terminate or otherwise discipline Ms Jones, her Honour referred to correspondence on 29 October 2009 from QTAC (which identified the possible chance of termination) and held that “Ms Jones [had] established a prima facie case that this correspondence, and the proposed meeting, constituted threats to terminate Ms Jones’ employment, which in itself is adverse action pursuant to s 342(2) of the FW Act”.

In relation to whether damages were a sufficient remedy, her Honour noted that the discipline of Ms Jones or the potential termination of her contract would detrimentally affect her reputation and future career prospects.  Accordingly, an injunction and not damages would be an appropriate remedy.  This is despite the fact that QTAC gave well-argued and persuasive reasons why it should not be granted, including the requirement on QTAC to provide safety to workers under the Workplace Health and Safety Act 1995 (Qld) and evidence of a high level of anxiety amongst other staff should the situation remain unchanged.

Although an injunction was granted in relation to the allegation of adverse action under the FW Act, her Honour declined to award an injunction on the separate issue of whether QTAC had breached its contract with Ms Jones.  Highlighting the broad nature of the adverse action provisions, her Honour stated that “while QTAC’s conduct in relation to the Carol Watson report may be “adverse action” for the purposes of the FW Act, it does not appear that the commissioning of the report or convening a meeting of QTAC to consider the report constituted a breach of contract with Ms Jones”.

Implications

Although this is only the first case to be heard in relation to adverse action, with the final hearing still pending, employers should be mindful of the potential use of these provisions by their employees.  Threatening to take some form of adverse action may be enough for the courts to preserve the status quo, which may have negative effects on the business including staff morale and financial burdens.

Wherever potential discipline of employees is to occur, employers should always ensure any processes set out in awards or internal policies are followed.  Where possible, the employee should be offered a support person and all relevant matters and meetings should be clearly documented.  This may serve to reduce (but not eliminate) the risk of adverse action claims by employees.  In any event, the adverse action provisions are definitely one to be watched in the new era of ‘Fair Work’.