Some tips preventing adverse action claims

Author: Harrison HR | Blog

Be very clear about your reasons for taking action against an employee, and be able to prove them — to minimise the prospect of adverse action claims.

Those are the two most important elements of a strategy to combat adverse action claims outlined at the 2012 Workplace Law Fundamentals seminar, conducted by Akolade, in Sydney, on 20 March 2012.
This is because the adverse action provisions require a causal link to exist for a claim to be successful. That is, the action against the employee must have been taken because the employee had a ‘workplace right’ or was involved in ‘industrial activity’. Secondly, the onus of proof is reversed in adverse action claims. This means that the employer is required to prove they did not act against the employee because the employee had a workplace right or was involved in industrial activity.

Adverse action claims attractive to employees . . . not very successful so far

Jack de Flamingh, partner in the law firm Corrs Chambers Westgarth, said that the adverse action provisions were one of the few contents of the Fair Work Act 2009 that had resulted in significant changes from the previous legislation. They had resulted in a substantial increase in claims made by employees to Fair Work Australia (FWA) but, so far, relatively few claims have been successful.

There are many reasons why adverse action claims are an attractive option to employees:

  • Accessible by a much wider range of people than ‘unfair dismissal’ claims, including prospective employees, probationers, contractors and employees above the high-income threshold — however, it does not apply to provisions in common law employee contracts as a general rule because the basis for action has to be found in legislation or an employment instrument (award/agreement).
  • Time limit for lodging claims is longer, so employees can try other options first.
  • Remedies available are broader (eg injunctions).
  • No cap on the amount of compensation that may be awarded.
  • The onus of proof is reversed, as discussed above.
  • The scope of ‘adverse action’ is very broad — see below.

To some extent, adverse action claims are being used in substitute for other types of claims. For example, the Australian Human Rights Commission has noted a drop in the number of discrimination complaints and claims that it is receiving, and because the scope of ‘adverse action’ includes discrimination, it is likely that some employees are pursuing adverse action claims instead.
De Flamingh described adverse action claims as ‘a very fertile and evolving area’, but also noted that so far only a few claims by employees have been successful.

The scope of adverse action

De Flamingh said that the scope of conduct that may amount to adverse action is very broad.
Dismissal, discrimination, demotion and disciplinary action are obvious actions, but disputes to date suggest that it can also include any of the following:

  • initiating an investigation against an employee
  • removal of access to employer’s internet and email systems
  • leave without pay as an alternative to termination of employment
  • issuing a ‘show cause’ letter to an employee
  • arguments or harsh conversations that, it can be argued, potentially damage the employee’s status or reputation
  • adverse performance appraisal results
  • placing pressure or duress on an employee (eg to cash out annual leave entitlements)
  • making misrepresentations to an employee
  • issuing threats to an employee (eg of dismissal or disciplinary action).

The above list is not exhaustive. He added that the adverse action provisions are being used by employees and unions to challenge disciplinary action and relatively low-level workplace disputes. Previously, issuing formal warnings to employees was an effective and relatively harmless strategy, but greater care is now needed.

To qualify for a remedy
To qualify for a remedy for adverse actions, there must be two distinct elements:

  1. conduct by the employer
  2. the reason for the conduct, which must be related to the employee having or exercising a workplace right in relation to an employment instrument (such as an award or agreement, but not a common law employment contract) or being involved in industrial activity.

This second point indicates that the motivation of the instigator of the action is crucial, as discussed further below.

The scope of ‘workplace right’ is also very broad. To date, the most-commonly used one is the employee’s ability/entitlement to make a complaint or enquiry in relation to his/her employment, which often crops up during the performance management process. Other common ones include the right to refuse to work unreasonable extra hours and the right to refuse to perform unsafe work.
In relation to ‘industrial activities’, the most common type of claim relates to seeking to have union representation in a dispute.

Motivation of the decision maker

For adverse action to occur, the action must be related to the employee’s workplace right or industrial activity. The employer’s objective motivation is what matters most (ie why did the employer take the alleged adverse action?).
De Flamingh added that this is the clue to avoiding or defending an adverse action claim. The employer should state clearly that ‘[Employer’s name] did [state the action] to [employee] for the following reason(s) [state reason(s)], NOT because [state reason(s) that might give rise to a claim]’. The reason for action needs to be related to the employee’s performance or conduct and the employer must be able to prove that the performance/conduct issue actually existed or occurred.
It is very important to provide the reason for the action up-front, otherwise you are required to prove the reason existed if/when a claim is made. The reverse onus of proof means that claims can be very time-consuming (and costly) to defend.
Note: the High Court is about to hand down a decision in the case of Barclay v Board of Bendigo Regional TAFE (expected by end of March) that is expected to clarify the issue of what is an objective versus a subjective test.

Risk prevention strategies

De Flamingh offered the following tips to employers to reduce the risk of adverse action claims:

  • Understand the law and be aware of the potential for claims.
  • Be able to prove why you made decisions, by documenting the reasons at the time. Remember that the majority of adverse action claims are unsuccessful.
  • Review and update your investigation and discipline processes.
  • Be very clear about who the actual decision maker is in each matter. It should be a different person to the one the employee has complained about. Also avoid having multiple decision makers.
  • Test the reasons for making a decision before that decision is actually implemented.
  • Remember that all documents are discoverable by FWA.
  • Resolve the matter in the first place if at all possible.

Further information
Further information about this seminar is available from Akolade.
Source: Mike Toten, HR writer, prepared this summary.

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