Adverse Action – the new risk in disciplinary proceedings

4 November 2010

You are two weeks into a misconduct investigation when Professor Smith* files a grievance against the Head of Department.

A letter from his solicitors, Jones, Jones and Jones*, has just landed on your desk and threatens 'adverse action' proceedings and an injunction for a breach of the enterprise agreement.

Over your morning coffee, you muse: "What is an adverse action claim? And what do we do about it?"

Welcome to the brave new world of the Fair Work Act.

(* Professor Smith and Jones, Jones and Jones are fictitious characters for the purposes of this article)

So what is exactly is an adverse action claim?

The Fair Work Act prohibits a person taking 'adverse action' against another person for particular reasons – which, for convenience, we'll refer to as 'Prohibited Reasons'.

Typically, this will involve an employer taking action against an employee – but this does not have to be the case. It could equally involve a principal and independent contractor, or a union and employee.

But it is probably easiest to explain the provisions on the assumption that an employer and employee will be involved.

'Adverse action' is a broad concept – which can include not only a warning or dismissal, but which can even potentially extend to a 'show cause' letter or unfavourable allocation of duties.

There are three broad categories of Prohibited Reasons:

  • because the employee has, or has exercised, a 'workplace right'. This includes:
    • having an entitlement under an industrial instrument or workplace law
    • having a role or responsibility under an industrial instrument or workplace law
    • because the employee is involved in process or proceedings under a workplace law – such as court proceedings, protected industrial action or making a flexible work request
    • because the employee has made a complaint – including filing an internal grievance
  • because the employee is (or is not) a union member or engages (or does not engage) in an 'industrial activity'. This includes engaging in lawful activities promoting a union.
  • because of a discriminatory reason – such as race, sex, age, disability or carers' responsibilities.

The Prohibited Reason need only be one of the reasons for the employer's action.

There is a 'reverse onus of proof' - that is, the employer must establish that the reason it took the adverse action was not for a prohibited reason. In effect, the employer must prove its innocence. Practically, this means the decision maker (often a very senior person) will need to be a witness in the defence.

Adverse action claims are heard by a court – typically either the Federal Court or Federal Magistrates Court. Court orders can include:

  • an injunction
  • compensation
  • reinstatement
  • a penalty of up to AUD33,000 for a corporation, or AUD6,600 for an individual.

Yet Fair Work Australia can – and in the case of a dismissal, must – conciliate before proceedings are brought.

How have adverse action claims been used?

In 2010, there were a series of major decisions on adverse action claims. While in most cases the employee was unsuccessful, they are a strong indicator of a trend and illustrate how adverse action provisions are being used.

Two cases will be of particular interest.

In Jones v Queensland Tertiary Admissions Centre Ltd (No 2) [2010] FCA 399, Ms Elizabeth Jones was the Chief Executive Officer of the QTAC. She was one of QTAC's negotiators in enterprise bargaining with the Australian Services Union. While the negotiations were underway, a number of employees made allegations of bullying against Ms Jones. The allegations related to her general conduct in the workplace – not her conduct in negotiations.

When QTAC sought to investigate, Ms Jones obtained an interlocutory injunction from the Federal Court temporarily halting the investigation. She argued that the real reason for the complaints and investigation was the fact that she was one of QTAC's negotiators – being a role under a workplace law.

In the final hearing, Ms Jones was unsuccessful. The Court accepted evidence from QTAC that – while the investigation constituted adverse action –the investigation was unconnected to her role as negotiator. Instead, the investigation was motivated by a genuine concern over serious accusations of bullying by a very senior employee.

In Barclay v The Board of Bendigo Regional Institute of TAFE [2010] FCA 284, Mr Barclay was a senior teacher at a TAFE and an official of the Australian Education Union (AEU). In his capacity as an AEU official, Mr Barclay sent an email to AEU members alleging that TAFE employees were engaging in fraud in relation to an audit. Once discovered, the TAFE suspended Mr Barclay and sent him a show cause letter.

Mr Barclay brought proceedings alleging that he had been suspended because of his AEU membership and activities.

The Court dismissed Mr Barclay's application. They accepted the TAFE's evidence that the investigation was genuinely motivated by concerns about the content of the email, its effect on the TAFE and staff members, and the fact that Mr Barclay had not raised the allegations with senior management beforehand.

What about the future?

We will undoubtedly be seeing many more adverse action claims in the next 12 months. One major area is likely to be adverse action claims, alleging that the employer is retaliating because of a grievance filed by the employee. These types of claims are becoming increasingly commonplace in the United Kingdom, for example.

Adverse action claims are not the only problem. Claims of enterprise agreement breaches are also likely to rise. Importantly, an employee can obtain – in effect – general damages for a breach of an enterprise agreement (or an award for that matter). This could result in claims for many years pay – for example, if a dismissed employee argues that they would have remained employed if the agreement had been complied with.

But the real sleeper in these claims is the capacity to obtain an injunction for a breach of enterprise agreement. This does not apply to old Workchoices collective agreements, but progressively enterprise agreements are being renegotiated under the Fair Work Act.

Interlocutory injunctions can be a major headache for Universities – especially in disciplinary investigations – so watch this space.

This article is from our November 2010 edition of Higher Education Focus.

Author(s) Gareth Jolly