Hunter Employee Relations is currently assisting a client with a General Protections – Adverse Action claim. The client, a small business food retailer with 3 employees, has been forced into a difficult choice - pay a $18,000 compensation claim to ‘settle’ the matter with the employee or a pay a hefty legal bill defending themselves from this claim.

The 25-year-old employee was terminated less than 4 weeks after commencing because they did not have the trade skills the employee claimed they had prior to being employed. The employer was paying above trade level wages for an employee who was only able to undertake year 1 apprentice duties – and slowly at best. (yes - reference checking would have been useful here!) 

Why is the employer in this legal predicament?

The employee, unable to make an unfair dismissal claim after only 4 weeks of employment, found a ‘no win-no fee’ solicitor who lodged an $18,000 General Protections claim against the employer following termination. The application claimed that because the employee had made a complaint (they raised a minor error in his wages which was immediately rectified) the employer had terminated him - for raising that complaint.

If the employer does not pay the $18,000 compensation settlement the employee has the right to have their claim heard in the Fair Work Division of the Federal Circuit and Family Court of Australia (‘the Court’). The employer cannot stop this matter progressing there.

While the employer can ultimately defend this claim they will incur substantial legal fees to defend themselves. Not appearing in Court to defend themselves is not an option. A judgement could well be made against them.

Who can make this type of General Protections – Adverse Action claim?

Any employee – permanent, casual, fixed term, Award, Award free, professionals, managers, executives. There is no salary cut off point.

Are small business employers protected?

No – any size employer can be caught by this.

What is the qualifying period of employment before an employee can make such a claim?

There is no qualifying period – it could after one day’s employment. (it could also happen during recruitment)

Do probationary periods provide any protection?

No – probationary periods do not prevent a General Protections - Adverse Action claim.

How much compensation can be awarded by the Court?
Unlimited. Some claims (mostly for senior executives) are in the hundreds of thousands of dollars.

What does the employer have to prove?

The employer bears the ‘onus of proof’. This means the employer has to prove that the decision they made (which had a negative impact on the employee) was for a legitimate reason and not because the employee had exercised a workplace right – such a making a complaint about a minor payroll error in this case.

Let’s explain the General Protections-Adverse Action process through the following example:

1. The employee makes some kind of complaint (not necessarily to the employer) or exercises a workplace right/entitlement such as requesting annual leave or taking sick leave. Such workplace ‘rights’ exist in their applicable Award, the National Employment Standards, the Fair Work Act, other Acts, workplace policies or their employment contract. There are many workplace rights.
2. At some point in time thereafter the employer makes a decision that has a negative impact on that employee – this is the ‘adverse’ action part. Examples of such decisions with a negative/adverse impact could include: Changing their hours of work or shift – resulting in a negative impact on their personal life, or withdraws a regular overtime shift – resulting in a negative financial impact, or terminates their employment for performance / attitude or redundancy reasons.
3. The employee finds a ‘no win-no fee’ solicitor who lodges a General Protections – Adverse Action claim stating that because the employee made the complaint (or exercised a workplace right) that the employer acted in an adverse (negative) manner towards them.
4. In the Fair Work Commission conference the employer receives a ‘settlement’ demand for $20,000, $30,000, $40,000 or much more. Where the employer does not agree to the 'settlement' claim, the Fair Work Commission allows the matter to proceed to the Federal Court for hearing. The Commission attempts to mediate but does not have the power to stop this process. If its not ‘settled’($) the employee can take it to the Court.

The key vulnerability for employers

When you distil the above down to its essential components: the key vulnerability for employers occurs when they terminate an employee (for an unrelated reason) at some stage after a complaint has been made or a workplace right as been exercised by that employee.

Yes, technically such an application can be made while an employee is still employed but most claims occur post termination.

So what kind of complaint can trigger this application?

For the purpose of lodging the adverse action application the employee’s solicitor will use any minor issue which the employee raised and turn it into ‘the complaint’. It could also be denying someone annual leave because you have other employees off at the same time.

Hunter Employee Relations has recently dealt with a number of trivial so called ‘complaints’ which have ended up in the Federal Court. Examples:

• The small employer mentioned above. The complaint was the pay error ‘inquiry’ which was rectified the same day. The solicitor dressed this up as the ‘complaint’ that caused the employee to be terminated.
• A new casual employee does not get their first week’s wages and raises this with the payroll office. Payroll investigates and finds that the employee has made an error in filling out their bank account number in the employment form, rectifies the account details and pays the employee immediately. The employee’s solicitor dresses this payroll inquiry up as ‘the complaint’ and lodges a General Protections claim several weeks later when the casual employee is let go for not doing their job.

What game are these solicitors playing?

The solicitors are forcing the employer into a financial settlement or they will take this matter into the Federal Court for prosecution.

If the employer doesn’t settle at the Fair Work Conference stage the additional pressure and stress of the initial Court processes often induces them to give in.

They are banking on the employer making a business decision based on ‘least cost’. This means the cost of a settlement package to the employee is less than the cost of defending themselves in Court proceedings. Given the high costs of engaging a lawyer this obviously drives up the settlement dollars they are asking for.

The only options the employer has is to either pay the settlement or get dragged into Court to prove their adverse decision occurred for legitimate reasons and not the alleged reason by the solicitor – being the payroll ‘complaint’ etc.

My view is that this legal ‘coercion’ is a form of extortion.

What their clients often don’t realise is that if a financial compensation settlement is negotiated the lion’s share may well go to that solicitor and they are left with the breadcrumbs.

What can employers do?

We’ll focus on ‘terminations’ here as the ‘adverse action’ as they are the most common and costly for employers.

There are a number of potential tactical/legal manoeuvres we take in such a situation which can up end their solicitor’s plans. However, this depends on the employer’s actions in the lead up to the termination (step 1 and 2 below). Without them ‘we are toast!’

Given that anything can be a ‘complaint’ and an employee exercises workplace rights continuously – its virtually impossible to prevent these from occurring. Therefore, you cannot stop this side of the equation.

However, employer’s need to be much more ‘structured’ and vigilant in how they manage their employee relations decisions – particularly around terminations.

Step 1 - the easy stuff first

• A comprehensive employment contract
• A well written code of conduct
• A small number of essential policies which outline expected behaviours

These documents are the foundation of your defence. Day to day, the Code of Conduct and Employment Contract, sit in the proverbial bottom draw and don’t seem important. However, when something goes wrong – they can become invaluable.

Step 2 – decisions which have a negative impact on employees

In a General Protections-Adverse Action case the employer must be able to show/prove (with evidence) why (and often how) they made a particular decision.

By proving that your decision was for legitimate reasons you are showing that your decision did not (even in part) relate to the employee making a ‘complaint’ or the exercising of a workplace right.

Quite frankly – this will be near impossible to prove where no documentation (a paper trail) exists.

If there is a particular employee performance or attitude issue that could result in a negative (adverse) action towards that employee it must be documented from as early as possible.

Once you head down the disciplinary (potential termination) path employers must get the steps right. In high risk matters an investigation process can be very useful.

And it gets worse…..compensation for 'non-economic loss'

In the next Employee Relations update I’ll give you an overview of ‘non-economic loss’. This has resulted in substantially larger ‘settlement’ claims and Court compensation payments for breach of the General Protections. Non-economic loss refers to the employee ‘suffering hurt, humiliation, distress etc’ as a result of your actions. The 25-year-old mentioned above has a Doctor’s certificate and is too distressed to seek work.

Employers requiring assistance to minimise their risk exposure (Step 1 and 2 above) or who find themselves with one these claims should contact Hunter Employee Relations.

Kind Regards
Michael Schmidt
M 0438 129 728
[email protected]
www.hunteremployeerelations.com.au

Industrial Relations - Employment Law - Workplace Performance

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