Adverse Action – the boundaries may be expanding

Adverse action as legislated in the Fair Work Act has proved to be a troublesome provision for employers, and may have in some cases “burst its own banks” in terms of protecting the rights originally intended by the policy makers who created it.

Adverse action as public policy instrument is designed to prevent an employer from making decisions that negatively impact upon an employee for unjust reasons.  For example, it would be unfair of an employer to put an employee on an unfavourable work roster because that employee had a partner they disapproved of, and it would be wrong to demote someone because of their country of origin.

Adverse action has two elements.  An employer may not:

• take adverse action against an employee;
• because the employee has exercised a workplace right.

Once adverse action has been alleged, the burden of proof falls on the employer to show that they have not acted unlawfully.

The boundaries of adverse action have arguably expanded, and the recent case of CFMEU and Scott v Clermont Coal is a helpful illustration of that expansion.

CFMEU and Scott v Clermont Coal¹ (Scott v Clermont)

In this case, a coal mining company, needed to make approximately 100 members of its workforce redundant.  Conscious of the need for the redundancy to be implemented in a fair and impartial manner, the employer instituted a three step process to select which workers would be made redundant.

The first step was for all employees to be assessed and scored by members of the company’s operations management team against certain criteria.  Once this task had been completed, the second stage was to rank employees according to the scores they were given during the assessment stage.  Finally, the third stage was for the management team, including the General Manager, to review the results to ensure the company maintained an appropriate mix of skills going forward.

One of the workers selected for redundancy by this process was a Mr Scott. Mr Scott also happened to be the President of the local CFMEU branch and an active union organiser.  During the course of Mr Scott’s employment, he had clashed with members of the operations management team while advocating for employees who were also members of the CFMEU.

Mr Scott therefore alleged that adverse action (being dismissed) had been taken against him because he had exercised a workplace right (represented CFMEU members).

The Court found that because one of the assessors had had considerable negative interactions with and views of Mr Scott, the whole process was invalid.  The finding was made despite the fact that there were many assessors involved in the process and that the particular assessor who had problems with Mr Scott may have had other reasons for assessing him in the manner he did.  Hence, one small part of the process was found to have tainted the whole.

The fact that the burden of proof falls on the employer once adverse action is alleged meant that Clermont Coal had to prove to the court, on the balance of probabilities, that one particular assessor’s reasoning processes were not affected by previous dealings with Mr Scott. This is no easy task, even if it is true.

Whilst the Court has determined that Mr Scott was terminated in contravention of the Fair Work Act’s adverse action provisions, the Court has not published any orders to date about any particular relief arising out of the adverse action.

Lavan Legal Comment

Employers may well ask themselves how it is possible to dismiss workers or implement redundancies fairly and lawfully without opening the business up to a potential claim from a disgruntled former employee.

Hence, an employer may do their best to follow all necessary processes and make sure all entitlements and outstanding debts are paid - and yet a clever litigation lawyer can still construct an argument that will drag an employer into a dispute with allegations of adverse action.

It may also not be possible for an employer, especially a small or medium enterprise, to have ideal processes - especially in cases of redundancies.  For example, commercial realities may preclude a business from hiring an external panel or advisor.

Employers should ensure that their processes are transparent, that conflicts of interest are avoided and that detailed records are kept in case a claim is made.