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Employment and Workplace Relations update: Discrimination / adverse action

Oct 22, 2014

There have been a couple of recent decisions that will be of interest to employers dealing with situations where they fear an adverse action or discrimination claims.

Adverse action

In a decision which should give some comfort to employers, the High Court has again considered the adverse action provisions of the Fair Work Act 2009 (FW Act) and found in favour of the employer: Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd [2014] HCA 41 (16 October 2014).

The adverse action provisions of the FW Act prevent adverse actions (such as terminating an employee) being carried out for certain prohibited reasons, such as because an employee is involved in ‘industrial activity’ such as protected industrial action.

The adverse action provisions of the FW Act impose a reverse onus of proof on employers. If an employee can show that they have been subject to adverse action, such as termination of their employment, the onus of proof shifts to the employer to prove the adverse action was not taken because of a prohibited reason. Establishing the real reasons for termination can sometimes be complicated when the surrounding circumstances suggest a prohibited reason might be behind the adverse action.

In this case, the employee was a mine worker who was terminated after participating in a union rally. The employee stood beside the entrance road to the mine during protected strike action holding a sign saying “No principles, SCABS, No guts”, which was a criticism of other workers who weren’t participating in the industrial action.

The mine’s general manager was the decision maker in respect to the dismissal. He gave evidence that the termination had nothing to do with the fact the employee was involved in protected industrial action, but that the sign he held up while doing so was “inappropriate, offensive, humiliating, harassing, intimidating, and flagrantly in violation of BHP Coal’s workplace conduct policy”. The employee and his union, on the other hand, argued the employee had been dismissed for engaging in industrial activity.

The case made its way through the court system, right up to the High Court. First, a single judge of the Federal Court found in favour of the employee. The Full Court of the Federal Court overturned the decision and found in favour of the employer. The employee and union then appealed to the High Court, who found in favour of the employer.

The High Court decision was split 3:2. Essentially, the majority found that the protected industrial activity was not the reason for the adverse action. The mine manager’s evidence was essential in assessing the basis for the mine manager’s decision to terminate. While a court is not obliged to accept such evidence without question, in this case the primary judge had accepted that the reasons given by the mine manager were the true reasons for the termination.

On the other hand, the minority of judges of the High Court found that the employee’s conduct in holding up the sign could not be separated from the circumstances in which it was used, being the undertaking of lawful industrial action.

What does this mean for employers?

The lessons from this case are:

  • The decision-maker at the employer needs to be very clear about what reasons are motivating any adverse action against an employee.
  • It is of assistance if performance or misconduct issues are carefully documented, well before any decision is made to terminate.
  • There is not necessarily a need to hold back on disciplining an employee for performance or misconduct issues, just because the surrounding circumstances involve facts which could lead to an adverse action claim (e.g. the employee is a union delegate or the employee has taken recent sick leave), although you should always obtain legal advice first.
  • This is still a contentious area, as evidenced by the different approaches taken by the various judges who considered this case.

Damages in discrimination cases

In another case, the Federal Court earlier this year indicated a change in the court’s approach to assessing damages in harassment cases.

In the decision of Richardson v Oracle Corporation Australia Pty Ltd [2014] FCAFC 82 (Richardson), a Full Court of the Federal Court, on appeal, increased the quantum of damages awarded to a former employee, Ms Richardson, from $18,000 to $130,000.

Ms Richardson had been successful in her initial litigation against Oracle and one of her colleagues. It was accepted by the original Judge that she was the victim of numerous incidents of unlawful sexual harassment. For example, she claimed her male colleague stated “you and I fight so much… I think we must have been married in our last life” followed by “….how do you think our marriage was? I bet the sex was hot.”

However at first instance, Ms Richardson was only awarded $18,000 for pain, suffering and loss of enjoyment of life. On appeal, it was found that this was inadequate and that: “there is reason to believe that community standards now accord a higher value to compensation for pain and suffering and loss of enjoyment of life than before.”

It was held that Ms Richardson should be awarded the sum of $100,000 in general damages. In addition she was also awarded a further $30,000 for economic loss.

What does this mean for employers?

Based on previous decisions, employers had been entitled to assume that their financial exposure in discrimination cases was reasonably low. Prior to this most recent case. it was reasonable to expect that awards for pain, suffering and loss of enjoyment of life in discrimination cases would be somewhere in the range of $10,000 to $20,000.

This is no longer the case. Vastly more significant awards of compensation are likely to follow this decision.

Many discrimination cases are settled at the mediation stage with relatively small payments, on the grounds that historically damages awarded by the court have been relatively low compared to the costs of litigation. It appears likely that this decision will provide an incentive for genuinely aggrieved parties to litigate matters, rather than settle early.

The best protections against such claims are to:

  • Deal with any issues that arise as early as possible, including conducting thorough investigations where warranted and undertaking appropriate disciplinary action against perpetrators;
  • Ensure that you have robust policies and procedures in place to deal with bullying, harassment and discrimination; and
  • Train employees about your policies and what is acceptable in the workplace.

We can assist you by advising about claims, training your employees and drafting policies for your workplace.

More information

For more information, please contact a member of our Employment and Workplace Relations team on (03) 8600 8888.

Note: This update is a guide only and is not intended to constitute legal advice.