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Employment and Workplace Relations update: New developments July, 2012

Jul 9, 2012

New developments:

  • Increased High Income Threshold for Unfair Dismissals
  • New Case Law on Recovering Costs in General Protections Applications

Increased High Income Threshold for Unfair Dismissal

The unfair dismissal high income threshold rose to $123,300 from 1 July 2012. The high income threshold excludes employees from making an unfair dismissal claim if they earn more than the threshold, and are not covered by an industrial instrument such as a modern award or enterprise agreement.

However, the rules about what types of remuneration count towards the high income threshold are complex.  For example, compulsory superannuation contributions do not count towards the high income threshold.  As a result, advice should be obtained in determining if an employee is covered by unfair dismissal laws.

What are general protections claims?

Many employers would now be aware of a new cause of action contained in the Fair Work Act 2009 – the general protections or adverse action provisions.

These provisions provide that an employee who is the subject of ‘adverse action’ by their employer for certain prohibited reasons, such as the exercise of a ‘workplace right’, may make an application to Fair Work Australia (FWA).

These claims have caused concern for employers because, unlike unfair dismissal claims:

  • there is no cap on the amount of compensation that can be awarded;
  • there is no bar on claims being brought about in respect of terminations occurring during the initial 6 month probationary/qualifying period;
  • there is a 60 day time limit on applications, which is more lengthy than the 14 days applying to unfair dismissal claims; and
  • the high income threshold limit applying to unfair dismissals does not apply, which means that even senior executives can bring a claim.

The role of FWA in these applications is limited to conducting conciliation conferences, with determination of claims being left to the Federal Magistrates Court (FMC) or the Federal Court.

Risks of not attending conciliation

Commissioner Lewin, of FWA, recently held that an employer’s failure to attend conciliation may be grounds for an order that the employer pay the legal costs incurred by an employee in attending1.

Whilst Commissioner Lewin declined to make an order for costs against the employer in that case, the decision has opened the way for future decisions awarding costs against employers who, either strategically or simply to avoid costs, decide not to attend a general protections conciliation conference.

Commissioner Lewin specifically noted that, in certain circumstances, costs could be ordered against an employer on the ground that the failure to participate in a compulsory conference constituted a ‘vexatious response’ to an application.

Early action to settle can assist employers in recovering costs

Federal Magistrate O’Sullivan, of the FMC, recently awarded costs against an employee in a decision2 which shows the benefits of seeking to settle proceedings early.

In this case FM O’Sullivan dismissed the employee’s general protections application. Normally, each party would be required to pay its own costs in these types of proceedings as the bar set for recovering legal costs is quite high.

In this case, however, the employer made an application that the employee pay its legal costs on the grounds that the employee had refused an early offer to settle the matter.

The offer made by the employer was that each party pay their own legal costs if the employee withdrew the application.

The employee did not respond to the offer and the matter required a four day hearing.

Ultimately, FM O’Sullivan found that the employer had incurred legal costs as a result of the employee’s unreasonable action in requiring all of the employer’s witnesses to attend court and give evidence in relation to matters that were not relevant to the main issue in dispute.

The employee was ordered to pay some of the legal costs of the employer, subject to the parties’ submissions on how the amount should be calculated.

What do these decisions mean for employers?

Both decisions demonstrate the importance of responding to general protections and getting early advice as to the strength of the employee’s case.

Simply not responding to an application may expose an employer to an order or costs from FWA.

Responding early, and putting your position plainly to an employee, including, if necessary, any offer to settle the application at Court, may provide the grounds to partially recover the legal costs involved in responding to an application.

Getting professional advice as soon as you receive an application means that you are in the best position to minimise your exposure to legal costs, and maximise your chances of recovering some of your legal costs when faced with vexatious or baseless claims.

More information

For more information regarding general protections claims, 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.

2 Cugura v Frankston City Council (No.2) [2012] FMCA 530