General Protections

Are Business Decisions No Longer those of the Employer? – The Potency of General Protections

When providing advice to employers regarding the disciplinary or performance management decisions they wish to make, we are often greeted with incredulity when we inform employers they need to be very careful how they conduct themselves, or they may fall foul of the law. This is especially true when employers have taken disciplinary or other adverse action against employees in circumstances where the employees do not have any unfair dismissal rights. It is not infrequent for us to have the comment: “But they cannot bring an unfair dismissal claim, so can’t I just terminate and give them notice?” Although, the answer to the question may be that as long as the terms of the contract are met, termination or other disciplinary conduct can proceed, this is not always the case, and failure to take into account the General Protection Provisions of the Fair Work Act 2009 (Cth) (“Act”), can mean significant adverse financial consequences.

Under the general protections provisions in Part 3-1 of the Act an employee who may otherwise not be entitled to commence a claim for unfair dismissal, may nevertheless be protected from dismissal or other forms of adverse action that they have suffered during employment. Adverse action is a very broad concept and can include for example discrimination, a disciplinary warning, removal or change of duties or demotion. In fact any action by the employer where the employee is able to successfully establish that they were prejudiced in their employment would constitute adverse action. However, in order to have a claim, the employee would need to demonstrate that the adverse action was taken because they exercised, or proposed to exercise, a workplace right, or to prevent them from exercising a workplace right.

Notably, the exercise of a workplace right need not be the primary reason for adverse action being taken against an employee, but only needs to be one of the reasons. In addition, where an employee can demonstrate an arguable case of adverse action based on the exercise of a workplace right, the onus shifts to the employer to prove to the Court that any consequential decision that may be have resulted in the employee being affected adversely, was not part of the reason for the action.

Adverse action can raise a number of challenges for employers and has increased the impetus for robust, well documented and sound decision-making processes that can withstand legal challenge. In order to better understand the framework of the general protections jurisdiction, one needs to examine the meaning of a workplace right, which encompasses a range of matters including among other things:

  • union participation rights;
  • rights to flexible working arrangements;
  • rights, benefits or responsibilities under a workplace law or workplace instrument or order made by an industrial body;
  • rights arising under the Act or other workplace instrument such as an Enterprise Agreement;
  • rights to initiate proceedings under the Act or participate in a process under a workplace law; or
  • the right to make a complaint or inquiry in relation to employment.

If an employee can show that as a result of exercising a workplace right their employer took some kind of adverse action against them, the Act provides generous remedies and other forms of relief including the potential to obtain penalties against the employer.

Although many management decisions may well adversely affect an employee, such action will not necessarily be unlawful if it is done for proper business reasons and not in response to the exercise by an employee of a workplace right. However, unlike the unfair dismissal jurisdiction, a general protections claim may be brought by an employee (or prospective employee) during the employment including where adverse action has been threatened, or after the employment has ended, provided it is commenced within the strict 21-day time limitation. In addition, any employee is able to bring such a claim. It is not limited to certain classes of employee as is the unfair dismissal regime.

In a landmark decision by the Federal Circuit Court delivered on 31 March 2016, an employee was awarded $415,000 in compensation after successfully arguing that his employer engaged in adverse action when it changed the status of his employment from full-time to part-time because of his workers’ compensation claim. In Cai v Tiy Loy & Co Pty Ltd [2016] FCCA 675 (“Cai”), the Court further imposed penalties against the employer in the amount of $50,000.

The potency of the general protections provisions is significantly illustrated by the decision in Cai.  Cai was  a tea attendant, who after almost 20 years of service, argued that he was forced to resign from his employment when his employer arbitrarily reduced his hours and changed his employment status to part-time as a consequence of him exercising the right to make a workers’ compensation claim. The Court found that the company had indeed prejudiced the employee by altering his position. It did so to reduce the extra cost incurred under the injury management plan required by the workers’ compensation scheme for full-time workers.

Given the employee’s personal circumstances, financial loss and inability to secure alternative employment, a significant compensatory order was made in the employee’s favour together with the imposition of civil penalties. In the decision, the Court noted that penalty orders were imposed to send a signal to the community that unilateral and disadvantageous alteration of an employee’s position, where the employee exercises a workplace right, will not be tolerated by the judicial system. Although in Cai, the employer had argued that it was unaware that it was unlawful to alter the employee’s employment status, and while Justice Manousaridis accepted this evidence, his Honour observed that the penalty was appropriate regardless of the employer’s ignorance of the law.

Given the very broad definition of workplace right to include an employee’s right to “make a complaint or inquiry in relation to his or her employment”, there is a very real risk that an employee can raise any grievance or concern that may loosely or indirectly be connected to their employment, and rely on that as the exercise of a workplace right to “make a complaint or inquiry”. However, this should not put employers off from taking appropriate disciplinary action or making managerial decisions that affect an employee’s interests, provided the decision is not being taken because of the exercise of a workplace right and this can be demonstrated. The critical issue, therefore, in defending management decisions is to ensure that a rigorous, clear and well planned decision-making process is undertaken and documented.

Some key learnings for employers arising from the legal authorities that have been decided under the General Protection provisions of the Act suggest that employers should consider the following issues:

  • what paper trail exists around the decision-making process by the relevant decision makers;
  • is the decision appropriate for the issue at hand and unrelated to any possible exercise of the employee of a workplace right;
  • have complaints or issues been properly investigated;
  • who within the business is involved in the decision-making process; and
  • who makes the final decision and how is it communicated to the employee.

Given the onerous evidentiary burden on employers to prove that the decision maker’s state of mind at the time the decision was made was not impacted by any workplace right that an employee had exercised, or proposed to exercise, it follows that the ability to successfully defend a claim will be greatly assisted if thorough records and documents around the decision-making processes and reasons for it is maintained including file notes, board minutes and other written correspondence. We also recommend that managers in positions of responsibility with the management authority to make decisions that may adversely affect employees, be provided performance management training to ensure they understand what is meant by a “workplace right” and how their decisions and conduct may give rise to legal claims, if they act in a manner inconsistent with the protections provided by the Act.

If you feel that you are being set up for a general protections claim, or require more information about your rights under the Act, please do not hesitate to contact our office for advice or assistance.

This alert is not intended to constitute, and should not be treated as, legal advice.

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