High Court narrows adverse action - but still a risk

For employers, the High Court decision in Bendigo Regional Institute of TAFE v Barclay [2012] HCA 32 is a positive development. By overturning the objective test endorsed by the Full Federal Court, the High Court has adopted a common sense approach. The High Court decision opens the way for employers to successfully defend claims by calling evidence that the employer acted for a substantial and operative reason, other than a prohibited reason. Nevertheless, general protections claims remain an area of significant risk for employers. The following article provides more information about the High Court decision.

Summary of Bendigo Regional Institute of TAFE v Barclay [2012] HCA 32

On 7 September 2012 in its decision in Bendigo Regional Institute of TAFE v Barclay [2012] HCA 32 the High Court of Australia overturned the decision of the Full Court of the Federal Court.

The case concerned an adverse action by the employer against its employee, who was also a union delegate. The employee was suspended and issued with a show cause letter. It was alleged that the employee had sent an email to other employees advising of allegations of misconduct by management, before having reported any such alleged misconduct to the employer.

The employee argued that the decision-maker at TAFE had taken the adverse action against the employee because of his industrial activities or association in breach of section 346 of the Fair Work Act 2009 (Cth) (FW Act).

The Full Federal Court found for the employee. The majority held that, in adverse action cases, the "real reason" for the behaviour in issue "may be conscious or unconscious. Where unconscious or not appreciated or understood, adverse action will not be excused simply because its perpetrator held a benevolent intent". This test meant that a person could breach adverse action provisions even if they honestly believed they were not acting for a prohibited reason.

The High Court decision

The High Court rejected the Full Federal Court's reasoning and held that the evidence of the decision-maker, which was accepted at trial and was not challenged by the Full Federal Court, established that the adverse action taken against Mr Barclay had not been for a prohibited reason.

The task of the court is to determine, on the balance of probabilities, why the employer took adverse action against the employee, and to ask whether it was for a prohibited reason and whether such reason was "a substantial and operative reason".

In separate judgments, the High Court justices held that the Full Federal Court had taken an erroneous approach to this task. The High Court held:

• there is no legitimacy in the search for "unconscious elements" in reasoning employed by the decision-maker;
• the direct evidence of a decision-maker's state of mind, intent or purpose, which is accepted as reliable, is capable of discharging the burden upon an employer;
• it is appropriate for a decision-maker to give positive evidence comparing the position of the employee affected by the adverse action with that of an employee who has no union involvement; and
• it is erroneous to treat an employee's union position and activities as inextricably associated with the adverse action.

Interestingly, Justice Heydon stated that a search for "unconscious" reasons behind the decision-maker's actions will impose an impossible burden on employers accused of contravening the general protections provisions of the FW Act. Justice Heydon noted: "How could an employer ever prove that there was no unconscious reason of a prohibited kind? An employer's inquiries of the relevant employees would provoke, at best, nothing but hilarity."

Implications

The High Court decision is important because it confirms in relation to adverse action claims that:

• the inquiry into "unconscious" reasons for an adverse action is unnecessary;
• an employer can successfully defend an adverse action claim by giving reliable evidence that the employer acted for a substantial and operative reason, other than a reason prohibited under the FW Act; and
• union membership, the conduct of industrial activities in the workplace as an officer of a union, or the exercise of a workplace right, without more, does not confer immunity for an adverse action on an employee.

The general protections provisions remain a popular avenue for claims against employers because of the reverse onus of proof, the availability of a range of remedies, and the expansive nature of the protection available to employees. They are often joined with other claims, such as breach of contract and misleading and deceptive conduct claims, as a means of redress for employees and executives. 

As the number of adverse action claims received by Fair Work Australia continues to grow, employers should ensure, as far as practicable, that they comply with the general protections provisions of the FW Act.