This is the second post in a series on ‘Managing Performance in the Age of Adverse Action Claims’, based on a presentation and paper delivered by Michael Cochrane (Special Counsel) on the Television Education Network (TEN) on 13 November 2019.
In our previous post, we provided a brief recap on our adverse action laws (a decade after their enactment in 2009). In this second post of the series, we will focus on why and how employees can use these provisions during a legitimate performance management process, and the importance of decision makers.
There are a number of reasons why the general protections provisions are often used by employees subject to performance management or dismissal. Unlike unfair dismissal, an adverse action application can be made at any point during the employment lifecycle, not only once an employee has been dismissed. There are also less jurisdictional hurdles when compared to the unfair dismissal laws. For this reason, adverse action claims are sometimes referred to as ‘back door unfair dismissal’ claims because they can be used by employees that would not otherwise have jurisdiction to lodge an unfair dismissal claim with the FWC, such as employees with less than 6 months service or employees who earn over the high income threshold.
Further, there is no cap on the amount of compensation a Court may award to a successful employee in an adverse action case and damages for hurt and humiliation may also be awarded. As stated above, a ‘reverse onus of proof’ applies which means that the employer bears the onus of disproving (rather than the employee having to prove) that the adverse action was taken for the prohibited reason/s alleged. Another potential area of risk that employers should keep in mind is that a Court has the ability to impose penalties of up to $63,000 per contravention for employers and $12,600 for individuals, which can extend to managers and/or individual decision makers ‘involved’ in a contravention of these provisions. All of these reasons make adverse action claims an attractive option for employees facing performance management or dismissal by their employer.
Importance of decision makers
If an employee is likely to be dismissed, injured in their employment or have their position altered to their prejudice as a result of the performance management process, the reason/s for the decision maker in taking certain actions will be all important in proving that the adverse action was not taken for a prohibited reason. In terms of decision makers, the following key considerations should be taken in account by employers during the performance management process:
- Importance of the decision makers: there needs to be at least one clear decision maker – the person who has the ultimate say on the decision being made. Multiple decision makers can potentially impact the clarity of the reason and from a practical perspective means multiple people will need to give evidence in any adverse action claim. However, sometimes multiple decision makers are simply unavoidable.
- Clear, non-prohibited reason: the decision maker/s must be able to clearly articulate non-prohibited reasons for their decision (and they must be the real reason/s). Decision maker/s must think clearly about why the decision is actually being made. In a performance management context, this should be the employee’s unsatisfactory performance.
- No guilty mind = no offence: evidence as to the state of mind of the decision maker/s will be critical. If the decision maker/s are clear in their own mind that the reason for their decision was not a prohibited reason, then their evidence will be accepted (subject to issues of credibility).
- Line manager and stakeholder awareness: key managers and stakeholders need to understand the basis upon which the decision has been made and to be clear on that reason and the authority of the decision makers.
- Control of the process and the importance of ‘good paper’: as the evidence of the decision makers’ reason/s will be critical to the defence of any adverse claim, it is important that a clear ‘paper trail’ of the decision exists. Careless record keeping at the beginning of the process (or throughout) can detract from the credibility of the decision maker/s.
Dealing with the opportunistic ‘complaint or inquiry’
A common scenario is when an employee lodges a workplace complaint or grievance during a legitimate performance management process. This can, for example, be in the form of a bullying complaint against a direct manager, or even a complaint regarding the performance management process itself. While many workplace complaints made by employees can be genuine and reasonable, sometimes they can merely be an attempt by an opportunistic employee to circumvent a legitimate performance management process. In either case, a potential outcome is a general protections application being lodged with the FWC alleging that adverse action (either during employment or involving dismissal) has been taken by the employer because of the employee’s ability to make ‘make a complaint or inquiry’ in relation to their employment.
There has been some opposing approaches as to what constitutes ‘the ability to make’ a complaint or inquiry in relation to employment over the years, but the Full Court of the Federal Court in Cigarette & Gift Warehouse Pty Ltd v Whelan  FCAFC 16 now appears to have settled this issue. In that case, the Full Court found that a complaint that an employee ‘is able to make’ in relation to their employment is not at large, but must be founded on a source of entitlement, whether instrumental or otherwise. In other words, it is not sufficient that a complaint merely be made by an employee to their employer in the course of their employment. this was recently followed by Steward J in The Environmental Group Ltd v Bowd  FCA 951 at . Steward J expressed the further view (at ) that the grant of the power to make a complaint or inquiry must be exercised bona fide, and for the purpose for which that power was conferred or granted. To this end, it now appears to be clear that if the employee’s complaint or inquiry is not grounded in any relevant ‘entitlement’ or ‘right’, it will not be a complaint or inquiry within the meaning of the FW Act.
Notwithstanding the decisions of Cigarette & Gift Warehouse Pty Ltd v Whelan and The Environmental Group Ltd v Bowd, employers still of course need to be vigilant in their complaint and inquiry handling processes to avoid being tripped up by an opportunistic employee (who may already be receiving legal advice in the background to set up an employer for an adverse action claim), particularly in a performance management context. Importantly, employers should have cogent internal processes in place for dealing with employment-related complaints and inquiries. Employers should also avoid leaving an employment-related complaint and inquiry unanswered or unresolved at the time of making any decisions during a legitimate performance management process as this could give the appearance of something untoward (even if that is not the case at all). By addressing or responding to an employment-related complaint and inquiry at the time they are made (preferably in accordance with an established policy), the employer will be better placed to focus on the real reasons for making any decisions during the performance management process. That is (presumably), because of the employee’s unsatisfactory or poor performance. To this end, it is important that the decision-makers can provide clear, unequivocal evidence for the reason/s underlying any subsequent performance-related decisions (supported by a robust ‘paper trail’), including termination of employment.
In the next post, we will focus on how to reduce the risk of an adverse action claim arising when an employee takes stress leave whilst under performance management. If you require further information on these issues or have any questions, please contact Michael Cochrane at firstname.lastname@example.org or on (03) 9491 8437.
 For example, (unlike unfair dismissals) there is no minimum employment period (being a minimum of 6 months, or 12 months if employed by a ‘small business employer’) or a high-income threshold (currently $148,700 per annum adjusted annually in July).
 Currently $148,700 per annum adjusted annually in July.
 In contrast to unfair dismissal claims which have a compensation cap of 26 weeks remuneration, or half the amount of the high income threshold immediately before the dismissal (whichever is higher): FW Act, s 392(5) and s 392(6)(a).
 Cigarette & Gift Warehouse Pty Ltd v Whelan  FCAFC 16 at  (Greenwood, Logan and Derrington JJ). There, the Full Court approved Collier J’s adoption (at ) of Dodds-Streeton J’s earlier approach in Shea v TRUenergy Services Pty Ltd (No 6)  FCA 271: see Whelan v Cigarette & Gift Warehouse Pty Ltd (2017)  FCA 1534.