Made to pay employer’s general protections legal costs
When making a general protections or unfair dismissal claim via the Fair Work Commission, it is important to ensure that you are doing it for the right reasons. Because if you unreasonably pursue a claim, you may be forced to pay your employer’s legal costs. They are rarely awarded but there is still exposure. You should not lodge a claim for revenge, payback, or to see the employer incur cost. You cannot go off on a frolic in the Fair Work Commission and in turn the Federal court system with immunity. This article is to hopefully build some self awarness of the issue.
This is what happened to an employee in a recent general protections case. The employee had declined six settlement offers, which reached as high as $40,000, claiming they were akin to “hush money.” In this article, we take a look at the events of this case. But first, we outline the circumstances in which the Fair Work Commission can force an employee to pay their employer’s legal costs.
The Fair Work Commission’s rules around ordering costs
The Fair Work Act 2009 specifies the criteria and procedures for ordering costs in relation to general protections and unfair dismissal claims. These sections delineate when the Fair Work Commission may exercise its discretion to order costs. The Fair Work Commission may direct one party to bear the costs incurred by the other party if it is satisfied with either of the following:
1. That the unfair dismissal or general protections claim or response filed by the party was made vexatiously or without reasonable cause.
2. That it should have been reasonably apparent that the party’s claim or response did not have a reasonable prospect of success.
The Fair Work Commission can order costs against the applicant or respondent involved in an unfair dismissal or general protections dispute if one party has caused the other to incur costs. That is, due to the first party’s unreasonable act or omission related to the conduct or continuation of the matter.
Vexatiously: Understanding the term
The term “vexatiously” signifies that the primary objective of the general protections or unfair dismissal claim or response is to harass, annoy or embarrass the opposing party. Vexatiousness can also be established when there is an ulterior motive behind the action. That is, a motive that is beyond resolving the issues raised in the claim or response.
The determination of whether a claim was made vexatiously hinges on the applicant’s motive when submitting their general protections or unfair dismissal claim. It serves as an alternative ground to the assertion that the claim was made “without reasonable cause.” And it applies even when a reasonable basis exists for the claim.
Without reasonable cause: The Test
The Fair Work Commission has a test to determine if an unfair dismissal or general protections claim or response is “without reasonable cause.” The claim or response must be so fundamentally untenable that it cannot possibly succeed. In simpler terms, it is manifestly groundless, manifestly faulty to the point of being indefensible. Or presents a case that Fair Work Commission is convinced cannot succeed under any circumstances. In essence, without reasonable cause implies that a claim or response is made devoid of any genuine reason, foundation or purpose.
No reasonable prospect of success: An objective test
The Fair Work Commission applies an objective test to decide if it was apparent that a general protections claim or response had no reasonable prospect of success. Such a determination must only be made if the claim or response is manifestly untenable or groundless.
An objective test considers the perspective of a reasonable person. That is, whether it would have been apparent to such a person that the claim or response lacked a reasonable prospect of success. This objective test aims to avoid subjective bias that could stem from a person’s vested interest in the matter.
Unreasonable act or omission
An unreasonable act or omission can encompass various actions. This includes failing to discontinue a general protections or unfair dismissal claim or refusing to a settlement offered. What constitutes “unreasonable” behavior hinges on the specific circumstances of the case. Importantly, costs are intended to be ordered only when there is clear and compelling evidence of unreasonable conduct.
Employee’s unreasonable settlement refusals leads to costly outcome
A general protections that serves as a cautionary reminder of the dangers of unreasonably pursing legal action is Virag v Eastern Victoria GP Training Ltd [2023]. The case saw an employee held responsible for indemnity costs incurred by her former employer to defend against the general protections claim. This decision came after the worker declined six settlement offers, which reached as high as $40,000, claiming they were akin to “hush money.”
The worker, Judith Virag, had been employed by Eastern Victoria GP Training as a part-time Medical Educator between January 2016 and December 2018. In July 2018, she made a complaint about several incidents during her annual performance review. Ms Virag requested that these be escalated to the CEO.
A workplace investigation of the incidents was undertaken and a report was published noting its outcome and recommendations. However, Ms Virag was not satisfied with this. So in October 2018, she escalated her grievances with the board of Eastern Victoria GP Training. Then in November, she filed a stop bullying order against a colleague with the Fair Work Commission.
A few days later, Ms Virag decided to send an all-staff email detailing her complaint about her team and her unsatisfaction with the CEO’s handing of it. She was subsequently told by Eastern Victoria GP Training that her employment will terminate at the end of her contract on 31 December 2018.
Employee makes general protections claim with Fair Work Commission
Via her legal representation, Mr Virag lodged a general protections claim with the Fair Work Commission, with the goal of seeking reinstatement. This was despite being advised by her lawyers that the court was “unlikely” to order reinstatement. The Federal Circuit and Family Court ruled that a worker had initiated the legal proceedings “vexatiously” and without a reasonable cause. Consequently, she ordered the worker to cover Eastern Victoria GP Training Ltd’s costs on an indemnity basis.
The court regarded Ms Virag’s legals team’s warning that her general protections claim was unlikely to succeed as a clear “red flag.” And that it should have caused her to “pause and reflect” on taking this course of action. Prior to the first court hearing, Ms Virag’s lawyers warned her that she “ought not to proceed to trial at the risk of a costs order being made against her.”
“Hush money:” Employee rejects large general protections payouts
It was revealed in court that Ms Virag turned down several settlement offers from Eastern Victoria GP Training. The court deemed these proposals to be “sensible” and Ms Virag’s rejection of them as “dismissive.” She was offered a general protections settlement of $20,000 four times, then one for $30,000 and another for $40,000. Ms Virag was warned once again that if she turned down these offers, she could face a costs order.
But Ms Virag remained defiant, branding these payouts as simply “hush money.” She viewed the settlements as an attempt by Eastern Victoria GP Training to “avoid accountability.” And she stressed that she was not taking legal action against the company for “financial gain.” Ms Virag requested that the company refrain from making any further settlement proposals.
Employee wanted to teach employer a lesson with general protections claim
Ms Virag told the court that she was pursuing her general protections case because she wanted “legitimate redress” of Eastern Victoria GP Training’s actions. She wanted the company to take “acceptance and accountability.” And she wanted there to be “appropriate denunciation” of its actions.
Eastern Victoria GP Training told the court that Ms Virag wanted to embarrass the company by escalating her general protections claim to court. The company argued that she wanted to do this instead of pursuing a remedy that was available to her under the Fair Work Act 2009.
Court says general protections claim was without reason
The court found that besides reinstatement, Ms Virag sought “no identifiable remedy or outcome” with her general protections claim. And that she went ahead with the claim despite being told that it was “highly unlikely” she would be reinstated. The court found that she had “no proper reason” to pursue the general protections claim.
The court stated that it was “highly unreasonable” for Ms Virag to pursue the claim. Particularly after being advised that Eastern Victoria GP Training would “incur significant costs as a result.” The court found that she had a “willful disregard” of the advice from her lawyers. And that her “unreasonable” actions caused Eastern Victoria GP Training to incur costs. The court therefore ordered Ms Virag to pay indemnity costs for the proceedings, which included the costs application.
Worker forced to pay employer’s $35,000 for general protections legal costs
Another general protections case where an employee was forced to pay their employer’s legal costs is Adamczak v Alsco Pty Ltd (No. 4) [2019]. Like the previous case, the employee’s refusal to accept reasonable settlement offers resulted in significant financial consequences. This general protections case serves as a cautionary reminder of the potential costs associated with rejecting fair settlement offers.
The case involved George Adamczak, who brought a general protections claim against Alsco and four of its employees. During the course of the legal proceedings, Alsco made several settlement offers to Mr Adamczak. These offers were made with the intention of resolving the matter amicably and avoiding further legal costs. Notably, the offers were carefully considered and adjusted in response to the circumstances of the case.
Employee rejects $80,000 general protections settlement
On 12 August 2016, Alsco offered to settle the general protections proceedings for $60,000, inclusive of costs, while providing a reasonable basis for their position. Subsequently, they increased the offer to $80,000 in September 2016. However, Mr Adamczak rejected the offers and responded with several counter offers. He demanded a settlement of $185,000 and later $179,500. He also made veiled threats regarding potential harm to Alsco if certain issues were exposed publicly.
Alsco’s solicitors, in response, offered to settle for $70,000. The company explained that the reduced offer was due to further costs incurred because of Mr Adamczak’s pursuit of the matter.
Court considers employers whether Employee should pay costs
The Federal Circuit Court subsequently dismissed Mr Adamczak’s general protections claim. And Alsco sought an order for costs. The court stated that the awarding of costs only happens in rare cases. And therefore its discretion to award costs had to be used carefully. The court considered whether Mr Adamczak’s refusal to accept the settlement offers was unreasonable. To make this decision, it considered several factors, including:
1. The quantum of money: The amount offered in settlement was carefully adjusted based on the circumstances. The offers made by Alsco were reasonable and proportionate to the claims.
2. Knowledge of the offeree: Mr Adamczak had access to relevant evidence and information at the time of the settlement offers. His response should have been based on a thorough understanding of the case.
3. Timing: The timing of the offers was crucial. They were made after the strengths and weaknesses of both parties’ cases had been presented. Mr Adamczak should have considered the offers in light of the available evidence.
Court finds Employee acted unreasonably
The court ultimately found that Mr Adamczak had acted unreasonably by rejecting the reasonable general protections settlement offers made by Alsco. It noted that Mr Adamczak’s response, which included veiled threats, amounted to an “inept attempt” or even “an attempt at extortion.” As a result, the court ordered Mr Adamczak to pay $35,000 in costs to Alsco.
Conclusion to: Forced To Pay Cost by the Court
Have your employment or employee rights been violated?
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