By Robby Magyar

Newton’s third law states that for every action there is an equal and opposite reaction. And while this usually applies to physics, the same principle can be applied to situations of inaction or action when it comes to general protections. So, what is adverse action?

A recent decision of the Federal Circuit and Family Court (FCFC) suggests inaction on the part of an employer may amount to adverse action for the purposes of the general protections provisions of the Fair Work Act 2009 (Cth) (FW Act).

In this article, I explore adverse action, how it’s defined under the FW Act and what a recent decision made by the FCFC means for employers going forward.

Adverse action under the FW Act

The FW Act prohibits a person (including an employer) from taking ‘adverse action’ against another person (including an employee) because the other person:

  • has a protected characteristic (e.g. race, gender, sexuality, age, disability, pregnancy etc.).
  • has exercised, or proposes to exercise (or not) a workplace right (e.g. making a complaint about their employment, taking personal leave, joining a union, raising a workplace health and safety concern).

Adverse action, in respect of action an employer takes against an employee, includes:

  • Injuring the employee in their employment (depriving them of a benefit of employment, including demotions or stand downs).
  • Altering the position of the employee to the employee’s prejudice (any adverse impacts including issuing a warning or altering their roster).
  • Discriminating between the employee and other employees.

Where adverse action is taken against an employee, the FW Act presumes it was taken for unlawful reasons, requiring the employer to rebut this presumption and bear the burden of proof. Meaning the employer must demonstrate that the adverse action wasn’t taken for an unlawful reason.

If it’s found that the adverse action was taken unlawfully against either a prospective or current employee, it can result in considerable compensation payouts as the level of damages available is uncapped.

Farac v Pendal Group Limited [2021] FedCFamC2G 25

Peter Farac made an adverse action claim against his employer, Pendal Group, based on his expected income being slashed by $250,000 and being threatened with dismissal after lodging a complaint of bullying that wasn’t investigated by the company.

Farac sought to rely on the general protections provisions of the FW Act in claiming the failure of Pendal to investigate his bullying complaint ultimately amounted to injuring him in his employment because he exercised a workplace right to raise a complaint about his employment. One of the employer’s arguments was that it was impossible to undertake inaction, or in other words, adverse action “did not comprehend inaction.”

On this issue, Judge Cameron found that although the “sense of ss.340(1) and 340(2) is one of a positive step having been taken, there can be circumstances where inaction does, for instance, injure an employee in his or her employment.” This is because the focus is on the consequence that the employee suffers, not the action that brought that consequence about. Even if the employer doesn’t do anything but maintain the existing status quo, adverse action can still arise from this inaction.

However, the Court agreed with the employer that the employee had poorly pled his case in respect of how he had suffered an injury in his employment as a result of the complaint not being investigated. It emphasised that where an employee intends to trigger the reverse burden of proof such as in adverse action cases, there does need to be clear facts setting out on what basis the claim is made to allow the employer to disprove the claim. Rather than leaving it to the “imagination of the reader to speculate”, pleadings should be drafted clearly to avoid being struck out.

The employer was successful in having certain parts of the employee’s statement of claim struck out, and was given leave to file an amended defence. This case currently remains on foot for a future hearing.

What does this mean going forward?

As a result of the Court’s comments in Farac, it now appears clearer that inaction by an employer, such as a failure to investigate claims of bullying, grievances and workplace safety concerns raised by employees may amount to adverse action. A person making such a claim will need to specify clearly what injury they suffered and how it related to the unlawful reason.

Given this expanded interpretation of the boundaries of adverse action, employers should be careful when making decisions such as whether to investigate a complaint. This is particularly important where there are performance management or termination processes underway because employers must be able to demonstrate that all complaints are taken seriously and that their action or inaction isn’t a result of an employee’s workplace right.

Robby Magyar is a Workplace Relations Consultant at HR Assured, who has been assisting clients across Australia from a range of industries and businesses with their work-related COVID-19 questions.