by David Bates

While many employers have at least a vague idea of what an ‘unfair dismissal’ is and how to avoid one, far fewer are familiar with ‘adverse action’ claims.

Given the rise in the number of these claims – and the significant risks they pose for small business employers – this week we take a look at the key differences between these two quite distinct claims.

Let’s start with ‘unfair dismissals’ which, under the notoriously named ‘Fair Work Act’, happen when a person is fired in circumstances which are ‘harsh or unjust or unreasonable’. If you think that sounds like a fairly wide definition, you’d be absolutely right.

While the Act does contain a list of specific factors which must be considered when deciding whether a dismissal is ‘unfair’ (such as whether or not the employee had a chance to respond before they were fired), the final factor in the list is: “any other matters that the Fair Work Commission considers relevant.” Uh oh.

Take the case of Paul Quinlivan v Norske Skog Paper Mills for example. In that case, the Commission relied on factors such as the amount the employee owed on his mortgage when deciding that the dismissal was unfair. No, I’m not kidding.

Some other important points about unfair dismissals include these:

  • If an employee claims to have been unfairly dismissed, they need to prove it.
  • An employee is technically only protected from unfair dismissal once they have completed the applicable ‘minimum employment period’. In small businesses (ie. those with fewer than 15 employees) that’s 12 months. In all other businesses, it’s 6 months.
  • If the employee wins their case, they can be awarded compensation up to a maximum of 6 months’ pay or half of the current ‘High Income Threshold’, whichever is the lesser amount.

Now let’s consider adverse action. This occurs when an employer takes some form of ‘negative action’ against an employee because they’ve exercised a ‘workplace right’. Examples of workplace rights include taking leave, joining a union, or even making a complaint. Forms of negative action include demotion, exclusion, or dismissal.

So, let’s say an employee is constantly absent and you decide they need to be sacked. If you don’t manage the process correctly, you could easily find yourself facing an ‘adverse action’ claim. Not worried yet? You should be. Here’s why:

  • Employees are protected from adverse action from day 1 of employment – there’s no ‘minimum employment period’ for these claims.
  • There’s no maximum cap on the compensation that can be awarded if the employee wins.
  • The employee is quite likely to win because, believe it or not, in these types of claims the ‘onus of proof’ is reversed(!). This effectively means that if you’re accused of taking adverse action, you’ll be considered guilty until you prove your innocence.

Still wondering why so many employers are reluctant to employ people in Australia?