A Federal Circuit Court Judge has recently ruled that a Melbourne migrant and refugee centre took unlawful action when it dismissed an employee under the guise of a cost-cutting restructure. The judgment highlights a critical takeaway for employers: the threshold for proving that a dismissal was for a lawful reason is high, and the reverse onus under the Fair Work Act 2009 (Cth) makes defending such claims particularly challenging. 

General protections, contained in the Fair Work Act 2009 (Cth) (the Act), safeguard employees from being subject to adverse action, coercion, undue influence, or misrepresentation.

Most cases heard by the Fair Work Commission relate to adverse action. A person, most often an employer, cannot take adverse action for a reason that is against the law (i.e. prohibited), including:

• Because an individual has exercised or proposed to exercise a workplace right;

• because of an individual's age, sex, disability, or another discriminatory reason; or

• because an individual is away from work due to sickness or injury.

An employer might be seen to take adverse action against an employee if the employer:

• Dismisses the employee;

• injures the employee in his or her employment;

• alters the position of the employee to the employee’s prejudice; or

• discriminates between the employee and other employees.

As such, when making an adverse action claim, an applicant must establish that:

a) They meet the eligibility requirements to apply; and

b) they have been the subject of adverse action for a prohibited reason.

Once the applicant has established the above, the reverse onus of proof is triggered. Under section 361 of the Fair Work Act 2009 (Cth), it will be presumed that the dismissal was taken for the reason alleged unless the employer can prove otherwise.

Accordingly, the employer must show, on the balance of probabilities, that the reason for the adverse action did not include a prohibited reason. The prohibited reason does not need to be the sole reason for the action.

Thus, there is a high bar for employers in adverse action claims, as they must provide a lawful and well-documented explanation for the dismissal. For example, this may be done by providing direct evidence of the decision-maker's process and reasoning. 

This case concerned a dispute between Southern Migrant and Refugee Centre (SMRC), a prominent non-profit organisation in Melbourne (the respondent), and a former employee (the applicant).

In 2017, SMRC dismissed its finance team leader, claiming it was part of a legitimate cost-cutting restructure. The employee challenged her dismissal in the Federal Circuit Court, alleging that she was dismissed due to her exercise of workplace rights, rather than for genuine operational reasons.  

Initial Hearing

At the initial hearing, Judge Heather Riley ruled that SMRC, its chair and interim managing director had taken adverse action against the finance team leader in breach of the Fair Work Act 2009 (Cth). Her Honour found that the redundancy was not genuine, but rather a result of the applicant's complaints, sick leave, and prospective or actual lodgement of proceedings with external bodies regarding alleged governance and financial irregularities. Her Honour concluded that the chair of the company conspired to remove the finance team leader and another employee to consolidate control of the organisation, and that the interim managing director was recruited specifically to carry out these dismissals. 

Appeal

Justice John Snaden overturned Judge Heather Riley's decision on appeal, finding that Her Honour's assessment of the witness's credibility "contaminated" her reasoning and unfairly prejudiced SMRC's defence. His Honour ordered a retrial so that the former chair and the interim managing director's evidence could be properly considered. 

Retrial

Following a retrial, Judge Jonathan Forbes ruled that SMRC had taken adverse action against the finance team leader and concluded that the former chair and interim managing director were accessorily liable. His Honour found that the applicant's dismissal was materially influenced by her history of complaints and exercise of workplace rights, both of which are prohibited reasons for dismissal under the Act.

Judge Jonathan Forbes placed emphasis on the involvement of an external law firm, purporting that it was "intuitively odd" to involve a specialist employment law firm in what SMRC claimed was a routine restructuring. Contrary to SMRC's assertions, His Honour declared that "[t]he organisational restructure was developed knowing that [the applicant] was not suitable for or would refuse to express interest in any alternative position."

His Honour accepted that the employee was a "most difficult and challenging employee for even the most patient of employers," but despite this finding, reinforced that the law protects such employees from dismissal based on the exercise of their workplace rights.  

The findings of this case serve as a critical reminder for employers that dismissal must be undertaken for a lawful reason and supported by credible evidence.

There are various steps employers can take to better demonstrate that actions around restructuring are lawful, including:

• Keep detailed records of decision-making: Clearly and comprehensively document the reasons for any dismissal, restructuring, or performance concerns. Identify and record who made the decision, what factors were considered, and why the action was taken. Without this, it will be difficult, if not impossible, to defend an adverse action claim.

• Manage complaints and performance separately: While poor performance may be a lawful reason for dismissal, it is unlawful to dismiss an employee for exercising their workplace rights. Where an employee is underperforming but has also raised complaints, undertake separate and well-documented processes. A failure to distinguish lawful concerns from protected activities will significantly weaken an employer's defence.

• Train decision-makers: Provide training to board members, managers, and other decision-making staff on the relevant legal framework and compliance requirements. The training should educate staff on the general protections afforded to employees under the Fair Work Act 2009 (Cth), with a specific focus on what constitutes adverse action and the prohibited reasons for taking such action.

• Implement structured and transparent HR processes: Have in place clear internal procedures for performance management, conducting investigations, and complaint handling. If an investigation is required, ensure that it is procedurally fair. The employee must be afforded a chance to respond, an impartial assessment, and adequate support.

• Conduct independent review: Before proceeding with high-risk dismissals, it might be necessary to conduct an independent review or risk assessment to identify potential exposure under the Fair Work Act 2009 (Cth). Seeking advice is still a useful way to manage risk.

At Colin Biggers & Paisley, we advise employers across all industries on navigating complex workplace issues, including how to manage dismissals and staff complaints.

If your organisation is managing a high-risk dismissal or seeking to ensure that your employment practices, policies, and procedures are compliant with the Fair Work Act 2009 (Cth), our Employment & Safety team can provide you with clear, strategic advice.