As an employer, you may face disputes with your employees. These disputes can be about employee misconduct, unsatisfactory performance, non-compliance with policies or breaches of contract. In some instances, it may be appropriate to consider taking adverse action against an employee. Alternatively, an employee might take adverse action against you. If you are an employer, this article will explore some of the key considerations to think about before you take action against an employee.
What is Adverse Action?
Adverse action is any action you take against current or prospective employees or independent contractors that negatively impacts their role at the business. This includes actions such as:
- dismissing an employee;
- refusing to employ a prospective employee;
- altering an employee’s position for discriminatory reasons; or
- refusing to engage in business relations with a contractor.
Additionally, adverse action cannot be taken against an employee for having or exercising a workplace right or for holding a protected attribute for discrimination purposes. These protected attributes include:
- race;
- sex;
- sexual orientation;
- age;
- religion;
- political opinion;
- appearance;
- marital status;
- family or carer’s responsibilities;
- pregnancy; or
- disability.
For example:
Here, George’s employer has taken adverse action by denying George the promotion for reasons unrelated to his employment (i.e. his carer’s responsibilities). Taking leave to which you are entitled under the FWA is exercising a workplace right, and George’s employer cannot take adverse action against him for this reason. Consequently, George may be able to make a general protections claim under the FWA.
Types of Adverse Action
Adverse action is not solely actions made by an employer against an employee. It can also occur between:
- employees and employers, such as an employee threatening to take industrial action against their employer because of their political opinion;
- prospective employers and prospective employees, such as an employer refusing to employ a prospective employee because of their carer’s responsibilities or an employer amending the terms and conditions of an employment offer due to the prospective employee’s plans for pregnancy;
- principals and contractors, such as a principal terminating a contractor’s contract because of their sexual orientation;
- principles and proposed contractors, such as a principal refusing to engage a contractor because of their age; and
- contractors and principals, such as a contractor ceasing to work for a principal because of their race.
What Can an Employee Do if They Are Facing an Adverse Action Claim?
If one of your employees is facing an adverse action claim, they can file a General Protections Application with the Fair Work Commission (FWC). Alternatively, they can report the conduct to the Fair Work Ombudsman, who can then investigate the claim.
If the employee’s general protections claim in the FWC was successful, you may face penalties of up to $16,500 as an individual or $82,500 as a corporation. Where a court determines that you have contravened the FWA’s general protections provisions, the court may also order:
- an injunction;
- the reinstatement of the employee (where the adverse action included dismissal); and
- compensation, which unlike unfair dismissal, includes compensation for harm and distress and is uncapped.
Two types of applications can occur:
- disputes not involving dismissal; or
- a dispute involving dismissal.
Dispute Not Involving Dismissal
Adverse action is not limited to termination of employment. Consequently, employees may make a claim against you where they have not been dismissed. For example:
Dispute Involving Dismissal
A dispute involving a dismissal occurs where your employee is dismissed from work for a reason they believe to be unlawful. For example:
How You Can Avoid a General Protections Claims
As an employer, you have the right to take adverse action against your employees. Taking adverse action is commonly in response to matters such as:
- misconduct;
- unsatisfactory performance;
- non-compliance with policies; or
- breaches of contract.
However, the law provides that you cannot take adverse action against an employee based on matters protected under the general protections provisions of the FWA.
Of course, there are strategies which you can use to mitigate the risk of such claims. Importantly, always ensure that actions taken against your employees are in good faith. This means you are taking action against your employees for work-related reasons, such as underperformance, not because of underlying discriminatory reasons.
If your actions are in good faith, ensure that you have evidence of the misconduct that caused you to take adverse action. In the case of an underperforming employee, this may include reports of their poor work quality or client complaints. You should also provide evidence that you have made the employee aware of these allegations and given them appropriate time to improve.
As an employer, understand your essential employment obligations with this free LegalVision factsheet.
Key Takeaways
As an employer, you may face disputes which cause you to take action against an employee. Before doing so, it is important to consider whether that action has been taken because of a legitimate reason that relates to employment. If you are not cautious and engage in adverse action, you could be liable to pay hefty penalties of up to $82,500 as a corporation or $16,500 as an individual.
If you have any questions about the right time to take adverse action, our experienced employment lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Adverse action means any action you take against current or prospective employees or independent contractors that negatively impacts their role at the business. This includes dismissing an employee, refusing to employ a prospective employee, altering an employee’s position or refusing to engage in business relations with a contractor.
In order to take lawful adverse action against an employee, you must ensure that the underlying reason for the action is not unlawful. For example, you must ensure the action is not a direct or indirect result of the employee having or exercising a workplace right or holding a protected attribute, such as their age, sex, or sexual orientation. However, you can take adverse action for reasons relating to their performance or conduct.
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