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Court finds employer’s inaction can result in adverse action

22 September 2021

#Workplace Relations & Safety

Published by:

Declan Johnston

Court finds employer’s inaction can result in adverse action

A recent decision by the Federal Circuit and Family Court of Australia (Court) has made it clear that inaction, or the act of not doing something, can still give rise to adverse action.

This interpretation may confuse some employers. On a first read, adverse action under the Fair Work Act 2009 (Cth) (FW Act) is described by reference to positive acts. For example, dismissing someone, demoting someone or bullying someone. Therefore, employers may think that they may reduce the risk of enlivening the FW Act’s general projections regime by refraining from action.

However, the Court’s interpretation of the relevant provisions in the FW Act in Farac v Pendal Group Limited [2021] FedCFamC2G 25 (Farac) focused on the “consequence suffered by the particular employee” as constituting the adverse action and held that the action or inaction can bring about this consequence. In this way, a positive adverse action can be the product of inaction.

Background

Mr Farac (Applicant) alleged his employer Pendal and Pendal’s CEO (Respondents) took adverse action against him by not investigating a complaint regarding bullying and inappropriate treatment during his employment because he exercised his workplace right to make this complaint.

Before the substantive hearing, the Respondents filed an interlocutory application to strike out sections of the Applicant’s pleadings on the basis it was “nonsensical” and “impossible” to undertake inaction. Additionally, the Respondents claimed section 340 of the FW Act, being one of the operative adverse action provisions, did not comprehend inaction.

The pleading in question stated:

“Pendal undertook the Failure to Investigate because of the First Bullying Complaint and Further Complaints, in contravention of section 340 of the FW Act.”

Judgement

The Court recognised that sections 340 and 342 of the FW Act, being the operative adverse action provisions, explicitly refer to positive acts in that:

  • section 340 of the FW Act states “a person must not take adverse action against another person”
  • section 342 of the FW Act sets out the circumstances in which a person takes adverse action against another person, including but not limited to dismissing, injuring, altering and discriminating against a person. 

The Court referred to a previous determination by the Federal Court in which an employer’s act of maintaining the status quo did not equate to the employer doing anything to injure an employee. That said, the Court also referred to a line of reasoning that recognises that there can be circumstances where “inaction” does gives rise to a proscribed adverse action.

Specifically, in Rowland v Allied Health [2014] FCA 2, the Federal Court determined that an employer had taken adverse action against an employee by inaction in failing to rehire the employee after completing an internal restructure. The Federal Court in Rowland also gave the example of an employee being denied a promotion as another example of inaction constituting adverse action.

On this basis, the Court declined to strike out the pleading and the allegation based on inaction was allowed to be maintained in the proceedings.

Considerations for employers

This decision is an important reminder that in certain circumstances, inaction by an employer can lead to an allegation of adverse action. The critical inquiry focuses on the consequence suffered by the employee and then assesses whether it came about “because of” a prohibited reason. 

This means that in relevant circumstances employers must ask themselves the following:

  • if we take this step, will the consequence be one of the proscribed grounds of adverse action?
  • if we do not take a step, will the consequence be one of the proscribed grounds of adverse action?

If you have any questions or need assistance with any employment law issue, please speak to us or contact us here.

Authors: Stephen Trew & Declan Johnston

Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Declan Johnston

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