The Fair Work jurisdiction is generally considered a “no costs” jurisdiction, meaning that, even if a party is successful in an action, they are usually unable to obtain a costs order against the opposing party.

However in 2012, the Fair Work Amendment Act 2012 (Cth) widened the scope of exceptions to the “no costs” rule by enacting section 570(2)(b) of the Fair Work Act 2009 (Cth).

This section allows costs orders to be made where a party has committed an “unreasonable act or omission” that causes legal costs to be incurred by the opposing party.

So what classifies as an unreasonable act or omission? Notably, recent case law (set out in the table below) has shown that one party’s failure to accept the other party’s reasonable settlement offer may be considered an unreasonable act, resulting in a costs order being made against them.

Click here to view table

Quick Tips for Employers

  • Where applicable, draw to the attention of an employee (particularly a self-represented litigant) why their case has a low prospect of success. If you have substantial evidence that contradicts their claim, this should also be brought to their attention.
  • Ensure any settlement offer made to an employee is both clear in its terms and reasonable in all the circumstances.
  • Include in all settlement offers a statement that, if the employee rejects the offer, the employer reserves the right to pursue costs under s 570(2)(b) of the Fair Work Act 2009.
  • When rejecting a settlement offer made by an employee, do so clearly and state the reasons for rejecting the offer so that these can later be relied upon to show that the grounds for rejection were reasonable.