Dan Trindade discusses the Barclay decision on adverse action under the Fair Work Act, and how employers should respond.

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Adverse action is an aspect of the Fair Work Act that seems to be attracting a fair amount of media attention. Can you explain exactly what adverse action means?

The Fair Work Act prohibits various parties, particularly employers, from taking adverse action against employees for various reasons. The main areas that it covers are industrial activity and the exercise of workplace rights. So the Fair Work Act prohibits an employer from taking adverse action which can include things such as disciplinary action, dismissal, demotion, denial of a pay increase or those sorts of things in circumstances where the reason for doing that is because an employee has, say for example, complained about their treatment at the workplace, has made a formal complaint, been involved in a proceeding or engaged in union activity.

Why is it such a hot topic?

It's a hot topic because the Fair Work Act changed the game quite significantly. These rights were always protected to some degree under the Workplace Relations Act but the rewriting of the Act and creating the Fair Work Act in 2009 substantially increased those rights. It also meant was that there was much more scope for courts and tribunals to take an expansionist view on how those protections apply.

A recent Full Federal Court decision on adverse action (Barclay) seems to have created a lot of concern among employers. Why is that the case?

The Barclay decision was an interesting one because at first instance the judge found that there was no adverse action. Predominantly the judge found that because the judge accepted that the honest evidence of the decision-maker was that the union activity of the employee didn't in any way contribute to the decision they made to discipline the employee.

On appeal the Full Court of the Federal Court took a different view and they said that whilst they accepted that that was the honest evidence of the decision-maker they actually went behind the honest evidence and looked to, what was subconsciously there. So they went to the broader factual scenario that sat behind it and effectively said you need to look into the subconscious mind of the decision-maker. That's quite a significant departure from all of the established law which is essentially said that you really need to look at what's in the mind of the decision-maker because if you're talking about why certain actions are taken the issue of the reason for that action really has to be what's in the conscious mind of the decision-maker.

Obviously this is a key area of legal risk for employers. Are there any measures they can take or should be taking to minimise their exposure?

I think the steps are the steps that have always been recommended, which is that you should make good decisions, make fair decisions and make decisions that are based on merit and are documented.

It was really important that an employer document those reasons, what people would call creating a paper trail, but it's really more like really what you want employers to do is to say "here are the reasons for a particular decision" and having those clearly articulated and put in a form that can be used if an issue arises down the track.

Is legislative reform needed? If so, why?

Well the Barclay decision is currently on application to the High Court. If the matter goes to the High Court and is overturned then I think we'll go almost back to the status quo and the courts will then refocus on what's in the mind of the decision-maker and is there a degree of differential treatment between certain types of employees. If however the Barclay decision is affirmed by the High Court then this would be an area that I think many employers would say is unworkable and in those circumstances we think the Parliament would need to have a look at that issue.