In the context of an adverse action claim brought under the Fair Work Act 2009 (Cth) (FW Act), the Federal Circuit Court of Australia has refused to allow an employer to rely on legal professional privilege (LPP) to withhold an investigation report where that report and the associated legal advice were relevant to the employer’s state of mind. This is because the employer’s state of mind was an issue in the proceedings. The employer’s act of putting its state of mind in issue is inconsistent with maintaining the confidentiality of the privileged advice. Accordingly, it would be unfair to the other side not to disclose it.

Implications for employers

Employers should keep in mind that it may be difficult to maintain privilege over an investigation report, and any legal advice provided based on that report, in a situation where there is a reverse onus of proof and the state of mind of the decision maker is an issue in the case. It should be noted that a reverse onus of proof exists not only in adverse action cases but also in relation to some other types of claim, such as unlawful termination.

If an employer commissions an investigation from lawyers in a situation where the employer wishes to rely on LPP, it is important that from the outset the dominant purpose of the investigation is said to be for obtaining legal advice or in anticipation of litigation. It is also good practice to ensure any legal advice is kept separate from the investigation report, regardless of who actually conducts the investigation and prepares the report.

Background: law

Among other things, Part 3-1 of the FW Act prohibits employers taking “adverse action” against employees, where a reason for taking the action is that the employee has a “workplace right” or other protected attribute. “Workplace rights” are broadly defined and include, for example, the right to make a complaint to the employer about the employee’s employment. In the case of employees, “adverse action” is defined to include, among other things, dismissal, alteration of the employee’s position to his or her prejudice, injuring the employee in his or her employment, or discriminating between the employee and other employees.

Importantly, where an employee lodges an adverse action claim, the employee is required only to establish that he or she has a protected attribute and that adverse action has been taken. Once the employee has established these things, it then falls to the employer to prove that the adverse action was taken for a reason other than the employee’s workplace right or protected attribute. This is known as a reverse onus of proof.

Background: facts

Doutta Galla Aged Services Limited (Doutta Galla) engaged a law firm, Aitken Partners (Aitken), to investigate an email and serious allegations made in that email. Doutta Galla received a confidential interim report from the law firm, which reported on the findings of its investigation. After considering the report, and receiving legal advice from Aitken based on the report, Doutta Galla’s Board made a number of recommendations to its CEO, Mr Anderson. One was a recommendation to terminate Mr Bartolo’s employment (it appears that a view had been formed that Mr Bartolo was in breach of Doutta Galla’s policies). Mr Anderson considered the Board’s recommendations and decided to terminate Mr Bartolo’s employment.

Mr Bartolo subsequently brought a claim alleging that prohibited adverse action had been taken against him in contravention of the FW Act. He alleged that the reason for his termination was his exercise of workplace rights. He also claimed that the investigation by Aitken itself amounted to adverse action. Given the reverse onus of proof, the state of mind of Doutta Galla in taking the actions against Mr Bartolo was an issue in the proceeding.

As an interlocutory step, Mr Bartolo sought disclosure and discovery of the involvement of Aitken and in particular, a letter of advice drafted to the Board of Doutta Galla by Aitken. In support of this application, Mr Bartolo argued that:

  • he was entitled to see the documents relevant to the state of mind of each of the Board and Mr Anderson. He noted that Doutta Galla’s pleadings indicated that the Board formed a view based on material provided to it by Aitken and Mr Anderson made his decision to terminate Mr Bartolo following receipt of the Board’s recommendations;
  • everything prepared by Aitken up to the letter of advice was not prepared for the dominant purpose of legal advice and was not subject to LPP;
  • LPP attaching to the recommendations and advice thereafter had been waived by Doutta Galla’s pleadings and affidavits. It was unfair for Doutta Galla to say it relied on the recommendations, the investigation, the letter of advice and the state of mind of the Board and Mr Anderson to establish its defence, but to rely on LPP to withhold the documents; and
  • there had been sufficient disclosure of the legal advice that was given by Aitken. This was because the recommendations of the Board were a necessary consequence of that advice and Mr Anderson made his decision following the recommendations.

Doutta Galla opposed Mr Bartolo’s application, on the basis that:

  • it had engaged Aitken to investigate the allegations contained in the email and to provide legal advice in relation to workplace laws and the Board’s legal liability. Contrary to Mr Bartolo’s argument, the dominant purpose was the receipt of the legal advice, so Doutta Galla was entitled to claim LPP over the documents;
  • there was no waiver of the LPP, as the gist or the substance of the advice had not been disclosed in a manner that was inconsistent with the maintenance of the confidentiality of the advice. Further, reference to the investigation report in an affidavit submitted on behalf of Doutta Galla did not waive LPP, and nor did the fact that the Board made recommendations to Mr Anderson; and
  • whilst the Board played a part in the process, it was Mr Anderson, not the Board, who was the decision-maker. Accordingly, it was the state of mind of Mr Anderson that was relevant, and not that of the Board.

Decision

Judge Whelan found in favour of Mr Bartolo. She held that:

  • the dominant purpose of the confidential communications between the Board and Aitken was in fact for the purpose of obtaining legal advice;
  • there was no substance to the argument that a reference to legal advice, or a reference to a decision having been made after consultation with lawyers, will amount to disclosure resulting in waiver of privilege;
  • however, where a client (in the present instance, Doutta Galla) puts in issue its state of mind and it appears that legal advice was given at the relevant time, the privilege will be lost where it is shown that there is a likelihood that the legal advice contributed to that state of mind;
  • Mr Anderson’s state of mind was influenced by his discussion with the Board. In turn, the Board made its recommendations to Mr Anderson following a meeting where Aitken distributed the investigation report and provided legal advice and information about the content of the investigation report to the entire Board. Accordingly, the outcome of the investigation was relevant to the decision to terminate Mr Bartolo’s employment;
  • the involvement of the Board in the decision was an issue in the proceedings and the reasons given for its recommendation to Mr Anderson to terminate Mr Bartolo’s employment were set out in Doutta Galla’s pleadings. This opened the basis for the recommendations, which was likely the Aitken report, to scrutiny; and
  • it would be unfair to Mr Bartolo to allow Doutta Galla to rely on its pleadings, if Doutta Galla were not required to disclose the factual basis on which the Board formed the conclusions which gave rise to the recommendation that Mr Bartolo be dismissed.

Bartolo v Doutta Galla Aged Services Ltd [2014] FCCA 1517 (15 July 2014)