Adverse action claims have become increasingly popular for reasons including their purported “no cost” jurisdiction status, which means that an employee can pursue a claim without risk of paying their employer’s costs if unsuccessful. There are however exceptions if the claim was initiated vexatiously or the person engaged in unreasonable acts. In a welcome decision for employers, the Federal Magistrate’s Court recently awarded costs to an employer.

Background

Mr Cugura  was employed by Frankston City Council as a Senior Community Safety Officer and was required to drive a car as part of his duties. He made a number of complaints regarding his ability to drive which he attributed to a medical condition. Mr Cugura subsequently contacted Victorian Police complaining of the Council’s treatment of him and raising other allegations outside the scope of his role.

Following an investigation, his employment was terminated due to serious misconduct. Mr Cugura’s initiated adverse action proceedings alleging that his employment was terminated because of his disability. The Council was successful in discharging the reverse onus of proof and it was held that Mr Cugura’s dismissal related to his misconduct and not his disability.

Costs application

Following the dismissal of the initial proceedings, the Council applied for a costs order against Mr Cugura on the basis that:

  • Mr Cugura instituted the initial proceedings vexatiously or without reasonable cause; and/or
  • he engaged in unreasonable acts or omissions that caused the Council to incur costs,

which entitled the Council to costs pursuant to section 570(2)(a) and (b) of the Fair Work Act 2009 (Cth) respectively.

The Council submitted that it should have been apparent to Mr Cugura that the element of his claim relating to family responsibilities, which was raised later in the proceedings, “could not possibly succeed” or was “manifestly groundless” and should have been withdrawn.

In relation to the second ground, the Council submitted that during the course of the proceedings, Mr Cugura engaged in a number of acts and omissions which caused the Council to incur costs, including by:

  • failing to accept or respond to an open-ended offer from the Council to forgo making a costs application if he withdrew from the proceedings;
  • abandoning a number of issues he initially raised but still requiring the Council’s witnesses for cross-examination of these issues which were unrelated to the proceeding; and
  • failing to challenge crucial evidence about why his employment was terminated.

Reasons for the decision

The Court confirmed that costs can only be awarded in adverse action claims where a number of specific circumstances are satisfied, including those claimed by the Council.

In determining whether Mr Cugura had pursued his adverse action case vexatiously or without reasonable clause, the Court held that it is necessary to consider whether or not on the applicant’s own material a proper basis for the proceeding can be made out. If not, that was a circumstance where the proceedings could be found to have been initiated without reasonable cause. However, the Court held that in all of the circumstances there was an issue regarding whether the dismissal related to a proscribed reason and the proceedings as a whole were not instituted without reasonable cause.

In determining the second ground, the Court granted costs on the basis that Mr Cugura had rejected a settlement offer made several months prior to the trial causing the Council to incur legal expenses. The Court accepted the Council’s argument that Mr Cugura did not accept a settlement offer despite knowing it had a significant volume of evidence on which to argue its case. Further, Mr Cugura’s conduct in requiring witnesses for cross-examination for abandoned claims was held to be unreasonable.

Implications for employers

The potential impact of this decision is that it may deter employees (and other claimants) in bringing adverse action claims or make them think twice about the consequences of making such claims. It will also assist employers to obtain costs in the event an applicant’s conduct during the course of the proceedings causes them to incur unnecessary legal costs. Conversely, employers should also now expect similar tactics to be adopted by applicants to recover costs and they will need to ensure they act reasonably in order to avoid a potential costs order.