High Court re-establishes balance in adverse action cases - Overturns Barclay decision

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7 September 2012

The High Court today handed down its much anticipated decision in Board of Bendigo Regional Institute of Technical and Further Education v Barclay [2012] HCA 32 (Barclay). As many observers expected, it overturned the majority decision of the Full Court of the Federal Court in that case.

In doing so the High Court has provided greater clarity for employers who are contemplating disciplinary or other action against employees who have formal positions in a union or who possess other attributes that may trigger exposures under Part 3-1 of the Fair Work Act 2009 (Cth) (FW Act).

Background  

Mr Barclay was employed by the Bendigo Regional Institute of Technical and Further Education (BRIT), and was also a delegate of the Australian Education Union (AEU). On 29 January 2010, Mr Barclay sent an email to members of the AEU employed at BRIT, stating that several members had advised him they had been asked to produce false and fraudulent documents for an audit being conducted for purposes of a re-accreditation process. After this email was drawn to her attention, the CEO of BRIT, Dr Louise Harvey, issued a letter to Mr Barclay asking that he show cause why he should not be subject to disciplinary action because of his behaviour. Pending investigation of the matter, Mr Barclay was suspended on full pay for two weeks, was directed not to attend BRIT during that time, and had his electronic access account suspended.

Mr Barclay, supported by the AEU, initiated Federal Court proceedings alleging that he had been subject to adverse action as a result of his industrial activity in breach of s.346 of the FW Act.

The Federal Court proceedings

At first instance, Justice Tracey found that Dr Harvey had provided ‘convincing and credible’ explanations of why she took the steps that she did, and that she had not acted for a proscribed reason for the purposes of s.346 FW Act.

Mr Barclay appealed against this decision. By a majority, the Full Court of the Federal Court upheld the appeal. In a joint opinion, Justices Gray and Bromberg acknowledged that the state of mind or subjective intention of the person who took adverse action ‘will be centrally relevant’. However ‘it is not decisive’. Their Honours went on to determine that the real reason for a person’s conduct is not necessarily the reason that the person asserts, even where the person genuinely believes he or she was motivated by that reason. It is, therefore, necessary to find the real reason for their conduct, recognising that the reason may be conscious or unconscious.

The decision was widely considered to have placed employers in an invidious position, especially when dealing with employees who held union office or who were union activists. In particular, it would often be quite impossible for employees to discharge the onus of establishing that decision makers were not unconsciously motivated by prohibited factors.

High Court upholds BRIT’s appeal

The High Court (comprising Chief Justice French and Justices Gummow, Hayne, Heydon and Crennan) unanimously allowed BRIT’s appeal.  

Chief Justice French and Justice Crennan found that it was erroneous to treat the onus imposed on an employer by s. 361 of the FW Act as being made heavier because an employee affected by adverse action happens to be an officer of an industrial association, and that such an employee who happens to engage in industrial activity should not have an advantage not enjoyed by other employees. Further, their Honours found that it was not the case that Mr Barclay’s status as an officer of an industrial association at the time that adverse action was taken against him was ‘inextricably entwined’ with the adverse action, and that Mr Barclay was therefore effectively immune from adverse action. They considered that adopting such reasoning would destroy the balance between employers and employees that is central to the operation of s.361.

Their Honours also found that Justices Gray and Bromberg had erred in assuming that an employee’s union position and activity must necessarily be a factor which must have something to do with adverse action, or which can never be dissociated from adverse action.

In applying these principles, Chief Justice French and Justice Crennan recognised that direct evidence by the decision maker as to why adverse action was taken may sometimes be considered unreliable – for example because of persuasive evidence to the contrary. However, if the decision maker’s evidence is accepted as reliable then it will be capable of discharging the burden of proof on the employer, even though an employee may be a union officer or activist.

Justices Gummow and Hayne were in general agreement with Chief Justice French and Justice Crennan. They also found that the distinction between ‘subjective’ and ‘objective’ considerations adopted by the Full Federal Court was in error, and that there was no basis for implying any such distinction into the legislation. Their Honours held that neither an objective nor a subjective test should be applied in determining whether adverse action has occurred. Instead, the test is whether adverse action has been taken because of a proscribed reason.

In his concurring opinion, Justice Heydon pointed out that it would impose an ‘impossible burden’ on employers if they were required to prove that they were not motivated by unconscious reasons of a prohibited kind in taking what was technically adverse action against an employee.

In light of this decision, the recent report of the Fair Work Review Panel which recommended that the FW Act should be amended to give greater weight to the subjective intention of employers in such adverse action cases now seems to be irrelevant.

What does this mean for employers?

Although the High Court’s rejection of the ‘objective’ test articulated by the majority in the Full Court is to be welcomed, it is important to appreciate that  adverse action and general protections will continue to be a high risk area for employers.

In light of the Barclay decision and in order to minimise that risk, employers should:

  • ensure they are aware of, and understand the general protection provisions of the FW Act including the attributes and activities which are protected;
  • understand that the employer has the onus of establishing that decisions were not made for an unlawful reason;
  • ensure that they are in a position to provide compelling evidence that their decisions were not motivated by proscribed reasons.

This in turn requires that all decision making processes are carried out in an open and impartial manner, and that outcomes are fully documented.

Employers should also be aware that while union delegates or members do not enjoy any special protection, they should ensure that union membership or activity does not influence their decision making.

Contacts

John Tuck

Partner. Melbourne
+61 3 9672 3257

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