Adverse action: Here's what you need to know

Workplace Relations & Safety
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Let's dissect our favourite legal alliteration. What does "adverse action" actually mean and why does it matter?

In our previous article, we discussed the ins and outs of workplace rights and what people are entitled to at work.

When there has been a breach of workplace rights, claims to that effect are usually made through the avenue of adverse action under the Fair Work Act (technically, these are labelled "general protections claims" by the Act). In short, the Act does not allow anyone to take adverse action against another person because they have exercised, or might exercise, a genuine workplace right.

Types of adverse action

Have you heard the one about the employees who claimed "adverse action" when their employer issued gift cards to the colleagues who had continued to work during a strike, but not to those who had ceased work?

Adverse action can take many forms beyond dismissing an employee, including altering someone's employment in a negative way. Relevant successful cases of adverse action have included:

  • threatening to reduce a person's salary
  • arbitrarily making someone redundant (and not properly consulting with them)
  • not allowing someone to take up an overseas posting they had applied for
  • issuing a formal warning letter
  • placing someone on suspension

It's not just contracted employees that can invoke claims of adverse action, the protections also apply to prospective employees and independent contractors.

When is adverse action prohibited or unlawful?

Adverse action is only prohibited when the motivation behind it is a prohibited reason, such as to punish someone for exercising a workplace right. It is, for example, fine to performance manage someone who is not meeting expectations, so long as there is no other prohibited reason driving the action.

How can you prove why a person took an adverse action in the past, short of using a time machine and a lie detector? Thankfully, the courts give employers the benefit of the doubt. eEvidence given directly by the relevant decision maker as to why they took a certain action is usually enough to show whether the intent behind the act was unlawful. However, this is of less assistance to employers in circumstances where this person is no longer with the business, or does not wish to appear as a witness. In such cases, a well maintained paper trail means that a court won't be left guessing exactly why your business denied that discretionary bonus being paid, or why an employee was not given a promotion.

When it's all said and done, if a person is successful in bringing an adverse action claim, they are entitled to be compensated for any loss that they suffered, up to and including reinstatement to their former role if the adverse action they encountered was being sacked. Although, in our experience, reinstatement is like getting back together after a bad break-up, not much fun for anyone, and likely to end in tears all over again.

How to minimise the risk of adverse action claims

As they say, perception is reality. One of the best ways to avoid an adverse action claim being made against your business is to leave employees in no doubt as to why certain decisions have been made. If a person is being suspended, dismissed or will be on the receiving end of a negative outcome, the (presumably legitimate) reasons for doing so should be made clear to them.

Providing training for managers and HR staff on the topics of workplace rights and adverse action will also help a business avoid making poor decisions for the wrong reasons. Claiming ignorance of the existence of a workplace right is no defence.

At the end of the day, you can't stop someone from making an adverse action claim if they really want to. What you can do is prepare your business to put up the best defence it possibly can against any legal adverse action it might face, or better yet, avoid claims from being made in the first place by ensuring employees are well informed about why the decisions impacting on them were made.

This article is part of a regular employment law column series for HRM Online by Workplace Relations & Safety partner Aaron Goonrey and Lawyer Luke Scandrett. It was first published in HRM Online on 24 August 2017. Read the HRM Online version of this article.

All information on this site is of a general nature only and is not intended to be relied upon as, nor to be a substitute for, specific legal professional advice. No responsibility for the loss occasioned to any person acting on or refraining from action as a result of any material published can be accepted.