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Adverse action: Reverse reaction

Cover Story

Cite as: March 2013 87 (3) LIJ, p.26

When an employer takes action against an employee it must prove it was not taken for a prohibited reason. This case went to the High Court.

By Emma Goodwin

The High Court’s recent decision in Board of Bendigo Regional Institute of Technical and Further Education v Barclay 1 ( Barclay HCA) has clarified the test to be applied in assessing whether an employer has discharged its onus of proof when responding to a claim of adverse action under Part 3-1 of the Fair Work Act 2009 (Cth) ( FW Act). This article provides a brief overview of the High Court’s decision, the history of the Barclay litigation and its impact. Space constraints prevent detailed consideration and discussion of relevant predecessor provisions and related case law. 2

Statutory context

The FW Act prohibits employers taking “adverse action” against employees and some other individuals where a reason for taking the action is that the individual has a “workplace right” or other protected attribute (s340). In the case of employees, “adverse action” is defined to include 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 (s342). Among other things, adverse action must not be taken because an employee is an officer or member of a union, or engages or proposes to engage in industrial activity (ss346 and 347).

Where an employee lodges an adverse action claim, the onus is on the employer to disprove the employee’s assertion that the adverse action was taken for a prohibited reason (s361). The Barclay litigation considered the test to be applied when determining what had motivated the employer to take adverse action and, ultimately, whether the employer had discharged the onus of proof.

Facts

In summary, the facts of this matter were as follows:

  • Mr Barclay was Team Leader – Teaching Excellence at BRIT and the president of the BRIT sub-branch of the Australian Education Union (AEU).
  • BRIT is audited annually by the Victorian Registration and Qualifications Authority for the purposes of re-accreditation as a provider of vocational education and training. The audits are critical as an adverse outcome affects BRIT’s funding and capacity to operate.
  • An audit was due in mid-February 2010. In late January 2010 Mr Barclay sent an email to BRIT AEU members claiming he had been contacted by BRIT AEU members alleging that “false and fraudulent” documents had been prepared for the audit. Mr Barclay exhorted AEU members not to become involved, but to contact the AEU for support. Mr Barclay signed off as “President, BRIT AEU Sub-Branch”.
  • Mr Barclay did not raise these allegations with BRIT management.
  • Senior managers became aware of the email and Mr Barclay’s manager, Mr Eckett, requested that Mr Barclay provide the names of those AEU members who had complained about preparation of false and fraudulent material. Mr Barclay refused.
  • Mr Eckett referred the matter to Dr Harvey, the CEO of BRIT.

    Dr Harvey:

    • commenced an investigation into the allegations that false and fraudulent documents had been prepared for the audit;
    • suspended Mr Barclay (on full pay) from physical and electronic access to BRIT until after the audit was completed; and
    • wrote to Mr Barclay, advising that he was required to show cause why he should not be subject to disciplinary action for serious misconduct. She expressed concern about Mr Barclay’s failures to raise the allegations via appropriate channels and to answer Mr Eckett’s questions, suggesting that Mr Barclay’s conduct was inconsistent with his obligations as an employee of BRIT and in the Victorian Public Sector.

Mr Barclay’s claim

Mr Barclay commenced proceedings in the Federal Court, claiming that in suspending him and sending the “show cause” letter, BRIT had taken prohibited adverse action in breach of Part 3-1. He claimed that BRIT had acted because:

  • he was an officer of the AEU (s346(a));
  • he was engaged in industrial activity (representing or advancing AEU interests) (ss346(b) and 347(b)(v));
  • he was engaged in industrial activity by encouraging or participating in a lawful activity organised or promoted by the AEU (ss346(b) and 347(b)(iii)); and
  • he had exercised workplace rights, being:
    • a role or responsibility under the relevant enterprise agreement (ss340(1)(a)(ii) and 341(1)(a)); and
    • the ability to participate in the dispute settlement process under clause 10 of the relevant enterprise agreement (ss340(1)(a)(ii), 341(1)(b) and 341(2)(j)).

The question of exercise of rights under the relevant enterprise agreement was not canvassed in depth in any of the judgments, there being no evidence that any person had invoked the dispute procedure, and so this aspect of the claim will not be discussed further (see Barclay v BRIT [2010] FCA 284 ( Barclay FCA) at [42] and Barclay v BRIT [2011] FCAFC 14 (Barclay FFCA) at [66]–[71]).

Interlocutory steps

At an interlocutory hearing on 12 February 2010, it was agreed that pending substantive hearing, Mr Barclay could return to work immediately, although remaining subject to disciplinary action ( Barclay FCA at [9]).

The decision at first instance

Tracey J handed down the Barclay FCA decision on 25 March 2010. He observed that:

 “The task of the court . . . is . . . to determine why the employer took the adverse action . . . Was it for a prohibited reason or reasons which included that reason? In answering this question evidence from the decision-maker which explains why the adverse action was taken will be relevant. If it supports the view that the reason was innocent and that evidence is accepted the employer will have a good defence. If the evidence is not accepted the employer will have failed to displace the presumption that the adverse action was taken for a proscribed reason . . . Because of the reverse onus provision the employer will normally need to call evidence from the decision-maker to explain what actuated him or her to act to the employee’s detriment . . . That evidence can be tested in light of the established facts. The credibility of the decision-maker will be assessed by the court” (at [34]–[35]).

The suspensions, as BRIT conceded, did constitute adverse action. The “show cause” letter may have constituted adverse action, although this was not finally decided (at [46]–[48]).

Notwithstanding that the adverse action had been taken, in this case it was not prohibited adverse action. Dr Harvey, the decision-maker, had given evidence that she took the action she did out of concern for BRIT’s reputation and because she thought the applicant had breached his employment obligations. She denied having acted for any reason associated with Mr Barclay’s union membership, office or activities or the enterprise agreement. She was comfortable with Mr Barclay raising his concerns with his members and for AEU members to raise concerns with their union. However, she was dissatisfied with Mr Barclay’s failure to raise such a serious matter with BRIT management (at [50–54]).

Tracey J accepted Dr Harvey’s evidence and decided in BRIT’s favour (at [54]–[55]).

Mr Barclay appealed to the Full Federal Court.

the Full Federal Court’s decision

The Barclay FFCA judgments were handed down on 9 February 2011, with Gray and Bromberg JJ in the majority in favour of Mr Barclay and Lander J dissenting.

Decision of Gray and Bromberg JJ

Among other things, the majority held that:

  • The word “because” in ss40(1)(a) and 346 means “by reason of the circumstance that” (at [24]–[25]).
  • The central question under s346 is why the person was treated as he or she was. This requires “characterisation of the reason or reasons of the person who took the adverse action. The state of mind or subjective intention of that person will be centrally relevant, but it is not decisive. What is required is a determination of . . . the “real reason” for the conduct. 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. The search is for what actuated the conduct of the person, not for what the person thinks he or she was actuated by . . . the real reason may be conscious or unconscious . . . [W]here unconscious or not appreciated or understood, adverse action will not be excused . . . because its perpetrator held a benevolent intent. It is not open to the decision-maker to . . . ignore the objective connection between the decision he or she is making and the attribute or activity in question” (at [27]–[28]).
  • To defeat a claim, the person accused of taking prohibited adverse action must establish that the reason for the taking of the adverse action is “dissociated” from the protected attribute or activity (at [32]).
  • Protection of an officer or member of a union under s346(a) includes protection of that status and activities carried out as an incident of membership (at [39]).
  • In relation to Mr Barclay, each of the suspension from duty, electronic access and the workplace was an adverse action. However, whether or not the “show cause” letter was an adverse action was not determined (at [57] and [58]).
  • Mr Barclay was acting in his capacity as AEU sub-branch president and engaging in industrial activity (at [59] and [64]). Accordingly, BRIT’s remedy was to raise the matter with the AEU, not Mr Barclay: “If employers were able to punish those of its employees who are union members or officers for the conduct of their union, the protection to those persons . . . would be entirely illusory and the purpose of the provision defeated . . . If adverse action is taken by an employer in response to conduct of a union, it is impossible for that employer to dissociate or divorce from that conduct its reason for the taking of the adverse action simply by characterising the activity of the union as the activity of its employee . . . the search [is] for what actuated the conduct of the person who took adverse action, not for what the person thinks he or she was actuated by” (at [73]–[74]).
  • Dr Harvey’s reasons for disciplining Mr Barclay were founded on Mr Barclay’s sending of the email. Accordingly, Dr Harvey took the adverse action she did for reasons that included that Mr Barclay was an AEU officer who had engaged in industrial activity, even if she subjectively characterised the conduct as conduct of an employee and addressed it on that basis. The matter was remitted to Tracey J for determination of penalty (at [78]).
Decision of Lander J

Lander J disagreed with the majority’s “objective” test approach, commenting that:

  • “where it is alleged that a person took [prohibited] adverse action . . . the inquiry must be as to why the person who is said to have contravened the section took the action. That must mean the Court has to inquire into the subjective intention . . . A person’s reasons for taking adverse action cannot be ascertained by employing an objective test. Those reasons can only be identified by reference to the person’s own intentions . . . The contravenor’s evidence will of course be considered in the context of all the other evidence . . . The subjective intention . . . if accepted by the Court to be the actual intention will be determinative” (at [197]–[199]).
  • Nothing in the language of the FW Act mandates an objective test (at [199]).
  • As the subjective view of the decision-maker is critical, ordinarily the decision-maker will have to give evidence as to the reason or reasons the adverse action was taken (at [208]).
  • Section 346(a) covers only status as an officer, not activities incidental to that status (at [212]–[216]).
  • Dr Harvey took action because Mr Barclay had prima facie breached his obligations as a BRIT employee and might cause further damage to BRIT. This is not a breach of ss346(b) or 347(a) or (b): “It is not enough as the appellants have contended that a union official can make out a contravention by simply establishing that adverse action was taken whilst the union official was engaged in industrial activity. That is not enough . . . The contravention is only established if in fact that is the reason for the taking of the adverse action” (at [226]–[227]).

BRIT appealed to the High Court. The federal Minister for Workplace Relations intervened in support of Mr Barclay.

The High Court’s decision

In three separate decisions (French CJ and Crennan J; Gummow and Hayne JJ; and Heydon J), the High Court in Barclay HCA unanimously found in favour of BRIT, holding that:

  • The question of why an employer took adverse action is one of fact (French CJ and Crennan J at [41] and [45]; Gummow and Hayne JJ at [101] and [121]). As Gummow and Hayne JJ note, the “subjective”/”objective” debate detracts from this fundamental position.
  • Nothing in the FW Act requires an objective test be applied in this context (French CJ and Crennan J at [44]; Gummow and Hayne JJ at [126]; Heydon J at [149]). The decision-maker’s evidence as to his or her motivation should be the “focus of the inquiry” (Gummow and Hayne JJ at [127] and see also Heydon J at [140]). Reliable, uncontradicted direct evidence of the decision-maker as to his or her subjective motivation is capable of discharging the employer’s onus of proof (French CJ and Crennan J at [45]). There is no need to search for a decision-maker’s “unconscious reason”. Indeed, Heydon J observed that such an approach was “indefensible” and would place an “impossible burden” on employers, who could never prove there was no “unconscious” reason (at [145]–[146]).
  • An employer will be found to have taken prohibited adverse action if the prohibited reason was a “substantial and operative” reason for an employer taking adverse action (Gummow and Hayne JJ at [104] and [127]).
  • The onus on the employer is not heavier simply because the employee in question is an officer of an industrial association or is engaging in industrial activity. The fact that Mr Barclay was engaged in lawful industrial activity at the time Dr Harvey took adverse action could not make Mr Barclay “immune” from the adverse action. “If accepted, such a position would destroy the balance between employers and employees . . . It is not necessary that “the establishment of the reason for adverse action . . . be entirely dissociated from an employee's union position or activities” (French CJ and Crennan J at [60]–[62]; see also Heydon J at [148]).
  • There was nothing to suggest that Tracey J’s conclusion on Dr Harvey’s evidence was incorrect; he was entitled to find as he did (French CJ and Crennan J at [65]; Gummow and Hayne JJ at [131]; and Heydon J at [141], [142] and [147]).

Subsequent decision on costs

In a subsequent decision, costs of the appeal were awarded in BRIT’s favour. 3

Comment

The Barclay HCA decision provides welcome clarification as to the test to be applied when assessing whether an employer has discharged the onus of proof in responding to an adverse action claim. In the author’s submission, the High Court’s approach is correct. The “unconscious reason” test had the potential to place respondents to Part 3-1 claims in an invidious position. Indeed, the panel reviewing the operation of the FW Act in September 2012 recommended amending the Act to state that the decision-maker’s subjective intention was the central consideration. 4 However, having said this, the author suspects very few (if any) of the Part 3-1 cases decided in the period between Barclay FFCA and Barclay HCA would have been decided differently had the “unconscious reason” test not applied. While decisions during this period generally acknowledged the test, in practice there was little apparent reliance on “unconscious reasons”. 5 Accordingly, it will be interesting to see whether future decisions vary markedly from their predecessors. It is also important to note that while Barclay HCA has clarified one of the key issues around operation of Part 3-1, other controversies remain. 6 No doubt these provisions will continue to be the subject of judicial commentary.



Emma Goodwin is a senior associate, King & Wood Mallesons. The views expressed are those of the author and do not necessarily represent the views of King & Wood Mallesons.

1. [2012] HCA 32.

2. Barclay HCA at [20]–[28]. For more information see, for example, Emma Goodwin and Bianca Friedman, “General protections under Pt 3-1 of the Fair Work Act: key features and protection of workplace rights” and “Beyond workplace rights: other protections under Pt 3-1 of the Fair Work Act” (2011) 17(3&4) Employment Law Bulletin 48 & 60.

3. BRIT v Barclay [No 2] [2012] HCA 42.

4. Fair Work Act Review Panel, Towards more productive and equitable workplaces: An evaluation of the Fair Work legislation, at www.deewr.gov.au/WorkplaceRelations/Policies/FairWorkActReview/Documents/Towards_more_productive_and_equitable_workplaces.pdf . See Recommendation 47 at p26 and the discussion at pp236-237. This recommendation has not been and, following Barclay HCA, presumably will not be, adopted.

5. Stephens v Australian Postal Corporation [2011] FMCA 448 ( Stephens) is a possibility.

6. There are a number of such examples. Space constraints prevent a detailed outline of each of these, but one example is the range of commentary as to what constitutes a “disability” for the purposes of the protection in s351 of the FW Act: see Hodkinson v Commonwealth [2011] FMCA 171; Stephens; CFMEU v Leighton Contractors Pty Ltd [2012] FMCA 487; and Corke-Cox v Crocker Builders Pty Ltd [2012] FMCA 677.

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