Employment Law Essentials for Business Owners (Part 2): Defending a Fair Work Claim

0:00
You're listening to Explain That by Velocity Legal, the podcast that keeps business owners and professional advisers ahead of the curve in an ever-changing legal landscape.

Previously, I spoke with Katherine Stewart and Jess Hill regarding the dismissal process in employment law and how to avoid a claim.

0:21
In this episode, we'll be talking about what to do when defending a Fair Work claim.

This issue is more prevalent than ever, as data from the Fair Work Commission shows the highest number of claims in the 2024 financial year, with an increase of 27%.

0:39
For employers, there are few things more stressful than receiving a Fair Work claim.

So how do you defend yourself when it happens?

To answer that question, I'm joined again by Katherine and Jess.

Welcome to the show.

Thanks, Andrew.

Thanks, Andrew.

So, Katherine, perhaps I'll first start by asking you this question. As an employer, I've tried my best, I've done all the right processes.

1:01
I've taken your advice on how to do things correctly to avoid a claim, but suddenly I've been hit with this claim.

What goes next?

So I think first of all, it's important to take a breath and remember that no dismissal is completely risk free.

And sometimes you can follow the most fair, the most correct process and still end up at Fair Work.

1:22
And that's just sometimes the cost of doing business.

But if you do have a claim that lands on your desk, usually it's one of the two most common claims, which is an unfair dismissal, which is by far the highest volume of cases at the Fair Work Commission.

And probably everyone's heard of an unfair dismissal claim.

1:39
And the other one you might be looking at is called a general protections claim.

And that's probably the claim that Jess and I deal with the most. It has a few more legal complexities that we'll talk about in this podcast, but it's on the rise.

So this is kind of the stakes are higher, there's higher compensation.

1:55
It's the one that lawyers will often look towards.

And if you deal with a claim, it's best to sit down, have a think, what are the risks here?

And do I need to get some advice?

Because if there's a lawyer on the other side, if there are large demands for compensation being made, then this may be one where you need to get the strategy right and have a think, well, how do we need to address this?

2:19
And what would an employer typically receive?

Firstly, would it be the notice from the court? Notice from another lawyer? What's the typical communication that they do get?

So you'll certainly get a notification from Fair Work with a copy of the claim.

And that's the usual way that you'll get served a copy of the claim, with all the employee's details saying that you're the worst employer in the world.

2:40
But potentially, if they've got an advocate as well, there may have been some negotiations going on.

So it can come in a variety of different ways.

And a Fair Work claim is, of course, not the only claim that you could get.

Some claims are contractual claims, and you might get a letter of demand saying you haven't paid these bonuses, you haven't paid out these things on termination that are due under the contract.

2:59
But one way or another, you'll probably find out reasonably soon after the dismissal process, or during the dismissal process, if you're going to have to face a claim.

There are quite tight timeframes in Fair Work.

So to ask that, the employee only has 21 days from being dismissed before they bring their claim, and that's a very hard deadline.

3:21
There's many, many cases out there about people who miss the deadline and what happens, but generally people will get it in within that 21 days to avoid any issues.

And so it's not a long period of time that you're waiting to find out, are you going to get a claim or not?

3:38
By the end of the month you'll know.

So I've got one or I probably don't, absent any sort of contractual claims, which obviously can be more complex.

So general litigation can be drawn out for a very long period, but I understand with employment and Fair Work Commission type matters, it's a much more expedited process.

3:57
The timeframes are quicker. Is that correct?

Yes and no.

So in terms of unfair dismissal claims, which is really where someone is just saying that their dismissal was unfair for a variety of reasons.

And that can either be procedural reasons, or it can be because they didn't do anything wrong or they don't think they've done anything wrong and the dismissal was unfair in that respect.

4:18
And we'll talk about the differences in those.

But if it's an unfair dismissal claim, it's a relatively short process.

You'll have seven days as an employer to file a response.

And so you need to work pretty quickly once you get a claim because, particularly if you need legal assistance, you'll need to get that done ASAP.

4:39
And so we encourage people to not sit on claims even if they're unsure if they need legal representation.

Having the conversation the day you get it means that you've got the full seven days to work within.

But really they get listed for a conciliation, which is a mediation-style sit down, which is facilitated by the Commission.

5:03
Often within four weeks.

There is a bit of a backlog at the moment, so we're getting them listed a bit slower, but they're typically listed pretty quickly, sort of four to six weeks.

And most of them will settle at that conciliation.

5:21
So it may be that the entire process is done in two and three months.

If it's a general protections claim, it's more complex.

Broadly, the system is that it gets brought in Fair Work. Again, the employer has seven days to file a response.

5:40
After that, it gets listed for conciliation.

So the process up until there is the same. If it doesn't settle at Fair Work at the conciliation, then a certificate gets issued by the Commission and then the employee has to make a choice about whether they want to bring it to either the Federal Circuit and Family Court or the Federal Court.

6:06
And that's the difference.

Whereas an unfair dismissal remains in Fair Work and it will run all the way through to an arbitration in Fair Work, a general protections claim, if it doesn't settle at conciliation, goes to the Federal Court and then that runs fairly similarly to a normal court process.

6:25
Yes, understood.

So that's the gateway that things go through.

If it's unfair dismissal, it will stay there. If it's something else, the general protections claim, then it will go to court.

Is it often that the claims are blended together as well, that you get an unfair dismissal and a general protections claim at the same time?

6:44
You can't run both, so the employee needs to make a choice early on about which one they want to run.

Sometimes there are strategic reasons. So unfair dismissal has timeframes on when you can bring a claim as an employee.

For a regular sized business, you can only bring a claim after six months as an employee.

7:03
If it's a small business, which is less than 16 employees, that's after 12 months.

So you may be statute barred from bringing an unfair dismissal claim.

And sometimes people will bring a general protections claim because it doesn't have that same window.

7:21
You can bring a general protections claim from day one.

So sometimes people will manipulate the claim that they're bringing because they can't get an unfair dismissal claim in, because they just can't bring that.

Sometimes people will bring a general protections claim because the issues are more complex.

7:44
There's been complaints, there's more multifaceted issues typically in a general protections claim, whereas an unfair dismissal claim is typically quite straightforward.

You didn't follow the process. I didn't get an opportunity to respond. I don't think I actually did those things that you're alleging I've done.

8:02
It's usually factually more straightforward, and it's for that reason it's usually a lot more easy to deal with.

Sometimes we'll have a conversation with the client and say, they can actually run that unfair dismissal process themselves or maybe attend the conciliation themselves, and we can just help them with the paperwork.

8:23
It can become cost prohibitive in an unfair dismissal to have legal representation, and particularly if the employee isn't legally represented.

Sometimes it's easier just to have the employer and employee sit down, with the help of the conciliator, to work through those issues one-on-one.

8:44
So it may not be that you need legal representation for an unfair dismissal.

Sometimes you do, because sometimes the issues are more complex and sometimes the employee is legally represented, and you know that the employee is going to want more because they're going to have to cover their legal costs as well.

9:02
That's a good point, Kath.

We often see the same lawyers on the employee side, and we have a pretty good sense of what they're going to want.

Yeah, yeah.

From those claims.

Well, I wanted to ask Katherine two different scenarios.

9:20
Let's go with the first one.

Let's say you're an employer, you get a claim come through and you think you've got a pretty good defence.

How do you go about arguing that or proving it or shoring it up?

What do you do in a situation where you get that claim and you think you've got a pretty good defence?

9:38
Yeah.

So first of all, as lawyers, I would look to see who the lawyer on the other side is, because sometimes you can have the strongest defence in the world.

But Jess and I, knowing a lot of the law firms that we deal with, often will go, we know they're going to run this in a certain way.

9:55
We know they've got a number in mind and it's unlikely it's going to settle below that number.

So sometimes it's important that we have to have that commercial chat with the client going, yes, we've got some really strong evidence, we've got a great defence here, but here's the commercial reality of defending this claim, and we may need to come to a practical resolution if you want to make it go away.

10:15
But in terms of getting your documents together, there's a few key documents we'll always want to look at.

So first of all, we want to look at the employment contract. We'll want to look at the dismissal letters, particularly if we weren't involved in giving advice.

We'll want to see all the correspondence that's gone on behind the scenes.

Because if you're defending a general protections claim, for example, it's all about was the decision maker's mind tainted by one of these protected reasons by law.

10:43
For example, the employee might say, you didn't sack me because I wasn't performing my job well, you sacked me because of my religion or because I made a bullying complaint a month ago.

And they might not want to accept or acknowledge that there were genuine performance reasons.

11:01
And that was actually the reason for dismissal.

So if we look at all the documents and the emails going on behind the scenes, we can say, oh no, the employer sent emails back and forth between managers going, unfortunately they're just not improving. These are some real performance issues we're having here.

11:17
It's got nothing to do with these protected reasons.

And that will provide really strong evidence to help defend that claim.

So start gathering your documents together.

And if you're dealing with a lawyer, we would then give you some strategies and some advice on how we can put your claim together in the strongest way.

11:34
And obviously, in Fair Work, you get the opportunity to put in your written response.

And this is where we'll often attach key documents, we'll put in written submissions saying this is the reason for dismissal, here is the evidence, and hopefully, if you get to conciliation, having that strong response together should help you have really productive discussions.

11:53
Yeah, yeah.

But if there is some risk there.

Yes.

As lawyers, we'll also be giving you advice on that because sometimes, maybe the employee has taken a lot of sick leave recently, or the employer is going, oh, I wish Bob would stop taking so much sick leave.

12:09
He's always off work and he's got this alleged mental illness.

And then there's documents or things that reflect that.

Then suddenly Jess and I might be starting to get a bit more worried and we go, look, there's some documents here that don't really help us so much in a legal sense.

12:26
So we might have to have a bit more of a discussion around how we want to try to resolve this conciliation and deal with this claim.

Because you're saying it's for misconduct, but here we've got all these emails where you're having a bit of a whinge about his access to sick leave and so on.

12:43
So we can make that kind of strategic assessment once we see the lay of the land.

Yes, yeah.

Well, I wanted to ask then, I guess, that second scenario.

Let's say you're an employer, you get the claim and it's pretty clear that there's not much of a leg to stand on.

13:00
The shield is very weak.

What do you typically do in those type of scenarios?

Minimise the damage, I guess.

Yeah, yeah, yeah.

So look, if there's not much of a leg to stand on, it's really talking, all right, how do we resolve this in a way that protects your business, protects your legal position?

13:18
And we'll be giving advice that, going, you've got some liability here.

If this went to court, these could be the penalties that you're faced with, or these could be the types of legal fees you might be paying if this goes all the way to a full trial.

And to avoid the cost and inconvenience of proceedings, whether that be in court or Fair Work, this is what we recommend is the range that this matter should resolve at.

13:42
And, of course, as you know, as advocates, we're going to try to get you the best outcome.

But you might be saying, look, it's very unlikely you're going to walk away from this without paying something.

Yes, yeah.

In addition to reputation loss, other damage and time and all that stuff.

Exactly.

13:57
And other consequences.

Exactly.

I wanted to ask about AI.

It might sound a bit unusual to ask about AI here, but I've seen all sorts of interesting cases where people have argued that tax is unconstitutional or the courts don't exist or this type of stuff.

14:16
And it seems that that's perhaps becoming more prevalent with ChatGPT and things like that, that people can run their own claims trying to quasi become lawyers.

Is that playing out at all, or is it too soon to tell whether that's a contributor towards this big increase?

14:34
And if it is, how do you deal with that when you're up against an unrepresented litigant?

It's always challenging when you're dealing with someone who's representing themselves because they may feel that they've got a really strong case, but they don't understand how that intersects with the law.

14:51
Or they might feel hard done by. They might feel like the employer's done the wrong thing by them, and there may be aspects of truth in that.

Nobody enjoys being dismissed, whether it be for unfair dismissal or other protected attributes.

15:07
And so it's always complex when you're dealing with someone who hasn't got that legal representation.

We're definitely seeing people using AI a lot more in their responses and in their applications.

I actually had one recently where all the correspondence we were getting from the employee was clearly generated by AI, and it was right in parts, but also very fundamentally wrong in parts.

15:40
And trying to convince someone that AI is giving them the wrong advice is quite challenging because they were assured by AI that this was the right path and that they were entitled to all of these things that they just weren't entitled to at law.

And, of course, we all know that it depends how you've prompted the AI and what parameters you've put on it, particularly if you're using a free version, it may not be that reliable.

16:06
And so they were saying, I'm entitled to this, I'm entitled to that.

And we're saying you're actually not entitled to any of those things.

But you're then up against an additional barrier of they don't have that legal representative saying, no, you're not entitled to those things.

These are the things that you should be claiming because AI is reinforcing that to them.

16:27
And depending on how you've asked the question, if you've asked, am I entitled to this? And AI says, yes, of course you're entitled to it.

It's very hard to move them from that position.

So we're definitely seeing it more commonly.

And unfortunately, we're sometimes seeing it with paid advocates in the Commission.

16:48
Someone doesn't need to be a lawyer to be able to be an advocate and they can represent someone.

And sometimes it's union positions, but sometimes it's just someone who.

HR adviser.

Or yeah, an HR adviser or an advocate of some other form.

17:08
And sometimes, more often, they're not legally trained.

And we're often seeing those advocates using AI in a way that can be quite destructive because a little bit of knowledge.

Is dangerous.

17:24
Yeah, it's very dangerous.

I think Katherine and I had one where we were getting pages and pages and pages of very unhelpful rhetoric from this paid agent who was using AI to generate all of his material and wasn't really engaging with the legal issues that we were trying to resolve.

17:48
And unfortunately, it cost our client a lot more time and energy and money.

You've got to read all that too.

Deal with that.

Yeah, try to cut through the noise and all the unhelpful statements and actually try to get to the heart of the matter.

18:03
Yeah, definitely.

Katherine, let's say I get a claim, I'm an employer again, I'm assessing, okay, what's the damage to my business?

What types of claims or what sort of monetary sums are we looking at or needing to consider here?

So if the claim that's been brought is an unfair dismissal claim, compensation is capped at six months wages or half the high income threshold, whichever is lower.

18:28
So in that way, it's helpful because we know absolutely this is the upper limit that you could be looking to pay.

And actually, if you look at the average damages on the Fair Work Commission's website where matters settle, it's usually more around the eight-week range, sometimes a bit more, sometimes a bit less.

18:44
They published the settled.

They used to publish that, yeah.

So you can actually get some really good data online about where these matters might settle in the ballpark.

Of course, every matter's different and sometimes you just have someone going, no, this is what I want to resolve it.

And as an employer, you're going to go, well, am I going to pay this or am I going to back my case and run it all the way?

19:04
So average eight weeks of settlement and capped at maximum six months.

Six months, exactly.

But if you're looking at a general protections claim, very different.

So compensation is uncapped.

So if, for example, you had someone who's brought a claim and maybe they're saying you sacked me for a reason that's prohibited under the Fair Work Act.

19:26
And I've had a mental health breakdown because of that, and I don't think I'm going to be able to work for two years, then the claim that they might be seeking is potentially two years wages that they've lost out on, and also what we call general damages, which is damages for the hurt and humiliation of that process.

19:45
And then potentially, if you get to a court, and of course all the costs that go along with that, you can also be faced with penalties for breaching the Fair Work Act.

And the penalties themselves can be, and we're talking the maximum penalties in the hundreds of thousands potentially, or maybe tens of thousands depending on the severity of the breach.

20:05
So the general protections landscape is very different.

And if you've got someone, if you're faced with a claim that may have legs and merit, it's important that those claims are taken very seriously because these are the claims that can really cost a business a lot of money.

20:21
And that's where lawyers like us can look at it, tell you what your risk could be if it gets too far down the track, and give you a ballpark of how to resolve it and what the best way to do that is.

It's also important to note that there is a reverse onus in general protections claims.

20:40
So in unfair dismissal, it's on the employee to demonstrate that they were dismissed unfairly.

Obviously the employer wants to demonstrate that they were dismissed fairly, but it's on the employee to demonstrate that.

In general protections there is a reverse onus.

20:56
So that means that the employer has to demonstrate that they were not terminated because of a protected reason.

And if you don't have good evidence, even if that is the case, even if there were no attributes or workplace rights in your mind when you dismissed the person, if you don't have evidence of that, it becomes very challenging.

21:18
Exactly.

That reverse onus, so the reason general protections we think are probably on the rise, and that 27% is really the general protections landscape.

Unfair dismissals remain relatively stable and they'll always exist, but general protections are on the rise because the compensation is so much more significant than in unfair dismissal.

21:46
Unfair dismissal, you'll often be settling them for, for a more junior employee, two weeks, four weeks.

If it's someone more senior, eight weeks, 10 weeks.

They're not huge sums, whereas general protections can be very significant.

22:04
And I think there's an increase as well in the complexity of those cases.

So we're seeing them with a lot of cases that have an intersection between mental health issues.

Yes, often there's a WorkCover aspect of it.

There may be a discrimination aspect of it, and there will be an intersection between all of them, yes.

22:24
And if someone's having a mental health crisis, they may not be acting rationally.

And so you're often dealing with multiple claims at the same time.

Someone may have brought a WorkCover claim, they bring a general protections claim, they've brought a discrimination claim, and there's nothing that prevents them from bringing those multiple claims.

22:42
And then you're dealing with multiple landscapes at the same time.

So they can be very complex matters to deal with.

And obviously there's always the employers thinking about the cost, the time and the reputational damage.

It's also important to note that legal costs are not generally recoverable in either of these jurisdictions.

23:02
So if the claim has been brought under the Fair Work Act, which these claims are, you can't recover your legal costs as a right.

So even if you go as the employer all the way through and the court vindicates you, there was no basis for this claim at all.

23:19
You still have to stop.

Pay your fees.

Pay for your own fees.

And that can be a significant amount, particularly if the claim's been brought in the Federal Court.

You're looking at full Federal Court fees.

It can be a huge amount of money to get to a pretty unsatisfactory outcome in the end, to find that you were vindicated.

23:37
But it's cost you tens of thousands of dollars, if not hundreds of thousands of dollars.

And the advantage, of course, of an unfair dismissal claim is that it's dealt with within the Commission.

The fees are usually fairly reasonable.

23:54
Parts of it can be done by the employee themselves, and it's arbitrated within that landscape.

And so the costs of that are a lot more sensible.

I've always thought it's so interesting, right, that you've got the unfair dismissal, okay, it's capped.

24:11
The settlements are pretty modest. You've got the tight timeframes, all this sort of stuff.

And then on the other hand, you've got the general protections claim that are so wide that there is, like being unfairly dismissed, it's still jarring.

It's still something you wouldn't want employers to, you know, you wouldn't want to encourage.

24:30
But it seems that there's a real massive gulf that's possibly getting wider between the two.

Yeah, in terms of how lawyers around town will run these types of claims, absolutely.

Because often there's just such a real strategic advantage if you're an employee advocate for finding a way to run your claim through the general protections regime.

Because potentially, as you say, you open up this much broader access to compensation.

24:56
There's a whole number of different rights that are protected under the Fair Work Act, from making bullying claims to accessing leave to discriminatory attributes.

So often you'll see that advocates will find ways, sometimes quite contrived.

Yeah, yeah.

To be able to run their claims through that jurisdiction just to be able to access the broader range of remedies.

25:12
And yeah, the benefit, I guess, with unfair dismissal is access to justice.

It allows a lot of employees to run these matters themselves.

And as we say, often employers will be really upset when they get an unfair dismissal claim.

25:33
And sometimes we just have to say, look, this is one of the costs of doing business, and we can work with you to wrap this up.

Most matters will settle at conciliation. Let's deal with it and then move forward.

What about other types of matters?

I guess you'd probably have contractual disputes over employment contracts, bonuses, maybe even employee equity.

25:56
I imagine those are less in number, but probably more complicated than either the unfair dismissal or the general protections claims.

Definitely more complicated.

We don't see nearly as many of them.

It's important to note as well that someone can actually bring a general protections claim without dismissal.

26:15
So you just need to have had an adverse action taken against you as an employee to bring that.

And that might be a demotion or a reduction in duties or things like that.

That can all.

So you don't actually need to be even dismissed to bring a general protections claim.

26:33
But absent that, contractual claims can be very expensive.

Particularly if someone's going to be bringing a contractual claim, they're typically doing it because there's a lot on the line, significant bonuses, things like that.

You know, we've seen them where there's bonuses in the hundreds of thousands.

26:50
People are going to litigate about that because it's worth it.

Whereas a general unfair dismissal case, you'll go to conciliation, you'll settle it, you'll move on.

A contract claim, you're going to be in one of the superior courts typically, and then you've got all the costs that are attached to that.

27:11
Yeah, if it's not tied to the Fair Work Act, costs will incur in those jurisdictions as well.

And so both parties are up for the other.

It's general litigation.

Yeah.

So it's general litigation.

We're often seeing a lot more claims around confidential information, restraints of trade, things like that.

27:29
And again, they can be quite significant depending on the litigation.

Discrimination claims, we're seeing increasingly more of those, particularly around mental health issues and work stresses, that sort of psychological safety piece, which I think is going to become more and more prevalent.

27:55
They're more complex claims to run from the employee perspective, but they're a lot more complex from the employer perspective to deal with as well.

And often with the compensation being sought, again, is into the hundreds of thousands, particularly around that general damages piece.

28:13
So general damages, effectively tax free because it's for your hurt and humiliation, and they can be well into the hundreds of thousands.

So that's often a large bulk of the claim.

The rest is sort of economic loss and that's tied to what have you lost, what wages, things like that.

28:32
It's fairly quantifiable, but the general damages can be pretty.

That's the open-ended goldmine.

Yeah, not quite open-ended, but it's getting pretty close.

Yeah.

Jess and Katherine, thank you again for your time speaking to me today about defending a Fair Work claim.

One of the things that I've learned is that as an employer getting those claims, it's critical to act fast.

28:54
Work out, is this a strong case? Is this a lesser case? And then having a firm action plan about what to do going forward.

If anyone has any queries, feel free to reach out directly to Jess or Katherine.

Thanks once again.

Thanks, Andrew.

Thanks, Andrew.