Cost awards in unfair dismissal cases – part 1

Being in business is hard work at the best of times; having to juggle the needs of customers, the demands of financiers and earning a dollar at the end of the day.  One of the most demanding aspects for many business owners is managing the performance of employees.  Given the industrial relations landscape in Australia, employers need to take care if wanting to terminate an employee because of misconduct or ongoing poor performance, lest they risk an unfair dismissal claim.

The unfair dismissal process

Despite the best efforts of employers in managing the dismissal process, many claims for unfair dismissal are still pursued by aggrieved employees before the Fair Work Commission (FWC).  While most unfair dismissal claims are settled at the conciliation stage, it is not uncommon for unmeritorious unfair dismissal claims to still be pursued before the FWC by way of a formal hearing.

Employers in response have little option but to incur costs in defending such claims so as to limit exposure to compensation orders of up to twenty-six (26) weeks of the employee’s wage at the time of termination.

In the event the employer prevails in defending an unfair dismissal claim at a formal hearing, the question asked is what costs is the employer entitled to recover from the unsuccessful employee complainant?

Fair Work Act provisions

The Fair Work Act 2009 (Qld) (FWA) is the piece of legislation that governs, together with any relevant modern award, the employment relationship for most employers and employees in Australia.

Within the context of an unfair dismissal claim, under the FWA the starting position is that a complainant employee or respondent employer must obtain the leave of the FWC in order to be legally represented at a hearing.^[1]   In other words, each party in the first instance is expected to conduct their own case.

Even if an employer is not legally represented, it will potentially still incur significant costs in defending an unfair dismissal claim in a formal hearing.  For example, evidence is usually led by way of affidavit from each witness to be called in support of the case.  Considerable time will be involved in preparing the required affidavit evidence.  In addition, any witness swearing the affidavit to be relied upon at the hearing will be required to attend the hearing to tender their affidavit evidence and to be cross-examined upon it.

Considering the number of matters dealt with by the FWC on a daily basis, even a simple unfair dismissal case with only one complainant and one respondent can be expected to consume at least half a day.  That is wasted, unproductive time.

Costs

If the employer is successful in defending the unfair dismissal claim, one would assume the employer would be entitled to some type of compensation for the loss and inconvenience incurred in defending the claim.

Unfortunately, the starting position is that this is not the case.  Under the FWC, a party to an unfair dismissal application, be it the complainant employee or the respondent employer, must bear its own costs in relation to a matter.^[2]  This starting position applies regardless of whether or not a party is legally represented.  Costs can however be ordered against a party if the FWC is satisfied that:

• the applicant or the respondent was acting vexatiously or without reasonable cause; or
• it should have been reasonably apparent to the relevant party that they had no reasonable prospect of success.^[3]

Costs can also be ordered against a party if the FWC is satisfied the party caused those costs to be incurred because of an unreasonable act or omission in connection with the conduct or continuation of the matter.^[4]  Unfortunately for an employer successfully defending an unfair dismissal application, the bar to get a costs order is in most cases too high.

Takeaways

Costs will in most, but not all cases, will not be awarded against the unsuccessful party in an unfair dismissal application.

Links and further references

Legislation

Fair Work Act 2009 (Qld)

Further information on unfair dismissal application

If you need advice on unfair dismissal claims, contact Dundas Lawyers Gold Coast for a confidential and obligation-free discussion:

Disclaimer

This article contains general commentary only.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

[1] Section 596.

[2] Section 611(1).

[3] Section 611(2).

[4] Section 400A.

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