Adverse Action in the Workplace: A Practical Guide for Australian Employers and Employees

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When managing a business or navigating your career, it’s important to understand what constitutes adverse action in the workplace. In Australia, adverse action covers any conduct that disadvantages an employee or prospective employee – from unjust dismissal and demotion to discrimination or even misrepresenting the nature of an employment relationship. Whether you’re an employer, an employee, or a prospective team member, knowing your rights and obligations under the Fair Work Act is essential to fostering a fair and respectful working environment.

What Does Adverse Action Mean?

Adverse action refers to behaviours that negatively impact the terms, conditions, or prospects of an individual’s employment. These can manifest in various ways and may include disciplinary action, changes to job roles or pay, or even non-financial harms such as hostility or the alteration of an employee’s status. The concept is central to general protections claims under Australian law, which provide a mechanism for employees to challenge actions taken against them simply because they have exercised a workplace right.

Definition and Scope of Adverse Action

The term “adverse action” is broad and encompasses a range of actions that could harm an employee’s position. It isn’t limited to termination alone. For example, adverse action can include:

Key Elements of Adverse Action

Detrimental Changes to Employment: This can involve demotion, reduction in pay or hours, or even a change in responsibilities that negatively impacts your career growth.
Dismissal or the Threat of Dismissal: Terminating an employee’s position without a valid reason may not only be wrongful but falls under the umbrella of adverse action.
Removal of Benefits or Accrued Entitlements: Actions that strip away benefits such as bonuses, shift allowances, or leave entitlements can also be considered adverse.
Misrepresentation of the Relationship: Altering the employment relationship to reclassify an employee as an independent contractor – a practice known as sham contracting – is expressly prohibited.

These examples illustrate that adverse action is not confined to what might traditionally be viewed as “punishments”. Instead, it covers any conduct that causes a disadvantage, whether by altering contractual terms or by creating a hostile work environment.

Protected Attributes and Activities

Under the Fair Work Act and other relevant legislation, people are broadly protected from adverse action that is linked to protected attributes or in response to exercising workplace rights. Some of the key protections include:

Protected Attributes: Discrimination on the basis of race, gender, age, disability, or sexual orientation is strictly prohibited. If an employer takes action because of an individual’s personal characteristics, this is likely to be viewed as unlawful.
Exercising Workplace Rights: Whether you are raising safety concerns, lodging complaints, or even joining a union, the law safeguards you against any retaliatory adverse actions.
Engaging in Industrial Activity: Employees who participate in strikes, protests, or other forms of industrial action are protected from being penalised.

It is also important to note that protections extend not only to current employees. Prospective employees can also be shielded from adverse action during the recruitment process. This means that any negative treatment or discrimination when applying for a job could lead to a valid claim in relation to adverse action.

For further guidance on protecting employee rights – especially in matters of workplace harassment and discrimination – exploring available resources can be beneficial.

Sham Contracting and Misrepresentation

One common scenario that courts scrutinise is sham contracting. This occurs when an employer deliberately misrepresents the true nature of the working relationship. In practice, an individual who is, in effect, an employee might be incorrectly classed as an independent contractor. This misrepresentation can strip workers of their entitlements and protections under employment law.

Reclassifying an employee can lead to a significant disadvantage – not only by denying access to benefits such as unfair dismissal protections and leave entitlements, but also by altering the obligations and expectations placed on both parties. It’s an area where employers must exercise caution and ensure that any restructuring of relationships accords with legal requirements.

Filing a General Protections Claim

If you believe you have been subjected to adverse action, understanding the process for filing a general protections claim is crucial. The general protections provisions of the Fair Work Act are designed to offer a pathway to seek redress when an employee is unfairly treated.

Steps to Make a Claim

Timely Submission: Claims must be lodged within strict timeframes. For instance, in cases of dismissal, employees typically have 21 days to file a claim with the Fair Work Commission. For more information, you may wish to visit the Fair Work Ombudsman website.
Notice and Response Period: Once a claim is filed, the employer is given notice and generally has up to seven days to respond, either by listing objections or by clarifying the grounds on which the adverse action was taken.
Investigation and Resolution: The commission may conduct an investigation and, should the claim be substantiated, dictate remedies such as reinstatement or monetary compensation. In some cases, penalties may also be imposed.

Understanding the process can help both employees and employers ensure they follow the proper procedures. It also underscores the need for employers to have sound employment contracts and clear internal policies that comply with all relevant laws.

Outcomes and Penalties

The implications of adverse action aren’t merely theoretical. If found liable under a general protections claim, an employer may face a range of outcomes including:

Reinstatement: The court or commission may require that an employee be reinstated to their previous position – complete with back pay for any losses incurred.
Compensation: Monetary awards may be granted to the affected employee as compensation for lost wages and other associated damages.
Penalties: In serious cases, significant penalties may be imposed. These can be as high as $82,500 for companies or $16,500 for individuals, per contravention. Such penalties are intended to serve as a strong deterrent against any practice that undermines workplace fairness.

It’s essential for employers to take these legal remedies seriously. Not only do they protect individual employees, but they also safeguard the overall reputation and operational integrity of the business.

Understanding the Employer’s Perspective

From an employer’s standpoint, mitigating the risk of adverse action claims involves maintaining a robust framework of policies and practices. This means ensuring:

Clear Communications: All changes to employment conditions should be communicated clearly and transparently to staff.
Fair Decision-Making: Any actions that might alter an employee’s role or benefits should be based on legitimate, documented business reasons.
Regular Review of Employment Documents: It is wise to continually update contracts and company policies – especially if you’re operating as a sole trader or transitioning to a larger corporate structure – to reflect any changes in legislation or business strategy. For additional guidance, you might consider our quick tips for registering a company.
Compliance with External Regulations: Staying informed of external obligations – such as those highlighted by Fair Work Australia and the Fair Work Commission – is crucial. Regular training or consultations with legal experts can help ensure that your policies meet the required legal standards.

Establishing these practices not only minimises the risk of encountering claims but also promotes a positive and supportive workplace culture. Such measures are part of broader considerations that might overlap with issues like the regulations affecting your corporation and are key to sound business operations.

How to Protect Your Business from Adverse Action Claims

Prevention is always better than cure. Here are some practical steps you can take to reduce the likelihood of adverse action claims:

Implement Fair Policies: Develop and regularly review your workplace policies to ensure they comply with the latest employment laws.
Provide Training: Educate managers and HR staff on identifying and avoiding behaviours that could constitute adverse action. Address topics such as the difference between employee and contractor roles, ensuring they understand the legal implications of misclassifying staff.
Document Decisions: Keep detailed records of performance reviews, disciplinary actions, and employee communications. This documentation can be vital in defending your decisions if a claim is brought against your business.
Seek Professional Advice: Consider routine consultations with a legal professional specialised in employment law. This proactive measure can help you identify any potential pitfalls before they become significant legal issues.

By taking these steps, you not only protect your business but also reinforce a culture of fairness and transparency that benefits everyone in the workplace.

Key Takeaways

Adverse action covers any conduct that detrimentally affects an employee’s terms or conditions of employment.
The scope of adverse action is broad, including dismissals, demotions, and misrepresentation of employment relationships through practices such as sham contracting.
Employees and prospective employees are protected when they exercise their workplace rights or are subject to discrimination based on protected attributes.
The process for filing a general protections claim involves strict timelines and can result in outcomes like reinstatement, compensation, and significant penalties.
Employers can mitigate risks by implementing fair, transparent policies and maintaining up-to-date employment contracts – learn more about what is a contract and what regulations affect your corporation.
Regular legal consultations, such as those suggested by our quick tips for registering a company, can ensure ongoing compliance and protect your business from potential legal pitfalls.

Understanding and addressing issues in adverse action is not just about legal compliance—it’s about fostering a respectful and equitable work environment. Whether you’re an employer striving to improve your workplace culture or an employee seeking to understand your rights, being informed is the first step toward proactive and positive change.

If you would like a consultation on adverse action, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.

Alex Solo

Alex is Sprintlaw’s co-founder and principal lawyer. Alex previously worked at a top-tier firm as a lawyer specialising in technology and media contracts, and founded a digital agency which he sold in 2015.

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