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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If you manage people in Australia, you’ve probably heard the term “adverse action.” It’s a core concept under the Fair Work Act that can trip up even well‑intentioned employers if decisions aren’t handled carefully.
In plain English, adverse action is about what you, as an employer, must not do to a worker because they have a workplace right, engage in industrial activity, or because of protected attributes (like race, sex, age, disability and more). Claims can be expensive, stressful and time‑consuming - but they’re also avoidable with the right processes and documentation.
Below, we define adverse action from an employer’s perspective, explain how it’s different to unfair dismissal, share common real‑world examples, and set out a practical, step‑by‑step approach to manage performance, restructure, or deal with complaints without falling into legal risk.
What Is “Adverse Action” In Australia (Employer Definition)?
Under the Fair Work Act’s general protections, adverse action is any action that injures or disadvantages a worker in their employment, or threatens to do so, because of a prohibited reason. For employers, that includes:
- Dismissing an employee.
- Demoting, disciplining, or altering their position to their prejudice (for example, removing duties, cutting hours, or moving them to a less favourable roster without a legitimate reason).
- Discriminating between employees.
- Refusing to hire a prospective employee for a prohibited reason.
- Taking action against an independent contractor in certain circumstances.
What makes an action “adverse” is not just the outcome, but the reason behind it. If the decision is made because of a prohibited reason, it can be adverse action even if your process was otherwise neat on paper.
Prohibited Reasons (The Triggers To Watch)
You must not take adverse action against a person because they:
- Exercise or propose to exercise a workplace right (for example, requesting personal/carer’s leave, asking about their pay, making a complaint or inquiry about their employment, or joining an industrial association).
- Engage in industrial activity (such as being a union member or participating in lawful union activities).
- Have a protected attribute (for example, race, colour, sex, sexual orientation, age, disability, pregnancy, family or carer’s responsibilities, religion, political opinion or national extraction).
- Are temporarily absent from work because of illness or injury (within legal parameters).
Importantly, the legal test looks at what was a “substantial and operative” reason for your decision. If a prohibited reason is part of the motivation, that can be enough.
The Reverse Onus (Why Your Records Matter)
In adverse action claims, the law uses a reverse onus of proof. If a worker alleges adverse action, the court will presume your action was taken for a prohibited reason unless you prove otherwise.
This is why clear, contemporaneous records - such as performance notes, consultation summaries, and well‑drafted correspondence - are crucial. Having consistent documentation that predates the dispute is often the difference between a defensible decision and a claim that gets traction.
How Is Adverse Action Different From Unfair Dismissal?
It’s common to conflate these two areas, but they’re different claims:
- Unfair dismissal focuses on whether the dismissal was harsh, unjust or unreasonable and whether a fair process was followed. The factors the Fair Work Commission considers are set out in section 387.
- Adverse action focuses on your reason for taking action. If the action was taken because of a workplace right, industrial activity, or protected attribute, that can be unlawful - and compensation is not subject to the same caps that apply in unfair dismissal claims.
Another key distinction: general protections (adverse action) claims can cover non‑dismissal situations and even prospective employees, whereas unfair dismissal is only about dismissals and has eligibility thresholds.
Common Examples Employers Should Watch For
Here are practical scenarios that often lead to allegations of adverse action if not handled carefully. The theme across all of them is the need for legitimate, documented business reasons and a fair process.
1) Cutting Hours After a Leave Request
An employee requests personal/carer’s leave. Shortly afterwards, their regular shifts are reduced. If the reduction is because they took leave, that’s risky.
How to manage: If there’s a genuine operational reason (for example, a sustained drop in demand), document the business rationale, apply criteria consistently across staff, and consult before finalising changes.
2) Disciplining After a Complaint
A worker sends an email questioning how their commission was calculated. The next day, they receive a warning for “attitude.” If the warning is connected with the complaint, it may look like adverse action for exercising a workplace right (making a complaint or inquiry).
How to manage: Separate the complaint process from performance management, assign different decision‑makers if needed, and keep written records that show legitimate performance issues pre‑date the complaint.
3) Demotion Following a Request For Flexible Work
An employee asks for flexible hours for caring responsibilities. You remove key responsibilities and reduce their status. Taking action because of family or carer’s responsibilities can be adverse action.
How to manage: Assess the request on its merits, consider reasonable business grounds, propose alternatives where appropriate, and record the operational reasons for any changes you make.
4) Restructure That “Selectively” Targets A Complainant
You’re running a genuine restructure, but one of the roles impacted belongs to a team member who recently raised an underpayment query. If the selection criteria or process target them for that reason, that’s a red flag.
How to manage: Ensure the restructure is genuine, consult as required by any applicable modern award or enterprise agreement, and apply objective selection criteria. For redundancy dismissals, check the “genuine redundancy” criteria in section 389 are satisfied (consultation and no reasonable redeployment).
5) Handling Misconduct Investigations
Standing an employee down without a sound basis or fair process, or moving straight to termination because they complained about safety, can lead to claims.
How to manage: Consider a temporary stand down or suspension only if permitted and appropriate, set out clear reasons, and run a procedurally fair process. Our guide to standing down an employee pending investigation and using a fair show cause letter can help you follow best practice.
Lawful Management Action: How To Reduce Your Risk
Good employers still need to manage performance, conduct and change. The key is to anchor your decisions in legitimate business reasons, follow a fair process, and keep a paper trail that proves your “why.”
Anchor Your Decision In Clear, Lawful Reasons
Identify the non‑prohibited reason for action (for example, capability, conduct, loss of role due to restructure, or documented performance concerns). Avoid loose statements that could be misconstrued (such as referring to someone’s leave, family situation, or complaint) in decision records or meetings.
Apply Consistent Criteria
Apply objective criteria consistently across comparable employees. If you’re changing rosters or reducing hours, ensure the same rule set applies to everyone in the cohort and record how you applied it.
Follow Procedural Fairness
Give the employee clear particulars of the concerns, provide relevant evidence, allow a reasonable time to respond, and genuinely consider their response before deciding. This is standard in unfair dismissal cases and also supports your position in an adverse action dispute.
Keep Strong Documentation
- Use a tailored Employment Contract for each role that sets expectations, duties and processes.
- Back it up with practical workplace policies covering performance, misconduct, discrimination, complaints, and leave.
- Maintain dated notes of coaching and performance discussions, consultation records in restructures, and copies of warnings and responses.
If you are considering redundancies, it’s sensible to get redundancy advice early so your process aligns with legal requirements and applicable awards.
Train Your Leaders
Most general protections claims start with a clumsy conversation or email. Train supervisors to avoid casual comments about protected attributes or workplace rights, and to escalate sensitive decisions for HR/legal review.
Don’t Ignore Complaints
When an employee makes a complaint or inquiry about their employment, treat it seriously. Acknowledge it, investigate where appropriate, and keep that process separate from any unrelated performance steps. Mixing them blurs your reasons and increases risk.
Step-By-Step Process Before You Take Action
Use this practical sequence when you’re considering disciplinary action, changing hours/rosters, or restructuring. It’s designed to help you avoid adverse action risk while still managing your business.
1) Identify the Legitimate Reason
Write down your genuine business reason (performance, conduct, operational change). Make sure it doesn’t reference an employee’s complaint, leave, union membership, or a protected attribute. Sense‑check with another manager or HR.
2) Check For Red Flags
Ask yourself: Has the employee recently exercised a workplace right or raised a complaint? Could we be seen as acting because of that? If there’s any perceived link, slow down and separate processes. Consider whether another decision‑maker should handle the action.
3) Gather And Organise Evidence
Collect performance data, customer feedback, incident reports, or financial/operational evidence for a restructure. Ensure your documentation predates the decision and is internally consistent.
4) Consult And Communicate
For performance or conduct matters, give particulars, provide evidence, invite a response (and a support person if appropriate), and genuinely consider it. For restructure, consult in line with any applicable industrial instrument, and explore redeployment. Cross‑check your approach with the “genuine redundancy” rules in section 389.
5) Consider Interim Measures
In misconduct matters, you may need temporary stand down or suspension while you investigate. Only do so where appropriate and permitted, with clear written reasons. Our guide on standing down pending investigation outlines the guardrails.
6) Decide And Confirm In Writing
Make a decision only after weighing the response and evidence. Confirm the outcome in writing, state the legitimate reasons clearly, avoid prohibited language, and set out next steps. If dismissal is on the table, align your correspondence with an employee termination documents suite that reflects your policy settings.
7) Keep Records
Save your notes, letters, consultation records, and internal approvals. If a claim arises, these documents will be central to showing your reasons were lawful and genuine.
What Happens If An Employee Raises An Adverse Action Claim?
General protections claims can arise where an employee alleges you took adverse action for a prohibited reason. If the claim relates to dismissal, applications usually start with the Fair Work Commission and need to be lodged quickly (there are short time limits). Non‑dismissal claims can go to court after a conference or where settlement isn’t reached.
Possible outcomes include orders for compensation, penalties, reinstatement, or other remedies. Claims can also name individuals (such as managers) who were “involved” in a contravention, which is another reason to train leaders and keep your processes robust.
Most matters settle through conciliation when employers can show a sound business reason and a fair process. Strong documentation significantly improves your position.
Best‑Practice Documents For Employers
The right contracts and policies won’t just help you run the business - they’re essential evidence if you need to show your actions were for lawful reasons and implemented fairly. Consider:
- Employment Contract: Sets clear duties, hours, reporting lines, performance expectations and disciplinary processes for each role.
- Workplace Policies: Practical rules for conduct, performance management, discrimination, grievance handling, and investigations, so managers act consistently.
- Performance Management Framework: A simple escalation pathway (coaching, informal feedback, written warning, final warning) and templates like a structured show cause letter.
- Restructure/Redundancy Toolkit: Criteria matrix, consultation script, redeployment checklist and guidance aligned with genuine redundancy requirements and any applicable award.
- Investigation Protocols: Scripts and guidance for interviews, and if needed, a lawful pathway for standing down pending investigation.
FAQs Employers Ask About Adverse Action
Can I still manage performance or dismiss a poor performer?
Yes - lawful management action is fine when it’s based on legitimate reasons and you follow a fair process. Keep the focus on performance or conduct, not on a workplace right the employee exercised. Clear records and a fair hearing go a long way toward de‑risking your decision.
Is a restructure automatically safe from adverse action claims?
No. Restructures must be genuine, follow consultation obligations, and use objective criteria. If a prohibited reason influences who is selected for redundancy, that’s risky. Align your approach with “genuine redundancy” under section 389 and get redundancy advice early.
How do unfair dismissal rules interact with adverse action?
They are separate regimes. Even if a dismissal process is procedurally strong for unfair dismissal purposes (see the factors in section 387), you still need to ensure the decision wasn’t made because of a prohibited reason.
What about prospective employees and contractors?
General protections also cover prospective employees and certain contractors. For example, refusing to hire someone because of union membership or a protected attribute can be adverse action.
Key Takeaways
- Adverse action is any action that disadvantages a worker because of a workplace right, industrial activity, or protected attributes - your “reason why” is central.
- It’s different from unfair dismissal; general protections focus on motive and can apply to non‑dismissal scenarios with potentially significant remedies.
- Reduce risk by anchoring decisions in legitimate business reasons, applying consistent criteria, following procedural fairness, and keeping solid records.
- Before acting, run a simple checklist: identify the lawful reason, spot red flags, gather evidence, consult, consider interim measures, decide, and document.
- Core tools such as an Employment Contract, practical workplace policies, investigation/discipline templates, and a restructure toolkit help you operationalise compliance.
- When in doubt - especially around restructures, investigations or dismissals - get advice early to prevent avoidable general protections claims.
If you’d like a consultation on managing adverse action risks in your workplace, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.
