Decision sends warning to employees pursuing unmeritorious claims

The Federal Circuit Court recently made a costs order to the total of $150,000 (including indemnity costs), against an ex-employee who pursued an unmeritorious discrimination claim against her employer.

Background

The employee was engaged as a full time software engineer for IBM Australia Limited (IBM). 

In July 2008, the employee commenced maternity leave, following which she returned to work.  It was agreed with IBM, that the employee would work part time, 20 hours week from home on a flexible basis.

In about March 2010, IBM became concerned with a decline in the employee's work performance and productivity. It also became apparent that the employee needed to "skill up" to meet a change in direction of the project she was involved in. 

Over subsequent months, the employee's performance failed to improve and eventually in March 2014, her employment was terminated due to poor performance. 

The employee commenced proceedings alleging that she was amongst other factors, discriminated against due to her gender and her status as a young mother, she was required to work in excess of 20 hours per week and was given a workload that required her to work in excess of 20 hours per week.

The employee was self represented during the proceedings. Prior to the full hearing of the matter, IBM made a without prejudice settlement offer to the employee in the form of a Calderbank offer. The without prejudice settlement detailed to the employee the difficulties with her case and offered her the opportunity to discontinue on the basis that each party pay its own costs as well as providing for mutual releases.

If a Calderbank offer is not accepted and the Court finds in favour of a respondent, or finds in favour of the applicant but for an amount less than offered in the Calderbank, the Court may, on the respondent's application, order indemnity costs against the applicant requiring the applicant to pay the respondent's full legal fees from the date of refusal of the offer rather than just on the scale for legal costs set by the Court.  

Finding

The Court dismissed the proceedings and found that the applicant had "embellished her evidence and exaggerated her claims in order to try and advance her interests in respect of the proceedings…"

Further, IBM had not subjected the employee to any unlawful conduct in contravention of relevant discrimination legislation. To the contrary the Court was "impressed by the level of care and concern for the applicant that each of those involved in her management displayed despite in what were obviously difficult circumstances in dealing with the applicant."

The employee was subject to a costs order of $150,000 in favour of IBM which included indemnity costs as the offer put to the employee was reasonable in the circumstances and the employee acted unreasonably in refusing the reasonable offer put to her.

Lessons

The decision reinforces that under Federal anti-discrimination laws, employers may be able to pursue all their legal costs against an employee, if the;

• employer has made a without prejudice offer to the employee and in that offer has identified the weaknesses in the employee's case and makes it clear that the employer will pursue indemnity costs if the offer is not accepted; and
• successfully defends the claim or is ordered to pay less than the amount previously offered in the without prejudice offer.

If you would like to know more about this case, please contact National Workplace Lawyers on +61 02 9233 3989.

National Workplace Lawyers

Note — this is for information purposes only and does not purport to be comprehensive or to render legal advice.