Unreasonable conduct by employer proves costly

In matters before the Fair Work Commission (the Commission), the standard rule is that each party bears their own costs. However where:

• an application is made vexatiously or without reasonable cause; or
• the application has no reasonable prospects of success; or
• a party has caused costs to be incurred due to an unreasonable act or omission in the conduct or continuation of a matter,

the Commission may make order for costs.

Further, if an employer unreasonably defends an unfair dismissal (or other) claim, the employer may be at risk of a costs order being made against them, as outlined in the case summary below.

Background

David Johnston (the Employee) was engaged by Macquarie Technology Group International (MTGI). The Employee's employment was terminated by MTGI in about January 2014 for allegedly abandoning his employment while on personal leave to care for his four children after the premature birth of his fifth child.

The Employee lodged an unfair dismissal claim. The Commission found the dismissal was harsh, unjust or unreasonable and the Employee was awarded 20 weeks' compensation.

A cost order of $8,500 was also made against MTGI in favour of the Employee on the basis that MTGI's actions during the proceedings were unreasonable. The Commission found that costs were unnecessarily incurred when it should have been reasonably apparent to MTGI that its response to the application had no reasonable prospect of success.

Examples of MTGI's conduct included its:

• failure to provide evidence in support of its submissions and response to the application;
• conduct during the proceedings, for instance constant interruptions and disregard for the Commission's Rules, seeking dismissal of the application as an abuse of process, making allegations of misconduct against the Employee' solicitor and the Commission, making and then withdrawing offers of settlement and seeking to adjourn proceedings without reasonable cause; and
• misleading the Commission by stating it had retained legal representation when it had not.

In making the costs order the Commission noted it was "…mindful of the cautious approach that the Commission should take in awarding costs and the right that a respondent has in proceedings before the Commission to defend a claim against it" but that MTGI had "crossed the line between what might be described as a robust defence to an unfair dismissal claim and an attempt to harass, intimidate or embarrass the applicant and the Commission in such a way as to prejudice the fair hearing and determination of the matter."

Appeal

MTGI appealed the cost order to the Full Bench on public interest grounds, including that it had not been afforded procedural fairness. Finding The Full Bench found there was no procedural error in the conduct of the initial hearing or the approach taken to the costs determination. Further the appeal did not raise any issues of importance, public interest, novel or exceptional issues. Accordingly, permission to appeal the costs order was declined and the appeal dismissed.

Lessons

Generally, in applications before the Commission, each party will bear their own costs. Nevertheless, it is important to bear in mind that in certain circumstances, the Commission has the discretion to order costs against a party to the proceedings, including employers, in the event they:

• unreasonably defend (or pursue) a claim for which there is no prospect of success; or 
• act in a vexatious manner - for instance, the purpose of the response (or application) is to harass, annoy, embarrass or is otherwise for another reason which does not form part of the proceedings; or
• cause unnecessary costs to be incurred by undertaking an unreasonable act or omission, or due to the conduct or continuation of the matter - for instance, not attending scheduled hearings.

Critically, parties to proceedings before the Commission should ensure they conduct both the proceedings and themselves in an appropriate manner to avoid potential cost orders being made against them. This may include amongst other measures, undertaking an appropriate assessment of the merits of the claim, ensuring adherence to relevant directions and engaging in appropriate conduct in the matter including between the parties and the Commission. It is preferable that parties obtain legal advice.

If you would like to know more about this case or potential costs orders generally, please contact National Workplace Lawyers on +61 2 9233 3989.

National Workplace Lawyers

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