Adverse Action ‘Decision-Makers’ And Update On Enterprise Bargaining Developments

In a recent decision of the Federal Court of Australia, the Full Court reviewed the question of who is a ‘decision-maker’ and therefore whose state of mind requires examination when the employment of an employee is terminated, and adverse action is alleged

Background to adverse action decision

An employee of a major Australian bank (Bank) was employed as a Manager, responsible for the Bank’s internet banking platform (Manager).  On 21 March 2017, the Bank stood her down and two months later, terminated her employment.

The Manager made an application for adverse action, claiming that her employment had been terminated because she had exercised a workplace right, namely making complaints and inquiries in relation to her employment.  In response, the Bank cited the poor performance of the internet banking platform and the Manager’s behaviour in the workplace as reasons for the termination of her employment.

First instance decision

During the initial hearing at the Federal Court, the process of decision-making by the Bank’s General Manager-Digital (General Manager) was examined in detail.  It was the General Manager who had articulated the Bank’s decision to the Manager regarding her stand down and subsequent termination of employment.

The Federal Court held that the state of mind of the Bank’s Head of Digital Platforms and Delivery (Line Manager), was of lesser significance as he was not ‘relevantly a decision-maker’. That is despite being the Manager’s line manager who recommended to the General Manager that the Manager be stood down and subsequently terminated. 

The Federal Court ultimately held that a prohibited reason – namely the Manager’s exercise of her workplace right to make complaints and inquiries – was not a substantial and operative part of the reasons for the Manager’s termination.  Accordingly, the Manager was not subjected to any unlawful adverse action.  The application was dismissed.

Appeal decision

The Manager appealed the decision to the Full Court of the Federal Court of Australia.  In the appeal, the Manager argued that the primary judge erred by:

  • finding that the Manager’s immediate supervisor, the Line Manager, did not participate in the decisions constituting the adverse actions in such a way that required any interrogation of his state of mind; and
  • finding that even if the Line Manager participated in the decisions, he did not act for the prohibited reason that the Manager has made complaints and inquiries concerning her employment.

The Full Court found that, in deciding to stand down and then later terminate the Manager’s employment, the reasons of both the Line Manager and the General Manager should have been examined.  Accordingly, despite the Line Manager’s lesser role, he was a relevant decision-maker. 

Despite that finding, the Full Court agreed with the primary judge that the reasons of both decision‑makers did not include unlawful reasons.  The appeal was dismissed.

Lavan comment

Pursuant to Board of Bendigo Regional Institute of Technical and Further Education v Barclay [No 1] [2012] HCA 32, the question of whether adverse action is taken for a prohibited reason is one of fact to be answered in light of all of the facts and circumstances established in the proceeding.  An employer contravenes the Fair Work Act 2009 (Cth) (FW Act) if the prohibited reason is a ‘substantial and operative’ reason for the employer’s adverse action.

In determining the reason for the adverse action, the primary judge in the Manager’s case held that the state of mind of the Line Manager was not a relevant consideration on the basis that:

... For my own part, I am unable to see how an individual officer might qualify as a maker of any given corporate decision unless he or she can be thought to have exercised some authority or executive power to effect it, be that actual or ostensible, formal or otherwise.

However, the Full Court held that:

In accordance with the principles stated in Kodak, it was necessary to inquire into [the Line Manager’s] reasons for making the contribution that he did, whether it be described as “significant”, “plainly important”, “major”, “substantial” or “essential”. It is enough to identify that [the General Manager] proceeded from factual assumptions that were detrimental to the Manager and that were principally (although not solely) based on an assumption that [the Line Manager’s] assertions were true. [The Line Manager’s] motivations were relevant and as such his actions and accompanying state of mind may be attributed to the Bank in accordance with s 793 of the FW Act.

In practice, it is regularly the case that it is the most senior manager of a business who articulates the decision to terminate an employee, but that they are not the only decision-maker. 

Accordingly, this recent decision demonstrates that in defending adverse action claims all decision-makers should be prepared to have their states of mind examined by the Federal Court in order to determine whether a prohibited reason was a ‘substantial and operative’ reason.  This may impact termination strategies and care needs to be taken in cases that involve multiple decision-makers or recommendations by line managers.

In other industrial relations news…

The Federal Government has introduced the new Fair Work Legislation Amendments (Secure Jobs, Better Pay) Bill 2022 into parliament. 

Some of the key proposals include broadening the capacity for employees to request flexible working arrangements, making it harder to maintain secrecy about pay rates, restricting the use of fixed term contracts, addressing the lack of pay equity for female workers and expanding access to protected industrial action and altering the process for taking it.  However, it is multi-employer bargaining and other amendments to enterprise bargaining that are garnering the most interest. 

The bill seeks to implement enterprise bargaining outcomes by amending the FW Act in five areas:

  • limiting the termination of nominally expired workplace agreements;
  • automatically sunsetting 'zombie' agreements made prior to the commencement of the FW Act and subsequent bridging period;
  • expanding access to single and multi-employer agreements;
  • removal of unnecessary complexity and making the Better Off Overall Test simple, flexible, and fair; and
  • expanding the capacity of the Fair Work Commission to address bargaining disputes.

In respect of multi-enterprise agreements, the bill proposed three streams of bargaining: co‑operative, which is an opt-in stream for small businesses; supported, including for low-paid industries; and single interest, which is for workers who want to band together because of similarities such as industry or work site.  The single interest stream is the most contentious.  If the bill passes, a majority of workers will be able to start the enterprise bargaining process on their own, without input from their employers.  If the employer does not agree to bargain in good faith, the Fair Work Commission can intervene and ratify protected industrial action.  The bill requires that parties participate in compulsory conciliation prior to any protected industrial action.

Employer groups, such as the Business Council of Australia, Australian Industry Group and the Australian Chamber of Commerce and Industry, argue that the new multi-enterprise agreement regime will draw employers into agreements that might not suit their particular business.  This is especially the case for large businesses, who argue that this will reduce competition by forcing big competitors to bargain together.  However, the bill requires workers to pass a public-interest and common-interest test to ensure it is appropriate for them to bargain together. 

The bill continues to be debated in Parliament.  Workplace Relations Minister Tony Burke has foreshadowed further concessions to secure the success of the Government’s industrial relations legislation before Christmas 2022.

If you have any questions about the topics covered in this article, please contact Lavan’s Employment, Safety and Education team.

Disclaimer – the information contained in this publication does not constitute legal advice and should not be relied upon as such. You should seek legal advice in relation to any particular matter you may have before relying or acting on this information. The Lavan team are here to assist.