What are workplace adverse action claims, and how do they work? August 29, 2023

Employment relationships often have the potential for adverse action, but knowledge and careful management can help to avoid legal claims 

As an employer, you must have a broad understanding of your rights and responsibilities, especially in respect of your employees. You can’t take action against them for prohibited reasons, so understanding the relevant Fair Work laws can help you effectively manage your workers and avoid adverse action claims. 

What is adverse action?

In an employment relationship, adverse action takes many forms. In essence, it’s action that one party takes (or threatens) against the other party that causes harm. So an employer can take adverse action against an employee and vice versa.  

The General Protections provisions in the Fair Work Act (the Act) regulate workplace adverse action. Adverse action is unlawful when taken for a prohibited reason under the Act. 

Typically, adverse action falls into the broad categories of: 

• dismissal
• injury
• changes to work conditions
• unfair work conditions
• discrimination
• refusal to hire
• industrial action.

Most adverse action claims involve employer action (or threats) against an employee. But independent contractors, principals, casual workers and even volunteers can also make legal claims because of prohibited adverse action.  

Are some types of adverse action permitted?

An important qualifier is that the Act permits some types of adverse action, but only in the right circumstances. For example, legally terminating an employee’s employment will cause harm to the employee, so technically, it’s an adverse action. But a legal termination for genuine reasons is permitted under the Act. 

What’s the difference between prohibited and permitted adverse actions?

Whether an adverse action is protected or prohibited depends on the circumstances. So to get a better understanding of these circumstances, let’s look at some examples:

How do I avoid employee adverse action claims?

When making an adverse action claim, the employee must show evidence that:

1. the employer engaged in the adverse action; and 
2. it was for a prohibited reason. 

If there’s a finding against a company, penalties include fines and compensation to the worker (for example, for lost earnings). In some limited circumstances where employment was terminated, a court may order reinstatement. 

For an employer, the stakes can be high, especially considering legal fees and time spent away from the business. They’re compelling reasons to reduce the risk of adverse action claims.

You can take several steps to reduce the risk of a successful claim. For example, ensuring that policies, procedures and training are regularly updated, especially in the areas of:

• workplace safety
• code of conduct
• anti-discrimination and equal opportunity
• privacy and data protection
• bullying and harassment
• grievances and complaints
• performance counselling and discipline
• email and internet use.

It’s also essential to maintain a culture of communication and respect. If necessary, engage the help of a third party (for example, a mediator) to help resolve the issues.  

It’s also critical to document and file:

• communications with the employee
• performance assessments
• disciplinary issues
• training completion 
• other matters. 

How we can help 

As an employer, you’re probably well-versed in most of these steps. However, your workplace may face some unique challenges requiring creative solutions. If you’re concerned about a specific issue or risk that may lead to an adverse action claim, seek legal help as soon as you become aware of the problem. Preventative measures are most effective, but if there has been an incident, the sooner you engage legal services, often the better the result. 

Our workplace legal team has significant experience in adverse action issues. We’re skilled in designing legal solutions to integrate with your workplace and foster positive working relationships. And, if the problem escalates and your business is subject to an adverse action claim, we’re skilled at managing all aspects of the legal process.

Contact us to learn more about adverse action claims and how we can help your business.