Adverse action in fair work law

Adverse Action

“Mr Bowd submitted that EG took adverse action against him in a number of ways.  Primarily, he contended that his dismissal was adverse action.  But he also alleged that the investigation into his conduct, his suspension, and the allegations made against him in EG’s letter of 14 February 2017, were all instances of adverse action.

EG did not, and could not, deny that Mr Bowd’s dismissal constituted “adverse action” for the purposes of s 342 of the FW Act. However, it did contend that the other alleged instances of adverse action did not fall within the definition of that term in s 342.

To constitute adverse action, relevantly the incident or event must constitute something that injured Mr Bowd or altered his position to his detriment for the purposes of Item 1 of the definition in s 342(1). In that respect, there may be some conflict in the applicable authorities.

Mr Bowd relied upon the decision in Jones v Queensland Tertiary Admissions Centre Ltd (No 2) (2010) 186 FCR 22 for the proposition that the commencement of an investigation could constitute the taking of adverse action. In that case the investigation was into workplace bullying. Collier J said at [81]:

As a general proposition I consider that the commencement of an investigation into bullying allegations could be adverse action against someone in Ms Jones’ position within the meaning of s 342 of the Act.  I form this view because:

In light of her position as CEO, the commencement of the investigation into allegations of bullying either could injure her in her employment or cause a deterioration in her standing in her workplace so as to alter her position within the meaning of s 342 of the Act; and

As observed by Goldberg J in United Firefighters Union [[2003] FCA 480; (2003) 198 ALR 466], Ms Jones’ position would be altered to her prejudice because of the exposure to a potential disadvantage of imposition of a penalty if the charges are ultimately proven

At [82], her Honour did not accept that disciplinary investigation was a “normal” incident of employment, even when commenced in good faith and with a proper prima facie evidentiary basis.

Earlier, in Police Federation of Australia v Nixon (2008) 168 FCR 340 at [48], Ryan J took the opposite view about disciplinary action being a normal incident of employment. His Honour was of the view that not every disciplinary hearing will amount to an injury to an employee or to an alteration in that employee’s position. At [42] and [46], his Honour said:

In the light of the history which I have just recounted, I consider that a serious question remains as to whether the resumption of the inquiry by Biggin and Cartwright amounts to an injury to Mullett in his employment.  Not every disciplinary inquiry or investigation of alleged misconduct by an employee will have that effect.  For example, the inquiry may be conducted in such a way that only the affected employee and a few other persons directly involved in it are aware that it is taking place.  Likewise, the subject matter or particulars of the alleged breach of discipline may, on balance, not be reasonably capable, at least before the investigation has been completed, of damaging the reputation of the employee or adversely affecting his or her standing in the workforce or among the wider community, assuming the fact of the inquiry to be so widely known.

In light of the conclusion just reached on “injury”, it is strictly unnecessary to consider the alternative question of whether the resumption of the [Ethical Standards Division] investigation of the Bullying Allegations can amount to an alteration of Mullett’s position as an employee of Victoria Police.  However, in my view, “alteration” in this context requires a substantive change in, or reduction of, the advantages enjoyed by the employee in that capacity.  Merely to be subject to a disciplinary inquiry or investigation does not, without more, constitute such a substantive change.  Examples of relevant substantive changes include reduction of salary, deprivation of overtime, diversion to a less congenial shift, forced taking of leave, transfer to lower duties or suspension from duties.  Some changes of this kind are expressly contemplated as being within the disciplinary regime for Victoria Police instituted by s 71 of the [Police Regulation Act 1958 (Vic)] and noted at [24] above

Importantly, at [48] his Honour said:

I consider, with respect, that amenability to a disciplinary charge brought in good faith and on a proper prima facie evidentiary basis is a normal incident of employment and does not of itself, before the laying of the charge, constitute “an adverse affection of, or deterioration in, the advantages enjoyed by the employee” in the sense used by the High Court in the passage from Patrick Stevedores 195 CLR 1 quoted at [14] above. Of course, it is otherwise where the charge is made out and some deleterious consequence is visited on the employee. That is the significance of the words to which I have added emphasis in the extract from Goldberg J’s reasons reproduced at [47] above. Until the charge has been proved, the disadvantage to the employee, as his Honour acknowledged, remains merely “potential.”

In Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v Visy Packaging Pty Ltd (No 3) (2013) 216 FCR 70, Murphy J agreed with the views of Collier J in Jones (at [103]).  An investigation which threatened the possibility of dismissal, it was said, reduced the security of future employment and was thus adverse action: cf Community and Public Sector Union v Telstra Corporation Ltd (2001) 107 FCR 93 at [17].

For my part, and if it matters, I respectfully prefer the reasoning of Ryan J in Nixon, at least with respect to CEOs of publicly listed companies. The very great responsibilities and duties which fall upon the shoulders of such senior officers, ordinarily reflected in the size of their salary, make both public (regulatory) and private investigation of their conduct a likely incident of their employment. That includes ongoing scrutiny of a CEO by the board of directors. Such scrutiny is an ordinary incident of the fiduciary duty each director owes to the company and its shareholders. When appointed, every CEO should know this and welcome such scrutiny. Ultimately, of course, whether an investigation does or does not constitute an injury or a prejudicial alteration in an employee’s position will depend upon the facts and the type of investigation. In that respect, as is well‑known, injury includes here “any adverse affection of, or deterioration in, the advantages enjoyed by” an employee: Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 at 18.

The decision to seek an independent review of Mr Bowd’s conduct at Baltec was made by the board on 21 January 2017.  Subsequently, Mr Cartney engaged Mr Foster of Lewis Holdway Lawyers to undertake that review.  The terms of that review were not before me.  Mr Foster produced an interim report to the board on 27 January 2017.  That report was not before me.  It is mentioned in passing in the letter of 14 February 2017.  In those circumstances, it is difficult for the Court to know how the commissioning of that report, and the carrying out of an investigation, by Mr Foster injured Mr Bowd or altered his position in the required way.  Mr Foster and Mr Bowd never met.  Mr Bowd never participated in the investigation.  The interim report was received after the decision to suspend Mr Bowd was made, but before the full board became aware of the complaint to ASIC.

Because I have found that Mr Bowd only exercised one “workplace right”, namely the taking of sick leave, and because that right was first exercised after the decision to investigate Mr Bowd, I need not finally determine whether the investigation was adverse action.  That is because taking sick leave could not have been one of the reasons for that investigation.  The decision to make the investigation predated the taking of sick leave.

In contrast, suspending Mr Bowd was “adverse action”.  Even though it was prompted by concerns for Mr Bowd’s health, suspending a CEO is a serious matter and would have injured Mr Bowd’s standing within EG, and his career more generally.  The fact that he remained on full pay is no answer to that conclusion.  I shall need to return to the reasons for suspension.

The sending of the letter of 14 February 2017 was not greatly pressed by Mr Bowd’s counsel as an incident of adverse action.  In my view, the sending of this letter to Mr Bowd’s solicitors neither injured him at that time nor prejudicially altered his position.  The letter was not made public and by 14 February Mr Bowd had already been suspended and was not at work.  His relationship with EG did not change following the receipt of the letter in any way: cf Metcalfe v Clayton Church Homes Inc [2015] FCA 219 at [131] per Besanko J.”

The Environmental Group Ltd v Bowd [2019] FCA 951 delivered 21 June 2019 per Steward J