Last week a Malaysian student of Chinese descent returned to her rented home in Perth’s southern suburbs after visiting family in Malaysia for a few weeks. Upon arriving home, she found the locks had been changed and a handwritten sign was on the door, notifying her she was no longer welcome in the house given the coronavirus “emergency”.

In an important decision last month, the Full Court of the Federal Court of Australia upheld the appeal of an employer who claimed, in dismissing a client executive who had been absent from work for 7 months due to mental health issues, it had acted lawfully and not dismissed him because of his illness.[1]

The judge at first instance had found the employer liable for breaching the ‘adverse action’ provisions of the Fair Work Act 2009 (Cth) (FW Act) because the employee’s mental illness could not be disaggregated from the employer’s reasons for dismissal.[2] This decision was seen by many as setting a dangerous precedent and employers should welcome the clarification provided by the Federal Court appeal bench.

Since the enactment of the ‘adverse action’ provisions under the Fair Work Act 2009 (Cth) (FW Act) some 10 years ago, it is far more difficult for an employer to lawfully dismiss an executive or senior manager. Why? Because adverse action claims:

  • are relatively easy to bring;
  • can include compensation for hurt, distress and humiliation (and damages are uncapped);
  • can be difficult to successfully defend (due largely to a reverse onus of proof); and
  • expose the employer to considerable financial, legal and reputational risks – even when there was a good reason to remove the executive and the terms of the employment contract were complied with.

It is therefore not surprising that the number of senior, and highly paid, individuals commencing adverse action claims to challenge their dismissal is continuing to trend upwards. So, what are adverse action claims and how can an employer protect itself against these risks?