The Rise of Employment Law Class Actions

There is no doubt you have heard of the term ‘class action’. In fact, class actions involving personal injury claims have gained significant media attention over the years. But did you know class actions can also be initiated against employers as a way of enforcing employee entitlements?

The number of employment law related class actions against employers have dramatically increased in recent years, and we are likely to see many more to come.

What is A Class Action?

Typically employment law related class actions are made in the Federal Court of Australia under Part IVA of the Federal Court of Australia Act 1976.

A class action (also known as a representative proceeding) is an action brought by one or more persons on behalf of a class of people (group members) who:

• Individually have similar claims against the same person (individual, company, business etc, often called the ‘Respondent’); and
• The claims arise out of similar or related circumstances with a common issue of law.

Applicants do not need to seek the individual consent of group members prior to commencing a class action on their behalf. Therefore, group members may be employees who are affected by the proceedings but may initially be unaware of the proceeding.

The ‘group members’ must be a minimum of seven employees affected by the claim.

Class Actions are conducted on an ‘opt-out’ basis, meaning employees affected by the claim will be automatically included in the class of group members unless they opt-out.

If a group member does not opt out, they will be bound by any settlement or judgement made in the class action. On the assumption that the class action is successful, each group member may be entitled to the benefit of any order or judgment made. If unsuccessful, the group members will no longer be able to pursue the same claims against the Respondent.

A unique feature of class action proceedings is that, once commenced, the parties cannot settle without the approval of the Court. This means that if a settlement or agreement to discontinue the proceedings occurs outside the Court, it will be subject to approval.

Who Pays?

Generally speaking in class actions, the Applicant is responsible for the cost of commencing and undertaking the proceeding, and any proceedings may be funded by what is known as a ‘litigation funder’.

On 6 March 2023, in the context of an employment law class action brought against fast food chain McDonalds, the Full Court of the Federal Court of Australia confirmed the Federal Court has the power to order that a portion of settlement monies be paid to the litigation funder, upon approval of any settlement. In the McDonald’s class action, the action is presently funded by Court House Capital.

Why is This Relevant for Employers?

Historically class actions were rarely used in relation to employment law claims such as for wage underpayments. Rather where groups of employees claimed a breach of employment laws against their employer, these were often dealt with by ‘joinder applications’ with multiple applicants, typically run by unions or the Fair Work Ombudsman.

However applicants and their representatives have commenced utilising class actions particularly in recent years, however the use of class actions in this area has been criticised, particularly in regard to the use of litigation funders and given the individual circumstances of employees can vary significantly.

Recent Class Actions

There have been a number of well-known employers who have faced, or are facing employment law related class actions.

In 2022, the Shop, Distributive and Allied Employees Association (SDA) and Shine Lawyers, lodged class action proceedings against 323 McDonald’s Australia and their franchisees alleging employees were denied paid rest breaks in breach of the relevant enterprise agreement and award. This case is still ongoing.

There have also been other national employers who have been subject to class actions, including Coles, Commonwealth Bank, BHP, Woolworths, Dominos, Wilson Security and others for allegedly breaching employment law obligations.

Key Takeaways

The recent rise in employment law related class action applications indicate that parties will continue to bring proceedings against employers to enforce employee entitlements or resolve employee entitlement disputes where there is an alleged large-scale breach.

This is of particular concern in the context of the significant changes to the Fair Work Act 2009 (Cth) (Act) in the last 12 months by the Labor Government. It’s therefore of vital importance for employers to stay ahead of their obligations and take steps to ensure compliance with the Act and any other employment instruments.

If you need any assistance with understanding class action proceedings, or what this may mean for your organisation or business, please contact HR Legal.

Please note that HR Legal is acting for a number of employers in Part IVA class action proceedings and can assist your business or organisation should this arise.