Applications in the Fair Work Commission are generally considered to be in a “no cost jurisdiction” where parties bear their own costs. This can present a challenge to employers in determining whether they will defend a claim, and incur significant costs, or make a commercial decision to seek to resolve the matter, even where the claim is without merit. Legal costs will only be awarded in circumstances where the Commission is satisfied that the application was made vexatiously or without reasonable cause; or that it should have been reasonably apparent to the applicant that their application had no reasonable prospect of success.
A recent case decided in the Fair Work Commission displays how it is in the best interests of employers to make reasonable efforts to settle claims before they reach arbitration.
Case Study: Applicant v Respondent  FWC 7077
The Applicant, a cabin crew supervisor, received a notice of termination on 4 February 2016 because of several sexual harassment claims made against him. In initial negotiations, the Respondent employer offered the Applicant four week’s pay, then increased the offer to $20,000 on the basis that the dismissal would be reclassified as a resignation. At that time, the Respondent informed the Applicant that they intended to call six witnesses in support of the allegations that had led to the termination of his employment.
The Applicant rejected this offer and the matter proceeded to arbitration. The Applicant’s case was based on the premise that his actions had been consistent with the airline’s workplace culture. As such, the Applicant alleged there was no sexual harassment and thus no valid reason for the termination. However, having heard the evidence of six witnesses attesting that the Applicant’s actions amounted to sexual harassment, the Commission concluded that “[a] reasonable person, even if they were telling the truth, must have been aware that the evidence of six people contradicted the Applicant’s version of events” and that he should have reasonably understood that his claim was bound to fail.
Bearing in mind the generous settlement offer that had been offered by the Respondent prior to arbitration, the Commission ordered that the Applicant pay the Respondent’s legal costs that they were forced to incur as a result of the Applicant continuing to pursue his claim to arbitration without a legitimate hope of success.
Lessons for Employers
Considering the significant costs involved in litigation, employers are encouraged to seek to resolve claims long before they go to final hearing. A reasonable offer to resolve a claim on a commercial basis can be of benefit, even if it is rejected, to gain a measure of costs protection in the context of unmeritorious claims.
HR Legal regularly represents employers in Fair Work Commission litigation, including advising on prospects of success, and representing employers at conciliation and arbitration. If you require assistance in relation to these areas, please contact us.
This article was produced by HR Legal. It is intended to provide general information only in summary format on legal issues. It does not constitute legal advice, and should not be relied on as such.