Indemnity costs ordered against employee in hopeless unfair dismissal claim

In the recent matter of Steven Post v NTI Limited [2016] FWC 1059, the Fair Work Commission ordered an employee to pay indemnity costs to his former employer as a result of his imprudent and delinquent conduct during the proceedings.

Section 400A of the Fair Work Act 2009 grants the Commission discretion to award costs against a party where it is satisfied that the costs were incurred because of an unreasonable act or omission in connection with the party’s conduct or continuation of a matter.

Further, section 611 of the Fair Work Act 2009 provides that the Commission may order a party to bear some or all of the costs of another party where the Commission is satisfied that the application was made vexatiously or without reasonable cause or where it should have been reasonably apparent to the party that their application had no reasonable prospects for success.

When the unfair dismissal matter was heard at first instance, the Commission found that the employee’s dismissal for serious misconduct was justified. The employee appealed the decision to the Full Bench of the Commission, where the decision at first instance was upheld.

The employee then appealed the decision of the Full Bench to the Federal Court seeking judicial review. However, before the appeal could be heard, the employee discontinued the Federal Court proceedings.

Due to the conduct of the employee and the unreasonable continuation of the matter, the employer sought an order for the employee to bear their costs on an indemnity basis under sections 400A and 611 of the Fair Work Act 2009.

In determining the application for costs, the Commission found that the employee had imprudently refused four separate offers to settle, wilfully disregarded the facts and caused undue prolongation of the proceedings. The Commission highlighted that the employee ‘should have appreciated he had a hopeless case’ and that his claim ‘was made without reasonable cause’.

In attempting to settle the matter, the employer had made offers of five weeks’ wages in December 2014, three months’ wages in January 2015 and two offers of six months’ wages in February 2015. The last two offers made by the employer were the maximum compensation available to the employee in the unfair dismissal proceedings.

The Commission’s unfavourable opinion of the employee was driven by his ‘unreasonable’ and ‘reckless’ conduct in refusing the numerous settlement offers from the employer. The Commission found that the employer’s offers to the employee were ‘extremely generous’ given the employee’s conduct and that the failure to accept any of the offers was unreasonable and invited the Commission’s criticism.

Due to the employee’s unreasonable conduct and continuation of the matter where it was apparent that the application did not have any reasonable prospects of success, the Full Bench upheld the decision at first instance and ordered the employee pay the employer’s costs on an indemnity basis.

This decision demonstrates that the Commission will exercise its discretion to award costs against a party under sections 400A or 611 of the Fair Work Act 2009 where the circumstances require.

Further, the decision highlights the strategic importance of employers making reasonable formal offers to employees in an attempt to settle an unfair dismissal claim prior to a hearing.

This article originally appeared in Cooper Grace Ward’s Workplace Relations & Safety Risk Management Adviser – April 2016. Click here to download the full newsletter