The Fair Work Commission (FWC) has awarded indemnity costs in favour of an employer in its recent decision of Post v NTI Limited [2016] FWC 1059 (4 March 2016).
In this decision, Commissioner Williams of the FWC ordered a former employee to pay all of his former employer’s legal costs, after prolonging and recklessly rejecting offers of up to six months wages to settle his “hopeless” unfair dismissal claim.
This case is significant as the FWC generally does not order costs against a losing party or in favour of an employer.
The Case
NTI Limited (Employer), a truck insurance company, dismissed Mr Steven Post (Employee) in November 2014 for serious misconduct after he ignored directions from his managers to avoid conflicts of interest.
The Employee claimed his dismissal was “grossly unfair” and that he was denied a reasonable opportunity to respond to the allegations of serious misconduct.
NTI argued the Employee was given multiple opportunities to respond to allegations. It also alleged the employee failed to engage in any reasonable settlement discussions. NTI repeatedly attempted to negotiate with the Employee, but he rejected settlement proposals ranging from 5 week’s wages in late 2014 to two offers of 6 months’ wages in early 2015.
NTI made an application that the Employee pay its’ costs on the basis that the unfair dismissal claim had no reasonable prospect of success and was made without reasonable cause. NTI in the FWC had incurred significant legal costs, which included costs for:
- Participation in conciliation conferences;
- Preparing witness statements;
- Briefing counsel to appear at FWC hearings;
- Attending FWC hearings; and
- Making interstate travel plans to fly interstate witnesses to Perth.
Reasons for awarding costs
Commissioner Williams found that it should have been “reasonably apparent” to the employee that his application was hopeless and lacking in merit and had no reasonable prospects of success.
While costs orders are not made to punish unsuccessful parties, in some cases “delinquency” can warrant ordering indemnity costs.
The employee commenced proceedings with a “wilful disregard of the facts known to him“, engaged in “undue prolongation” of an unfounded claim, and imprudently refused offers of compromise.
The employee was either unwilling, or unable, to objectively assess the merits of his application. It was particularly unreasonable for the Employee to twice reject the equivalent of the statutory limit for compensation, and force NTI to incur further costs at each stage. This constituted delinquent conduct.
Commissioner Williams made an order under section 611 of the Fair Work Act (Act) that the Employee pay all the legal costs incurred by NTI in relation to his unreasonable conduct. The Employee was also ordered to pay all costs incurred after the first settlement offer was made, under section 400A of the Act.
Lessons for employers
The Post v NTI case has established that the FWC is prepared to order a party to pay the costs of another party where behaviour has been ‘imprudent’ or ‘delinquent’.
Employers defending claims before the FWC should be mindful of situations where an employee:
- Prolongs a case by making groundless claims or unreasonably refuses offers of compromise;
- Makes allegations of fraud knowing them to be false;
- Commences or continues proceedings with an ulterior motive;
- Commences or continues proceedings with a wilful disregard of known facts or clearly established law; or
- Makes allegations which ought never to have been made.
Post v NTI Limited [2016] FWC (4 March 2016)
This article was written by Justin Le Blond, Special Counsel and Lily Schafer-Gardiner, Graduate at Law.