How to deal with false and vexatious employee claims

| December 5, 2019

All too often aggrieved employees lodge unfair dismissal claims purely to spite their employers, and those employers are then forced to invest time and resources in conciliating or settling. How can you prevent vexatious claims from going too far?

No employer ever truly enjoys letting an employee go. After all, this is a person you’ve invested time, energy and money into, and they may have been a part of your business for a while.

However, what’s even more stressful is when the employee refuses to accept the situation and files an unfair dismissal claim against your organisation.

Of course, there are some scenarios where employee claims are warranted. In these cases, it’s important that your organisation takes responsibility and appropriate action.

However, the unfortunate reality is that some employees do make false accusations out of spite, shame or to reap financial benefits. This can lead to legal action against your company, which can result in financial impacts or damage to your reputation.

The good news is, organisations don’t have to take untrue or spiteful employee claims lying down. By knowing your rights, you can protect your business and ensure the truth prevails. Here’s what you need to know.

What does Fair Work say about dismissing claims?

The Fair Work Commission is usually an employee’s first port of call when they want to make a claim. However, the Commission exists not only to protect staff, but also to reach fair resolutions between employees and employers. According to Section 587(1) of the Fair Work Act, the Commission can dismiss an application if:

  • the application is not made in accordance with the Act;
  • the application is frivolous or vexatious; or
  • the application has no reasonable prospect of success

What is a frivolous or vexatious claim?

To be considered frivolous or vexatious, an application must:

  • be so obviously untenable that it cannot possibly succeed
  • is manifestly groundless
  • is so manifestly faulty that it does not admit of an argument
  • discloses a case with the Commission is satisfied cannot succeed
  • does not disclose a cause of action

An example of a frivolous or vexatious claim

Let’s look at the case of West vs Hi-Trans Express. In this example, the employee was dismissed for negligently driving a forklift into a building support column. Here, the employee admitted that he was “driving toward the middle roller door heading outside but was watching Jim to see if he was stopping for another smoke break” and then hit the building support column.

He was dismissed for gross misconduct and then instigated an unfair dismissal claim. The Commission dismissed the claim because there was no doubt about the facts and the employee conceded that he was negligent. The claim was so obviously untenable that it could not possibly succeed.

What does ‘no reasonable prospect of success’ mean?

In order for a claim to have ‘no reasonable prospect of success’, it must be manifestly untenable and groundless — meaning, there’s no evidence or logic to back it up.  The real question is not whether there is any issue that couldarguably be heard, but whether there is any issue that should be permittedto be heard. However, this is a high bar – if there is some issue that should be determined, the Commission will want to hear it.

Examples of no reasonable prospect of success

In the case of Dekort vs Johns River Tavern,the employee took sick leave on New Year’s Eve and provided a medical certificate. However, a photo on Facebook showed that the employee was out participating in New Year’s Eve celebrations. He was later dismissed for misleading conduct and brought an unfair dismissal claim. However, the employee did not put forth any case to counter the assertion of misleading conduct. Therefore, the Commission found there was no reasonable prospect of success and dismissed the claim.

Another example is the case of Shaw vs ANZ Bank. The employee brought an application for a ‘stop bullying’ order. However, the employee no longer worked for the employer so there was no risk of continued bullying. For the Commission to make a ‘stop bullying’ order it must be satisfied that there is a risk of continued bullying. The Commission found that, given the absence of a risk of continued bullying, there was no reasonable prospect of success for the order being made.

Grounds you can use to refute claims

If you are looking to refute a vexatious employee claim, it pays to be aware of the conditions that must apply in order for them to be accepted by the Commission.

  • Bullying claims. The Commission must be satisfied that there is no risk of continued bullying — which is not the case if the employee involved no longer works there.
  • Unfair dismissal claims.
    • The employee must earn under $148,700 or be covered by Award or enterprise agreement
    • They must have completed 6 months of employment (12 months if you have less than 15 employees)
    • Casuals are excluded unless they’re regular and systematic
    • An employee can’t bring an unfair dismissal claim if it’s a genuine redundancy, there were no reasonable redeployment opportunities and required consultation was carried out
  • Adverse action. The claim must be related to exercise of a workplace right, such as a complaint about employment.

Can you claim costs for a vexatious claim?

What happens after an employee’s unfair dismissal claim has been held to be vexatious by the Commission? You have likely lost valuable time and money throughout the process, and may feel that your organisation deserves compensation. Generally the Commission is a ‘no-cost’ jurisdiction, however in rare circumstances they will award costs to the employer if:

  • It should have been reasonably apparent to the employee that their application had no reasonable prospect of success.
  • The employee’s application was made vexatiously (meaning, the main purpose of the application is to harass, annoy or embarrass the other party) or without reasonable cause
  • Costs were incurred because of an unreasonable act or omission in connection with the conduct or continuation of the matter.

An example of a cost being ordered

In the case of Mijaljica vs Venture, an employee wrongly believed her employment had been terminated and made an unfair dismissal claim. The employer then clarified that the employee was still employed, but the employee still continued the application. The Commission awarded costs from the point that the employee was made aware that they weren’t dismissed.

To settle or not to settle

To put your organisation in a better position to claim costs, consider making a written settlement offer. This should clearly set out that you may seek costs orders if the offer is not accepted. This can add risk to an employee if they continue their claim and therefore create pressure to settle.

If an employee refuses to accept the settlement offer, you may be able to seek costs. In order to determine whether refusing the offer was an unreasonable act, the Commission will look at:

  • the amount of money offered;
  • The knowledge of the employee at the time the offer was made regarding the evidence that will be presented at the hearing; and
  • the timing of the offer