Unfair Dismissal: Applicant’s failure to disclose leads to costs award

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Case Note: Lindy Smith v Ecolab Pty Ltd [2016] FWC 8491

In this matter, The Fair Work Commission (the FWC) awarded costs against the applicant (Ms Smith) and her representative (Mr Dircks) in an unfair dismissal claim, on the basis that they knowingly failed to produce a critical document.

Background

Ms Smith had commenced an unfair dismissal claim against her employer Ecolab Pty Ltd (the Respondent). Not long after the dismissal took place, Ms Smith was able to secure a new employment contract, however she continued with her unfair dismissal claim.

On 5 August, the Respondent made Ms Smith an offer to settle of 4 weeks pay, which Ms Smith rejected on the basis that she had no employment and was seeking reinstatement.

On 9 August 2016, the FWC issued Orders for Ms Smith to produce various documents relevant to the mitigation of her loss. This included any contracts of employment she had entered into from 17 June 2016 to 9 August 2016.

On 16 August 2016, Mr Dircks advised the FWC that Ms Smith did not have any of the requested documents. However, on 7 September 2016, Mr Dircks emailed the FWC and advised that Ms Smith no longer wished to be reinstated, and attached a copy of a contract of employment dated 29 July 2016. This contract had been signed by Ms Smith on 3 August 2016.

Ecolab made an offer of four weeks’ pay to settle the matter on 7 September 2016 that was subsequently accepted on 8 September 2016.

What became evident was that at the time Ecolab made their original offer to settle of 4 weeks pay (on 5 August), Ms Smith had already obtained new employment, on a higher salary then she was earning with Ecolab. Ms Smith (and her representative) had failed to disclose this information, even thought he FWC had requested that she produce any new employment contracts. It was also relevant that in his submissions, Mr Dircks had suggested that Ms Smith rejected the initial offer at the time ‘because she had no employment and was seeking reinstatement’.

Given the circumstances, Ecolab considered that, had Ms Smith made proper disclosure, the matter would have settled when they made the initial offer of 4 weeks wages on 5 August (rather then being delayed until 8 September). On the 8 September 2016 Ecolab made an application for costs pursuant to s.400A and s.401A of the Fair Work Act against Ms Smith and Mr Dircks respectively.

In order for the FWC to conclude that costs should be awarded, they had to decide whether there was a causal link between the unreasonable act or omission (whereby Ms Smith and Mr Dircks failed to produce the new employment contract) and the additional costs that were incurred by Ecolab.

The FWC was satisfied that the actions of Ms Smith and Mr Dircks each contributed to the costs incurred by Ecolab in that had Ms Smith accepted the original offer, Ecolab would not have proceeded to prepare extensive material for the Commission. Likewise, had Mr Dircks taken appropriate steps to ensure documentation was produced in accordance with the FWC Order, even if Ecolab had begun preparing materials, it would have ceased that work to allow further settlement discussions to occur.

The FWC decided that the costs payable related to the two weeks prior to the scheduled hearing date on 25 August 2016 and that both Ms Smith and Mr Dircks were each responsible for 50% of the amount.

Lessons

The extent of the actual loss incurred by an applicant is relevant in an unfair dismissal matter. Failing to disclose information which determines this loss, particularly where evidence shows that the loss has been mitigated, will likely be considered an unreasonable act or omission.

The Fair Work Act is predicated on the basis that parties should meet their own costs in matters that go before the Commission. However, where a party (or their representative) acts unreasonably during the course of proceedings, and such actions prevent or delay the parties reaching a fair resolution, this case clearly establishes that the FWC will order costs against the party at fault.

This case is a warning for both clients and their representatives. Clients should note the importance of disclosing everything relevant to their matter; representatives should note the importance of ensuring that their client follows court orders and procedure.

For more information regarding unfair dismissal or in relation to failure to disclose, contact us

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This article was written by Natasha Duff (Associate).