The Fair Work legislation provides that parties should usually bear their own costs in relation to matters before the Fair Work Commission. This is an exception to the general rule applicable in court proceedings where costs follow the event i.e. the losing party pays the winning party’s costs. The fact that parties usually bear their own costs in Fair Work Commission proceedings even if they win is thought to be the reason that employers often settle claims, even unmeritorious claims, by the payment of so called “go away” money, rather than incur significant legal costs to vindicate their legal position.
This is all the more the case in unfair dismissal claims where applicants are often represented by paid agents or lawyers acting on a “no-win no-fee” basis. This means that the employee carries no risk with proceeding with a claim, whereas the employer with legal representation is likely to incur significant legal costs at a hearing.
In the case of Colin Ferry v GHS Regional WA Pty Ltd  FWC 3120 trading as GHS Solutions, the employer successfully defended an unfair dismissal claim at hearing and then made a separate application for payment of its legal costs on an indemnity basis i.e. for full reimbursement of the legal costs incurred.
The facts of the case were that the employee had been summarily dismissed for entering the employer’s premises on an unauthorised basis after hours and removing items of scrap property. When the employee was confronted with the fact that the employer was aware of his actions, the employee failed to be open and honest and did not provide any satisfactory explanation for his misconduct.
Prior to the hearing, the parties had participated in three separate telephone conciliations before the Fair Work Commission. Conciliations are conducted on a without prejudice basis and any offers made at the conciliations cannot be referred to in open hearing. However, after the third telephone conciliation the employer made an open offer of settlement in writing to the employee, which was communicated to the Fair Work Commission. This was the offer of settlement which the employer relied on in its subsequent costs application.
The offer also put the employee on notice that if rejected and the employer incurred further legal costs, the employer would rely on the letter to recover its costs. The employee rejected the offer of settlement and then lost at the hearing.
After the hearing, the employer sought an order from the same Commissioner on the grounds that the employee engaged in an unreasonable act or omission in connection with the conduct or continuation of the matter when the applicant refused to accept the settlement offer prior to the hearing.
The employee represented himself throughout the proceedings and was not legally qualified or experienced in the Fair Work Commission, nor expected to have brought the level of understanding or judgement to the matter that may be expected of a person with experience in the jurisdiction.
- Nonetheless, the Fair Work Commission was satisfied that the employee’s failure to accept the offer of settlement involved the continuation or proceedings in wilful disregard of known facts and also was an imprudent refusal of an offer of compromise.
- This delinquent conduct went beyond “hard bargaining” by the employee and warranted the Commission exercising its jurisdiction to award indemnity costs to the employer under the Fair Work Act 2009 (Cth).
- The employee was ordered to pay the employer’s costs in the amount of $13,875.50 having received an offer to settle of $3,000.
Final points to note
- The Fair Work Commission can only make a costs order against an unsuccessful employee if the employer makes application after the hearing for recovery of its costs because of the unreasonable act or omission of the employee in connection with the conduct or continuation of the matter.
- A successful employer can also make application against the employee’s representative (ie lawyer or paid agent), if the representative encouraged the employee to start or continue the matter when it should have been reasonably apparent to the representative that the employee had no reasonable prospects of success or costs were incurred because of an unreasonable act or omission of the representative in connection with the conduct or continuation of the matter.