Costs orders in employment litigation and the duty to disclose medical conditions which may impact safety

A recent case involving an accountant terminated for misconduct gives rise to important lessons for employers and employees.

Wayne Debus was employed as an assistant accountant at Condor Energy Services (Former Employer) on a probationary basis starting in July 2019.

His employment agreement required the disclosure of medical information.

However, Mr Debus did not disclose that he was autistic, nor did he request any accommodations on account of his disability.

After four months, Mr Debus was dismissed before completing his probationary period because of his hostile conduct in the workplace, including the use of vulgar language directed at his co-workers and allegations that Mr Debus had been “threatening to headbutt someone”.

Mr Debus subsequently filed an adverse action claim, alleging that his employment was unlawfully terminated due to his disability and attributing his disruptive workplace behaviour to that disability.

As Mr Debus had never disclosed his disability, nor had he sought any accommodations on account of his disability, the Court dismissed his claim. Instead, it held that the Former Employer was unaware of Mr Debus’ diagnosis at the time of dismissal and that it was Mr Debus’ misconduct at work that was the primary reason for his dismissal.

The court held that Mr Debus had a duty to disclose his pre-existing medical condition as it could reasonably affect his ability to perform his role safely. His Honour Egan J said “he had a disability which may adversely impact upon his capacity to effectively and efficiently carry out his employment” and that the obligation to disclose his disability to his employer existed “both as an implied term of his contract of employment, as well as pursuant to his contractual obligations”.

As the Former Employer had no notice of Mr Debus’ disability, his Honour dismissed the case, finding that there was no causal relationship between Mr Debus’ disability and his dismissal.

The important lesson for employers is to ensure that employment agreements include a duty to disclose medical information which may be relevant to the safe performance of work. This case also serves as a reminder to ensure that there are properly articulated reasons for termination given, even during probationary periods, to make the reasons for dismissal clear for all parties.

For employees, it means that if:

(a) a disability is best supported by accommodations or adjustments in the workplace, the accommodations must be requested and properly documented from the outset; and

(b) contractual obligations involve a duty to disclose relevant medical conditions, such conditions must be disclosed and/or advice sought if there are other considerations (such as privacy or discrimination concerns). These obligations cannot simply be ignored.

Costs in Litigation

In litigation commenced under the Fair Work Act, it is exceedingly rare for the party which wins to be awarded costs. Instead, each party usually pays its own costs irrespective of the outcome.

Under section 570 of the Fair Work Act, courts can only award costs in very limited circumstances where:

(a) A party instituted the proceedings vexatiously or without reasonable cause; or

(b) the court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs; or

(c) a party refused to participate in a matter before the Fair Work Commission and the proceedings in the Court then arose from the same facts.

However, the Former Employer in Mr Debus’ case succeeded in its application to be awarded costs.

In that case, a representative of the Former Employer had sent a written offer to Mr Debus in July 2020 to settle the matter, indicating that costs would be sought if Mr Debus did not discontinue the proceedings.

Mr Debus promptly rejected the offer in an email, asserting his intention to file a statement of claim and signing off the correspondence with the words “Thanks, but no thanks”.

A second written offer was made to Mr Debus in May 2021, proposing a settlement amount of $5,000 along with any unpaid wages and leave entitlements. Mr Debus promptly dismissed this offer as well, stating that he was not prepared to settle on such “ludicrous terms” and expressed his determination to proceed with the trial, regardless of potential costs.

His Honour noted that Mr Debus’ hasty and definitive responses indicated a lack of careful consideration of the consequences of rejecting the settlement offers. The first and second offers were rejected by Mr Debus within 20 and 10 minutes of their receipt, respectively. His Honour opined that Mr Debus should have given more thought to the claims being made against him and the claims he was asserting before rejecting the offers.

Commenting on the initial offer, His Honour stated that it was made clear to Mr Debus that his claim that his dismissal was due to his mental health disability “was without substance because no one in the employ of the respondent knew that he suffered from any such disability.” His Honour concluded that Mr Debus should have accepted the initial offer.

In this case, a rare costs order was made on an indemnity basis from the date of the first offer until the date of judgment. The court accepted that the failure to accept the first offer was an unreasonable act in all the circumstances.

This case serves as an important reminder for parties involved in a dispute to:

(a) give consideration to making settlement offers in writing and in detail so that those letters can later be relied upon if the settlement offers made are rejected by the other side;

(b) always give proper consideration to offers of settlement because hastily rejecting offers can expose a party to a costs order.

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This publication is produced by Pigott Stinson. It is intended to provide general information only. The contents of this publication do not constitute legal advice and should not be relied upon as legal advice. Formal legal advice should be sought from us in respect of the matters set out in this publication. Liability limited by a scheme approved under Professional Standards Legislation.