The Respect@Work Report (the “Report”) contained 55 recommendations, and all but one have been implemented over the past couple of years. The Parliament has now passed the final recommendation by introducing a protection for applicants against adverse costs orders in discrimination cases (including sexual harassment cases).  

The aim of the new reforms is to address the Report’s finding that Australia’s often expensive litigation process can act as a barrier for potential applicants who experience discrimination or sexual harassment.

The Report recommended that the Australian Human Rights Commission Act 1986 (Cth) (“AHRC Act”) insert a costs protection provision consistent with that in the Fair Work Act 2009 (Cth) (“FW Act”). The general position under the FW Act is that parties bear their own costs, but costs can be awarded if a party instituted proceedings vexatiously or without reasonable cause, or a party’s unreasonable act or omission caused the other party to incur costs.  

However, the final reforms in the AHRC Act have gone further giving applicants even greater costs protection. What the Government has adopted is a model which provides for the payment of an applicant’s costs if their claim is successful (even if they are only successful on one ground) but if the respondent is successful in defending the claim the parties will generally bear their own costs.  

Who pays what and when… 

The new reforms apply to all claims made under federal discrimination legislation, despite the Report being produced in the limited context of sexual harassment and discrimination.  

If the applicant is successful:

• on one or more grounds, the Federal Court or Federal Circuit and Family Court (the “Court”) must order the respondent to pay the applicant’s costs. 

If the respondent is successful: 

• the Court must not order the applicant to pay the respondent’s costs and the parties bear their own costs.
• the Court can only order the applicant to pay the respondent’s costs where an applicant’s unreasonable act or omission caused the other party to incur costs, or where the applicant instituted proceedings vexatiously or without reasonable cause.
• the Court may order an applicant to pay a respondent’s costs if the respondent:
  • was successful in the proceedings;
  • does not have a significant power advantage over the applicant; and
  • does not have significant resources (financial or otherwise) relative to the applicant. 

What do the reforms mean for employers? 

Employers should be aware of these cost reforms when faced with the risk of potential litigation to inform decision making.  

While many discrimination claims are settled by the AHRC at the conciliation stage, the reforms will give comfort to applicants who progress their claims to Court as they are unlikely to face an adverse costs order. Practically, the reforms may result in employees being more bullish about progressing claims with reasonable prospects of success to Court and employers may be more incentivised to look to remedies and settlements outside of Court to avoid litigation. Employers who find themselves responding to discrimination claims should ensure they have a settlement negotiation and litigation strategy in place which is informed by their potential costs exposure.