Final Respect@Work recommendation implemented: the new costs protections under the Australian Human Rights Commission Act

Following the Australian Human Rights Commission Amendment (Cost Protection Bill) 2023 receiving royal assent on 1 October 2024, the Australian Human Rights Commission Act 1986 (Cth) (the Act) was amended to provide applicants with greater costs protections when bringing a claim under any Federal anti-discrimination legislation.

This article outlines the new costs protections and the potential impact on respondent employers.

Background

In 2020 the Australian Human Rights Commission (AHRC) published the Respect@Work: Sexual Harassment National Inquiry Report which recommended that the Act be amended to insert a cost protection provision consistent with s 570 of the Fair Work Act 2009 (Cth). The Report considered that such an amendment would ensure that costs would only be ordered against a party if the court was satisfied that the party:

• instituted the proceedings vexatiously or without reasonable cause, or
• through an unreasonable act or omission caused the other party to incur costs.

However, recent amendments to the Act have instead inserted a modified ‘equal access’ cost protection provision in order to “alleviate the barrier to justice that the risk of an adverse costs order currently poses for applicants in federal unlawful discrimination court proceedings.”[1]

These new amendments go beyond what was originally recommended by the AHRC. They curtail the traditional discretion of the courts to decide whether it is appropriate, in all the circumstances, to make adverse cost orders and they stand to have significant financial implications on respondent employers.

What are the new protections?

From 2 October 2024, s 46PSA of the Act provides that respondents to court proceedings (in either the Federal Court or the Federal Circuit and Family Court of Australia) must be ordered to pay an applicant’s costs when the applicant has been successful on one or more grounds against the respondent. The only exception is where an applicant’s unreasonable act or omission caused the applicant to incur costs, in which case only those costs that were incurred because of that act or omission will be excluded.

Furthermore, the court has been provided with the discretion to assess whether the respondent should pay the applicant’s costs on an indemnity basis (ordering that the respondent must pay all costs that were reasonably and properly incurred by the applicant) or otherwise (such as on a party-party basis which follows the schedule of costs outlined in the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021).

However, in contrast, the default position is that applicants “must not be ordered to pay costs incurred by another party to the proceedings”[2] and may only be ordered to pay the respondent’s costs where:

• the court is satisfied that the applicant instituted the proceedings vexatiously or without reasonable cause, or
• the court is satisfied that the applicant's unreasonable act or omission caused the other party to incur the costs, or
• all of the following apply:
  • the other party is a respondent who was successful in the proceedings (being that it successfully defended all claims against it)
  • the respondent does not have a significant power advantage over the applicant, and
  • the respondent does not have significant financial or other resources relative to the applicant.

Impact on respondent employers

These new cost protections do not apply to any court application made before 2 October 2024 and as such, it will be some time before we see how the courts will choose to interpret and apply the new provisions.

However, given that the courts are required to make an order for costs against respondent employers if an applicant is successful on any ground/s, these amendments place respondent employers at a significant disadvantage. This may curtail a respondent’s ability to defend by putting the applicant to proof (rather than admitting facts alleged), responding to and/or challenging defective pleadings and/or making strike-out or summary dismissal applications, as doing so may increase the applicant’s costs and therefore the employer’s potential liability for costs.

Unfortunately, while the new cost protections may incentivise respondents to resolve claims at the earliest opportunity—given that applicants will carry almost no costs risk—it remains to be seen whether a respondent willing and able to settle a matter on commercial terms will be met with unrealistic expectations from an applicant emboldened by their new protections.

Conclusion

As the saying goes, ‘prevention is better than cure’.  Therefore, it is crucial for all employers and their managers to understand their obligations under Federal anti-discrimination legislation and to receive appropriate training. Additionally, employers should implement clear and effective policies, procedures and practices to prevent unlawful discrimination.  For further guidance on this point, please see our article on evidence-based measures to fulfil your positive duty.

However, if an employer has made every effort to comply but still faces a claim of unlawful discrimination, it is essential to develop an effective legal strategy for defending or resolving the matter right from the start of the claim.  This is especially important given the potential for significant financial consequences.

[1] Explanatory Memorandum, Australian Human Rights Commission Amendment (Costs Protection) Bill 2023 2.

[2] Australian Human Rights Commission Act 1986 (Cth) s 46PSA(5).