Costs orders as a shield: Combating the rise of AI-driven unmeritorious claims

What you need to know

• Two recent decisions of the Fair Work Commission highlight a growing problem and a practical response. Applicants now wield AI tools to draft submissions, fabricate contractual terms, and pursue claims they cannot win. These two decisions, read together, chart a clear course for employers confronting the growing tide of AI-assisted unmeritorious claims.
• Employers who face these claims can, and should, pursue costs orders to deter this conduct.

What you need to do

• Act early and create a paper trail. The employer in O'Meley v Bara Barang Corporation Ltd [2026] FWC 61 wrote to the applicant on the day it filed its response, flagging the jurisdictional bar and inviting discontinuance. That letter established that the applicant had been "put squarely on notice" of the deficiency in her claim, anchoring the costs award under s 400A of the Fair Work Act 2009 (Cth). It also served the purpose of establishing the date from which the applicant's failure to discontinue became unreasonable, providing a defined period over which to measure costs.
• Warn of costs consequences. The employer's letter in O'Meley explicitly warned it would seek a costs order if the applicant persisted. That warning created an objective benchmark against which the Commission measured the applicant's subsequent conduct. It also negated any suggestion that the applicant did not understand the risk of continuing.
• Engage with the Commission process. In Hoverd v M & J D Pty Ltd [2026] FWC 1013, the respondent engaged a solicitor and presented clear, well-supported submissions. The contrast between the employer's conduct and the applicant's AI-generated misrepresentations influenced the Commission's invitation for a costs application.
• Challenge AI-generated evidence directly. Deputy President Lake's decision to cross-check the applicant's AI-extracted contractual terms against the actual contract proved damaging to the applicant's credibility. Deputy President Lake treated the misrepresentations as evidence of dishonesty, not mere ignorance. Employers should compare AI-generated submissions against source documents and present the inconsistencies.

The Fair Work Commission has sounded a clear warning. Two recent decisions; Hoverd v M & J D Pty Ltd [2026] FWC 1013 and O'Meley v Bara Barang Corporation Ltd [2026] FWC 61, highlight a growing problem and a practical response. Applicants now wield AI tools to draft submissions, fabricate contractual terms, and pursue claims they cannot win. Employers who face these claims can — and should — pursue costs orders to deter this conduct.

The problem: AI-enabled unmeritorious claims

As the Fair Work Commission has now repeatedly warned, unfair dismissal and general protections applications have surged to untenable levels. One key driver sits in the hands of every applicant: generative AI tools that empower unrepresented applicants to generate legal-sounding submissions in minutes. But speed does not equal substance. These tools can be used by applicants to generate arguments untethered from facts and that rely on legal standards that do not apply or exist. This is coupled with the relatively low "barrier to entry", that is, an application fee of $89.70 (reviewed 1 July each year).

General protections claims, in particular, have surged in volume, owing largely to reasons that the grounds for eligibility are broader and compensation is uncapped. Such applications also involve a reverse onus of proof. Once an employee establishes that they experienced adverse action and possessed or exercised a workplace right or held a protected attribute, it is presumed the action was taken for the unlawful reason unless the employer proves otherwise. Hoverd v M & J D Pty Ltd [2026] FWC 1013 offers a stark example. Mr Hoverd lodged a general protections application alleging constructive dismissal after he resigned from his role as an Earthmoving Plant Operator/Labourer.

Mr Hoverd had confirmed to the Commission that he "used AI tools to assist in organising and drafting" his submissions. The consequences proved damaging. The AI "extracted" terms from his employment contract did not exist. It changed his position title, omitted the word "Labourer," and invented set contractual hours of "6:00am–4:30pm Monday to Friday" — none of which appeared in the contract he signed.

The applicant also relied on a "clause 23.2" of the Waste Management Award 2020 that he claimed that required majority consent for a finishing time beyond 5:00pm. No such clause exists in the Award. Even after the Commission warned Mr Hoverd not to provide false or misleading evidence, he continued to press arguments grounded in these fabricated provisions. It took a reminder during the hearing that he was giving sworn evidence before the applicant accepted his contract did not say what he contended.

Deputy President Lake noted that the applicant "chose to rely on AI to 'extract' terms of the contract which did not exist, instead of reading the contract which he signed". The Commission held "serious reservations" about the applicant's "honesty and credibility as a witness" and found his conduct amounted to "deliberate misrepresentation" — not mere ignorance of the law.
The Commission found the applicant "was not forced to resign" and dismissed the application.

The response: Costs orders under the Fair Work Act

Two costs mechanisms allow employers to push back against unmeritorious claims: ss 611 and 400A of the FW Act.

Section 611: Costs for unreasonable or vexatious applications

Section 611 includes an exception to the general rule that each party bears its own costs. The Commission may order costs where it finds an application was made "vexatiously or without reasonable cause," or where "it should have been reasonably apparent" that the application "had no reasonable prospect of success" (see s 611(2)).

The Full Bench in Church v Eastern Health [2014] FWCFB 810 (cited in O'Meley) confirmed that this power should be exercised "with caution and only in a clear case". An application lacks reasonable cause where it can be "characterised as so obviously untenable that it cannot possibly succeed" or is "manifestly groundless". The test under s 611(2)(b), that "it should have been reasonably apparent" and "had no reasonable prospect of success" is objective: it asks whether it "should have been reasonably apparent" to the applicant — not whether the applicant subjectively believed the claim had merit. The Full Bench in Baker v Salva Resources Pty Ltd [2011] FWAFB 4014 cautioned that a conclusion that an application "had no reasonable prospects of success" should only be reached where the application is "manifestly untenable or groundless or so lacking in merit or substance as to be not reasonably arguable".

In Hoverd, a costs application was not proposed for Deputy President Lake to determine, instead, he took the unusual step of actively inviting a costs application from the employer, stating: "I welcome a costs application from the Respondent for this matter. The Applicant has repeatedly displayed a disregard for facts and has relied on incoherent legal arguments in order to contrive a basis to claim compensation".

Section 400A: Costs for unreasonable conduct in unfair dismissal matters

Section 400A targets unreasonable conduct in the continuation of unfair dismissal proceedings. Under s 400A(1), the Commission may order costs where a party's "unreasonable act or omission" in connection with the "conduct or continuation" of a matter caused the other party to incur costs. Such orders can only be made by the Commission on an application under s 402 for an order for costs pursuant to s 611.

O'Meley v Bara Barang Corporation Ltd [2026] FWC 61 demonstrates how s 400A operates with s 611 in practice. Ms O'Meley filed an unfair dismissal application against her former employer, a not-for-profit charitable organisation that employed only 13 people. She had worked for less than 12 months. The employer, a small business, raised the jurisdictional objection that Ms O'Meley had not served the 12-month minimum employment period required under s 383(b) of the Act for her to be eligible to bring an unfair dismissal application.

The employer's legal representative wrote to Ms O'Meley on 4 September 2025, explaining the jurisdictional bar and inviting her to discontinue. The letter warned that the employer would seek costs if Ms O'Meley persisted. Ms O'Meley did not respond. When the Commission itself directed Ms O'Meley to address the issue, she offered only a bare assertion that she "was aware of at least 16 employees" — without any supporting evidence. She then disengaged entirely: she did not comply with directions, did not respond to a show cause notice, nor did she return phone calls from the Commission. The underlying application was dismissed under s 587.

Deputy President Boyce awarded costs of $3,102 to the employer under s 400A. The decision found Ms O'Meley's failure to discontinue her proceedings on or about 5 September 2025 constituted an "unreasonable act or omission" that caused the employer to incur legal costs it did not need to incur. The Deputy President described the circumstances as "undoubtedly exceptional and extraordinary".

The decision also carries a footnote that deserves headline treatment: Deputy President Boyce observed that Ms O'Meley "was well versed in the use of ChatGPT" and that nothing prevented her from using it to engage with the Commission's process, undermining her claims of incapacity. The implication cuts both ways: the same tool that may have enabled her to file the application in the first place could also have helped her understand the jurisdictional objection against her, and withdraw. Ms O'Meley's assertion that she believed the employer's legal costs "were not her concern" earned particular criticism.

Looking Ahead

The Commission for many months now has signalled AI as a driver of unmeritorious claims increasing case volumes and causing backlog. It is using the tools at its disposal to deter such applicants, including a number of new internal measures introduced by President Hatcher.

For employers grappling with the rising volume of AI-assisted applications, the strategy is clear. Identify the jurisdictional or substantive deficiency early. Write to the applicant and put them on notice. Warn of costs. And if the applicant persists, apply for costs. The Commission has shown it is prepared to award them and may soon do so with increasing frequency.

Authors: Roanize Irish, Senior Associate, Shelley Williams, Partner.