Legal development

Court likely to favour union proceedings over class actions (although not this one) 

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    What you need to know

    • The increase in employment claims is starting to lead to overlapping class actions, union and regulatory proceedings. This was the first application for a stay between competing union and class action proceedings.
    • The multifactorial approach used for competing class actions is relevant but "imperfect" in these situations.
    • The Court will generally not allow multiple representative cases to go forward when one will suffice, and a union not seeking a funding commission will usually be a significant factor in staying a class action.
    • Here though the Court favoured a joint trial model, in particular because of concern about delay and inefficiency in the way the union proceedings were brought.
    • Contrary to a position argued by the union, the Court may not allow it to further agitate claims on behalf of workers if they are settled in a class action.

    Recap of competing claims

    Two or more competing class actions are relatively common, and the Court's multi-factorial approach for choosing to stay or consolidate claims is now well established. We discuss that in our article.

    There have also been a number of regulatory enforcement proceedings and class actions, which have tended to be managed together, although practices have varied (including via consecutive hearings or joint hearings).

    However, while unions have special standing to bring quasi-representative proceedings, they have rarely done so until recently. The Elliott-Carde case is the first decision dealing with overlapping union and class action proceedings.

    A general preference for union cases if they don't take a funding commission?

    While the nuances of the case meant there was no stay here, the following key themes emerged in terms of general guidance:

    1. Generally, only one claim should go forward

      The Court said that unless there is a good reason, two or more cases of a representative nature should not be allowed to go forward when one will suffice. Duplicative proceedings are a vice and there is a risk of inconsistent outcomes, vexation to a respondent and increased costs.

    2. Unions have a special role in litigating claims

      Federally registered employee organisations have played, and continue to play, a special and central role in protecting the interest of workers. That role should be given full effect and not diminished.

    3. Litigation funding is an important factor – unions will be favoured if they don't seek a commission

      "All else being equal", registered employee organisations may be the preferred vehicle for running claims seeking employee compensation and penalties where they do not take out a funding commission or legal costs from the compensation awarded. 

      That said, any deductions for funding or legal costs in the class action would require Court approval to ensure they are fair and reasonable.

    4. There is no scope for a union to re-litigate

      Lee J considered it wrong for the union to contend that it would not be bound by judgment in the class action and could re-litigate claims for workers (removing finality). In particular:

    • If the claims in the class action failed – that would be the end of the matter under the usual principles of res judicata and issue estoppel.
    • If a worker received compensation either via compensatory award or settlement – that would resolve the claim for that worker and the Court would not exercise its discretion to make an additional award.

    This is particularly significant, as it has been argued by unions that they have their own entitlement to agitate claims on behalf of workers even if those workers have resolved them – which posed a potential barrier to settling employment class actions.

    The particular nuances of the Elliott-Carde case

    In Elliott-Carde, the union did bring representative proceedings and it did not seek a funding commission. But the class action was still not stayed and both claims will travel together.

    1. That was essentially due to the Court's concerns about how the union proceedings had been managed. In particular, the union commenced 16 separate proceedings in a "piecemeal way".

      Initially, the union's claims were for a "limited suite" of employees. The class action was then filed for the entire cohort. Subsequently, the union broadened its claim. In the meantime, the class action applicants had incurred costs and disbursements of approximately AU$1.2 million. In this way, the delays and approach of the SDA contributed to the circumstances of competing claims.
    2. When considering alternative paths forward, the union's proposal "involved an unwieldy hotch-potch of different actions without the manifold procedural benefits of a class action" and via a "presently undetermined process". This was less favourable than a joint, limited initial hearing of common issues.

    Had circumstances been different and there been a choice between two actions commenced in a timely fashion, namely (a) a funded class action; and (b) an "unfunded" class action run by the union, the interest of group members would likely have required a stay of the funded class action.

    The Court was also not asked to consider a stay of the union proceedings in favour of the class action.

    Novel ways of distributing notices to group members

    The case also provides guidance on the Court's developing expectations on parties when distributing notices to group members. While informed by the nature of the class in this case (comprising minors), his Honour's comments may be more broadly applicable.

    First, opt-out notices need to be more accessible, including the use of graphics and animation. Applicants' solicitors need to "think laterally and realistically about digital communication and the use of social media".

    Secondly, it may be appropriate to appoint an independent lawyer, armed with a 'frequently asked questions' document settled by the Court, who will be in a position to respond to telephone or email queries as to any matters raised by group members relevant to the notice.

    What next?

    1. We expect to see more rivalry between employment class actions and union / regulatory proceedings.
    2. We may see unions using the class action regime and themselves being applicants in class actions, in view of Justice Lee's comments that there is "no barrier" to a union doing so.
    3. Unions may now be quicker off the mark to file claims or signal their intentions to the media to investigate claims, making it more difficult for funded class actions to win this sort of contest.
    4. The Courts will continue to adopt a multi-factorial approach and manage competing claims based on their individual circumstances.

    Elliott-Carde v McDonald's Australia Limited (Stay Application) [2023] FCA 1210

    Authors: Ian Bolster, Partner; John Pavlakis, Partner; Sally-Anne Stewart, Senior Associate; and Andrew Westcott, Expertise Counsel.

    The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
    Readers should take legal advice before applying it to specific issues or transactions.


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