Pandemic Pay Cuts and Unconscionable Conduct

COVID-19 has forced the hand of individuals and businesses globally to dip into their  financial reserves to stay afloat. This shared misfortune may institute a mindset where one less begrudgingly ‘does their part’. However, this may shift to feelings of injustice or even unconscionability when one person discovers that they may have unilaterally forfeited their interests.

Unfair pay cuts

Widespread pay cuts and layoffs occurred in many industries throughout the pandemic, and Brisbane law firm AJ & Co was no exception. However, paralegal Carly Bullock alleges that their handling of her pay cut at the height of the pandemic was unfair. As a result, she has lodged a claim for unconscionable and misleading conduct.

Bullock expresses that she was misled into believing that all staff were made to accept pay cuts. She also believed that she would be risking her job if she refused to accept the pay cut.  Bullock later discovered that a number of other employees had successfully negotiated to retain their original salary, or receive a reduction in working hours commensurate with the pay cut. Conversely, Bullock states that though her pay was reduced by 20%, her work hours and tasks increased.

In light of this, Bullock elected to leave the firm in July and file for unconscionable and misleading conduct in the Federal Court. This presents the first case to challenge pay cuts due to COVID-19 in Australia.

Unconscionable and misleading conduct

Unconscionable conduct is prohibited under ss 20-21 of the Australian Consumer Law (ACL).

  • While lacking a precise definition, unconscionable conduct is made out on a case-by-case basis.
  • It is likely to be found where conduct is harsh or oppressive, taking into account factors listed in s 22 of the ACL such as the bargaining power of the parties, the use of undue influence, and the willingness of the stronger party to negotiate with the weaker party.

Misleading conduct is prohibited under s 18 of the ACL.

  • Misleading conduct is any conduct that misleads or causes error or misunderstanding.
  • It can be found in a variety of interactions. These not only include positive acts, but also omissions.

Potential outcome

While AJ & Co has not commented on the claim, they are expected to deny allegations. If Bullock is able to prove unconscionable conduct, she may be able to seek compensation for loss, given that she had to access her superannuation fund to make up the difference between her original salary and her reduced salary. AJ & Co may also face additional financial penalties. Further, Bullock may be able to satisfy the court that AJ & Co made an omission amounting to misleading conduct, through their failure to admit that other employees had maintained their original salary. Remedies for misleading conduct are similiar to those of unconscionable conduct, and include orders for compensation.

As an unprecedented case, the outcome may spark further claims by those who experience layoffs, resignation, or pay cuts due to the COVID-19 pandemic. This is an interesting development to follow, and is due in court next on the 8th of February.

Want to know more about employment and consumer matters and COVID-19? Please don’t hesitate to contact our experienced employment and consumer lawyers at Butlers Business Lawyers on (02) 4929 7002 or fill out an inquiry form.