Costs in Fair Work Act Proceedings: What Employers Need to Know

22 May 2026

Under the Fair Work Act 2009 (Cth) (FW Act), parties in a proceeding – such as an unfair dismissal or general protections application – before the Fair Work Commission (FWC) are generally expected to ‘bear their own costs’. Where an employer successfully defends an application brought by an employee – even a dubious or spurious application – in most cases it is generally difficult for an employer to recover the legal costs they have incurred.

Legislative basis for seeking costs

The FW Act does provide a mechanism for a party to proceedings to attempt to recoup their legal costs in certain circumstances where the other party has acted ‘unreasonably’. Section 570(2) of the FW Act provides that a court may order a party to pay costs where the court is satisfied that the party:

  1. commenced proceedings vexatiously or without reasonable cause, or
  2. by unreasonable act or omission, caused the other party to incur the costs, or
  3. unreasonably refused to participate in a matter before the FWC and the matter arose from the same facts as the proceedings.

As a general rule, a party can argue that the other party has acted unreasonably if that other party has rejected an offer of settlement which would have left them better off than they actually are at the outcome of the proceeding.

For example, if a respondent to a claim offers to settle that claim for an amount that ends up being more than the applicant was awarded by the Court or Commission, the respondent can argue that the applicant was not acting reasonably in refusing the offer.

Similarly, if a respondent offers to settle a matter, and the offer is not accepted by the applicant, and the respondent successfully defends the application, the respondent can also argue that the applicant failed to act reasonably by refusing an offer to settle what turned out to be an unmeritorious application.

In practice, these applications for costs, while frequently made, are rarely successful and a Court or the Commission will usually exercise its discretion to award costs extremely cautiously.

While successfully obtaining an order for costs remains a difficult endeavour, a recent decision by the Federal Court of Australia has shed some light on what employers may do to improve their chances of obtaining an order for costs against the other party.

Recent decision in the Federal Court 

In Fair Work Ombudsman v Construction, Forestry and Maritime Employees Union (Kwinana Bulk Jetty Case) (Costs) [2026] FCA 126, the Construction, Forestry and Maritime Employees Union (CFMEU) was unsuccessful in obtaining a costs order against the Fair Work Ombudsman (FWO) even though the CFMEU submitted that the FWO’s ‘unreasonable’ rejection of a settlement offer had caused it to incur unnecessary legal costs of preparing and running a trial.

The CFMEU had made an offer of settlement to the FWO which proposed, inter alia, that the FWO discontinue the proceedings on the basis that the FWO’s case had no prospect of success, and if the FWO did so, the CFMEU would bear its own legal costs to date. The CFMEU’s offer put the FWO on notice that it would consider a rejection of its offer to be an ‘unreasonable act’ justifying a future claim for costs pursuant to section 570(2)(b) of the FW Act.

The Court did not grant the CFMEU’s application for costs and found that the FWO’s rejection of the CFMEU’s offer was not unreasonable.

The key reasons that the Court found that the CFMEU’s offer of settlement (and the FWO’s subsequent rejection of that offer) was insufficient to enliven the CFMEU’s entitlement to costs in section 570(1)(b) were:

  • the CFMEU’s offer was made at a late stage in the proceeding, only six (6) days before the commencement of the hearing, and the FWO had only three (3) days to consider that offer, and
  • while the FWO was ultimately unsuccessful in its case, its prospects of success were not “doomed” because the Court in its decision gave detailed consideration to the FWO’s arguments. 

Tips for employers seeking costs orders

The Court noted that its discretion under section 570(2)(b) should be exercised cautiously, as to not discourage parties from pursuing or defending a claim.

The Court further noted that a party can improve its prospects of a successful application for costs pursuant to section 570(2)(b) if it can demonstrate that:

  • the settlement offer to the other party was made in a timely fashion, and afforded the other party a reasonable period of time to accept or reject the offer in all the circumstances, and
  • the other party’s arguments were not ones to which the Court gave detailed consideration in the judgment.

Respondents (usually employers) should consider the above factors before proceeding with a costs application, even if they consider the other party’s case to have no prospects of success, and they have expressly put the other party on notice of their intention to seek costs during settlement negotiations.

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At Hentys, we only represent employers, which means we have a focused understanding of the commercial and legal risks you face. We’re known for our:

  • Expertise in employment law and Fair Work litigation
  • Proactive strategies to minimise exposure and prevent disputes
  • Strong courtroom advocacy and proven negotiation results
  • Responsive, employer-focused support

Whether you’re responding to a claim or trying to prevent one, Hentys Lawyers is the legal partner you can rely on.

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If your business is facing an unfair dismissal or adverse action claim—or you want to reduce the risk of one—speak to our team at Hentys Lawyers today. We’ll provide expert advice and a clear action plan to protect your workplace.

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