Finally, a costs order: What employers can learn from a vexatious complainant case

When I first read about this case, my immediate thought was: are we finally taking a step in the right direction when it comes to vexatious complainants?

This one really resonated with me because, over the past few months, we’ve dealt with multiple cases where employees have lodged complaint after complaint, often all at once, seemingly throwing every possible allegation at their employer to see what sticks.

Maybe it’s the rise of AI making it easier to draft complaints and legal correspondence. Maybe employees are simply becoming more savvy about the legal avenues available to them. Either way, we’re seeing more workplace issues escalate very quickly into formal complaints, claims and legal proceedings — and for employers, the time, cost and disruption can be enormous.

That’s why this recent Federal Court decision, handed down in August 2026, caught my attention.

The case involved an employee who ran two separate legal proceedings against her former employer, a federal government agency, following a workplace bullying complaint. Internally, HR had described her as a “vexatious complainant.” She took exception to that — and sued.

She lost.

And not only did she lose, the Court ordered her to pay half of the employer’s legal costs for the final hearing because pursuing the claims all the way to trial was, in the Court’s view, unreasonable.

Wow.

Finally, a win for employers. Yes, the employer happened to be the public service — but I’ll take the win nonetheless.

So, what can businesses learn from it?

What actually happened?

The employee raised a bullying complaint at work. Her employer investigated, and in the process also looked into aspects of her own conduct. She didn’t like the direction things took, so she launched Federal Court proceedings alleging the employer had taken adverse action against her for raising the complaint, and that leadership had improperly influenced the HR investigation.

The employer made three separate settlement offers over three years. All were rejected. The matter went all the way to a final hearing, and every claim was dismissed.

The employer then applied for costs under section 570 of the Fair Work Act, arguing it had racked up considerable legal costs because the employee had persisted with claims she’d been warned were flawed.

Why does a costs order matter under the Fair Work Act?

Normally, in Fair Work matters, each side pays its own legal costs, win or lose. That’s deliberate. It’s meant to stop cost pressure discouraging genuine claims. But section 570 carves out an exception: if the court finds a party’s unreasonable act or omission caused the other side’s costs, it can order them to pay up.

That’s a high bar. Losing isn’t enough. Being difficult isn’t enough. What tips it over is pursuing claims that have no real prospect of success, especially once you’ve been put on notice that they’re weak, and especially once you’ve knocked back reasonable chances to settle.

That’s exactly what happened here. The court found several of the claims had “no possible basis,” one was described as “hopeless,” and another as “obscure and difficult to follow.” Combined with three rejected settlement offers spanning three years, that was enough to make continuing the trial of unreasonable conduct unreasonable.

What does the “vexatious complainant” label actually protect you from?

Nothing, on its own. Calling someone vexatious doesn’t stop them from suing you, and it won’t help you in court unless the substance backs it up. What actually protected this employer was documentation: a clear record of the investigation, of the settlement offers made, and of the point at which the claims stopped having any real substance.

The label is a description, not a shield. The paper trail is the shield.

What should you actually do differently?

If you’ve got a staff member who complains repeatedly, escalates every outcome, and won’t accept resolution, don’t reach for a label. Reach for a process.

• Document every complaint and its outcome, properly and contemporaneously
• Make genuine settlement offers where there’s commercial sense in doing so, and keep a clear record of them
• Get advice early on whether a claim has real legal substance, don’t just assume persistence equals merit
• If someone’s conduct is genuinely making it hard to run a fair process, deal with that as a performance or conduct issue, separately from how you manage the underlying complaint

Cost orders like this one are rare and hard-won. Don’t run your workplace strategy on the assumption that you’ll get one. Run it assuming you won’t and build the discipline in from day one instead.

FAQs

Can I always recover legal costs if an employee loses their Fair Work claim?

No. The general rule is that each party bears its own costs regardless of the outcome. Cost orders are the exception, not the norm, and only apply where the losing party’s conduct was unreasonable, not just unsuccessful.

What counts as “unreasonable conduct” for a costs order?

Pursuing a claim with no real prospect of success, especially after being told it’s flawed, rejecting reasonable settlement offers, or running proceedings in a way that’s needlessly repetitive or difficult to follow.

Does calling someone a “vexatious complainant” protect the business legally?

No. The label carries no legal weight by itself. What matters is the documented substance behind it, the investigation record, the settlement history, and whether the claims genuinely lacked merit.

Should we settle early with a repeat complainant to avoid legal costs?

Sometimes, but not automatically. A genuine, well-timed offer protects you either way. If they accept, it’s resolved. If they don’t and later lose, that rejected offer strengthens any later costs application.

What should we do if we think a staff member is pursuing a hopeless claim?

Get legal advice early, keep documenting, and don’t rely on assumption. Courts look for evidence the claim was hopeless, not just your gut feel that it was.

Got someone in your business who won’t stop escalating? We’ll help you build the paper trail that actually protects you, not just a label that doesn’t. Get in touch and let’s cut through the BS.