Losing your job can be highly stressful. Likewise, deciding to dismiss an employee can be a difficult and confronting time for an employer.
In Australia, the law protects employees from unfair treatment and provides an avenue for redress if an employee has been unfairly dismissed. The concept of “unfair dismissal”, however, is frequently misunderstood by both sides of the employment relationship.
Whether you are an employee facing an unexpected dismissal or an employer grappling with a difficult decision, this article helps shed light on unfair dismissal laws in Australia. The information is general only and does not constitute legal advice. For advice tailored to your circumstances, we recommend seeking assistance from an experienced employment lawyer.
What is an Unfair Dismissal?
Under the Fair Work Act 2009, a person who has been dismissed will have been unfairly dismissed if the dismissal was:
- harsh, unjust, or unreasonable; and
- not consistent with the Small Business Fair Dismissal Code; and
- not a case of genuine redundancy.
Generally, a “dismissal” occurs when an employee’s employment is terminated at the employer’s initiative. However, an employee’s forced resignation due to inappropriate conduct by an employer that makes it impossible for the employee to continue working may also be a dismissal. This is known as a “constructive dismissal”.
What is Harsh, Unjust, or Unreasonable?
The Fair Work Commission (FWC), Australia’s national workplace relations tribunal, is the body that decides unfair dismissal claims. When the FWC looks at a case, it considers a range of factors to determine if a dismissal was fair, including:
- Was there a valid reason for the dismissal? A valid reason must be sound, justifiable, and not based on whim or prejudice. Reasons can relate to the employee’s poor performance, misconduct, or a genuine redundancy.
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- If dismissal relates to misconduct or performance, it should not be disproportionate to the conduct.
- A genuine redundancy occurs when an employer no longer needs the employee’s job to be performed by anyone, and they have followed all legal requirements for redundancy.
- Was the employee notified of the reason? The employee should be clearly told why their employment is ending.
- Was the employee given an opportunity to respond? The investigation or performance management process must be conducted reasonably, and the employee must be given a chance to explain their side of the story before a final decision is made.
- Was the employee allowed to have a support person? The employer should not have unreasonably refused to allow the employee to have a support person present at meetings or discussions about the dismissal.
- Were there prior warnings? If the dismissal was related to performance, the employee should have been warned about the issue and given a chance to improve. The warning should also include that termination of employment may be a consequence if there is no improvement in performance.
- The employer’s size and access to HR resources. The size of the enterprise and the availability of a dedicated human resource management team will be considered when assessing the procedures followed in dismissing the employee.
Am I Eligible to Make a Claim? (For Employees)
If an employee is dismissed unfairly, they may have grounds to lodge an application with the Fair Work Commission seeking reinstatement and/or compensation.
Your eligibility to make a claim depends on your circumstances and the type and size of the employer enterprise. Generally, to be eligible:
- You must work for a national system employer – most, but not all, employers in Australia are national system employers – your lawyer can confirm this.
- You must have been an employee in a business with 15 or more employees for at least 6 months or, if you worked for a small business (with fewer than 15 employees), you must have been employed for at least 12 months.
- You must be earning less than the “high-income threshold” – this threshold changes each year, so it is important to check the current amount. Note, if you earn more than the high-income threshold, you may still be covered through an applicable award or enterprise agreement.
- If you are a casual employee, your employment must have been on a “regular and systematic basis”, with an expectation of ongoing employment.
You will need to lodge your application with the Fair Work Commission within 21 days after the dismissal takes effect. This time limit is strict, and the Commission will only accept a late application if there are exceptional circumstances.
How Do I Respond to a Claim? (For Employers)
If an employee makes an unfair dismissal claim against your business, you will be notified by the Fair Work Commission. You have an opportunity to respond to the claim, and it is essential to do this promptly.
When responding, you will need to explain why the dismissal was not unfair. This involves demonstrating to the Commission that you followed a fair process and had a valid reason for the termination.
If you are a small business, you have a specific guide to follow called the Small Business Fair Dismissal Code. The code provides a process for handling dismissals, particularly those related to misconduct or poor performance. You should show that the guide was followed when dismissing the employee.
Process and Outcomes
Most unfair dismissal claims are resolved through conciliation, which is a private, informal discussion facilitated by a Fair Work Commission conciliator. The goal is to help both parties reach an agreement without a formal hearing.
If conciliation fails, the matter can proceed to a formal hearing before a member of the Commission. Both the employer and employee present their evidence and arguments, and the Commission member makes a binding decision.
If the Fair Work Commission finds that a dismissal was unfair, it can order one of two remedies:
- Reinstatement: This means the employee gets their job back, and the employer must provide them with back pay for any wages they lost from the date of dismissal. This is the primary remedy, but it is not always a practical or appropriate solution.
- Compensation: If reinstatement is not suitable (for example, if the relationship has broken down completely), the Commission may order the employer to pay the employee compensation. The amount is capped at the lower of 26 weeks’ pay or the compensation cap (reviewed annually), and is intended to cover lost wages, not emotional distress or hurt feelings.
Conclusion
An unfair dismissal occurs when an employee is terminated from their job in a way that is “harsh, unjust, or unreasonable”. It considers the reason for the dismissal and whether the process used to dismiss the employee was fair.
If you or someone you know wants more information or needs help or advice, please call (02) 5127 5261 or email [email protected].