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 a way to seek redress if an employee faces unfair dismissal. The concept of “unfair dismissal” is frequently misunderstood by both sides of the employment relationship.
Whether you’re an employee facing an unexpected dismissal or an employer facing a difficult decision, this article explains unfair dismissal laws in Australia. The information is general only and does not constitute legal advice. For advice tailored to your circumstances, seek assistance from an experienced employment lawyer.
What is an Unfair Dismissal?
Under the Fair Work Act 2009, a person who an employer dismisses will face unfair dismissal 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 employer ends an employee’s employment. However, if an employer’s inappropriate conduct forces an employee to resign, that also counts as a dismissal. This is known as “constructive dismissal”.
What is Harsh, Unjust, or Unreasonable?
The Fair Work Commission (FWC), Australia’s national workplace relations tribunal, decides unfair dismissal claims. When the FWC reviews a case, it considers several factors to determine fairness, including:
- Was there a valid reason for the dismissal? The reason must be sound, justifiable, and free from whim or prejudice. Reasons can relate to poor performance, misconduct, or genuine redundancy.
- If the dismissal relates to misconduct or performance, it should not exceed the severity of the conduct.
- Genuine redundancy occurs when an employer no longer needs the employee’s role and follows all legal redundancy requirements.
- Was the employee notified of the reason? The employer should clearly explain why employment is ending.
- Was the employee given a chance to respond? The employer should conduct investigations or performance management reasonably and allow the employee to explain their side before making a final decision.
- Was the employee allowed a support person? Employers should not unreasonably refuse support persons at meetings or discussions regarding dismissal.
- Were there prior warnings? If performance caused the dismissal, the employer should have warned the employee and given a chance to improve.
- Employer size and HR resources. The FWC considers the enterprise’s size and available HR resources when reviewing dismissal procedures.
Am I Eligible to Make a Claim? (For Employees)
If an employer unfairly dismisses you, you may lodge an application with the Fair Work Commission to seek reinstatement or compensation.
Your eligibility depends on your circumstances and the employer’s size. Generally, to qualify:
- You must work for a national system employer. Most Australian employers are, but your lawyer can confirm this.
- You must have worked at a business with 15 or more employees for at least 6 months. For small businesses with fewer than 15 employees, employment must last at least 12 months.
- You must earn less than the “high-income threshold”. This amount changes yearly, so check the current figure. Even if you earn more, you may still qualify under an applicable award or enterprise agreement.
- If you are a casual employee, your employment must have occurred on a “regular and systematic basis” with an expectation of ongoing work.
Submit your application to the Fair Work Commission within 21 days after dismissal. The Commission only accepts late applications in exceptional circumstances.
How Do I Respond to a Claim? (For Employers)
If an employee files an unfair dismissal claim, the Fair Work Commission will notify you. You must respond promptly.
Explain why the dismissal was fair by showing that you followed proper procedures and had a valid reason. Small businesses should follow the Small Business Fair Dismissal Code, which outlines processes for misconduct or poor performance dismissals.
Process and Outcomes
Many claims resolve through conciliation, a private discussion facilitated by a Fair Work Commission conciliator. The goal is to help both sides reach an agreement without a formal hearing.
If conciliation fails, the claim proceeds to a formal hearing. Both parties present evidence and arguments, and the Commission member issues a binding decision.
If the Fair Work Commission rules a dismissal unfair, it may order:
- Reinstatement: The employee returns to their job, and the employer provides back pay. This is the primary remedy but may not always suit the situation.
- Compensation: If reinstatement is unsuitable, the Commission may order the employer to pay compensation. This covers lost wages up to 26 weeks’ pay or the annual cap and does not cover emotional distress.
Conclusion
An unfair dismissal occurs when an employer terminates employment in a way that is “harsh, unjust, or unreasonable.” It considers both the reason for dismissal and whether the employer followed a fair process.
For more information or advice, call (03) 9600 2768 or email [email protected].