What is an Unfair Termination in Australia?

What is a Dismissal?

The term dismissed is defined in the Fair Work Act 2009 (Cth) as a situation where a person’s employment has been terminated at the employer’s initiative, or a person was forced to resign because of the conduct or course of conduct engaged in by the employer. For more information on Forced Resignation or Constructive Termination, please see our specific article on this issue in the website tabs above, or alternatively give us a call on 1800 333 666.

A dismissal does NOT include where a person is demoted in his or her employment without a significant reduction in duties or remuneration and remains employed by the employer, a person was employed under a contract for a specified period of time, specified task or for the duration of a specified season and the employment comes to an end at the end of that period, or a person had a training arrangement with their employer which specified that the employment was limited to the duration of the training arrangement, and whose employment ends at the end of that training arrangement.

Notifying an employee of their dismissal

Notification of dismissal should not be made by text message or other electronic communication. Unless there is some genuine apprehension of physical violence or geographical impediment, the message of dismissal should be conveyed face to face. It has been held that even in circumstances where text message or other electronic communications are ordinarily used, the advice of termination of employment is a matter of such significance that basic human dignity requires that dismissal be conveyed personally with arrangements for the presence of a support person and documentary confirmation. Furthermore, a dismissal does not take effect unless and until it is communicated to the employee who is being dismissed. Where payment in lieu of notice is made the dismissal usually takes effect immediately.

Genuine Redundancy

An unfair dismissal application cannot be made if the dismissal was a case of genuine redundancy. A dismissal is a case of genuine redundancy when the employer no longer requires the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise, and the employer has complied with any obligation imposed by an applicable modern award or enterprise agreement to consult about the redundancy.

A dismissal is NOT a case of genuine redundancy if it would have been reasonable in all of the circumstances to redeploy the person within the employer’s enterprise, or the enterprise of an associated entity of the employer. If an employer believes that an employee’s dismissal was a genuine redundancy, and the employee has made an application for an unfair dismissal remedy, the employer may make a jurisdictional objection to that application.

If an employer can prove that the requirements of s.389 of the Fair Work Act 2009 (Cth) have been met, the Commission will have no jurisdiction to hear the unfair dismissal claim. However, if the requirements of s.389 of the Fair Work Act 2009 (Cth) have not been met, the Commission must determine if the dismissal was unfair.

What is an Unfair Dismissal?

Under the Fair Work Act 2009 (Cth), a person has been unfairly dismissed, if the Fair Work Commission (the Commission) is satisfied that an employee (who is protected from unfair dismissal) has been dismissed and the dismissal was harsh, unjust or unreasonable, and was not consistent with the Small Business Fair Dismissal Code (in the case of employees of a small business), and was not a case of genuine redundancy. Employees who have been unfairly dismissed, can lodge an Unfair Dismissal Application to the Fair Work Commission. There is a strict 21 days after your dismissal takes effect to lodge an application. If you wish to discuss this matter further, please contact us for free advice on 1800 333 666.

The purpose of the unfair dismissal provisions is to establish a framework for dealing with unfair dismissal that balances the needs of business (including small business) and the needs of employees, to establish procedures which are quick, flexible and informal and address the needs of employers and employees and to provide remedies where a dismissal is found to be unfair, with an emphasis on reinstatement.

What makes a dismissal unfair?

When assessing whether a dismissal is harsh, unjust or unreasonable, the Fair Work Commission must take into account:

  • whether there was a valid reason for the termination which relates to the employees’ capacity or conduct;
  • whether the employee was notified of this reason;
  • whether the employee was given any opportunity to respond to that reason;
  • whether there was any unreasonable refusal by the employer to allow the presence of a support person for any discussion relating to the termination;
  • whether the employee was warned about unsatisfactory performance prior to the termination if this was the reason for the termination;
  • the degree to which the size of the employer’s enterprise would likely impact on the procedures followed in making the termination;
  • the degree to which the absence of dedicated human resource manager specialists or expertise in the employer’s enterprise would be likely to impact on the procedures followed in the termination and;
  • any other matters the Commission considers relevant.

This criterion above is mandatory and must be considered in determining whether a dismissal is harsh, unjust or unreasonable. The criteria need only be taken into account to the extent that they are relevant. Failure to take account of each of the criteria is a significant error of law and may provide a basis for appeal. Whether a circumstance existed must then be taken into account, considered and given due weight as a fundamental element in determining whether the termination was harsh, unjust or unreasonable. The Commission has ultimate discretion in weighing each matter carefully in arriving at a decision.

When is a person protected from Unfair Dismissal?

A person is protected from unfair dismissal if, at the time of the termination, they have completed at least the minimum employment period with the employer and they earn less than the high income threshold (which is currently $148,700 per year) or a modern award covers their employment, or an enterprise agreement applies to their employment.

What constitutes continuous service?

The minimum period of employment is six months of continuous service or one year of continuous service if the employer is a “small business”. Under the Fair Work Act 2009 (Cth), a small business is a business that employs fewer than 15 employees. The number of employees is determined by a head count of all full-time and part-time employees. Casual employees employed on a regular and systematic basis are also included in the count.

Service is a period during which an employee is employed by an employer, but does not include certain excluded periods. Continuous service is a period of unbroken service with an employer by an employee. As continuous service was not clearly defined in the Fair Work Act 2009 (Cth), the Fair Work Commission has decided that the term should be given its ordinary meaning. Periods of unauthorised absence, certain types of unpaid leave and certain types of unpaid authorised absence do not count as service and are considered to be excluded periods. An excluded period does not break an employee’s continuous service with their employer. However, it does not count towards the length of the employee’s continuous service. In other words, section 22(3) of the Fair Work Act 2009 (Cth) deems that in some circumstances, service that is not continuous can be considered continuous depending on the reasons for the periods of absence.

Resignation, dismissal or transfers of employment which do not meet the definition of a ‘transfer of employment’ in s.22(7) of the Fair Work Act 2009 (Cth), will break an employee’s continuous service.

An excluded period does not break an employee’s continuous service with their employer. However, it does not count towards the length of the employee’s continuous service. Periods of casual employment may affect the length of an employee’s continuous service for the purpose of an application for an unfair dismissal remedy.

An employee’s period of unauthorised absence or certain periods of unpaid leave or unpaid authorised absence (there are exceptions for community service leave, certain stand downs and prescribed leave or absences). Unauthorised absences include periods of industrial action engaged in by employees, and other absences from work contrary to the direction of the employer. Unpaid authorised absences include unpaid parental leave, and unpaid personal/carer’s leave.

Small Business Fair Dismissal Code (SBFDC)

In the case of dismissal by a small business employer, a person has not been unfairly dismissed if the Commission is satisfied that the dismissal was consistent with the Small Business Fair Dismissal Code (the Code). A person’s dismissal is consistent with the Code if immediately before the time of the dismissal or at the time the person was given notice of the dismissal (whichever happens first), the person’s employer was a small business employer, and the employer complied with the Code in relation to the dismissal.

It is fair for an employer to dismiss an employee without notice or warning when the employer believes on reasonable grounds that the employee’s conduct is sufficiently serious to justify immediate dismissal. Serious misconduct includes theft, fraud, violence and serious breaches of occupational health and safety procedures. For a dismissal to be deemed fair it is sufficient, though not essential, that an allegation of theft, fraud or violence be reported to the police. Of course, the employer must have reasonable grounds for making the report.

In other cases, the small business employer must give the employee a reason why he or she is at risk of being dismissed. The reason must be a valid reason based on the employee’s conduct or capacity to do the job. The employee must be warned verbally or preferably in writing, that he or she risks being dismissed if there is no improvement. The small business employer must provide the employee with an opportunity to respond to the warning and give the employee a reasonable chance to rectify the problem, having regard to the employee’s response. Rectifying the problem might involve the employer providing additional training and ensuring the employee knows the employer’s job expectations.

In discussions with an employee in circumstances where dismissal is possible, the employee can have another person present to assist. However, the other person cannot be a lawyer acting in a professional capacity. A small business employer will be required to provide evidence of compliance with the Code if the employee makes a claim for unfair dismissal to Fair Work Australia, including evidence that a warning has been given (except in cases of summary dismissal). Evidence may include a completed checklist, copies of written warning(s), a statement of termination or signed witness statements.

Making an Unfair Dismissal Application

If an employee believes they have been unfairly dismissed and can demonstrate that the termination was harsh, unjust or unreasonable, the employee can lodge an Unfair Dismissal (Form F2) with the Fair Work Commission. An unfair dismissal application must be lodged with the Commission within 21 days after the termination takes effect and the Commission may allow a further period for lodgement in exceptional circumstances. Once an application is lodged, the Fair Work Commission will set the matter down for a conciliation conference, a private proceeding conducted by an independent conciliator. This conference is an informal method of resolving an Unfair Dismissal dispute in which an independent conciliator will assist the parties in exploring options for resolution and help them to reach an agreement without the need for a formal hearing or court proceedings.

Remedies for Unfair Dismissal

Compensation may be awarded to an employee who was unfairly terminated if the Fair Work Commission is satisfied that reinstatement is inappropriate. Compensation in this form is designed to compensate unfairly terminated employees in lieu of reinstatement for losses reasonably attributable to the unfair termination. As a result, compensation cannot be awarded for shock, distress or humiliation.

When determining the amount of compensation that may be awarded, the Fair Work Commission will take into account the employees’ length of service, the remuneration the employee would have received, or would have been likely to receive, if they had not been terminated, the efforts of the employee to mitigate the loss suffered because of the termination, such as looking for alternative work, the amount of remuneration earned by the employee from employment or alternative work during the period between the termination and making the compensation order.

The compensation cap for an unfair dismissal claim is the lesser of the amount of remuneration received by the person, or that they were entitled to receive (whichever is higher) in the 26 weeks before the termination, or half the amount of the high income threshold immediately before the termination.

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