What Employers Need to Know About Unfair Dismissal Claims
A Short Guide to Unfair Dismissal Claims in Australia
In 2020, unfair dismissal claims shot up by almost 70% during the coronavirus crisis with the Fair Work Commission dealing with an “unprecedented” caseload.
Recently, the NSW District Court awarded a former Aussie Toyota employee and Dad a damages award of $276,000 on the basis that the company could not prove he had engaged in serious misconduct and had unlawfully terminated him only one day before he was to due to receive a massive redundancy package.
So what if you need to dismiss an employee and want to minimise the risk of those consequences?
In a challenging economic climate, it can be overwhelming as an employer to consider terminating an employee when you may face the complexities of an unfair dismissal application.
Here’s the lowdown for employers on unfair dismissal claims:
- Who can make an unfair dismissal claim?
In order to bring an unfair dismissal claim in Australia, a dismissed employee must have been employed for a minimum period of time, which period depends on whether the employer is considered to be a small business employer.
A small business employer is defined by the Fair Work Act 2009 (Cth) as an employer that employs fewer than 15 employees at that time.
The Fair Work Act says that when calculating the number of employees at the time of an employee’s dismissal, all employees are to be counted including employees of associated entities (as defined under section 50AAA of the Corporations Act 2001 (Cth)), the employee being dismissed, and any other employee(s) being dismissed at the same time.
You don’t count casual employees unless at the time of the relevant employee’s dismissal, the casual employee(s) are working on a regular and systematic basis.
If the employer is a small business employer, the employee needs to have been working for the employer for at least 12 months before they are eligible to make a claim under the legislation.
If you’re not a small business employer, the employee needs to have worked for your business for a minimum period of 6 months before becoming eligible to bring an unfair dismissal claim.
If there’s been a change of business ownership, service with the first employer may count as service with the second employer when calculating the minimum employment period.
The employee must also be either covered by a Modern Award or an enterprise agreement, or if not, have an income less than the high-income threshold (see s 382 and 332 of the Fair Work Act).
The high income threshold is currently $153,600 however this figure is adjusted annually on 1 July. For a dismissal which took effect on or before 30 June 2020, the high income threshold was $148,700.
If an employee does not meet the above eligibility requirements, they cannot bring a claim for unfair dismissal under the Fair Work Act however they may have a potential claim under the ‘general protections’ (otherwise known as ‘adverse action’) provisions of the Fair Work Act.
2. What other type of claim can I bring?
Employees may also have other options available than just an unfair dismissal claim, some of which may entitle them to a lot more compensation because, unlike unfair dismissal claims (where you can only claim up to 6 months of your wages as compensation), the compensation available in relation to other common law claims may be ‘uncapped’ or subject to a higher jurisdictional amount. These include:
- Breach of Contract Claim;
- Adverse Action Claim (General Protections Claim);
- Discrimination Claim; or
- Unlawful Termination or Wrongful Dismissal Claim.
2. What constitutes an unfair dismissal?
Under s 385 of the Fair Work Act 2009 (Cth) (FWA), a person has been unfairly dismissed if the Fair Work Commission is satisfied that the dismissal was harsh, unjust or unreasonable. The Commission must also be satisfied that the dismissal was not a case of genuine redundancy. If the employee worked for a small business employer and they failed to comply with the Small Business Fair Dismissal Code, this can also be grounds for dismissal under the Act.
3. Criteria for unfair dismissal
In considering whether it is satisfied that a dismissal was harsh, unjust or unreasonable, the Fair Work Commission must take into account the following (s 387 of the Fair Work Act):
- whether there was a valid reason for the dismissal related to the person’s capacity or conduct (including its effect on the safety and welfare of other employees)
- whether the person was notified of that reason
- whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person
- any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal
- if the dismissal related to unsatisfactory performance by the person—whether the person had been warned about that unsatisfactory performance before the dismissal
- the degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal
- the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal, and
- any other matters that the Commission considers relevant.
4. What should an employer do if it receives a Fair Work Commission claim?
An employee has 21 days to file an unfair dismissal claim before the Commission, from the date the dismissal took effect. Once you receive a claim form, before filing a response to the claim, the first thing you should do as an employer is seek legal advice.
You may be able to lodge an objection to the matter being dealt with by the Fair Work Commission, such as the claim being lodged outside of the requisite 21-day time frame. You could argue that the employee is not eligible to make a claim for unfair dismissal, or that the claim is vexatious, frivolous or has no prospects of success.
An employer is otherwise required to file a response after which time the matter proceeds to a conciliation conference with a Fair Work Commission conciliator. This gives both parties a chance to state their case and try and resolve the dispute.
Fair Work Commission stats show that approximately 80% cases are resolved before ever getting in front of a Commissioner, being either “resolved informally by agreement of the parties” or because the applicant dropped the claim.
If a claim is not resolved on or before the Commission conciliation conference, upon request, the Fair Work Commission has the authority to conduct a hearing and make a determination in the matter after hearing the evidence of both parties.
If a resolution cannot be achieved, the employee will receive a certificate from the Fair Work Commission stating that the parties have attempted conciliation and the employee will then have access to the Fair Work Commission, the Federal Court of Australia or Federal Circuit Court of Australia to seek a determination in the matter.
Once the matter has proceeded to a hearing in the Fair Work Commission, Federal Court of Australia or Federal Circuit Court of Australia, the parties will be provided with a written decision which contains reasons for the decision.
At Law Quarter, we’re experienced in providing employers with pre-dismissal guidance and advising and representing employers in relation to unfair dismissal claims and employment-related claims. We’d love to help. Contact our team on 02 8324 1333 for a free consult today.
The articles on this website comprise legal general information and not legal advice. It is general information presented and must not be relied upon without specific legal advice being sought in each individual case. In the event that you wish to obtain legal advice on the contents of this general information, you may do so by contacting our office to discuss.
PS Need more advice as an employer in managing employees in the new flexible working climate? Check out our COVID-19: Working from Home Guide here.