Unfair Dismissal

Employment Law Handbook

You may encounter situations throughout your working journey where your employer lets you go without any explanation or fires you for something that does not reasonably warrant termination. Understandably, such circumstances can lead to undesirable amounts of stress and frustration.

The Australian Fair Work legislative framework accommodates for employees who believe that they have been unfairly dismissed by their employer to make a claim for certain remedies. Interestingly enough, claims for unfair dismissal are by far the most common actions currently filed and present before the Fair Work Commission (“FWC”).

Who can make a claim for unfair dismissal?

Not all employees who believe that they have been unfairly dismissed are entitled to make a claim. In order to be eligible to make a claim for unfair dismissal, an employee must:

be a “national system employee”;
have completed the minimum period of employment with the employer; and
earn less than the high income threshold, or be covered by a Modern Award or Enterprise Agreement.

Generally speaking, a “national system employee” includes:

all employees in Victoria (with limited exceptions in relation to some State public sector employees), the Northern Territory and the Australian Capital Territory;
all employees on Norfolk Island, the Territory of Christmas Island and the Territory of Cocos (Keeling) Islands;
employees employed by private enterprise employers in New South Wales, Queensland, South Australia and Tasmania;
those employed by local government in Tasmania;
those employed by a constitutional corporation in Western Australia (including proprietary limited companies);

those employed by the Commonwealth or a Commonwealth authority; and
waterside employees, maritime employees or flight crew officers in interstate or overseas trade or commerce.

The “minimum period of employment” is usually 6 months, however this period is extended to 12 months in the case of a “small business” employer. An employer will be classified as a “small business” if it employs less than 15 employees.

The “high income threshold” for the 2021/2022 Financial Year is $158,500. However, employees earning higher than this amount may still be eligible to make a claim for unfair dismissal if their employment was covered by a Modern Award or Enterprise Agreement.

Unfortunately, independent contractors are unable to make a claim pursuant to the unfair dismissal provisions due to the fact that there is no contract of employment in existence. Additionally, employees who are employed on a casual basis are not eligible to make a claim either, unless it can be proven that they have been employed on a regular and systematic basis and had a reasonable expectation of ongoing work on a regular and systematic basis.

It should be noted that employees who wish to make a claim for unfair dismissal must file their application to the FWC within 21 days after the dismissal takes effect. Although the FWC has discretion to extend this limitation period, it is a very rare and exceptional occurrence.

What makes a dismissal “unfair”?

In order for a dismissal to be regarded as “unfair”, it must be determined whether the dismissal was “harsh, unjust or unreasonable”. In doing so, the FWC is obliged under section 387 of the Fair Work Act 2009 (Cth) (“the Act”) to take into account:

(a) 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); and

(b) whether the person was notified of that reason; and

(c) whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person; and

(d) any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal; and

(e) if the dismissal related to unsatisfactory performance by the person – whether the person had been warned about that unsatisfactory performance before the dismissal; and

(f) the degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

(g) 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

(h) any other matters that the FWC considers relevant.

Therefore, when assessing an employee’s claim for unfair dismissal, the FWC is obliged to consider a very broad range of factors, allowing for a comprehensive analysis of the unique set of circumstances in each and every case.

However, an employee will not have been unfairly dismissed if the dismissal was a result of “genuine redundancy”, or in the case of a small business employer, the dismissal was compliant with the Small Business Fair Dismissal Code.

The Small Business Fair Dismissal Code

Where a small business employer is alleged to have unfairly dismissed an employee, it will be held that the dismissal was not unfair within the meaning of the Act if the small business employer can prove that it has behaved in a way that is consistent with the Small Business Fair Dismissal Code (“the Code”).

The Code essentially requires that:

small business employers provide an employee a reason as to why they are at risk being dismissed;
that reason must be a valid reason based on the employee’s capacity to do the job;

this warning must be given verbally (and preferably also in writing), informing the employee that they risk being dismissed if there is no improvement; and
the employee must be provided with an opportunity to respond to the warning and a chance to rectify the problem, having regard to this response.

Although, it should be noted that the Code permits small business employers to summarily dismiss an employee, absent of any warning or notice, where “serious misconduct” is committed by the employee. “Serious misconduct” encapsulates theft, fraud, violence and serious breaches of work health and safety procedures, and may also include the serious and imminent risk to the reputation of the employer’s business.

What is genuine redundancy?

An employee will not have been unfairly dismissed if the dismissal was a result of a “genuine redundancy”.

A “genuine redundancy” occurs only in circumstances where the employer no longer requires the employee’s job or duties to be performed by anyone else as a result of an operation change within the employer’s enterprise, and provided that the employer complied with any and all obligations in an applicable Modern Award or Enterprise Agreement to consult about the redundancy.

A dismissal will not be a result of genuine redundancy if it was reasonable for the employer to reassign the employee to a different role within the employer’s or an associated entity’s business. Furthermore, a genuine redundancy will not be established if the employer deemed that the employee as an individual was no longer required – the redundancy must relate to the job itself.

What remedies are available?

Provided that the FWC decides that the dismissal was in fact unfair, an award of remedies may be made by the FWC for the employee. Remedies are not an automatic entitlement of a successful employee, but rather a discretionary award that the FWC may grant.

Reinstatement of the employee in the position they held immediately prior to the dismissal or to another position on terms and conditions no less favourable than those of the position they previously held is the primary remedy for unfair dismissal ordered by the FWC. In addition to an order for reinstatement, the FWC may also order that the employee’s continuity of employment with the employer is maintained, and that the employer pay for the remuneration lost or likely to have been lost as a result of the unfair dismissal.

As it can be imagined, there are certain situations where reinstatement is simply an inappropriate and unreasonable remedy. This may be the case where the dismissal has resulted in the irreversible deterioration of the employer and employee’s relationship, or where the position held by the employee has ceased to exist. Nevertheless, in such circumstances where reinstatement is not a viable option, the FWC may award the employee compensation as a remedy. The criteria that the FWC must apply when determining the amount of compensation to be award is stipulated under section 392(2) of the Act, which includes:

(a) the effect of the order on the viability of the employer’s enterprise; and

(b) the length of the person’s service with the employer; and

(c) the remuneration that the person would have received, or would have been likely to receive, if the person had not been dismissed; and

(d) the efforts of the person (if any) to mitigate the loss suffered by the person because of the dismissal; and

(e) the amount of any remuneration earned by the person from employment or other work during the period between the dismissal and the making of the order for compensation; and

(f) the amount of any income reasonably likely to be so earned by the person during the period between the making of the order for compensation and the actual compensation; and

(g) any other matter that the FWC considers relevant.

Useful Resources

Fair Work Act 2009 (Cth)
Small Business Fair Dismissal Code
Unfair Dismissals Benchbook
Fair Work Commission at https://www.fwc.gov.au/
Fair Work Ombudsman at https://www.fairwork.gov.au/

Park & Co Lawyers Employment Law Experts

Our team of Employment Law Experts and Park & Co Lawyers are strong advocates for the correct treatment of employees in any circumstance. We understand the immense toll that losing your job can have on you and your wellbeing.

Should you require any assistance in relation to making a claim for unfair dismissal, please do not hesitate to get in contact with our team.