Unfair dismissal matters can be complex and frustrating for both employers and employees alike. Since the commencement of the Fair Work Act (‘the Act’) in 2009, employers have responsibilities to correctly terminate employees. More employees are commencing unfair dismissal claims, and it is important to understand for both employers and employees to understand how these claims work.
Terminating a person’s employment is usually stressful and upsetting for everyone concerned, so it’s crucial to understand when and how termination an be done in a fair and appropriate manner.
The issues can be complex
Unfair dismissal claims may incorporate far-reaching issues including the employment type of the employee, award and enterprise agreement coverage, and time limits for claims.
In addition, the definition of ‘dismissal’ can include a situation where a person resigns but was forced to do so because of their employers conduct. This is commonly referred to as ‘constructive dismissal’.
A dismissal must be harsh, unjust or unreasonable for it to be an unfair dismissal under the Act. The primary remedy in the Act is reinstatement (where an employee is returned to their position), but in practice this is the exception rather than the rule. More often than not, compensation is ordered instead – the Fair Work Commission can order compensation of up six months of the employee’s salary.
Who is covered by the unfair dismissal provisions of the Fair Work Act?
- In a small business (with fewer than 15 employees), an employee is covered if they have worked for at least 12 months. However, even if an employee has worked at the business for 12 months, a dismissal will not be unfair where the small business has complied with the Small Business Unfair Dismissal Code.
- For larger businesses, employees are covered after six months
- Under the Act, a dismissal will not be unfair if an employer can show that it was a “genuine redundancy”.
What is a “genuine redundancy”?
There are three elements to a genuine redundancy
- The employer no longer requires the employee’s job to be done by anyone because of changes in the employer’s operational requirements; and
- The employer has complied with any consultation obligations that it might have in an enterprise agreement or award; and
- It would not have been reasonable for the employer to redeploy the employee within the employer’s business or the enterprise of an associated entity of the employer.
Small businesses – don’t be caught out
Research by Benoit Freyens, assistant economics professor at the University of Canberra, and Paul Oslington, economics professor at the Australian Catholic University, found that in the change from the Workplace Relations
Act 1996 to the Fair Work Act:
- Claimant success rates have lifted from 33% under Work Choices to 51% under the current Act.
- Claims under the Act against businesses with more than 100 employees have a 41% success rate, versus the 33% rate under the Workplace Relations Act.
- Claims lodged under the Act have jumped to 17,000 per year, from 6000 under Work Choices.
- Payouts were steady, averaging about 12 weeks’
Employers need to be vigilant in conforming to proper process when dismissing somebody, even when the employer believes they have sufficient reasons to justify dismissal. Employers need to follow the correct process – such as providing warnings and collecting documentary evidence. In the absence of this process it’s very easy to formulate an unfair dismissal claim on the basis of a lack of fair process.
For employers the best way to avoid claims of unfair dismissal is to make sure that your organisation and your employees really understand their obligations under the Fair Work Act when terminating someone’s employment. It also means there should be an internal review of the firm’s policies.
We represent both employers and employees so if you or your organisation needs assistance or advice on how to proceed please call on (02) 9963 9800 or via our contact form.