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Unfair Dismissal

Employees whose have been dismissed unfairly may be able to take action under the Fair Work Act 2009 (Cth) or the Fair Work Act 1994 (SA).

Harsh, unjust or unreasonable

A dismissed employee has the task of convincing the relevant body that the dismissal was, in real and objective terms, harsh or unjust or unreasonable. This will depend on the facts in the particular case and on general standards of industrial fairness. For instance, in cases of inefficiency or misconduct, (except where there is gross inefficiency or gross misconduct) an employer is expected to clearly and formally warn the employee that a repetition of the inefficiency or misconduct, or similar behaviour, will not be tolerated and, if it is repeated, that dismissal will result. An employer who, by indulgence or inattention, has permitted certain practices to occur in the workplace (such as sleeping on the job) cannot decide to amend the situation by sacking a worker as an example to the rest. Before dismissal an employer is expected to consider any alternative action, such as, if the circumstances warrant, changing the employee to a lower classification or job in the workplace. Although this may amount to dismissal if the employee refuses, the fact that the harshness of the dismissal was offset by the offer of other employment will be taken into account.

Where there has been misconduct serious enough to warrant dismissal, (such as theft) the employer does not have to prove beyond reasonable doubt that that a particular employee is guilty. However, the employer must have conducted a reasonable investigation and be satisfied on the balance of probabilities that this particular worker has committed misconduct serious enough to warrant dismissal

[Hooper v. Bi-Lo Pty Ltd I.76/1992].

When is a dismissal unfair?

Unfair dismissal laws do not seek to intrude on an employer's right to make the normal decisions about the manner in which the business is conducted. But when making those decisions, the employer must act fairly, taking into account all relevant circumstances before deciding to dismiss. Each case is considered individually. As a general guide, an employee should not be dismissed without good reason and the act of dismissal should be handled without unnecessary offence recognising that people are entitled to be treated with dignity.

Some examples of where it would be fair to dismiss an employee could include:

  • Where the employee refuses to obey the employer's lawful instructions
  • Consistent and repeated inefficiency, negligence or incompetence, where the employer has given clear warning that the employee's work is unsatisfactory and the employee has been given a chance to improve and has been warned that they may be dismissed it they don't
  • Where the employee becomes unable to carry out the duties of the position, for instance where the employee is imprisoned and cannot come to work. However, where the employee is unable to work due to illness or injury, special considerations apply and legal advice should be sought.
  • Misconduct, which can include drunkenness, drugs, assault, insolence, serious breaches of work safety standards, dishonesty, or criminal acts in the course of work. Not all misconduct will justify a dismissal. It depends on many factors such as how serious the misconduct was, the type of work, the employee's duties in the situation, the employee's length of service and work record etc.
  • Retrenchment due to a genuine lack of work or re-organisation of the workplace. However the employer must follow any retrenchment process in the relevant award or agreement which covers the employee. There should be consultation with the employee and the process of selecting who is to be retrenched should be fair.

An employee who neglected their work, who did not have or use the minimum skills demanded by the job, or who disregarded instructions, is unlikely to succeed in a claim, unless they can show that the events complained of were trivial and harmless. On the other hand, if the employer gave no particular instructions about what to do, gave no warning that the employee's performance was unsatisfactory, and offered no correction when mistakes were made, then the dismissal may be unfair. It is also relevant to look at how long the employee had held the job, whether they were told to do it in a particular way, and whether they were warned or given sufficient opportunity and assistance to improve or modify their performance or behaviour. The results of the dismissal for the employee - for example, a ruined reputation or financial trouble - may not in themselves make the dismissal unfair. Lastly, it must be done in a reasonable fashion remembering the employee is entitled to the respect appropriate to the situation.

Constructive dismissal

'Constructive dismissal' is the term used where the employee leaves the

employment, apparently voluntarily, because it has become untenable to continue working there. In some cases, the commission or the court will conclude that, although the employee ostensibly resigned, the resignation was not voluntary but a 'constructive dismissal' and therefore the employee can claim for unfair dismissal. Constructive dismissal only occurs if an employer behaves in a manner that is considered to breach the terms of the employment contract to the point where it is an effective dismissal.

One example may be a situation in which the employee suffers from sexual

harassment at work and the employer does nothing to stop the harassment. Another example is where the employer threatens to sack an employee if they do not resign. However, an employee cannot turn a voluntary resignation into a constructive dismissal just because they are faced with a disagreeable situation and respond to it by resigning. To constitute constructive dismissal there must be a lack of alternative or any reasonable choice. Because this may be difficult to prove, a decision to resign should not be made in expectation that an unfair dismissal claim can be made later.

Unfair dismissal under federal law

What is unfair dismissal?

A person has been unfairly dismissed when Fair Work Commission is satisfied that:

  • the person has been dismissed;
  • the dismissal was harsh, unjust or unreasonable;
  • the dismissal was not a case of genuine redundancy; and
  • the dismissal was not consistent with the Small Business Fair Dismissal Code (where the employer is a small business employer)

    [s 385 Fair Work Act 2009 (Cth)].

What constitutes harsh, unjust or unreasonable?

Fair Work Commission will look at all the following factors when considering whether a dismissal was harsh, unjust or unreasonable:

  • 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 any opportunity to respond to that reason;
  • any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to the dismissal;
  • if the dismissal was related to unsatisfactory performance by the person – whether the person had been warned about the unsatisfactory performance before the dismissal;
  • whether the size of the employer’s enterprise is likely to impact on the procedures followed in the dismissal;
  • whether a lack of dedicated human resource management specialists or expertise in the employer’s enterprise are likely to impact on the procedures followed in the dismissal; and
  • any other matters that the Fair Work Commission considers relevant [s 387].

General Protections

There are prohibitions against dismissing someone on discriminatory grounds or for other reasons such as engaging in industrial activity or being temporarily absent from work because of illness or injury. This is not the same as unfair dismissal and is dealt with under the General Protections part of the Fair Work Act 2009 (Cth) (Part 3-1).

Who can make an unfair dismissal claim?

A person can make an unfair dismissal claim if they have:

  • completed the minimum employment period; and
  • are covered by a modern award (or award-based transitional instrument) or an enterprise agreement (or agreement-based transitional instrument) applies to the person.

In some situations, high earning employees will be excluded from unfair dismissal protections. All employees who are covered by an award (or award-based transitional instrument) or who have an enterprise agreement (or agreement-based transitional instrument) applying to their employment will have access to unfair dismissal remedies. However, if neither of these criteria applies, a person will only be able to bring an unfair dismissal claim if the sum of their annual rate of earnings and any other amounts worked out in accordance with the regulations is less than the high income threshold ($142 000 for full-time employees, as at 1 July 2017 and indexed annually each year on 1 July).

What are the minimum employment periods?

Employees must have served a minimum employment period before they can make an unfair dismissal claim. The minimum employment periods are:

  • one year for employees of a small businesses (fewer than 15 employees based on a head count of total employees)
  • six months if the employer is not a small business [s 383].

The head count test

The head count involves counting all employees employed by the employer at the time of dismissal or notice of dismissal (whichever is the earliest). Casual employees are not to be included in the count unless they have been employed by the employer on a regular and systematic basis. Employees of associated entities are also counted. A small business, for the purpose of unfair dismissals is a business with fewer than 15 employees based on a simple head count.

How is a period of employment defined?

An employee’s period of employment is based on the employee’s continuous service with the employer.

Service as a casual employee can count towards the period of employment as long as it was on a regular and systematic basis and the employee had a reasonable expectation of continuing work on a regular and systematic basis [s 384].

Any unauthorised absences and most periods of unpaid leave do not count as service; however these do not break an employee’s continuity of service [s 22].

Example of how continuity of service is calculated where there are periods of unpaid leave

John worked for 6 months as a full-time permanent employee. He then took leave without pay for 2 months and returned to work for a further 6 months. John’s total period of continuous service is 12 months, which is the total period worked before and after the period of leave without pay.

How is the minimum employment period assessed?

Whether an employee has served the minimum employment period is assessed either when the person is given notice of dismissal, or when the dismissal actually takes effect, whichever happens first [s 383].

What happens to the period of employment when the business is transferred to a new owner?

In a transfer of business, a new employer can choose not to recognise the employee’s service under the old employer for the purposes of unfair dismissal provisions. However, they must inform the employee in writing before the new employment starts.

Associated (related) entities [s 384].

This does not apply if the transfer of business was between associated entities. In this circumstance service with the first employer will always count towards service with the second employer for the purposes of unfair dismissal provisions.

Making an application for unfair dismissal

A person who believes they have been unfairly dismissed can make an application to the Fair Work Commission.

'Unfair Dismissal Application' forms are available from www.fwc.gov.au or call the Fair Work Commission on 1300 799 675

What are the lodgement timeframes?

An application must be made within 21 days of the dismissal taking effect . However, the Fair Work Commission has discretion to extend the timeframe for making an unfair dismissal application if there are exceptional circumstances, taking into account:

  • the reason for the delay;
  • whether the person first became aware of the dismissal after it had taken effect;
  • any action taken by the person to dispute the dismissal;
  • any possible disadvantage to the employer;
  • the merits of the application; and
  • fairness as between the person and other persons in a similar position [s 394].

What fees can I expect to pay?

Unfair dismissal applicants are required to pay fees prescribed by regulation. The Regulations prescribe a modest application fee ($70.60 at 1 July 2017), the method for indexing the fee and the circumstances in which all or part of the fee may be waived or refunded. The fee is refunded if the matter settles or is withdrawn prior to going to the tribunal [s 395].

What is the procedure through the Fair Work Commission?

The Fair Work Commission is required to decide certain matters before considering the merits of the application:

  • whether the application was made within the 21 day time limit;
  • whether the person is protected from unfair dismissal;
  • whether the dismissal was consistent with the Small Business Fair Dismissal Code (only relevant where the employer is a small business employer); and
  • whether the dismissal was a genuine redundancy [s 396].

The Fair Work Commission must hold a conference or hearing in relation to a matter that involves contested facts.

What is a Conference?

  • Fair Work Commission conferences are the preferred option in an unfair dismissal claim.
  • Fair Work Commission conferences are informal and must be conducted in private when considering an application.
  • The Fair Work Commission has the power to direct people to attend a conference at a time and place specified by the Fair Work Commission, but must take into account the wishes of the parties, for instance where it holds the conference or the method of conducting it.
  • The Fair Work Commission must take into account any difference in the circumstances of the parties when considering and informing itself in relation to the application [s 398].

What is a Hearing?

The Fair Work Commission must only hold a hearing in relation to an unfair dismissal matter if it considers it appropriate after taking into account the views of the parties and where a hearing would be the most effective and efficient way to resolve the matter. Unfair dismissal hearings must be held in public, except where evidence is of a confidential nature.

The Fair Work Commission can hold a hearing in relation to only part of an unfair dismissal claim if it decides that an element of the claim is best dealt with in a formal hearing. For example the Fair Work Commission might hold a hearing on an initial matter, such as whether the dismissal was a genuine redundancy, but then deal with the rest of the matter by way of a conference [s 399].

Representation

Can I have someone representing me?

A person may be represented by a member, officer or employee (whether legally qualified or not) of a union, employer association or peak council representing the person.

Lawyer or paid agent

A person may be represented in a matter before the Fair Work Commission by a lawyer or paid agent, but only with the permission of the Fair Work Commission.

The Fair Work Commission may grant permission for a person to be represented by a lawyer or agent only if:

  • it would allow the matter to be dealt with more efficiently, having regard to the complexity of the matter
  • the person to be represented is unable to represent himself, herself or itself effectively
  • it would be unfair not to allow the person to be represented taking into account fairness between the person and other persons in the same matter (Section 596).

However, the Fair Work Commission's permission is not required if the lawyer in question is representing the person in their capacity as an employee of an employer or company defending a claim.

Can I get the other party to pay my costs?

Generally, a person must pay their costs associated with hiring a lawyer or paid agent to represent them in a matter before the Fair Work Commission.

Cost orders - Lawyers and Paid Agents

A person may make an application for costs against the other party’s lawyer or paid agent within 14 days after a matter has been decided by the Fair Work Commission. This means that a person believes that the other party’s lawyer or paid agent should pay the costs they have incurred.

The Fair Work Commission can make cost orders against lawyers and paid agents in two circumstances:

  • where the lawyer or paid agent caused costs to be incurred by the other party to the matter because they encouraged a person to commence or continue a matter when it should have been reasonably apparent there was no reasonable prospect of success
  • where they have caused costs to be incurred by the other party because of an unreasonable act or omission in conducting or continuing the matter.

Cost orders – a person

In addition, the Fair Work Commission can make cost orders against a person in the following circumstances:

  • if a person made or responded to an application, vexatiously or without reasonable cause
  • if a person made or responded to an application and it should have been reasonably apparent to the person that their application or response to an application had no reasonable prospects of success [s 611].

What happens when a cost order is not complied with?

Not complying with a cost order could result in the Federal Court or Federal Circuit Court imposing a civil (monetary) penalty.

Enforcing orders: Orders of the Fair Work Commission can only be enforced through separate proceedings in the Federal Courts. In this instance, employers and employees should obtain independent legal advice on such matters.

Can I appeal a decision of the Fair Work Commission?

The Fair Work Commission cannot grant appeals from a decision made in an unfair dismissal case unless it is in the public interest to do so.

The Minister for Employment and Workplace Relations can apply to the Fair Work Commission for a review of an unfair dismissal decision (other than those made by the full bench) if the Minister believes the decision is contrary to the public interest.

To the extent that an appeal is based on an error of fact, it will only be allowed where that error is a significant error of fact [s 400].

The Fair Work Commission has discretion to deal with appeals as it considers appropriate. Appeals will be conducted in a hearing unless Fair Work Australia decides that the appeal can be determined without oral submissions and the parties agree to the appeal being conducted without a hearing.

Compensation and other remedies

Reinstatement

Reinstatement is the Fair Work Commission's primary remedy for unfair dismissal. An order for reinstatement must be to reappoint the person to the position they had immediately before the dismissal or appoint them to another position that has terms and conditions no less favourable than the position they held previously. The Fair Work Commission can make a reinstatement order applying to an associated entity of the person’s previous employer where the person’s position no longer exists with the original employer but that position, or an equivalent position, is available in an associated entity [s 391(1A)]. An associated entity is defined under section 50AAA of the Corporations Act 2001(Cth). It includes “related bodies corporate”. In unfair dismissal matters, the Fair Work Commission has the power to order the reinstatement of an employee to an associated entity.

The Fair Work Commission can make any other order that it considers appropriate to maintain the person’s continuity of employment and the period of the person’s continuous service with the employer.

The Fair Work Commission can also make any other order it considers appropriate for an employer to pay an amount for remuneration lost or likely to have been lost because of the dismissal. This could include any money the person may have earned during the period since the dismissal. As these orders are only to compensate for lost remuneration, they cannot extend to include any component by way of compensation for shock, distress or humiliation caused by the manner of the person’s dismissal [s 391].

Compensation

The Fair Work Commission can make an order for payment in lieu of reinstatement if it is satisfied that reinstatement is inappropriate and that compensation is appropriate. The Fair Work Commission must take into account all of the circumstances of the case in determining the amount of compensation, including:

  • the effect of the order on the viability of the employer’s business;
  • the length of the person’s service with the employer;
  • the remuneration that the person would have received, or would have been likely to receive, if the person had not been dismissed;
  • the efforts of the person (if any) to mitigate the loss suffered by the person because of the dismissal;
  • the amount of any pay earned by the person between the dismissal and the order for compensation;
  • the amount of any pay likely to be earned by the person between the dismissal and the order for compensation; and
  • any other matter the Fair Work Commission considers relevant.

The Fair Work Commission can reduce the amount of compensation if it is satisfied that the person’s misconduct contributed to the employer’s decision to dismiss the person.

Any compensation ordered by the Fair Work Commission will not include compensation for shock, distress or humiliation caused by the manner of the person’s dismissal [s 392].

What is the maximum amount that can be paid in compensation?

There is a cap on the compensation that can be ordered by the Fair Work Commission for an unfair dismissal case. The compensation cap is the lesser of:

  • half the amount of the high income threshold - for full-time employees that is $71 00 (half of the $142 000 high income threshold as at 1 July 2017 and indexed annually each year on 1 July)
  • the amount of remuneration received by the person, or that they were entitled to receive (whichever is higher) in the 26 weeks before the dismissal.

The compensation cap will be the same for all employees, regardless of what workplace arrangement they are employed under (for example modern award or enterprise agreement).

Small Business Fair Dismissal Code

The Small Business Fair Dismissal Code [Fair Work Act 2009 (Cth) s 388] is available to small business employers (those with fewer than 15 employees) who are considering dismissing an employee. Until 31 December 2010, the threshold used to define a small business for the purpose of applying the unfair dismissal arrangements will be fewer than 15 full-time equivalent employees.

From 1 January 2011, the threshold will be based on a simple headcount of employees.

It is not a compulsory Code – the employer does not have to follow the Small Business Fair Dismissal Code, but if the dismissal was consistent with the Code, then the dismissal will be considered fair and the other factors relating to unfair dismissal do not need to be considered (see s 396). If the Small Business Fair Dismissal Code is not followed, the claim will be treated the same as any other unfair dismissal claim and may be found to be fair or unfair depending on the circumstances.

How does the Small Business Fair Dismissal Code work?

The Small Business Fair Dismissal Code allows for a dismissal without notice or warning in cases of serious misconduct such as theft, fraud or violence.

For underperformance, the Small Business Fair Dismissal Code requires that the employee be given a valid reason why they are at risk of being dismissed and a reasonable opportunity to rectify the problem.

Voluntary Checklist

A checklist to assist with complying with the Small Business Fair Dismissal Code has been developed for small business employers to complete at the time of dismissal and to keep in case an unfair dismissal claim is made. However, it is not a requirement for compliance with the Small Business Fair Dismissal Code that the checklist be completed.

The checklist covers off information such as if:

  • the employee was stealing money or goods from the business
  • the employee committed a serious breach of occupational health and safety procedures
  • the employee was clearly warned (either verbally or in writing) that the employee was not doing their job properly and would have to improve his or her conduct or performance, or otherwise be dismissed
  • the employee was provided with any training or opportunity to develop their skills
  • the employee voluntarily resigned or abandoned his or her employment.

Unfair dismissal under State law

The Fair Work Act 1994 (SA) applies to employees not covered by the Fair Work Act 2009 (Cth). This is only State Government and Local Government employees - Private sector employees are covered under the Federal system.

Under the Fair Work Act 1994 (SA) [s 109] if it can be shown to the South Australian Employment Tribunal (SAET) that an employee was dismissed in a manner that was harsh, unjust or unreasonable, SAET can order the employer to reinstate the employee in the same or a different position or, if that is not appropriate, to pay to the employee an amount of compensation.

However, some employees are excluded from taking action under this provision, including:

  • An employee not covered by an award who earns over a certain amount ( $139 035 as at 1 January 2017 - this amount increases each year with rises in the cost of living).
  • An employee on a fixed term contract or a contract for a set task, who is dismissed when the time has run out or the task is done. Of course, they may have a claim if they are wrongly dismissed before then.
  • An employee who is on a probationary period, as long as it is not unreasonably long and is determined in advance. The probationary period cannot extend beyond 12 months, but most probationary periods are less than three months.
  • A 'casual employee' - but not all workers who are called 'casual' really are so. If a so-called “casual” employee has worked on a regular basis and systematic basis (currently 6 months or more), and reasonably expects the work to continue, they can make a claim.
  • A trainee under a traineeship, or an apprentice whose employment is limited to the period of the contract of training.
  • An independent contractor
  • An employee who is already making another claim for the same dismissal. For example, a complaint to the Equal Opportunity Commission alleging that the employee was dismissed on discriminatory grounds.

A dismissed employee must file an application for unfair dismissal in the Registry of the South Australian Employment Tribunal (SAET), within 21 days after the dismissal took effect. Although SAET can extend that period if it thinks fit, it must not be assumed that the SAET will do so. Other difficulties can arise if the dismissed employee unduly delays taking action - for example, another person may have been employed whose circumstances must be taken into account in considering whether or not to extend the time.

After the lodgement of the application, the Registrar serves the application upon the respondent employer. The employer must then provide an answer to the response within 10 days, 'Employer Response'. When the response is filed, the Registrar serves a copy on the applicant.

After the application and response have been filed and served, the claim is referred to a conciliation conference with the employer and the employee to try and resolve the dispute in an informal manner. Any agreement reached at this stage is binding on the parties. Importantly, the conciliation conference deals with matters 'in confidence' and more than 90% are resolved at this stage.

If the matter is not resolved at the conciliation conference, it must be referred for a formal hearing, called an arbitration.

Remedies

Under both Federal and State law, the remedies for an unfair dismissal are reinstatement and compensation. Reinstatement will be ordered if it is practicable in the circumstances, but the most common remedy is compensation.

Compensation

Compensation is calculated so as to compensate the unfairly dismissed employee for losses resulting from the loss of the job. Both employer and employee sided factors are considered. These include:

  • the effect of the order on the viability of the employer’s business;
  • the length of service of the employee;
  • the remuneration that the employee would have received had employment not been terminated;
  • the effort of the employee in mitigating loss such as by taking up other work while waiting for the claim to be heard; and
  • any misconduct of the employee which may have contributed to the termination of employment.

Calculation will depend on whether the applicant has found other employment. Where the employee has found other employment the calculation is based on the amount of wages lost between the date of dismissal and the date the employee commenced his or her new employment, less any amount paid to the dismissed employee up to the date of the hearing and any loss in salary between the former employment and the new employment. But the limit of compensation is 6 months salary. Where the dismissed employee has not subsequently found new employment, compensation is calculated by taking into account all relevant matters including the likely loss of income arising from the dismissal, the mitigation efforts of the worker, and any income earned in the intervening period.

Protection for people assisting with emergency management

Under the Emergency Management Act 2004 (SA) a person who is absent from employment on official duties in connection with response or recovery operations undertaken in accordance with the Act, is not liable to be dismissed or prejudiced in employment because of that absence [s 33].

If you are a CFS volunteer or similar and are involved in official emergency response duties, you should let your employer know. It might also be that there is a specific enterprise agreement clause or clause in your employment contract which covers whether or not you are allowed to have paid leave when you undertake these official duties.

    Unfair Dismissal  :  Last Revised: Tue Sep 15th 2009
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