Unfair Dismissal

An unfair dismissal occurs where an employee makes an unfair dismissal application and the Fair Work Commission finds that:

• the employee was dismissed, and
• the dismissal was harsh, unjust or unreasonable, and
• the dismissal was not a case of genuine redundancy, and
• where the employee was employed by a small business, the dismissal was not consistent with the Small Business Fair Dismissal Code.

Casual employees are also entitled to unfair dismissal however they must show that they have been employed on a regular and systematic basis with a reasonable expectation of ongoing work.

Eligibility

If the employee is covered by an award or enterprise agreement and has served the minimum employment period they will be eligible to make a claim for unfair dismissal.

If the employee is not covered by an award or enterprise agreement but earns less than the high-income threshold (which is adjusted annually and is $162,000 as of 1 July 2022), they are also eligible to make a claim for unfair dismissal if they have served the minimum employment period.

To look at it another way, if an employee is covered by an award or enterprise agreement, then their earnings are irrelevant to their ability to bring an unfair dismissal claim. If they are not covered by an award or enterprise agreement, they must earn less than the high income threshold to bring a claim.

Minimum Employment Period

Employees have to be employed for at least 6 months before they can apply for unfair dismissal if they do not work for a small business..

Employees working for a small business have to be employed for at least 12 months before they can apply.

A small business is one with less than 15 employees (including employees in any associated entities of the employer, e.g. businesses with the same owners or in parent/subsidiary relationships, etc.).

Application

For dismissals involving redundancy, see our separate guidance. 

For other dismissals, the Fair Work Commission will assess whether an employer has been both substantively and procedurally fair in dismissing the employee.

Substantively fair: means that the employer had a valid reason for the dismissal (eg the employee was guilty of the thing they were accused of)..

Procedurally fair: means the employer followed sound a fair process when dismissing an employee (eg they were invited to a formal meeting to discuss the matter before a final decision was taken).

In assessing whether an employer has been both substantively and procedurally fair in dismissing an employee, the Fair Work Commission will consider whether the dismissal was “harsh, unjust or unreasonable” (see further below).

There is a more simplified process where the dismissal is by a small business, in which case the Fair Work Commission will just consider whether the dismissal was in accordance with the “Small Business Fair Dismissal Code”, however many of factors below will still be relevant.

Harsh, Unjust or Unreasonable

To determine whether a dismissal is harsh, unjust or unreasonable the following factors are considered by the Fair Work Commission:

• Whether there was a valid reason for the dismissal related to the employee’s capacity or conduct;
• Whether the employee was notified of the reason being considered;
• Whether the employee was given an opportunity to respond to that reason;
• Any unreasonable refusal by the employer to allow the employee to have a support person present in the meeting to discuss the matter;
• Whether the employee had been warned about any prior unsatisfactory performance before the termination (if relevant);
• The degree that the size of the business and internal HR expertise would impact on the procedures followed; and
• Any other relevant matters.

Process and Remedies

The first step in an unfair dismissal claim is usually a telephone conciliation hearing, basically a mediation aimed at trying to settle the matter. Most applications for unfair dismissal do settle at conciliation. The conciliation process is in private and often results in a mutual agreement on compensation to be paid to the  employee in turn for them dropping the case.

If the matter does not settle and proceeds to arbitration (which is a formal hearing determined by the Fair Work Commission), remedies for unfair dismissal may include:

• Reinstatement (getting the job back);
• Compensation (must not be more than 26 weeks’ pay); and
• Non-financial remedies such as a written statement of service.

Further Help

We have produced free downloadable guides that will assist you in avoiding unfair dismissal claims when dismissing for misconduct, poor performance or redundancy. 

• https://www.employmentinnovations.com/resources/disciplinary-process-guide-for-employee-misconduct/
• https://www.employmentinnovations.com/resources/performance-management-process-guide/
• https://www.employmentinnovations.com/resources/redundancy-process-checklist/

About Employment Innovations

Employment Innovations is one of Australia’s leading providers of employment services designed to increase productivity and ensure compliance. Its services and solutions include all the tools that every Australian small to medium sized employer needs – including workplace advice, legal services, payroll solutions, migration, human resource management and HR software.

Disclaimer

The information provided in these blog articles is general in nature and is not intended to substitute for professional advice. If you are unsure about how this information applies to your specific situation we recommend you contact Employment Innovations for advice.