Terminating someone’s employment is never a nice thing to do, and is usually stressful and upsetting for everyone involved. In addition, unfair dismissal matters can be complex and frustrating for all parties involved.
Since the commencement of the Fair Work Act in 2009, employers have had additional responsibilities placed on them to ensure they are correctly terminating employees, and furthermore, more employees are able to make unfair dismissal claims successfully, as employers have narrower exceptions when they’re defending claims.
In light of the above, it’s always important to understand when and how terminating an employee can be done in a fair and appropriate manner.
The issues can be complex
Unfair dismissal claims can be complex, as issues such as employment type, award and enterprise agreement coverage, time limits for claims and the provisions of the legislation need to be considered on a case by case basis.
Added to those issues, the definition of ‘dismissal’ itself can include situations where a person has resigned but only because they were forced to do so because of their employer’s conduct towards them, or towards others which affect their employment, a legal concept commonly referred to as ‘constructive dismissal’.
Following the recent legislative changes, for a ‘dismissal’ to be an ‘unfair dismissal’ for the purposes of the Act, that dismissal must be harsh, unjust or unreasonable. The Act provides that the primary remedy is to be reinstatement, but from a practical perspective, this remains the exception rather than the rule. In most cases, the Fair Work Commission will order the employer to pay the employee compensation of up six months of the employee’s salary.
Who is covered by the unfair dismissal provisions of the Fair Work Act?
In businesses with less than 15 employees (‘small businesses’), an employee will be covered by the provisions of the Act if they have worked for the ‘small business’ for at least 12 months. It should be noted however that even if an employee has worked for a ‘small business’ for a period of 12 months, a ‘dismissal’ will not be unfair if the business can show that it has complied with the Small Business Unfair Dismissal Code.
For larger businesses, employees will be covered by the Act after six months continuous service.
Under the Fair Work Act, if an employer can show that it was a “genuine redundancy” however, a dismissal will not be unfair.
What is a “genuine redundancy”?
In order to be considered a “genuine redundancy”, the following three elements must be meet:
- due to changes in the employer’s operational requirements, the employer no longer requires the employee’s job to be done by anyone;
- the employer has complied with all of its consultation obligations that it is required to comply with in any applicable enterprise agreement or award; and
- it would be unreasonable for the employer to redeploy the employee to another part of the employer’s business or an enterprise of an associated entity of the employer.
Small businesses – don’t be caught out
Research conducted by Benoit Freyens, assistant economics professor at the University of Canberra, and Paul Oslington, economics professor at the Australian Catholic University, has found during the transition from the Workplace Relations Act 1996 to the Fair Work Act:
- Where unfair dismissal cases have been arbitrated during the period 2000 to late 2010, the success rates of claimants have risen from 33% under Work Choices to 51% under the current Fair Work Act.
- Claims under the Fair Work Act against businesses with more than 100 employees have risen to a 41% success rate, compared with the 33% success rate under the Workplace Relations Act.
- Claims lodged under the Fair Work Act have risen to 17,000 per year, up from 6000 under Work Choices. This is in line with the increase in the number of employees who are now able to make unfair dismissal claims (as well as the removal of many employees from the State industrial relations system to the Federal industrial relations system). Compensation payouts were steady and averaged about 12 weeks’ pay.
Employers need to be vigilant in ensuring they conform to the proper process when dismissing an employee. Even if the employer believes that they have sufficient reasons to justify dismissing the employee, they need to ensure they follow the correct process to do so. This includes providing warnings and ensuring proper documentary evidence is collected. In the absence of this process, it’s very easy for the dismissed employee to formulate an unfair dismissal claim on the basis that there has been a lack of fair process.
For employers, the best way to avoid a claim of unfair dismissal being made is to ensure that your organisation and your employees fully understand their obligations under the Fair Work Act when someone’s employment is being terminated. There should also be regular internal reviews of the firm’s policies.
That said, however, only about 1% of unfair dismissal applicants who apply to the Fair Work Commission successfully achieve reinstatement of their position through arbitration. The most common outcome in these circumstances is a conciliated settlement. Properly understanding unfair dismissal claims will ensure the parties optimise the best outcome for all involved in what can be a confusing system.
At Frichot & Frichot we represent both employers and employees.
If you or your organisation needs assistance or advice on how to proceed please contact us to arrange an Introductory Consultation on (08) 9335 9877 or email reception@localhost