U1 - Unfair Dismissal

What is a Dismissal?

A dismissal is the termination of an individual's employment by the employer. Employees have a right not to be unfairly dismissed from employment. Before dismissing an employee, employers need to make sure that they have a potentially fair reason. A dismissal can also be wrongful (sometimes known as constructive), where an employee resigns in response to his or her employer's breach of contract.

What is Unfair Dismissal?

Unfair dismissal is when an employee is dismissed from their job in a harsh, unjust or unreasonable manner. The Fair Work Commission (FWC) decides on cases of unfair dismissal. Employees have to apply to the Commission within 21 days of the dismissal taking effect. The 21 day period starts the day after the dismissal. FWC hearings can be time-consuming, consume business resources and very stressful for all involved – they should be avoided.

Minimum Employment Period

Employees have to be employed for at least 6 months before they can apply for unfair dismissal. Employees working for a small business have to be employed for at least 12 months before they can apply. If there was a change of business ownership, service with the first employer may count as service with the second employer when calculating the minimum employment period.

What is a Small Business Employer?

Small businesses have different rules for dismissal. The Small Business Fair Dismissal Code provides protection against unfair dismissal claims, where an employer follows the Code. The Commission will deem a dismissal to be fair if the employer follows the Code and can provide evidence of this.

A small business is defined as any business with fewer than 15 employees.

To figure out whether a business is a small business, count all employees employed at the time of the dismissal including:

• the employee and any other employees being dismissed at that time
• regular and systematic casual employees employed by the business at the time of the dismissal (not all casual employees)
• employees of associated entities, including those based overseas.

The size of the business is counted the earliest of:

• when the employee is told their employment has been terminated, or
• when the employee is given their notice of termination.

Other Types of Dismissals

Employees can also apply to the Commission if they’ve been dismissed on the basis of a breach of general protections or unlawful termination.

Unfair Dismissal Vs Wrongful Dismissal

The differences between unfair dismissal and wrongful dismissal are outlined below. The main quality of unfair dismissal is that it is found to be harsh, unjust or unreasonable. By contrast, wrongful dismissal concerns breach of the employment contract or Common Law:

Unfair Dismissal Remedies

In order to avail remedies under unfair dismissal, an employee is required to make an application to the Commission within 21 days after the dismissal takes effect. Sections 390 – 393 of the Fair Work Act confer the remedies available for an employee when such person has been unfairly dismissed.

The main remedies for unfair dismissal are:

• Reinstatement: It can be issued by the Commission as a remedy in an unfair dismissal matter. Generally, the bone of contention by an employer against a reinstatement or restoration Order is that the relationship between the employer and employee has extinguished. However, such an assertion made by the employer may not be sufficient.
• Monetary compensation: An Order for the payment of unfair dismissal compensation to an employee must be in lieu of reinstatement. Section 392 (6) confers that the total amount of remuneration relates to any period of employment with the employer during the 26 weeks immediately before the dismissal. One should also be mindful while applying for workers compensation that it cannot be awarded for shock, distress or humiliation caused by the manner of the dismissal (Section 392(4) of the Act).

Wrongful Dismissal Remedies

The main remedies for wrongful dismissal are:

• Compensation for loss and damage: this is considered to be the most efficacious remedy for wrongful dismissal. The intention of giving compensation is to put the injured party in the same position as if the contract had been performed according to its terms. Damages can be awarded for loss of the following:
  • Wages and other remuneration;
  • Superannuation;
  • Injuries suffered because of the supposed termination; or
  • Loss of opportunity to obtain further employment.
• Specific performance of the contract: this is rarely awarded by the Courts. The reason behind such seldom awards is that the Courts are also reluctant to force unwilling parties to continue in an employment relationship. However, there can be special occasions where a Court reinstates an employee if they have a special position.

Tips for Avoiding Unfair Dismissal Claims

1. Give the person a chance to improve

There are very few situations where you can sack a person on the spot. You need to explain what the person has done wrong and provide constructive criticism. Part of this is setting clear and genuine performance targets. If you feel it is appropriate you may wish to give the employee a warning; though contrary to popular belief there is no legal requirement for you to give an employee a specific number of warnings before you terminate their employment.

You should first meet with an underperforming employee to discuss the problem, and then devise a potential solution with them. Following this, clear performance goals should then be set and implemented with dates agreed for reconvening to discuss whether the proposed solution has been working.

2. Don’t abuse the process

Often employers dismiss someone because they don’t like their personality, rather than for performance reasons. This is a sure-fire way to land your business in trouble.

You will also need to be aware of the way other workers can abuse the complaints system against each other because they don’t like another worker or because they think they are a threat. A business has a right to dismiss a worker who is under-performing or behaving badly, not get rid of people who are not liked.

3. Allow the person to respond to any allegations

Any allegations about misconduct or under-performance should be made out clearly and in full to the employee.

It is important you are vigilant about spelling-out all the particular allegations of misconduct directly to the accused, as many employers are pinged in court for not making the allegations clear enough to the employee. The employee then needs to be given a chance to respond.

So really you need to articulate the allegations to the employee in writing, give them a chance to consider them and respond in writing. You may also need to make time to have further discussions about it. Even if you are planning to dismiss them, you still need to give them a chance and time to respond. You also need to genuinely consider their response.

4. Allow the person to have a support person present for any discussions related to the dismissal

 Allowing the employee to bring a support person is yet another element of ‘procedural fairness’ or ‘natural justice’ which you have a legal obligation to apply in a dismissal. Under the Fair Work Act, the FWC should consider whether you allowed the person to bring in a third party (be it a lawyer, union representative or friend) to discuss their performance issues or any other issues related to the dismissal when deciding whether or not to penalise an employer.

5. Be nice about it

Often people litigate in unfair dismissal because they feel angry, humiliated or under-appreciated because of the sacking. It may not be realistic to sugar-coat something as unpleasant as a dismissal, but the way you conduct the dismissal may have an impact on whether a person takes legal action.

Try to be nice and as non-vindictive as possible, even if you feel the person doesn’t really deserve that level of consideration. Concentrate on the positives, wish them luck, give them notice and offer to help them find another job if you feel it is appropriate. Importantly, note that you are required to give an employee notice of their dismissal and the amount of notice required is based on the length of service of the employee.

6. Make sure it’s proportionate to the misconduct/poor performance

There are very few things which justify instant (also known as summary) dismissal. It is only fair for a small business employer to dismiss an employee without any notice or warning if they have been involved in theft, fraud, violence or serious breaches of workplace health and safety laws.

Whilst you do not need to show the person committed the breach ‘beyond a reasonable doubt’ it is helpful to avoiding legal sanctions if you report the matter to the police or to the health and safety regulator.