Unfair Dismissal

UNFAIR DISMISSAL

Introduction

The general philosophy underlying the Fair Work Act 2009 is the provision of a quick, flexible and informal system for resolving unfair dismissal actions. This system must properly balance the rights of employees to be protected from unfair dismissal, and the needs of employers to manage their workplace.

There has already been a substantial increase in the number of applications to Fair Work Australia, with Deputy President Acton estimating a 62% increase in applications for both unfair and unlawful dismissals as compared to the previous regime.

Unfair dismissal applications increased to 5,208 from 1 July 2009 to 31 December 2009 (Senate Estimates Committee Hearing 10 February 2010).

Whilst many employers, especially those in small businesses, resent the fact that their right to hire and fire has been restricted, it is most important that they understand and appreciate, that to bring an unfair dismissal action, an employee must first qualify.

Eligibility to apply for relief against unfair dismissal claim

An employee is able to bring an unfair dismissal claim if they have completed at least 6 months service, or 12 months service if their employer employs fewer than 15 full time equivalent employees, and at the time of the dismissal be:

·       Covered by a modern award;

·       Covered by a pre-modern award instrument, such as a federal award, a state reference

     transitional award or a notional agreement preserving state award;

·       Covered by an enterprise agreement or an agreement based transitional instrument; or

·       Earning less than a specified amount, which is indexed annually and presently $113,800.00 per year.

What is an unfair dismissal?

Under section 385 of the Fair Work Act a person has been "unfairly dismissed" if Fair Work Australia is satisfied:

(a)   the person has been dismissed; and

(b)   the dismissal was harsh, unjust or unreasonable; and

(c)   the dismissal was not consistent with the Small Business Fair Dismissal Code (“SBFDC”); and

(d)   the dismissal was not a case of genuine redundancy.

A person will not be taken to have been dismissed if they were:

• Employed for a specific period of time, or for specific tasks or for the duration of a specified season;

• Employed under a training arrangement for a specified period of time; or

• Demoted, if it does not involve a significant reduction in the employees’ remuneration or duties.

It should be noted that a dismissal can arise in the situation where an employee believes that he is being pressured or has no alternative but to resign. This is known as “constructive dismissal”.

In determining whether a dismissal is “harsh, unjust or unreasonable” a range of factors are considered, including:

1. whether there was a valid reason for the dismissal related to the employee's capacity or conduct;
2. whether the employee was notified of that reason and given an opportunity to respond;
3. any unreasonable refusal by the employer to allow the employee to have a support person present to assist at any discussions relating to dismissal;
4. if the dismissal related to unsatisfactory performance by the employee, whether they had been warned about the unsatisfactory performance before the dismissal;
5. the degree to which the size of the employer's enterprise and the degree to which the absence of dedicated human resource management specialists or expertise would be likely to impact on the procedures followed in effecting the dismissal; and
6. any other matters that Fair Work Australia considers relevant.

A dismissal might be considered harsh because of its consequences for the personal and economic situation of the employee or because it is disproportionate to the gravity of the misconduct.

A dismissal may be considered unjust because the employee was not guilty of the misconduct on which the employer acted.

A dismissal may be considered unreasonable because it was decided on inferences which would not reasonably have been drawn from the material before the employer.

Further, it is not an unfair dismissal if the employer is a small business employer (employs fewer than 15 employees (up to 1 January 2011 this means 15 full-time equivalent employees) and they follow the Small Business Fair Dismissal Code when dismissing an employee. 

The Code

An employer may dismiss an employee without notice or warning where the employer believes on reasonable grounds that the employee’s conduct is serious.

Serious misconduct includes dishonesty, violence or serious breaches of occupational health and safety procedures. Where the misconduct is likely to have consequences in the criminal law then the conduct must be reported to the police.

Where issues relate to performance, an employee must be warned verbally but preferably in writing so that he understands there is a risk of dismissal if there is no improvement.

The employee must have the opportunity to respond to the warning and rectify the problem. This may involve the employer providing additional training and ensuring the employee knows and understands what the employer expects of him.

An employee is entitled to have another person present to assist in circumstances where dismissal is possible but this person cannot be a lawyer acting in a professional capacity.

If an employee applies for relief against unfair dismissal and the employer wishes to rely upon the Code it will need, except in cases warranting summary dismissal, to provide evidence that warnings have been given, a statement of termination or signed witness statements.

If a person’s dismissal is consistent with the code, then the dismissal will be considered fair and other factors relating to unfair dismissal need not be considered. If, however, an employer has not complied with the code, the claim will proceed as normal.

For example, a summary dismissal will satisfy the code, provided it is based on reasonable grounds. That is, it is fair to sack an employee without notice or warning for:

·         Theft;

·         Fraud;

·         Violence; and

·         Serious breaches of occupational health and safety procedures.

Usually an allegation of theft or fraud needs to be reported to the police.

Other dismissals will be fair and satisfy the Code if:

1.                The employee was clearly warned that he or she was not doing their job properly and would need to improve, or otherwise be dismissed.

2.                The employee was provided with a reasonable amount of time to improve performance or conduct.

3.                Before dismissal, the employee was given both reasons for the proposed dismissal, and the opportunity to respond.

The issue of whether the proposed dismissal is harsh, unjust or unreasonable will only arise if it was not a case of genuine redundancy. The FWA states that:

(1)   A person’s dismissal was a case of genuine redundancy if:

(a)   the person’s employer no longer required the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and

(b)   the employer has complied with any obligation in a modern award or enterprise agreement that applied to the agreement to consult about the redundancy.

(2)   A person’s dismissal was not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within:

(a)   the employer’s enterprise; or

(b)   the enterprise of an associated entity of the employer.

.

 Examples include:

• A machine now available to do a job performed by the employee;

• Economic downturn, an example of which is when an employer only needs three people to do a particular task or duty instead of five;

• The employer is restructuring to improve efficiency and tasks done by a particular employer are now distributed between several other employees meaning that the persons’ job no longer exists.

However, the FWA provides that a dismissal is not a genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within the employer’s enterprise, or the enterprise of an associated entity of the employer.

The employee will also be able to claim the redundancy was unfair if there was a failure to follow the consultation obligations contained in the applicable workplace instrument.

Application and procedure

A dismissed employee must apply to Fair Work Australia within 14 days after the dismissal takes effect, although Fair Work Australia may accept late applications in limited circumstances. A small application fee is payable, which may be waived in limited circumstances.

Fair Work Australia will provide the employer with a copy of the application and invite its response.

It will then arrange a conciliation, which may take place by telephone, to assist the parties to resolve the matter by negotiation.

If resolution is not reached, a formal conference or hearing will be held at which the parties can call evidence and make legal submissions.

Except in limited circumstances, the parties to applications for relief against unfair dismissal must bear their own costs of having an agent or lawyer act for them.

Remedies for unfair dismissal

These are:

·         Reinstatement of employment; or

·         Compensation.

Compensation for an employee is capped at the employee’s total remuneration of the period of 26 weeks before the dismissal.

In ordering compensation, Fair Work Australia must take into account the following matters:

·       The effect of the order on the viability of the employers’ enterprise;

·       The length of the person’s service with the employer;

·       The remuneration 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 remuneration earned by the person from employment or other work during the period between the dismissal and the making of the order for compensation;

·       The amount of any income reasonably likely to be so earned by the person during the period between the making of the order for compensation and the actual compensation; and

·       Any other matter considered relevant.

Orders cannot be made to compensate a person for shock, distress or humiliation.

If Fair Work Australia is satisfied that a person’s misconduct contributed to the decision to dismiss, they must reduce the amount of compensation accordingly. Monetary orders can be made by way of instalments (section 393).

How can Nevett Ford help?

Nevett Ford is experienced in employment law and workplace relations and has a long history of working in the area for both employees and employers.

If you are an employee or an employer and you think you might have an unfair dismissal claim, or alternatively, have had an unfair dismissal claim made against you, contact us and we can assist you.