Fitzroy Legal Service Logo

Bookmark and Share Fitzroy Legal Service facebook link Fitzroy Legal Service Twitter link

Termination of employment

Most claims in relation to termination of employment fall into three categories:

  1. unfair dismissals under the FW Act;
  2. dismissals otherwise prohibited under the FW Act; and
  3. common law claims for wrongful dismissal.

This section will deal with unfair dismissals and common law claims for wrongful dismissal.

The "General protections" section of this chapter deals with dismissals that are otherwise prohibited under the FW Act.

This chapter does not deal with claims under other legislation relating to termination of employment, such as equal opportunity legislation and the Competition and Consumer Act 2010 (Cth).

Unfair dismissals

Since 1 July 2009 a new system of unfair dismissals has been in operation.

A person has been "unfairly dismissed" under section 385 of the FW Act if all of the following apply:

  • the person has been dismissed; and
  • the dismissal was harsh, unjust or unreasonable; and
  • the dismissal was not consistent with the Small Business Fair Dismissal Code; and
  • the dismissal was not a case of genuine redundancy.

The person must be protected from unfair dismissal to be eligible to apply for a remedy for unfair dismissal (see "Persons protected from unfair dismissal", below). The FWC website, at www.fwc.gov.au, contains an unfair dismissal bench book, which provides detail of the law and procedures of unfair dismissal cases. The website also contains a Fair Hearings Practice Note, which describes the procedures to be adopted in a hearing in the FWC.

Harsh, unjust and unreasonable

In considering whether a termination was harsh, unjust or unreasonable, the following must be considered (s 387 FW Act):

  • whether there is a valid reason for the dismissal connected with the employee's capacity or conduct;
  • whether the employee was notified of the reason relied on by the employer;
  • whether the employee was given an opportunity to respond to the allegations made in relation to the employee's conduct or performance;
  • any unreasonable refusal of the employer to allow the employee a person to assist in discussions related to the termination;
  • if the termination related to performance, whether warnings were given;
  • the degree to which the size of the employer impacted upon the procedures followed in effecting the termination; and
  • the degree to which the absence of dedicated human resource management specialists impacted upon the procedures followed in effecting the termination,

as well as other relevant matters.

Case study

In Woodman v the Hoyts Corporation [2001] AIRC 694, a full bench of the AIRC reinstated a casual cinema worker who was accused of allowing another off-duty employee to take a company product from the Candy Bar without paying and later lying about the incident. The full bench found that the employee's conduct amounted to a valid reason for termination but that termination in all the circumstances of the case was disproportionate. The employee had not himself participated in the theft and the lie was not premeditated or intended to benefit the employee himself. The AIRC was satisfied "in all the circumstances" that reinstatement was appropriate.

Has the person been dismissed?

For the purpose of section 385 of the FW Act, the person has been dismissed if they were terminated at the initiative of the employer or they were forced to resign because of the conduct or course of conduct of the employer (s 386).

A person will not be dismissed, for the purpose of the unfair dismissal provisions, if:

  • they were employed under a contract of employment for a specified period or specified task or specified season and the employment ended at the end of the period, task or season;
  • they were employed under a training arrangement for a specified period or for the period of the training and the employment ended at the end of the training; or
  • they were demoted but the demotion does not involve a significant reduction in their remuneration or duties (s 386).

If the person has not been dismissed they would not be able to make out the necessary elements of section 385 of the FW Act for the termination to be an unfair dismissal.

Small Business Fair Dismissal Code

The Minister for Workplace Relations has declared a Small Business Fair Dismissal Code under section 388(1) of the FW Act. A person's dismissal will be consistent with the Code if the employer was a small business employer at the time of the dismissal and the employer has complied with the provisions of the Code in relation to the dismissal (s 388 FW Act).

From 1 January 2010, the definition of "small business employer" is a business with less than 15 employees by head count.

The code states that a dismissal will be fair where an employer dismisses an employee where the employer believes on reasonable grounds that the employee's conduct is sufficiently serious to justify immediate dismissal. Therefore, under the Code, an employer does not need to prove the misconduct actually occurred.

If the employer is a "small business employer" and the employer complied with the provision of the code, the termination will be deemed to be fair and the elements of an unfair dismissal required for section 385 will not be made out.

If the employer is not a small business employer or a small business employer has not complied with the code in terminating the employee, then the dismissal will not be consistent with the Small Business Fair Dismissal Code and the necessary element of section 385 will be made out.

Genuine redundancy

A person's dismissal will be a genuine redundancy if both of the following requirements are met (s 389 FW Act):

  • the person's employer no longer requires the person's job to be done by anyone because of changes in operational requirements; and
  • the employer in dismissing the employee complied with any consultation obligations in a modern award or enterprise agreement.

Under section 389(2) of the FW Act it would not be a genuine redundancy if it was reasonable to redeploy the person within the employer's enterprise or an associated entity.

If a person's dismissal was found to be due to a genuine redundancy, the person would not be able to make out the required element of section 385 of the FW Act for the dismissal to be an unfair dismissal.

Persons protected from unfair dismissal

To make an application for unfair dismissal the person making the application must be protected from unfair dismissal. Under sections 382 to 384 of the FW Act, a person is protected from unfair dismissal if the following applies to them:

The employee has completed a minimum period of employment of:

  1. one year for an employee of a small business employer (as defined above);
  2. six months for an employee of a business other than a small business employer.

and

One of the following applies to the employee at the time of termination:

  1. the employee was covered by a modern award; or
  2. the employee was covered by an enterprise agreement; or
  3. the person's income was less than the high income threshold, currently $129,300 (from 1 July 2013).

and

If the person was a casual employee of a business other than a small business employer and was employed on a regular and systemic basis for more than six months, and the employee had a reasonable expectation that such employment would continue.

If the person was a casual employee of a small business employer and was employed on a regular and systemic basis for more than one year, and had a reasonable expectation that such employment would continue.

Remedies

The primary remedy for a dismissal found to be harsh, unjust or unreasonable is to reinstate the employee to the same position or to a comparable position as they held prior to the termination. FWC has the power in certain circumstances to reinstate a worker to an equivalent position with an associated entity of the employer. A reinstated worker can seek an amount representing their lost wages between the date of termination and the reinstatement, and to have all employment benefits continue to accrue without loss of continuity.

Where reinstatement is inappropriate (e.g. where the position has been filled by another worker or where tensions in a small workplace would be insurmountable if the dismissed employee returned to work), compensation may be ordered instead of reinstatement. The maximum compensation payable to employees covered by an award is six months wages; and for non-award employees is half the amount of the high income threshold (discussed above in "Persons protected from unfair dismissal") or six months wages, whichever is less.

Procedural matters

Applications for a remedy for unfair dismissal must be made within 21 days after the day on which the termination took effect, or such period as FWC allows (see s 394 FW Act). The matters to be taken into account for an extension of time to lodge an application have been codified in section 394(3) of the FW Act. Importantly, the applicant must show that there were exceptional circumstances.

A number of matters must be decided by FWC before the merits of an unfair dismissal are considered. These matters are:

  1. whether the application was made within 21 days or such further period as FWA allows;
  2. whether the person is protected from unfair dismissal;
  3. whether the dismissal was consistent with the Small Business Fair Dismissal Code;
  4. whether the person was dismissal because of genuine redundancy.

The first step for a worker who applies for a remedy for unfair dismissal is usually a conciliation conference with the employer at the AIRC. If the matter is not resolved at that stage, it then usually proceeds by way of arbitration. The FW Act gives FWC considerable discretion in relation to the method of finalising the claim.

Appeals to a Full Bench of FWC can be made where there has been an error of law or a significant error of fact.

Costs against a party in an unfair dismissal can only be awarded against an Applicant if an application was made vexatiously or without reasonable cause, or if it should have been apparent to the Applicant that the application had no reasonable prospect of success. Costs will only be awarded against a Respondent if the response to an application was made vexatiously or without reasonable cause, or if it should have been apparent to the Respondent that the response had no reasonable prospect of success (s 611 FW Act). Generally costs in a matter under the FW Act, including an unfair dismissal application, can be awarded to a party if the other party caused those costs to be incurred because of an unreasonable act or omission of the other party in connection with the conduct or continuation of the matter (s 400A).

Costs can be awarded against a lawyer or paid agent where they caused the other party to incur costs by some unreasonable act or omission or because they encouraged a person to start, continue or respond to a matter when it should have been apparent to them that the person had no reasonable prospects of success (s 401).

Common law

Wrongful dismissal at common law

Workers who are not entitled to bring proceedings for unfair dismissal may still be entitled to bring proceedings elsewhere for the wrongful termination of their contract of employment.

If the contract is for a fixed period, it terminates when that period expires; no special notice is required. If the contract is for a fixed period and the contract is terminated by the employer before the end of the fixed period, the employee maybe able to sue for damages relating to the remainder of the fixed period.

If the contract is not for a fixed period, and the employee is dismissed, or if the employee is dismissed prior to the end of the contract, then there may be an action for wrongful dismissal. In the absence of misconduct or any other circumstances justifying immediate dismissal, the employee is entitled to be given notice in accordance with the written contract of employment (if any), or if there is no express term for the period of notice the employee would be entitled to rely upon an implied term of reasonable notice. The question of what is reasonable will depend on the circumstances (including position, seniority, salary, length of service and age).

An employee who can show that the dismissal was wrongful has a claim for damages. The amount of damages may relate to the wages that could have been earned during the "reasonable" period of notice, taking into account whether the employee has subsequently found work.

Suspension and stand down of employees

Unless specifically authorised by an award or employment agreement, an employer has no general right to suspend employees without pay, but an employee who is not ready, willing and able to work in accordance with the obligations under the contract of employment may not be entitled to be paid.

At common law, an employer does not have the right to stand down employees without pay when they cannot be usefully employed. Unless there is some provision in the contract of employment or award to the contrary, an employer who cannot usefully employ their employees has the alternative of either paying them wages during the period or dismissing them. In dismissing an employee in these circumstances, the employer should take careful note of the unfair dismissal provisions (see "Unfair dismissals", above).

Some awards permit deductions of pay where employees cannot be usefully employed for reasons such as a strike, a breakdown of machines or a stoppage of work for which the employer cannot reasonably be held responsible.

Termination of employment :: Last updated: Sun Jun 30th 2013