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Employment Law - Unfair dismissals under the Fair Work Act

Date: April 15, 2010

Authors: Michael Pickering B.A., LL.B. (Hons.), LL.M., M. A.

The Fair Work Act 2009 (Cth) became fully operational from 1st January 2010. The Fair Work Act changed the rights of employees and responsibilities of employers relating to dismissals.

Part 3 – 2 of the Fair Work Act provides a simple unfair dismissal regime which sets out what is protected, what will amount to an unfair dismissal, remedies and procedural matters. Part 3–2 is overseen by Fair Work Australia and deals only with unfair dismissal.

The important change introduced by the Fair Work Act has been the winding back of the 100 employee ‘Small Business’ exemption. “Small business employer” now means an employer with less than 15 employees excluding casuals who are not employed on a regular or systematic basis.

The Fair Work Act now refers to a “minimum period of employment” which is one year if the employer is a small business employer or is otherwise six months. This minimum period of employment replaces the exclusion of probationary employees and the six months “qualifying period” which could be shortened or lengthened by agreement between the employer and employee.

Fixed term, fixed task and seasonal workers are no longer prevented from bringing an unfair dismissal claim. Failure to re-hire these workers at the end of the term, task or season does not amount to a dismissal. Casuals employed on a regular and systematic basis by a larger employer will now qualify for protection after six rather than twelve months.

The Fair Work Act sets out four tests to determine whether there has been an unfair dismissal:

  1. Has the person been dismissed?
  2. Was the dismissal harsh, unjust or unreasonable?
  3. Was the dismissal inconsistent with the Small Business Fair Dismissal Code?
  4. Was the dismissal a case of genuine redundancy?

The Small Business Fair Dismissal Code (‘Code’) provides additional protection to small businesses. In addition to being a required element of the unfair dismissal, Fair Work Australia must determine whether a dismissal is consistent with the Code on a preliminary basis before in can consider the merits of an application.

The Code provides for situations where summary dismissal will be fair. The Code states that a “fair” summary dismissal is whether it is fair for an employer to dismiss an employee without notice when the employer believes upon reasonable ground that the employee’s conduct is sufficiently serious to justify immediate dismissal.

The Code also provides that in cases of termination for conduct or performance, the employee must be warned and given the opportunity to rectify the problem. There is no requirement for any such warning to be in writing.

Returning to the four tests in paragraph 6 above which must be established to make out an unfair dismissal, the first is that the employee must be dismissed. This test will continue to apply the enquiry as to whether a worker’s employment was terminated on the employer’s initiative or whether a person was forced to resign because of the employer’s conduct.

The second test is whether the dismissal was harsh, unjust or unreasonable. Fair work Australia will be required to take into account whether there was a valid reason for termination and whether the employee was accorded procedural fairness in accordance with the Fair Work Act.

The third test is whether there is a genuine redundancy. This test replaces the ‘operational reasons’ defense enshrined in Work Choices. A dismissal will not be unfair if the employer no longer required the person’s job to be performed by anyone. The Fair Work Act now provides, however, that in order to be a ‘genuine redundancy’, the employer must comply with any obligation to consult about the redundancy arising from any applicable modern award or enterprise agreement. Similarly, a dismissal will not be a genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed by their employer in either the same enterprise or in an associated enterprise.

There are two important procedural changes in the Fair Work Act. First, an unfair dismissal application to Fair Work Australia must be made within 14 days after the dismissal took event rather than the 21 days under Work Choices. A worker can extend the 14 day period for ‘exceptional circumstances’ but this will not be easy. Secondly, workers cannot now make multiple applications relating to their dismissal. The ability under Work Choices to make claims for unlawful termination and for unfair dismissal has been abolished. Workers must elect. Legal advice will be needed for workers to determine which pathway should be pursued.

The ability for employees or employers to have legal representation before Fair Work Australia is also limited to where such representation would promote efficiency in dealing with the matter or where it would be unfair were a party be unrepresented having regard to the ability of that person to represent himself or herself.

The Fair Work Act also provides that employers and employees must generally bare there own costs before Fair Work Australia. Fair Work Australia may order that a party pay costs if that party has conducted a case frivolously or without reasonable cause. However, an unreasonable act or omission which causes the other party to incur costs will no longer form the basis of an award of cost against a party.

For the first time, the Fair Work Act provides for a schedule of costs in relation to items likely to be incurred in unfair dismissal proceedings before Fair Work Australia. This might have the practical effect of encouraging Fair Work Australia to award costs.

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