In part one, we discussed five of the key steps to follow when it’s obvious an employment relationship is becoming untenable and you have made the decision that you need to end your employee’s employment.
In this follow-up article, we talk about the risks of unfair dismissal and the importance of why you should always have HR Assured’s number in your back pocket.
What is unfair dismissal?
An unfair dismissal is one which was harsh, unjust, or unreasonable. For a dismissal to be fair, the employer must ensure that:
- there is a valid reason for the dismissal;
- that the employee has been warned about his/her conduct/performance concerns before being terminated (unless of course, the employee has engaged in serious misconduct);
- the employee is provided an opportunity to respond to the proposed termination before a decision is made; and
- the employee’s response is considered and taken into account prior to formalising its decision.
An example of the importance of providing employees with warnings prior to pressing the trigger on termination is explored in the case of Phillipson v Fincar Pty Ltd [2017] FWC. In short, Ms Phillipson was terminated from her employment for poor performance and bought an unfair dismissal claim to the FWC. While the FWC acknowledged that Ms Phillipson “did not perform due diligence” in relation to her role, the FWC said that there was a “complete absence of formal procedures documenting the way in which the applicant was meant to go about performing her role, which would have contributed to the difficulties that occurred.” Given this, the FWC found that Ms Phillipson was unfairly dismissed, and Ms Phillipson was compensated six weeks’ pay.
Had the employer followed the steps as discussed in Part 1, a very different outcome may have occurred.
Who can make an unfair dismissal claim?
- Employees who have been employed for at least the minimum employment period, which is six months for large businesses, or in the case of small businesses (businesses who employ less than 15 employees) 12 months, have access to make an unfair dismissal application.
This is why during the minimum employment period, employers should carefully assess the employee’s ability for the role and cultural fit because ultimately termination whilst an employee is still within their minimum employment period protects a business from an unfair dismissal claim.
Employers still need to be careful however because an employee may have access to bring another claim, such as a general protections claim. We explore how to avoid general protections risks here.
- Employees who earn over the high-income threshold, which is currently $162,000 per annum (this gets indexed every 1 July), do not have the ability to make an unfair dismissal claim unless their employment is covered by a modern award.
- Casual employees have the ability to make an unfair dismissal claim if their employment is considered to be regular and systematic and they have an expectation of continuing employment.
- Employees who are engaged on maximum/fixed-term contracts are not eligible to make unfair dismissal claims.
Remedies available to employees
When an employee makes an unfair dismissal claim, there are several stages at which both parties can attempt to settle the dispute. The first opportunity to settle is at a conciliation conference. However, if an agreement is not reached the dispute will proceed to a hearing before the FWC, which is a costly and time-consuming process for any business.
If an employee has been unfairly dismissed, the remedies that may be sought include:
- Reinstatement (that is, the employee getting their job back and receiving back pay).
- Compensation, up to a maximum of six months’ pay.
- Non-financial outcomes such as a written statement of services.
Whilst reinstatement is considered the preferred remedy, often this is not possible due to the breakdown of the relationship between the parties after dismissal. If reinstatement is not possible, the FWC may order that a business pay the employee the lesser of six months’ pay or half the current unfair dismissal high-income threshold. The high-income threshold for 2022/2023 is $162,000, which means the maximum remedy a business may be required to pay is $81,000. It is rare that an employer will be ordered to pay the maximum level of compensation, however in the most extreme unfair dismissal cases, this could be a possibility. It is therefore so important that before terminating an employee, you have all your ducks in order and ensure the process you are following is strict and compliant – this is where HR Assured can help.
If I don’t follow dismissal procedure correctly, what might be the consequences?
A failure to follow due process when terminating an employee will cost you, so we want you to understand the legal framework by which employers can minimise their exposure to potential unfair dismissal claims.
At the end of the day, to work out precisely when an employment relationship ends and whether dismissal or resignation has occurred, and what to do next, read HR Assured’s essential guide here.
Are you thinking of terminating an employee? HR Assured offers advice from experienced workplace relations consultants whenever you need it. If you would you like to find out more, contact us.
Emilia Palka is a Workplace Relations Adviser who is currently studying a Bachelor of Laws/Arts (Honours) at the University of Queensland. Working from HR Assured’s Brisbane office, Emilia is passionate about human rights and diplomacy, which together drive her eagerness to ensure that employment settings are thriving.