Unfair dismissal

What is the meaning of “unfair dismissal”?

Unfair dismissal is provided for under Part 3-2 of the Fair Work Act 2009 (Cth) (the Act). [1]

The Act provides that a person is protected from unfair dismissal and termination which occurs if:

  • a person is 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. 

Estimated reading time: 15 minutes

Time limit for an unfair dismissal claim

If you have been dismissed (terminated, sacked or fired) and have considered making an unfair dismissal claim against your previous employer, you need to do so quickly. Under the Act, you have 21 days from the date that dismissal takes effect to make a claim (although exceptions may apply). 

Wrongful dismissal and unfair dismissal

Unfair dismissal should not be confused with wrongful dismissal. Wrongful dismissal is when an employer dismisses an employee who has breached the written terms of the employment contract.

Grounds for an unfair dismissal claim

There are several  factors that need to be considered before you can make a claim for unfair dismissal. These include:

  • whether you are a “national system” employee; 
  • how long you were employed before being dismissed; 
  • the basis of your employment; and
  • whether an award or enterprise agreement applied to your employment, or if not, whether your income was less than the high-income threshold.

Meaning of “national system” employer and employee

A claim for unfair dismissal or termination can be made only by a “national system” employee. You would most likely be a national system employee if you were an employee of the Commonwealth or a private enterprise.

However, if you were an employee of the State of Queensland, or a local government (for example, the Brisbane City Council), it is unlikely that you would be considered a national system employee. You may not be covered by the Act but you may still be able to make a claim through the Queensland Industrial Relations Commission (QIRC).

Length of employment

The Act provides that a person can only make a claim for unfair dismissal if they have been working for their previous employer for a minimum of:

  • 6 months for a large business employer; or
  • 12 months for a small business employer. 

A small business employer is defined as having fewer than 15 employees, whereas a large business employer will have 15 or more employees.

A small business employer is defined as having fewer than 15 employees, and a large business employer as having 15 or more employees.

The employment period ends either at the time when the employee is notified of the dismissal or at the time immediately before the dismissal (which happens earliest).

Basis of employment

  • If you were employed as a part-time or full-time employee on a permanent basis, then you will usually be able to claim for unfair dismissal or termination.
  • If you were employed on a casual basis, it could be assumed that you did not expect your employment to continue. However, if you were employed on a casual basis, you may still be able to make a claim if your employment was regular and systematic, and you reasonably expected that to continue. basis.

If you worked on a contractual basis (e.g. a monthly contract), then it is difficult to claim unfair dismissal because under the Act, an employee under a contract cannot technically be “dismissed”.

Award, enterprise agreement, or high income threshold

The final factor to be considered before making a claim is whether you were employed subject to an award and/or enterprise agreement, or whether you had annual earnings below the high income threshold. The threshold changes on 1 July each year. For the 2021-22 financial year, it is $158,500

If the grounds are not satisfied

If you do not meet the requirements for making a claim for unfair dismissal, you may still be entitled to a claim for adverse action under the Act, or alternatively, a claim through the QIRC (depending on which requirements were not met).

Harsh and unfair dismissal

As noted above, the Act provides that a person will be considered to have been unfairly dismissed only if the dismissal can be seen as harsh, unjust or unreasonable.

Dismissal

Dismissal must be at the initiative of the employer, or if not, at the initiative of the employee only if the employee was forced to resign because of the employer’s conduct. The latter is sometimes referred to as “constructive dismissal”.

Dismissal will generally not apply to persons who are in a training arrangement or who have been employed under a contract for a specified period.

Harshness of the dismissal

The Fair Work Commission (FWC) may consider a multitude of factors in deciding whether your dismissal was harsh, unjust or unreasonable. These factors include:

  • any valid reason for your dismissal (such as the safety and welfare of other employees);
  • whether you were notified of the reason for your dismissal;
  • the opportunities you were given to respond to the reasons for your dismissal;
  • your access to a support person to assist in discussions;
  • whether you were given warnings about unsatisfactory performance before being dismissed; and
  • the size of the employer’s business and its effect on the procedures followed after making the dismissal.

Small Business Fair Dismissal Code

This condition applies only if the employer was a small business employer (i.e. fewer  than 15 employees) at the time the notice of dismissal was given to the employee or at the time the actual dismissal occurred (whichever was earlier).

The small business employer needs to have breached the Small Business Fair Dismissal Code in relation to the dismissal; if the dismissal was consistent with the code, it is unlikely that it will be considered harsh, unjust or unreasonable.

You can view the code on the Fair Work Ombudsman website.

Difference between genuine redundancy and unfair dismissal

Unfair dismissal can occur if your case was not a genuine redundancy.

A genuine redundancy is where:

  • the employer no longer needs your job performed by anyone because of changes in the employer’s operational requirements; and
  • the employer has complied with its obligations under any relevant modern award and/or enterprise agreement in relation to your redundancy.

However, your case would not be a genuine redundancy if you could have been redeployed within the employer’s enterprise or the enterprise of an associated entity of the employer.

Unfair dismissal application, remedies and entitlements

If the criteria outlined under the Act has been satisfied, then a person can make an application to the FWC.

The remedies that a person can seek include reinstatement or compensation.

Reinstatement

The FWC can order an employer to reinstate a person who has been unfairly dismissed. The position can be:

  • the same position which the person was employed as immediately before being dismissed; or
  • another position on terms and conditions that are no less favourable than the previous position.

The FWC can also make orders for the continuity of the person’s employment; and that the employer pay the person for any amounts lost because of the dismissal or termination.

Compensation

The FWC can order compensation only if it is satisfied that reinstatement is inappropriate or if it considers compensation is appropriate in all the circumstances of the case.

It will generally exercise discretion in awarding compensation, which will depend on factors such as:

  • whether the person contributed to the dismissal through misconduct;
  • the difficulty or ease of finding a role of similar status and pay in the current job market;
  • the effect of the order on the employer’s enterprise;
  • the length of the person’s service with the employer;
  • the remuneration that the employee would have or would likely have received had he or she not been dismissed;
  • the employee’s efforts to mitigate its loss by applying for new jobs;
  • how much the employee has been earning in income after being dismissed (if applicable); and
  • any other matter that the FWC considers relevant.

The amount in compensation for an unfair dismissal claim does not depend on any pain and suffering caused to the employee; the objective is to compensate for loss of income.

Additionally, the maximum amount that can be ordered by the FWC is 26 weeks’ (6 months’) worth of remuneration based on the person’s recent remuneration or half of the high income threshold.

For employers – has a claim for unfair dismissal been made against you?

If you are an employer and a previous employee has made an unfair dismissal or termination claim against you or your company, we may be able to act on your behalf subject to the permission of the FWC.

Given our knowledge of unfair dismissal, wrongful dismissal, genuine redundancy and other areas of employment law, we can provide advice on the risks involved in your matter, fight vigorously to have the claim dismissed (if possible) or negotiate a reasonable settlement with the claimant.

Under Australian law, “costs” usually refers to legal costs incurred in making or fighting a claim.

The FWC has the discretion to order costs against a party if it is satisfied that party unreasonably caused the costs to be incurred.

If you have a strong claim for unfair dismissal or termination and you win in your claim, or if a poor claim was made against you, you may be able to have part or most of your legal costs paid for by the other party or by the other party’s lawyer or paid agent. This decision is at the discretion of the Fair Work Commissioner, so it will depend on the case.

This also means that if you make an unsubstantiated claim against a previous employer, or if you unreasonably defend a previous employee’s claim against, you may be liable for the other party’s costs.

The FWC can make an order for costs only if you or your lawyer makes an application for costs under the Act.

Adverse action

If you have been dismissed, demoted, had a salary cut or something similar in breach of a workplace right or in relation to discrimination, you may be entitled to damages

Support person

If you are having conferences with your employer or HR about your employment, you may be entitled to have a lawyer accompany you.

Frequently Asked Questions

What does it mean to be dismissed, and how does that differ from being constructively dismissed?

A person has been dismissed if the person’s employment with his or her employer has been terminated on the employer’s initiative (e.g. if a person has been fired or sacked). If the employee has been explicitly fired or sacked by their employer, they would have been “constructively dismissed”.

A person has been constructively dismissed if they were forced to resign because of the conduct, or a course of conduct, engaged in by their employer.

Conduct includes any act or omission (a failure to act) by the employer. Common situations where this arises include where an employee is effectively instructed to resign in the face of a threatened dismissal, or the employee quits in response to conduct by their employer which forces them to resign

Can I bring a claim for unfair dismissal if I believe that I have been fired unfairly?

Yes, you can bring a claim for unfair dismissal if you have been fired unfairly, only if you satisfy four requirements:
• You are a “national system employee”
• You were employed for more than 6 months
• You were a full-time or part-time employee
• An award or enterprise agreement applied to your employment

What constitutes an “unfair dismissal” or termination of employment?

A person has been unfairly dismissed or their employment has been unfairly terminated if the Fair Work Commission is satisfied:
• 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.

What things will the Fair Work Commission consider in an unfair dismissal case?

In determining whether it is satisfied that a dismissal or firing was harsh, unjust or unreasonable, the Fair Work Commission must take into account:
(a) whether there was a valid reason for the dismissal related to the person’s capacity or conduct (including its effect on the safety and welfare of other employees); and
(b)  whether the person was notified of that reason; and
(c)  whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person; and
(d)  any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal; and
(e)  if the dismissal related to unsatisfactory performance by the person, whether the person had been warned about that unsatisfactory performance before the dismissal; and
(f)  the degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal; and
(g)  the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal; and
(h)  any other matters that the FWC considers relevant.

What are the time limits for making an unfair dismissal or unfair termination of employment application?

The time limits for making an unfair dismissal application are strict. If you have been dismissed and intend on making an unfair dismissal claim against your previous employer, you only have 21 days from the date that dismissal takes effect to make a claim. There is a limited exception if you fall outside this time limitation.

The Fair Work Commission may allow longer if it is satisfied there are exceptional circumstances, taking into account:
(a)  the reason for the delay; and
(b)  any action taken by the person to dispute the dismissal; and
(c)  prejudice to the employer (including prejudice caused by the delay); and
(d)  the merits of the application; and
(e)  fairness as between the person and other persons in a like position.

This means that if you have received notice from your employer that your employment has been terminated, you should immediately seek legal advice because  you may be eligible to make an unfair dismissal claim against your employer. It is important the unfair dismissal application is lodged within 21 days.

What is a small business employer and what is a large business employer? How does this affect a claim for unfair dismissal?

A small business employer is simply defined as having fewer than 15 employees, and a large business employer as having 15 or more employees. The Fair Work Commission calculates this based on a simple head count. When the worker’s employment is terminated, the worker should be included in determining the number of employees, including any other employees terminated at the same time.

There is a practical difference when it is a small business employer and a large business employer involved in the employee’s dismissal. The Act requires that a person can only make a claim for unfair dismissal if they have been working for their previous employer for a minimum of six months for a large business employer, or 12 months for a small business employer.

Can casual employees bring an unfair dismissal claim?

If you were employed on a casual basis, it could be assumed that you did not expect your employment to continue. However, if you were employed on a casual basis, you may still be able to make a claim if your employment was regular and systematic, and you reasonably expected that to continue.

In satisfying this, a casual employee may only make a claim provided they satisfy the other requirements outlined in FAQ “Can I bring a claim for unfair dismissal if I believe I have been fired unfairly?”.

It is noted that if you worked on a contractual basis (e.g. a monthly contract), then it is difficult to claim unfair dismissal because under the Act, an employee under a contract cannot technically be “dismissed”.

What is the difference between a wrongful dismissal and an unfair dismissal?

A wrongful dismissal is when an employer terminates an employee’s employment contract, and the termination breaches a term or terms of the employment contract.

An unfair dismissal is a right of action employees have under the Fair Work Act on the basis of a harsh, unjust or unreasonable dismissal.

If you believe you have been wrongfully dismissed, see our Breach of Employment Contract article.

What are the legal remedies available for unfair dismissal?

The remedies that a person can seek if they have been fired include reinstatement or compensation.

However, the Fair Work Commission (FWC) can order compensation only if it is satisfied that reinstatement is inappropriate or if it considers compensation is appropriate in all the circumstances of the case. Furthermore, the employee can only be awarded compensation not exceeding 26 weeks of pay.

The Act is explicit in maintaining that the amount in compensation does not depend on any pain and suffering caused to the employee; the objective is to compensate for loss of income.

It will generally exercise discretion in awarding compensation, which will depend on factors such as:
whether the person contributed to the dismissal through misconduct;
• the difficulty or ease of finding a role of similar status and pay in the current job market;
• the effect of the order on the employer’s enterprise;
• the length of the person’s service with the employer;
• the remuneration that the employee would have or would likely have received had he or she not been dismissed;
• the employee’s efforts to mitigate its loss by applying for new jobs;
• how much the employee has been earning in income after being dismissed (if applicable); and
• any other matter that the FWC considers relevant.

What is the average payout for an unfair dismissal claim?

In calculating the amount of compensation there are a number of factors that the Fair Work Commission must consider when deciding if compensation should be ordered, which is determined on a case by-case basis. There is therefore no average payout. However, the maximum payout or amount of compensation that can be awarded is capped at the lesser of:
• the total amount of remuneration received by the person, or to which the person was entitled to receive (whichever is higher) for any period of employment with the employer during the 26 weeks immediately before the dismissal; and
• half the amount of the high income threshold before the dismissal.

Can costs be awarded in unfair dismissal cases?

Costs can be awarded in an unfair dismissal case. If you have a strong claim for an unfair dismissal and you win in your claim, or if a poor claim was made against you, you may be able to have part or most of your legal costs paid for by the other party or by the other party’s lawyer or paid agent. This decision is at the discretion of the Fair Work Commissioner.

References


  1. Fair Work Act 2009 (Cth) Part 3-2. ↩︎