What is Unfair Dismissal?


If you are a construction employer in the private sector dismissals of employees are covered by the Fair Work Act 2009 (Cth).

As a result it’s important you understand the concept of unfair dismissal, and ensure that your systems and approach to dismissing employees are crafted accordingly.

What is unfair dismissal?

So, what makes a dismissal ‘unfair’?

A dismissed employee will need to demonstrate a number of factors to argue they have been dismissed ‘unfairly’:

  1. fairly obviously, that the employee was dismissed;
  2. they qualify for protection from unfair dismissal (see “Who can make an unfair dismissal application” below);
  3. the dismissal was harsh, unjust or unreasonable;
  4. the dismissal was not a case of genuine redundancy; and
  5. if the employer was a small business (fewer than 15 employees), the dismissal was not consistent with the Small Business Fair Dismissal Code.

What counts as “Harsh, Unjust or Unreasonable?”

The key question in most unfair dismissal cases is whether the termination was “harsh, unjust or unreasonable”. There are no set rules here, so the Fair Work Commission is going to look at all the circumstances surrounding the dismissal, and consider questions such as:

  • Was there a valid reason for dismissal, i.e. the misconduct or underperformance of the employee?
  • Was the employee notified of that reason?
  • Was the employee given an opportunity to respond to that reason?
  • Did the employer unreasonably refuse to allow the employee to have a support person during the dismissal discussions?
  • Was the employee warned about their unsatisfactory performance before they were dismissed?
  • In following company procedures during the dismissal, to what degree did the size of the employer’s company affect the method / process of dismissal?

The answers to questions like these, and the extent of the “bad” or “good” elements will be taken into account by the Commission. Ultimately, the Commission’s decision is entirely discretionary after weighing the relevant factors.

So, for example, it may be harsh and unreasonable to dismiss an employee who may find it difficult to find other employment because of their age.

This was the case in Anderson v Thiess Pty Ltd [2014] FWC 6568, where an employee was dismissed for sending offensive emails in breach of company policy. Because the emails had the potential to significantly damage the company’s reputation, the Commission found that there was a valid reason for dismissal. The Commission also found, however, that the dismissal was harsh and unreasonable because the employee was 65 years old and it was unlikely that he would find another job.

Conversely, it may not be harsh and unreasonable to dismiss an employee who has operated machinery or equipment in a manner inconsistent with their training, despite their positive track record with the company. In BlueScope Steel Limited v Trevor Knowles [2020] FWCFB 3439, the Commission held that dismissing a long-standing employee in line with the company’s zero-tolerance policy for safety breaches was not harsh, unjust or unreasonable. The employee in question had operated an overhead crane dangerously, which caused a steel coil to be damaged and a risk of the crane coil toppling and causing injury. The Commission found that the company had notified the employee of the safety requirement, trained the employee on the requirement and consistently enforced the safety standard. Therefore, the employer was acting reasonably in dismissing the employee for breaching the safety procedure policy.

What is a genuine redundancy?

An employee cannot succeed in an unfair dismissal application against you if their dismissal was a case of genuine redundancy.

A genuine redundancy is when:

  1. the employer no longer required the role to be performed by the employee, or anyone else, because of changes to the operations of the company; and
  2. the employer complied with any obligations under an award or enterprise agreement to consult the employee about the redundancy.

It is not a genuine redundancy if the employee could have been reasonably redeployed in:

  1. the employer’s business; or
  2. another business associated with the employer.

Who can make an unfair dismissal application?

When an employee believes that they have been unfairly dismissed, an application must be made to the Fair Work Commission within 21 days after the dismissal takes effect.

To be eligible for protection from unfair dismissal, the employee must also be:

  • employed for at least 6 months (at least 12 months for a small business i.e. fewer than 15 employees); and either:
    • earn under the high income threshold ($158,500 as at 1 July 2022); or
    • be covered by a modern award (for example, the Building and Construction General On-site Award 2020) or enterprise agreement.

Not all workers in a private sector construction company can make an unfair dismissal application, excluding individuals such as:

  • independent contractors;
  • employees who resign (unless the employee can prove a constructive dismissal i.e. they had no other option other than to resign because of the employer’s conduct);
  • employees under contract for a specific period of time, task, etc. whose employment ends at the end of the contract;
  • trainees who were employed for a specified period of time and are dismissed at the end of that time (or training arrangement).

How will I know if there has been an unfair dismissal application against me and what should I do?

If one of your former employees brings an unfair dismissal application against you, you will receive a copy of their application from the Fair Work Commission.  At the same time, you will also be notified of a date when the matter will be conciliated.  The conciliation is conducted by telephone, by a conciliator appointed by the Commission.  This is an opportunity to settle the dispute.

If you receive a copy of your employee’s application from the Commission, you should respond within 7 days. This response should identify the employer’s “story” in relation to the dismissal.  You should include:

  1. important dates such as when the employee started work, when they were dismissed, and when they actually finished work;
  2. the reasons for dismissing the employee;
  3. prior misconduct or underperformance;
  4. responses to the employee’s arguments set out in their application (it does not have to be a line-by-line response, but should deny any incorrect allegations by the employee);
  5. any jurisdictional issues that may be raised; and
  6. your signature.

An employment lawyer can help you prepare the response and appear at the conciliation.

A copy of the response must be given to the employee.

What happens if the matter does not resolve at conciliation?

If the employee’s dispute doesn’t settle at conciliation, the matter will be listed for a hearing.  The employee will be required to put on evidence and submissions in support of their unfair dismissal application, usually within a few weeks of the unsuccessful conciliation.

You will then be required to put on your evidence and submissions identifying why the dismissal was fair and responding to the employee’s allegations. The employee will have the opportunity to put on any evidence in reply, and the matter will then be listed for hearing shortly after that.

Depending on how many witnesses there are in the matter, the hearing may take one, two or even three days.  Each witness will be cross-examined, which can be a daunting experience for your managers or other employees, even if they haven’t done anything wrong.

Often it is the time and energy that the evidence and hearing process requires that persuades employers to settle.

Hearings are public, meaning that theoretically anyone can sit in.  The decision and transcript of the hearing will also be made public.

What happens if my employee’s unfair dismissal application is successful?

There are, generally, two outcomes for an unfair dismissal application:

  1. compensation; or
  2. reinstatement.

As you might imagine, reinstatement is not a common remedy for an unfair dismissal application as the relationship between the employer and employee has usually soured.

It is more likely that a successful unfair dismissal application will result in compensation being awarded. This compensation is capped at the lower amount of:

  1. six months of employee’s annual wage; or
  2. $81,000 (as of 1 July 2022).

In deciding the amount of compensation to be awarded to the employee, the Commission will consider factors such as:

  • how long the employee would have remained employed if they had not been dismissed;
  • any proof of the employee’s regular earning;
  • the ability of the company to continue to operate while paying the compensation;
  • things which may have affected the earning capacity of the employer after dismissal, including increased transport costs or a higher/lower paying job;
  • whether the dismissal was the result of the employee’s misconduct; and
  • the reasonable efforts the employee has made to reduce their loss after the dismissal.

Can the employee or I recover any legal costs in this process?

The Unfair Dismissal process is generally a “no costs” process.  This means that, unless there are exceptional circumstances, neither you or the employee will recover their legal costs in this process.

Key Takeaways

Dismissing an employee is not a decision that should be made lightly. If the process does not go  smoothly and the employee has been dismissed unfairly, an unfair dismissal application can cause unwanted drama for both you and your business.

Potential compensation aside, the opportunity cost of having to respond to applications and deal with lawyers can be significant.

If you need help understanding whether you are compliant with the Fair Work Act 2009 (Cth) in dismissing an employee or in responding to an unfair dismissal application, get in touch here.

Batch Mewing acknowledges law clerk Joshua Saunders for his assistance producing this article.

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