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Unfair dismissal and unlawful termination

This is the fifth in a series of articles about the Federal Government's proposed new workplace legislation known as the Fair Work Bill 2008.

The Government intends for the new laws to be fully introduced by 1 January 2010, with some aspects to commence 1 July 2009. At the date of this article, there have been no changes in the law and it is possible that there will be changes to the Fair Work Bill as it moves through the Senate. We will report on any substantial changes as they occur.

This article summarises some of the key aspects of the Fair Work Bill with respect to the unfair dismissal laws and unlawful termination laws. These particular legislative provisions are intended to take effect on 1 July 2009.

Unfair dismissal laws to apply to all employers in the federal systemEmployers of fewer than 100 employees have been largely exempt from unfair dismissal claims since 27 March 2006. The Fair Work Bill will change this so that the unfair dismissal laws will apply to all businesses in the federal jurisdiction. Two aspects of new laws will see small business treated differently from medium and large business.

First, employees in businesses with fewer than 15 employees will be unable to take unfair dismissal proceedings if dismissed within the first 12 months of employment. For businesses with 15 or more employees, a dismissed employee will be unable to bring a claim if dismissed within the first 6 months of employment. Second, a dismissal in a small business will be deemed fair if the employer follows the 'Small Business Fair Dismissal Code'. There is no comparable statutory code for medium and large businesses.

Fewer exclusions

The Fair Work Bill introduces several other substantial changes. Most notably, there will be fewer exclusions from the unfair dismissal provisions. This means that there is an increased likelihood of unfair dismissal claims against businesses. In this regard, since 27 March 2006 it has not been possible to challenge the fairness of a dismissal if the dismissal was for reasons of an economic, technological, structural or similar nature. Consequently, employers have been largely exempt from facing challenges to the fairness of redundancies. The Fair Work Bill will dispense with the operational reason exclusion, and employers will be unable to use it to completely resist claims.

However, the Fair Work Bill provides some measure of protection for employers. A dismissal which is a genuine redundancy will not be an unfair dismissal. That is, a dismissal will be a redundancy if the employee's job is no longer required to be performed by anyone because of changes in the operational requirements of the employer's enterprise. If it would have been reasonable for the dismissed employee to be re-deployed within the employer's enterprise, the dismissal will not be presumed to be a genuine redundancy. A failure to follow consultation obligations in awards or enterprise agreements will also expose the employer to the prospect that the dismissal will not be considered a genuine redundancy.

In view of this, employers who make workers redundant can expect to face the burden of demonstrating that the decision is justified on the grounds that:

  • there were changes in operational requirements,
  • termination due to redundancy was unavoidable as re-deployment was not available,
  • consultation provisions in relevant awards or agreements were followed (if applicable to the employees concerned).

Similar to current law, employees who earn more than the high income threshold (which is yet to be determined) and who are not covered by an award or enterprise agreement will not be eligible to make a claim for unfair dismissal.

Process of claims

A new body known as Fair Work Australia will take over responsibility for handling unfair dismissal claims. A claim must be made within 7 days after the dismissal takes effect. Under current law, the period is 21 days. In some circumstances, Fair Work Australia will be able to exercise discretion to extend the period in which an application can be made.

Fair Work Australia will convene a private conference between the dismissed employee and the employer. At the conference, Fair Work Australia must take into account the wishes of the parties regarding the way in which it considers and informs itself on the claim. More formal hearings will only occur if Fair Work Australia considers it appropriate in the circumstances. For example, a hearing might be held in order to resolve disputed facts.

Relevant considerations

Fair Work Australia will be able to take into account a variety of matters in considering the merits of a claim, notably:

  • whether there was a valid reason for the dismissal related to the person's capacity or conduct;
  • whether the employee was notified of the reason;
  • whether the employee was given an opportunity to respond;
  • any unreasonable refusal by the employer to allow the employee to have a support person present;
  • whether the employee had been warned about any unsatisfactory performance before the termination (if relevant);
  • the degree to which the size of the employer’s enterprise or the absence of dedicated human resource management specialists would be likely to impact on the procedures followed in effecting the termination;
  • any other relevant matters.

For the most part these matters largely replicate current unfair dismissal law, although an unreasonable refusal by the employer to allow the employee to have a support person present is a new consideration.

Generally, each party must bear their own costs. Costs could be ordered if a person makes the application (or responded to an application) vexatiously, without reasonable cause, or the application or the response had no reasonable prospect of success. As a consequence of these changes, there is a potential for costs against employers who defend claims.

Unlawful termination

The Fair Work Bill largely retains the existing unlawful termination provisions, but with some modifications to procedural rules. A termination is unlawful if the decision to terminate is based upon one or more of the prohibited reasons or if the termination is effected without satisfying the minimum period of notice. For example, it is unlawful to dismiss an employee for reason of physical disability, absence on paid sick leave, membership or non membership of a union, filing a complaint or participating in proceedings against the employer.

Under the Fair Work Bill an application in relation to an unlawful termination must be made to Fair Work Australia within 60 days after the employment is terminated. This is a substantial increase on the current period which is 21 days. Fair Work Australia will also have the discretion to extend the 60 days period if it considers that there is merit in individual cases.

If the matter cannot be resolved by Fair Work Australia through conciliation, the Federal Court or the Federal Magistrates Court may deal with the matter.

Remedies

With respect to unfair dismissal, reinstatement will continue be an available remedy. Monetary compensation will also continue to be available, although it is subject to a maximum of 6 months' pay or half the amount of the high income threshold, whichever is lesser.

With respect to unlawful termination, remedies include reinstatement, compensation and injunctions. Additionally, the Court may award penalties of up to $6,600 for individuals and $33,000 for corporations.

Minimum severance payments

The National Employment Standards, due to take effect on 1 January 2010, will enshrine minimum severance payments and notice provisions in the event of redundancy. Of significance, the obligation to make severance payments will apply to all federal employers who employ 15 or more employees. The redundancy provisions contained within the National Employment Standards will be covered in more detail in a forthcoming article.

Should you require advice regarding this or any other workplace matter, please call Australian Business Lawyers & Advisors: 1300 565 846.

Note: This is for information purposes only.
It does not purport to be comprehensive or to render legal advice.


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