In the last few weeks we have appeared in numerous unfair dismissal matters. The level of activity in this jurisdiction is not unusual given that in the period between October to December 2015 the Fair Work Commission (“Commission”) received a total of 3636 unfair dismissal applications. Why is this jurisdiction so popular? It may be due to the fact that 49% of all conciliations settle by way of a monetary payment to the employee within the range of $2,000 to $4,000, and 79% for a payment of less than $8,000. As is often the case, such payments are made because an employer wishes to make the problem “go away”, which can be extremely dissatisfying in circumstances where an employee has followed the appropriate termination procedures and best practices.
The unfair dismissal laws under the Fair Work Act 2009 (Cth) (“Act”) are premised on the notion of a “fair go all round” and are designed to prevent dismissals that:
- are “harsh, unjust or unreasonable”;
- are procedurally defective;
- do not comply with the Small Business Fair Dismissal Code (in the case of an employer who employs less than 15 employees); and
- are not cases of genuine redundancy.
Under the Act, a dismissal takes place where an employee is terminated at the initiative of their employer, or where the conduct, or a pattern of conduct, forced the employee to resign – otherwise, known as a constructive dismissal.
Termination of employment signifies the end of the relationship between an employer and employee except to the extent that the parties owe surviving obligations to one another. When an unfair dismissal application is validly made to the Commission within 21 days of the date of termination, an employee is essentially asking the Commission to assess whether the surrounding circumstances of the dismissal, and the dismissal itself, was underscored with some kind of unfairness, injustice or unreasonableness. The inquiry undertaken by the Commission is two-fold:
- did the employer have a valid reason for the dismissal; and
- was the dismissal procedurally flawed in some way.
However, before the Commission can determine the merits of an unfair dismissal action, a number of preliminary matters are considered as to whether the Commission has the jurisdiction to hear and determine the matter. Those considerations include an assessment of whether:
- the unfair dismissal application was made within the correct period required under the Act (minimum employment period of 6 months);
- the employee is able to commence proceedings because they were covered by a modern award or enterprise bargaining agreement;
- the employee was remunerated in excess of the unfair dismissal income cap (set at $136,700 for 2015) and is not covered by a modern award or enterprise agreement;
- if a small business, the dismissal was consistent with the unfair dismissal code for small business;
- the dismissal was a case of genuine redundancy; and
- the employee is excluded from making an unfair dismissal application because:
- the employee was under a contract of employment for a specified period of time, for a specified task, or for the duration of a specified season, and the employment was terminated at the end of the period, the completion of the task, or at the end of the season;
- the person was an employee to whom a training arrangement applied, and the employment was terminated at the end of the training arrangement;
- the person was a casual employee without ‘regular and systematic’ employment and an expected that they would be employed on a ‘regular and systematic’ basis;
- the person was dismissed for ‘serious misconduct’;
- the employee has not completed the relevant minimum period of employment; or
- the person was an independent contractor.
Assuming that none of the above jurisdictional issues are raised by an employer, and the matter does not resolve by telephone conciliation in the first instance, the Commission will then arbitrate the matter with a view to examining the termination based on the following criteria:
- whether there was a valid reason for the termination related to the employee’s capacity, performance or conduct (including its effect on the welfare and safety of other employees);
- whether the employee was notified of the reason(s) for termination;
- whether the employee was given an opportunity to respond to any reason related to their capacity, performance or conduct;
- any unreasonable refusal by the employer to allow the employee to have a support person present to assist at any discussions relating to dismissal; and
- if the termination related to unsatisfactory performance by the employee — whether the employee had been warned about that unsatisfactory performance before the dismissal and given an opportunity to improve;
- if the termination related to unsatisfactory performance by the employee – whether the employee was told a failure to improve could result in termination;
- the degree to which the size of the employer’s business would be likely to impact on the procedures followed in effecting the dismissal; and
- the degree to which the absence of dedicated human resources personnel would be likely to impact on the procedures followed in effecting the dismissal; and
- any other matters that the Fair Work Commission considers relevant.
The Commission ultimately exercises its discretion in carefully weighing up each matter above before forming a view, based on the evidence, as to whether the employee was unfairly, harshly or unreasonably dismissed. Inherently, the decision may result in a finding that the termination was harsh but not unjust or unreasonable, unjust but not harsh or unreasonable, or unreasonable but not harsh or unjust. In many cases the concepts will overlap. The findings of the Commissioners deciding these matters are often quite subjective and vary greatly. It is therefore often difficult to predict an outcome.
Given reinstatement is the primary remedy, where the Commission is satisfied that a person was unfairly dismissed, it will look at whether it is appropriate to reinstate the employee to their employment. In many cases, this does not occur due to an insurmountable breakdown in the employment relationship. As such, other available remedies, principally compensation orders are generally awarded. It is worthy to note that the maximum compensation that can be awarded by the Commission in the unfair dismissal jurisdiction is capped at the lesser of:
- half the amount of the high income threshold; or
- the total amount of remuneration received by the employee (or to which they were entitled) during the 26 weeks immediately before the dismissal.
However, it is generally quite rare for orders in excess of 6 months to be made, and usually such orders for maximum compensation are made in only the most grievous circumstances. This is not widely understood by both applicants or the employer, and the costs of running the proceedings to a hearing far outweigh any compensation order made.
In the recent decision of Cole v PQ Australia [2016] FWC 1166 (“Cole”), the Commission ordered compensation against the employer after it was established that a bullied employee was forced to resign after refusing to comply with an unreasonable request to be examined by a company-nominated medical practitioner. In Cole, the Commission heard evidence that the employee was subject to a barrage of emails, calls, text messages and covertly recorded conversations from his employer, who also failed to act after the employee raised complaints about a number of bullying incidents, including the erection of a noose over his workstation.
After providing his employer with a certified medical certificate in June 2015 for depression, the employee was suspended on pay on the basis that his employer was concerned about his welfare. Then, after the end of the stand-down period, the employee was directed not to return to work until he saw the company’s nominated doctor. By email, the employee was summarily dismissed for failing to attend the doctor’s appointment and purportedly not complying with a lawful direction.
The employee was subsequently informed that the company would pay him notice plus his statutory leave entitlements if he tendered a resignation letter, to which he declined. The Commission found that suspending the employee created considerable uncertainty and anxiety. Further, it was held that directing the employee to undergo a medical examination with the company doctor was unreasonable and part of a disciplinary process which the employee had no opportunity to respond. Based on the employee’s four years of service, job history and the circumstances of the dismissal, Commissioner Roe ordered the employer to pay compensation amounting to $43,900.00 to the employee, but considered reinstatement to be an inappropriate remedy.
As is evidenced by Cole, the unfair dismissal jurisdiction can nonetheless be an incredibly powerful and effective forum for a dismissed worker, particularly where the nature of the termination is comprised by one or more elements of unfairness, harshness or unreasonableness.
To reduce the degree of risk and exposure applicable to the unfair dismissal jurisdiction, it is critical to bear in mind the best practice procedures for handling terminations, including:
- being familiar with and applying workplace policies and other industrial instruments such as an enterprise agreement, HR manual or Codes of Conduct correctly;
- ensuring that the employee is told in specific language the issues and concerns with their employment, preferably in writing, and that a failure to improve may result in termination;
- that the employee is given clear guidance and direction to improve conduct and unsatisfactory performance to the expected standard – in other words, the issues are discussed;
- the employer acts reasonably and in good faith toward the employee;
- that adequate training and resources are made available to the employee to support improvement;
- if an employee’s job is at risk, that they are informed of that matter and given warnings;
- if a serious conduct issue comes to light, that the employee is given a reasonable opportunity to respond prior to any final decision being made;
- the employee is given the opportunity to bring a support person to any disciplinary process; and
- the employee is generally given ‘a fair go all round’.
Even though an apparently sound termination process has been followed, the risk of unfair dismissal is sometimes beyond an employer’s control. However, we do not suggest that “rolling over” is an optimal method for dealing with unfair dismissal claims. In addition, if a robust approach has been adopted, the unfair dismissal claim can be defended and often resolves at the telephone conciliation or the employee withdraws the claim thereafter. To avoid being seen as a “soft touch” – we suggest that defending the occasional unfair dismissal matter can have an important demonstration effect on the workforce.
If you have been dismissed, or have received an unfair dismissal claim, please do not hesitate to contact us for specialist advice or assistance.
This alert is not intended to constitute, and should not be treated as, legal advice.