Australia: Fair Work Bill - Unfair And Unlawful Dismissal

As part of Cooper Grace Ward Lawyers fortnightly updates on the Fair Work Bill (Bill), this bulletin summarises some of the key aspects of the Bill concerning unfair dismissal and unlawful dismissal. These particular legislative provisions are intended to take effect on 1 July 2009.

A new umpire

Fair Work Australia (FWA) is the new umpire who will deal with disputes pertaining to dismissal. This body replaces the current Australian Industrial Relations Commission (AIRC). FWA's power is not known in its entirety but a number of rules surrounding its operation have been outlined.

Conferences and hearings will replace the AIRC's conciliation and arbitration process and hearings will only occur if FWA considers it appropriate in the circumstances. FWA will have the power to conduct its own investigations when facts are in dispute. This was not something that the AIRC had the power to do.

Applications for unfair dismissal will need to be made within seven days of a termination occurring, whereas applications for unlawful termination must be made within 60 days of a termination occurring. Under current law, the period is 21 days. Lawyers and advocates are still allowed to represent employers or employees in FWA, but they could be the recipient of a cost order if found to be intentionally delaying proceedings.

Unfair dismissal

Work Choices introduced significant changes to the provisions relating to unfair dismissal. These have largely been eroded by the changes proposed by the Rudd Government. There will no longer be a 100 employee exemption and unfair dismissal will be available to employees after a six month probationary period, or a period of one year for employees engaged by companies with less than 15 employees.

Rights to unfair dismissal remain unavailable to employees engaged on fixed term contracts, trainees engaged for specific tasks and when a demotion occurs that does not involve a significant reduction in remuneration or duties if the employee remains in the employment of the employer.

The Bill clarifies that a dismissal can occur in two occasions:

1. if a persons employment has been terminated by the employer; or
2. if a person resigns as a result of being forced to do so because of the conduct of the employer (constructive dismissal).

Specific criteria have been outlined for FWA to consider when deciding whether a dismissal is harsh, unjust or unreasonable. We recommend that employers use these points when considering the process they undertake in dismissing an employee. This is not the complete list included in the Small Business Fair Dismissal Code which has been released by the Government. We recommend that employers with less than 15 employees defer to this code for guidance.

When assessing the termination of employment FWA will consider:

1. if there was a valid reason for the dismissal which can relate to capacity or conduct including safety and welfare issues;
2. whether the employee was notified of the reason and given an opportunity to respond in relation to capacity or conduct;
3. whether there was the ability for the employee to have a support person present in any discussions;
4. whether the person had actually been warned about their performance if the dismissal related to the unsatisfactory performance; and
5. the size of the employer's business and whether there are dedicated human resources staff are employed.

An employee cannot seek a remedy for unfair dismissal in the event of a genuine redundancy.

Like the current Workplace Relations Act, employees have a right to reinstatement or compensation in the event that FWA determines that the dismissal was harsh, unjust or unreasonable. Compensation is capped at the lesser of six months salary or half the high income threshold (approximately $53,200).

Unlawful Dismissal

The Bill significantly changes how laws relating to unlawful dismissal are outlined and extends employees rights. Employees have the right to make a claim for unlawful dismissal if their employment is terminated for reasons which include:

1. a temporary illness or injury (that is one that last less than three months);
2. membership (or not being a member) of an industrial association;
3. engaging or proposing to take industrial activity;
4. acting (or not acting) as an officer of an industrial association
5. the persons race, colour, sex, sexual preference, age, physical or mental disability, marital status, family or carer's responsibilities, pregnancy, religion, political opinion, national extraction or social origin; and
6. taking or proposing to exercise a workplace right including:

Unlike the Workplace Relations Act, this Bill enables employees to instigate proceedings against an employer for actions which injure an employee's prospects with the employer, including any prejudicial action. The employment relationship will no longer need to be terminated before an employee can seek a remedy for the above actions.

Initial applications for unlawful dismissal will be dealt with by conference in FWA. If parties do not reach agreement at the conference an employee will need to apply to the court for a remedy. Remedies available to the court include reinstatement, compensation and injunctions. Additionally, the Court may order a penalty of up to $6,600 for individuals and $33,000 for corporations who are found to have breach there obligations under this section.

There have been significant changes to the termination of employment law referred to above. This will be developed by us detail in upcoming Workplace Relations seminars which we will advise in due course.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.