Whenever employment is terminated, the first legal remedy to consider is a statutory unfair dismissal claim. We say “statutory” because the remedy only exists under legislation. There is no common law concept of unfair dismissal. At common law, employers can terminate an employment contract for any reason or indeed no reason at all and their only obligation is to give or pay notice required under the contract. It’s important to remember that unfair dismissal as a concept has only been around since the 1970s and has only become a widespread remedy since the 1990s. Unfair dismissal applications are made to state and federal tribunals whose powers are limited by legislation. For most private sector employees, this will be the Fair Work Commission (FWC). Of course, there are alternatives to unfair dismissal but these claims (such as claims of breach of general protections rights/unlawful dismissal or discrimination) are technical in nature and the unfairness of the dismissal is not the focus.
However, unfair dismissal claims cannot be made by everyone. There are several threshold requirements to meet. There is an effective deemed probationary period so that employees terminated in the first 6 months of their employment (12 months if the employer has less than 15 employees by headcount on the date of termination, including those employed by associated entities) are, quite arbitrarily, not able to bring an unfair dismissal claim. Likewise, employees earning over a certain high income threshold who are not subject to industrial award or enterprise agreement, are unable to bring an unfair dismissal claim. Many states retain more intricate requirements in respect of their public servants. Casual and fixed term employees also have threshold requirements to meet before they can bring an unfair dismissal claim. A strict timeframe of 21 days is applied to applications and extensions are rarely granted.
Having passed these initial hurdles, the unfairness of a dismissal involves considering whether the employee was given a “fair go all round”. This can relate to procedural fairness and whether there was a valid reason justifying dismissal but also whether the dismissal judged as a whole was harsh, unjust or unreasonable. It is important to remember that the FWC can only order reinstatement if it is practicable and it can only order compensation for loss of income capped at 6 months pay (less tax). There is no relationship between how bad a dismissal is and how much compensation is awarded. The law says that employees have an obligation to try and find other work and any income earned will be taken into account in determining compensation. A lack of procedural fairness may be outweighed by other circumstances or can result in a minimal amount of compensation being awarded. The statistics published by the FWC show that most employees only receive a small amount of compensation for unfair dismissal with the median being 6 – 8 weeks pay. Less than 0.4% of applicants receive the maximum amount.
Unfair dismissal is relatively quick, cheap and simple as far as legal remedies go and it is intended to be a layperson’s jurisdiction. Paid represenatives need the permission of the FWC to appear after the initial conference stage and costs are not generally awarded even to successful applicants. But it is a long way from the one stop shop proposed by the then Rudd opposition in 2007 where it was said that the Fair Work Commission would attend workplaces to conduct a conference between an employer and employee and resolve matters in the workplace. The first step in the process is generally a telephone conference with a FWC conciliator which takes the form of a mediation. We say “generally” because sometimes an employer will require a jurisdictional objection to be heard before any consideration of the merits. Even then, employers often don’t take conferences seriously and the conciliator cannot make a binding decision. Conciliation does have its benefits but settlement at this stage usually involves significant compromise by both sides. If conciliation is not successful, then it is generally necessary for both parties to file their written evidence and outline of submissions about both the unfair dismissal itself and the remedy being sought. Hearings can take place in several forms before a commissioner who will generally reserve their judgment. A written decision is delivered several weeks after the hearing. The process can be daunting.
Many people are left disappointed by what they see as the inadequacies of the system. Employers on the other hand criticise the process as encouraging the payment of “go away money”. There has also been a rise in “no win no fee” arrangements, particularly involving non lawyers. Ultimately, no one can wind back the hands of time and the reality is that unfair dismissal cannot truly address all the consequences of an unfair dismissal on the person terminated (and their families). A bit like democracy as a form of government, it is the most inadequate form of legal redress, except for all the others. However, it remains for many the most practical way of doing something to address termination of employment. Spare a thought for contractors, who don’t even have this right.
Please contact us if you would like any further information or help.