Unfair dismissal: National vs State systems
The information on this page deals with unfair dismissal claims in relation to “national system employees” under the Fair Work Act 2009 (Cth) (Fair Work Act).
Most, but not all, employees in Australia are “national system employees” covered by the national industrial relations system under the Fair Work Act.
In Western Australia, some employees are “state system employees”, being employed by employers covered by the state industrial relations system under the Industrial Relations Act 1979 (WA) (ordinarily being employers who are sole traders, partnerships and non-trading corporations).
We have expertise and experience in dealing with unfair dismissal claims in both industrial relations systems. If you are not sure which system applies, you should contact us.
Who is eligible to make an unfair dismissal claim?
In order to be “protected from unfair dismissal” and able to make an unfair dismissal claim to the Fair Work Commission (FWC) under the Fair Work Act, an employee must have:
- been “dismissed”;
- served at least the “minimum employment period” at the time of their dismissal; and
- either been covered by a modern award or enterprise agreement in relation to their employment or earned less than the “high income threshold” at the time of their dismissal (see section 382 of the Fair Work Act).
Even if an employee is not protected from unfair dismissal or is unable to make an unfair dismissal claim, they may still have other claims available to them in the event of their dismissal (such as a general protections claim or a breach of contract claim).
When is an employee “dismissed”?
In accordance with section 386 of the Fair Work Act, a person has generally been “dismissed” for the purposes of an unfair dismissal claim if:
- the person’s employment with his or her employer been terminated on the employer’s initiative; or
- the person has resigned from his or her employment, but was forced to do so because of conduct, or a course of conduct, engaged in by his or her employer (commonly known as “constructive dismissal”).
However, there are some exceptions contained in section 386(2), which preclude some events and circumstances from constituting a dismissal.
Minimum period of employment
The “minimum employment period” is a required period of continuous employment with an employer, being generally:
- 6 months ending at the earlier of the time when the employee is given notice of the dismissal and immediately before the dismissal; or
- one year (if the employer is a “small business employer” within the meaning of section 23 of the Fair Work Act).
For casual employees, a period of service as a casual employee will usually only count towards a period of continuous employment where:
- the employment as a casual employee was as a “regular casual employee” (within the meaning of section 12 of the Fair Work Act); and
- during the period of service as a casual employee, the employee had a reasonable expectation of continuing employment by the employer on a regular and systematic basis.
In some limited circumstances (which usually require a transfer of employment), past service with a previous different employer can count towards the minimum employment period.
High income threshold
If an employee is not covered by a modern award, or if an enterprise agreement does not apply to them, then they ordinarily need to have an annual rate of earnings of less than the high income threshold in order to be “protected from unfair dismissal”.
The high income threshold is currently $167,500 (as at August 2023 and for dismissals taking effect on or after 1 July 2023). The high income threshold is adjusted annually on 1 July.
There are particular rules as to determining an employee’s annual rate of earnings and, depending on the circumstances, earnings may potentially not include bonuses or commissions.
How long does an employee have to make an unfair dismissal claim?
Employees ordinarily must make any unfair dismissal claim within 21 days after their dismissal took effect.
In order to obtain an extension, an applicant will ordinarily need to make an application for an extension and persuade the FWC, to its satisfaction, that there are exceptional circumstances warranting an extension (see section 394(3) of the Fair Work Act).
In practice, extensions are infrequently granted and employees should not operate under the assumption that an application for an extension of time will be granted. As such, it is important for employees to ensure that they lodge any unfair dismissal application within the 21 day time limit.
What remedies can the Fair Work Commission award?
The FWC may order a person’s reinstatement and/or the payment of compensation to a person, if:
- the FWC is satisfied that the person was “protected from unfair dismissal” at the time of being dismissed; and
- the person has been “unfairly dismissed”.
It is important to note that reinstatement is the primary remedy in an unfair dismissal claim and the FWC must not award compensation on its own unless:
- the FWC is satisfied that reinstatement of the person is inappropriate (which may, for example, be due to a breakdown in the relationship between the employer and the employee); and
- the FWC considers an order for payment of compensation is appropriate in all the circumstances of the case (see section 390 of the Fair Work Act).
There are a number of statutory criteria which the FWC must take into account when determining the amount of any compensation (see section 392 of the Fair Work Act). Importantly, any compensation may be reduced as a result of any unreasonable failure by an employee to make efforts to mitigate their loss (by finding or attempting to find alternate employment).
There is also a statutory cap on compensation, which means the FWC generally cannot order compensation in excess of either 6 months’ pay or half the high income threshold immediately before the dismissal (see section 392(6) of the Fair Work Act).
Additionally, the FWC cannot award compensation for shock, distress or humiliation or other analogous hurt (see section 392(4) of the FW Act).
While the FWC does not have jurisdiction to deal with underpayment claims, such claims can sometimes be ventilated and resolved during the conciliation process.
What does the Fair Work Commission consider when determining an unfair dismissal claim?
Pursuant to section 385 of the Fair Work Act, a person has been “unfairly dismissed” if the FWC is satisfied, among other things, that their dismissal was “harsh, unjust or unreasonable”.
Whilst the FWC is required to consider all the circumstances it considers relevant in determining whether the dismissal was “harsh, unjust or unreasonable”, section 387 of the Fair Work Act sets out particular mandatory considerations that the FWC must have regard to.
In practice, the key focus and emphasis of the FWC is usually on whether:
- there was an objectively valid reason for dismissal relating to the employee’s capacity or conduct;
- the employee was afforded adequate procedural fairness prior to dismissal (i.e. they were allowed a proper opportunity to respond to any concerns of the employer prior to dismissal, including having an adequate chance to address any poor performance); and
- the dismissal was harsh due to the employee’s personal circumstances or incongruent treatment compared to other employees.
In an unfair dismissal claim, the employer usually has the onus of establishing any valid reason for dismissal (assuming they are not a “small business employer” able to rely on the Small Business Fair Dismissal Code). If the employee does not admit any alleged misconduct relied upon, the employer will usually need to call witness evidence to objectively establish, to the FWC’s satisfaction, that the misconduct did indeed occur. If the employer cannot persuade the FWC that the misconduct actually occurred, then such misconduct would not ordinarily provide a valid reason for dismissal (such that the dismissal would likely be found to be unfair).
Jurisdictional objections/defences
Employers may be able to raise various defences or “jurisdictional objections” to an unfair dismissal claim. In addition to other possible objections such as that an application was filed out of time or an employee was not “dismissed”, an employer may contend that a dismissal was a genuine redundancy or, in the case of a small business employer, was consistent with the Small Business Fair Dismissal Code.
Compliance with Small Business Fair Dismissal Code
It is a defence to an unfair dismissal claim for an employer to satisfy the FWC that an employee’s dismissal was “consistent with the Small Business Fair Dismissal Code”. A person’s dismissal was “consistent with the Small Business Fair Dismissal Code” if:
- immediately before the time of the dismissal or at the time the person was given notice of the dismissal (whichever happened first), the person’s employer was a small business employer; and
- the employer complied with the Small Business Fair Dismissal Code in relation to the dismissal.
The Small Business Fair Dismissal Code provides a more employer-friendly regime to reduce the burden on small businesses.
Genuine redundancy
It is a defence to an unfair dismissal claim for an employer to satisfy the FWC that an employee’s dismissal was a case of “genuine redundancy”. A person’s dismissal is a case of “genuine redundancy” if:
- the person’s employer no longer required the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise;
- the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy; and
- it would not have been reasonable in all the circumstances for the person to be redeployed within the employer’s enterprise or an the enterprise of an associated entity of the employer (see section 389 Fair Work Act).
Can parties be represented by a lawyer?
Generally, a person may be represented in a matter before the FWC (including by making an application or submission to the FWC on behalf of the person) by a lawyer or paid agent only with the permission of the FWC (see section 596 of the Fair Work Act).
In practice, however, it is common for permission to be granted for parties to be represented upon application (particularly if both the employer and the employee are seeking to be legally represented).
Where a party to a matter is represented by a lawyer, they are usually required to bear their own legal costs regardless of whether they are successful or not. However, there are some exceptions to this rule whereby the FWC may be empowered to make costs orders requiring one party to pay some or all of the other party’s legal costs (see sections 400, 400A and 611 of the Fair Work Act).
What is the process involved?
Lodging application and response
The unfair dismissal process is commenced by the former employee making an unfair dismissal application (also known as a claim) to the FWC.
Once the application has been lodged with the FWC, the application is then served on the employer (who is known as the respondent). The employer is then required to lodge and serve an employer response document setting out what they say in response to the claim made by the former employee (who is known as the applicant).
Conciliation conference
Unfair dismissal applications are ordinarily listed for a telephone conciliation conference (which is usually listed to occur on a date which is around 2 to 10 weeks from the application being made).
Whilst conciliation is generally a voluntary process, it often very effective in resolving unfair dismissal disputes.
The purpose of the conciliation conference (which usually lasts around 2 hours) is to provide the parties the opportunity to resolve the matter between themselves by way of negotiating a settlement before the matter proceeds further. The conciliation conference is conducted by telephone whereby a staff member from the FWC will act as a conciliator between the parties. The conciliator helps the parties explore and understand their positions and options. The conciliator does not make any findings or decisions concerning the matter.
The conference is held on a confidential and “without prejudice” basis. This means that evidence of anything said during the conference cannot ordinarily be used itself as evidence later on should the matter fail to resolve during the conciliation stage.
However, cases will frequently be resolved by way of a settlement agreement reached during the conference. If the matter is successfully resolved, the terms of any settlement are ordinarily recorded into a formal terms of settlement document or settlement deed which is signed by the parties.
Jurisdictional and procedural hearings
Where a jurisdictional objection is raised, the FWC may decide to hold a preliminary “jurisdictional hearing” to determine whether the claim can proceed or may instead decide to deal with any jurisdictional objections at a final hearing (or determinative conference).
If procedural orders or directions (for example, in relation to orders for the production of documents or the attendance of witnesses) are sought by a party during a matter, a procedural hearing may be held to determine whether any orders or directions should be made. In some cases, the FWC may also decide to determine such issues “on the papers” without holding any procedural hearing.
Final hearing or determinative conference
Unless the matter is otherwise resolved (either by negotiated settlement or discontinuance), the unfair dismissal claim will need to be determined by the FWC and will ordinarily be allocated to a particular FWC member to hear and determine the matter.
Commission members have a degree of discretion as to how any matters before them are to be conducted.
Prior to a final hearing taking place, the Commission member will usual make directions (also known as programming orders) requiring the parties to do various things in preparation for the hearing. This usually involves, among other things, lodging and serving detailed witness statements of any witnesses and detailed submissions canvassing the party’s arguments as to why their case should succeed.
Some FWC members will invite the parties to engage in a further conciliation conference (facilitated by the member as conciliator) should they both choose to prior to any directions being issued.
Where there is a dispute about the facts (for example, whether particular conduct or poor performance did or did not occur), the FWC must conduct a conference or hold a hearing in relation to the matter (see section 397 of the Fair Work Act).
Particularly where one or more parties are unrepresented, the FWC may adopt a less formal procedure including by using a determinative “conference” rather than formal “hearing”. Conferences are usually held in private, where as hearings are usually open to the public.
In hearing and determining any unfair dismissal claim, the FWC is not bound by the rules of evidence and may inform itself in such manner as it considers appropriate (see sections 590 and 591 of the Fair Work Act).
At any hearing or determinative conference, the employer and employee will ordinarily call their respective witnesses to give evidence and adduce any relevant documents that they wish to present to the FWC. The employer and employee will also ordinarily be able to make opening and closing submissions about their respective cases.
Following any determinative conference or hearing, the FWC will usually publish written reasons for its decision which will be publicly available. It usually takes a number of weeks or months for any decision to be finalised and published.
It is usually open to the parties to continue any settlement negotiations or discussions prior to any final decision being delivered should they be inclined to do so.
Can an unfair dismissal decision be appealed?
Section 604 of the Fair Work Act provides that a person who is aggrieved by a decision made by the FWC (other than a decision of a Full Bench or an Expert Panel) may appeal the decision with the permission of the FWC.
Despite section 604, the FWC must not grant permission to appeal from a decision made by the FWC in relation to an unfair dismissal matter unless the FWC considers that it is in the public interest to do so: see section 400(1) of the Fair Work Act. Furthermore, an appeal from a decision made by the FWC in relation to an unfair dismissal matter can only, to the extent that it is an appeal on a question of fact, be made on the ground that the decision involved a significant error of fact (see section 400(2)).
Outside of an appeal to the Full Bench (with permission), a party may also be able to:
- seek judicial review of the original decision of the original Commission member or any appeal decision of the Full Bench in a federal court (such as the Federal Court of Australia or the Federal Circuit and Family Court of Australia); and
- in some circumstances, seek that the President of the FWC refer a question of law to the Federal Court of Australia.
Further information
If you require advice or assistance, please do not hesitate to contact us.
Please note that the information on this page is intended to be of a brief and general nature only and should not be relied or acted upon as legal advice. You should always seek legal advice tailored to your own individual circumstances.
