LexisNexis Practical Guidance®

Part 3-2 of the Fair Work Act 2009 (Cth) (FW Act) allows national system employees to apply for an unfair dismissal remedy if they believe that the termination of their employment was ‘harsh, unjust or unreasonable’. However, certain employees are excluded from making an unfair dismissal claim, and certain types of dismissals may not be the subject of such a claim.

See Which employees are eligible to make an unfair dismissal claim?

See National System Employer Tool.

Self-evidently, the occurrence of a “dismissal” is a prerequisite for making an unfair dismissal claim under Part 3-2.

An employee is taken to have been dismissed where:

• •the employee’s employment was terminated on the employer’s initiative; or
• •the employee resigned, but was forced to do so because of conduct (or a course of conduct) engaged in by the employee’s employer — this type of situation is also known as “constructive dismissal”.

However, an employee will not be considered to have been dismissed if:

• •the employee was employed 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; on completion of the task; or at the end of the season;
• •the employee was employed under a training arrangement for a specified period, and the employment terminated at the end of that period; or
• •the employee was demoted in employment, but the demotion did not involve a significant reduction in remuneration or duties, and the employee remained employed with the employer that effected the demotion.

For more information, see What constitutes a “dismissal” under the FW Act?

Unfair dismissal protection does not extend to employees who earn above the high income threshold unless:

• •the employee is covered by an award; or
• •an enterprise agreement applies to the employee.

The effect of this provision is that an award/agreement-free employee who earns at or above the high income threshold is ineligible to make an unfair dismissal claim.

See What impact does the high income threshold have on an unfair dismissal claim?

An employee cannot make an unfair dismissal application if the dismissal was:

• •a case of genuine redundancy; or
• •effected in accordance with the Small Business Fair Dismissal Code (in the case of a small business employer).

A dismissal will be considered unfair if it was “harsh, unjust or unreasonable”. This will depend on a number of factors, including whether:

• •the employer had a “valid reason” for dismissal relating to the employee’s capacity or conduct (see Was there a valid reason for the dismissal?);
• •the employer accorded the employee “procedural fairness” in the process leading to the dismissal (see Was the dismissal procedurally fair?);
• •any other matters that the Fair Work Commission considers relevant, such as the proportionality of the penalty, the consequences of termination upon the employee’s personal and economic circumstances, the employee’s age, length of service and disciplinary record.

Unfair dismissal applications are lodged with, and determined by, the FWC.

There is a time limit of 21 days for making an unfair dismissal application which may only be extended in “special circumstances”.

If an employer has any jurisdictional objections to the employee’s application, ie because the dismissal was a case of genuine redundancy, such objections are usually determined before the matter proceeds to a conciliation conference or formal hearing.

See What are the steps involved in initiating and resolving an unfair dismissal claim?

A successful unfair dismissal applicant may be reinstated and/or receive an award of compensation. While the FW Act makes reinstatement the default option, in most cases reinstatement is deemed inappropriate because in the view of the FWC there has been an irretrievable breakdown in the parties’ relationship. Accordingly, successful applicants usually receive an award of compensation.

See What remedies are available?

The unfair dismissal protections under the FW Act have effectively supplanted the state unfair dismissal laws for most employees. However, state laws continue to operate in relation to the public sector in most states, local government (in some instances) and, to a very limited extent, employees in the private sector in Western Australia.

See What are the unfair dismissal processes available under State laws?

The termination of an employee’s employment may result in an application by the dismissed employee under the “unlawful termination” provisions in the Fair Work Act 2009 (Cth) (FW Act). However, claims for unlawful termination are uncommon as the FW Act prohibits a person from applying for relief under the unlawful termination provisions where they are entitled to make a general protections court application in relation to the same conduct. See Introduction to the general protections. This is in recognition of the substantial overlap between the two types of application.

See Unlawful termination.

Where the termination of an employment contract is in breach of contract, the termination will be “wrongful” and the innocent party may seek a remedy at common law. When the employer is the party terminating, this is known as “wrongful dismissal”.

The two main remedies in wrongful dismissal cases are specific performance of the contract (similar in effect to reinstatement), and more commonly compensation. Compared to unfair dismissal claims under the Fair Work Act 2009 (Cth) (FW Act), there is no cap on the amount of compensation available to a successful claimant in a wrongful dismissal action.

Common law wrongful dismissal claims are usually the province of more senior employees who are not covered by the unfair dismissal regime, and for whom the potential to recover more money than they could under the FW Act provisions justifies the time and resources involved in pursuing the matter, as well as the risk of adverse costs orders if a claim is unsuccessful. Common law claims often augment other claims made by more senior employees, for example claims alleging misleading and deceptive conduct under the Competition and Consumer Act 2010 (Cth).

See What is an employee’s recourse for wrongful termination under the common law?

Where an employee wrongfully terminates a contract, most commonly by providing insufficient notice of resignation, an employer may take action to recover damages associated with that breach of contract.

However, given that the courts are highly unlikely to ever order specific performance of the contract by the employee, employers rarely bother with suing the employer for loss occasioned by their unlawful termination of the contract. Such claims will usually only be pursued in the context of disputes concerning restraint of trade provisions or where there are other special circumstances or claims to be pursued (ie claims related to diverting business or breaching the duty of fidelity and good faith).

See What is an employee’s recourse for wrongful resignation under the common law?

Redundancy is when an employer no longer needs to have a job performed by anyone — in other words, that the job the employee was doing has ceased to exist.

An employee whose job has been made redundant and whose employment is terminated may have an entitlement under statute, an industrial instrument or contract to redundancy or severance pay.

Redundancy pay is in addition to any payment in lieu of notice which the employee may also be entitled to receive on termination of their employment and payments for unused accrued paid leave entitlements.

See What is redundancy?

The National Employment Standards (NES) provide a statutory entitlement to redundancy pay for most national system employees who have 12 months’ continuous employment, as set out in Pt 2-2, Div 11, Subdiv B of the Fair Work Act 2009 (Cth) (FW Act). Most businesses with fewer than 15 employees do not have to pay redundancy pay.

If a national system employee also has a right to redundancy pay under a contract of employment, award, agreement or other industrial instrument, or state legislation, these instruments remain applicable to the employee to the extent that they confer more generous redundancy terms than the minimum set down in the NES.

An employer may apply to the Fair Work Commission (FWC) to reduce the amount of NES redundancy pay owing to an employee if the employer offers other acceptable employment to the employee (irrespective of whether the employee accepts the alternative position) or the employer is not able to pay the amount of redundancy pay required by the NES. The FWC may determine that redundancy pay is reduced to nil.

See What are the redundancy pay entitlements under the NES?

If the dismissal is a “genuine redundancy” then that will be a complete defence to an unfair dismissal claim under Pt 3-2 of the FW Act is that the dismissal was not a case of genuine redundancy.

A genuine redundancy occurs where:

• •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 or the insolvency or bankruptcy of the employer;
• •the employer has complied with any obligation in an applicable modern award or enterprise agreement to consult about the redundancy; and
• •the person's dismissal will not be a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within the employer's enterprise; or the enterprise of an associated entity of the employer.

Redundancy pay may not be payable where the job is no longer required to be done due to the ordinary and customary turnover of labour.

See What happens in the case of a genuine redundancy?

When there is a transfer of business, employees normally cannot be transferred from one employer to another as you would a chattel. However, where there is a share sale, there is no change of employer, and the existing employment contracts will remain unchanged.

See Effect of transfer of business on employment contract.

Termination of contracts of employment without notice can arise in a number of circumstances — the most important being summary dismissal and acceptance of a repudiatory breach which are dealt with elsewhere. See Summary dismissal and Repudiation of employment contract.

Some of the less common situations in which a contract of employment can be terminated without notice include:

• • frustration;
• • abandonment;
• • bankruptcy or insolvency of the employer;
• • summary dismissal; and
• • repudiation.

Where an employment contract is frustrated, it comes to an end by operation of law rather than at the initiative of the employer. Frustration of employment may occur, for example, as a result of the death or imprisonment of an employee. However, employers should be aware that the courts and tribunals are generally reluctant to find that a contract has been frustrated.

See When has an employment contract been frustrated?

In abandonment of employment situations, the employer’s acceptance of the employee’s repudiation (constituted by the abandonment) is generally considered to be the act that terminates the employment contract. This is significant for the purposes of the unfair dismissal provisions under the Fair Work Act 2009 (Cth) which depend for their operation upon termination of employment being at the initiative of the employer.

See What constitutes an abandonment of employment?

Bankruptcy or insolvency of an employer does not automatically terminate the employment contracts of employees of the bankrupt or insolvent entity. The appointment of receivers and managers may have the effect of terminating employment contracts, although this is not necessarily the case. Whether it does so or not will depend on the terms of their appointment.

Employees whose employment is terminated due to the insolvency or bankruptcy of their employer and who are unable to recover outstanding employee entitlements from the employer or another source may be entitled to a payment under the Commonwealth-funded Fair Entitlements Guarantee (FEG) scheme.

See What happens to the employment relationship on the bankruptcy or insolvency of the employer?

Summary dismissal occurs where an employer terminates an employee’s employment without providing notice or payment in lieu of notice. It is reserved for the most serious cases where no lesser form of disciplinary action is appropriate.

See What is a summary dismissal?

A repudiatory breach of a contract of employment may occur where one party to the contract engages in conduct that evinces an intention no longer to be bound by the contract, or to carry out the employment contract only in a way that is substantially inconsistent with that party's obligations under the contract. Such breach will entitle the innocent party to elect to terminate the contract and to end the employment immediately.

Repudiation may also occur if a party to an employment contract exhibits an unwillingness or inability to perform obligations under a contract such that it will not be substantially performed.

See What is a repudiatory breach of the employment contracts?

An employee who has been dismissed from their employment may pursue a number of claims. Because of the range of options available to a dismissed employee, choosing the appropriate form of relief to pursue can be difficult.

The cost, time and complexity of the different applications, as well as the potential remedies, will need to be considered.

Regard should also be had to the time limit for each cause of action.

See What are the legal actions available to a dismissed employee?

When an employment relationship ends, the employer is required to pay the employee a number of outstanding or existing benefits. This guidance note walks through which payments may be payable, and when they apply.

See What payments must be made when an employment relationship ends?