When it comes to ending an employment relationship, getting it wrong can put you at risk of employee claims of unfair dismissal and breaching general protections.
Most businesses are well aware of unfair dismissal claims, but not everyone knows about claims workers can make about a dismissal under general protections.
MyHR has seen an increase in these claims this year, and it can be time-consuming for employers to deal with responding, going to meetings, and conciliation (not to mention the costs!).
To help you understand the difference between unfair dismissal and general protections, we’ve put together this handy reference guide. It looks at the similarities and differences, as well as the best ways to protect yourself from these sorts of employee claims.
Unfair dismissal
Unfair dismissal is when an employer is judged to have dismissed an employee from their job in a way that is:
- Harsh - an extreme response to the situation, or the dismissal has an unreasonably severe impact on the employee.
- Unjust - employee is not guilty of the action or behaviour the employer dismissed them for.
- Unreasonable - evidence does not support the decision to dismiss the employee.
Who can apply for unfair dismissal
Employees need to be employed for at least 6 months before they can apply for unfair dismissal (or at least 12 months if they are employed by a small business, i.e. less than 15 employees).
Employees must earn less than the high income threshold (currently $167,500). People who earn more cannot apply for unfair dismissal, unless an award or agreement covers their employment.
Casual employees are also exempt, unless they work regular and systematic hours with a reasonable expectation of ongoing employment.
Independent contractors, unpaid volunteers, or employees of any organisation outside the national system cannot claim unfair dismissal.
Employer protections
An employer is protected from unfair dismissal claims if:
- The dismissal is a genuine redundancy, i.e. you don’t need anyone to do the job, you explored options to redeploy the person into other roles, and you followed any consultation requirements in the relevant award or enterprise agreement.
- It is a small business and you followed the Small Business Fair Dismissal Code, and can provide evidence of this.
The unfair dismissal process
Employees have 21 days from the day after the dismissal to lodge a claim with the Fair Work Commission (FWC).
Employers have 7 days after they receive notification of an unfair dismissal claim to respond to the FWC.
Parties to a claim can reach agreement at conciliation. If not, the case may continue to a formal hearing in front of the FWC
Unfair dismissal claims are generally faster to resolve than general protections claims.
Potential outcomes
Potential outcomes include compensation to the employee (typically between 5-7 weeks pay), and/or reinstatement.
The maximum compensation is the lower of half of the employee’s annual wage or the compensation cap (currently $83,750).
General protections
General protections are workplace rights the Fair Work Act provides to all people working in Australia’s national employment system. The protections include the right to:
- Correct pay, leave, and other entitlements.
- Join a union and take part in union activities.
- Not be discriminated against.
- The benefit of an industrial law or instrument, e.g a modern award, registered agreement, workplace safety law.
- Make an enquiry or complaint about workplace conditions.
Dismissing an employee (or threatening to dismiss them) is considered adverse (harmful) action under general protections and can be a breach of the laws if it is for a prohibited reason. For example, you fired the person:
- On the basis of their features or attributes, e.g. age, race, colour, sex, gender identity, disability.
- Because they were away from work for a long period while sick or injured.
- Because they had a workplace right, used or said they would use a workplace right, or you did it to stop them using a workplace right.
Remember that other actions - e.g. demoting an employee, changing their job, overlooking them for promotion - may also be considered adverse, and employees (and potential employees) are also protected from coercion, undue influence or pressure, and misrepresentation.
Who general protections cover
Most employees (except some who are employed by a state or local government) can apply to the FWC for help under general protections laws.
Permanent (full- or part-time), casual, and fixed-term employees can lodge an application. Independent contractors may be covered in certain situations.
There are no minimum employment period requirements or high income threshold.
The general protections claim process
Employees have 21 days starting from the day after they were dismissed to lodge an application with the FWC.
Employers have 7 days to respond.
The FWC conciliates a general protections claim in a conference between the parties. The two sides can reach their own settlement at any stage.
If the parties cannot agree at the conference, the FWC issues a certificate that confirms it has been unable to resolve the case (about 25% of general protections dismissal cases).
The employee then has 14 days to apply for arbitration by the FWC (the employer must agree) or take the case to the Federal Court or Federal Circuit Court.
Court is a more formal and complex procedure than the FWC tribunal and can take longer to finalise.
If the claim is not about a dismissal, employees have up to 6 years after the dispute or incident to lodge an application under general protections laws.
Potential outcomes
The outcome can be whatever the parties agree to. This is most commonly a financial settlement, but could also be anything from an apology to the employer reinstating the employee, the employer allowing the employee to resign, or employment continuing as it did before.
There is no cap on the amount of compensation, however, the FWC states that in more than 40% of agreements, the average compensation is less than $4,000, and in 75% of cases it is less than $10,000.
How to safely terminate employment
To minimise your exposure to risk when dismissing an employee, make sure you always follow fair and reasonable process and document it as you go.
You need to base your decision on a valid reason, whether that is consistently poor performance, repeated misconduct, or genuine redundancy.
You should always investigate issues when they arise and address them using proper performance management or disciplinary procedure.
If you reach the point of wanting to terminate employment, you need to inform the employee, allow them an opportunity to respond, and consider their response before deciding on the outcome.
Make sure you also consult the relevant modern award or registered agreement and the employee’s employment contract so you can be sure you have followed all the required steps in ending their employment.
Remember, too, that a dismissal isn’t always as obvious as you telling the person they no longer have a job. An employee could also be considered dismissed if you give them no choice but to resign (also know as forced resignation), act as though they were dismissed, (e.g. by not giving them any more shifts), or by demoting or transferring them to a job that pays less, has a different location, or different duties or working conditions.
