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Employment

30 Aug 2016 - 15:25 | Version 13 |

Based on the contribution of Craig Dowling and Neill Campbell for The Law Handbook 2016, published by Fitzroy Legal Service, as amended by ClareMcKenzie and current to 1 May 2016

Introduction

This section provides information about employment law in the Northern Territory, and covers:
  • Where employment rights come from, including contracts, awards, registered agreements and provisions of the Fair Work Act 2009 (FW Act).
  • Information about employment contracts.
  • Minimum conditions under awards, registered agreements and the FW Act and how to enforce minimum conditions of employment.
  • Termination of employment including unfair dismissal and general protections.
  • Bullying at work.
  • Wages and employment records.

Where do employment rights come from?

Employment rights and obligations come from:
  • The FW Act;
  • Modern Awards and Registered Agreements; and
  • Employment contracts.
The FW Act is a Federal law which sets out the minimum conditions of employment for all employees in the Northern Territory (with a few exceptions), including:
  • The National Employment Standards, which provides certain employees with rights such as annual leave, personal or sick leave and parental leave.
  • The ability to make claims such as unfair dismissal and general protections.
  • The making of awards and registered agreements.
Employment rights contained in the FW Act, awards or registered agreements are generally minimum terms and conditions. This means that the parties can agree by contract to, for example, pay more than the minimum for any one or more entitlements covered by the FW Act, award or registered agreement.

A common law contract cannot provide for a lesser term than that contained in the FW Act, award or registered agreement. The employer must provide the employee with at least every minimum term or condition in the statute, award or registered agreement. It is no excuse if the employee was, overall, better off under the common law contract.

Contract, award and registered agreement terms and conditions exist side by side, with an employee being entitled to the best term that applies. For example, the ordinary hours pay rate in a contract may be the most beneficial term for the employee's ordinary hours of work, but the award overtime condition may be the most beneficial for overtime work. In those circumstances, the employee is legally entitled to the contractual term for ordinary time work and the award term for overtime work.

Employment Contracts

Contract of employment or individual contractor?

Some of the protections offered by the FW Act and industrial relations system are only available to employees and not independent contractors. It can sometimes be very difficult to say whether someone is an employee or an independent contractor. Some of the characteristics of an independent contractor are that they:
  • control the way work is to be done;
  • can assign or delegate (subcontract) the work to others outside the organisation;
  • are paid on a fixed price basis payable at the completion of the task;
  • may supply special equipment or tools to do the job;
  • pay a significant proportion of the business expenses from their own income or are paid without income tax deducted; and
  • directly profit or lose from the business.

The fact that a written contract describes someone as an independent contractor does not necessarily mean they are for legal and tax purposes, particularly if everything else points to them being an employee.

Sham Contracting

The FW Act prohibits "sham contracting" arrangements where an employer treats an employee as an independent contractor in order to avoid having to meet its obligations to that employee under workplace law.

Under the sham contracting provisions of the FW Act an employer cannot:
  • misrepresent an employment relationship or a proposed employment arrangement as an independent contracting arrangement;
  • dismiss or threaten to dismiss an employee for the purpose of engaging them as an independent contractor; or
  • make a knowingly false statement to persuade or influence an employee to become an independent contractor.
The Fair Work Act 2009 provides serious penalties for contraventions of these provisions. If an employee believes they are part of a "sham contracting" arrangement, the employee can complain to the Fair Work Ombudsman.

Terms of an employment contract

Every employee has a contract of employment - an agreement with their boss about working conditions. A contract of employment does not have to be written. It can be partly oral (spoken), partly written, partly custom and practice or implied by law. For example, a contract could be made up of a job advertisement, a job description, what has been said at an interview, relevant law, such as the FW Act, and custom and practice, such as long lunches on a Friday. Often a worker doesn't know about the kinds of protection they have under their contract of employment, and only learns when they have a problem within their workplace.

A contract of employment, whether written or oral, will contain a number of express and implied terms.

Express terms

The express terms of a contract of employment are those specifically agreed to by the employer and the employee. The wage to be paid, the hours to be worked, the type of work to be done and where, are examples of express terms. In addition, some workplaces have specific rules that are handed to workers when they start their employment or displayed on notice boards. If, before the employment contract is made, the worker is given a copy of the rules and made to sign for them, or if the existence of the rules is brought to the worker's attention, the rules may become express terms of the employment contract. If they are shown to the worker after they have started work, the worker must consent to them before they become part of the contract.

Implied terms

Implied terms are the terms of a contract that exist without being stated or written down. Implied terms fall into two categories:
  1. those implied by law (terms that the courts have identified as necessary); and
  2. those implied by the circumstances of a particular case.
An implied term in an employment contract does not apply when an express term contradicts it.

Terms implied by law: the employee's duties

The following terms are implied into every contract of employment:
  • An employee must take all reasonable steps to carry out what has been promised under the contract of employment. Sometimes this is described as 'the duty to obey the lawful and reasonable instructions of the employer', which usually means getting on with the work when there is work to be done and fitting in, as far as is reasonable, with the employer's scheme of operation.
  • An employee must exercise reasonable care and skill in their performance of the work; that is, the employee has a duty to be efficient and to avoid negligence when doing the work.
  • An employee undertakes to do the job honestly and faithfully. This includes the duty to account for any property used and to pass on to the employer any profits made through the employment.
  • If an employer requests information about the conduct of other employees, an employee may be under a duty to disclose information about conduct that falls within the range of the employee's work activities. An employee who exercises managerial or supervisory functions may be obliged to disclose information to the employer, even if not asked, about the misconduct of other employees. Where an employee is merely not carrying out their proper duties, a supervisor is less likely to be under such a duty.
  • An employee should avoid activities that may be harmful to the employer's business, such as running another business in competition with their employer.
  • An employee should not tell others any details of their employer's profits or losses, customers, special methods or techniques used, or any information about the business that might help a competitor. Such 'inside' knowledge is distinguished from any skill, expertise or general knowledge an employee has gained or developed over the course of employment. Some contracts of employment contain an express term preventing the employee, on leaving the employment, from entering into competition with the employer's business. Such a term may be declared void by the courts, unless it can be shown to be reasonable and not contrary to the public interest.
Generally, an employee can, without breaching their contract, disclose misconduct or other events that ought to be disclosed in the public interest. However, in so doing, they can't also disclose their employer's trade secrets or misuse confidential information acquired in the employment. An employer can't sack an employee for complaining to relevant authorities about the employer's unlawful conduct.

Terms implied by law: the employer's duty

Under the terms implied by law into all employment contracts, an employer has the following obligations:
  • An employer must pay the wages promised at the times agreed.
  • An employer must not make deductions from an employee's wages, except for income tax, without the employee's express agreement.
  • An employer must take all reasonable steps to make it possible for an employee to carry out their part of the agreement and must not deprive the employee of the opportunity to perform the work.
  • An employer must not act in a way likely to destroy or seriously damage the relationship of trust and confidence between themselves and the employee by, for example, by being abusive, making false allegations or failing to take a complaint of sexual harassment seriously.
  • An employer must take reasonable care for the safety of an employee while the employee is at work. The courts require employers to pay great attention to this duty. It relates not only to all the physical aspects of the premises, the plant or the task required to be done, but also involves the liability of the employer to pay damages for the negligence of other employees who in the course of their work injure a fellow employee, another person or their property. This is called the employer's vicarious liability.
  • An employer must ensure that an employee is adequately informed about and trained for their job and must take positive action to ensure that all reasonable steps to prevent or reduce accident or danger are taken. An employee asked to do something unsafe can refuse to do it without being in breach of the contract.
  • An employer must not oblige an employee engaged to do a particular type of work, such as hairdressing, to perform entirely different work, such as the employer's weekly shopping.
  • An employer has no right to demand that an employee move to another location in another town. However, this requirement, called mobility, may be implied into certain employment contracts and certainly exists where it is an express or agreed term of the contract.
  • An employer has to indemnify (pay for loss or damage) an employee for loss or damage caused to others, unless the employee's action amounts to serious and wilful misconduct. Also, an employer must indemnify an employee who is acting within the scope of their authority as agent.
Some particular groups of employees, especially in the public sector, may have important rights set out in special legislation. For example, NT public servants have many of their terms of employment set out in the Public Sector Employment and Management Act and Commonwealth public servants in the Public Service Act. NT police employment is governed by the NT Police Administration Act.

Varying an employment contract

Sometimes, during the course of employment, an employer will attempt to alter an employee's working conditions, classification or grading, rate of pay or other employment terms. Generally, this can't be done without the employee's agreement. Before taking any action or making assumptions about their rights to vary a contract of employment, an employer and employee should obtain expert advice from their employer association or union, the Fair Work Ombudsman or a solicitor.

National Employment Standards

The FW Act creates National Employment Standards (NES). The NES are statutory terms and conditions of employment and apply to all employees in the national system, including management employees. They are enforceable by statute and cannot be displaced by awards, enterprise agreements or common law contracts, unless specifically provided for in the FW Act.

Sections 61 to 125 of the FW Act detail the NES. In summary the NES are:
  1. a maximum of 38 hours per week, subject to additional hours if reasonable and the averaging of hours over a period of time (ss 62-64);
  2. the right to request flexible working arrangements for an employee in circumstances specified by the FW Act, including caring responsibilities for a child. The employer must respond in writing and can only refuse on reasonable business grounds (s 65);
  3. parental leave and related entitlements of, among other things, 12 months unpaid parental leave to care for a child (ss 67-85);
  4. annual leave of four weeks accrued for each year of service or five weeks for shift workers, as defined (ss 86-94);
  5. personal/carer's leave of 10 days paid per year with the possibility of further unpaid days in defined circumstances. Compassionate leave of two days per year in defined circumstances (ss 95-107);
  6. community service leave for an employee to undertake a defined type of community service, such as volunteering for a fire fighting body, in defined circumstances (ss 108-112);
  7. long service leave as provided by a pre-reform award, unless excluded by an enterprise agreement, and if there is no federal award entitlement, the NT Long Service Leave Act will apply (s 113); 1 the entitlement to be absent from work on the public holidays specified in the FW Act, unless the employer makes a reasonable request for an employee to work and the employee does not have a reasonable basis for refusing (ss 114-116);
  8. notice of termination or pay in lieu according to the table below;
  9. redundancy pay as calculated as shown in the table below (ss 117-123) if the employee's employment is terminated at the employer's initiative because the employer no longer wants the job of the employee done by anyone, except where this is due to the ordinary and customary turnover of labour, or because of the insolvency or bankruptcy of the employer.
  10. a fair work information statement to be provided by an employer to each of their employees (ss 124-125).

Notice of termination or pay in lieu

Employee's period of continuous service with the employer at the end of the day the notice is given

Period

Not more than 1 year

1 week

More than 1 year but not more than 3 years

2 weeks

More than 3 years but not more than 5 years

3 weeks

More than 5 years

4 weeks

Note:

The period of notice is increased by one week if the employee is over 45 years old and has completed at least two years of continuous service with the employer.

Redundancy pay

Employee's period of continuous service with the employer on termination

Redundancy pay period

At least 1 year but less than 2 year

4 weeks

At least 2 years but less than 3 years

6 weeks

At least 3 years but less than 4 years

7 weeks

At least 4 years but less than 5 years

8 weeks

At least 5 years but less than 6 years

10 weeks

At least 6 years but less than 7 years

11 weeks

At least 7 years but less than 8 years

13 weeks

At least 8 years but less than 9 years

14 weeks

At least 9 years but less than 10 years

16 weeks

At least 10 years

12 weeks

Summary dismissal

At common law, an employer may dismiss an employee without notice or wages in lieu of notice where the conduct of the employee is serious and justifies summary dismissal.

Examples of conduct justifying summary dismissal are: serious misconduct, incompetence, neglect of duty, wilful refusal to obey lawful and reasonable commands of the employer. Misconduct is active conduct of a serious nature that indicates that an employee rejects the contract of employment, for example, by repeated drunkenness, persistent absenteeism or dishonesty. The breaches must usually be substantial or persistent.

Where an employee is dismissed for serious misconduct, the employee is generally not entitled to notice in lieu of termination.

Superannuation

The Superannuation Guarantee Scheme was enacted by the Commonwealth Government in 1992 under the Superannuation Guarantee Charge Act 1992 (Cth) and the Superannuation Guarantee (Administration) Act 1992 (Cth). The scheme is intended to complement existing award superannuation entitlements that remain in force. Employers must meet the minimum levels of contribution to a superannuation fund as set out in the Superannuation Guarantee legislation.

Employers must contribute a minimum percentage of each employee's base earnings. There is a tax penalty for failure by an employer to make the contributions required by the legislation.

There are some exemptions from the scheme, including:
  • employees who earn less than $450 per month;
  • persons who are paid to do work of a domestic nature for not more than 30 hours per week;
  • employees under 18 years of age working 30 hours or less per week; and
  • employees over 70 years of age.
The legislation is administered by the Commissioner of Taxation, and the tax is calculated by the employer's self-assessment (see Superannuation). The Commissioner enforces payment under Superannuation Guarantee legislation. Employees do not have a right to commence proceedings for the recovery of unpaid superannuation under Superannuation Guarantee legislation. Employees can make complaints to Australian Taxation Office (ATO) about unpaid superannuation, which the ATO should investigate.

In addition to the minimum superannuation requirements referred to above, an employer and employee can agree that the employer pay more superannuation or can agree to a term of the contract that the employer will pay the Superannuation Guarantee legislation amount. There is no reason why such an agreement cannot be included in an individual agreement as a term. However, the additional obligation is not administered by the Commissioner for Taxation. It is enforceable in the same way as any other term of the individual agreement.

Whatever the source of the superannuation obligation, once it is paid by an employer as superannuation into the employee's nominated fund the employer's contributions are not available to the employee until he or she reaches the age of 55, with limited exceptions.

Legislation has come into effect that increases the Superannuation Guarantee percentage progressively from 2013 until it reaches 12% in 2020 (the current federal government has proposed delaying this timetable).

Awards

FW Act and Modern Awards

Under the FW Act, awards provide part of the safety net of terms and conditions, along with the NES (see National Employment Standards). Awards are also used as a reference instrument to decide whether an agreement passes the "no disadvantage test" (pre-1 July 2009) and the "better off overall test" (post-1 July 2009).

From 1 January 2010 new modern awards and the NES took the place of the old awards. The old awards no longer apply to any employees or operate for any other reason under the Act, save as a historical reference or where expressly, or by deeming, they are to be incorporated into modern awards, the NES or enterprise agreements. Modern awards have reduced the overall number of awards by combining the coverage of a number of awards into one award.

Modern awards do not apply to workers on higher incomes. The FW Act defines a high-income earner as an employee who has a written guaranteed income, accepted by the employee of greater than the amount set by regulations. From 1 July 2014 the amount set by the regulations is $133,000 for full-time workers. Note that workers are not excluded solely because of the level of income, they must also have a written and accepted guarantee of a specified income to be excluded from award coverage (see ss 47(2), 329-333 FW Act).

Ten Minimum Standards

Modern awards can contain 10 minimum standards in addition to the NES (s 139). These minimum standards are:
  1. minimum wages, including skill-based classification;
  2. type of employment;
  3. arrangement of work, including hours, rosters, consultation regarding changes to rosters and breaks;
  4. overtime rates of pay;
  5. penalty rates, including for shift, weekend and public holiday;
  6. annualised wage and salary arrangements;
  7. allowances, including for expenses incurred, additional skills, responsibilities or disabilities;
  8. leave, leave loading and arrangements for leave;
  9. superannuation; and
  10. procedures for consultation, representation and dispute settlement.

Flexibility Terms

Modern awards must also include a flexibility term. Such a term helps an employer and employee to reach an arrangement to vary the effect of an award to meet the genuine requirements of the parties. An employee must be better off overall on the flexibility arrangement than under the terms of the relevant award. The flexibility arrangement must be in writing and signed by each party.

Modern awards may also include terms relating to outworkers, industry specific redundancy schemes (e.g. the construction industry redundancy fund) and incidental and machinery terms (see ss 140-142 FW Act). Modern awards may also provide additional detail of the NES required for the specific industry.

Registered Agreements

FW Act Agreements

Since 1 July 2009, registered agreements can be made under the FW Act. They are known as enterprise agreements. Under section 172 of the FW Act there are two types of statutory agreements:
  1. single enterprise agreements; and
  2. multi-enterprise agreements.
Single enterprise agreements can be made in two ways. First, an agreement can be made between an employer or two or more employers that are single interest employers and employees. A trade union may or may not be covered by this type of agreement. Alternatively, a single enterprise agreement can be made for a genuine new enterprise (a greenfield), between an employer or two or more employers that are single interest employers and one or more trade unions.

Multi-enterprise agreements can also be made in two ways. First, a multi-enterprise agreement can be made between two or more employers that are not single interest employers and employees. A trade union may or may not be covered by this type of agreement. Alternatively, a multi-enterprise agreement can be made for a genuine new enterprise (a "greenfields agreement") between an employer or two or more employers that are single interest employers and one or more trade unions.

How Registered Agreements come into force

Under the FW Act an agreement comes into operation seven days after the agreement is approved by Fair Work Commission (FWC) or a later day specified in the agreement (s 54 FW Act).

Since 1 July 2009 an enterprise agreement has needed to pass the "better off overall test" (BOOT) to be approved by FWC. Agreements made prior to 27 March 2006 and between 28 March 2008 and 30 June 2009 were subject to a "no disadvantage test" before being approved. Section 193 of the FW Act provides that a non-greenfield, enterprise agreement passes the BOOT if FWC is satisfied that each employee and prospective employee would be better off overall if the agreement applied to them than if the relevant modern award applied to them.

Section 189 of the FW Act provides that if an agreement fails the BOOT, it may still be approved by FWC if it is satisfied that due to exceptional circumstances the approval would not be contrary to the public interest. An agreement approved on this basis can only have a nominal expiry date of a maximum of two years after approval.

For each type of enterprise agreement there are different procedures for making an agreement (s 182 FW Act):
  • For a single enterprise agreement (that is not a greenfields agreement): the agreement is made when the majority of employees cast a valid vote in favour of approving the agreement.
  • For a multi-enterprise agreement (that is not a greenfields agreement): the agreement is made when the majority of employees of at least one of the employers cast a vote in favour of approving the agreement.
  • For a greenfields agreement : The agreement is made when it is signed by the employer and each relevant trade union that is expressed to be covered by the agreement.
Under section 180 of the FW Act an employer must take reasonable steps prior to the agreement being voted on to ensure:
  • the employees have had access to the written agreement;
  • the employees are advised of how, when and where the vote will take place; and
  • the terms and effect of the agreement have been explained to the employees.
Enterprise agreements come into force only once they have been approved by FWC. Before approving an enterprise agreement, FWC must be satisfied of a number of matters, including:
  • that the agreement passes the BOOT, or if it fails the BOOT should be otherwise approved (see "Better off overall test", above);
  • that the agreement does not contravene section 55 of the FW Act, including that the agreement does not seek to exclude any provisions of the NES (s 186(2)(c) FW Act);
  • that the agreement includes a nominal expiry date of not more than four years after FWC approves the agreement and a dispute resolution clause (s 186); and
  • if the agreement is not a greenfields agreement, that the employees genuinely agreed to the agreement (s 186(2)(a)).

Content of enterprise agreements under the FW Act

The content of an enterprise agreement is largely a matter for the parties. However, there is some content that the FW Act requires, permits and prohibits. Under section 55 of the FW Act an enterprise agreement cannot exclude the NES or any provision of the NES (see "National Employment Standards", above). Part 2-2 of the FW Act allows enterprise agreements to deal with some matters in the NES.

What an agreement should contain

An enterprise agreement under the FW Act should contain:
  • A nominal expiry date. This is the date after which the agreement may be replaced by a new agreement.
  • A dispute settlement procedure. A procedure that deals with disputes about any matters arising under the agreement, and in relation to the NES, must form part of an enterprise agreement (s 186(6)).
  • Minimum entitlements. Although not required to be part of a workplace agreement, the NES provides minimum entitlements to employees and cannot be excluded by an enterprise agreement (s 55). The minimum entitlements of employees can be improved in an enterprise agreement.
  • A flexibility term. Under section 202 of the FW Act an enterprise agreement must contain a flexibility term that allows an employee and an employer to agree that terms of the enterprise agreement have effect in relation to the employee and the employer as if the agreement were varied by that arrangement.
  • A consultation term. An enterprise agreement must contain a consultation term that requires an employer to consult with employees about major workplace change that is likely to have a significant effect on employees (s 205).

What an agreement may contain

The content of a workplace agreement is substantially in the hands of the parties. For matters to be included in an enterprise agreement under the FW Act they must fall within one of the following categories:
  • matters relating to the relationship between the employer(s) and the employees;
  • matters relating to the relationship between the employer(s) and the relevant union(s);
  • deductions from wages authorised by the employee; and
  • how agreements will operate.
See section 172(1) of the FW Act.

What an agreement must not contain

An enterprise agreement under the FW Act must not contain a term that is an unlawful term (s 186(4) FW Act). Unlawful terms are defined in section 194 of the FW Act to include:
  • discriminatory terms, being terms that discriminate on the basis of the employee's race, colour, sex, sexual preference, age, physical or mental disability, martial status, family or carer's responsibilities, pregnancy, religion, political opinion, national extraction or social origin;
  • objectionable terms, being terms that would require or permit conduct in breach of the "general protections" contained in the FW Act;
  • a term that would confer additional rights on an employee to claim unfair dismissal within the minimum employment period or would exclude or detrimentally modify an employee's unfair dismissal rights;
  • a term inconsistent with employees' or employers' rights in relation to industrial action; or
  • a term that modifies union officials' rights of entry into workplaces.

Enforcing your entitlements

First steps

An employee who has a dispute with an employer concerning an entitlement under a registered agreement, a common law employment contract or the relevant award should first raise the matter with the employer, preferably in writing. The most common disputes relate to non-payment, or underpayment, of wages or another monetary amount. If the matter is not resolved, the employee may consider the following steps.

Fair Work Ombudsman Complaint

The FW Act empowers inspectors to investigate breaches of awards and agreements. Inspectors are appointed by the Fair Work Ombudsman under section 700 of the FW Act. If, on investigation, the inspector considers that there has been a breach of the agreement or award, they will usually attempt to get the employer to rectify it. If the employer fails to rectify the breach, the inspector may then prosecute the employer.

The legislation protects employees from any discriminatory action by an employer as a result of an employee making a report about breaches of employment conditions. Underpayment of wages, or non-payment, is considered to be a breach.

Civil proceedings

Breach of award or agreement

A union or individual employee covered by the NES, a federal award, enterprise agreement or collective agreement may bring proceedings for a penalty, the recovery of money due and payable under the award or agreement (ss 44, 45, 50, 539, 540 FW Act). The proceedings may be brought in the Local Court, the Federal Circuit Court or in the Federal Court. Proceedings for an injunction to stop or remedy the effects of a breach may only be brought in the Federal Circuit Court or the Federal Court (s 545). The FW Act established a Fair Work Division of both the Federal Court and the Federal Circuit Court.

The FW Act imposes maximum penalties, with higher penalties for corporations than for individuals.

The general rule about proceedings brought under the FW Act is that the parties bear their own legal costs, except where it can be shown that the proceedings were brought vexatiously, or without reasonable cause, or that the party's unreasonable act or omission caused the other party to incur costs, or that the other party unreasonably refused to participate in a matter before FWA related to the matter in which costs were sought (s 570).

Proceedings may be brought up to six years from the date payment became due.

Breach of contract

An employee whose employment is governed by a common law contract can take action to recover wages as a contractual debt. The employee sues on the basis of the terms and conditions of the contract of employment and in this way can recover over-award payments or payments in excess of the award entitlement. The employee can also proceed in this manner to recover the amount provided for in an award where a term of the contract of employment was that the employee would receive the amount payable under an award.

Proceedings for the recovery of a contractual debt are commenced in either the Local Court or the Supreme Court, depending on the amount in dispute. The time limit is three years. If no wage rate is fixed or agreed, the employee can sue for a reasonable price for the services rendered once the contract has been terminated.

Insolvent employer compensation scheme

The Fair Entitlements Guarantee Act 2012 (Cth) (which replaces the General Employee Entitlements and Redundancy Scheme (GEERS)) provides for a Fair Entitlements Guarantee scheme to compensate employees who have lost wages and/or other entitlements due to an employer's insolvency or bankruptcy. The scheme is administrated by the Department of Education and applies to the employees of an employer who became bankrupt or entered liquidation on or after 5 December 2012. The scheme provides for a right to internal review (s 38) and external review by the Administrative Affairs Tribunal (s 40) of decisions made under the scheme. Details of the scheme are at the department's website (at http://www.education.gov.au/).

Where an employer became bankrupt or entered liquidation before 5 December 2012, employees can claim for lost wages and entitlements under GEERS.

Termination of employment

Introduction

There are three potential claims an employee can make in relation to a dismissal, which are covered in this chapter:
  1. unfair dismissals under the FW Act;
  2. general protections dismissal disputes under the FW Act; and
  3. common law claims for wrongful dismissal.
This chapter does not deal with claims under other legislation relating to termination of employment, such as equal opportunity legislation and the Competition and Consumer Act 2010 (Cth).

Unfair dismissals

Since 1 July 2009 a new system of unfair dismissals has been in operation.

A person has been "unfairly dismissed" under section 385 of the FW Act if all of the following apply:
  • the person has been dismissed; and
  • the dismissal was harsh, unjust or unreasonable; and
  • the dismissal was not consistent with the Small Business Fair Dismissal Code; and
  • the dismissal was not a case of genuine redundancy. The person must be protected from unfair dismissal to be eligible to apply for a remedy for unfair dismissal. The FWC website (at www.fwc.gov.au) contains an unfair dismissal benchbook, which provides detail of the law and procedures of unfair dismissal cases. The website also contains a Fair Hearings Practice Note, which describes the procedures to be adopted in a hearing in the FWC.

Harsh, unjust and unreasonable

In considering whether a termination was harsh, unjust or unreasonable, the following must be considered (s 387 FW Act):
  • whether there is a valid reason for the dismissal connected with the employee's capacity or conduct;
  • whether the employee was notified of the reason relied on by the employer;
  • whether the employee was given an opportunity to respond to the allegations made in relation to the employee's conduct or performance;
  • any unreasonable refusal of the employer to allow the employee a person to assist in discussions related to the termination;
  • if the termination related to performance, whether warnings were given;
  • the degree to which the size of the employer impacted upon the procedures followed in effecting the termination; and
  • the degree to which the absence of dedicated human resource management specialists impacted upon the procedures followed in effecting the termination,
  • as well as other relevant matters.

Case study

In Woodman v the Hoyts Corporation [2001] AIRC 694, a full bench of the Australian Industrial Relations Commission (the AIRC, now largely replaced by the Fair Work Commission (FWC)) reinstated a casual cinema worker who was accused of allowing another off-duty employee to take a company product from the Candy Bar without paying and later lying about the incident. The full bench found that the employee's conduct amounted to a valid reason for termination but that termination in all the circumstances of the case was disproportionate. The employee had not himself participated in the theft and the lie was not premeditated or intended to benefit the employee himself. The AIRC was satisfied "in all the circumstances" that reinstatement was appropriate.

Has the person been dismissed?

For the purpose of section 385 of the FW Act, the person has been dismissed if they were terminated at the initiative of the employer or they were forced to resign because of the conduct or course of conduct of the employer (s 386).

A person will not be dismissed, for the purpose of the unfair dismissal provisions, if:
  • they were employed under a contract of employment for a specified period or specified task or specified season and the employment ended at the end of the period, task or season;
  • they were employed under a training arrangement for a specified period or for the period of the training and the employment ended at the end of the training; or
  • they were demoted but the demotion does not involve a significant reduction in their remuneration or duties (s 386).
If the person has not been dismissed they would not be able to make out the necessary elements of section 385 of the FW Act for the termination to be an unfair dismissal.

Small Business Fair Dismissal Code

The Minister for Workplace Relations has declared a Small Business Fair Dismissal Code ("the Code") under section 388(1) of the FW Act. A person's dismissal will be consistent with the Code if the employer was a small business employer at the time of the dismissal and the employer has complied with the provisions of the Code in relation to the dismissal (s 388 FW Act).

The code states that a dismissal will be fair where an employer dismisses an employee where the employer believes on reasonable grounds that the employee's conduct is sufficiently serious to justify immediate dismissal. Therefore, under the Code, an employer does not need to prove the misconduct actually occurred.

If the employer is a "small business employer" and the employer complied with the provision of the code, the termination will be deemed to be fair and the elements of an unfair dismissal required for section 385 will not be made out.

If the employer is not a small business employer or a small business employer has not complied with the code in terminating the employee, then the dismissal will not be consistent with the Code and the necessary element of section 385 will be made out.

Genuine redundancy

A person's dismissal will be a genuine redundancy if both of the following requirements are met (s 389 FW Act):
  • the person's employer no longer requires the person's job to be done by anyone because of changes in operational requirements; and
  • the employer in dismissing the employee complied with any consultation obligations in a modern award or enterprise agreement.
Under section 389(2) of the FW Act it would not be a genuine redundancy if it was reasonable to redeploy the person within the employer's enterprise or an associated entity.

If a person's dismissal was found to be due to a genuine redundancy, the person would not be able to make out the required element of section 385 of the FW Act for the dismissal to be an unfair dismissal.

Persons protected from unfair dismissal

To make an application for unfair dismissal the person making the application must be protected from unfair dismissal. Under sections 382 to 384 of the FW Act, a person is protected from unfair dismissal if the following applies to them:

The employee has completed a minimum period of employment of:
  • one year for an employee of a small business employer (as defined above);
  • six months for an employee of a business other than a small business employer;
and one of the following applies to the employee at the time of termination:
  • the employee was covered by a modern award; or
  • the employee was covered by an enterprise agreement; or
  • the person's income was less than the high income threshold, currently $133,000 (from 1 July 2014).
or

If the person was a casual employee of a business other than a small business employer and was employed on a regular and systemic basis for more than six months, and the employee had a reasonable expectation that such employment would continue.

Remedies

The primary remedy for a dismissal found to be harsh, unjust or unreasonable is to reinstate the employee to the same position or to a comparable position as they held prior to the termination. A reinstated worker can seek an amount representing their lost wages between the date of termination and the reinstatement, and to have all employment benefits continue to accrue without loss of continuity.

Where reinstatement is inappropriate, compensation may be ordered instead of reinstatement. The maximum compensation payable to employees covered by an award is six months wages; and for non-award employees is half the amount of the high income threshold or six months wages, whichever is less.

Procedural matters

Applications for a remedy for unfair dismissal must be made within 21 days after the day on which the termination took effect, or such period as FWC allows (see s 394 FW Act). The matters to be taken into account for an extension of time to lodge an application have been codified in section 394(3) of the FW Act. Importantly, the applicant must show that there were exceptional circumstances.

A number of matters must be decided by FWC before the merits of an unfair dismissal are considered. These matters are:
  • whether the application was made within 21 days or such further period as FWA allows;
  • whether the person is protected from unfair dismissal;
  • whether the dismissal was consistent with the Small Business Fair Dismissal Code;
  • whether the person was dismissal because of genuine redundancy.
The first step for a worker who applies for a remedy for unfair dismissal is usually a conciliation conference with the employer at the FWC. If the matter is not resolved at that stage, it then usually proceeds by way of arbitration. The FW Act gives FWC considerable discretion in relation to the method of finalising the claim.

Appeals to a full bench of FWC can be made where there has been an error of law or a significant error of fact.

Costs against a party in an unfair dismissal can only be awarded against an applicant if an application was made vexatiously or without reasonable cause, or if it should have been apparent to the applicant that the application had no reasonable prospect of success. Costs will only be awarded against a respondent if the response to an application was made vexatiously or without reasonable cause, or if it should have been apparent to the respondent that the response had no reasonable prospect of success (s 611 FW Act). Generally costs in a matter under the FW Act, including an unfair dismissal application, can be awarded to a party if the other party caused those costs to be incurred because of an unreasonable act or omission of the other party in connection with the conduct or continuation of the matter (s 400A).

Costs can be awarded against a lawyer or paid agent where they caused the other party to incur costs by some unreasonable act or omission or because they encouraged a person to start, continue or respond to a matter when it should have been apparent to them that the person had no reasonable prospects of success (s 401).

Common law

Wrongful dismissal at common law

Workers who are not entitled to bring proceedings for unfair dismissal may still be entitled to bring proceedings elsewhere for the wrongful termination of their contract of employment.

If the contract is for a fixed period, it terminates when that period expires; no special notice is required. If the contract is for a fixed period and the contract is terminated by the employer before the end of the fixed period, the employee maybe able to sue for damages relating to the remainder of the fixed period.

If the contract is not for a fixed period, and the employee is dismissed, or if the employee is dismissed prior to the end of the contract, then there may be an action for wrongful dismissal. In the absence of misconduct or any other circumstances justifying immediate dismissal, the employee is entitled to be given notice in accordance with the written contract of employment (if any), or if there is no express term for the period of notice the employee would be entitled to rely upon an implied term of reasonable notice. The question of what is reasonable will depend on the circumstances (including position, seniority, salary, length of service and age).

An employee who can show that the dismissal was wrongful has a claim for damages. The amount of damages may relate to the wages that could have been earned during the "reasonable" period of notice, taking into account whether the employee has subsequently found work.

Suspension and stand down of employees

Unless specifically authorised by an award or employment agreement, an employer has no general right to suspend employees without pay, but an employee who is not ready, willing and able to work in accordance with the obligations under the contract of employment may not be entitled to be paid.

At common law, an employer does not have the right to stand down employees without pay when they cannot be usefully employed. Unless there is some provision in the contract of employment or award to the contrary, an employer who cannot usefully employ their employees has the alternative of either paying them wages during the period or dismissing them. In dismissing an employee in these circumstances, the employer should take careful note of the unfair dismissal provisions (see Unfair dismissals).

Some awards permit deductions of pay where employees cannot be usefully employed for reasons such as a strike, a breakdown of machines or a stoppage of work for which the employer cannot reasonably be held responsible.

General protections

Introduction

Under the heading "Rights and responsibilities of employees, employers, organisations, etc." Part 3-1 of the FW Act sets out what it describes as "General Protections".

The Explanatory Memorandum to the FW Act describes the purpose of the general protections as ensuring "fairness and representation at the workplace by recognising the right to freedom of association and preventing discrimination and other unfair treatment".

The general protections are relevantly divided into workplace rights, industrial activities, and other protections. The protections relating to workplace rights broadly include employment entitlements and the freedom to exercise and enforce those entitlements. The protections relating to industrial action broadly include the freedom to be or not to be a member or officer of an industrial association and to participate in lawful activities, including those of an industrial association. The other protections include the taking of adverse action, including dismissal of employees for a range of reasons including their race, colour, sex, age, marital status and other matters. The protections are dealt with separately below.

Workplace rights

One protection provided for by part 3-1 of the FW Act is a prohibition on a person taking adverse action against another person because the other person:
  • has a workplace right; or
  • has, or proposes to, exercise a workplace right (s 340).
"Workplace right" is defined by the FW Act (s 341(1)) as including:
  1. the entitlement to the benefit of, or a role or responsibility under, a workplace law, workplace instrument or order made by an industrial body;
  2. initiating, or participating in, a process or proceeding under a workplace law or workplace instrument; or
  3. the ability to make a complaint or inquiry to a person or body having the capacity under a workplace law to seek compliance with that law or workplace instrument or an inquiry in relation to the person's employment.
The FW Act also defines a "process or proceedings under workplace law or workplace instrument" as including:
  • court proceedings;
  • protected industrial action;
  • a protected action ballot; and
  • making, varying or terminating an enterprise agreement and other matters (s 341(2)).
"Adverse action" is defined by section 342 of the FW Act. That section sets out a table describing the relevant "adverse action" depending on the different relationships between the relevant parties. If the adverse action is taken by an employer against an employee the adverse action includes:
  1. dismissing the employee; or
  2. injuring the employee in their employment;
  3. altering the position of the employee to the employee's prejudice; or
  4. discriminating between the employee and other employees of the employer.

Industrial activities

Part 3-1 of the FW Act (s 346) also provides that a person must not take adverse action against another person because the other person:
  1. is or is not, or was or was not, an officer or member of an industrial association;
  2. engages, or has at any time engaged or proposed to engage, in industrial activity;
  3. does not engage, or has not at any time engaged or proposed to not engage in industrial activity.
This section provides protection against adverse action taken by reason of a person being an officer or member of an industrial association, or not being an officer or member of an industrial association and taking or not taking industrial action as defined by section 347 of the Act.

Engaging in industrial action is defined by the FW Act to include:
  1. organising or promoting lawful activity for an industrial association; and
  2. representing or advancing the views, claims or interests of an industrial association and taking part in industrial action.
"Adverse action" may include dismissing the employee, injuring the employee, altering the position of employee to the employee's prejudice or discriminating between the employee and other employees of the employer.

Other protections

Part 3-1 of the FW Act also provides for what were formerly described as "unlawful terminations" (div 4 Workplace Relations Act 1996 (Cth) ("WRA"), now largely repealed and replaced by the FW Act.

Section 351 of the FW Act prohibits discrimination on the grounds of 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. Like the WRA, the FW Act prevents termination on one or more of those grounds. However, the FW Act extends the protection by prohibiting not just termination, but any "adverse action".

Section 352 of the FW Act prevents termination of an employee on the grounds of the employee's temporary absence for illness or injury. That section prohibits only termination on that ground and not any other adverse action.

Compliance and remedies

The FW Act provides a new procedural regime for the commencement of any proceedings alleging a breach of the general protections. Section 365 (read with s 371) provides that a person alleging a contravention of part 3-1 must apply to FWC for it to deal with the dispute (unless an interim injunction is sought). Section 366 provides a time limit of 21 days after any dismissal in breach of the general protections for the making of such an application. Section 369 of the FW Act provides for FWC to issue a certificate if it is satisfied that all reasonable attempts to resolve the dispute have been, or are likely to be, unsuccessful. This certificate is necessary prior to any court application in relation to the alleged breach of the general protections.

Under section 371 of the FW Act, a general protections court application must be made within 14 days after the certificate is issued by FWA. Alternatively, section 369 of the FW Act provides that the parties may consent to the FWC dealing with the general protections application by arbitration. Notification of the parties' consent to FWC arbitrating the matter must be given to FWC within 14 days of the certificate being issued.

Applications alleging a breach of the general protections may be commenced by industrial associations if the industrial association is affected by the contravention, or the person affected is a member, or entitled to be a member, of the industrial association.

The remedies for a breach of the general protections are set out in part 4-1 of the FW Act. The range of penalties that may be imposed start from $3,300 for an individual to $33,000 for a body corporate (which includes an industrial association). The FW Act also provides that orders may be made by a court on application to it. The court may make orders:
  1. granting an injunction, or interim injunction, to prevent, stop or remedy the effects of a contravention;
  2. an order awarding compensation for loss that a person has suffered because of the contravention; or
  3. an order for reinstatement of a person.
The orders that FWC may make following a consent arbitration are:
  1. reinstatement to employment:
  2. payment of compensation and/or lost remuneration;
  3. for continuity of service and/or maintaining the person's continuous service.

Bullying at work

From 1 January 2014 the FW Act provides a scheme for a worker to obtain a remedy to stop bullying at work. The scheme applies to a wider range of workers than persons in employment relationships. The scheme applies to contractors, sub-contractors, outworkers, apprentices, trainees, students on work experience and volunteers (s 789FC). The FW Act defines a person as being bullied at work if while they are at work an individual or a group of individuals repeatedly behaves unreasonably towards the worker or a group of workers, including the worker, and that behaviour creates a risk to health and safety (s 789FD(1)). A person is not bullied at work if the action was reasonable management action carried out in a reasonable manner (s 789FD(2). The scheme does not cover all businesses in Australia. A person seeking to make an application to stop bullying at work will need to seek advice as to whether the relevant business is covered by this section (see s 789FD(3)).

In the decision of Ms SB [2014] FWC 2014 the FWC considered the application of section 789FD and what constitutes bullying under that section. The FWC determined that:
  • "unreasonable behaviour" should be considered to be behaviour that a reasonable person, having regard to the circumstances, may consider to be unreasonable; and
  • A "risk to health and safety" means the possibility of danger to health and safety, and is not confined to actual danger to health and safety. The "risk" is the exposure to the chance of injury or loss and must also be real and not simply conceptual; and
  • All of the requirements of section 789FD(1) must be read together in the assessment of whether a worker has been bullied at work.
When a person makes an application to stop bullying at work, FWC must commence dealing with the matter within 14 days. If FWC is satisfied that the person has been bullied at work and there is a risk the person will continue to be bullied, then FWC may make any order it considers appropriate to prevent the person being bullied at work (s 789FF). FWC cannot make an order for payment of a pecuniary amount.

Wage and employment records

An employer is only allowed to deduct income tax, orders for attachment of earnings made by a court, or other deductions that have been authorised by the employee. An employer is not compelled to make requested deductions, however, and may refuse, for example, to pay union dues by automatic deduction. The employee may withdraw an authority at any time by making a written request to the employer.

Under the FW Act and Fair Work Regulations 2009 (see part 3-6 Regulations) an employer must give the employee a payslip showing:
  • the employer's name and ABN number;
  • the employee's name;
  • the date of payment;
  • the period to which the payment related;
  • ordinary hourly rate and the number of hours worked at that rate (if paid an hourly rate);
  • any special hourly rates (e.g. overtime) and number of hours at that rate;
  • rate of annual salary;
  • gross and net amounts;
  • allowances; and
  • superannuation contributions and fund.
An employer is required to keep certain employment records. An employer is required to keep a record of employees, specifying:
  • whether full-time or part-time;
  • whether permanent, temporary or casual;
  • the gross and net amounts paid;
  • any guarantee of earnings;
  • overtime worked;
  • rate of remuneration;
  • leave entitlements;
  • superannuation contributions; and
  • if terminated, how.
A copy of the record must be given to the employee to whom the record applies, on request.

Discrimination

See Discrimination chapter of the Law Handbook.

Contacts

Employment Law Information and Advice

Central Australian Aboriginal Legal Aid Service
Address: 55 Bath St, Alice Springs NT 0870
Phone: (08) 8950 9300
Email: reception@caalas.com.au
Web: caalas.com.au

Central Australian Women's Legal Service
Address: 77 Todd Street, Colocag Plaza,
Alice Springs NT 0870
Phone:(08) 8952 4055
Email: enquiries@cawls.org.au
Web: cawls.org.au

Darwin Community Legal Service
Address: 75 Woods St, Darwin NT 0800
Phone:(08) 8982 1111
Email: info@dcls.org.au
Web: dcls.org.au

North Australian Aboriginal Justice Agency
Address: 61 Smith Street, Darwin NT 0800
Phone:(08) 8982 5100
Email: mail@naaja.org.au
Web: naaja.org.au

Northern Territory Legal Aid Commission
Address: 6th Floor, 9-11 Cavenagh St. Darwin NT 0800
Phone: 1800 019 343
Email: info@ntlac.nt.gov.au
Web: ntlac.nt.gov.au

NT Working Women's Centre
Address: 98 Woods Street, Darwin NT 0800
Phone: 1800 817 055 or (08) 8981 0655
Email: admin@ntwwc.com.au
Web: ntwwc.com.au

Top End Womens Legal Service
Address: 2/5 Edmunds Street, Darwin NT 0800
Phone: (08) 8982 3000
Email: admin_tewls@clc.net.au
Web: tewls.org.au

Employee entitlements

Fair Work Ombudsman
Address: 39-41 Woods Street, Darwin NT 0800
Tel: 13 13 94
Web: www.fairwork.gov.au

Dismissals and bullying complaints

Fair Work Commission
Address: Level 10, NT House, 22 Mitchell Street, Darwin NT 0800
Tel: (08) 8936 2800
Email: darwin@fwc.gov.au
Web: www.fwc.gov.au

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