Termination of employment

Based on the contribution of Craig Dowling and Neill Campbell for The Law Handbook 2016, published by Fitzroy Legal Service, originally amended by ClareMcKenzie for the NT Law Handbook, as amended by Bradley Allen Love Lawyers, Canberra, by Gabrielle Sullivan, May Oboodi and Robert Allen and current to March 2018.

There are a number of ways that employment can be terminated. The most common ways are by resignation and dismissal. The Fair Work Act, applicable Awards or enterprise agreements and (usually) contracts for employment may also provide employees with additional protections and rights in the case that their employment is terminated.

Contracts for fixed-term employment will come to a close automatically at the conclusion of the period of employment per the contract.

Termination by notice

It is important to note that employment relationships can be brought to a close by either the employer or the employee. If the employer terminates the employment, it is essential that the employee is provided with proper notice or pay in lieu (See Notice of Termination or Payment in Lieu). In these circumstances, it may also be appropriate that the employee receive redundancy pay (see Redundancy Pay).

Summary Dismissal

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 that could justify summary dismissal are:

• serious misconduct;
• grave incompetence;
• neglect of duty; and
• 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.

Where an employee believes that their employment may have been wrongfully terminated or that they have been otherwise treated adversely during the course of their employment, there are a number of potential claims that may be pursued.

This section will cover three potential claims that an employee can make in relation to a dismissal or adverse treatment:

1. Unfair dismissals under the Fair Work Act;
2. General protections dismissals under the Fair Work Act; and
3. Common law claims for wrongful dismissal.

Unfair Dismissal (Part 3-2 Fair Work Act)

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

It is important to note that an Unfair Dismissal Application must be made within 21 days after the day on which the termination took effect, or such period as Fair Work Commission allows (see s 394 Fair Work Act). An extension of this time will only be granted in exceptional circumstances.

A person has been "unfairly dismissed" under the Fair Work Act if all of the following apply (s 385 Fair Work Act):

• the person has been dismissed;
• the dismissal was harsh, unjust or unreasonable;
• the dismissal was not consistent with the Small Business Fair Dismissal Code; and
• the dismissal was not a case of genuine redundancy.

Additionally, the person must be protected from unfair dismissal to be eligible to apply for a remedy for unfair dismissal.

Protection from unfair dismissal

In order to be eligible to make an application for unfair dismissal, an employee must satisfy the following (s 382 Fair Work Act):

• they have completed the minimum employment period which is six months (or one year if the employer is a small business); AND
• be covered by a Modern Award applicable to their employment; or
• an enterprise agreement applicable to their employment; or
• the employee earns less than the high income threshold (equal to $142,000 per annum from 1 July 2017).

Has the person been dismissed?

A person has been dismissed if their employment was terminated at the initiative of the employer, or they were forced to resign because of the conduct or course of conduct of the employer. An employee can also be constructively dismissed if, despite never having official received notice of their dismissal, the circumstances point to a factual reality that the employment has effectively been terminated.

A person will not be dismissed, for the purpose of the unfair dismissal provisions, if (s 386 Fair Work Act):

• they were employed under a contract of employment for a specified period, 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.

A person cannot make an application for unfair dismissal if they cannot show that they have been ‘dismissed’.

Harsh, unjust and unreasonable

In considering whether a termination was harsh, unjust or unreasonable, the following must be considered (s 387 Fair Work 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;
• 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.

Genuine Redundancy

The unfair dismissal protections are not applicable if a person's dismissal was a genuine redundancy. A genuine redundancy occurs when both of the following requirements are met (s 389 Fair Work 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 the Fair Work 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. However, if the tasks that were once performed by an employee are now performed by other employees and, as a result of this restructure, the role that was performed by the employee is no longer required, this is likely to be considered a case of genuine redundancy notwithstanding that the tasks are still being performed.

While a worker who was made redundant is not entitled to the remedies outlined above for unfair dismissal, they will often be entitled to redundancy payment. This is typically found in the NES, applicable enterprise agreement, or contract of employment.

Procedure for making an Unfair Dismissal application

Fair Work Commission will contemplate a number of matters 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 Fair Work Commission. If the matter is not resolved at that stage, it then usually proceeds to arbitration in the form of a determinative conference or hearing.

If the Commission finds that a person was protected from unfair dismissal and that they were unfairly dismissed, it can order reinstatement of employment or the payment of compensation. A decision of a Commissioner can be appealed to the full bench of Fair Work Commission where there has been an error of law or a significant error of fact.

People must generally pay for their own legal costs when appearing before Fair Work Commission. Costs will only be awarded against the applicant if it can be shown that they have made an application vexatiously, without reasonable cause, or with no reasonable prospect of success. Costs can also be awarded against either party if it can be shown that costs were incurred as a result of an unreasonable act or omission of the other party.

More information on the laws relating to unfair dismissal and the procedure for seeking remedies for unfair dismissal can be found in the Unfair Dismissal Benchbook, at www.fwc.gov.au.

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 award-free employees it is half the amount of the high income threshold or six months’ wages, whichever is less.

Small Business Fair Dismissal Code

The Small Business Fair Dismissal Code was declared on 24 June 2009 in accordance with s 388(1) of the Fair Work Act. An individual’s dismissal is consistent with the Small Business Fair Dismissal Code if they were employed by a small business and the employer complied with the Code in relation to the dismissal.

The Code states that a dismissal will be fair where an employer dismisses an employee when 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.