Termination of employment

Contributed by CatherineRusso and current to 27 July 2018

An employee’s employment might be terminated for any number of reasons, including as a result of poor performance, employee misconduct, redundancy or employee capacity.

Termination of employment is subject to minimum statutory periods of notice and courts will even award ‘reasonable notice’ where certain employees have no express notice period in their employment contract.

Legislative minimum entitlements

For national system employees, where an employee's employment is terminated by the employer, the FW Act provides an entitlement to at least the minimum period of notice (or payment in lieu of part or all of the notice period) as set out in the NES (section 117 of the FW Act).

The table below sets out these minimum notice periods.

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

If the national system employee is aged over 45 years and has completed at least 2 years’ continuous service with the employer, the period of notice above is increased by 1 week.

However, an employer is not required to provide notice, or payment in lieu, where the employee's employment is terminated because of serious misconduct (section 123(1)(b) of the FW Act). Serious misconduct is defined in regulation 1.07 of the Fair Work Regulations 2009 and includes wilful or deliberate behaviour by an employee that is inconsistent with the continuation of the contract of employment, conduct that causes serious and imminent risk to health and safety, fraud, theft or assault.

Some employment contracts may also contain a definition of 'serious misconduct'. If so, the employer will need to ensure that the employee's conduct comes within any description of 'serious misconduct' contained in the employment contract before deciding not to provide notice in accordance with the employment contract.

Redundancy

A termination on account of redundancy occurs where the employee’s employment is terminated at the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone.

In circumstances where the reason for termination is redundancy, unless an exception or exclusion applies, most federal system employees will be entitled to receive at least the minimum redundancy payment in accordance with section 119 of the FW Act, as set out in the table below.

Redundancy pay period
	Employee’s period of continuous service with the employer on termination	Redundancy pay period
	At least 1 year but less than 2 years	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

There are some exclusions from the obligation to pay redundancy pay, such as:

• where the employer is a small business employer (employing less than 15 employees);
• if the employee is employed as a casual employee or for a specified period, season or task;
• if there is a transfer of employment, unless the new employer decides not to recognise the employee's prior service for the purposes of redundancy pay; and
• where the employee rejects an offer of employment that recognises the employee’s service with their existing employer, and is on substantially similar and overall, no less favourable, terms.

Under the FW Act, an employee for whom the dismissal was a case of genuine redundancy is excluded from bringing an unfair dismissal claim (described in more detail below).

A ‘genuine redundancy’ will occur where:

• the business no longer requires the position to be performed by anyone;
• the business complies with any obligation under an industrial instrument to consult with the employee; and
• the employee cannot be reasonably redeployed within the business or a related entity.

Unfair dismissal claim

Employees in both the federal and state systems can bring unfair dismissal claims, although the regime operates slightly differently in each:

• Under section 385 of the FW Act, it occurs when an employee’s termination is ‘harsh, unjust or unreasonable’.
• Under section 29(1)(b)(i) of the IR Act, the term refers to a termination of employment in circumstances that are ‘harsh, oppressive or unfair’.

Terminations of employment by an employer usually occur with the employer directly terminating the employment of the employee. However, in some circumstances an employee's resignation can be considered constructive dismissal and attract the unfair dismissal jurisdiction. A constructive dismissal will occur if the employee 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.

Who can bring a claim?

To make an unfair dismissal claim, an employee must be:

National / federal system

State system

employed under the national system; either covered by a modern award or enterprise agreement, or earning less than the high income threshold ($145,400 from 1 July 2018); employed for the “minimum employment period”, which is 12 months if the employer is a small business employer (less than 15 employees) or 6 months if the employer is not a small business employer employed under the state system; earning less than $162,990 per year (as at 1 July 2018) if the employee is not covered by an award or industrial agreement; and have been dismissed (or constructively dismissed) from employment

employed under the state system; earning less than $162,990 per year (as at 1 July 2018) if the employee is not covered by an award or industrial agreement; and have been dismissed (or constructively dismissed) from employment

When is an unfair dismissal claim able to be brought?

A claim must be brought:

• under the FW Act, within 21 days of the dismissal coming into effect;
• under the IR Act, within 28 calendar days from the date of the employee’s dismissal.

What factors are considered in determining if a dismissal is unfair?

Under both federal and state systems, the commission will focus on both the substantive fairness of the decision to terminate the employment, and whether the process by which the decision to terminate employment was procedurally fair.

For example, section 387 of the FW Act sets out the following matters that the FWC must take into account in determining whether a dismissal was harsh, unjust or unreasonable:

• whether there was a valid reason for the dismissal related to the person’s capacity or conduct (including its effect on the safety and welfare of other employees); and
• whether the person was notified of that reason; and
• whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person; and
• any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal; and
• if the dismissal related to unsatisfactory performance by the person—whether the person had been warned about that unsatisfactory performance before the dismissal; and
• the degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal; and
• the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal; and
• any other matters that the FWC considers relevant.

What are the possible remedies if the claim is successful?

Under the FW Act, if the FWC makes a finding that the dismissal is harsh, unjust or unreasonable, the primary remedy is reinstatement. This means the employee is re-engaged on the same terms as it existed immediately prior to the dismissal. The FWC also has a related power to order that the remuneration lost between the dismissal and the order for reinstatement be paid, as well as orders preserving the employee's length of service for all service-related entitlements. These related orders are discretionary, so that it is possible that even where reinstatement is ordered, the FWC may form the view due to the seriousness of the conduct that it is appropriate for the employee to forego some remuneration.

If the FWC is satisfied that reinstatement is inappropriate in any particular case, it may order compensation. The compensation that may be awarded is capped at the lesser of 6 months of an employee's total annual remuneration or half of the high income threshold applicable immediately before the termination.

Similar orders may be made by the WAIRC under section 23A of the IR Act.

An employee is required to mitigate his or her loss following termination of employment, that is, to make reasonable efforts to find other suitable employment. A commission will examine what efforts the employee has made when assessing the amount of damages to be awarded by way of compensation for unfair dismissal.

Further information

For national system claims, the FWC publishes an unfair dismissal benchbook that provides further information about how to lodge or respond to unfair dismissal claims in the national system. The benchbook can be accessed at: https://www.fwc.gov.au/resources/benchbooks/unfair-dismissals-benchbook

General protections claim involving dismissal

Where a national system employee is terminated, a common alternative to an unfair dismissal application is the general protections regime. The general protections regime is described above in the section titled ‘Workplace rights and equal opportunity’.

If a general protections claim involving dismissal is made, the FWC generally deals with the claim initially through a conciliation conference held by telephone. Once the conciliation conference has occurred, the FWC may mediate the matter, make a recommendation or express an opinion. If all reasonable attempts to resolve the dispute by conciliation have been (or are likely to be) unsuccessful, the FWC must issue a certificate. Once a certificate has been issued, the employee may decide whether to proceed to the Federal Circuit Court or the Federal Court for determination.

Alternatively, if the dispute relates to a dismissal and all parties consent, the FWC may hear and determine the matter instead. This is a faster, less expensive and less formal alternative.

Where a court of commission makes a finding that the general protections regime has been contravened, the court or commission has the power to order compensation. Unlike unfair dismissal, compensation awarded in general protections claims is uncapped.

Unlawful termination

An employee or their representative who is:

• not a national system employee; or
• a national system employee who is not eligible to make a general protections application,

may make an application to the FWC alleging that the termination was for a prohibited reason set out in section 772 of the FW Act (or for reasons that include such a reason).

Section 772 largely replicates the prohibited reasons contained in the general protections provisions of the FW Act. Applications are heard in the Federal Court or Federal Circuit Court, but they are initially subject to conciliation in the FWC.

Claims for unlawful termination are rare because the FW Act prohibits unlawful termination applications where the employee is entitled to make a general protections application in relation to the same conduct.