Last updated 24 May 2017

An application for unfair dismissal does not depend upon the lawfulness of any action. Rather, the action is based upon an allegation that the employer’s action in terminating the employment was harsh, unjust or unreasonable.

An unfair dismissal application must be made within 21 days of the date the dismissal takes effect.

As set out above, all of Queensland’s private sector employers together with all of their employees, must pursue their industrial relations issues in the federal jurisdiction (i.e. in the Fair Work Commission (FWC)) pursuant to the Fair Work Act 2009 (Cth) (Fair Work Act). This applies to claims for unfair or unlawful dismissal. State and local government employees will need to pursue their claim in the Queensland Industrial Relations Commission pursuant to the Industrial Relations Act 2016 (Qld), which will not be discussed here.

Who may apply?

The categories of employees who will be excluded from making a claim for unfair dismissal under the Fair Work Act include employees:

  • who are working a qualifying period (see below)
  • subject to training arrangements
  • on a short-term casual basis (i.e. an employee who has been engaged for less than six months)
  • engaged for a fixed term, specified task or specified season
  • not covered by a modern award or enterprise agreement whose annual rate of earnings exceeds the high-income threshold (indexed each July)
  • where the termination was a genuine redundancy.

Qualifying period

For the purpose of unfair dismissal, any contractual probationary period to be served by the employee becomes irrelevant, and the focus instead is on the qualifying period of employment. An employee who is serving a qualifying period cannot make an application for unfair dismissal. A qualifying period is the first six months of employment. In the case of a small business, that period is extended to 12 months.

Fixed-term or specific-purpose employment

If a contract has been entered into genuinely for a fixed period of time or to achieve a particular purpose, there can be nothing unfair if, at the end of the agreed period or when the agreed purpose has been completed, the employment comes to an end. This, after all, is what the parties had agreed to at the beginning of their arrangement.

The FWC will not deny access to an employee engaged upon such an arrangement if it considers that the employer’s main purpose in making the arrangement was to avoid the application of the unfair dismissal provisions.

Also, the fact that a contract is for a fixed term does not exclude unfair dismissal applications where the employment is terminated before the end of the term.

It sometimes happens that an employer engaging an employee on a fixed-term contract will extend that fixed term multiple times. Once a contract of this kind has been extended, a subsequent dismissal will become harder to defend on the basis that the contract was entered into for a fixed term.

Financial threshold

An employee engaged under an award or enterprise agreement is protected from unfair dismissal irrespective of the level of remuneration. For all other employees, the high income threshold is currently $136 700, having last been increased on 1 July 2015.

Genuine redundancy

Financial, technological or structural reasons can mean that an employer no longer requires a particular job or jobs to be undertaken.

A financial downturn in the affairs of the business may mean that there is a reduction in the output of a factory. If that requires fewer employees, then some positions will become redundant. Similarly, an upgrade in the technology used by a company may mean that some employees no longer have the necessary skills to operate the new technology, or some jobs are no longer required to be done because they have been replaced by new technology.

In these circumstances, the position affected is said to have become redundant. It is the position rather than the person that becomes redundant.

If a genuine redundancy involves the overall reduction in the number of employees required, or if the change means that employees are no longer properly skilled or qualified, they should be redeployed if other suitable positions can be found. If not, those employees may have to be dismissed.

The Fair Work Act requires the employer to establish that they have conducted themselves fairly and properly in relation to that redundancy. For example, a standard condition in an enterprise agreement may require an employer to consult, either with employees or with their union, before announcing a program of redundancy. Failure to consult as required may mean the redundancy is not a genuine redundancy. Likewise, a failure to exhaust redeployment options may prevent the redundancy from being genuine. A dismissal that is otherwise a genuine redundancy may still be an unfair dismissal within the meaning of the Fair Work Act if these things have not occurred.

It is helpful to seek legal advice about whether a termination constitutes an unfair dismissal, as these issues have become somewhat technical and are difficult to understand.

Harsh, unjust or unreasonable dismissal

A dismissal is unfair if it can be said to be harsh, unjust or unreasonable.

This expression relates to termination that concerns the conduct, performance or capacity of an employee.

There are no absolute rules, and circumstances will always alter cases. For that reason it is very hard to see one decision as a reliable precedent for another.

For a dismissal to be fair, the reason must be seen to be sufficient, and the process must also be fair. This includes making sure that the employee understands the reason for the dismissal enough to respond to it.

The employee should also have been given a proper opportunity, if appropriate, to correct the conduct or non-performance, and the employee must also have been made aware that such conduct or performance (if uncorrected) was likely to result in the termination of their employment.

It is commonly believed that for a dismissal to be fair, an employee must receive three warnings. There is no legal basis for this belief.

For example, if an employee had stolen money from their employer or a fellow employee and had been caught doing so, most people would readily accept that dismissal was a necessary and expected outcome. Even in the absence of any warnings, there would seem to be nothing unfair about the employer’s action.

On the other hand, if after 10 years of good and faithful service, an employee arrives 10 minutes late for work one morning and is dismissed for that reason, most people would consider the employer’s action to have been unfair for three reasons: one, the nature of the offence was not of itself something so serious as to justify dismissal; two, there was no previous history to place the present offence in a more serious light; and three, no indication had been given by the employer that the position was at risk for such a trivial reason. For each of these reasons, the decision to terminate would plainly be unfair.

That is not to say that constantly arriving late could never form the basis of an unfair dismissal. However, to justify dismissal in such circumstances, some earlier warning and/or counselling process warning the employee that continuing such conduct would result in their dismissal would have had to have happened.

An employee is entitled to be put on notice if their performance is considered unsatisfactory, told clearly why it is considered unsatisfactory, what improvements are required to be made and time frames for the improvements. Only if there is no sufficient improvement can dismissal be considered. In this regard, it will be helpful for the employer and the employee to have agreed on key performance indicators or targets to be achieved against which performance can readily be measured.

Small Business Dismissal Code

A dismissal is not unfair if the employer employs fewer than 15 employees at the time of dismissal or notice of the dismissal (whichever was first), and the employer complies with the Small Business Fair Dismissal Code.

Transmission of business

Where a business is sold, it is not uncommon for the employees of the vendor’s business to transfer to the purchaser’s business at the moment of sale.

Technically, these employees have all become redundant so far as the vendor’s business is concerned, but none of these employees are losing their employment in any real sense. Generally, awards and agreements make provision for what will happen to employees in these circumstances. Provided the transferring employees lose no benefits and retain continuity of service, they are not generally entitled to receive any severance payment.

The transmission of business principles in the Fair Work Act ensure that employees whose employment is transferred in such circumstances retain the continuity of their employment, notwithstanding the change of employer.

Dismissal generally

It is difficult to provide an exhaustive definition of the kind of conduct that will be acknowledged as sufficient to justify dismissal. The context in which the conduct occurs is important but, as social conditions change, certain conduct will become more or less acceptable.

As always, it is appropriate to consider the circumstances in which behaviour is alleged to have occurred. There is, for example, a difference between a factory worker using obscene language to a workmate on the factory floor and a receptionist at a five-star hotel using the same language to a guest. It will also be important for the employer to have conducted a proper investigation into allegations of misconduct or poor performance and to have allowed the employee an opportunity to respond to any allegations that are made.

Remedies for unfair dismissal

The primary remedy for unfair dismissal is reinstatement. If the FWC is satisfied that the conduct of the employer was harsh, unjust or unreasonable, it will assess whether reinstating the employee is possible. The FWC will not reinstate an employee if it believes the future working relationship is untenable. While this may cause hardship for the employee, the FWC will not consider it reasonable to re-establish a working relationship that is simply not going to work.

The alternative remedy is compensation. Anything paid to the employee either by way of notice or as an ex gratia payment, and anything earned by the employee after their dismissal, will be taken into account by the FWC when it calculates the amount of compensation. The maximum amount that the FWC can order is six months of the annual wage of the employee (up to a maximum of $68 350) at the date of dismissal.

If an order is made to reinstate the employee, the FWC may also order that the employer make up the difference in wages lost by the employee from the date of dismissal to the date of reinstatement up to the maximum amount of compensation.

The Fair Work Act provides for a 21-day time limit for an unfair dismissal application to the FWC.