Unfair Dismissal In Australia: Employee Rights and Legal Remedies

Losing a job can be a distressing experience, but when a dismissal is unfair, employees have legal avenues to challenge it. Unfair dismissal in Australia happens when an employer terminates an employee in a harsh, unjust, or unreasonable manner or fails to follow proper procedures. In Australia, the Fair Work Act 2009 (FWA) sets out strict rules to protect employees from wrongful termination and provides a clear framework for making claims.

This article explores what constitutes unfair dismissal in Australia, the legal process involved, eligibility criteria, employer defenses, and the remedies available to affected employees.

What is Unfair Dismissal?

Section 385 of the Fair Work Act defines a dismissal as unfair if it meets the following conditions:

1. The employee was dismissed.
2. The dismissal was harsh, unjust, or unreasonable.
3. The dismissal did not comply with the Small Business Fair Dismissal Code (if applicable).
4. The dismissal was not a genuine redundancy.

A dismissal is harsh when an employer imposes a disproportionately severe penalty for the alleged misconduct or poor performance. It is unjust when an employer dismisses an employee without proper cause, and it is unreasonable when an employer fails to follow fair procedures, such as allowing the employee to respond to allegations before making a decision.

For a claim to succeed, the employee must prove the employer had no justification or acted unfairly. Employers can defend their actions by showing the dismissal was necessary due to misconduct, poor performance, or business restructuring.

Eligibility to Make an Unfair Dismissal Claim

Not all employees can bring an unfair dismissal claim. The Fair Work Commission (FWC) requires employees to meet certain conditions before they can lodge an application.

Firstly, an employee must have completed a minimum employment period of six months for businesses with more than 15 employees, or one year for small businesses with 15 or fewer employees. This rule ensures that only workers with sufficient tenure can make a claim.

Secondly, the employee must earn below the high-income threshold, currently set at $167,500 per year (as of 2023-2024), unless an award or enterprise agreement covers them. The law generally excludes high-income earners from unfair dismissal protections, as it assumes they have greater bargaining power when negotiating their employment contracts.

Finally, the employee must lodge the claim within 21 days of dismissal. The FWC strictly enforces this deadline and rarely accepts late applications unless exceptional circumstances exist.

Was the Dismissal Harsh, Unjust, or Unreasonable?

A key aspect of unfair dismissal claims is determining whether the dismissal was harsh, unjust, or unreasonable, as outlined in Section 387 of the FWA. When assessing this, the Fair Work Commission considers several factors:

• Was there a valid reason for the dismissal? The reason must relate to misconduct, poor performance, or business requirements.
• Was the employee notified of the reason? Employees should be informed in writing and given specific details.
• Was the employee given a chance to respond? They must be given an opportunity to explain their actions before the final decision is made.
• Were there previous warnings? If the dismissal was due to performance issues, the employer must provide prior warnings and a chance to improve.
• Did the employer follow fair procedures? The dismissal process must be transparent, and employees should not be dismissed without proper investigation or due process.

Even with a valid reason for termination, an employer’s failure to follow fair procedures can make the dismissal unfair. For example, if an employer fires an employee without a formal warning or the chance to defend themselves, the employee may have strong grounds for a claim.

Genuine Redundancy vs. Unfair Dismissal

One of the main defenses employers use against unfair dismissal claims is genuine redundancy. Under Section 389 of the FWA, a redundancy is considered genuine if:

1. The employee’s job is no longer required due to changes in the business’s operational needs.
2. The employer has consulted with the employee about the redundancy, as required by modern awards or enterprise agreements.
3. The employer has considered redeployment options within the company or associated businesses.

If the employer can prove that they met these conditions, they will not consider the dismissal unfair. However, if evidence shows that the redundancy was a sham—for example, if the employer gave the employee’s role to someone else shortly after the dismissal—the claim may still succeed.

A well-known case illustrating this is Iryna Margolina v Jenny Craig Weight Loss Centres Pty Ltd [2011] FWA 5215, where the Fair Work Commission ruled that the redundancy was not genuine because the employer failed to provide evidence of a legitimate restructure. This case highlights the importance of employers following proper procedures when making positions redundant.

The Unfair Dismissal Process

If an employee believes they have been unfairly dismissed, they must follow a formal process to seek justice.

1. Lodging an Application – The employee must submit an Unfair Dismissal Application (Form F2) to the Fair Work Commission (FWC) within 21 days of dismissal. There is a filing fee of $87.20.
2. Employer’s Response – The employer can contest the claim, arguing that the dismissal was justified.
3. Conciliation Process – The FWC arranges a conciliation meeting, where both parties attempt to negotiate a resolution. Many cases are settled at this stage.
4. Hearing Before the FWC – If conciliation fails, the case proceeds to a formal hearing, where evidence is presented and a ruling is made.

If the FWC finds in favor of the employee, it may order reinstatement or compensation.

Remedies for Unfair Dismissal in Australia

The Fair Work Commission can provide two main remedies for successful unfair dismissal claims:

1. Reinstatement – The employee may be reinstated to their former position or an equivalent role, with back pay for lost wages. However, this is rare, as most employees and employers prefer financial compensation.
2. Compensation – If reinstatement is impractical, the FWC may award compensation, calculated based on lost earnings. However, compensation is capped at 26 weeks’ pay and does not cover emotional distress or reputational damage.

Each party usually bears their own legal costs, unless the claim was frivolous or vexatious.

Challenges in Unfair Dismissal Claims

Employees may face several challenges when pursuing an unfair dismissal in Australia claim. Employers often argue that the termination was justified due to misconduct, poor performance, or business restructuring. Additionally, even if an employee wins their case, compensation may be limited, and reinstatement is rarely ordered.

However, employees with a strong performance record, procedural unfairness in their dismissal, and evidence of employer inconsistencies have a higher chance of success.

Conclusion

Unfair dismissal laws protect employees from arbitrary and unjust termination, ensuring that businesses follow proper procedures when ending employment. If an employee is dismissed in a way that is harsh, unjust, or unreasonable, they have the right to challenge the decision through the Fair Work Commission. While the process can be complex, a well-prepared claim supported by strong evidence can lead to reinstatement or financial compensation.

For employees facing dismissal, seeking legal advice and acting within the 21-day deadline is crucial to maximizing their chances of success.

Jake McKinley notes that this article is written for the purpose of providing generalised information and not to provide specialised legal advice. If you require qualified legal advice on anything mentioned in this article, our experienced team of solicitors at Jake McKinley are here to help. Please get in touch with us on 02 9232 8033 today to make an enquiry.