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How to avoid an unfair dismissal claim

In this episode of our podcast, we’re taking a closer look at unfair dismissal because it is something that we hear often that business owners and managers are worried about. 


What is?  


According to the law, an unfair dismissal is when an employee is dismissed from their job in a: 

  • Harsh 
  • Unjust; or  
  • Unreasonable manner 


Basically, it’s when you’re ex-employee sues your business because they lost their job, but they don’t feel it was right. 


To claim unfair dismissal an individual needs to: 

  • Have been dismissed by the employer (resigning from their job doesn’t apply) 
  • Have worked the minimum employment period (12 months for small business, 6 months otherwise) 
  • Have earnt less than the high-income threshold 
  • (if Casual) Have worked on a regular and systematic basis before the dismissal and have a good reason to believe this would continue  
  • Apply within 21 days from the day after they’re dismissed 
  • Pay the fee ($83.30) 


(in some parts of Australia this does not include local government, state public sector or law enforcement employees) 


The reasons why an employee or ex-employee may claim unfair dismissal is usually when things get quite tricky. Perhaps they were dismissed rather quickly or they lost their job because of redundancy they weren’t expecting. It’s usually quite emotional. 


What are the risks  

  • Financial and legal obligation – this could include the cost of legal counsel, potentially paying compensation to your ex-employee if that is the outcome of the hearing (capped at equivalent to 6 months of their pay). No matter if you end up in front of the Fair Work Commission (FWC) or in Court, it’s going to cost you money whether you win or not. 
  • Reinstating the employee – there are cases where the FWC order you to reinstate an employee to their former position. So that could be very uncomfortable because there has been damage to the working relationship. 
  • Impact on the morale of other staff – it’s not uncommon for staff to talk and if they perceive there to be something negative going on, they will want to know what it’s all about. Then there’s also things like reduced productivity (even if it’s just from people gossiping!), increased absenteeism or even resignations.  
  • Reputation damage – people talk. So, it’s going to be known. If it is a dramatic case or you are a high-profile organisation or industry, you might even find that there’s media attention.  
  • It takes a lot of time – responding to an unfair dismissal claim is a big distraction from your day-to-day work. It would be taxing both in time and your stress about it and taking the resources away from your day-to-day job just to deal with that, getting together whatever documentation you need etc. 
  • Potential for additional claims – if you have an ex-employee who’s willing to put in a claim for unfair dismissal, there’s also the potential for other claims like adverse action or discrimination. If they don’t have the successful ending they were hoping for, they may then try another way. 
  • Further scrutiny – it could bring your business under the spotlight. This could be checking that you compliant in other areas, or being very sensitive to further unfair dismissal claims in the future.  
  • Work after the claim – if the claim was upheld, there are likely things you will want to implement or change to prevent it from happening again and there’d be a certain amount of work. For example, changing practices in performance management or communication or creating a policy. 


That can be a scary list, because in most cases you have dismissed someone because of a legitimate business need. But there is a lot you can do to prevent these claims or even respond to a claim confident in the knowledge it wont be upheld because you treated the employee fairly.  


How do you avoid it?  

  • Understand the legislation – knowing what the conditions are is important so that includes the Fair Work Act, National Employment Standards and Award but also other legislation around anti-discrimination, work health & safety and more. If you don’t feel confident in this area, that’s understandable! You can ask the advice of someone like us or an employment lawyer. 
  • Have fair reasons for the dismissal – it has to be legally sound, defensible and well documented. Poor performance, misconduct or redundancy.
  • Have a procedure – think about how you would go about dismissing an employee before you have to. Document the ways you will be fair, the timing, how you will let the employee know and let them respond etc. And again, if you are not confident in this area, that’s understandable! We are here to help. 
  • Be transparent with your team when someone leaves – you don’t need to go into every detail, but don’t just let them disappear and then leave everyone wondering. 
  • Follow the Small Business Fair Dismissal Code – if you are a small business, and can show you followed this code at the time the person was dismissed, then they can’t claim unfair dismissal. Even if you are not a small business employer, it’s a really practical guide. It has a lot of things in there that you can implement which will reduce the risk of an unfair dismissal claim so check that out. 
  • Maintain procedural fairness – this is a lot of things, but it means how you conduct the dismissal with your employee, what evidence you have to show you were fair, had a procedure and that the decision wasn’t biased or discriminatory matters but is compliant with the law. Practically speaking, here’s a couple of things this is: 
  1. Giving the employee a chance to ask questions or simply respond to your reasoning 
  2. Allowing the employee to bring a support person to disciplinary meetings 
  3. Giving adequate notice of the meeting 
  4. Stating the reason for the meeting  
  5. Documenting the meeting 

Again, if you’re not feeling comfortable, we are here to help and can guide you through that. 

  • Get legal advice – especially if it’s a complicated situation. There’s so many grey areas in employment and it’s not always exactly clear. There’s so many pieces of the puzzle when it comes to legislation and sometimes they fight against each other, whether it be a definition or which one takes priority and then there’s precedent or case law, someone like a lawyer would be across all of that and be able to support you. 
  • Communicate respectfully – this is part of being procedurally fair. It sounds like it should be obvious, but in the heat of the moment it doesn’t always happen well. 
  • Pay the right entitlements – that includes giving the correct notice period or payment in lieu of that, and if applic. severance payments, redundancy pay, unused leave entitlements and any others that might be due to that person. 
  • Train your managers in how to do this correctly  


When a disciplinary matter happens or you need to dismiss someone…yes, it’s awful. Someone’s losing their job and that’s not great. But it’s a part of business and avoiding risk.  


And if you have someone like us or a lawyer supporting you through the process to make sure that you’re doing it in a fair way, you will feel assured because you will have evidence to prove you have been procedurally fair and your decision was lawful.  


And there are many unfair dismissal claims that go against the the ex-employee! There are times that the employer is found to have done nothing wrong so it just ends there. And if you ever receive an unfair dismissal claim, that is the outcome you want. 


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