Tips for Businesses on How to avoid Unfair dismissal claims

Tips for Businesses on How to Avoid Unfair Dismissal Claims


4 min read
Letting employees go is an unfortunate, but sometimes necessary, reality of running a business. But when is it considered ‘unfair dismissal’ under the law, and how do you avoid a claim being made against your business?

Sacked. Fired. Let go. Made redundant. Unfairly dismissed? When an employer ends the working relationship with an employee, more often than not, it’s a negative experience. But what factors turn something unpleasant into an unlawful action? Read on to understand how to avoid unfair dismissal and do the right thing by your staff and your business.

What is Unfair Dismissal?

First off, a ‘dismissal’ is the act of an employer letting an employee go. This can include firing an employee with or without warning for bad behaviour, poor performance or because their role has been made redundant. To be ruled unfair, the Fair Work Commission (FWC) will consider three key factors:

  • Is it harsh?

A harsh dismissal could be when the punishment doesn’t fit the crime. You can’t lawfully sack someone for not using emojis in text messages , for example.

  • Is it unjust?

An unjust dismissal might occur if an employee is fired for the actions of others, i.e, they’re not responsible for what happened and were lumped in with other employees.

  • Is it unreasonable?

If the evidence doesn’t support the accusation, but the employee is still let go, this can lead to a ruling of unfair dismissal.

Casual and Full-time Employees Can Make a Claim of Unfair Dismissal

Unfair dismissal claims are submitted by the employee to the FWC and may be considered if they meet any of the above criteria, or if they’re not a genuine redundancy , provided the employee is protected under the law.

To be protected, employees must work for a national system employer, which is most Australian workers except for some state government employees in certain states. They also need to earn less than the high-income threshold ($162,000) and have worked for a minimum of 6 months before the dismissal (12 months for small business). A casual employee can make an unfair dismissal claim if they work on a regular and systematic basis (i.e a roster) before dismissal and had reason to believe this would continue.

Poor Redundancy Processes Lead to Unfair Dismissal Claims

We see many SME businesses get tangled up in unfair dismissal claims because they fail to follow due process when making an employee’s role redundant. This can include ‘sham redundancies’, where the role is still required to be performed by someone or the employee could’ve been offered other work within the business.

Even when the redundancy is genuine, businesses sometimes find themselves in trouble because they tend to rush the process, failing to consult properly with employees whose jobs are at risk. If your business conditions require you to make some redundancies and you’re not sure about your processes, reach out to our employment law specialists .

Generally, consultation requirements include:

  • notifying employees who may be affected as early as possible once business decisions have been made.
  • providing the employees with information, in writing, about the reasons and their expected effects on the business and personnel.
  • discussing steps taken to avoid and minimise negative effects on the employees.
  • listening to and considering the employees ideas or suggestions about the changes.

Don’t Rush Performance Management Processes

Employers also tend to rush the process when it comes to dismissing an employee due to poor performance. Businesses are within their rights to fire under performing staff, but it requires careful management. Some SMEs make the mistakes below that can lead to popping up on the FWC’s radar:

  • The sacked employee did not receive proper training.
  • The employer didn’t explain how the employee’s performance was lacking.
  • The employee wasn’t given a chance to improve with a performance plan.
  • The employee wasn’t responsible for the alleged performance breaches.
  • The employee wasn’t warned they’d be fired if their performance didn’t improve.
  • There was a good reason to explain the employee’s under performance in line with expectations.

Ultimately, failure to offer support, to set out concerns and to give an opportunity to respond before dismissing an employee will leave a business open to unfair dismissal claims.

Communicate Workplace Policies Clearly and Regularly

We’ve talked about businesses getting into trouble due to not following due process, or not having a process at all. Even if your business has comprehensive employment agreements and workplace policies and procedures in place, you can still find yourself in hot water with the FWC.

It’s not sufficient just to have policies in the workplace; employees need to know about it. And if you need to terminate an employee for breaching your workplace policy, you may need to prove that policies were clearly communicated during the course of their employment.

Don’t Rely On Insurance To Bail You Out

So…you’ve done the wrong thing when letting an employee go, you’re facing an unfair dismissal claim at the FWC and you remember you have insurance to protect you? With the average compensation for unfair dismissal being less than $10,000, you might consider paying your insurance excess at around $2,000 is the better option.

However, once you start claiming for things like unfair dismissal, underwriters will reassess your premiums and it’s not uncommon to see them jump up to 300%. With some help from specialist employment lawyers, or attending a conciliation discussion , a claim could be settled for $2,000 or nothing at all.

Once your business is on the radar of the FWC for doing the wrong thing, you’re likely to have them peering into other areas of your operations, much like the ATO if your books aren’t up to scratch.

Get Expert Employment Law Advice to Avoid Unfair Dismissal Claims

If anything in this article has made you question your business’s employment policies and processes, our employment law team is here to help you get it right. Our services cover redundancy, unfair dismissal, payment disputes, customised employment contracts and tailored policies for your workplace.

As always, getting on the front foot by chatting with one of our unfair dismissal lawyers is the best approach and will not only lead to less legal risk but also happier staff.

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