Unfair Dismissal in Australia: What the Fair Work Commission Actually Considers

Unfair dismissal is one of the most common employment disputes in Australia. The Fair Work Commission (FWC) received over 14,000 unfair dismissal applications in the 2023-24 financial year. For employers, the risk is not limited to compensation orders - the process of defending a claim consumes management time, legal fees and organisational focus. For employees, understanding how the FWC actually assesses claims is essential to knowing whether you have a case worth pursuing. Astris Law acts for both employers and employees in unfair dismissal proceedings.

Who Can Claim Unfair Dismissal?

To be eligible to make an unfair dismissal application under s 382 of the Fair Work Act 2009 (Cth), the employee must:

• Have completed the minimum employment period (12 months for small business employers with fewer than 15 employees; 6 months for all other employers)
• Earn less than the high income threshold (currently $175,000 per year) or be covered by a modern award or enterprise agreement
• Not have been dismissed as part of a genuine redundancy
• Lodge the application within 21 days of the dismissal taking effect

The 21-day time limit is strictly enforced. Extensions are granted only in exceptional circumstances under s 394(3).

The Section 387 Criteria

When assessing whether a dismissal was harsh, unjust or unreasonable, the FWC must consider the criteria in s 387:

• (a) Valid reason: Whether there was a valid reason for the dismissal related to the employee's capacity or conduct
• (b) Notification: Whether the employee was notified of that reason
• (c) Opportunity to respond: Whether the employee was given an opportunity to respond to any reason related to their conduct or capacity
• (d) Unreasonable refusal of support person: Whether the employer unreasonably refused to allow the employee a support person during discussions about the dismissal
• (e) Performance warnings: If the dismissal was related to unsatisfactory performance, whether the employee was warned about that performance
• (f) Business size: The degree to which the size of the employer's enterprise would impact on procedures followed
• (g) HR capability: The degree to which the absence of dedicated human resource management expertise would impact on procedures followed
• (h) Any other relevant matters

Process Failures: Where Most Employers Lose

The consistent theme across FWC decisions is that a valid reason for dismissal is necessary but not sufficient. Employers who have a legitimate basis for termination still lose unfair dismissal claims when they fail to follow a fair process. Common procedural failures include:

• No warning: Dismissing an employee for poor performance without prior warnings or a performance improvement plan
• No opportunity to respond: Deciding to terminate before giving the employee a meaningful chance to respond to the allegations
• Ambush meetings: Calling the employee into a meeting and dismissing them on the spot without prior notice of the purpose of the meeting
• Denying a support person: Refusing the employee's request to have a support person present during the termination discussion
• Predetermined outcome: Going through the motions of a process where the decision to dismiss has already been made

In Crozier v Palazzo Corporation Pty Ltd (2000) 98 IR 137, a Full Bench of the Australian Industrial Relations Commission held that where a dismissal is effected in a manner that is "unnecessarily harsh, humiliating or insensitive," it may be unfair even where the reason for dismissal is valid. This principle has been consistently applied by the FWC.

Serious Misconduct: When Summary Dismissal Is Justified

An employer may dismiss an employee without notice for serious misconduct as defined in Regulation 1.07 of the Fair Work Regulations 2009. Serious misconduct includes:

• Wilful or deliberate behaviour inconsistent with the continuation of the employment contract
• Conduct that causes serious and imminent risk to the health or safety of a person or the reputation, viability or profitability of the employer's business
• Theft, fraud, assault or sexual harassment
• Being intoxicated at work

Even in serious misconduct cases, the FWC still expects the employer to have conducted a reasonable investigation and given the employee an opportunity to respond before dismissing.

The Small Business Fair Dismissal Code

Employers with fewer than 15 employees can rely on the Small Business Fair Dismissal Code under s 388. If the employer has followed the Code, the dismissal is deemed to be fair. The Code requires that the employer genuinely believed the employee's conduct was sufficiently serious to justify immediate dismissal, or alternatively, that the employer gave the employee a warning and a reasonable opportunity to improve before terminating.

Remedies: Reinstatement and Compensation

The primary remedy for unfair dismissal is reinstatement (s 391). In practice, reinstatement is ordered in only a small minority of cases - where the employment relationship has broken down, it is usually not appropriate. The more common remedy is compensation, capped at 26 weeks' pay (s 392). Compensation is calculated by reference to the remuneration the employee would have received but for the dismissal, less any income earned or reasonably expected to be earned from other employment.

General Protections: The Alternative Claim

Employees who are not eligible for unfair dismissal (for example, because they earn above the high income threshold or have not completed the minimum employment period) may be able to bring a general protections claim under Part 3-1 of the Fair Work Act. General protections claims are not subject to the same eligibility requirements and are not capped at 26 weeks' compensation. However, the employee must prove that the dismissal was for a prohibited reason - such as exercising a workplace right, discrimination or temporary absence due to illness.

The reverse onus of proof under s 361 means that once the employee establishes that a protected attribute or workplace right existed, it is presumed that the employer acted for that reason unless the employer proves otherwise.

Conclusion

Unfair dismissal claims are won and lost on process. Even where the employer has a strong substantive reason for termination, a failure to follow a fair procedure can result in a finding of unfairness and a compensation order. For employers, the cost of getting the process right before terminating is always less than the cost of defending an unfair dismissal claim after the fact. For employees, understanding the s 387 criteria is essential to assessing whether a claim is worth pursuing. Astris Law's employment team advises employers and employees on termination processes, unfair dismissal defence and general protections claims.

This article is for general information purposes only and does not constitute legal advice. You should seek professional advice tailored to your specific circumstances before acting on any information in this article. Liability limited by a scheme approved under Professional Standards Legislation.