The New, New Unfair Dismissal Laws

Tuesday, 30 June 2009

One of the more controversial aspects of the WorkChoices laws involved its unfair dismissal provisions. Under WorkChoices, employers with up to 100 employees were exempted from unfair dismissal laws. According to a report by the Standing Committee on Education, Employment and Workplace Relations, this exempted over half of the Australian workforce from federal unfair dismissal laws.

On 7 April 2009, the Fair Work Act 2009 (Cth) received royal assent. The new unfair dismissal provisions will commence on 1 July 2009. One of the stated objectives of the legislation was to protect good employees from being dismissed unfairly while enabling employers to manage underperforming employees with fairness and confidence.

From 1 July 2009, all employers, regardless of size (but provided that they are trading, foreign or financial corporations) will be subject to unfair dismissal claims by employees unless the employee falls within one of the exemptions. Generally, in order to be an unfair dismissal:

• the employee must have been dismissed;
• the dismissal must have been harsh, unjust or unreasonable; and
• the dismissal must not have been a case of genuine redundancy.

The following employees are exempt and unable to bring an unfair dismissal claim:

• employees hired to perform a specified task or for a specified period or seasonal employees;
• employees who have not met the qualifying period of service (which is six or 12 months depending on the size of the employer);
• casual employees without regular and systematic employment for the relevant qualifying period of service; and
• high income employees earning more than $100,000.

In addition, employees must bring an application for unfair dismissal within 14 days after the dismissal took effect, unless there are exceptional circumstances. Originally the government had proposed a seven day period in which to bring a claim.

Small businesses will have more flexibility with respect to dismissal than larger businesses. An employee of a small business cannot bring an unfair dismissal claim where:

• the employee has less than 12 months service; and
• the small business has complied with the Small Business Fair Dismissal Code.

The Small Business Fair Dismissal Code provides that it is fair for an employer to dismiss an employee without notice or warning where the employer believes on reasonable grounds that the employee's conduct is sufficiently serious to justify immediate dismissal. This would include matters such as theft, fraud, violence or serious breaches of occupational health and safety procedures. In other situations, the small business employer must provide the employee with a warning that he or she is at risk of being dismissed. The employer must provide a valid reason based on the employee's conduct or capacity to do the job, and must provide the employee with a reasonable chance to rectify the problem.

The contentious definition of small business was the subject of much political debate, particularly in the Senate during the final days of debating the Fair Work Bill. Ultimately there will be an 18 month transitional phase, as follows:

• from 1 July 2009 until 31 December 2010, a small business will be defined as having fewer than 15 full time equivalent employees; and
• from 1 January 2011, a small business will be defined as having fewer than 15 headcount employees (including casual employees).