Termination of employment

A. Minimum entitlements to notice

When terminating a worker’s employment, it is important to ensure that an employee is given proper notice according to law (or paid an equivalent amount in lieu of notice) and has received payment of their accrued entitlements (eg annual leave). This involves consideration of legislative and award entitlements as well as the contract of employment.

There is a minimum entitlement to notice under the Fair Work Act which operates where a written contract is silent on the issue of notice or provides for less than the minimum required by legislation. The only exception to this requirement is if an employee has been sacked for gross misconduct and there is no challenge to the validity of the sacking. If an employee accepts that their termination is due to their gross misconduct, they will not be entitled to payment for notice although they will be entitled to payment for any annual leave owed.

The minimum entitlements to notice under the Fair Work Act are:

Period of employee’s service	Required period of notice
Not more than 1 year	At least 1 week
More than 1 year but not more than 3 years	At least 2 weeks
More than 3 years but not more than 5 years	At least 3 weeks
More than 5 years	At least 4 weeks

An employee who is over 45 years of age and has worked for the same employer for at least two years is entitled to an extra weeks notice.

It is important to note that these are minimum entitlements only and an employee may be entitled to a greater period of notice according to the circumstances of the case.

An employer may require an employee to serve out the notice period or may choose to terminate their employment with immediate effect (or within the next few days) and pay an amount in lieu of notice.

It is common for written contracts to enable either party to terminate the contract on the provision of notice. Often the contract provision merely reflects the statutory minimums for notice. It is also common for contracts to contain periods of a fortnight or a month. It is important to note that if a contract provides for a period of notice which is less than the statutory requirement, it is still necessary for the employer to comply with the statutory requirements for notice.

If an employee resigns their employment, the employer should check that they have provided the appropriate notice. If not, the employer may be within their rights to withhold an equivalent amount from any payment due to the employee, eg from any annual leave due if this is allowed by an industrial award or sue the employee for the amount of notice not given.

In addition to any notice, an employee is also entitled to payment for any outstanding annual leave entitlements and, in the case of long serving employees, long service leave entitlements. If an employee has worked for the one employer for more than seven years but less than 10 years, they may be entitled to payment for pro-rata long service leave in certain circumstances. Employers should also be careful to check whether the employee was transferred from a previous employer and the terms of that transfer.

What happens if an employer wants to make a particular job redundant? The first question to ask is whether it is a genuine redundancy or not. Where the employer decides that it does not wish a job performed by the employee to be performed anymore, or proposes to redistribute the duties of the job amongst other employees, the position may be made redundant. The important thing about redundancy is that it relates to the position itself rather than the person holding the position. In those circumstances, the employer should consult with the employee about the proposed redundancy and endeavour to re-employ the employee elsewhere in the organisation. Before considering termination.

From 1 January 2010, employers are required to make an additional payment to an employee if their position is made redundant. The scale of redundancy pay is:

Period of employee’s service	Redundancy pay period
1 – 2 years	4 weeks
2 – 3 years	6 weeks
3 – 4 years	7 weeks
4 – 5 years	8 weeks
5 – 6 years	10 weeks
6 – 7 years	11 weeks
7 – 8 years	13 weeks
8 – 9 years	14 weeks
9 – 10 years	16 weeks
More than 10 years	12 weeks

If the employer obtains other acceptable employment for the redundant employee or cannot pay the required redundancy pay, the employer can make application to Fair Work Commission to vary the required amount.

The requirement to pay redundancy does not apply if the employee has less than 12 months continuous service or is a “small business employer”. This means an employer with less than 15 employees.

It is important to note that the scale will only apply to service after 1 January 2010.

It is also important to check that an applicable industrial award or employer policy or the contract of employment itself does not create a more generous entitlement for the employee.

It is worth keeping in mind that employees can make a complaint to government authorities if they feel that they have not been paid their appropriate entitlement. Employees can make a complaint to the federal Fair Work Ombudsman. This is a federal government agency established to provide a free service to assist employees obtain their proper entitlements. There are also state equivalent agencies.

B. What legal action can a terminated employee take for unfair dismissal?

There are several possible forms of legal action open to a dismissed employee. The main types of action generally available on termination of employment are:

Unfair dismissal claim in the Fair Work Commission;
General protections/adverse action claim in the Fair Work Commission/Federal Court/Federal Circuit Court;
Discrimination claim under state anti-discrimination legislation or federal human rights and equal opportunity legislation;
Civil claim for breach of contract in the state common law courts;
Civil claim for breach of the Australian Consumer Law in the state common law and federal courts.

1. Unfair dismissal claim the Fair Work Commission

As a general rule, the quickest, cheapest and most practical way of making a claim of unfair dismissal is to lodge an application for reinstatement/compensation with the Fair Work Commission.

a. Time limit for lodging application

The single most important thing to remember is that an application for reinstatement/compensation must be lodged with the the Fair Work Commission registry no later than 21 days after the date of termination of employment. There are very strict rules about extensions of time and extensions will only be granted in exceptional circumstances. The first thing to check on an unfair dismissal application is that it has been lodged within 21 days of the termination taking place. If not, an objection to the application can be raised.

b. Is the unfair dismissal claim excluded?

After making sure the claim is in time, the next thing to check is whether the unfair dismissal claim is specifically excluded by legislation. If so, then an objection can be lodged and the applicant may be dismissed at an early stage. If an application is filed with the Fair Work Commission which involves one of these restrictions, the employer will normally file a document objecting to the jurisdiction of the Fair Work Commission and the issue may need to be the subject of a preliminary hearing (either in person or by written submissions) before proceeding further. Alternatively, the conciliator may bring the issue to your attention at the conciliation conference.

The major grounds of exclusion are:

i. Not having served the minimum employment period

The unfair dismissal provisions of the Fair Work Act do not apply to employees in the first months of their employment. If the employer has 15 employees or less, this will be the first 12 months. Otherwise, the minimum employment period is 6 months. It is not necessary for an employer to give reasons for termination if the employment is ended during the minimum employment period. However, an employee terminated during a minimum employment period can still take action for unlawful dismissal or breach of workplace protections if they can show the employer terminated the employment for a prohibited reason.

ii. Other exclusions

Other classes of persons excluded from taking unfair dismissal include:

Employees earning wages of more than $142,000.00 gross per annum (as at 1 July 2017 but subject to annual indexation) whose employment is not subject to an award or enterprise agreement;
Employees whose positions are made redundant subject to the requirements of the Fair Work Act.

c. Was the dismissal unfair?

A dismissal will be unfair if the dismissal:

was harsh, unjust or unreasonable;
was not consistent with the Small Business Fair Dismissal Code (if the employer has less than 15 employees);
was not a case of genuine redundancy.

The criteria for deciding whether a dismissal was harsh, unjust or unreasonable include:

whether there was a valid reason for the dismissal related to the person’s capacity or conduct;
whether the person was notified of that reason;
whether the person was given an opportunity to respond to the reason;
any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal;
if the dismissal related to unsatisfactory performance – whether the person had been warned about the unsatisfactory performance before the dismissal.

There is a lot of case law about the meaning of the words “harsh, unjust or unreasonable” but essentially a common sense approach is adopted so that employers are required to give employees “a fair go”.

The Fair Work Commission will consider both whether the dismissal was procedurally fair and substantively fair. From a procedural point of view, it is relevant whether the employee has been given procedural fairness, i.e. whether allegations were put to an employee in sufficient detail, whether the employee was allowed to respond appropriately and whether the response was taken into account before a decision was made about termination. Apart from considering whether a dismissal was procedurally fair, the Commission will consider whether the dismissal was substantively fair, i.e. procedural fairness might have been given to the employee but the decision to terminate was itself unfair or not called for in the circumstances or some lesser penalty than termination would have been more appropriate.

d. What remedies can the Fair Work Commission give?

The Fair Work Commission must order reinstatement unless it is impracticable (in practice, reinstatement is rarely granted) and/or compensation up to a limit of six (6) months wages. The dismissed employee has a duty to mitigate their loss, i.e. they have to try and find other employment and not just sit back and wait for the unfair dismissal hearing. The Fair Work Commission may reduce the amount awarded to the employee if it feels that the employee hasn’t made an effort to find other work.

CASE EXAMPLE

HOW TO CALCULATE COMPENSATION FOR UNFAIR DISMISSAL

Diana Gabriela Arndt AND Crown Business Solutions Pty Limited

This case provides a good illustration of the process for calculation of compensation in the industrial relations commissions. The Commission found the employer had imposed quite unreasonable demands on the applicant to complete a database and termination based on failure to meet these demands was not a valid reason for termination. The Commissioner also found that the employer had not warned the applicant about her unsatisfactory performance or provided an opportunity to respond prior to the termination. The Commissioner considered that reinstatement would not be appropriate and turned to the issue of compensation. He adopted the following process:

Assess the applicant’s loss by considering:
- the length of time the applicant would have been likely to remain in the employment had she not been terminated; and
- what income the applicant would have received in that time.
Determine the applicant’s actual earnings since termination.
Consider whether the applicant has made reasonable efforts to mitigate their loss.
Discount any amount to take account of unknown contingencies such as sickness and accident.

Here, the Commissioner considered the applicant would have only continued working with the employer for a further 4 months because of the extremely demanding nature of the job, the lack of assistance from the employer and the unlikelihood of the applicant moving to another similar position in the company. The second matter is a factual one. In deciding whether reasonable efforts to mitigate loss had been taken, the Commissioner considered the number of job applications submitted and Centrelink’s involvement in seeking work on the applicant’s behalf. Finally, the Commissioner decided that no discount should be made as the likely period of employment had already passed. The Commissioner ordered payment of a gross sum subject to taxation within a period of 3 months.

Whilst the Fair Work Commission can order reinstatement and compensation, it does not automatically order that a losing party pay the legal costs of the other party. The general rule is that each party bears their own costs. The Fair Work Commission does have a discretion to award legal costs if a claim is frivolous or vexatious or either party has acted in an unreasonable manner during the conduct of the claim. In practice, costs are only rarely awarded and it is necessary for the dismissed employee to pay for legal costs out of any amount awarded by the Fair Work Commission for compensation. This can often be a disincentive to engaging lawyers for the trial process.

e. What is the process?

i. File application for reinstatement/compensation

There is a time limit of 21 days for an employee to lodge an application with the Fair Work Commission after the date of dismissal. There is a small filing fee payable on the application. The application must generally set out the grounds and facts relied on for the application. The form can be downloaded from www.fwc.gov.au and may be filed in person, by post, by facsimile or by email, as long as it is lodged within the time limit. The Fair Work Commission will generally send a copy of the application to the employer.

ii. Conciliation conference

After filing and service of the application, (assuming that no application is made by the employer to dismiss the employee’s claim because of one of the exclusions) the Fair Work Commission will usually convene a conciliation conference of the parties which is held by telephone with a conciliator from the Fair Work Commission. This conference may be held face to face where both the employer and employee agree. The conference is usually held within two to three weeks of the application being filed. At the conference, the parties are able to speak about their claim (and in the case of the employer, their defence) and the conciliator attempts to help the parties reach a resolution without the matter progressing further. The conference proceedings are confidential and what is said in the conference cannot generally be raised at a later date. After opening statements by the parties, the conciliator will normally speak with each of the parties privately and seek to negotiate a resolution, whether that be in the form of a money payment, provision of a statement of service, reinstatement or some other form. If the matter is resolved at the conference, then a deed of settlement is usually prepared by one of the parties or by the Fair Work Commission recording the terms of settlement.

Deeds usually contain provisions for payment by the employer to the former employee in exchange for the withdrawal of the employee’s claim, the provision of a statement of service, confidentiality and a binding promise to make no further claims.

If the matter cannot be resolved at the conference, it is referred for dates of hearing and directions about preparation for hearing to be made.

iii. Steps to prepare for hearing

If the matter has not been resolved at the conciliation conference, the Fair Work Commission will normally provide written directions to the parties to prepare the matter for hearing. These directions set the claim down for dates of hearing and make directions about dates for disclosure of relevant documents by the parties and the exchange of witness statements prior to the hearing.

Primary evidence (also called evidence in chief) is given by written witness statement with oral cross examination of any witnesses required for cross examination. A great deal of care should be taken with the preparation of witness statements. Notice must be given to the other side if any of their witnesses are required for cross examination. It is important to remember that there is no property in witnesses and it is quite acceptable for the former employer’s representatives to seek to speak with any persons who have filed witness statements, just as it may be appropriate for the employee or their representatives to seek to speak with witnesses of the employer. However, harassment of witnesses or seeking to persuade them not to give evidence is not acceptable behaviour.

iv. Hearing and decision

Unfair dismissal claims are heard by a single member of the Fair Work Commission. After presentation of the primary evidence and any cross examination, each party is able to provide a closing statement to the member hearing the matter and the member will generally then reserve their decision. It is rare for a member to provide a decision immediately after the conclusion of the hearing. It is more normal to have to wait several weeks for the member to consider the evidence and write their decision. The decision is usually released to the parties without their having to appear again. There is the possibility of appeal from a decision of a member but appeals can only be on questions of law and not generally on matters of fact or the credibility of witnesses.

2. General protection claims in the Fair Work Commission/federal courts

There is a broader set of general protections in the Fair Work Act which include prohibitions on:

the taking of adverse action against a person or coercing them because of a “workplace right” they have;
an employer exerting undue influence or pressure on an employee to make various agreements or arrangements;
knowingly or recklessly making a false or misleading representation about another’s workplace rights, or their exercise;
taking adverse action against a person because of their membership or non membership of an association, or their engagement or non-engagement in various industrial activities;
an employer discriminating against an employee or prospective employee because of their race, sex, age, disability etc;
dismissing an employee because of temporary absence from work through illness or injury;
demanding payment of a bargaining services fee;
various conduct relating to “sham” contracting arrangements.

The Fair Work Commission can be asked to convene a conference to deal with a dispute over a claim of prohibited conduct which is effectively compulsory when dismissal occurs. The claim must be filed within 21 days of dismissal. This must occur before any court action can be taken.

Adverse action includes dismissal, injury, alteration of position, discrimination, refusal to employ or engage services, the taking of industrial action and organising industrial action. It also includes threatening to do any of these acts. Adverse action may be taken by:

an employer against an employee;
a prospective employer against a prospective employee;
a person (the principal) who has entered into a contract for services with an independent contractor against the independent contractor, or a person employed or engaged by the independent contractor;
a person (the principal) proposing to enter into a contract for services with an independent contractor against the independent contractor, or a person employed or engaged by the independent contractor;
an employee against his or her employer;
an independent contractor against a person who has entered into a contract for services with the independent contractor;
an industrial association, or an officer or member of an industrial association, against a person.

Adverse action must not be taken in relation to:

workplace rights; and
industrial activities.

a. Workplace rights

The protection provided is from adverse action being taken by a person against another person because they or a third person have a workplace right, whether or not it has been or is proposed to be exercised or to prevent the right from being exercised. A person is defined as having a workplace right if they:

are entitled to a benefit, role or responsibility under a workplace law, instrument or order;
are able to initiate or participate in a process or proceedings under a workplace law or instrument, including:
- conferences held by the Fair Work Commission;
- court proceedings;
- protected industrial action and ballots;
- the making, variation or termination of an enterprise agreement or bargaining representative appointment;
- making or terminating individual flexibility arrangements;
- agreement to cash out paid annual leave or paid personal/carers leave;
- flexible working arrangement requests;
- dispute settlements;
are able to make a complaint or inquiry in relation to their employment or to certain independent bodies.

b. Industrial activities

The protection provided is from adverse action being taken by a person against another person because the person:

is or isn’t, was or wasn’t an officer or member of an industrial association;
engages or has engaged or proposed to engage in industrial activity;
doesn’t engage or hasn’t engaged or has proposed to not engage in industrial activity.

Industrial activity is basically defined to mean any action taken in relation to an industrial association (including membership, non membership, organising, encouraging or participating in lawful activities promoted by the industrial association, advancing the views, claims or interests of the industrial association and even organising unlawful activities for the industrial association.)

There are also prohibitions against coercion, misrepresentations and inducements related to industrial activity.

c. Sham arrangements

There are prohibitions on:

employers misrepresenting employment as an independent contracting arrangement;
employers dismissing an employee in order to engage them as an independent contractor to perform the same work;
employers making misrepresentations to employers in order to persuade them to become an independent contractor performing the same work.

d. How contraventions are dealt with

There are two types of contravention of this part – those involving dismissal and those that do not. If a person has been dismissed then application must be made to the Fair Work Commission within 21 days of the dismissal taking effect (subject to a power of extension in exceptional circumstances). There is a 6 year time limit on non dismissal contraventions.

The Fair Work Commission must conduct a conference in private to deal with a dismissal related dispute. If the matter cannot be resolved, the Fair Work Commission must issue a certificate to this effect and the applicant then has 14 days to make a court application.

For non dismissal related disputes, the parties must agree before a conference can be held by the Fair Work Commission. Where the parties do not agree on a Fair Work Commission conference, a party can still make an application to the Federal Court or Federal Circuit Court for orders. There are time limits on the commencement of these proceedings.

Proceedings in the Federal Circuit Court are, generally speaking, more formal than in the Fair Work Commission but the Federal Circuit Court does try to deal with matters as informally and as quickly as possible. After filing and serving the initiating documents, the court will convene a directions hearing to prepare the case for hearing and will generally set the matter down for hearing once these steps have been completed.

Once the applicant puts forward some evidence to show the link with the unlawful reason, the onus of proving that the termination did not rely on an unlawful ground is on the employer at the hearing.

As with the Fair Work Commission, the general rule is that each party bears their own costs. Accordingly, it is necessary to consider the costs and benefits of engaging lawyers as part of this process.

The court (either the Federal Court or Federal Circuit Court can impose a penalty of up to 60 penalty units under these provisions. The court can also make injunctions, award compensation and order reinstatement. There is no cap on the amount of damages available to a successful applicant.

3. Discrimination claims

For information relating to discrimination claims, go to the discrimination section of this website under employees.

4. Civil claim for breach of contract (“wrongful dismissal”)

If an employee is unable to take one of the forms of legal action above arising from termination of employment, they may be able to consider a legal action in the common law courts claiming a breach of the employment contract by the employer. There is generally a 6 year time limit on these types of claims.

a. Legal grounds for action

The most common claim made is for breach of the obligation in a contract to give reasonable notice. Before terminating an employee, an employer should check to see whether the employment contract contains a provision about the amount of notice which has to be given to the employee. If there is no provision in the contract, then a term will be implied that the employer can only terminate on reasonable notice. This is a separate requirement to the minimum entitlements under legislation.

If the contract is for a fixed term, then the employee may be able to claim payment for the rest of the term of the contract if it is terminated early. This may depend on whether the contract provides for termination on any lesser period of notice.

What is reasonable notice will depend on a number of factors and will vary from case. Relevant factors include:

Length of employment;
Seniority of the position;
Amount of remuneration/salary;
Educational qualifications;
How easy it is to find other employment of a similar nature and level;
Your age and financial commitments;
Mobility – i.e., how easy it is for you to locate to another centre in order to find employment;
The extent to which your conduct was responsible for the dismissal.

There is a duty on a dismissed employee to mitigate their damage. This means that they have to take reasonable steps to find other employment of a similar nature. Any income earned by the employee will be taken into account in assessing their monetary damages.

Whilst the former employee’s conduct may be relevant to an assessment of how much notice is reasonable in the circumstances, the same does not apply to the employer. This means that even if the termination has occurred in questionable circumstances, it is unlikely to result in a greater monetary award in the employee’s favour. The employer’s conduct is not strictly relevant to the calculation of reasonable notice.

The amount of notice will vary depending on the facts of each particular case. At its highest, it may be more than a year.

Whilst the High Court has held that there is no implied duty of mutual trust and confidence between an employer and employee, it is possible that there is an implied duty of good faith (although this is not settled law). This may cover situations where an employer acts maliciously during the employment but the duty probably does not relate to the manner of termination itself. There is relatively little case law about this area of implied terms although it has been the subject of a lot of legal debate.

The common law courts do not have the power to order reinstatement. Monetary damages are the normal remedy. In some circumstances, an application could be made to the court for an injunction to stop an employer from terminating employment. However, this type of claim is rare.

The general purpose of a damages award is to place the dismissed employee in the same position as if the contract had been properly observed. A dismissed employee is generally able to sue for loss of wages and other remuneration which would have been earned but for the dismissal. This may include the loss of superannuation entitlements, employer benefits such as motor vehicle and telephone and bonuses. As with the statutory actions for unfair dismissal and unlawful dismissal, the courts do not award damages for distress and humiliation.

b. Legal process

Common law claims are most commonly conducted in the common law courts of the relevant state. In Queensland, this means the Supreme Court, District Court or the Magistrates Court. There is a 6 year time limit on commencing legal proceedings for breach of contract.

Claims are commenced by filing a claim and statement of claim in the relevant court and paying the applicable filing fee. A copy of those documents then must be served on the employer, who has a set time (normally 28 days) in which to file a defence to the claim. Depending on the circumstances, it may be necessary for a document replying to any issues raised in the defence to be filed.

Each of the parties is required to provide a copy of any relevant documents to the other party. Alternatively, a list of the documents can be provided and the other party can inspect the documents and obtain a copy of any relevant ones or just ask for a copy of any particular documents they want. It is generally a good idea to obtain a complete copy of any documents disclosed by the employer. Any other steps to prepare the matter for hearing, such as obtaining witness statements and obtaining the disclosure of relevant documents from third parties should be undertaken at this stage.

A compulsory conference must be held with a court registrar before the matter can be set down for hearing. Court hearings in the common law courts follow the normal civil format. i.e.

the plaintiff gets to present their case first which may involve an opening statement, the calling of witnesses to give evidence and their cross examination by the other party;
the defendants then call their witnesses subject to cross examination;
closing addresses to the court by the parties;
final decision by the magistrate or judge, normally after considering their reasons for some time.

The normal civil rules in relation to costs apply which means that the losing party is generally responsible for the winning party’s costs, assessed on the applicable court scale. The general rule of thumb is that the winning party can recover half to two-thirds their actual legal costs from the losing party.

Claims in the common law courts can commonly take 12 – 18 months and longer to finalise.

There is a simplified process which exists in the Magistrates Court of Queensland for claims falling within its jurisdiction and where employees are earning less than $101,000 per annum. Under this process, the first step after the filing of a claim document is a conference in the Queensland Industrial Relations Commission with an industrial commissioner. If this conference is not successful in resolving the claim, the defendant must then file a defence to the claim. A simplified process exists to take the matter to hearing and no costs are generally ordered against a losing party.

Advice should be obtained before commencing or defending common law proceedings as these claims can be complex, time consuming and expensive.

5. Civil claim for breach of the Australian Consumer Law

a. Legal grounds for action

A terminated employee may also be able to bring legal action against their former employer for breach of trade practices legislation or equivalent provisions of state fair trading legislation.

The grounds which have had most attention are misleading and deceptive conduct and misleading and deceptive conduct in relation to employment. This means that you may be able to take action against your former employer where they have engaged in misleading or deceptive conduct towards you. There have been several cases where this ground has been relied on in the context of pre-employment representations about terms of employment which have not been carried out.

The other primary ground is unconscionable conduct. This ground is of potentially broader application than the misleading and deceptive conduct provisions but has not yet been the subject of any significant court decision.