July 2006

Unfair dismissals: fire at will?

While Work Choices has introduced some relaxation of the unfair dismissal laws for "small" business, employers are mistaken if they believe it is open season on employees; there are still traps for the unwary.

Changes to unfair dismissal laws

Some of the main changes to the unfair dismissal jurisdiction are:

  • No unfair dismissal application against companies employing 100 or less employees.

  • No unfair dismissal claims if dismissed for genuine operational reasons.

  • There is a qualifying period of employment of six months. No claim within that time.

  • Any award of compensation is to take into account any misconduct by an employee which contributed to the decision to dismiss.

  • No compensation can be awarded for shock, distress or humiliation.

There are also streamlined processes introduced that allow the AIRC to deal with certain matters, such as extension of time applications, on the papers without a formal hearing.

Recent decisions

The Australian Industrial Relations Commission has started to hear cases that raise the application of these new laws.

In Koya v Port Phillip City Council (13 June 2006) an employee's unfair dismissal claim was excluded as the termination was for "genuine operational reasons" under section 643(8) of the Workplace Relations Act.

The employee was unable to show that the dismissal was a sham or was contrived to remove him from his job as an IT specialist with the Council. The Commission, after hearing evidence about the restructure implemented by the Council, was satisfied the termination had been for genuine operational reasons.

Contrast this with the decision in Perry v Savills (Vic) Pty Limited (20 June 2006) where the employee's job as a financial manager had been abolished as a result of a company restructure.

Although the Commission accepted that the termination was as a result of a restructure, evidence before the Commission established that Savills could have retained the employee as her skills were still useful to the company, and a viable alternative position could have been found for her.

A number of cases have considered the 100 employee exemption.

In Baldacchino & Ors and Triangle Cables (Aust) Pty Limited (24 May 2006) the Commission considered applications from 9 workers dismissed by Triangle Cables which argued that it had less than 100 employees.

Triangle Cables had structured its workforce to come under the 100 employee limit, partly by the use of workers from labour hire companies. But because these companies were not "related body corporates" as defined in section 50 of the Corporations Act, the labour hire workers did not count towards the 100 employee threshold.

In Triangle Cables the Commission took the approach of counting all employees in a group of related companies, including those based overseas.

Issues to consider

  • In determining if you have 100 or less employees, you must count employees of related companies (and overseas based employees) and casuals employed for more than 12 months.

  • All employees can still bring a claim for unlawful dismissal if dismissed for reasons that include a prohibited reason, such as discrimination.

  • There is still a duty to consult and consider redeployment in redundancy situations but a claim for unfair dismissal cannot be brought against the employer if the reasons for dismissal included a genuine operational reason.

  • Companies must still comply with any contractual obligations, and the obligations in any industrial instrument.

  • Companies must still provide the appropriate notice of termination under statute, industrial instrument and contract.

  • Effective 1 July 2006 an employee who earns more than $98,200 (unless covered by an award) is excluded from making an unfair dismissal claim.

  • Limitations on unfair dismissal claims means we are likely to see the development of an implied term of trust and confidence, and the rise in use of other remedies such as the Trade Practices Act.

Summary

For employers with less than 100 employees it is easier to terminate employment without the threat of an unfair dismissal claim, but the termination must still be carried out lawfully and in accordance with any contract or industrial instrument. If you are unsure of your obligations, or whether you can rely on any exclusion for unfair dismissal claims, obtain professional advice.