What is Unfair Dismissal?
Examples of ‘dismissal’
‘Dismissal’ means the employer telling the employee they no longer have a job.
For example, the employer may:
- fire an employee with or without warning for their behaviour
- fire an employee because they are not performing their job to the level required
- tell the employee their position is redundant now or on a future date.
In some cases, if the employer's behaviour forces an employee to resign, that might also be a dismissal.
What is not dismissal?
When an employee chooses to resign, this is not dismissal.
Also, an employer is not dismissing an employee just because they do not offer a new contract when:
- the old contract ends
- the employee has completed the specified task they were employed to complete
- the employee was only employed for seasonal work and the season ends.
What makes a dismissal 'unfair'
A dismissal is not always unfair. In some situations, it is fair to end an employee's employment.
When an employer dismisses an employee, the law says that they:
- should not dismiss an employee if it is harsh, unjust or unreasonable
- should not make an employee redundant if it is not a genuine redundancy
- should follow the Small Business Fair Dismissal Code (if they are a small business).
The legal definition is in section 385 of the Fair Work Act 2009.
Examples of ‘harsh’, ‘unjust’ and ‘unreasonable’ dismissal
A dismissal may be unfair if it is one, 2 or all 3 of ‘harsh, ‘unjust’ or ‘unreasonable’. This is explained in section 387 of the Fair Work Act.
Examples of ‘harsh’ dismissal
- the dismissal is an extreme response to the situation
- the dismissal has a very big ('disproportionate') impact on the employee’s economic and personal situation.
Example of ‘unjust’ dismissal
- the employee is not guilty of the action or behaviour the employer used as the reason to dismiss them.
Example of ‘unreasonable’ dismissal
- the evidence does not support the decision to dismiss the employee.
Next steps
If you are an employee and you think your dismissal meets the definition of ‘unfair’, please contact us to begin your dismissal case within 21 days (the earlier the better) of the date of your dismissal.
Please note unfair dismissal applications are only for:
- employees who have worked for 6 months in a large business or 12 months in a small business. This is the minimum employment period.
- employees who have lost their job. You cannot apply before your employer dismisses you.
- employees who are part of the national system. Examples of people who are not part of the national system are sole traders, contractors, people who work through an agency, or some government employees.
In some cases, if your employer made you redundant, or forced you to resign, you may also be able to apply.
Compensation for unfair dismissal
If the Fair Work Commission (FWC) finds a dismissal was unfair (‘harsh, unjust or unreasonable’), it may order compensation. An employee can only receive compensation for lost income ('remuneration').
An employee does not always receive compensation, even if the dismissal was unfair.
Before the FWC can order compensation, they must decide if the employer should give the employee their job back ('reinstatement').
Reasons the FWC might not order reinstatement:
- the business no longer operates
- the employee cannot work because of illness or injury
- the employer and employee cannot work together as their relationship has broken down
- the employer would probably dismiss the employee again.
Note: The FWC cannot order compensation for reasons such as pain and suffering, shock, distress, hurt or humiliation.
Average compensation for unfair dismissal
It is important to know that most employees only receive a small amount of compensation for unfair dismissal. The average is less than $10,000.
Less than 0.4% of applicants receive the maximum limit (the 'compensation cap') that the FWC can order an employer to pay.
The maximum the FWC can order is the lower of these 2 amounts:
- half of the employee’s annual wage OR
- the compensation cap, which is $79,250 for 2021-22 and changes on 1 July each year.
The FWC may reduce the amount of compensation if they find:
- the employee did not suffer any financial loss from the dismissal
- the employee deserves a lower amount because of bad behaviour ('misconduct').
The way the FWC works out compensation is complex. For full details please see: The formula to work out compensation. This considers the rules in section 392 of the Fair Work Act 2009.