Unfair dismissal and wrongful dismissal are often used interchangeably. However, they are not the same and there are key differences between the two. In simple terms, the primary difference between them is one is statute based (that is legislation/laws made by Parliament) and the other is common law based (that is, law declared by Judges). This blog explores, in more detail, the eligibility requirements for both and the remedies available under either unfair dismissal or wrongful dismissal.

What is unfair dismissal?

Section 385 of the Fair Work Act 2009 (Cth) (>FW Act>) says a person has been unfairly dismissed if the Fair Work Commission (>FWC>) is satisfied that a person has been dismissed, and the dismissal:

  • was harsh, unjust, or unreasonable; and
  • was not consistent with the Small Business Fair Dismissal Code; and
  • the dismissal was not a case of genuine redundancy.

Section 387 of the FW Act provides for a non-exhaustive list of matter the FWC must consider when deciding if a dismissal is unfair, including:

  • whether there was a valid reason for the dismissal related to the employee's capacity or conduct?
  • Whether the employee was notified of the reason?
  • Whether the employee was given an opportunity to respond?
  • If the employee was sacked for poor performance, had they been warned about the poor performance?

Eligibility requirements for unfair dismissal

To be entitled to make a claim for unfair dismissal under the FW Act, the worker must have been an employee of a national system employer. A national system employer includes, but is not limited to, private enterprise employers and Commonwealth authorities.

It's important to note that state and local government employers are not national system employers.

If an employee satisfies the national system employer requirements, they are eligible to make an application for unfair dismissal if:

  • they have completed the minimum period of employment, being at least:
    • 6 months; OR
    • 12 months if the employee worked for a small business (less than 15 employees).
  • they earn less than the high-income threshold ($162,000.00), or
  • a modern award covers their employment; or
  • an enterprise agreement applies to their employment.

Section 387 of the FW Act provides the criteria for whether a dismissal is harsh, unjust or unreasonable and a number of considerations are taken into account. Those are:

  • 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 any reason related to their capacity or conduct;
  • any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to the dismissal;
  • if the dismissal related to unsatisfactory performance by the person, whether the person had been warned about that unsatisfactory performance before the dismissal;
  • the degree to which the size of the employer's enterprise would be likely to impact on the procedures followed in effecting the dismissal;
  • the degree to which the absence of dedicated human resource management specialists or expertise in the business would be likely to impact on the procedures followed in effecting the dismissal; and
  • any other matters that the FWC considers relevant.

Remedies for unfair dismissal

If a person is successful in their claim for an unfair dismissal, there are two remedies available.

The first is reinstatement. The FWC may make an order to reinstate a person into their job, however, this is not common.

The more common remedy is compensation. This is ordered where an order of reinstatement is determined to not be appropriate due to the breakdown of trust and confidence between the employer and employee.

What is wrongful dismissal?

Wrongful dismissal is an action brought against an employer at common law for a breach of contract.

The Encyclopaedic Australian Legal Dictionary defines wrongful dismissal as:

"an employer's termination of an employee's employment otherwise in accordance with the terms of the contract of employment, award or statute."

Common examples of wrongful dismissal are when an employer:

  • dismisses an employee without complying with the notice period stipulated in the employment contract;
  • dismisses an employee before the end date of the contract;
  • dismissing an employee without providing ''reasonable notice''.

Remedies for wrongful dismissal

If a person is found to have been wrongfully dismissed, damages (compensation) may be awarded.

The main basis for litigation for wrongful termination (wrongful dismissal) is in respect to contracts which do not provide for the precise period of notice required by an employer to terminate the contract.

The High Court, in the judgement of their Honours Brennan CJ, Dawson & Toohey JJ in Byrne v Australian Airlines [1995] HCA 24 relevantly held:

"In the absence of any provision in the award and of any express provision in the contract of employment the law would regard it as a legal incident of the contract that it should be terminable upon reasonable notice or summarily for serious breach.''

In cases where a contract is silent on the period of notice required to terminate a contract of employment or provides only a minimum, a term may be implied into the contract that provides for what the court considers in the circumstances of the case to have been "reasonable notice''. In such circumstances there is a contractual "gap to fill" and the law will imply into the contract a term to the effect that the contract is terminable by either party on reasonable notice to the other: see Westpac Banking Corporation v Wittenberg [2016] FCAFC 33 at [238] and Byrne v Australian Airlines Ltd [1995] 185 CLR 410, 425 and 446.

This remedy is not available where a precise, defined notice period is expressly provided for in the contract.

The reasonableness of the notice is a question of fact and is determined at the time at which the notice is given, not at the time at which the contract was made: Martin-Baker Aircraft Co. Ltd. v Canadian Flight Equipment Ltd [1995] 2 QB 556. at p. 581.

It is well established that a term which expressly provides for a minimum period of notice leaves room for the implication of reasonable notice of a longer period: see for example McAlister v Yara Australia Pty Ltd [2021] FCCA 1409 or Windross v Transact Communications Pty Ltd [2002] FMCA 145 . This applies equally to minima terms in industrial instruments: see Graske v 5KA Broadcasters Pty Ltd (1988) 55 SAIR 702.

The period of notice that may be implied, and therefore the damages that an employee in this situation may recover, is determined by the Courts on the basis of the particular employment. The high grade of the position, length of service, age of the employee, financial circumstances and responsibilities of the employee, and nature of the industry are but a few of the factors the Court can consider when determining what the period of reasonable notice of termination is appropriate in a given case.

Awards of damages in this type of claim can be significant. Some cases have seen 18 months to 2 years' wages awarded as damages, though it is more common to see periods of 6 to 9 months' notice (salary) awarded as damages.

This is also a remedy which would ordinarily occur in a costs jurisdiction, where costs will follow the event, unlike claims under the Fair Work Act. In a costs jurisdiction, the Court will usually order the unsuccessful party to pay the costs of the successful party.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.