Australia: Unfair dismissal payouts in Australia

Some employees may want to claim unfair dismissal payout if they're wrongfully terminated in their workplace. This essentially means that an employer has treated an employee unfairly which led to his/her termination. However, it's important to take extra precautionary measures since lodging claims could involve:

• Money (employers who don't pay their employees on time. This may also include employers who don't give a resigning employee's backpay)
• Reputational damage (defamatory statements may lead to reputational damage)
• Principal payments
• Calculating basic and compensatory awards
• Identifying an employee's gross weekly pay
• Revenge (Some employers may fire employees out of spite)
• Unpaid commissions

Unfair dismissal claims may cause legal disputes between employers and employees that can further escalate into unfavourable situations. Making claims for unfair dismissal may also involve a lot of complex and difficult procedures. Hence, it's important to read this article that discusses unfair dismissal payout in Australia.

What Does the Fair Work Commission Say?

According to the Fair Work Commission (FWC), a dismissal that breaches general protection provisions for employees is unfair. The FWC is Australia's independent employment tribunal that is in charge of ensuring that minimum wages and working conditions are properly and legally upheld. This includes a variety of other workplace functions and regulations, for instance, an unfair dismissal payout.

The FWC may order compensation if they find out that the dismissal is unfair. If a person is eligible for both applications, he or she must decide which option will result in the best possible outcome. An unfair dismissal occurs when an employee files an unfair dismissal remedy application and the Fair Work Commission determines that:

• Employee was dismissed
• The dismissal was harsh, unjust or unreasonable
• The dismissal was not a case of genuine redundancy
• The dismissal was not consistent with the Small Business Fair Dismissal Code (for employees in small businesses who has less than 15 employees)

An employee does not always receive an unfair dismissal payout even if the dismissal was unjust. Before the FWC orders compensation, they must first decide whether the employer should reinstate the employee (bring the employee's job back). The FWC may refuse reinstatement if the:

• Business no longer operates
• Employee cannot work due to an illness or injury
• Both the employer and employee cannot work together because their work relationship has broken down
• There is a high chance that the employer may dismiss the employee again after reinstatement

Read: Mitigating Employment Issues During COVID-19 Pandemic

Unfair Dismissal vs Wrongful Dismissal

People who talk about an unfair dismissal payout may often interchange it with a wrongful dismissal. Indeed, these terms are quite similar when using them in a general sense. However, there are key differences between these two types of dismissals. Below is a table that differentiates the two.

Eligibility for an Unfair Dismissal Claim

An employee can make an application for unfair dismissal claim if they:

• Have completed the required amount of time spent on the job. The minimum period is six months if the employee works for an employer with 15 or more employees. While the minimum period is 12 months if the employer has fewer than 15 employees.

A simple headcount of all employees is used to calculate the number of employees. This includes employees who are employed on a regular and systematic basis at the time of dismissal.

• Earn less than the high-income threshold which is currently $162,000. This figure is adjusted annually every 1st of July. Can an employee still make a claim for an unfair dismissal payout if they earn more than the high-income threshold? Yes. However, they will need to prove that a modern award or enterprise agreement covers their employment.
• Have been dismissed. Casual employees who meet the above eligibility requirements may file an unfair dismissal claim.
• Were employed on a regular and systematic basis
• Had a reasonable expectation of remaining with their employer.

Employees may also lodge claims regarding constructive dismissal. Some common examples of contrsuctive dismissal may include:

• Demoting employees
• Cutting pay without reason/notice
• Employer acting unlawfully (breaching health and safety rules)
• Bullying or harassing employees
• Changing place of work without notice or reason

Unfair Dismissal Compensation

It is critical to understand that most employees receive only a basic award or compensation for unfair dismissal. The average compensation ranges from 6 to 8 weeks. The FWC may order an employer to pay the maximum amount (the compensation cap) for less than 0.4% of applicants. But, how much can the FWC order an employer to provide? The FWC may only order the lesser of these two amounts;

1. Half of the employee's annual wage; or
2. The compensation cap which is $79,250 for 2021-2022.

Unfair Dismissal Case Examples Regarding Payments

1. Compensatory Award Within the Cap

For instance, Judas earned $50,000 per year before his employer fired him. Half of Judas' salary is $25,000 which is lower than the current compensation cap of $79,250. So Judas' salary cap is $25,000 which is lower than his salary and the compensation cap. In this case, the Commission determines Michael's pay to be 6 weeks' salary, or $5,770. Because this falls within his $25,000 cap, the Commission orders the employer to pay him a compensatory award of $5,770.

2. Compensatory Award Over the Cap

For instance, Gregory earned $50,000 annually before his employer fired him. Half of Gregory's annual salary is $25,000, and the compensation cap is $79,250. So Gregory's salary cap is $25,000 which is lower than his salary and the compensation cap. While this does not happen often, the Commission determines that Gregory's compensation exceeds his salary cap of $25,000. The Commission orders Gregory's employer to pay her $25,000 in restitution.

3. Enterprise Agreement That Protects a High-income Employee

Angie is a wealthy woman who earns $180,000 per year, but was also fired from her work. She then decided to file an unfair dismissal payout claim because an enterprise agreement covers her employment. Half of her annual income is $90,000 which is higher than the compensation cap of $79,250. The Commission calculated a compensation worth $93,000. Because this exceeds the limit, the Commission orders the employer to pay her $79,250.

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.