Unfair Dismissal and Constructive Dismissal

Unfair Dismissal and Constructive Dismissal

When you hire an employee, you don’t do so with the expectation that one day you will need to terminate their employment.  You hire them in the hope that they will remain with the company for at least a couple of years and that they’ll either be promoted within the company, or they’ll move on now up skilled from their time spent in employment for you.

Sometimes things don’t go to plan, and you find yourself in the difficult position of having to end the employment relationship. However, terminating an employee is not a straightforward endeavour and sometimes without intending to, you can drift into taking action that might constitute unfair dismissal.

But what does constitute an unfair dismissal? And what’s constructive dismissal? This blog will attempt to answer some of the most asked questions about both.

What is unfair dismissal?

Unfair dismissal is when an employee’s employment ends in a way that is unjustified, harsh, or unreasonable. Most commonly the Fair Work Commission (the Commission), who oversees employment regulations around the country will consider a person’s termination unfair if they were dismissed and the dismissal was harsh or unreasonable. Unfair dismissal does not include genuine redundancy.

What constitutes harsh or unreasonable dismissal?

The Commission deems that dismissal will be unfair if there was not a valid reason for the employee’s termination, or if the employee did not have the chance to respond (known as natural justice or procedural fairness), or if the company’s own policies and procedures were not followed.

The Commission may also consider it unfair dismissal if the employee was not allowed a support person at meetings and if they had not been warned previously about their performance. In making a determination, the Commission also considers the size of the business and any other information that might be relevant.

Demotions without consultation and without notice equivalent to the termination notice periods set down in Awards and the Fair Work Act may also constitute an unfair dismissal regardless of the fact that the employee continued to be employed by the company.

What is constructive dismissal?

Recently constructive dismissal has been called ‘Quiet Firing’. It is a forced resignation. Constructive dismissal can occur when an employee resigns from their job but was effectively forced to because of the employer’s conduct towards the employee. If your employee has to resign because of your conduct, this may constitute constructive dismissal.

Examples of conduct towards an employee which may be considered constructive dismissal if they resign include asking an employee to resign, failing to provide feedback, withholding information relevant to the successful performance of their position, breaching the employment contract, creating and enabling a toxic work culture, failing to manage underperforming staff, changing their position without consultation, reducing their pay, demotion.

What is unlawful termination?

Unlawful termination is when an employee is terminated for a reason that is prohibited against under the Fair Work Act.

What are the prohibited reasons?

Prohibited reasons include:

  • Being temporarily absent because of illness or injury
  • Trade union membership including not being a member
  • Participating in trade union activities outside of work hours
  • Participating in trade union activities, with consent, during work hours
  • Seeking office with a trade union or acting as a union representative
  • Race, skin colour, sexual orientation, sex, age or physical or mental disability, marital status, family status, pregnancy, political opinion or religion.
  • Taking maternity or parental leave
  • Engaging in voluntary emergency management activity
  • Raising a grievance

How much notice do I have to give?

The minimum notice period depends on how long the employee has been working for you.

Length of Continuous Service Period of Notice
Not more than 1 year 1 week
More than 1 year, not more than 3 years 2 weeks
More than 3 years, not more than 5 years 3 weeks
More than 5 years 4 weeks
If you are over the age of 45 years and have at least two years’ service, you are entitled to one additional week’s notice of termination from the employer.

In some situations, you may be able to pay them the equivalent wage in lieu of notice.

Some employees are not entitled to any notice, for example, if your employee is a casual then you don’t have to give them any notice. If you have found them guilty of serious misconduct such as fraud, assault, theft or refusal to carry out the responsibilities of the position then again, no notice is necessary.

Regardless of the reason for termination, you do need to ensure that you treat the individual fairly and that you pay them any applicable entitlements.

What entitlements do I have to pay?

When you dismiss an employee, they are entitled to a final payment. The final pay will include any unpaid wages and accrued entitlements such as holiday pay, superannuation and any long service leave. If applicable you will be required to pay redundancy or make a payment in lieu of notice. In most cases you have to make the final payment to a terminated employee within seven days however in some situations it’s appropriate to make the payment in the next pay period.

If you have any questions about terminating an employee and would like advice, get in touch at megan@meganmacallister.com.au or via the Contact Form.



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