Unfair Dismissals: Lessons From A Recent Case

A recent case highlights the importance of fair, transparent and well-documented dismissal processes, according to HVIA Employer Assist provider Industry Legal Group.

What Is Unfair Dismissal?

Unfair dismissal occurs where an employee makes an unfair dismissal remedy application and the Fair Work Commission (FWC) finds:

• The employee was dismissed;
• The dismissal was harsh, unjust or unreasonable;
• The dismissal was not a case of genuine redundancy; and
• Where the employee was employed by a small business (business that employs fewer than 15 employees), the dismissal was not consistent with the Small Business Fair Dismissal Code.

To be eligible to make an application, the employee must be a national system employee and have completed the minimum employment period of six months (or 12 months if the employer is a small business employer).

In addition, if the employee’s earnings are more than the high-income threshold (currently $175,000 per year), they must be covered by an award or enterprise agreement to be eligible.

The application must be lodged with the FWC within 21 days after the dismissal takes effect.

The FWC may order reinstatement or payment of compensation if they find that the employee was unfairly dismissed. Compensation is intended to compensate the employee in lieu of reinstatement for losses reasonably attributable to the unfair dismissal (e.g. lost income).

The FWC notes that median compensation ordered is between five to seven weeks’ pay. The maximum compensation that the FWC can order is the lower of half the employee’s annual wage or the compensation cap which is $87,500 for the 2024-2025 financial year.

The compensation can be reduced if the FWC finds that the employee did not suffer any financial loss or the employee deserves a lower amount due to misconduct.

Applications can be settled at conciliation or after negotiations between the employee and employer (or their representatives). If the matter does not settle, the application proceeds to a hearing.

While an employee does not always receive compensation and the median is relatively low, recent cases where near maximum penalties have been ordered show how serious an unfair dismissal claim can be.

Case Example: Crowley v Modcon Group

In the recent case of Shaun Crowley v Modcon Group Pty Ltd [2024] FWC 1423, the FWC found in favour of the employee (applicant), awarding him $71,187.07 in compensation (near maximum compensation for unfair dismissal).

This case underscores the critical importance of procedural fairness, substantiated reasons for dismissal, and the need for employers to follow clear and transparent processes when terminating employees. This case provides key lessons for all employers when considering terminating employees.

Background Of The Case

The applicant was employed by the employer (respondent) in a managerial role and was terminated from his employment for alleged serious misconduct and causing financial harm to the business.

The applicant disputed the allegations, claiming that they were never communicated to him prior to the termination, making his dismissal procedurally unfair.

What Is Serious Misconduct?

Serious misconduct involves an employee deliberately behaving in a way that is inconsistent with continuing their employment

Examples include causing serious and imminent risk to the health and safety of another person or to the reputation, viability or profitability of their employer’s business, theft, fraud, assault or sexual harassment.

Underperformance is not classified as serious misconduct.

Employers should be careful not to miscategorise employee issues as serious misconduct. Terminating an employee due to serious misconduct if the conduct is not that severe, can lead to difficulties in proving the termination was just and reasonable.

Key Issues And Findings

Lack of Valid Reason for Dismissal: The FWC found that the respondent failed to substantiate the allegations of serious misconduct against the applicant. The FWC highlighted that a valid reason for dismissal must be sound, defensible and well-founded. In this case, the allegations were deemed unreliable and unsupported by strong evidence.

Procedural Unfairness: The FWC found that the respondent’s dismissal process lacked transparency, and key issues were not communicated to the applicant for his response prior to his termination. The FWC emphasised that procedural fairness is a cornerstone of lawful dismissal. Employers must ensure that employees are informed of the reasons for their dismissal and given a chance to respond.

Harsh and Unreasonable Dismissal: The FWC found that the dismissal was harsh and unreasonable. The FWC noted that per the evidence provided at Hearing, the dismissal appeared to be due to internal workplace politics, rather than being driven by genuine misconduct. The FWC highlighted the importance of employers ensuring that dismissal decisions are based on objective and substantiated reasons rather than personal grievances.

Lessons For Employers

Ensure Clear Communication: Employers must clearly communicate any performance or conduct issues to employees. This includes providing specific examples of the behaviour in question and documenting all warnings and discussions, whether formal or informal.

Follow Procedural Fairness: Procedural fairness involves informing the employee of the reasons for dismissal, allowing them to respond and genuinely considering their input before making a final decision. Employers should have a structured process in place for managing performance and conduct issues, ensuring that employees are treated fairly and transparently throughout. We would recommend following a show-cause process, where the employee is provided with a letter outlining the performance and conduct issues and providing them with a reasonable opportunity to provide a response in writing.

Document Everything: Proper documentation is crucial. This includes records of performance reviews, warnings, meetings and any other relevant interactions. In the absence of clear documentation, it becomes challenging to defend the decision to dismiss an employee if contested. We recommend taking notes of all conversations around performance, and documenting instances of poor performance or misconduct as thoroughly as possible.

Seek Legal Advice When Needed: Especially in complex situations involving senior employees or serious allegations, it is advisable to seek legal advice to ensure that all procedures comply with employment law. Legal counsel can provide guidance on how to handle the situation appropriately and minimise the risk of unfair dismissal claims. Seeking legal advice early in the process may help reduce stress and mitigate legal risk by ensuring that you are following the proper procedures.

Reflect on Employee Management Practices: Employers should regularly reflect on and improve their employee management practices. Regular training for management on handling performance issues and implementing fair dismissal procedures can help prevent disputes around handling misconduct and performance issues.

Conclusion

The case of Shaun Crowley v Modcon Group Pty Ltd highlights the importance of fair and transparent dismissal processes. Employers must ensure that they have valid, well-documented reasons for dismissal and that they follow procedural fairness. By doing so, they can protect themselves from unfair dismissal claims and maintain a fair and respectful workplace environment.

Member Service

Employer Assist provides advice on all aspects of employment law. Contact Employer Assist on (07) 3376 6266 or hvia@employerassist.com.au if you have any questions relating to this article or to discuss any employment issues that arise in your business. This article is intended for information purposes only and should not be regarded as legal advice. Please contact Employer Assist for advice.