Avoiding unfair dismissal claims – how employers can reduce risk
Unfair dismissal claims are one of the biggest employment law risks employers face, often resulting in costly legal proceedings, significant management time and reputational damage.
That’s why it’s essential to have fair, robust policies and procedures in place to assist in mitigating unfair dismissal claims.
At a glance:
- A dismissal may be unfair if it is harsh, unjust or unreasonable.
- Employers need a valid reason for dismissal and must follow a fair process before making a final decision.
- Clear policies, appropriate warnings and detailed records can help businesses respond to an unfair dismissal claim.
CCIWA’s Employee Relations Helpline advises on best practice to help you minimise unfair dismissal risk. For support, contact us on 08 9365 7660 or [email protected].
For legal advice or assistance responding to an unfair dismissal claim, contact Business Law WA on 08 9365 7746 or email [email protected].
Who can make an unfair dismissal claim?
An unfair dismissal claim can be lodged with the Fair Work Commission (FWC) (national system) or WA Industrial Relations Commission (WAIRC) (State system) by an employee who believes they were unfairly dismissed.
National system employers
Most private-sector employers in WA are covered by the national system. Eligible employees can make an unfair dismissal application to the FWC within 21 days of the dismissal (though the FWC can extend the timeframe due to “exceptional circumstances”).
Generally, an employee must have been employed for at least:
- Six months for a business who is not a “small business employer” under the Fair Work Act; or
- 12 months for a business who is a “small business employer”.
The employee must also be covered by an award or enterprise agreement or earn less than the high-income threshold.
Businesses should confirm if they are a “small business employer” under the Fair Work Act. If you’re not sure, contact our Employee Relations Helpline.
State system employers
Eligible employees may be able to lodge a claim to the WAIRC within 28 days. There’s no minimum length of service that a State system employee must have to be eligible to make an unfair dismissal claim. However, in determining the claim, the WAIRC must consider whether the employee was on an agreed probation period of less than three months at the time of dismissal.
Employers should confirm which industrial relations system applies before taking action. If you’re not sure, contact our Employee Relations Helpline.
What constitutes unfair dismissal?
Unfair dismissal is just one of the claims that may be available to an employee on termination. Other claims, such as for unlawful termination, breach of general protections or unlawful discrimination may also be available.
The relevant industrial tribunal deals with claims and considers the reasons for dismissal and whether the employer was fair to the employee before dismissal.
A dismissal may be considered unfair if it is:
- Harsh, unjust or unreasonable
- Inconsistent with the Small Business Fair Dismissal Code, where the employer is a small business employer (under the Fair Work Act)
- Not a case of genuine redundancy
For an employer’s decision to dismiss to be lawful, they must:
- Have a valid reason for termination; and
- Ensure the employee is afforded procedural fairness in termination
What procedural fairness encompasses
- Notifying the employee of the dismissal reason
- The employee has an opportunity to respond
- Ensuring there is no unreasonable refusal to allow the employee to have a support person present
- If the dismissal is related to unsatisfactory performance, warning the employee about that before the dismissal
- Whether the size of the employer’s business or the absence of human resource specialists would likely impact the procedures followed in the dismissal process
- Any other matters the tribunal considers relevant
How can employers reduce unfair dismissal risk?
Have a valid reason
A valid reason for dismissal must be sound, defensible and based on the employee’s conduct or capacity to perform their role.
Employers should be able to clearly explain and support the reason with objective evidence. Broad statements such as “you have a bad attitude” or “you are not a good fit” are unlikely to be enough.
Depending on the circumstances, a valid reason may relate to:
- Ongoing underperformance
- Misconduct or serious misconduct
- An inability to meet the inherent requirements of the role
The employer should investigate the issue and establish the relevant facts before deciding if dismissal may be appropriate.
Follow a fair process
The FWC and WAIRC consider both the reason for a dismissal and how the employer reached its decision.
Before dismissing an employee, employers should generally:
- Clearly explain the concerns or allegations
- Provide specific examples and any relevant evidence
- Give the employee reasonable time and an opportunity to respond
- Allow a support person to attend relevant meetings if requested
- Genuinely consider the employee’s response and any mitigating circumstances
- Avoid making a final decision until the process is complete
Holding separate meetings can help demonstrate procedural fairness. The first can be used to outline the concerns and hear the employee’s response, with a later meeting held to communicate the outcome after that response has been considered.
Related reading
- Employment law in Western Australia: a summary for employers
- Managing poor performance: employer obligations and fair process explained
- Workplace and mediation: guidance for employers
- Redundancies and terminations: know your legal obligations
Workplace toolkits and guides
- Fair Work Act Guide – practical guidance and ready-to-use templates to help employers follow fair dismissal processes, manage performance and reduce the risk of unfair dismissal claims.
- Employment Lifecycle Kit – guidance notes on managing the full employment lifecycle, including procedural fairness in disciplinary action, with template letters for written warnings and termination.
Keep clear records
Records can be critical if a dismissal is challenged.
Employers should keep copies of:
- Relevant policies and procedures
- Complaints and investigation material
- Meeting invitations and notes
- Performance plans and review outcomes
- Verbal and written warnings
- Employee’s responses
- Termination letter
Policies should also be communicated to employees and applied consistently across the business. Different treatment of employees involved in similar circumstances may be considered when determining whether a dismissal was unfair.
What if a dismissal is deemed to be unfair?
If a dismissal is found to be unfair, reinstatement is the primary remedy available to the dismissed employee.
Where reinstatement is inappropriate, the relevant industrial tribunal may award compensation, subject to a cap. It can also order the employer to restore lost pay when reinstating an employee.
Even where a claim is unsuccessful, responding can take considerable time and resources. A fair, well-documented process is therefore the best way to reduce risk.
Get support
Before dismissing an employee, contact CCIWA’s Employee Relations Helpline on 08 9365 7660 or email [email protected] for practical guidance.
For legal advice or assistance responding to an unfair dismissal claim, contact Business Law WA on 08 9365 7746 or email [email protected].
This article is authorised by Business Law WA, an incorporated legal practice and wholly owned subsidiary of CCIWA. The contents of this article is general in nature and is not legal or professional advice and should not be relied upon as such.
