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Terminating someone's employment is usually stressful and upsetting for everyone concerned,
so it's always important to understand when and how it can be done in a fair and appropriate
manner.
There are also legal obligations, and the new Fair Work Act has increased those.
Employers have expanded responsibilities to ensure they correctly terminate employees
under the Fair Work Act.
At the same time, more employees are able to make unfair dismissal claims, while employers
have narrower exceptions when they're defending claims.
Fundamentally though, the crux of the law remains the same: a dismissal must be harsh,
unjust or unreasonable for it to be unlawful, and the primary remedy remains reinstatement.
Fair Work Australia can also order compensation of up six months of the employee's salary.
Certain classes of employees also remain excluded from unfair dismissal.
But let's turn now to focus on the changes. First, who is covered by the unfair dismissal
laws in the Fair Work Act?
An employee is covered if they have worked for 12 months for a small business, which
is one with 15 or fewer equivalent full-time positions. If you're a larger business, your
employees are covered after six months.
There's an additional hurdle for employees of small business. Even if an employee has
worked for it for 12 months, the small business will be immune from unfair dismissal claims
if it complies with the Small Business Unfair Dismissal Code.
Under the Fair Work Act, a dismissal will not be unfair if an employer can show that
it was a genuine redundancy. This is a narrowing of the genuine operational reasons exception
under WorkChoices.
So what makes it a genuine redundancy? It's genuine if the employee's position is no longer
required because of the business' operational requirements; and the employer has complied
with any consultation obligations that it might have in an enterprise agreement or other
industrial instrument.
What is important though, is that a dismissal will not be a genuine redundancy if it would
have been reasonable for the employer to redeploy the employee within the employer's business.
What's really striking is that this includes redeployment within an associated entity of
the employer's business. The implications of this are far-reaching,
and they are particularly significant for large companies.
Another important change is that the time limit for an employee making an unfair dismissal
application has been reduced from 21 to 14 days, so they have to make that decision quickly.
We think that these changes will mean a sharp increase in the number of unfair dismissal
claims, but these claims may largely be dealt with in administrative conferences with no
formal hearings.
The best way to avoid claims of unfair dismissal is to make sure that your organisation and
your people really understand their obligations under the Fair Work Act when terminating someone's
employment.
That means reviewing policies. Because redeployment now has a broader meaning, it's really important
that your HR managers think about vacancies and suitable positions within related companies
when seeking to make an employee redundant.