An employee must have completed a minimum period of continuous service with an employer to lodge a claim for unfair dismissal. As an employer, you must familiarise yourself with these considerations, as legal costs defending unfair dismissal claims are costly. This article explains minimum employment periods and how the Fair Work Commission will calculate a period of continuous service.
Unfair Dismissal and Minimum Employment Periods
If you dismiss an employee harshly, unjustly or unreasonably, they could lodge an unfair dismissal claim with the Fair Work Commission. However, an employee can only make an unfair dismissal claim if they:
- are covered by a modern award or an enterprise agreement;
- earn less than the maximum high-income threshold, which is $158,500 from 1 July 2021 onwards; and
- have completed the minimum employment period.
Under the Fair Work Act, the minimum employment period is:
- 12 months of continuous service for those who work for small business employers with 15 or fewer employees; and
- six months of continuous service for other employer types.
You can seek legal advice if you are unsure whether an employee satisfies the eligibility criteria to lodge a claim. Alternatively, you can complete the eligibility questionnaire on your employee’s behalf.
Important Considerations When Determining ‘Continuous Service’
The calculation of an employee’s continuous service can be affected by various factors. It is, therefore, crucial to consider the following circumstances:
Probation Period
A probation period is a trial period at the start of your employee’s full-time or part-time employment. Depending on your industry, a probation period can range from three to six months. When calculating an employee’s period of continuous service, you must include their probation period in this calculation.
Leave
When calculating continuous service, the authorised unpaid leave will not count towards service. This can include:
- parental leave;
- personal leave; and
- community service leave.
However, the leave period does not break an employee’s continuous service; instead, you include the work completed on either side of their leave.
Termination
If you dismiss an employee or your employee resigns, the period after the termination will not be considered part of their continuous service. This is the case even if your employee returns to work later. However, you should note that if your employee works out their notice period, this notice period will count towards their continuous service.
Associated Entity
Some businesses may decide to create a new business or entity and transfer their employees to that business. Obviously, it would be unfair to employees if you wipe these entitlements out simply because you decide to create a new entity or if your employee starts with the new business owner doing the same role.
Therefore where there has been a transfer of business within the meaning of the Fair Work Act, an employee’s service will be continuous.
Business Transfer
Under the Fair Work Act, where an employee is transferred from one business to another, the employee’s period of service for the original employer may count as service for the new employer. This is the case where the new employer owns the same business the employee worked for (for example, a business asset sale or sale of business), and the employee is hired by the new employer within three months of the termination of their employment with the original employer.
Even when an employee signs a new employment agreement, their continuous service will start from the date of employment with the original business owner. Where a new employer does not recognise entitlements or continuous service, the previous employer will usually make sure that all entitlements are met by them. Before signing, you should ensure that this is addressed in any sale of business agreement.
As an employer, understand your essential employment obligations with this free LegalVision factsheet.
Casual Employees and Continuous Service
A casual employee’s period of continuous service generally does not count towards their minimum employment period unless:
- you employed them on a “regular and systematic basis”; and
- during their service period, they had a reasonable expectation of continuing employment on a regular and systematic basis.
There is no clear-cut definition of what employment is on a “regular and systematic basis”. The Commission will interpret the facts and circumstances of each case to decide whether you employed a casual worker on a regular and systematic basis. If you contracted a casual employee to work an average of 28-40 hours per week, the Fair Work Commission could consider this work on a “regular and systematic basis”. As a result, a casual worker could be eligible to lodge an unfair dismissal claim.
Key Takeaways
To be eligible to lodge an unfair dismissal claim, your employee must complete the minimum employment period. Under the Fair Work Act, the minimum employment period is 12 months of continuous service for small business employers with 15 or fewer employees and six months of continuous service for other employer types. While a period of continuous service will include probation periods or transfers, it will not include the period after termination.
If you are unsure about your employee’s eligibility to lodge an unfair dismissal claim, LegalVision’s experienced employment lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
To be eligible to lodge a claim for unfair dismissal, an employee must have completed a minimum employment period. The minimum employment period is 12 months of continuous service for small business employers with 15 or fewer employees or 6 months of continuous service for other employer types.
Not all casual workers can lodge an unfair dismissal claim. Generally, casual employees can only lodge a claim if they meet the additional requirements. These are that you employed them on a “regular and systematic basis”; and that during the period of service, your employee had a reasonable expectation of continuing employment on a regular and systematic basis.
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