Before terminating or making an employee redundant, employers should ensure they are familiar with their obligations under the Fair Work Act 2009 (Cth) (the Act). An employee can file an unfair dismissal claim if an employer unfairly terminates the employment agreement or improperly makes them redundant. We discuss some important factors employers must keep in mind when considering ending an employment relationship.
What is a Redundancy?
An employer can make an employee redundant when the position is no longer required. For instance, a restructure of the business or changes to how they operate. Employers must meet the requirements of the Act, relevant award or enterprise agreement when making a worker redundant.
Under the Act, an employee is not entitled to a redundancy payment if they are:
- employed for a specified period, task or season which comes to an end;
- terminated for some reason other than redundancy;
- employed for less than 12 months;
- employed in a small business (i.e. less than 15 employees);
- a casual employee; or
- transferred to a new employer.
What Must the Employer Pay?
The employer should calculate the redundancy payout by reference to the employee’s years of service. Employers must pay redundancy in addition to any entitlement to notice (or payment in lieu). The table below outlines redundancy pay periods for an employee’s years of service.
|Employee’s Years of Service||Redundancy Pay Period|
|Between one and two years||Four weeks|
|Between two and three years||Six weeks|
|Between three and four years||Seven weeks|
|Between four and five years||Eight weeks|
|Between five and six years||Ten weeks|
|Between six and seven years||Eleven weeks|
|Between seven and eight years||Thirteen weeks|
|Between eight and nine years||Fourteen weeks|
|Between nine and ten years||Sixteen weeks|
|Ten years and over||Twelve weeks|
Can an Employer Use Redundancy as a Defence to an Unfair Dismissal Claim?
A ‘genuine redundancy’ is a defence to an unfair dismissal claim and is where:
- an employer no longer requires anyone to perform the employee’s job due to operational changes within the organisation; and
- the employer has met any requirements under the relevant award or enterprise agreement; and
- it is not possible for the employer to provide the employee with a new role within the business or “associated entity” of the employer.
In Gamboni v Bendigo and Adelaide Bank Ltd  VSCA 92, the employment contract contained a detailed description of the responsibilities and duties of the position. Even though the employer offered the employee a comparable senior position, the Commission held the previous role was nonetheless made redundant.
What is an Unfair Dismissal?
An employee can apply for unfair dismissal where the termination is deemed ‘unfair.’ The Fair Work Commission will consider whether the employer gave the employee:
- a valid reason for dismissal;
- an opportunity to respond to the employer’s reasons for dismissal;
- prior warnings about their conduct; or
- a support person present at the meeting in which they discussed the dismissal.
An employee cannot bring a claim for unfair dismissal if they earn more than the high-income threshold (currently $138,900). The Commission will consider the following when determining whether the threshold will apply:
- employee’s salary;
- any additional amounts the employer paid on the employee’s behalf; and
- the value of any non-monetary fringe benefits.
The threshold does not include:
- overtime; or
- performance-based bonuses.
An employee must commence an unfair dismissal claim within 21 days of the employer terminating their relationship.
What is a Constructive Dismissal?
Constructive dismissal occurs when an employer unfairly varies an employee’s working conditions, ultimately forcing them to resign, for example:
- giving the employee an ultimatum to ‘resign or be dismissed’;
- changing an employee’s role which results in a demotion as well as significant reduction in their remuneration or duties;
- restricting access to equipment or information that is necessary for the employee to fulfil their role; or
- altering the employee’s working arrangements where such changes are unfair, such as the hours or days the employee works.
If an employee can prove that the employer’s actions forced their resignation, they can also bring an unfair dismissal claim against the employer.
What is a Summary Dismissal?
An employer can terminate an employment agreement at any time without notice if they can prove serious misconduct has taken place (i.e. summarily dismiss an employee). Under the Fair Work Regulations 2009 (Cth) (Regulations), serious misconduct is:
- wilful or deliberate behaviour that is inconsistent with the employee continuing their employment agreement;
- conduct that puts someone’s health and safety at risk or damages the reputation, viability or profitability of the business.
Serious misconduct can include any the following:
- theft, fraud or assault while working;
- being intoxicated at work;
- refusing to follow any lawful and reasonable instructions from the employer that is consistent with the employee’s employment agreement.
If you have any questions about your obligations under the Fair Work Act or need advice on terminating an employment agreement, get in touch with LegalVision’s employment lawyers on 1300 544 755 or fill out the form.
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