In the last of the HR Highlight Series on Unfair Dismissal, this week in Part 6, we will explore the outcomes of all of the activity around Unfair Dismissal.  We will explore the remedies – what exactly can an employee seek and be awarded as a remedy to an unfair dismissal, as well as the actual statistics for the last financial year, and for the crazy year that has been 2020 to date.  We will tease out from the data the likelihood of a matter going to the Commission, as well as the average payouts at each stage.

Unfair Dismissal Process Review

As outlined earlier in the series on HR Highlights on Unfair Dismissal, Part 1: A Fair Dismissal (procedural fairness) https://acapmag.com.au/2020/07/hr-highlight-unfair-dismissal-series-part-1-what-does-fair-dismissal-look-like/ and Part 2: Claim of Unfairness (responding to a claim) https://acapmag.com.au/2020/07/hr-highlight-unfair-dismissal-series-part-2-claim-of-unfairness/, when an employee believes that the end of the employment relationship was unfair they have the right to lodge an unfair dismissal claim. 

As explored in Part 3: The Conciliation Conference  https://acapmag.com.au/2020/07/hr-highlight-unfair-dismissal-series-part-3-the-conciliation-conference/ when a claim is received the Conciliation Conference is touted as the last point at which the parties can come to an agreed Settlement before the matter is passed to a Hearing and a Commissioner will make a decision and someone will be at fault. Conciliation Conferences will either result in a Settlement or in a continuing dispute…one that is on its way to a Hearing.

As covered in Part 4: After Conciliation https://acapmag.com.au/2020/07/hr-highlight-unfair-dismissal-series-part-4-after-conciliation/ there are two pathways after Conciliation; one if there is a Settlement, the other if there is no Settlement.

As we saw in Part 5:  Preparation for Hearing https://acapmag.com.au/2020/08/hr-highlight-unfair-dismissal-series-part-5-preparation-for-hearing/ there comes a time where it is appropriate to seek counsel and to arrange the evidence and witnesses…all in preparation for the (thankfully) rare Unfair Dismissal Hearing

This weeks instalment will focus on the available remedies for an unfair dismissal and then the statistics around unfair dismissal for the 2018/2019 financial year, and for the three quarters to 31/3/2020.  It is important to note that the results for the fourth quarter have not been released, anecdotally however, employer organisations are reporting between a 2.5 and 6 times increase in the number of claims they have processed in April, May and June 2020.

Remedies when a Dismissal is UNFAIR
If a dismissal is determined at a Hearing to be Unfair, then there are three possible outcomes or Remedies.  The employee can be reinstated (get their job back), the employee can be compensated (or paid a monetary amount), or the employee can receive no remedy order (even if the dismissal was unfair…more on this later).

Reinstatement is not a common remedy to be awarded, this is because it is only appropriate to award in cases where the employment relationship has not completely broken down, and the process of unfair dismissal (and indeed the dismissal in the first place) generally creates a situation where reinstating employment is untenable.

Compensation is a much more common remedy to be awarded.  The Commission will only award compensation if appropriate, and must follow a particular formula, that can mean that after application of the formula the employee does not get awarded any money at all.  It is a misconception and a myth that the Commission can award money to an employee for general hurt, humiliation or distress – it cannot.

The Commission is restricted in the amount of compensation that they can award in any unfair dismissal – this is called the compensation cap.  The maximum amount that can be awarded is the lower of either $76,800 (for 1/7/2020-31/6/2021) or 26 weeks of pay.  So if the employees annual salary was $50,000 per annuum prior to the dismissal then 26 weeks pay is $25,000.  As $25,000 is less than $76,800 then $25,000 is the maximum that the employee can be awarded for an unfair dismissal.

When the Commission determines that the dismissal was unfair, and that compensation is appropriate it then must apply a formula to determine how much compensation to award.  The formula requires the Commission to consider certain things in order;

  • How much money the employee would have earned if they had not been unfairly dismissed (including how long they could reasonably expect to be employed given their status, previous warnings etc)
  • Less any money that the employee has earned since they were unfairly dismissed (including Workers Compensation)
  • Any Contingencies (these are other matters the Commission considers relevant) including; a lowering of earnings due to taking a lower paying job, or a higher job, illness, injury and other elements that impacted actual amount earnt after being unfairly dismissed
  • Any Misconduct, as part of employment or after employment ended, will be considered by the Commission and if found will lead to a reduction in the amount of compensation awarded
  • Then the impact that any compensation awarded will have on the viability of the business (and the Commission may reduce the awarded amount because of this)

The figure that the Commission comes up with having applied this formula is then compared to the compensation cap.  If the amount the Commission came up with is less than the cap then that is the amount that will be awarded.  If the amount the Commission came up with is more than the cap then the cap is the amount that will be awarded.

If in our example the Commission decided the dismissal was unfair, and that, due to the status of the employee, the previous warnings, the misconduct and the money the employee has earned since the dismissal, the employee should be awarded $5,000 then that is the amount that would be awarded, as $5,000 is less than the $25,000 compensation cap in our example.  If on the other hand the Commission decided that the employee should be awarded $42,000 then the amount awarded would be reduced to the level of the compensation cap ($25,000), because the Commission can not award higher than the appropriate compensation cap.

It is important to understand that there is a requirement on employees to take reasonable steps to reduce their losses.  This means they need to actively look for, and not reject appropriate, work.  If an employee does not meet the requirement to take reasonable steps to reduce their losses then the amount of compensation they will receive will be lowered by the Commission (the business will pay less).  Reasonable steps does not mean selling off their assets to live, but it does mean that they must be active and genuine in the job search.

Unfair Dismissal Statistics

The statistics for unfair dismissal claims, conciliations, settlements and hearings are published in the Fair Work Commission Annual Report in detail, and in the Quarterly Reports in summary.  These statistics highlight that the majority of claims are settled well before a hearing or decision by the Commission, and that of the ones that make it to a decision from the Commission, the vast majority are dismissed or found to be fair dismissals, meaning that no remedy at all is awarded.

2018/2019 Annual Report

The 2018-2019 Fair Work Commission Annual Report shows that as at 30/6/2019, in the preceding year;

  • 13,928 unfair dismissal claims were lodged
  • 2,560 were settled before they reached the Conciliation Conference
  • 8,161 were settled at the Conciliation Conference stage
  • 1,927 were settled after the Conciliation Conference stage and before the Hearing
  • 46 were settled after the Hearing and before the Commission handed in a Decision
  • 728 were concluded as a result of a Decision of the Fair Work Commission

Of the cases that concluded as a result of a Decision of the Fair Work Commission;

  • 353 were dismissed on administrative grounds (including non participation by the employee)
  • 146 were dismissed because the jurisdictional objections of the employer were upheld
  • 89 were assessed on the merits and found to be fair dismissals
  • 140 were assessed on the merits and found to be UNFAIR DISMISSALS – that is 1% of all claims are determined to be UNFAIR – and only 96 received compensation as an awarded remedy

Or to put it another way;

  • 91.14% of claims are settled before the Commission makes a Decision
  • 3.25% of claims are withdrawn
  • 5.61% of claims make to the stage of a Commission Decision and of those;
    • 68.54% are dismissed for administrative or jurisdictional grounds
    • 12.23% are found to be FAIR
    • 19.23% are found to be UNFAIR 

The Report also highlights some interesting statistics;

  • that and only 0.68% of all Unfair Dismissal claims are were awarded compensation as a remedy by the Commission
  • that the average time between lodgement (which must happen no more than 21 days after dismissal) until the Conciliation Conference is 32 days
  • that 4,700 (or 33.7%) of all unfair dismissal claims came from employees whose employer had less than 100 staff

How much did the employees get???

From the Annual Report the median award of compensation from the Commission in a case that goes all the way to Hearing and gets a Decision is $8,704 or the equivalent of 8 weeks pay. 

This is only part of the story however.  As the vast majority of claims are settled well before the Commission makes a binding Decision it is important to understand the level of compensation that is agreed by the parties at the earlier Conciliation Conference stage.

The Report shows that of the 8,161 claims that were settled at the Conciliation Conference stage, 6,627 (81.2%) had compensation as an element of the settlement. 

Of these Conciliation Conference settlements with compensation – 6,627 in total – 5 ,543 (83.64%) settled for less than the median Commission awarded level including 4,404 (66.46%) of these cases settling for less than 1/2 of the median Commission awarded level. 

2019/2020 Statistics

The Annual Report for 2019/2020 will not be published for some time, but the Quarterly Reports for Q1, Q2 and Q3 shed some light on the trend for this most recent year.  It is important to note that the results for the fourth quarter have not been released, anecdotally however, employer organisations are reporting between a 2.5 and 6 times increase in the number of claims they have processed in April, May and June 2020, so it is anticipated that there will be significant jump shown in these numbers once Q4 is released.

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Takeaways

The message that the statistics bare out is that often the reality of the unfair dismissal landscape is not what either party expects it to be. 

Employees tend to think that they will “take the employer to the cleaners” when the reality is that Decisions finding unfairness are only made in a fraction of cases, and even then not all of them receive compensation, and when they do the compensation is significantly lower than many employees anticipate.  The majority of cases are settled as part of the conciliation process, which requires employees to proactively engage in finding a mutually beneficial settlement if one is to be reached so a “get em” approach is not helpful.

Employers tend to think that because they had a valid reason for termination that they are protected, but the reality is that many businesses, when faced with the long, difficult and oftentimes expensive process of preparing for and attending a Hearing, opt instead to settle at the Conciliation stage, and often times for more than the Commission likely would have awarded.

The bottom line is that information and a clear understanding of the process helps smooth the process along, avoids unnecessary delays and actions, and can assist in minimising disappointment due to unreasonable expectations.

More information

For more on Unfair Dismissal see the Fair Work Commission website at;

https://www.fwc.gov.au/termination-of-employment/unfair-dismissal

For the detailed Annual Report see;

https://www.transparency.gov.au/annual-reports/fair-work-commission/reporting-year/2018-2019-38

For the Quarterly Reports see;

Here to Help

HR Highlights are things to consider, implement and watch out for in your business. They are provided as general advice and you should seek further advice on your situation by  emailing employment@acapma.com.au to get in contact with one of ACAPMA Workplace Relations Professionals, its free for members.

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Elisha Radwanowski BCom(HRM&IR)

Executive Manager for Employment and Training

ACAPMA