Ending an employment relationship via a dismissal, is a nerve wracking time for a business, even when there is clear cause, and businesses are rightly concerned about “getting it right”. For most small and medium fuel businesses receiving an unfair dismissal claim is a thankfully rare occurrence, but remains a constant concern. Understanding what a fair dismissal process looks like is vital to ensuring compliance and protecting against claims. Despite best efforts however, unfair dismissal claims will be made, so it is important that the business have a clear understanding of what the process is and how to respond within the formal and exacting framework and timelines. This HR Highlight Series is a deep dive into dismissing an employee, and the process that is triggered if the employee puts in a claim for unfair dismissal.
In this, the last of the Unfair Dismissal series, 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 most recent reporting year. We will tease out from the data the liklihood of a matter going to the Commission, as well as the average payouts at each stage.
Unfair Dismissal Process Review
Throughout this Series we have explored;
In this instalment we will focus on the available remedies for an Unfair Dismissal and the statistics around Unfair Dismissals for the 2021-2022 financial year (the most recent Fair Work Commission reporting period).
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 (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 $81,000 (for 1/7/2020-31/6/2021) or 26 weeks of pay, whichever is the lower amount. 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 the lower amount, the amount that is equal to 26 weeks of pay, $25,000 is the maximum that the employee can be awarded for that particular 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.
2021-2022 Annual Report
The 2021-2022 Fair Work Commission Annual Report shows that as at 30/6/2022, in the preceding year 13,101 unfair dismissal claims were lodged.
Of those 13,101 claims;
- 11,979 were settled or withdrawn
- 1,122 were concluded as a result of a Decision of the Fair Work Commission
Of the 1,122 cases that concluded as a result of a Decision of the Fair Work Commission;
- 12 were dismissed as consistent with the Small Business Code
- 56 were dismissed on administrative grounds (including non participation by the employee)
- 467 were dismissed as frivolous or vexatious
- 372 were dismissed because the jurisdictional objections of the employer were upheld
- 128 were assessed on the merits and found to be fair dismissals
- 87 were assessed on the merits and found to be UNFAIR DISMISSALS – that is 0.66% of all claims are determined to be UNFAIR – and only 50 received compensation as an awarded remedy
Or to put it another way;
- 91.44% of claims are settled or withdrawn before the Commission makes a Decision
- 8.56% of claims make to the stage of a Commission Decision and of those;
- 80.84% are dismissed for administrative or jurisdictional grounds
- 11.41% are found to be FAIR
- 7.75% are found to be UNFAIR
The Report also highlights that and only 0.53% of all Unfair Dismissal claims are were awarded compensation as a remedy by the Commission
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 $6,701 or the equivalent of 5.25 weeks pay.
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 from this Series
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 email@example.com its free for members.
ACAPMA membership is affordable at only $810 per year for a single site and valuable with sites gaining HR and IR advice support and representation in unfair dismissal matters as well as a raft of other benefits and discounts see; https://acapma.com.au/membership/ for more information.
Elisha Radwanowski BCom(HRM & IR)