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The Importance of Understanding Wrongful Dismissal Laws as an Employer

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Did you know employers can be held liable for wrongful dismissal? Many businesses, particularly startups, may not know much about employment law now wrongful dismissal laws.

When you have staff, you need to know the laws and what is deemed wrongful dismissal.

There are many reasons why employees might want to take legal action against their employer for wrongful dismissal. The most common cause is when they believe that they were unfairly dismissed.

Employers can be held liable for wrongful dismissal, so it is essential to understand the laws in your area.

With legal action, what’s the worst that can happen to your business? A judgment favouring a dismissed employee could result in significant damages, including loss of income and potential future earnings.

Employers must take all necessary precautions when firing employees to be not vulnerable to being sued for wrongful dismissal by former employees.

Understanding these laws will help ensure that you don’t pay out compensation unnecessarily and avoid any other negative repercussions from an employee fired without good reason.

What Classifies as Reasonable Dismissal?

In Australia, your employer cannot terminate your employment unless they have reasonable grounds for doing so.

Reasonable grounds are defined as misconduct or serious breach of the contract. However, this can be very difficult to prove, and employers often get it wrong.

What is Serious Misconduct?

Serious misconduct is in itself a term that needs to be explained and understood. Let’s look at the word: misconduct. Wikipedia has a broad explanation of misconduct which can be premeditated, intentional or that the action is harming other people.

Types of serious misconduct

Some of the more obvious events that are deemed serious misconduct include:

  • theft
  • fraud
  • violence
  • serious breaches of occupational health and safety procedures

What Is Not Serious Misconduct?

Poor performance is not serious misconduct. For example, suppose an employee is terminated because of their inability or incapacity to complete tasks outlined as requirements for the position.

In that case, they require written warning(s) and opportunities to develop and improve before they are dismissed. If these warnings and opportunities are not offered, the Fair Work Commission may find the dismissal unreasonable.

Questioning the employment contract, reporting abuse or discrimination with the Fair Work Commission, filing for Worker’s Comp, or contacting the tax office regarding unpaid Superannuation are not valid reasons for serious misconduct.

So how should the process proceed when an employee believes they have a case for unfair dismissal?

The Process Employers and Employees Must Follow

If an employee believes they have a case for unfair dismissal, they need to apply to the Fair Work Commission (the Commission) within 21 days of the dismissal taking effect.

The Fair Work Commission will only consider dismissal unfair if it is shown that the employer did not follow all of their obligations concerning terminating an employment contract or did not give one of these entitlements.

Employees may also have a right to pursue legal action in the courts if this process does not result in a favourable outcome.

Ensure you understand your legal obligations when terminating an employee’s employment and make sure you have complied with them. This includes providing written notice, payment instead of notice where applicable, and ensuring that any termination processes are conducted fairly and consistently.

As an employer, you should use this checklist to ensure that you have taken all of the proper steps before terminating employment:

  • Were there valid reasons for terminating the employment related to the staff member’s capacity or conduct?
  • Did the employee receive prior warnings that their performance was unsatisfactory?
  • Was there a case of serious misconduct like theft, fraud, violence and serious breaches of occupational health and safety procedures?
  • Was the proper investigation and interview process to give the employee a fair opportunity to prove their innocence or guilt?
  • Was the employee offered a support person through this process?

There are Different Rules for Small Employers

Small businesses (defined as any business with less than 15 employees) have different rules for dismissal, which are outlined under The Small Business Fair Dismissal Code.

If a small business employer adheres to this code and can provide evidence, the Fair Work Commission will deem the dismissal fair.

In all dismissal cases, it is always best to refer to the Fair Work Ombudsman and seek legal advice through a dedicated employment lawyer if there is any doubt.