Australia

Sources of regulation

The Workplace Relations Act 1996 (Cth) (WRA) and Workplace Relations Regulations 2006 (WRR) regulate the rights and responsibilities of most private sector Australian employers in respect of the termination of employment of employees.  From 27 March 2006, the Workplace Relations Amendment (Work Choices) Act 2005 (Cth) (Work Choices) substantially amended the WRA, so that the federal legislation covered the field and excluded the operation of State legislation in this area for all incorporated private sector employers. 

Each of the Australian States, with the exception of Victoria, maintains industrial legislation which contains protections against unfair dismissal for employees (so long as the employees do not fall into certain exempted classes). The State regimes continue to apply to State public sector employees, and also apply to employers who are not covered by the federal law, i.e., employers who are not “trading or financial corporations”, employers operating businesses in international trade or commerce, or employers in the Territories or Victoria.

Employees who are not entitled to bring a claim under the WRA may bring a wrongful dismissal claim under the common law, and some cases have also been brought under the Trade Practices Act 1974 (Cth) s 52, for breach of a general obligation upon corporations not to engage in conduct which is misleading and deceptive. High income earners who are excluded from the statutory schemes have also been able to seek remedies for termination of employment under this general commercial statute, prohibiting misleading and deceptive conduct in commercial dealings.[1] The availability of a remedy will depend on the employee’s ability to establish that the employer made representations of secure, long term employment.

Employees whose employment has been terminated for reasons which would breach any of a range of anti-discrimination statutes may also bring a claim under special legislation.  Those statutes include the Sex Discrimination Act 1984 (Cth), the Racial Discrimination Act 1975 (Cth), the Disability Discrimination Act 1992 (Cth) and the Age Discrimination Act 2004 (Cth).

Scope of Legislation

The WRA provides two types of protection, protection from ‘unlawful’ dismissal, and protection from dismissal which is ‘harsh, unjust or unreasonable’.

The unlawful dismissal protections were held in Victoria v Commonwealth (1996) 187 CLR 416 to be a valid exercise of federal legislative power under the external affairs power in the Australian Constitution, s 51(xxix), because these provisions seek to give effect to Australia’s obligations under the ILO Termination of Employment Convention, 1982 (No. 158), ratified by Australia in 1993, and the ILO Termination of Employment Recommendation, 1982 (No. 166).

Unlawful dismissal protection is available to all Australian employees.  Employees may not be dismissed for reasons of discrimination, absence from work for reasons of temporary illness or injury, freedom of association, whistle-blowing.  The list of discriminatory grounds in s 659(2)(f) comprises race, colour, sex, sexual preference, age, physical or mental disability, marital status, family responsibilities, pregnancy, religion, political opinion, national extraction or social origin.  An employer may defend a discriminatory dismissal, however, on the basis of an inherent requirement of the job concerned. 

Victoria v Commonwealth also held that provisions protecting employees from dismissal which is ‘harsh, unjust or unreasonable’ (described as ‘unfair dismissal’) were not appropriate and adapted to give effect to these international law obligations – at least in the form in which the laws were framed at the time.  Those provisions have since been redrafted, and are now supported by the Commonwealth’s power to regulate corporations under s 51(xx).  This means that federal protection against unfair dismissal is available only to employees of incorporated employers, and also to Commonwealth public sector employees, employees in the Commonwealth Territories and Victorian employees.  (Victoria, alone of the six Australian States, referred its powers to make laws with respect to industrial matters to the Commonwealth in 1997.)  A number of classes of employees are excluded from unfair dismissal protection.

WRA section 638 excludes:

• Employees engaged for a specified period of time or a specified task;
• Employees serving a period of probation of up to three months (or longer, so long as the longer period is reasonable given the nature and circumstances of the employment.
• Casual employees who have not been working on a regular and systematic basis for at least 12 months.
• Trainees
• Employees who are not employed on award-derived conditions, and have an income above a threshold set by WR Regulation 12.3  (as at 27 March 2006, the threshold was $94,900).
• Seasonal employees.

The Work Choices legislation also restricted access to unfair dismissal protection to employees of employing enterprises with more than 100 employees: s 643(10).  So that large corporate employers are not able to circumvent obligations under these laws by dividing their workforces among a number of related subsidiary companies, the legislation provides that the employees of related corporate entities (as defined by the Corporations Act 2001 (Cth) s 50) are included for the purpose of calculating the employer’s workforce size: s 643(11).

Work Choices also introduced a qualifying period of six months for all employees, and introduced an exception for any dismissal for “operational reasons”, defined as any reason of “an economic, technological, structural or similar nature” relating to all or a part of the employer’s undertaking, establishment, service or business: s 643(8) and (9).

Contracts of employment

The WRA applies only to workers who are engaged as employees for an indeterminate period of time. Australian law continues to distinguish between workers who are employed under a contract of service, and other workers who perform services under so-called “independent” contracts. Common law tests continue to apply to determine this difficult and porous boundary.[2]  Self-employed workers may have rights to seek remedies for the precipitate termination of a work contract under unfair contracts review legislation.  Some Australian States (notably NSW and Queensland) have legislated to allow for the review of contracts under which work is performed. Remedies under these statutes have been flexible, and include variation of contracts and compensation.

Employees, who are engaged for a fixed term, or to complete a specified task, are excluded from the unfair dismissal provisions in the WRA.  Australian law recognises the concept of a “casual employment contract” – one where an employee is paid only for hours worked and receives a salary loading to compensate for the absence of entitlements to paid leave.  Only those casual employees who have been engaged on a regular and systematic basis for at least 12 months, and have a reasonable expectation of continuing employment, are eligible under the WRA termination provisions.

Termination of employment

Employment can be terminated without being considered a “dismissal”:

• By mutual agreement of the parties
• By the death of one of the parties
• By the employee’s resignation by giving any agreed notice
• (Rarely) because the employment contract has been frustrated by a supervening event beyond either parties’ control
• By the effluxion of time, where the contract was for a fixed term.

Dismissal

Under both the common law and statute, an employer may dismiss an employee summarily because of the employee’s misconduct or incompetence.  The common law allows dismissal by the employer giving the employee a period of notice.  Where the employment contract does not expressly stipulate a notice period, the employer must give “reasonable” notice, taking into account a range of factors such as the employee’s age, experience, qualifications, seniority, length of service and future employment prospects.  A long serving, highly skilled, senior employee may expect a period of about 12 months.[3]

Employers may not, however, dismiss employees – even with reasonable notice – if the dismissal is for a reason which includes one of the reasons prohibited by the unlawful dismissal provisions in s 659 of the WRA.

Unlawful dismissal protection

Section 659 of the WRA protects employees from dismissal for any of the following prohibited reasons:

• Temporary absence from work because of illness or injury.  Regulations provide that “temporary” means up to three months, and entitlements to take advantage of this protection depend on compliance with certain formalities regarding documentary medical evidence.
• Participation or non-participation in a trade union or its legitimate activities.  (Employees also enjoy rights of freedom of association under Part 16 of the WRA.)
• Filing a complaint, or participating in proceedings against an employer involving alleged violation of laws or regulations or recourse to competent administrative authorities.
• Race, colour, sex, sexual preference, age, physical or mental disability, marital status, family responsibilities, pregnancy, religion, political opinion, national extraction or social origin.
• Refusing to negotiate in connection with, make, sign, extend, vary or terminate an Australian Workplace Agreement (which is an individual statutory contract between the employer and an individual employee allowing the employer to override the terms of any otherwise applicable industrial award or collective enterprise agreement).
• Absence from work during maternity leave or other parental leave.
• Temporary absence from work because of the carrying out of a voluntary emergency management activity, where the absence is reasonable having regard to all the circumstances.

If an employee alleges one of these reasons for dismissal, the employer bears the onus of proving that the dismissal was not unlawful: s 664.

If the employee is eligible to claim the protection of the unfair dismissal provisions in the WRA or a state industrial statute, the employee must not be dismissed in circumstances which were “harsh, unjust or unreasonable”.

If an employer intends to terminate the employment of 15 or more employees for operational reasons, the employer has an obligation under WRA  s 660 to notify Commonwealth Employment Services (now provided by a number of private service providers), of the numbers and reasons for these terminations.  Termination of the employees prior to giving this notice is unlawful. The remedies available for breach of s 660 are fines of up to $1,000, and orders that the terminations cannot take effect until compliance: s 665(6).

Notice and prior procedural safeguards

It is also unlawful for an employer to dismiss an employee without providing at least the minimum notice period stipulated in WRA s 661.  (The Regulations provide that employers may nevertheless dismiss summarily for sufficiently serious breaches of the employment contract.)  The notice periods are:

Employees who are over 45 years of age, and have served continuously for at least two years with the employer are entitled to an additional week’s notice.

If the employee is eligible to bring an unfair dismissal complaint, the employee also enjoys some entitlement to fair procedures for dismissal, including being given a valid reason for the dismissal, and an opportunity to respond: see WRA s 652.

Severance pay

Employees will only have entitlement to an additional payment in respect of a dismissal for reasons of redundancy if this entitlement is provided in an industrial award, a collective or individual workplace agreement, or in a common law contract. The Australian Fair Pay and Conditions Standard in the WRA, which since 27 March 2006 has provided a set of basic minimum conditions for all employees covered by the federal system, makes no provision for redundancy pay. Small business employers with fewer than 15 employees are not obliged to pay redundancy payment even if they are otherwise bound to do so by an industrial award. 

Avenues for redress

An employee bringing a complaint for unlawful dismissal under the WRA must apply to the Australian Industrial Relations Commission (AIRC) within 21 days after the day on which the termination took effect: s 643(14). The AIRC will seek to conciliate the matter, and if conciliation is unsuccessful, will provide the employee with a certificate enabling the employee to bring proceedings in the Federal Court or Federal Magistrate’s Court to have the matter determined.  The employee must commence proceedings within 28 days of receiving the certificate.

The Court is empowered under s 665 to order reinstatement of the employee (together with compensation for the period of lost income), or, where reinstatement is impractical, to order compensation of up to six months salary. The court may also order that the employer pay a fine of up to $10,000.

An employee bringing a complaint for unfair dismissal under the WRA must apply to the AIRC within 21 days of the termination taking effect.  The AIRC must first attempt to conciliate the matter, and if conciliation fails, will issue a certificate entitling the employee to continue to arbitration. The employee has seven days to decide whether to pursue the matter.  If the matter goes forward, the AIRC will arbitrate, and has a range of orders available under s 654, including reinstatement or compensation of up to six months salary.  The AIRC must discount awards to take account of any misconduct of the employee which contributed to the termination: s 654(10).  The AIRC is expressly forbidden from making any award in respect of shock, distress or humiliation caused by egregious conduct of the employer: s 654(9).

The statutory schemes do not preclude employees from bringing an action for breach of an employment contract in the general courts (although court processes are generally so expensive and time consuming, that only highly paid employees, or those who have been able to secure the financial support of a trade union or pro-bono advocate, tend to bring claims.) An employee who can provide evidence that termination of employment was in breach of contract will be able to bring a claim for damages.  Damages are calculated on the basis of the income the employee has lost by early termination.  Since most employment contracts are able to be terminated without reasons by giving notice, damages awards are generally limited.  However, if an employment contract stipulates that the employer may not terminate the employment except on certain grounds, then a capricious or arbitrary dismissal may sound in a longer period of damages. Recent case law has held that employers’ human resources policy manuals are able to create contractually binding obligations on employers not to dismiss employees capriciously, without reasons and fair procedures.[4]

Further information

• ILO Natlex Australia

[1] See for example O’Neill v Medical Benefits Fund of Australia [2002] FCAFC 188 (17 June 2002) and Magro v Freemantle Football Club Limited [2005] WASC 163 (27 July 2005). 

[2] See generally Andrew Stewart, “Redefining Employment? Meeting the Challenge of Contract and Agency Labour” (2002) 15 Australian Journal of Labour Law 235-276.

[3] See for example Quinn v Jack Chia (Aust) Ltd [1992] 2 VR 567.

[4] See for example Dare v Hurley [2005] FMCA 844 (12 August 2005); Nikolich v Goldman Sachs J B Were Services Pty Ltd [2006] FCA 784 (23 June 2006).