SECTION: Chapter
ChapterNum: 19
Title: Remedies for Wrongful or Unfair Termination
19.1
Wrongful Termination by Employees
[19.01]
Any unauthorised termination of employment is wrongful and
may enable the ‘innocent’ party to seek relief at common law. In the case of
wrongful termination by employees, however, this rarely happens. Even if
the employer can identify substantial loss, an action for damages would
rarely be cost effective, given that most employees would lack the means to
meet any judgment (including costs) obtained against them.1
[19.02]
The more obvious remedy in this situation will generally lie in
self-help. For example, the employer may withhold wages due for work
done before the departure. Any action by the employee to recover these
wages can then be met by a counter-claim for damages. But an employer
has to be careful in this situation. If the wages were due under an industrial
instrument or legislation, the employer may be subject to a penalty for
failing to comply with its obligations, even if it succeeds in a damages
claim. On the other hand, modern awards now expressly permit an
employer to withhold moneys otherwise due on termination, though only
up to the amount the employee would have received for any period of
notice they have failed to give under the award.2 Such a clause will not
apply if the employer waives the requirement for the employee to give
notice.3
[19.03]
Some contracts also fix a ‘bond’, or a sum by way of ‘agreed
damages’, to be given up in the event of a premature departure by the
employee. However, in order to avoid the rule against penalties, the
amount in question must constitute a genuine pre-estimate of the loss likely
to be occasioned by the employer as a result of any wrongful termination,
rather than being an arbitrary sum.4 Many provisions are likely to fail to
satisfy that requirement.5 However, in Tullett Prebon (Australia) Pty Ltd v
Purcell6 a financial services company recovered over $500,000 from one of its
brokers, who had insisted on leaving to work for a competitor several
months before the end of his fixed-term contract. The relevant clause in his
contract required him to pay a sum that was calculated as a percentage of
1But see Oldcastle v Guinea Airways Ltd [1956] SASR 325.
2See the model provision formulated in Award Modernisation (2008) 177 IR 364 at [54].
3AWU v Mason and Cox Foundries (1996) 66 IR 27.
4See Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656; Carter et al 2007: 871–80.
5See eg Arlesheim v Werner [1958] SASR 136; Amos v Commissioner for Main Roads (1983) 6 IR 293.
6[2009] NSWSC 1079. See also Pigram v Attorney-General (NSW) (1975) 132 CLR 216; Surveillance
Australia Pty Ltd v McClennan (Mag Ct of SA, Eldridge SM, 20 May 2004) (overturned on
other grounds: McLennan v Surveillance Australia Pty Ltd (2005) 142 FCR 105). Note also
McKellar v Jetstar Airways Pty Ltd (No 2) [2010] FMCA 509, where a promise to reimburse
$30,000 in training costs was enforced.
1
LABOUR LAW
his average net brokerage fees, and this was held to be a genuine estimate of
the loss likely to be suffered from his early departure.
[19.04]
According to basic principles of contract law, the employer may
decline to accept a wrongful termination and call for performance of work
until such time as the contract is lawfully terminated.7 However, if the
employee refuses to comply, the employer has little prospect of obtaining a
court order to compel a return to work, given the reluctance of the courts to
make orders in the nature of specific performance of an employment
contract.8 As Young J has explained:9
This disinclination stems from two factors: (a) that it is to the community’s
advantage to have people’s talents available to be used for the community’s
benefit; and (b) that it is undesirable to re-introduce servile employment
where a person has virtually no [option] but to serve an employer with
whom there is no bond.
[19.05]
There is at least one partial exception to this principle. Where a
contract contains a promise by the employee not to work for other
employers during the currency of the employment, an injunction may
sometimes be granted to restrain a breach of this promise, at least until such
time as the contract has lawfully been terminated.10 The practice is often
traced back to Lumley v Wagner,11 where a singer was restrained from
performing at any theatre other than the plaintiff’s during her contracted
engagement. Even so, the courts are generally concerned to avoid making
orders that require the specific performance of contracts of employment. If,
for example, enforcement of such a stipulation would have the effect in
practice of compelling the employee to work for the original employer, this
being the only means of earning a livelihood, no injunction will normally be
granted.12 The same principle may prevent an injunction being granted to
restrain a firm from ‘poaching’ a competitor’s employees by interfering with
those employees’ contracts.13 On the other hand, the employer may succeed
where the stipulation merely restrains the performance of similar work for
other employers and the court is satisfied that the employee has the
capacity to find suitable work in another field;14 or where the court feels
able to enforce the stipulation to an extent which at least keeps the
7See Tullett Prebon (Australia) Pty Ltd v Purcell [2009] NSWSC 1079 at [38]–[62]; and see further
[19.07]. Cf Zuellig v Pulver [2000] NSWSC 7 (even if employees had failed to give
adequate notice of termination, employer had accepted repudiation).
8See eg Tradition Australia Pty Ltd v Gunson (2006) 152 IR 395.
9TCN Channel Nine Pty Ltd v Northern Star Holdings Ltd (1990) 32 AILR ¶298. See also De
Francesco v Barnum (1890) 45 Ch D 430 at 438.
10See generally Davis G 1996.
11(1852) 1 De G M & G 604; 42 ER 687. For background on this case, and the related decision in
Lumley v Gye (1853) 2 El & Bl 216; 118 ER 749, see Waddams 2001.
12See eg Heine Bros (Aust) Pty Ltd v Forrest [1963] VR 383; Heath Lambert Australia Pty Ltd v
Keenan (2000) 102 IR 306; Bearingpoint Australia Pty Ltd v Hillard [2008] VSC 115. Cf the use
of injunctions to restrain industrial action by groups of employees: see [22.63].
13See eg TCN Channel Nine Pty Ltd v Northern Star Holdings Ltd (1990) 32 AILR ¶298.
14See eg Warner Bros Pictures v Nelson [1937] 1 KB 209; Curro v Beyond Productions Pty Ltd (1993)
30 NSWLR 337; Tullett Prebon (Australia) Pty Ltd v Purcell (2008) 175 IR 414.
2
WRONGFUL OR UNFAIR TERMINATION
employee out of the hands of the employer’s competitors.15 There have also
been cases in which an employer has been able to secure an injunction by
making a reasonable offer to pay wages for the remainder of the contract,
without requiring any work from the employee.16 But some courts have
derided such a practice as, in effect, allowing an employer to ‘purchase’ an
injunction.17 An injunction that involves compelling an employee to take
‘garden leave’ may also be refused on the basis that it would breach an
implied right for the employee to be given work to perform.18
19.2
Wrongful Dismissal: Common Law Remedies
[19.06]
An action for ‘wrongful dismissal’ is a claim that an employer has
terminated or purported to terminate an employment contract without
authority.19 Historically, opportunities for wrongful dismissal suits have
been limited. Since most public sector workers have a variety of statutory
remedies open to them,20 recourse to the law of contract has been largely
unnecessary for them. In the private sector, the capacity of most employers
to terminate employment for any reason merely by giving the appropriate
notice (or payment of wages in lieu) has meant that there are few situations
where employees can establish that they have been wrongfully dismissed.
Even where this does prove possible, the remedies available in all but
highly exceptional cases have been such as to make the time and expense
involved in civil proceedings of dubious practical value. Moreover, as
explained later in the chapter, many workers have for a number of years
had access, to a greater or lesser extent, to tribunals that are empowered to
inquire into the fairness of their dismissal. As against that, reforms to unfair
dismissal laws have excluded certain classes of employee, notably those on
higher salaries, from bringing a statutory claim.21 For those workers, a
common law action is in general their only form of recourse if they believe
their rights have been infringed.22 Since it is the higher paid managers and
professionals who are more likely to have the resources to contemplate
litigation in the ordinary courts, it is not altogether surprising that actions
for wrongful dismissal have now assumed greater practical significance
than had been the case historically.
15See eg Buckenara v Hawthorn Football Club Ltd [1988] VR 39; Bulldogs Rugby League Club Ltd v
Williams [2008] NSWSC 822. But cf Hawthorn Football Club Ltd v Harding [1988] VR 49.
16See eg Evening Standard Co Ltd v Henderson [1987] ICR 588; BDO Group Investments (NSW-Vic)
Pty Ltd v Ngo [2010] VSC 206.
17See eg Curro v Beyond Productions Pty Ltd (1993) 30 NSWLR 337 at 349–50.
18See eg William Hill Organisation Ltd v Tucker [1999] ICR 291; and see further [13.43].
19See Rothenberger Australia Pty Ltd v Poulsen (2003) 58 NSWLR 288 at 300–1.
20See Chapter 19.6.
21See eg [19.41]–[19.43].
22For a while, it was popular in New South Wales for non-award, high-earning employees to
challenge the fairness of their dismissals by invoking the unfair contract provisions in the
Industrial Relations Act 1996 (NSW). However, amendments have limited that option, and
in any event the provisions no longer apply to national system employees: see [17.10]–
[17.15].
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LABOUR LAW
(a)
Reinstatement
[19.07]
The principal shortcoming of an action for wrongful dismissal, as
far as employees are concerned, is that it very rarely results in reinstatement
in their employment. There is no power at common law for an employer to
be ordered to hire an employee. In order to obtain reinstatement, therefore,
the worker must be able to establish that the original contract remains on
foot, a task which is rarely feasible.23 Theoretically, as the High Court
confirmed in Watson’s case,24 and more recently in Visscher v Giudice,25 a
wrongful dismissal is no more than a repudiatory breach of the contract
which the employee may elect not to accept as determining the contract.26 In
practice, however, there may be little point in an employee seeking to affirm
a contract that their employer is determined to end. This practical reality is
sometimes encapsulated in the observation that, while the employment
contract may survive a wrongful dismissal, the employment relationship
rarely does.27 As Heydon, Crennan, Kiefel and Bell JJ put it in Visscher, in
such a case ‘the possible continuation of [the contract] will rarely be of
significance’.28 If the employer refuses to allow any work to be done, the
employee will not normally be able to assert that wages are payable for any
period of enforced idleness, and instead will be left to find a remedy in
damages.29 If the employee is to secure reinstatement, therefore, it will be
necessary to wait out what is likely to be a substantial period from the time
of dismissal to the conclusion of the litigation without a regular source of
income. Acceptance of an alternative position will almost certainly be
viewed as an election to treat the contract as terminated.30 This is true even
if the employee is unaware of the right to keep the contract alive.31 All that
can safely be done is to undertake temporary work, and then only if the
employee remains ready and willing to work for the original employer.32
The employee may also find that they are in a kind of ‘Catch-22’ situation
by virtue of the fact that failure to accept (or indeed seek) alternative
23Re Associated Dominions Assurance Society Pty Ltd (1962) 109 CLR 516 at 518; Wheeler v Philip
Morris Ltd (1989) 97 ALR 282 at 310–11.
24Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435.
25(2009) 239 CLR 361 at [53]. See further [9.16]; and see also Keats 2010.
26See also Re Associated Dominions Assurance Society Pty Ltd (1962) 109 CLR 516; Turner v
Australasian Coal & Shale Employees’ Federation (1984) 55 ALR 635; Byrne v Australian
Airlines Ltd (1995) 185 CLR 410 at 427. The same is true of any action by the employer
which, while not a dismissal in itself, constitutes a repudiation of the employment
contract: see eg Rigby v Ferodo Ltd [1988] ICR 29 (unilaterally imposed pay cut).
27See eg Watson (1946) 72 CLR 435 at 450–1, 461, 463–4, 466; Byrne v Australian Airlines Ltd
(1995) 185 CLR 410 at 427–8; Jarratt v Commissioner of Police (NSW) (2005) 224 CLR 44 at
[7]. See further Honeyball & Pearce 2006, exploring some of the conceptual issues
presented by this distinction.
28(2009) 239 CLR 361 at [55]. By contrast, in Visscher itself the continuation of the contract was
found to be significant: see [9.16].
29See eg Sterling Commerce (Australia) Pty Ltd v Iliff (2008) 173 IR 378; and see further [13.54].
30Wheeler v Philip Morris Ltd (1989) 97 ALR 282 at 310–11.
31Ford v Council of the City of Lismore (1989) 28 IR 68.
32Ibid at 77; Reilly v Victoria (1991) 5 VIR 1; Conway-Cook v Town of Kwinana (2001) 108 IR 421.
4
WRONGFUL OR UNFAIR TERMINATION
employment may, under the doctrine of mitigation, reduce the amount of
damages that may be recovered for the wrongful dismissal.33
[19.08]
In any event, even if the employee survives this period, there is a
general rule or presumption against the grant of an injunction to restrain the
employer from proceeding with or acting on a wrongful dismissal.34 One
explanation of the resistance to such orders lies in the obverse of the
principle quoted above in relation to actions against employees: that if
employers cannot seek specific performance, then neither should employees
be able to do so. The more usual rationale, however, is that ‘trust and
confidence’ will typically be lacking between the parties and that the court
will not compel the mending of a relationship that has irretrievably broken
down.35 In Turner v Australasian Coal & Shale Employees Federation36 it was
pointed out that this concern is redolent of a different era, when the typical
employment relationship (or more accurately the domestic master/servant
paradigm which underpins the common law of employment) was more
personal in nature.37 It is true that in recent years it has become increasingly
common for courts to grant injunctions to restrain a dismissal, or
declarations recognising the subsistence of the employment contract.
However, most of these cases can readily be reconciled with a general rule
against specific performance.38 In some, trust and confidence clearly
remained between the parties, the employer feeling impelled to dismiss the
employee but being satisfied as to their conduct and competence.39 In
others, the employee was seeking to keep the contract alive for a specific
and temporary reason such as the accrual of rights through length of
service,40 or to allow for a contractual or statutory procedure to be
completed.41 Moreover, in most instances the injunction obtained was
merely an interlocutory order, restraining prejudicial action pending a full
trial of the plaintiff’s claim.
[19.09]
Nevertheless, it remains hard to see just why there has been such
judicial reluctance to order reinstatement. There is no evidence to suggest
that the availability of the remedy, through industrial tribunals in
33See further [19.16].
34Lucy v Commonwealth (1923) 33 CLR 229 at 237; Byrne v Australian Airlines Ltd (1995) 185 CLR
410 at 428; Jarratt v Commissioner of Police (NSW) (2005) 224 CLR 44 at [30].
35See eg Gregory v Philip Morris Ltd (1988) 80 ALR 455.
36(1984) 55 ALR 635 at 648–9. See also AMIEU v G & K O’Connor Pty Ltd (2000) 100 IR 383 at
394–5.
37See further [2.02].
38But cf Walsh v Police Association (2000) 140 IR 58, where an injunction was granted without
reference at all to the general rule, or the authorities that support it.
39See eg Powell v Brent London Borough Council [1988] ICR 176; Reilly v Victoria (1991) 5 VIR 1.
See also Downe v Sydney West Area Health Service (No 2) (2008) 71 NSWLR 633, where a
declaration was made as to the invalidity of a suspension order (see [13.45]).
40See eg Hill v C A Parsons & Co Ltd [1972] Ch 305.
41See eg Baker v Corp of the City of Salisbury (1982) 2 IR 168; Reilly v Victoria (1991) 5 VIR 1; Paras
v Public Service Body Head of the Department of Infrastructure (2006) 152 IR 75. See also
AMIEU v Frugalis [1990] 2 Qd R 201, in which the union obtained a declaration that the
defendant employer was obliged to observe the terms of a collective agreement, in so far
as they called for the reinstatement of certain workers.
5
LABOUR LAW
particular, has caused chaos or hardship, probably because in cases where
difficulties would genuinely be occasioned the tribunals are capable of
recognising reality, either making no order or seeking some compromise
such as re-engagement in a different position.42 In light of this well
established experience, there is no compelling reason why the common law
could not reverse its presumption and order specific performance unless the
evidence disclosed a reason for not doing so.43
(b)
Damages
[19.10]
Where an employee is dismissed in breach of contract, they are
entitled to an award of damages that will compensate them for any loss
suffered as a result of the breach.44 As previously indicated, the general
purpose of such an award is to place the injured party in the same position
as if the contract had been properly performed.45 In accordance with this
principle, and depending on the circumstances, a wrongfully dismissed
employee may be able to seek compensation for various types of financial
loss. For example, a person who has incurred substantial expenses (such as
removal costs) in order to take up a new job, only to find that the employer
has reneged, may be able to recover damages for that wasted expenditure.46
Another possible claim may be for entitlements (for example, under a
superannuation scheme) to which the employee would have had some
claim, or a greater claim, but for the unlawful dismissal.47 But there are
limits to such recovery in relation to the loss of statutory unfair dismissal
rights. As noted in the previous chapter, a wrongfully dismissed employee
cannot claim as damages the costs of pursuing an unfair dismissal claim.48
But there is also British authority for the proposition that damages cannot
be claimed at common law for the compensation that would or might have
been recovered on a statutory claim, had the employee not been wrongfully
dismissed before completing the qualifying period for such a claim.49
[19.11]
By far the most common type of loss suffered by a wrongfully
dismissed employee is that they are deprived of the opportunity to earn
42It should be noted, however, that industrial tribunals have also become somewhat reluctant
to make orders for the reinstatement of employees who have been unfairly dismissed: see
[19.74]–[19.75].
43See Bostik (Australia) Pty Ltd v Gorgevski (1992) 36 FCR 20 at 36–8; Quinn v Overland [2010]
FCA 799 at [97]–[104]; and see further Ewing & Grubb 1987; Furness 1989; Creighton et al
1993: 264–88; Brodie 1998b.
44As to whether such an award may be precluded by an express term fixing a severance
payment in the event of termination, see Guthrie v News Ltd [2010] VSC 196.
45See [16.60].
46See eg Blakeley v Vanpress Pty Ltd (1989) 5 SR (WA) 133; Goldburg v Shell Oil Co of Australia Ltd
(1990) 95 ALR 711.
47See eg Ryan v Commonwealth (1936) 57 CLR 136; Ford v Council of the City of Lismore (1989) 28
IR 68.
48Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (2008) 72 NSWLR
559: see [18.38].
49Harper v Virgin Net Ltd [2005] ICR 921. As to the qualifying period for an unfair dismissal
claim under the FW Act 2009, see [19.35]–[19.38].
6
WRONGFUL OR UNFAIR TERMINATION
their agreed remuneration. ‘Remuneration’ for this purpose may include
not just wages or salary as such, but also the pecuniary value of other
benefits that the employer is obliged to provide. Aside from superannuation
contributions (whether the minimum required by statute or any greater
amount determined by agreement),50 such benefits might, for instance,
include the provision of a motor vehicle or of health insurance,51 as well as
any bonus or incentive payments that the employee would necessarily have
received.52 However, no claim may be made in respect of fringe benefits
which are entirely a matter for the employer’s discretion.53 This is because
of a general principle that, where damages are being assessed, it will be
assumed in the defendant’s favour that they would have performed the
contract in the manner least financially burdensome in the circumstances.54
[19.12]
This principle also explains why the maximum period in respect
of which an employee may claim loss of remuneration normally extends
from the date of dismissal to the earliest date at which the employer could
lawfully have terminated the contract.55 Where the contract is simply
terminable on notice, this means that damages may in general only be
claimed for wages and other benefits lost over the relevant period of
notice.56 In contrast, in the case of a fixed-term agreement which cannot be
terminated on notice, the employee may claim for wages and benefits lost
up to the date on which the contract was due to expire.57 A similar principle
applies to a contract for the duration of a particular task.58
[19.13]
There also circumstances in which a claim may extend to loss
sustained beyond the ordinary end-date of the contract. For example, if it
can be shown that the defendant’s breach has denied the plaintiff the chance
to seek other employment at the conclusion of their expected period of
engagement, that may be the subject of an award of damages for the value
of that lost opportunity.59 More generally, and despite the ‘least
50See Macauslane v Fisher & Paykel Finance Pty Ltd [2003] 1 Qd R 503.
51See eg Burton v Litton Business Systems Pty Ltd (1977) 19 SASR 162; Kilburn v Enzed Precision
Products (Australia) Pty Ltd (1988) 4 VIR 31; Conway-Cook v Town of Kwinana (2001) 108 IR
421.
52See eg Reilly v Praxa Ltd [2004] ACTSC 41.
53Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130; NSW Cancer Council v Sarfaty
(1992) 28 NSWLR 68; Reynolds v Southcorp Wines Pty Ltd (2002) 122 FCR 301. Cf Dyer v
Peverill (1979) 2 NTR 1.
54Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 92–3; Saad v TWT Ltd [1998]
NSWSC 282.
55Bostik (Australia) Pty Ltd v Gorgevski (1992) 36 FCR 20 at 32–3.
56See eg Kelderman v SHRM (Australia) Pty Ltd (1989) 32 AILR ¶89; Walker v Zurich Australian
Insurance Ltd [2001] QCA 296.
57See eg Scharmann v APIA Club Ltd (1983) 6 IR 157; Patterson v Middle Harbour Yacht Club (1996)
64 FCR 405; Conway-Cook v Town of Kwinana (2001) 108 IR 421. Note, however, that a term
in a contract that automatically requires a dismissed employee to be paid out for the full
remuneration due over the remainder of their contract may be unenforceable as a penalty
clause (see [19.03]), where it appears unlikely the employee will actually suffer that
amount of loss: see Biodiesel Producers Ltd v Stewart [2007] FCA 722.
58See eg Bryant v Defence Housing Authority [2002] ACTSC 43.
59WT Partnership (Aust) Pty Ltd v Sheldrick (1999) 96 IR 202; Quinn v Gray (2009) 184 IR 279.
7
LABOUR LAW
burdensome’ principle, it should also be open to a wrongfully dismissed
employee to claim damages for the loss of the chance that the employment
contract would have been renewed at the expiry of a fixed term, or that the
employer would not have given notice at the earliest opportunity. Such an
award would be consistent with the approach taken by the High Court to
the assessment of damages for breach of contract in Commonwealth v Amann
Aviation Pty Ltd.60 In Murray Irrigation Ltd v Balsdon61 this notion was firmly
rejected by the New South Wales Court of Appeal. However, other courts
have disagreed, and awards of this type have been made in a number of
cases.62 The most notable of these was Walker v Citigroup Global Markets
Australia Pty Ltd,63 in which a market analyst was found to have been
offered a highly paid position with a guarantee of employment until the
end of 1998, and thereafter on the basis that either party could terminate on
one month’s notice. He was not allowed to take up the position and sued for
breach of contract.64 The Full Court of the Federal Court found that, if he
had been allowed to commence work, he would have remained until at
least July 2003. On that basis, it awarded damages of $2,346,553 for lost
earnings over that period. The court highlighted the absence of any ‘direct
evidence’ that the employer would have exercised its power to terminate
the contract without cause:
That NatWest would have sacked a skilled and competent employee holding
a high profile position within the company without cause is not a natural
inference to be drawn without direct evidence. To act in that fashion would
deprive it of the services of a valuable employee and risk damage to its
reputation in the financial community.65
On the other hand, it would seem that no claim will be possible where the
court is satisfied that, even if the employer had complied with the contract,
it would not in any event have wanted or been prepared to extend the
employment.66
[19.14]
In the relatively rare instances in which employment cannot be
terminated without cause being shown, the employee may potentially claim
wages lost up to their projected or likely date of retirement.67 This includes
cases where, as in Gregory v Philip Morris Ltd,68 the contract is taken to
contain a provision prohibiting unfair dismissal. In such cases the court’s
task is to ‘consider the matter upon the basis that, were it not for the
unlawful dismissal, it was likely that the employment would have
60(1991) 174 CLR 64: see Stewart 1993.
61(2006) 67 NSWLR 73. See also Clunne v Nambucca Shire Council (1995) 63 IR 304.
62See eg Tasmania Development and Resources v Martin (2000) 97 IR 66; Macdonald v Australian
Wool Innovations Ltd [2005] FCA 105; and see also Northern Land Council v Hansen [2000]
NTCA 1.
63(2006) 233 ALR 687.
64As to his separate claim for misleading and deceptive conduct, see [17.07].
65Ibid at [83].
66See eg Guthrie v News Ltd [2010] VSC 196.
67Lucy v Commonwealth (1923) 33 CLR 229.
68(1988) 80 ALR 455: see [9.22].
8
WRONGFUL OR UNFAIR TERMINATION
continued indefinitely’.69 Where the employer fails to fulfil an obligation to
accord procedural fairness, but the dismissal is in other respects justified,
the measure of damages may be the value of the chance that the dismissal
would not have occurred had an appropriate procedure been followed.70 On
the other hand, where the employer, although obliged to follow a specific
procedure in order to effect a dismissal, retains an absolute discretion at the
end of the process as to whether or not to dismiss, the employee may claim
only for wages lost during the time it would have taken to complete the
procedure.71
[19.15]
In some instances then an employee may have a prima facie claim
for remuneration lost over a very lengthy period. However, this is subject to
a discount being made for ‘foreseeable events which might have brought
the employment to an end’,72 including the possibility that the employee
might have died or become incapacitated, or resigned to take up other
employment, or taken early retirement, or engaged in conduct that would
have provided grounds for a (lawful) early termination. Thus, in assessing
the loss sustained by a worker dismissed in breach of a term prohibiting
unfair dismissal, a discount must be made for the possibility that the
employment might at some later point have been terminated fairly.73
Similarly, in Walker a 25% ‘discount’ was applied ‘to take account of the
possibility of earlier termination for one reason or another’.74 By the same
token, it would seem logical to allow as well for contingencies which might
operate in the employee’s favour, such as the chance of a wage rise.75
[19.16]
A further factor that bears on the assessment of damages is the
doctrine of mitigation. This ensures that no account will be taken of any loss
that the plaintiff either has in fact avoided by obtaining substitute income,76
or which the employer can show the plaintiff could reasonably have
avoided by seeking alternative work of a comparable nature.77 The
employee is not necessarily expected to accept different or inferior work.78
Nor, ordinarily, will they be expected to accept an offer of re-employment
with the employer that dismissed them, at least where it is clear that
69Bostik (Australia) Pty Ltd v Gorgevski (1992) 36 FCR 20 at 33; Wheeler v Philip Morris Ltd (1989)
97 ALR 282 at 311–12; and see further Brooks 1995.
70Bostik (1992) 36 FCR 20 at 34–5; Byrne v Australian Airlines Ltd (1994) 120 ALR 274 at 285.
71Gunton v Richmond-upon-Thames London Borough Council [1981] Ch 448.
72Wheeler v Philip Morris Ltd (1989) 97 ALR 282 at 311. See eg Lucy v Commonwealth (1923) 33
CLR 229; Dyer v Peverill (1979) 2 NTR 1; Carr v Blade Repairs Australia Pty Ltd (No 2) [2010]
FCA 688.
73Gregory v Philip Morris Ltd (1988) 80 ALR 455 at 484; Bostik (Australia) Pty Ltd v Gorgevski
(1992) 36 FCR 20 at 33. See also Barnes v Ranger Uranium Mines Pty Ltd (1993) 50 IR 38.
74(2006) 233 ALR 687 at [84].
75See eg Kilburn v Enzed Precision Products (Australia) Pty Ltd (1988) 4 VIR 31; Quinn v Jack Chia
(Australia) Ltd [1992] 1 VR 567; L’Huillier v Victoria [1996] 2 VR 465.
76See eg Wheeler v Philip Morris Ltd (1989) 97 ALR 282; Hutt v Cascade Brewery Co Ltd (1991) 34
AILR ¶179; Patterson v Middle Harbour Yacht Club (1996) 64 FCR 405.
77See eg Lucy v Commonwealth (1923) 33 CLR 229; Harding v Harding (1928) 29 SR (NSW) 96.
78Scharmann v APIA Club Ltd (1983) 6 IR 157; Quinn v Jack Chia (Australia) Ltd [1992] 1 VR 567.
9
LABOUR LAW
relations have broken down.79 Nevertheless, unless the employee’s skills are
in over-supply, or the position formerly occupied is of a kind not readily
available elsewhere, the amount of lost remuneration that may be claimed
will be significantly reduced by the operation of this doctrine.
[19.17]
In awarding damages the court will also allow the employer to
offset any severance payment it has made to the employee, whether on an
ex gratia basis or pursuant to a pre-existing obligation.80 This is unless the
payment is one that the employer would have been obliged to make even if
the contract had continued to its lawful conclusion.81 Likewise, the court
will deduct any social security payments (such as unemployment benefits)
to which the employee is automatically entitled as a result of the dismissal.82
The question of deducting taxation that would have been payable on the
lost income is more difficult, and has indeed prompted significant
disagreement amongst the judiciary. On one view no deduction should be
made, since the damages award itself will be taxed as an ‘employment
termination payment’ (ETP) within the meaning of (currently) s 82-130 of
the Income Tax Assessment Act 1997 (Cth).83 Those who adopt this position
distinguish High Court decisions to the effect that allowance should be
made for notional tax where only a small portion of a damages award
representing lost income is taxable,84 by emphasising that in general the
whole award is taxable. However, a competing line of authorities suggests
that, at least where the lost income would have been taxed at a much higher
rate than the rate applicable to ETPs, a more complex approach should be
adopted. This involves assessing lost income net of taxation, then ‘grossing
up’ the resulting figure so as to allow for the tax that the plaintiff will have
to pay on the award itself.85
[19.18]
As to non-pecuniary losses, the established view is that distress or
humiliation inflicted on the employee is not as a general rule compensable,
no matter how obvious a consequence of the dismissal or the way it is
handled.86 This approach, generally associated with the House of Lords’
decision in Addis v Gramophone Co Ltd,87 has often been criticised.88
79Bostik (Australia) Pty Ltd v Gorgevski (1992) 36 FCR 20; Whittaker v Unisys Australia Pty Ltd
(2010) 192 IR 311.
80Black v Brimbank City Council (1998) 152 ALR 491; Furey v Civil Service Association of WA (Inc)
(1999) 91 FCR 407. Cf Haley v Public Transport Corp of Victoria (1998) 119 IR 242.
81Reynolds v Southcorp Wines Pty Ltd (2002) 122 FCR 301. The position is similar with
superannuation benefits: L’Huillier v Victoria [1996] 2 VR 465.
82McCasker v Darling Downs Co-operative Bacon Association Ltd (1988) 25 IR 107; but cf Burton v
Litton Business Systems Pty Ltd (1977) 19 SASR 162.
83Kilburn v Enzed Precision Products (Australia) Pty Ltd (1988) 4 VIR 31; Wheeler v Philip Morris
Ltd (1989) 97 ALR 282; Grout v Gunnedah Shire Council (No 3) (1995) 59 IR 248.
84See Atlas Tiles Ltd v Briers (1978) 144 CLR 202 at 224–7, 235–6; Cullen v Trappell (1980) 146 CLR
1.
85See eg NSW Cancer Council v Sarfaty (1992) 28 NSWLR 68; Slifka v JW Sanders Pty Ltd (1995) 67
IR 316; Patterson v Middle Harbour Yacht Club (1996) 64 FCR 405.
86Tucker v Pipeline Authority (1981) 3 IR 120; Beck v Darling Downs Institute of Advanced Education
(1990) 140 IR 364; Burazin v Blacktown City Guardian Pty Ltd (1996) 142 ALR 144 at 147–51.
87[1909] AC 488. This case constrains the remedies available for wrongful dismissal in other
common law countries as well: see eg Fudge 2007.
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WRONGFUL OR UNFAIR TERMINATION
Nevertheless, in Baltic Shipping Co v Dillon89 the High Court not only
affirmed the general rule that such loss is not compensable in the law of
contract, but specifically alluded to its application in employment cases.
[19.19]
On the other hand, the principles applied by the High Court in
Baltic Shipping also suggest that the restriction does not apply to claims for
psychiatric illness resulting from the employer’s breach of contract, in so far
as that can be considered a ‘physical’ injury.90 Nor would it apply where, as
in Baltic Shipping itself, the very object of the obligation breached (in that
instance to provide a holiday) is to afford enjoyment, peace of mind or
freedom from stress. Hence, if the obligation to maintain trust and
confidence in the employment relationship does indeed extend to the way
in which the employer handles the termination of the relationship,91 a
breach of that obligation should logically expose the employer to claims for
any resulting distress occasioned to the employee.92 So much was indeed
held to be the case in Quinn v Gray,93 where Byrne J rejected a challenge to
the decision of an arbitrator to award damages for distress caused to a
dismissed school principal. The breach of the duty of trust and confidence
identified here was said to be a failure to accord procedural fairness in the
way the decision to dismiss was taken. It is difficult, however, to see how
this decision can be reconciled with the approach taken in cases such as
Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney.94
In that case Basten JA observed that ‘to uphold a claim to damages because
of steps taken by an employer leading up to a dismissal’ would be to
‘sidestep the rule in Addis’.95
[19.20]
What is clearer is that some workers, particularly in the
entertainment industries, can claim that, since the opportunity to enhance
their reputation is an inherent aspect of their employment, the deprivation
of that opportunity through their wrongful dismissal should be the subject
of compensation.96 In Malik v Bank of Credit and Commerce International SA97
the House of Lords also recognised a potential claim for ‘damage to
reputation’ (in the form of diminished employment prospects) on the part of
employees ‘stigmatised’ by their association with a corrupt business;
88See eg Byrne v Australian Airlines Ltd (1994) 120 ALR 274 at 334; Gray 1994. Cf Gibson 2006.
89(1993) 176 CLR 344.
90See eg Clunne v Nambucca Shire Council (1995) 63 IR 304; Goldman Sachs JB Were Services Pty
Ltd v Nikolich (2007) 163 FCR 62; but cf Alderslea v Public Transport Corp (2001) 3 VR 499;
New South Wales v Paige (2002) 115 IR 283 at 305–6. See also Brackenridge v Toyota Motor
Corp Australia Ltd (1996) 142 ALR 99, emphasising that a causal link must in any event be
established between the relevant breach and the illness.
91But see [18.35]–[18.38].
92Burazin v Blacktown City Guardian Pty Ltd (1996) 142 ALR 144 at 152.
93(2009) 184 IR 279.
94(2008) 72 NSWLR 559: see [14.44], [18.38].
95Ibid at [63].
96See eg White v Australian and New Zealand Theatres Ltd (1943) 67 CLR 266.
97[1998] AC 20.
11
LABOUR LAW
though the employees in question were unable in subsequent proceedings
to prove such loss.98
[19.21]
The net result of the application of these various principles as to
the assessment of damages for wrongful dismissal is that the common law
generally offers significant awards only to employees who (a) are dismissed
well before the date on which their employment could lawfully have been
terminated, and (b) cannot readily find comparable employment elsewhere.
For most workers, therefore, the amount of damages they are likely to
recover, even if they succeed in establishing wrongful dismissal, means that
litigation will rarely be worthwhile.
19.3
Unfair Dismissal: History and Development of
Statutory Remedies
(a)
State Laws and the ‘Individual Right’ Model
[19.22]
At least before Work Choices, the legislative authority of the
States allowed them to address the issue of unfair or arbitrary dismissal in
any way they saw fit – so long as they did not do so in a manner that was
inconsistent with a valid law of the Commonwealth.99 For most of the 20th
century no positive provision was made by the States on the matter at all,
other than in relation to certain forms of ‘victimisation’.100 At most a claim
for the reinstatement of a dismissed worker might become the subject of an
industrial dispute in the same way as any other issue.101 However, in 1972
South Australia enacted a provision explicitly conferring power on the
Industrial Court to hear and determine claims by individual workers that
their dismissal was ‘harsh, unjust or unreasonable’.102 This provision soon
generated what in comparison to the other jurisdictions was a large number
of applications for relief. Its popularity was further boosted in 1984 by the
transfer of the jurisdiction to the Industrial Commission, and the creation of
a power to award compensation in lieu of reinstatement.103
[19.23]
Each of the other States followed suit in giving individual workers
the capacity to seek relief, rather than having to rely on a trade union
notifying a dispute over the dismissal; although in New South Wales this
was actively resisted by the union movement. Ironically, it took a Liberal
Government in 1991 to give workers in that State the right to lodge their
own complaint of unfair dismissal.104 For the most part the procedures
based on the South Australian model have worked reasonably well, offering
a cheap and speedy form of redress when compared to the ordinary courts.
98Bank of Credit and Commerce International SA v Ali (No 2) [2002] ICR 1258.
99See eg R v Industrial Court of SA; Ex parte General Motors-Holden Pty Ltd (1975) 10 SASR 582.
100See [17.64].
101See generally Davidson 1980.
102Industrial Conciliation and Arbitration Act 1972 (SA) s 15(1)(e).
103Industrial Conciliation and Arbitration Act (later renamed Industrial Relations Act) 1972 (SA)
s 31.
104See Stewart 1992f.
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WRONGFUL OR UNFAIR TERMINATION
Part of the reason for this is the provision that is usually made for a
conciliation conference to be held within a few weeks of an application
being made, allowing an early opportunity for the parties to air their views
and explore the possibility of a negotiated settlement.105 This has resulted in
a high proportion of claims not proceeding to a formal hearing. Moreover,
costs are only awarded in exceptional circumstances. However, while each
of the States that retain industrial systems still make provision for unfair
dismissal claims,106 outside Western Australia they apply now only to
public sector workers and (except in Tasmania) local government
employees.
(b)
Introduction of Federal Laws
[19.24]
Before the enactment of Division 3 of Part VIA of the Industrial
Relations Act 1988, which took effect on 30 March 1994, federal industrial
law had relatively little to say on the issue of termination of employment.
Leaving aside provisions dealing with victimisation on the grounds of
union membership or activities,107 no statutory remedy was offered to
workers who were unfairly dismissed. And unlike the State systems,
constitutional considerations made it unclear whether the arbitral tribunal
could resolve disputes over claims for the reinstatement of dismissed
employees. What the tribunal usually did, instead, was to conciliate and
even arbitrate such disputes with the agreement of the parties. Lacking any
formal jurisdiction, however, the tribunal could do no more than issue nonbinding recommendations as to how the dispute should be settled.108
During the 1980s and early 1990s, the obstacles to formally notifying a
dispute over reinstatement to the Arbitration Commission were gradually
overcome, thanks to a series of High Court decisions.109 Nevertheless,
notifying a dispute remained an option fraught with difficulties, especially
if the employer was inclined to contest the issue of jurisdiction. Moreover,
although in 1984 the Commission had accepted the ACTU’s argument for
the inclusion in federal awards of a provision prohibiting harsh, unjust or
unreasonable termination,110 the only option for those dismissed in breach
of this provision was to seek to enforce the award through the imposition of
a penalty. As previously explained, an attempt by the Federal Court to offer
contractual remedies for breach of the prohibition was closed off by the
105For a valuable study of this process, see Meredith 2001.
106See Industrial Relations Act 1996 (NSW) Ch 2 Pt 6; Industrial Relations Act 1999 (Qld) Ch 3; Fair
Work Act 1994 (SA) Ch 3 Pt 6; Industrial Relations Act 1979 (WA) ss 23A, 29, 29AA;
Industrial Relations Act 1984 (Tas) ss 29–31.
107See [17.64].
108See O’Donovan 1976: 639–40.
109See Re Ranger Uranium Mines Pty Ltd; Ex parte Federated Miscellaneous Workers Union of
Australia (1987) 163 CLR 656; Re Federated Storemen and Packers Union of Australia; Ex parte
Wooldumpers (Victoria) Ltd (1989) 166 CLR 311; Re Boyne Smelters Ltd; Ex parte Federation of
Industrial Manufacturing and Engineering Employees of Australia (1993) 177 CLR 446; Re
Printing and Kindred Industries Union; Ex parte Vista Paper Products Pty Ltd (1993) 67 ALJR
604.
110TCR case (1984) 8 IR 34; 9 IR 115.
13
LABOUR LAW
decision in Byrne v Australian Airlines Ltd.111 Award provisions of this type
in any event became non-allowable after 1996.
[19.25]
In the light of this background, the provisions introduced by the
Industrial Relations Reform Act 1993 marked a dramatic change in the
Commonwealth’s approach.112 The new laws were not limited to the
question of unfair dismissal, but imposed on employers a whole series of
obligations, compliance with which was necessary for any termination to be
lawful. A claim for unlawful termination could be pursued in the Industrial
Relations Court of Australia, with the court empowered to grant a range of
remedies including reinstatement or compensation. In such proceedings,
the employer carried the burden of proving that the termination was lawful.
Provision was also made for the AIRC to exercise certain powers in relation
to dismissals on account of redundancy.113 The new laws were based
squarely on ILO Convention 158 on Termination of Employment – indeed,
in places the wording was almost identical. This reflected the
Commonwealth’s extreme caution in establishing a constitutional
foundation through the external affairs power.114 By using that power, it
was possible for the legislation to apply to all employees, regardless of
whether they were covered by federal awards. However, certain categories
of worker – those employed for a fixed term or specific task, probationers
and short-term casuals – were excluded from protection.115
[19.26]
The 1993 legislation provoked heated and at times hysterical
opposition from employer groups and commentators,116 even though the
broad thrust (if not the precise detail) of the new laws was similar to
regimes that had been in operation in most of the States for several years.
Persistent lobbying from employers led to a series of backdowns by the
Keating Government, which saw the legislation amended to exclude a
wider range of workers (notably those earning more than $60,000 per year),
to modify the burden of proof, and to cap compensation for successful
applicants at six months’ remuneration.117
111(1995) 185 CLR 410: see [9.22]–[9.24].
112See Pittard 1994b.
113See [18.62].
114In Victoria v Commonwealth (1996) 187 CLR 416 the constitutional validity of the new
provisions was largely upheld. The exception was s 170DE(2), which the High Court
interpreted to prohibit dismissals even where the employer had a ‘valid reason’ for
termination within the meaning of the Convention. Cf Chapman et al 1997: 2–4, criticising
this analysis by reference to preparatory material on the Convention.
115Such exclusions are permissible under Article 2 of Convention 158, provided they are made
prior to the member state submitting its first report to the ILO under Article 22. Since
Australia’s first report on Convention 158 was submitted in September 1995, subsequent
exclusions (such as the ‘small business’ exemption later introduced by the Howard
Government) would not conform to the Convention even if otherwise authorised by the
terms of Article 2: see Creighton 1997b: 41–2.
116For a more reasoned (but still very strong) critique of the 1993 provisions, see ACCI 1995.
117See Industrial Relations Amendment Act (No 2) 1994; Industrial Relations and Other Legislation
Amendment Act 1995.
14
WRONGFUL OR UNFAIR TERMINATION
(c)
Curtailment of Rights under the Howard Government
[19.27]
The Howard Government’s Workplace Relations and Other
Legislation Amendment Act 1996 made further changes to the termination of
employment provisions in what by now was Division 3 of Part VIA of the
WR Act 1996.118 Aside from vesting the AIRC with primary jurisdiction over
unfair dismissal claims, many of these changes were intended to strike a
‘fairer’ balance between the interests of employers and employees by
eliminating or modifying features of the 1993 legislation that were
considered unduly to favour applicants. The system now more closely
resembled the State laws developed on the South Australian model. Indeed,
it expressly incorporated the language used in one of the best known State
unfair dismissal cases, Re Loty and AWU,119 in stating that the procedures
and remedies established by Division 3 were intended to ensure that a ‘fair
go all round’ was accorded to both employer and employee (s 170CA(2)).120
Importantly, however, the 1996 reforms also narrowed the scope of the
unfair dismissal jurisdiction so as to confine it primarily to workers
employed under federal awards by incorporated employers. Aside from
reflecting greater reliance on the corporations power, this shift effectively
marked the abandonment of the Keating Government’s goal of establishing
a genuinely national system of protection through use of the external affairs
power. However, key parts of the Division were still based on the external
affairs power, notably Subdivision C. This prohibited termination on certain
grounds, in particular for the discriminatory reasons listed in s 170CK.
Applicants had the option of lodging a complaint of ‘unlawful termination’
with the AIRC, either as well as or instead of an unfair dismissal claim. If
the AIRC was unable to resolve the matter by conciliation, the applicant
could elect to pursue the matter in court. Most of the limitations on unfair
dismissal claims did not apply to unlawful termination applications.
[19.28]
After 1996, the Howard Government sought to limit still further
the impact of termination of employment legislation on employers. In
particular, it repeatedly proposed to exempt small businesses (those with
fewer than 15 employees, or in later iterations 20 employees) from exposure
to unfair dismissal claims. The rationale for this reform was said to be that
unfair dismissal laws hinder job creation in small enterprises. The
government persistently quoted claims, usually based on spurious surveys
or commissioned research, that the exemption would create thousands of
new jobs.121 In fact, there has never been any persuasive evidence that
unfair dismissal laws (at least of the type found in Australia) have any more
118See Chapman 1997.
119[1971] AR (NSW) 95 at 99: see [19.60].
120Cf the widely publicised remark by Gray J in Fryar v Systems Services Pty Ltd (1995) 130 ALR
168 at 189 under the previous legislation that ‘the realm of the “fair go all round” … is
not a realm which [the Industrial Relations Court] inhabits’.
121See eg Senate Employment, Workplace Relations and Education Legislation Committee
2003, exposing the shortcomings of one such study (Harding 2002).
15
LABOUR LAW
than a modest impact at most on employment levels.122 Even if there were,
there would still be a powerful case on grounds of both equity and
efficiency for laws of general application which protect workers against the
arbitrary or unnecessary deprivation of their livelihood, regardless of the
size of their employer.123 Nevertheless, the Coalition persisted with its
efforts to create an exemption – and was just as persistently blocked by the
Senate.124
[19.29]
The Howard Government’s opportunity came in 2005, when it
gained control of the upper House. The Work Choices reforms did not make
major changes to the way in which unfair dismissal claims were handled,
under what was now Division 4 of Part 12 of the WR Act. But s 643
significantly limited access to such claims.125 Instead of a ‘small business’
exemption, there was a bar on any claims against an employer with 100 or
fewer employees at the date of termination.126 The cut-off figure of 100
seems to have been chosen as a more or less arbitrary compromise between
those in the government who wished to stick to a small business exemption,
and those pushing to remove unfair dismissal protection entirely. For
employees who worked at larger employers, it was necessary to serve a
‘qualifying period’ of six months before being able to lodge a claim;127 while
for some employees it remained possible for longer probationary periods to
be set.128 In addition, no claim could be made in relation to any dismissal
effected ‘for genuine operational reasons or for reasons that include genuine
operational reasons’. This was most obviously intended to prevent
redundancy dismissals being challenged, though the broad definition of the
term ‘operational reasons’ potentially gave it a wider application.129 These
various exclusions were complemented by two further limitations.
Employees working for constitutional corporations were now precluded by
s 16(1) from bringing unfair dismissal claims under State law, even if they
had previously been covered by a State instrument. And unions were
122See eg Robbins & Voll 2005; Freyens & Oslington 2007; Bryson & Howard 2008; and see also
the OECD analysis quoted in FW Bill EM paras [r.238]–[r.2.41]. The Howard
Government’s expert witness was forced to concede the lack of evidence when pressed
on the point in Hamzy v Tricon International Restaurants (2001) 115 FCR 78, a case
concerning the validity of a regulation excluding casual employees from unfair dismissal
protection. The Full Federal Court noted (at 95) that there was ‘no basis for us to conclude
that unfair dismissal laws make any difference to employers’ decisions about recruiting
labour’. See further Dowling & Howe 2002.
123See Stewart 1995: 106–9; Waring & de Ruyter 1999. It is also worth pointing out that a small
business exemption might, on the Howard Government’s own logic, actually dissuade
successful small businesses from growing!
124See eg Workplace Relations Amendment (Fair Dismissal Reform) Bill 2004; and see further
Pittard 2002; O’Neill 2008.
125See generally Chapman 2006b; Pittard 2006.
126Then, as now (see [19.36]), the count included employees in any related corporation.
127This was an increase from the requirement of serving three months that had been
introduced by the Workplace Relations Amendment (Termination of Employment) Act 2001.
128As to the reasonableness of such probationary periods, see the case law surveyed in
Donaghey 2006: 103–23. As to the relationship between the concepts of a qualifying
period and a probationary period, see Baker v University of Ballarat (2005) 151 IR 122.
129See further [19.72]–[19.73].
16
WRONGFUL OR UNFAIR TERMINATION
prohibited from seeking to include protections against unfair dismissal in
collective agreements negotiated under the WR Act.130
[19.30]
The effect of these changes on the number of unfair dismissal
claims lodged under the WR Act was dramatic.131 During the first year after
the Work Choices amendments took effect in March 2006, total claims fell
by 18.5% – this at a time when the number of employees covered by the
federal system had increased dramatically. In Victoria, where there had
been no change in coverage, claims fell from 3688 to 1994. There was, by
contrast, an increase in applications under the unlawful termination
provisions, which were largely unaffected by the reforms.
(d)
Forward with Fairness: A New Regime
[19.31] In its ‘Forward with Fairness’ policy, Labor committed itself to
establishing ‘a simpler unfair dismissal system which balances the rights of
employees to be protected from unfair dismissal, with the need for
employers to manage their workforce, and to ensure a faster, less costly and
less complex process for all’ (Rudd & Gillard 2007a: 19). Only higher paid
non-award employees would be excluded altogether. All other employees
would become eligible after serving a qualifying period that allowed their
employer an ‘adequate opportunity’ to determine their suitability. The
needs of small business would be acknowledged by imposing a longer
qualifying period – 12 months, rather than the six months required for
larger employers.132 There would also be a Fair Dismissal Code which, if
complied with by a small employer, would shield them from any claim. As
for the process for resolving claims, it would involve a single, informal
conference at which FWA would be required to reach a conclusion. There
would be ‘no formal written submissions, no cross examination and no
hearing’ (Rudd & Gillard 2007a: 20). The new regime would be ‘a fast and
simple system, which left lawyers out of the picture and encouraged an end
to the matter after a conference, not endless days of hearings before the
Industrial Relations Commission’ (Rudd & Gillard 2007b: 18).133 It was also
confirmed that a ‘genuine redundancy’ would not be treated as an unfair
dismissal (ibid: 19).
[19.32]
Labor’s plans were implemented in the form of the provisions as
to unfair dismissal in Part 3-2 of the FW Act.134 The objects of the Part are set
out in s 381. They include establishing a framework that balances the needs
of business (including small business) and of employees, that has ‘quick,
flexible and informal’ procedures, and that places an ‘emphasis on
130See WR Act s 356; WR Regs 2006 Ch 2 reg 8.5(5). Note that some State laws purported to
allow federal system employers to make unregistered agreements consenting to the
arbitration of unfair dismissal claims by the relevant State Commission: see [6.67].
131See Chapman 2009a: 211–12, from which the figures quoted in this paragraph are taken.
132Cf Chapman 2009a: 225, criticising the absence of any evidence or research to justify this
distinction.
133For criticism, see Mourell & Cameron 2009.
134See generally Chapman 2009c.
17
LABOUR LAW
reinstatement’ in providing remedies for a dismissal found to be unfair. The
relevant procedures and remedies are specifically ‘intended to ensure that a
“fair go all round” is accorded to both the employer and employee
concerned’ (s 381(2)).135 The provisions of Part 3-2 are described in detail
below, followed by an examination of the separate provisions in the Act
dealing with unlawful termination. In terms of coverage, the new regime
operates more or less exactly as described in Forward with Fairness. Its
effect has been to bring an estimated 100,000 previously exempt businesses,
employing between them around 3 million employees, back within the
scope of the federal unfair dismissal system.136 Unsurprisingly, given what
has already been said, that restoration of unfair dismissal rights appears to
have had no obvious impact on employment levels. Where the FW Act
differs from Forward with Fairness, however, is in the process used to
handle claims. As will be seen, it is far from being the lawyer-free,
conference-focused regime that had been promised.
19.4
Unfair Dismissal Claims under the Fair Work Act
(a)
Eligibility
[19.33]
Under s 390(1)(a) of the FW Act, FWA may not grant a person a
remedy in respect of an unfair dismissal unless it is satisfied that, at the time
of being dismissed, the person in question was ‘protected from unfair
dismissal’. Section 382 provides that an employee is so protected if they can
satisfy two requirements. In the first place, they must have completed the
‘minimum employment period’ prescribed by s 383. Secondly, they must
either be covered by an award or enterprise agreement, or have annual
earnings that are less than the ‘high income threshold’ prescribed under
s 333. In addition, they will need to show that they have been dismissed,
within the meaning of s 386. These various requirements are explored in
more detail below, together with the provisions in the Act that seek to
preclude an employee from making multiple applications in relation to their
dismissal. It should also be noted that only national system employees are
eligible to bring a claim.137 This not only excludes non-national system
employees, but independent contractors and other workers who do not
meet the common law description of an employee.138 As will appear later,
however, non-national system employees can access the unlawful
termination jurisdiction.139
135Once again, a note adverts to the origin in this phrase in Re Loty and AWU [1971] AR (NSW)
95 at 99.
136FW Bill EM: para [r.13].
137See s 380, which states that any reference in Part 3-2 to an ‘employee’ or ‘employer’ is to a
national system employee or employer.
138See eg Zhou v Aims Real Estate [2009] FWA 1135. The only exception concerns certain police
officers: see [5.08], [8.39].
139See Chapter 19.5.
18
WRONGFUL OR UNFAIR TERMINATION
[19.34]
Importantly, the new legislation omits a series of qualifying
requirements or exclusions that had been progressively introduced by the
Keating and Howard Governments. Aside from once again permitting
claims against employers with less than 100 employees, the most significant
reform in this regard is the removal of the blanket exclusion of employees
(including trainees) on fixed term, fixed task or seasonal contracts.140 If such
employees are not re-hired at the end of their engagement, they will not
have been ‘dismissed’ and hence will not be eligible to seek relief, as
explained below.141 But if they are let go in the middle of their contracts,
they can now potentially make a claim unless excluded on some other basis.
A further exclusion that has disappeared is that relating to probationary
employees.142 While employers may still want to nominate a probationary
period, for the purpose of assessing a new employee, that employee will
generally become eligible to make an unfair dismissal claim as soon as they
have served the applicable minimum employment period. There is no scope
under the FW Act for varying that minimum period by agreement. Finally,
many ‘regular’ casuals need no longer wait 12 months to become eligible to
challenge their dismissal.143 Unless they are working for a small business
employer, they need only serve the standard six-month minimum
employment period.
(i)
Minimum employment period
[19.35]
The minimum employment period required by s 383 is ordinarily
six months. That period must be dated from the time the employee was
given notice of their dismissal, or immediately before the dismissal itself,
whichever happened earlier. But the period extends to 12 months in the case
of a ‘small business employer’. That term is generally defined in s 23 to
mean an employer that has fewer than 15 employees. This is calculated on a
‘headcount’ basis – all workers (whether full-time or part-time) are counted,
with the sole exception of casuals who are not employed on a regular and
systematic basis. However, under a compromise negotiated by the
government to secure support for the Fair Work Bill in the Senate, this
definition does not apply for the first 18 months of the new legislation.
Instead, Schedule 12A to the TPCA Act provides that for unfair dismissal
purposes a small business employer is one that has fewer than 15 full-time
equivalent positions. The calculation is determined by a complex formula,
which essentially involves totalling the number of ordinary weekly hours
worked in the business (averaged over the four weeks preceding the
dismissal), then dividing that total by 38. Hence a business might have
considerably more than 15 workers on its books, yet still fall below the
threshold if many of them work on a part-time basis. After 1 January 2011,
140Cf WR Act (as amended) s 638(1)(a)–(b),(e),(g).
141See [19.48]–[19.50].
142Cf WR Act (as amended) s 638(1)(c).
143Cf WR Act (as amended) s 638(1)(d).
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LABOUR LAW
however, the definition will revert to the simple headcount as provided by
s 23.
[19.36]
In all cases, both before and after that date, the count includes the
employee who is claiming unfair dismissal, and any other employee dismissed at the same time. It also includes any employees who work for an
‘associated entity’ of the employer, within the meaning of s 50AAA of the
Corporations Act 2001.144 This is an important provision, since it would
otherwise allow a business to minimise its exposure to unfair dismissal
claims by dividing its workforce between a series of small employing
entities. It appears that related bodies overseas count for this purpose.145
This means that what might otherwise appear to be a ‘small’ employer in
Australia will not be treated as a small business employer for the purposes
of the FW Act, because it is part of a larger multinational group.146
[19.37]
Under s 384(1), an employee’s period of employment is generally
determined by the ‘continuous service’ they have completed with their
employer, as defined in s 22. As noted in an earlier chapter,147 that provision
refers to the ‘period during which the employee is employed by the
employer’, excluding (among other things) certain periods of unpaid
leave.148 Although neither s 22 nor s 384 say so explicitly, it would seem
clear that an employee’s service with an employer is not taken to restart for
this purpose every time they change jobs with that employer, even if they
are engaged under a new contract. The only exception might be where there
is a sufficient break between separate engagements to justify a conclusion
that the employee was not ‘employed’ throughout the period.
[19.38]
As far as a period of casual employment is concerned, s 384(2)(a)
makes it clear that this will not count towards the minimum period unless
the employment in question was ‘on a regular and systematic basis’, and the
employee had a reasonable expectation of ongoing employment on that
basis.149 Consistent with what has been said above, however, it would seem
that a ‘regular’ casual who met those criteria, and was then offered a
permanent position, would not be taken to restart their minimum period. It
144As to the critical question of whether one body ‘controls’ another for the purpose of this
definition, see eg Adams v Condamine Catchment Natural Resource Management Corp Ltd
[2010] FWA 5374.
145See eg Wilkinson v Hospitality Marketing Concepts Pty Ltd (AIRC, PR973660, 11 August 2006);
Bomford v Porta (Tas) Pty Ltd [2009] AIRC 880.
146But note the practical difficulties that may arise in determining the ‘true’ relationship
between local and foreign affiliates: see eg Arulchelvam v MCH Cargo Australia Pty Ltd
[2008] AIRC 575.
147See [10.28].
148Unauthorised absences or periods of unpaid leave do not generally break an employee’s
continuity of service, as s 22(3) makes clear. But they may be sufficient to prevent an
employee reaching the minimum service needed to make a claim: see eg Webster v Toni
and Guy Port Melbourne Pty Ltd [2010] FWA 4540. A period of work as an independent
contractor, rather than as an employee, will also not count for the purpose of satisfying
the minimum employment period: see eg Wright v Runge ICT Group Pty Ltd [2010] FWA
3148.
149See the extensive discussion in Ponce v DJT Staff Management Services Pty Ltd [2010] FWA
2078 as to the circumstances in which this requirement will be satisfied.
20
WRONGFUL OR UNFAIR TERMINATION
is also clear from s 22(5) that, as a general rule, an employee will maintain
their continuity of service when they move to new a job with a related
employer within three months of having been dismissed, or when they are a
transferring employee who is re-employed following a transfer of
business.150 Hence there is no need to re-start the minimum employment
period. The only exception is where the new employer informs the
employee that their previous service will not be counted for this purpose.
But this must be done in writing before the new employment commences,151
and does not apply where the new employer is an associated entity of the
old employer (s 384(2)(b)).
(ii)
High income earners
[19.39]
The exclusion of higher paid non-award employees was originally
introduced by the Keating Government to meet employer concerns about
the possibility of high-paid executives using the new laws to increase the
size of their severance payments, as indeed had become a feature of some
State unfair dismissal systems in the 1980s and early 1990s.152 This fear was
fuelled by a number of highly publicised claims that were lodged as soon as
Division 3 became operative in 1994. The government argued at the time
that the amendment was necessary to prevent the Industrial Relations Court
being ‘clogged’ by the length and technicality of the proceedings involved
in such claims. The exclusion has been retained ever since, with the ‘salary
cap’ generally being indexed to rise with inflation. Little if any attempt has
been made by successive governments to justify the exclusion by reference
to hard and fast evidence, or to consider the extent to which those excluded
can meaningfully be expected to protect themselves against unfair
termination by negotiating appropriate contractual arrangements.
[19.40]
Under the FW Act, and regardless of how much they earn, an
employee is eligible to bring an unfair dismissal claim if they are covered by
a modern award, or if an enterprise agreement applies to them
(s 382(1)(b)(i),(ii)). The same is true if they are covered by an ‘old’ award, or
a transitional agreement applies to them (TPCA Act Sch 3 item 36; Sch 3A
item 51).153 Even if a high-earning employee has accepted a ‘guarantee’ of
their earnings under Division 3 of Part 2-9, so that a modern award does not
apply to them,154 the employee can still complain of unfair dismissal –
because they remain covered by that award.
[19.41]
On the other hand, if there is no award coverage, and no
agreement applies, an employee can only bring a claim if the sum of their
150As to the definitions of a ‘transferring employee’ and a ‘transfer of business’, see [12.100]–
[12.102]. Under the WR Act, by contrast, a qualifying period would generally restart on a
transmission of business: see eg Aged Care Services Australia Group Pty Ltd v Ziday (2008)
172 IR 385.
151See eg Ahmed v Serco Australia Pty Ltd [2010] FWA 5121.
152See Stewart 1995: 90, 110–11.
153Cf Taylor-Hunt v Downer EDI Works Pty Ltd [2010] FWA 4626, where the applicant was
found not to fall within the coverage of either an award or an agreement.
154See [11.60]–[11.63].
21
LABOUR LAW
‘annual rate of earnings’ at the time of dismissal, and any amounts
prescribed by the regulations, is less than the ‘high income threshold’
(s 382(b)(iii)). This is a figure which is calculated in accordance with
regulations made pursuant to s 333, under which it can be indexed to rise,
but never to fall. In accordance with reg 2.13, the threshold had risen to
$113,800 as from 1 July 2010. Unlike the position with award-related
guarantees, the threshold is not prorated for part-time employees, but
simply operates as a set limit.155
[19.42]
In calculating an employee’s annual rate of earnings, it is
necessary to refer to the definition of ‘earnings’ in s 332.156 Besides the
employee’s wages (s 332(1)(a)), the term includes ‘amounts applied or dealt
with in any way on the employee’s behalf or as the employee directs’
(s 332(1)(b)). This would, for instance, cover amounts paid to a childcare
centre or a car park as part of a package of benefits; but not, it would
appear, the value of accommodation or a motor vehicle supplied by an
employer other than as part of such a package.157 Also included are any
‘non-monetary benefits’ to which the employee is entitled in return for
performing their work, and for which a ‘reasonable money value’ has been
agreed between the parties (s 332(1)(c),(3)) – for example, the use of a car
when included in a salary package. But by virtue of s 332(2) an employee’s
earnings are taken not to include reimbursements, or any payment ‘the
amount of which cannot be determined in advance’. A note suggests that
this would include ‘commissions, incentive-based payments and bonuses,
and overtime (unless the overtime is guaranteed)’. Also excluded are
‘compulsory’ superannuation contributions, for example made to avoid a
charge under the Superannuation Guarantee legislation, or to discharge an
obligation under a defined benefit or statutory scheme (s 332(2)(c),(4)). But
additional superannuation contributions required from an employer under
the terms of an enterprise agreement or employment contract, for example
as part of a salary package, would count towards an employee’s earnings.
[19.43]
Regulations may be made under s 332 either including or
excluding certain benefits in calculating ‘earnings’, but at the time of
writing no such regulations had been promulgated. However, a regulation
has been made under s 382(b)(iii). Regulation 3.05 of the FW Regs requires
that, in determining whether an employee is over the high income
threshold, account must be taken not just of their annual rate of earnings,
but of certain other amounts. In the first place, where all or part of an
155This is because the prorating provision in s 329(2) does not appear to be picked up by the
reference in s 382(b)(iii) to the high income threshold set by s 333.
156Note that the previous legislation, in a similar context, used the (undefined) term
‘remuneration’: see WR Act (as amended) s 638(6)–(7)); and see Donaghey 2006: 135–9.
Given that the terms are different, caution should be exercised before applying pre-Fair
Work Act authorities on this point.
157See eg Batley v Cocos Islands Co-operative Society Ltd [2010] FWA 2289, suggesting (at [34])
that to be included the amount in question must be ‘distinguishable as a discrete amount
expended on behalf of the employee as part of their total “cashable” salary or wages and
not an amount which is indistinguishable from the normal operational costs of
employing employees’.
22
WRONGFUL OR UNFAIR TERMINATION
employee’s income is paid at piece rates that are set by reference to a
‘quantifiable output or task’, rather than time worked, any income of that
type over the previous 12 months is to be taken into account (reg 3.05(2)–
(5)).158 Secondly, FWA is given a discretion to include a benefit that is not a
payment of money, and that does not qualify as a ‘non-monetary benefit’
within the meaning of s 332(3). It may do so where it is satisfied that it is
appropriate to take it into account, and that it can attribute a ‘real or
notional’ value to the benefit, in default of any agreement by the parties
(reg 3.05(6)).
(iii)
The need for a dismissal
[19.44]
Where the WR Act required an applicant to show that there had
been a ‘termination of employment at the initiative of the employer’,159 the
FW Act requires FWA to be satisfied that a person has been ‘dismissed’
before there can be any finding of unfair dismissal (s 385(a)). While the term
‘dismissal’ has been more commonly used in the State systems, it has often
been treated as synonymous with the phrase used in the previous federal
statute.160 This is reinforced by the definition of ‘dismissed’ in s 386 of the
FW Act, which not only incorporates the WR Act terminology but is
evidently intended to be a codification of the case law under that statute.
[19.45]
Section 386(1)(a) commences by indicating that a person is
dismissed if their employment ‘has been terminated on the employer’s
initiative’. As the FW Bill EM confirms (at para 1528), this is intended to
‘capture’ previous case law on that phrase, such as the decision of the
Industrial Relations Court of Australia in Mohazab v Dick Smith Electronics
Pty Ltd (No 2).161 As the Full Court put it in that case:
[A] termination of employment at the initiative of the employer may be
treated as a termination in which the action of the employer is the principal
contributing factor which leads to the termination of the employment
relationship …
[I]t is unnecessary and undesirable to endeavour to formulate an
exhaustive description of what is termination at the initiative of the employer
but plainly an important feature is that the act of the employer results
directly or consequentially in the termination of the employment and the
employment relationship is not voluntarily left by the employee. That is, had
the employer not taken the action it did, the employee would have remained
in the employment relationship.162
On this approach, a wrongful attempt by the employer to dispense with the
employee’s services can clearly constitute a dismissal, even if in a strict
158Note that these provisions contain formulae to deal with a situation where the employee has
not been employed for the whole of that 12 months, or has been on leave without full pay
during that period.
159See the definition of ‘termination’ in s 642(1) of the WR Act (as amended).
160See eg Fryar v Systems Services Pty Ltd (1994) 1 IRCR 246 at 254; Advertiser Newspapers Pty Ltd
v Industrial Relations Commission of SA (1999) 74 SASR 240 at 259.
161(1995) 62 IR 200.
162Ibid at 205–6; and see also Pawel v AIRC (1999) 94 FCR 231 at 237–8.
23
LABOUR LAW
sense it is the employee who puts an end to the employment contract by
accepting the employer’s repudiatory breach.163
[19.46] Section 386(1)(b) goes on to include a situation where ‘the person
has resigned from his or her employment, but was forced to do so because
of conduct, or a course of conduct, engaged in by his or her employer’. A
forced resignation is often referred to as a ‘constructive dismissal’. Even in
the absence of an express formulation of the type found in s 386(1)(b), State
and federal tribunals had been prepared to treat this as a ‘dismissal’, or a
‘termination’ by the employer.164 For example, in Mohazab itself, an
employer’s direction to an employee to resign or have the police ‘called in’
to investigate an alleged act of dishonesty was held to be the ‘critical action’
that brought the employment to an end. The court emphasised that the
employee, who wanted to spare both himself and his family the ordeal of a
police investigation, had no real choice other than to agree. By contrast,
there is no dismissal where it is apparent that the employee has resigned of
their own accord, without the employer being at fault.165
[19.47]
The more difficult situation is where an employee leaves in
response to unacceptable conduct by the employer that amounts to a
repudiation of its obligations. Before Work Choices, there was certainly
authority for treating this as a constructive dismissal, even if the employer
may not have been seeking to bring the employment relationship to an
end.166 The only question is what to make of the term ‘forced’, first added to
the legislation by the Work Choices amendments,167 and retained by
s 386(1)(b) of the FW Act. On one view, it might be taken as requiring the
employee to show that they were effectively compelled to resign, that they
had no real choice to remain.168 But on a broader interpretation, it would be
enough that the employer had seriously breached its obligations in such a
way that resignation could be regarded as a ‘probable result’ of the
employer’s actions.169 In Australian Hearing v Peary,170 the first Full Bench
decision to deal with the new formula, it was confirmed that the employee
did not have to prove that the employer intended them to resign. However,
in upholding a decision that an employer’s conduct had been so
unreasonable that it gave the employee ‘no effective or real choice but to
163See eg Siagian v Sanel Pty Ltd (1994) 1 IRCR 1; Advertiser Newspapers Pty Ltd v Industrial
Relations Commission of SA (1999) 74 SASR 240 at 247–9.
164See eg Roberts v Prince Alfred College (1979) 46 SAIR 598; Allison v Bega Valley Council (1995)
39 AILR ¶5-064; Attorney-General v WA Prison Officers Union of Workers (1995) 62 IR 225.
Cf McCarry 1994a.
165See eg Gunnedah Shire Council v Grout (1995) 134 ALR 156; Pacific National (NSW) Ltd v Bell
(2008) 175 IR 208; Pritchard v ISS Security Services Pty Ltd [2010] FWA 1740.
166See eg Smith v Department of Administrative Services (1993) 35 AILR ¶384; Woolworths (SA) Pty
Ltd v Russian (1996) 66 IR 13; Stevenson v Guardian Hall Pty Ltd (2005) 149 IR 93. The
extension of the doctrine of constructive dismissal to such cases is clearly accepted in the
UK: see [14.41].
167See WR Act (as amended) s 642(4).
168See eg Hastie v Impress Australia Pty Ltd (2008) 171 IR 311 at [55]–[62].
169See eg O’Meara v Stanley Works Pty Ltd [2006] AIRC 496 at [23].
170(2009) 185 IR 359.
24
WRONGFUL OR UNFAIR TERMINATION
resign’,171 the Full Bench did not indicate whether such a finding was
necessary for the resignation to be treated as ‘forced’. It did, on the other
hand, make it clear that just because an employer’s conduct has been
sufficiently unreasonable to trigger a forced resignation, that does not
automatically mean that the dismissal must be treated as unfair.
[19.48]
According to s 386(2)(a), there is no dismissal where an employee
is engaged for a specified period, task or season, and the employment
terminates at the end of that period or season, or the completion of that task.
But this will not apply where a ‘substantial purpose’ of the employee’s
engagement under a contract of that kind is to avoid the employer’s
obligations under Part 3-2 (s 386(3)). Section 386(2)(a) is plainly intended to
reflect previous case law to the effect that allowing a contract to expire and
not offering a further period of employment cannot be treated as a
dismissal.172 It is a question of fact as to whether employees have or have
not been engaged for a specified period.173 There have, for example, been
cases in which workers apparently engaged under a series of short fixedterm contracts have been held as a matter of fact to have an ongoing
employment contract.174 However, this may be difficult to establish in
practice, where the employer has been clear as to the nature of the
arrangement.175 As a Full Bench of the AIRC noted in Department of Justice v
Lunn,176 the practice of engaging staff on a succession of fixed-term
contracts may be ‘viewed by some as industrially contentious’. But ‘subject
to legislative constraints, employers are entitled to structure their affairs,
including the contracts they offer to employees, in the way that they think
best suits their interests’. So long as the parties’ intent, viewed objectively,
was to create a contract with a fixed end date, that intent should be
respected.
[19.49]
In Lunn the contract in question was not, strictly speaking, a
contract for a ‘specified period’, because it could be terminated on notice
during the term.177 Nevertheless, the employer could not be said to have
terminated such an ‘outer limits’ contract if it simply allowed the agreed
term to expire.178 A similar view has been taken by FWA in Drummond v
171Peary v Australian Hearing [2009] AIRC 152 at [210].
172See eg Victoria v Commonwealth (1996) 187 CLR 416 at 520; Fisher v Edith Cowan University
(No 2) (1997) 72 IR 464; Saarinen v University of Tasmania (1997) 7 Tas R 154; Griffin v
Australian Postal Corp (1998) 155 ALR 369.
173See eg Primus v State Rail (Passenger Fleet Maintenance) (1999) 90 IR 26 (contract ‘expected to
continue’ until a certain date held not to be for a specified period).
174See eg D’Lima v Board of Management, Princess Margaret Hospital for Children (1995) 64 IR 19;
Minister for Health v Ferry (1996) 65 IR 374.
175See eg Fisher v Edith Cowan University (No 2) (1997) 72 IR 464; D’Ortenzia v Telstra Corp (No 2)
(1998) 82 IR 52;
176(2006) 158 IR 410 at [42].
177For earlier decisions to that effect, see eg Cooper v Darwin Rugby League Inc (1994) 1 IRCR
130; Andersen v Umbakumba Community Council (1994) 1 IRCR 457; O’Hara v Victoria (2004)
133 IR 118. These decisions had the effect that such a contract would not fall within the
blanket exclusion that then existed for employees on specified period/task contracts. As
noted in [19.34], the FW Act no longer contains such an exclusion.
178See also Marsh v Macquarie University (2005) 147 IR 401.
25
LABOUR LAW
Canberra Institute of Technology.179 In that case Deegan C, with whose views a
Full Bench later expressed agreement in refusing leave to appeal,180
accepted that an outer limits contract was not a contract for a specified
period within the meaning of s 386(2)(a). Nonetheless, it was still open to
the employer to argue that allowing such a contract to expire was not a
dismissal, as defined in s 386(1).181 It should be noted that in both Lunn and
Drummond, short shrift was given to any suggestion that the employer had
adopted its fixed-term contract strategy to ‘avoid’ unfair dismissal
obligations. It is indeed hard to see how a worker could ever establish that
they had been put on a fixed term merely for avoidance purposes, given the
many plausible reasons for such an arrangement.
[19.50]
The fact that a refusal to re-hire will not be treated as a dismissal
has obvious implications for any casual employee seeking to bring an unfair
dismissal claim. Certainly a ‘true’ casual who is hired under a short-term
contract, and who is refused further work at the end of that contract, can
have no claim, regardless of how much they might have expected to receive
more work.182 But as noted in Chapter 8, it is not all unusual for tribunals to
find that a ‘permanent’ casual does in fact have a single, ongoing contract.183
In contrast with the carefully structured arrangements considered in Lunn
and Drummond, many such casuals are engaged on an informal basis, with
little attention to the duration of their hiring. If a casual is able to meet the
minimum employment requirement by showing regular and systematic
engagement over a period of either six or 12 months, and nothing has been
done by the employer to establish a pattern of limited-term hirings, the
casual may well be able to show that they have been dismissed rather than
refused a further contract.184
[19.51]
Having dealt more generally with specified period/task contracts,
s 382(2)(b) provides that there is no dismissal where employment is
terminated at the end of a training arrangement, and the employment was
either for a specified duration or otherwise limited to the duration of the
arrangement.185 Likewise, no dismissal occurs if an employee is demoted,
but accepts the demotion and remains in the employer’s service. But this is
so only where there is no ‘significant reduction’ in their remuneration or
duties (s 386(2)(c)). Where there is a significant reduction, the better view is
that the employee can claim to have been dismissed. So long as the
demotion has put an end to the contract under which the employee had
179[2010] FWA 3534.
180Drummond v Canberra Institute of Technology [2010] FWAFB 5455.
181As the Commissioner noted ([2010] FWA 3534 at [51]), this view was supported by the FW
Bill EM at para 1532.
182See eg Pacific Waste Management Pty Ltd v Saley (1993) 51 IR 339; Thompson v Big Bert Pty Ltd
(2007) 168 IR 309.
183See [8.06].
184See eg M v LD Pty Ltd [2009] FWA 1676 (upheld without reference to this point in Mills v
Lextor Developments Pty Ltd [2010] FWAFB 979).
185See eg Qantas Airways Ltd v Fetz (1998) 84 IR 52 (fixed-term apprenticeship held to be for
‘specified period’ even though duration capable of variation by Commissioner for
Vocational Training).
26
WRONGFUL OR UNFAIR TERMINATION
been engaged, the employee should not lose the right to complain about it
merely because they accept what is in effect an offer to do a different job.186
So much indeed was assumed by the High Court in Visscher v Giudice.187
[19.52]
There appear to be at least three further ways, not specifically
mentioned in s 382(2), in which an employment contract may come to an
end without there being a ‘dismissal’. One is where an employee ‘abandons’
their job.188 A second is where the employer and employee agree to
terminate the employment by mutual consent.189 Thirdly, there is no
dismissal where an employment contract is frustrated or otherwise ends
automatically by operation of law.190 As noted in the previous chapter,
however, the courts are generally reluctant to allow an employer to plead
frustration in the case of a contract that is readily terminated by notice.191
(iv)
Avoiding multiple claims
[19.53]
Section 725 of the FW Act seeks to prevent multiple applications
in relation to a dismissal. It provides that if any application or complaint of
a type listed in ss 726–732 is made by or on behalf of a dismissed employee,
then no other application or complaint of those types can be made by that
employee. The types listed are:
• s 726 – an application to FWA for a bargaining order, on the ground
that the employee has been dismissed in breach of the good faith
bargaining requirement in s 228(1)(e);192
 s 727 – an application to FWA under s 365 to deal with a dispute
over a dismissal alleged to be in contravention of the general
protections in Part 3-1;193
 s 728 – a general protections court application relating to a
dismissal;
 s 729 – an unfair dismissal application under Part 3-2;
 s 730 – an application to FWA to deal with a dispute over what is
alleged to be an unlawful termination;194
 s 731 – an unlawful termination application to a court;
 s 732 – an application or complaint in relation to a dismissal under
any other federal law, or a State or Territory law.
186See Advertiser Newspapers Pty Ltd v Industrial Relations Commission of SA (1999) 74 SASR 240;
Charlton v Eastern Australia Airlines Pty Ltd (2006) 154 IR 239; but cf Brackenridge v Toyota
Motor Corp Australia Ltd (1996) 142 ALR 99.
187(2009) 239 CLR 361 at [30], [37]. Their observations were made in the context of s 170CD(1B)
of the WR Act, which was to the same effect as s 386(2)(c).
188See eg Erbacher v Golden Cockerel Pty Ltd [2007] AIRC 491; and see further [18.48]–[18.49].
189It is unclear whether this is what happens where an employee accepts a voluntary
redundancy package: see [18.47].
190See University of WA v NTEU (2003) 129 IR 348.
191See [18.45].
192See [21.25], [21.29].
193See [17.102]–[17.104].
194As to unlawful termination, see Chapter 19.5.
27
LABOUR LAW
This last would plainly include an application under any type of antidiscrimination law,195 as well as any measure that was concerned with
protecting employees against victimisation. The broad reference to an
application or complaint ‘in relation to’ a dismissal would also, arguably,
cover an action by way of judicial review seeking to invalidate a purported
termination,196 an appeal process provided under public sector
legislation,197 or the activation of a dispute resolution procedure in an
enterprise agreement.198 Presumably, however, a common law action for
wrongful dismissal would not be caught, on the basis that the reference to a
‘law’ in s 732 is to a statute, or to an instrument having effect under a
statute.
[19.54]
The effect of these provisions is that, if an employee complains of
unfair dismissal under the FW Act, they are barred from pursuing any other
type of dismissal-related claim. Conversely, pursuing an action under the
general protections or an anti-discrimination law will preclude an unfair
dismissal complaint. However, as ss 726–732 each make clear, any bar is
lifted whenever an application is withdrawn, or fails for want of jurisdiction
on the part of the body to which the application has been directed. Other
proceedings may also be instituted if FWA certifies that it has been unable
to resolve a general protections or unlawful termination dispute
(ss 727(1)(b)(iii), 730(1)(b)(iii)). Similarly, an unfair dismissal applicant can
pursue other avenues if their claim fails because FWA is satisfied the
dismissal was a case of genuine redundancy (s 729(1)(b)(iii)).199 Otherwise,
however, the mere fact that an application or complaint is unsuccessful will
not mean that the applicant can then try a different action. On the other
hand, it is specifically provided that no bar will arise from a proceeding
relating solely to a failure to provide a benefit (such as notice, or severance
pay) to which an employee was entitled on dismissal (s 733). It would also
appear that while a dismissed employee might be barred by s 725 from
lodging a certain type of application because of a previous complaint that
they had made, it would still be open – subject to any arguments about res
judicata or issue estoppel200 – for someone else acting on their behalf to seek
a remedy: for example, a union initiating a dispute resolution process under
195See eg Deva v University of Western Sydney (2009) 191 IR 268; Lin v University of Melbourne
(2009) 179 IR 242; Emerald Ocean Developments Pty Ltd v Johnson (2002) 120 IR 381. Where a
complaint under the Australian Human Rights Commission Act 1986 is amended so that it
relates to a dismissal, where it had not done so before, it is from that point taken to be a
complaint relating to a dismissal (FW Act s 732(3)).
196See eg Baker v University of Ballarat (2005) 151 IR 122; but cf Stannard v McIntyre (2004) 140
FCR 249. Note that these cases were decided under the more narrowly worded s 170HB
of the WR Act. As to actions for judicial review, see [19.82].
197Ilardo v Rail Corp NSW [2010] FWA 3892, distinguishing decisions such as State Transit
Authority v Caine (2004) 135 IR 73 made under s 170HB.
198As to the possibility of invoking such procedures in relation to dismissals, see [19.85]. Cf
Alcoa of Australia Ltd v Barrett (2008) 170 IR 254, again decided under the more narrowly
worded s 672 of the post-Work Choices WR Act.
199See [19.73].
200As to whether a decision by a tribunal on an unfair dismissal application can raise an issue
estoppel, see Miller v University of NSW (2003) 132 FCR 147.
28
WRONGFUL OR UNFAIR TERMINATION
an agreement. But the reverse would not be true. If the union made its
application first, this would arguably bar any subsequent application by the
employee.201 Furthermore, where an employee lodged an unfair dismissal
application, then was allowed (perhaps mistakenly) to pursue another
application which was ultimately rejected, s 725 would not bar them
reopening the unfair dismissal claim; but the employer could nonetheless
ask FWA to dismiss the claim under s 587 as being vexatious.202
(b)
Procedures for Dealing with a Complaint
[19.55]
An unfair dismissal complaint is commenced by the dismissed
worker lodging an application with FWA under s 394(1). A filing fee
(currently $60.60) must be paid by each applicant, unless FWA is satisfied
this would cause serious hardship to the applicant (s 395; reg 3.07). An
application must ordinarily be made within 14 days of the dismissal taking
effect (s 394(2)). FWA does, however, have a discretion under s 394(3) to
accept late applications in ‘exceptional circumstances’, taking into account
the following factors:
(a) the reason for the delay; and
(b) whether the person first became aware of the dismissal after it had
taken effect; and
(c) any action taken by the person to dispute the dismissal; and
(d) prejudice to the employer (including prejudice caused by the delay);
and
(e) the merits of the application; and
(f) fairness as between the person and other persons in a similar position.
As the FW Bill EM (paras 1573–4) confirms, this list is based on the
principles articulated by the Industrial Relations Court in Brodie-Hanns v
MTV Publishing Ltd,203 with the addition of the factor set out in
paragraph (b). What has also been added, however, is that the
circumstances justifying the extension must be ‘exceptional’. It has been
suggested that this has created a ‘higher hurdle’ for extensions of time,
although it is not necessary for the circumstances to be ‘unique’ or
‘unprecedented’.204 Even under the WR Act, late applications would
generally only be accepted where the applicant had a good explanation for
missing the deadline, and the respondent would not be unduly prejudiced
by the delay.205 That appears to remain the case: for example, it has been
held that incorrect advice or representative error may still provide a good
reason for a delay in lodging and make it equitable to grant an extension, as
201This is because the operation of s 725 would be triggered by s 732, which (like ss 726–731)
refers to an action ‘by, or on behalf of, the person in relation to the dismissal’. It is only
s 725 itself, the barring provision, which refers solely to the ‘person who has been
dismissed’ making an application or complaint.
202See eg Austin v Victoria (Department of Education and Training) (2008) 170 IR 45.
203(1995) 67 IR 298 at 299–300.
204Johnson v Joy Manufacturing Co Pty Ltd [2010] FWA 1394 at [25]–[28].
205See eg Nottage v National Australia Bank Ltd (2007) 166 IR 380.
29
LABOUR LAW
was the case under the previous legislation.206 On the other hand, while
ignorance of the time limit may sometimes be excused, a failure by a worker
to seek any advice or information until well after the time limit has expired
will count against any extension.207
[19.56]
The Act itself has relatively little to say about how an application
should be handled. Section 396 requires that FWA must, before considering
the merits of an application, consider whether the application was made
within the required period; whether the applicant was protected from
unfair dismissal within the meaning of the provisions discussed above;
whether the dismissal was consistent with the Small Business Fair Dismissal
Code (if applicable); and whether it was a case of genuine redundancy. The
last two of those matters are discussed later on.208 After considering these
preliminary issues, it is then for FWA to determine whether to deal with the
matter ‘on the papers’, or to convene a conference or a hearing.209 Unlike the
position under the previous legislation, or most of the State systems, there is
no requirement to proceed through conciliation to arbitration. What the Act
does say, however, is that FWA must conduct a conference or hold a hearing
if the matter involves disputed facts (s 397). Any conference to deal with an
unfair dismissal claim must be held in private (s 398(2)). FWA must also
consider ‘any difference in the circumstances of the parties’, as well as the
wishes of those parties, in determining how to deal with the application in
such a conference (s 398(3)–(4)). On the other hand, it must not hold a
hearing unless it considers it appropriate to do so, taking into account the
parties’ wishes and ‘whether a hearing would be the most effective and
efficient way to resolve the matter’ (s 399(1)). If it does decide to hold a
hearing, however, it may still decide to deal with parts of the matter in
some other way (s 399(2)). Conversely, it is not prevented from moving into
a hearing either before, during or after a conference (s 399(1)).
[19.57]
A person reading this part of the Act might gain the impression
that unfair dismissal applications are handled in a highly flexible manner,
with cases being dealt with in different ways according to their
circumstances. The reality is otherwise. Since the new system commenced in
July 2009, FWA has chosen to adopt a set procedure for applications. Over
its first year in operation, that procedure has gradually been refined – and
also applied more strictly and consistently across the country. It is a process
that seeks to resolve matters more quickly than had been the case under the
system it replaced. But it bears only a passing resemblance to the procedure
described in Forward with Fairness.210
206See eg Johnson v Joy Manufacturing Co Pty Ltd [2010] FWA 1394; Bradbury v Interact Australia
(Victoria) Ltd [2010] FWA 4829. The second of these cases dealt with a similarly worded
power under s 366(2) to grant an extension of time (beyond 60 days) for a general
protections application: see [17.103].
207See eg Wemyss v Mission Australia Employment Services [2010] FWA 1798.
208See [19.68]–[19.73].
209As to FWA’s general powers in dealing with a matter, see [6.16]–[6.19].
210See [19.31].
30
WRONGFUL OR UNFAIR TERMINATION
[19.58]
After an application is lodged, FWA gives a copy to the employer
and asks it to complete a form outlining the reasons for the dismissal and
the employer’s response to the applicant’s contentions. The employer is also
given an opportunity, if it wishes, to object to the application being dealt
with at all. It may, for instance, argue that the applicant was not eligible to
make a claim, or ask FWA to exercise its power under s 587 to dismiss the
application on the ground that it is ‘frivolous or vexatious’ or has ‘no
reasonable prospects of success’.211 In some, though by no means all, cases
where such an objection is made, the matter will go to a preliminary hearing
by a Member of FWA. More often though, the matter is swiftly listed for
conciliation. This is usually conducted by telephone, rather than face-toface, by a specialist conciliator. The conciliators who handle this part of the
process generally have a background in alternative dispute resolution,
and/or workplace relations. They are not Members of FWA as such, but
public servants appointed to the staff of FWA. So far as the authors are
aware, they have not been formally delegated with the power to conduct
conferences, as s 625(1)(c) would plainly allow. This rather curious omission
means that the processes they conduct have no status under the Act. In
other words, conciliation is completely voluntary – a fact acknowledged by
FWA,212 but not always advertised to parties.213 It also means that the
conciliators cannot, for instance, make determinations on whether a party
may be assisted or represented by a lawyer or paid advocate. Nonetheless,
most parties choose to participate, and in the first nine months of the new
system 81% of claims were settled at conciliation, with only 2% in total
going on to ‘merits arbitration’.214 One reason for this is that any claim not
settled at conciliation is immediately listed for determination by a Member,
with directions to the parties to file witness statements and outlines of
argument. No further opportunity is offered for conciliation, although the
parties may be offered an opportunity for the matter to be dealt with by
means of a conference, rather than a more formal hearing. Either way, given
the preparation costs involved, there is a powerful incentive to settle at or
soon after conciliation.215
211Under the WR Act the view was taken that an application should be dismissed on this basis
only where it was ‘manifestly untenable or groundless’: Wright v Australian Customs
Service (2003) 120 IR 346 at 358. However, in Applicant v Respondent [2010] FWA 1765 it
was suggested that the different scheme of the FW Act requires a less stringent approach,
and that it is enough to conclude that the applicant does not have ‘evidence of sufficient
quality and weight to be able to succeed at trial’.
212See eg Acton 2010: 9.
213At the time of writing, for example, the otherwise helpful material about unfair dismissal
claims on FWA’s website (www.fwa.gov.au) made no mention of this fact.
214See Acton 2010: 10–11, which also records that conciliations were on average held 25 days
after lodgement of the application, with 92% being conducted by telephone. By
comparison, under the WR Act around 75% of claims typically settled at conciliation,
with the first conference typically being held between 45 and 55 days after lodgement:
AIRC 2009: 10, 47.
215In the Forward with Fairness Implementation Plan, Labor had promised that it would
effectively end the payment of ‘go away money’ by employers to settle unmeritorious
claims: Rudd & Gillard 2007b: 18. Needless to say, the practice is still very much alive,
31
LABOUR LAW
[19.59]
Where a matter does go to a hearing, whether on a preliminary
point or on the merits, it will be conducted in much the same way as an
arbitration under the previous system. As noted in an earlier chapter,
certain lawyers and paid advocates can be excluded, but in practice are
generally allowed to represent their clients.216 Where a decision of any kind
is issued, any person aggrieved may lodge an appeal with a Full Bench
under s 604. However, s 400(1) makes it clear that the Full Bench must not
grant leave to appeal unless it is in the public interest to do so. This
effectively sets a higher threshold for intervention than in relation to other
matters under the Act, where it might be sufficient simply to demonstrate
error.217 So much was noted in GlaxoSmithKline Australia Pty Ltd v Makin,218
where although the Full Bench was reluctant to offer any definition of the
‘public interest’, it suggested that:
[T]he public interest might be attracted where a matter raises issues of
importance and general application, or where there is a diversity of decisions
at first instance so that guidance from an appellate court is required, or
where the decision at first instance manifests an injustice, or the result is
counter intuitive, or that the legal principles applied appear disharmonious
when compared with other recent decisions dealing with similar matters
…219
Section 400(2) also states that where an appeal under Part 3-2 involves a
question of fact, it can only be made on the ground that the decision
‘involved a significant error of fact’.
(c)
‘Harsh, Unjust or Unreasonable’
[19.60]
For any finding of unfair dismissal to be made, FWA must be
satisfied that the dismissal was ‘harsh, unjust or unreasonable’ (s 385(b)).
These epithets have long been used, either singly or in combination, to
denote the type of dismissal or termination that may call for redress. They
have been described as ‘ordinary non-technical words which are intended
to apply to an infinite variety of situations where employment is
terminated’.220 Even before they appeared in legislation, they had been
adopted by some of the State tribunals in order to provide a consistent basis
for the resolution of disputes over dismissals. In applying these criteria, the
tribunals have generally tried to avoid what has been described as
‘adjectival tyranny’.221 But in doing so they have frequently had recourse to
though the amounts in question are often very low – a reflection of the generally very
meagre amounts of compensation on offer to successful applicants: see further [19.76].
216See [6.20]–[6.21].
217See [6.25].
218[2010] FWAFB 5343.
219Ibid at [27].
220Bostik (Australia) Pty Ltd v Gorgevski (1992) 36 FCR 20 at 28; Byrne v Australian Airlines Ltd
(1995) 185 CLR 410 at 467.
221Re Loty and AWU [1971] AR (NSW) 95 at 99.
32
WRONGFUL OR UNFAIR TERMINATION
vague concepts such as securing ‘a fair go all round’,222 or ensuring the
observance of ‘industrial fair play’.223
[19.61]
Historically, the State tribunals in particular tended to accord a
degree of deference to the notion of managerial prerogative. Emphasis was
consistently placed on the need to ensure that management was not entirely
deprived of the power to make employment decisions and that a dismissal
was not unfair merely because the tribunal might have reached a different
decision if it were in the employer’s place.224 As against that, there was a
strong emphasis on procedural fairness, particularly in terms of affording
the employee a reasonable opportunity to respond to allegations of
misconduct.225 It also became firmly established that an employer should
not in ordinary circumstances dismiss for incompetence or poor work
performance without first alerting the employee to the problem and giving
them a reasonable chance to improve. Although common sense and
principles of sound management might suggest that this should be the case,
this insistence has helped to ensure the widespread adoption of a standard
procedure for dealing with alleged incapacity. Typically, this involves
employees receiving a series of warnings, escalating in seriousness, as a
precursor to dismissal. A similar procedure may also be employed in
relation to absenteeism or misconduct of a minor nature.226
[19.62]
The relevance of factors such as whether the employee has been
given a fair hearing or any chance to improve their performance has now
been given legislative expression. This has been done by including these
factors in a list of considerations that a tribunal is directed to take into
account in dealing with allegations of unfair dismissal.227 In the FW Act, the
relevant provision is s 387:
In considering whether it is satisfied that a dismissal was harsh, unjust or
unreasonable, FWA must take into account:
(a) whether there was a valid reason for the dismissal related to the
person’s capacity or conduct (including its effect on the safety and
welfare of other employees); and
(b) whether the person was notified of that reason; and
(c) whether the person was given an opportunity to respond to any
reason related to the capacity or conduct of the person; and
222Ibid; Re Registered Nurses Conciliation and Arbitration Board (1984) 9 IR 19 at 30; Undercliffe
Nursing Home v Federated Miscellaneous Workers Union of Australia (1985) 65 WAIG 385 at
386.
223Minchin and Gorman v St Jude’s Child Care Centre (1973) 40 SAIR 106 at 116–17; Hallett Brick
Industries Ltd v Kenniwell (1976) 43 SAIR 477 at 488–9.
224See eg Western Suburbs District Ambulance Committee v Tipping [1957] AR (NSW) 273 at 279–
80; North West County Council v Dunn (1971) 126 CLR 247 at 263; Woolworths (SA) Ltd v
Schutz (1985) 52 SAIR 281 at 287.
225See eg Bunnett v Henderson’s Federal Spring Works Pty Ltd (1989) 31 AILR ¶356; Bi-Lo Pty Ltd v
Hooper (1992) 53 IR 224; and see further Johnstone et al 1991.
226See [14.54].
227As to the duty cast on the tribunal by such a provision to consider each of the nominated
factors, see Edwards v Giudice (2000) 169 ALR 89 at 92; Re AIRC; Ex parte Smith (2004) 134
IR 316.
33
LABOUR LAW
(d) any unreasonable refusal by the employer to allow the person to
have a support person present to assist at any discussions relating
to dismissal; and
(e) if the dismissal related to unsatisfactory performance by the
person—whether the person had been warned about that
unsatisfactory performance before the dismissal; and
(f) the degree to which the size of the employer’s enterprise would be
likely to impact on the procedures followed in effecting the
dismissal; and
(g) the degree to which the absence of dedicated human resource
management specialists or expertise in the enterprise would be
likely to impact on the procedures followed in effecting the
dismissal; and
(h) any other matters that FWA considers relevant.
This is essentially the same list that appeared in the WR Act,228 with the
addition of the factor listed in paragraph (d).229
[19.63]
The first of the factors listed in s 387 speaks of a ‘valid reason’ for
dismissal.230 It has been said that a valid reason is one that is ‘sound,
defensible or well founded’, rather than ‘capricious, fanciful, spiteful or
prejudiced’.231 A reason may be valid even if there would not be grounds
for summary dismissal at common law.232 Conversely, there may be no
valid reason for a termination even where the employer is legally entitled to
dismiss the employee.233 To provide a flavour of the case law in this area,
recent Full Bench decisions have treated the following as valid reasons for
dismissal:
•




assaulting, or fighting with, a co-worker;234
unauthorised access to co-workers’ e-mails and computer files;235
leaking confidential documents;236
misappropriation of funds;237
refusing to comply with legitimate directions;238
228See WR Act s 170CG(3); WR Act (as amended) s 652(3). These two provisions were identical,
except in so far as s 170CG(3)(a) referred to a ‘valid reason for the termination related to
the capacity or conduct of the employee or to the operational requirements of the employer’s
undertaking, establishment or service’. The italicised words were omitted from s 652(3)(a),
because of the exclusion that had been introduced by Work Choices for operational
reasons dismissals. Section 387(a) of the FW Act likewise omits those words, because of
the separate treatment of ‘genuine redundancy’ dismissals: see [19.73].
229As to the significance of not being given a chance to call upon a ‘support person’, see eg N v
The Bakery [2010] FWA 3096.
230As to the breadth of this term, see eg Qantas Airways Ltd v Cornwall (1998) 84 FCR 483; and
see further Chapman et al 1997. As to the meaning of the term ‘capacity’, see Crozier v
AIRC [2001] FCA 1031.
231Selvachandran v Peteron Plastics Pty Ltd (1995) 62 IR 371 at 373.
232Annetta v Ansett Australia Ltd (2000) 98 IR 233; Shanahan v AIRC (No 2) (2006) 236 ALR 612;
Royal Melbourne Institute of Technology v Asher (2010) 194 IR 1.
233Miller v University of NSW (2003) 132 FCR 147 at 154, 170–1.
234Kleidon v Toyota Motor Corp Australia Ltd (2009) 187 IR 243; Spillard v Patrick Stevedores
Holdings Pty Ltd (2010) 193 IR 184.
235Metricon Homes Pty Ltd v Bradley (2009) 181 IR 115.
236Ziogas v Telstra Corp Ltd [2010] FWAFB 2664.
237Royal Melbourne Institute of Technology v Asher (2010) 194 IR 1.
34
WRONGFUL OR UNFAIR TERMINATION





breach of safety procedures;239
offensive and intimidating behaviour;240
testing positive at work for alcohol use, in breach of a clear
policy;241
repeated speeding by a truck driver;242
‘high range’ drink driving, on the part of a brewery worker.243
In most of these cases, the Full Bench went on to uphold the dismissal.
However, the presence of a valid reason is not determinative. An employer
may have a perfectly good reason for the dismissal of a worker, but the
dismissal may nonetheless be found to be unfair because of the way it was
handled, or because the worker has a long record of hitherto unblemished
service.244
[19.64]
The same point applies to the question of giving the employee an
opportunity to ‘respond’ to whatever reason was the basis for their
dismissal. It seems this does not just refer to the employee being given a
chance to respond to any allegations made against them, but contemplates
that they will have an opportunity to persuade the employer not to dismiss
them by (for example) putting forward extenuating circumstances or
emphasising their previous record.245 Under the original 1993 legislation,
any failure to accord a fair hearing would in itself render a termination
unlawful, regardless of whether the employee’s conduct or performance
appeared to merit dismissal.246 But under s 387, it is just one factor to be
considered. This accords with the approach adopted by the High Court in
Byrne v Australian Airlines Ltd247 in relation to an award provision
forbidding harsh, unjust or unreasonable dismissal. Two baggage handlers
who worked at an airport were accused of pilfering from passengers’ bags.
The evidence principally relied on by the employer was a video recording
of them at work. Although the actions portrayed were suspicious, the
evidence was far from conclusive. The employees were not shown the video
until five months later. When they failed to give an immediate explanation
for their behaviour, they were dismissed. The Full Court of the Federal
Court held that the award had been breached, since among other things the
employer had not clearly explained the accusation against them and had
not given them a reasonable opportunity to present their side of the story,
238Darvell v Australia Postal Corp [2010] FWAFB 4082.
239GlaxoSmithKline Australia Pty Ltd v Makin [2010] FWAFB 5343.
240Randall v Australian Taxation Office [2010] FWAFB 5626.
241Gane v Rail Corp of NSW [2010] FWAFB 3788.
242Rand Transport (1986) Pty Ltd v Gervasoni (2010) 193 IR 279.
243Kolodjashnij v Lion Nathan [2010] FWAFB 3258.
244See eg Royal Melbourne Institute of Technology v Asher (2010) 194 IR 1; GlaxoSmithKline
Australia Pty Ltd v Makin [2010] FWAFB 5343; Francis v Kalgoorlie Consolidated Gold Mines
Pty Ltd [2010] FWA 5472.
245Shields v Carlton & United Breweries (NSW) Pty Ltd (1999) 86 FCR 446.
246See Industrial Relations Act 1988 s 170DC; and see eg Shields v Carlton & United Breweries
(NSW) Pty Ltd (1999) 86 FCR 446.
247(1995) 185 CLR 410.
35
LABOUR LAW
especially in light of the time delay involved.248 However, this finding was
overturned by the High Court. The dismissal could not be regarded as
harsh, unjust or unreasonable merely by reason of a lack of procedural
fairness, without at least considering whether the employees’ conduct
nonetheless warranted dismissal.249
[19.65]
The High Court in Byrne also confirmed that an employer may
justify a dismissal by reference to circumstances that subsequently come to
light, even though they were not a reason as such for the termination.250 By
the same token, the emergence of facts not known at the time can make a
dismissal harsh, unjust or unreasonable, where it might otherwise have
appeared fair – as for instance where it becomes apparent that the employee
was not in fact guilty of misconduct.251 The fact that the employer might in
such a case have acted ‘reasonably’ will not preclude a finding that the
dismissal was unfair – subject to what is said in the next section about the
effect of the Small Business Fair Dismissal Code.
[19.66]
It is notable that, just like the previous legislation, the FW Act
does not formally put the burden of establishing unfairness on the
applicant. However, since FWA must be ‘satisfied’ that a dismissal is unfair,
there is in a practical sense a burden on the applicant to establish a case for
relief. Where an employer alleges misconduct by the applicant, and that
allegation is denied, there is an ‘evidentiary onus’ on the employer to put
forward some evidence to suggest that the misconduct occurred.252
Nevertheless, studies have shown that in cases decided on the merits (that
is, on non-jurisdictional grounds), employees can expect to succeed in
establishing unfair treatment in only one out of every two cases.253
[19.67]
From what has been said, it should be clear that most unfair
dismissal cases essentially turn on their own facts. Conduct that may appear
to justify dismissal in one context will be excused in another – perhaps
because the employer concerned has not properly communicated its policy
on that issue to its workforce, or has not applied its policy in a consistent
manner, or has not properly investigated the matter, or has failed to take
248Byrne v Australian Airlines Ltd (1994) 120 ALR 274.
249See also Crozier v AIRC [2001] FCA 1031 (dismissal justified on ‘capacity’ grounds despite
lack of procedural fairness).
250(1995) 185 CLR 410 at 430, 467, applying Lane v Arrowcrest Group Pty Ltd (1990) 99 ALR 45 at
74–5; and see also Metricon Homes Pty Ltd v Bradley (2009) 181 IR 115. Cf Wheeler v Philip
Morris Ltd (1989) 97 ALR 282 at 308. This is in line with common law authority on this
point: see [18.25].
251Australia Meat Holdings Pty Ltd v McLauchlan (1998) 84 IR 1. Cf Bi-Lo Pty Ltd v Hooper (1994)
53 IR 224.
252Hinchey v North Goonyella Coal Mines Pty Ltd (2009) 178 IR 252. Cf Article 9 of ILO
Convention 158, which stipulates that a worker should not have to ‘bear alone the burden
of proving that the termination was not justified’. For an interesting analysis of cases
involving alleged misconduct, and how the employees concerned sought to defend their
actions, see Southey 2010.
253See eg Chelliah & D’Netto 2006: 489; Southey 2008: 35. See also Southey & Fry 2010, noting a
‘mildly significant’ correlation between the background of the arbitrator (that is, whether
they previously represented employers or workers) and their propensity in such cases to
find in favour of employers or employees.
36
WRONGFUL OR UNFAIR TERMINATION
proper account of the employee’s length of service and previous good
record. This makes it difficult if not impossible to distil from the case law a
clear set of principles, even though experienced practitioners may develop a
‘feel’ for how FWA (or a particular Member) is likely to react in any given
situation. In the end, the familiar generalisations such as ‘ensuring a fair go
all round’ may have to suffice.254
(d)
The Small Business Fair Dismissal Code
[19.68]
Under s 385(c), a dismissal cannot be regarded as unfair unless
FWA is satisfied that it was ‘not consistent with the Small Business Fair
Dismissal Code’. The Code is an instrument declared by the Minister for
Workplace Relations (s 388(1)). A dismissal will be taken to be consistent
with the Code where two requirements are satisfied (s 388(2)). The first is
that the employer was a small business employer at the time the employee
was given notice or dismissed (whichever happened earlier). Hence the
requirement is only relevant to employees with fewer than 15 employees.255
The second is that the employer complied with the Code in relation to the
dismissal. If that can be established, the application must be dismissed. If
not, FWA will then proceed to consider the matter by reference to the
factors listed in s 387.256
[19.69]
The Small Business Fair Dismissal Code formally declared in June
2009 is extremely short and simple.257 It provides that:
• A dismissal will be deemed to be fair whenever the employer has
reasonable grounds to believe that the employee was guilty of serious
misconduct, such as theft, fraud, violence or serious breaches of
occupational health and safety requirements. It is ‘sufficient, though not
essential’ that the employer reports the allegation to the police or some
other relevant authority.
 For other dismissals, an employee must be given a valid reason that
is based on their conduct or capacity. This must be preceded by a
warning, preferably but not necessarily in writing,258 that they risk
being dismissed if there is no improvement. The employee must
also be given an opportunity to respond to the warning and a
reasonable chance to rectify the problem.
254For attempts, nonetheless, to derive principles of general application from the cases
(generally under the WR Act) on what constitutes ‘harsh, unjust or unreasonable’
treatment, see eg Donaghey 2006: 204–24, ch 7; Sappideen et al 2009: 432–7.
255See [19.35].
256See N v The Bakery [2010] FWA 3096 at [12].
257See Declaration under subsection 388(1), Legislative Instrument F2009L02570, 24 June 2009.
The Code and its accompanying documents (including the preamble and checklist
discussed below) can be accessed on FWA’s website (www.fwa.gov.au).
258For an example of verbal warnings being accepted as complying with the Code, see
Maczkowiack v B & A Gleeson Pty Ltd [2010] FWA 3940.
37
LABOUR LAW


Employees can have another person present to assist them in any
‘circumstances where dismissal is possible’. But that person cannot
be a lawyer acting in a professional capacity.
If the employee lodges an unfair dismissal complaint with FWA,
the small business employer will be required to ‘provide evidence
of compliance with the Code’. That may include ‘a completed
checklist, copies of written warning(s), a statement of termination or
signed witness statements’.
At the same time as releasing the Code, the government issued a Small
Business Fair Dismissal Code Checklist as a ‘tool’ to help small employers
comply with the Code. Both this checklist and the preamble to the Code
were revised in July 2010,259 following criticism by some FWA Members
that they did not accurately reflect the Code itself or other aspects of the
legislation.260 Among other things, it is now stated that ‘[c]ompleting the
Checklist does not mean that the Code has been complied with, nor is it a
requirement of the Code that the Checklist be completed’. It is also made
clear that the Code does not deal with redundancy dismissals, which
instead are dealt with in s 389 of the FW Act, considered below.
[19.70]
The Code does make some important concessions to small
employers. In particular, the employer may be able to rely on a reasonable
belief that an employee was guilty of serious misconduct, even if the
allegation turns out to have been unfounded. But even in such cases, there
are still procedural requirements. And in other situations, it remains open
to FWA to conclude that a particular reason was not ‘valid’, or that an
employee was not given a ‘reasonable chance’ to rectify a problem with
their performance. As the Code stands, therefore, it is far from being a
licence to small employers to dismiss at will. But it would be open to a
future government to vary the Code to reduce FWA’s capacity to scrutinise
dismissals and essentially require small businesses merely to follow a few
basic procedural steps.
(e)
Redundancy Dismissals
[19.71]
One interesting subset of unfair dismissal cases involves claims by
workers who have been made redundant.261 Before Work Choices, it was
clear that a retrenched worker could not attack the actual decision that their
job should be abolished. Both federal and State tribunals consistently took
the view that, provided the employer had acted in good faith,262 its judgment
259See ‘Crean changes Dismissal Code checklist’ Workplace Express, 20 July 2010.
260See eg N v The Bakery [2010] FWA 3096 at [74]; Nalevansky v Thought Equity Motion Inc [2010]
FWA 3707 at [13]–[14].
261As to the concept of redundancy, see generally [18.50].
262As opposed, for instance, to having invented a redundancy situation merely to disguise
what is in truth an attempt to be rid of a specific individual: cf Kilworth v Zweck (1973) 40
SAIR 458.
38
WRONGFUL OR UNFAIR TERMINATION
as to the needs of the enterprise must be respected.263 Nevertheless, a claim
that the dismissal was harsh, unjust or unreasonable could be established by
challenging other aspects of the decision-making process.264 It might be
argued, for instance, that the applicant was not properly consulted before
the decision to retrench was implemented;265 or that the applicant was
unfairly selected for redundancy ahead of another worker;266 or that in
selecting the applicant out of a group by reference to their relative conduct
or performance, no opportunity was afforded to them to respond (before any
final decision on selection) to any concerns management might have over
the applicant’s record or capabilities.267 A further ground for challenge,
accepted in some jurisdictions but not others, was that any severance
benefits provided by the employer did not conform to ‘contemporary
industrial standards’.268
[19.72]
Under s 643(8) of the amended WR Act, by contrast, no unfair
dismissal claim could be maintained where the applicant’s employment had
been terminated for genuine operational reasons, or for reasons that
included such reasons.269 ‘Operational reasons’ were defined to mean
‘reasons of an economic, technological, structural or similar nature relating
to [all or part of] the employer’s undertaking, establishment, service or
business’ (s 643(9)). Once an employer could establish that such reasons had
genuinely played a part in a dismissal, it was not for the AIRC to inquire
further as to whether the dismissal was a ‘logical’ or appropriate response,
or more broadly whether the employee had been fairly treated. This was
emphasised in Village Cinemas Australia Pty Ltd v Carter,270 where the
manager of a cinema that was closed down was not permitted to argue that
he should have been allowed to take long service leave while waiting to see
whether another position was available elsewhere in the company.
[19.73]
While the operational reasons defence was in force, doubts
persisted about its potential application to situations not otherwise
involving redundancy.271 By contrast, the equivalent provision in the FW
263See eg Mitchell v Tecalemit (Australia) Pty Ltd (1985) 27 AILR ¶475; Quality Bakers of Australia
Ltd v Goulding (1995) 60 IR 327 at 333.
264See Garbett v Midland Brick Co Pty Ltd (2003) 129 IR 270 at 286–7.
265See eg Quality Bakers of Australia Ltd v Goulding (1995) 60 IR 327; RJ Gilbertson (Qld) Pty Ltd v
Lloyd (1996) 71 IR 377.
266See eg Diprose v Simplot Pty Ltd (1999) 94 IR 330; Smith v Moore Paragon Australia Ltd (AIRC,
PR915674, 21 March 2002); and see also Re AIRC; Ex parte Smith (2004) 134 IR 316.
267See eg Kenefick v Australian Submarine Corp Ltd (1996) 65 IR 366; Windsor Smith v Liu (1998)
140 IR 398; Clarke v Formfile Infosoft Pty Ltd (2003) 122 IR 348.
268See eg Jackson v Atco Ltd (1986) 53 SAIR 95; Coleman v Aluminium Anodisers Pty Ltd (No 3)
(1988) 30 AILR ¶474; Fosters Brewing Group Ltd v Industrial Commission of SA (1993) 61
SASR 329; Serco Gas Services Pty Ltd v Alkemade (AIRC, R6090, 21 June 1999). But cf Epath
WA Pty Ltd v Adriansz [2003] WASCA 175.
269As to the interpretation and effect of this defence, see Forsyth 2007c, 2008; Chapman
2009a: 214–17.
270(2007) 158 IR 137. See also Boeing Australia Ltd v Acworth (2007) 166 IR 371; Cruickshank v
Priceline Pty Ltd (2007) 164 IR 259.
271On a broad reading, just about any termination could be said to have a basis in an
‘economic, technological, structural or similar’ reason. The AIRC resisted the view that an
39
LABOUR LAW
Act is more limited. Under s 385(d), a dismissal may only be treated as
unfair if FWA is satisfied it is ‘not a case of genuine redundancy’. According
to s 389(1), a dismissal falls into this category if the employer ‘no longer
required the [applicant’s] job to be performed by anyone because of changes
in the operational requirements of the employer’s enterprise’. As
emphasised in the previous chapter,272 what matters for this purpose is
whether the applicant’s position has been abolished; there may still be a
redundancy even if some of the tasks formerly performed by the applicant
have been redistributed to other positions.273 Importantly, however, as
s 389(1)(b) makes clear, the employer cannot rely on the genuine
redundancy defence unless it has also complied with any obligation in an
applicable award or enterprise agreement to consult about the
redundancy.274 There must also have been no reasonable opportunity for the
person to be redeployed within the employer’s enterprise, or the enterprise
of an associated entity (s 389(2)).275 This last proviso seems clearly designed
to address the situation in the Village Cinemas case. However, if an employer
can establish that the redundancy was genuine, that any consultation
obligations have been met, and that redeployment would not have been a
reasonable alternative, then no unfair dismissal claim can succeed. In such a
case it would be irrelevant, for example, that the employer may not have
acted fairly in selecting the applicant for redundancy.276 On the other hand,
the mere fact that an employer cannot rely on the genuine redundancy
defence – for example because of a failure to consult – does not mean that
the dismissal will automatically be treated as unfair. The employer may still
argue that the dismissal was not harsh, unjust or unreasonable in all the
circumstances.277
employer could plead operational reasons for a dismissal based on poor work
performance: see eg Evans v CLB No 1 Pty Ltd (AIRC, PR973439, 4 August 2006). But in
Cruickshank v Priceline Pty Ltd [2007] AIRC 1005 it was held that an employer could put
forward an ‘economic’ reason for replacing an employee with someone who would do
the same job for lower wages or less generous conditions.
272See [18.50].
273Ulan Coal Mines Ltd v Howarth [2010] FWAFB 3488. Note that a casual employee may be
made redundant in this sense: see eg M v LD Pty Ltd [2009] FWA 1676 (upheld in Mills v
Lextor Developments Pty Ltd [2010] FWAFB 979).
274This includes an obligation to consult under an applicable transitional instrument: TPCA
Act Sch 3 item 36, Sch 3A item 51. For an example of this requirement being satisfied, see
Ulan Coal Mines Ltd v Howarth [2010] FWAFB 3488.
275See eg Campbell Australasia Pty Ltd v McNay [2010] FWAFB 6048, where this issue was
determined by reference to the requirements of an applicable collective agreement. Cf
Howarth v Ulan Coal Mines Ltd [2010] FWA 4817 (redeployment opportunities found to
exist at associated entities); Ho v A P Eagers Ltd [2010] FWA 5897 (failure to offer more
junior position created in course of restructure that abolished applicant’s job).
276See eg Johnston v Blue Circle Southern Cement Pty Ltd [2010] FWA 5149. Though note that if
that reason fell into one of the categories prohibited by the general protections in Part 3-1,
a claim could still be brought under those provisions: FW Bill EM para 1553.
277See eg Di Masi v Coastal Fisheries Pty Ltd [2010] FWA 6280 (despite failure to consult,
redundancy still a ‘sound reason’ for dismissal). Cf Aleckson v Tewantin Noosa RSL &
Citizen’s Memorial Club Inc [2010] FWA 6452 (failure to consult or offer redeployment
rendered dismissal unfair).
40
WRONGFUL OR UNFAIR TERMINATION
(f)
Remedies
[19.74]
If FWA is satisfied that a dismissal is unfair, there are two possible
remedies it may grant. It may either reinstate the employee or order that
they be compensated (s 390(1)). But compensation must not be ordered
unless FWA is satisfied that reinstatement is ‘inappropriate’, and that
compensation is ‘appropriate in all the circumstances of the case’ (s 390(3)).
An order for reinstatement may involve either ‘reappointing’ the employee
to their former position, or appointing them to ‘another position on terms
and conditions no less favourable’ than those they formerly enjoyed
(s 391(1)).278 If the original position no longer exists, but the same or an
equivalent position can be identified at an associated entity of the employer,
the reinstatement order may be made against the associated entity instead
(s 391(1A)). Where FWA considers it appropriate, the reinstatement order
may be accompanied by an order doing anything necessary to preserve the
employee’s continuity of service with the employer or the associated entity
(s 391(2)). FWA may also order the employer (but not, it would seem, any
associated entity) to pay the employee an amount in respect of
remuneration lost as a result of the termination, taking into account
anything the employee has earned or could reasonably have earned from
other work during the period between being dismissed and reinstated
(s 391(3)–(4)). While some employees are reinstated with full back pay, it is
not at all unusual for an applicant to be denied some or all of their lost
wages, especially where they have been guilty of misconduct.279 Once
reinstated, however, the employee is entitled to be given meaningful work
to do.280
[19.75]
For much of the 20th century, and in marked contrast to the
position at common law, reinstatement was the standard form of relief for
unfair dismissal in Australia. But once tribunals were given the power to
award compensation, reinstatement became the exception rather than the
rule.281 While no official statistics are yet available, it appears that this
pattern is continuing under the FW Act. In reality, many applicants (or their
advisers) are ultimately willing to settle for monetary compensation,
especially if it is offered by way of a settlement that obviates the need to
proceed to a hearing. But even where an applicant persists with a claim for
reinstatement, the arbitrator may be unwilling to consider that to be an
‘appropriate’ remedy in the face of opposition by the employer. In a case of
this kind, any element of trust and confidence between the parties will have
broken down and it will be difficult to envisage them working with each
other again. It has been emphasised that this should not become an
278See generally Meggiorin 1999; Wheelwright 2001.
279See eg GlaxoSmithKline Australia Pty Ltd v Makin [2010] FWAFB 5343.
280Blackadder v Ramsey Butchering Services Pty Ltd (2005) 221 CLR 539: see [13.44].
281From the time when the WR Act 1996 took effect up until the end of June 2009, only 300
orders for reinstatement were made by the AIRC, compared with nearly 1300 awards of
compensation (AIRC 2009: 11). For similar patterns under the State systems, see
Hagglund 1999 (SA) and Brown et al 2004 (WA).
41
LABOUR LAW
automatic reason for refusing reinstatement, and that where the statutory
criteria are satisfied an order should be made.282 Indeed, it appears that in
exceptional cases a reinstatement order may be made even in favour of
employees who are not fit to perform the full range of duties associated
with their original positions.283 Nevertheless, only in a minority of cases will
a dismissed employee be ‘imposed’ on an employer that claims to have lost
confidence in them.284 This is unfortunate. Even allowing that reinstatement
may only be a remedy of lasting value where the applicant is supported by a
union which can help to ‘enforce’ the order in the workplace,285 there is
much to be said for the view that tribunals should adopt a more robust
attitude to restoring employees to the jobs of which they have unfairly been
deprived.286
[19.76]
The general willingness of applicants to accept compensation
cannot be explained by any particular largesse on the part of the tribunals.
Compensation awards have always tended to be fairly low,287 as indeed
have the amounts paid by way of negotiated settlements.288 The FW Act is
unlikely to be any different in this regard. Section 392(2) directs FWA, in
determining an amount of compensation to be paid in lieu of reinstatement,
to have regard to certain factors.289 These are the effect of any order on the
‘viability’ of the employer’s business;290 the length of the employee’s service;
the remuneration that the employee would be likely to have received but for
the dismissal,291 and any efforts by the employee to mitigate their loss,
282See eg Perkins v Grace Worldwide (Aust) Pty Ltd (1997) 72 IR 186; Tenix Defence Pty Ltd v Galea
(AIRC, PR928494, 11 March 2003). Cf Diamond Offshore General Co v Robertson (2003) 128
IR 297 (reinstatement not appropriate because employment was due to terminate for
redundancy in any event).
283See eg Smith v Moore Paragon Australia Ltd (2004) 130 IR 446. Cf Qantas Airways Ltd v Meyer
(2004) 130 IR 473, which reflects what is perhaps the more normal position of an
employee being denied reinstatement for lack of evidence that they were able to perform
their original job.
284For exceptions, see eg Fletcher v Commonwealth (2007) 164 IR 245; GlaxoSmithKline Australia
Pty Ltd v Makin [2010] FWAFB 5343.
285See Sherman 1989.
286Cf Leonardis v Salvation Army William Booth Hostel (1992) 59 SAIR 107; Liddell v Lembke (1994)
127 ALR 342 at 367–8.
287See eg Southey 2008: 36, recording that in over 40% of the decisions sampled in which
compensation was awarded, the amount was less than $5000. Around the same number
involved sums of between $5000 and $15,000, with less than 10% exceeding $20,000.
288See eg Hagglund & Provis 2002: 228–9, whose study of unfair dismissal claims in the South
Australian jurisdiction revealed that the great majority of cash settlements agreed to
following conciliation involved payment of two to four weeks’ pay, with 60% amounting
to less than $2000.
289The factors listed below are broadly similar to those listed in s 170CH(2) and (7) of the WR
Act and s 654(2) and (8) of the post-Work Choices WR Act. As to the requirements
imposed on the AIRC by those provisions, see Henderson v Department of Defence (AIRC,
S8591, 28 July 2000) at [16]–[20].
290The inclusion of this factor is highly contentious, in so far as it suggests that an employer in
financial difficulty should somehow be treated more leniently than they might otherwise
be. No such concession is made in relation to liability for breach of contract, tort or just
about any other form of breach of duty. In practice, it is hard to find an award that has
been reduced on this ground.
291See Re Lewin; Ex parte He (2004) 133 IR 217.
42
WRONGFUL OR UNFAIR TERMINATION
including any income earned from other sources after the dismissal.292 In
addition, if FWA is satisfied that misconduct by the employee contributed
to their dismissal, the amount of compensation that would otherwise be
awarded must be reduced by an appropriate amount (s 392(3)).293
Furthermore, FWA is barred from awarding any compensation for ‘shock,
distress or humiliation, or other analogous hurt, caused to the person by the
manner of the person’s dismissal’ (s 392(4)).294 In all cases, the amount of the
compensation cannot exceed the ‘cap’ imposed by s 392(5) and (6). This is
either the total amount of remuneration to which the applicant was entitled
during the six months before dismissal,295 or half the high income threshold
($56,900 at the time of writing), whichever is the lesser amount.
[19.77]
Under the WR Act, the AIRC developed an approach to the
assessment of compensation that was broadly similar to that used for
calculating damages for wrongful dismissal at common law. As set out in
Sprigg v Paul’s Licensed Festival Supermarket,296 a decision which is still being
followed under the FW Act,297 it primarily involves estimating the
remuneration the employee would have received but for the dismissal.
From that will be deducted any compensatory payments from the
employer, together with any amounts the applicant either has subsequently
earned or could reasonably have been expected to earn from other sources.
The resulting figure may then be discounted to allow for various
contingencies. Finally the cap will be applied, if necessary, to reduce the
figure that would otherwise be awarded. The cap is simply an arbitrary
limitation – it does not operate as a maximum amount to be awarded only in
the most grievous or serious cases.298 In practice, it is rare for the cap to
preclude the award of larger amounts; most applicants are generally in a
position to find alternative employment some time within six months of
dismissal, or alternatively could not reasonably have expected to keep their
job for that long in any event. Nevertheless, for some the cap has a severe
292See further [19.16]. Note that an employee may be expected, by way of mitigating their loss,
to accept a genuine offer by the employer of reinstatement: see eg Bechara v Gregory
Harrison Healey & Co (1996) 40 AILR ¶3-421.
293See eg Theoctistou v Austaron Pty Ltd [2010] FWA 1695.
294This limitation was introduced by Work Choices: see WR Act (as amended) s 654(9). Before
that, compensation of this type was sometimes (though not commonly) awarded: see eg
Coms 21 Ltd v Liu (AIRC, S3571, 25 February 2000).
295Where the employee has been on leave during this period without pay, or without full pay,
the amount is calculated by reference to what they would ordinarily have received if they
had not been on leave: FW Regs 2009 reg 3.06.
296(1998) 88 IR 21. Cf Smith v Moore Paragon Australia Ltd (2004) 130 IR 446, cautioning that
while the Sprigg guidelines should generally be followed, their outcome might need to be
reassessed in any case where they produced an amount that, in the particular
circumstances, was either clearly excessive or clearly inadequate. See further Donaghey
2006: 250–7.
297See eg Wright v Cheadle Hume Pty Ltd [2010] FWA 675; Davidson v Griffiths Muir’s Pty Ltd
[2010] FWA 4342; Westblade v Harvey & Dunn Pty Ltd [2010] FWA 4961.
298Perrin v Des Taylor Pty Ltd (1995) 58 IR 254 at 258; May v Lilyvale Hotel Pty Ltd (1995) 68 IR
112 at 117–18; PrintLinx Pty Ltd v Hughes (AIRC, PR910359, 17 October 2001).
43
LABOUR LAW
impact: notably those whose age and particular skills (or lack thereof) make
it difficult to find another source of income.299
[19.78]
The cap on compensation was originally introduced to meet the
same concerns about big-money claims that prompted the introduction of
the ‘salary cap’ on eligibility to bring claims.300 But while there may well be
good reasons for highly paid managers and professional employees to be left
to negotiate appropriate contractual arrangements to protect them in the
event of termination, it is far from clear why this should also mean
artificially limiting compensation payments for lower paid workers or even
middle management. It should also be noted that the cap may affect
employers in a quite arbitrary way. Many provide wages in lieu of notice
and/or ex gratia payments on termination. Although these may be taken
into account in assessing an applicant’s loss, they will not prevent the
applicant receiving the maximum award where that loss exceeds six
months’ remuneration. So by making the payment (often out of
consideration for the employee, or as a gesture of good will, or simply in an
attempt to reduce the chances of an unfair dismissal claim), the employer
may effectively be worse off: had they not made the payment, they would
still only be liable to pay a maximum of six months’ remuneration. On the
other hand, anecdotal evidence suggests that some employers deliberately
withhold statutory payments at the point of termination with a view to
including such amounts in any sum payable as part of a settlement of a
subsequent unfair dismissal claim. Withholding entitlements in this way is,
or course, unlawful, but the practice does appear to be quite common in
some industries.
(g)
Costs Orders
[19.79]
The general rule in unfair dismissal cases, as with other FWA
proceedings, is that the losing party will not be ordered to pay the winner’s
costs (s 611(1)). But s 611(2) does permit a party to apply for costs where the
other party has acted vexatiously or without reasonable cause, or has
pursued a matter where it should have been apparent that there was no
reasonable prospect of success. This can be invoked by a respondent
employer against an applicant.301 But costs orders can also be made against
an employer who has acted unreasonably in defending a claim.302 In
practice, any assessment as to the merits of a case given by FWA during or
after a conciliation conference is likely to be crucial. If a party persists with a
claim or defence after a clear indication they should withdraw or settle, they
increase the prospects of a successful claim against them for costs. In certain
circumstances, a costs order may be made not just against a party, but
against their representative (s 401) – for example, where they advise their
299See eg Bostik (Australia) Pty Ltd v Gorgevski (1992) 36 FCR 20, where in the absence of a cap
$195,000 was awarded to a 54-year-old worker.
300See [19.39].
301See eg Wodonga Rural City Council v Lewis (2005) 142 IR 188.
302See eg Hi Security Fencing Systems Pty Ltd v Forsyth (2007) 166 IR 413.
44
WRONGFUL OR UNFAIR TERMINATION
client to institute or defend proceedings without reasonable prospects of
success.303 Any application for a costs order must be made within 14 days
after the matter in question has either been determined by FWA or
discontinued (s 402). A party may also, at an earlier stage in proceedings,
seek an order that another party pay a security bond to show that they can
meet any costs order that might subsequently be made against them.304
19.5
Unlawful Termination under the Fair Work Act
[19.80]
Under the WR Act, as mentioned earlier in the chapter, applicants
had the option of lodging a complaint of unlawful termination with the
AIRC, either as well as or instead of an unfair dismissal claim. Such a claim
could be made by any employee, regardless of whether they were working
for a federal system employer. Part 6-4 of the FW Act retains provisions
dealing with unlawful termination that also on their face apply to all
employees. Crucially, however, s 723 provides that a person may not apply
for relief against an unlawful termination if they are entitled to challenge
that dismissal under the ‘general protections’ in Part 3-1 that were outlined
in Chapter 17. The reasons for termination prohibited under Part 6-4 would
also be unlawful under those provisions. In practice, therefore, it is only
applicants who fall outside the constitutional coverage of Part 3-1 –
principally non-national system employees – who are now able to bring
unlawful termination applications.305
[19.81]
The central provision in Part 6-4 is s 772, which largely replicates
s 659 of the post-Work Choices WR Act. Subsection (1) prohibits
termination of employment for any of the following reasons:
(a) temporary absence from work because of illness or injury of a kind
prescribed by the regulations;306
(b) trade union membership or participation in trade union activities
outside working hours or, with the employer’s consent, during
working hours;
(c) non-membership of a trade union;
(d) seeking office as, or acting or having acted in the capacity of, a
representative of employees;
(e) the filing of a complaint, or the participation in proceedings, against an
employer involving alleged violation of laws or regulations or recourse
to competent administrative authorities;307
303See eg Dircks v JimRoy Pty Ltd (2009) 186 IR 242 .
304Fair Work Australia Rules 2009 cl 16, as authorised by s 404 of the FW Act. As to the
principles that govern whether such an order should be made, see eg Clack v Collins
(No 1) [2010] FCA 513.
305This is a limitation that is easily overlooked: see eg Maher v Mulgowie Fresh Pty Ltd [2010]
FCA 439, where an unlawful termination application by a national system employee got
all the way through FWA before being picked up in the court proceedings; and see also
Trudgett v Training Aids Australia Pty Ltd [2010] FWA 2235.
306See FW Regs 2009 reg 6.04, which is to broadly the same effect as reg 3.01: see [17.92].
307As to the meaning of ‘recourse’ and ‘competent administrative authority’, see eg CSR
Viridian Ltd v Claveria (2008) 171 FCR 554.
45
LABOUR LAW
(f)
race, colour, sex, sexual preference, age, physical or mental disability,
marital status, family or carer’s responsibilities, pregnancy, religion,
political opinion, national extraction or social origin;308
(g) absence from work during maternity leave or other parental leave;309
(h) temporary absence from work for the purpose of engaging in a
voluntary emergency management activity, where the absence is
reasonable having regard to all the circumstances.
A termination will be unlawful where just one of the reasons for dismissal is
listed in s 772(1). Furthermore, in any proceedings s 783 places the burden
on the employer to prove that an employee was not dismissed for a
proscribed reason.310 Section 772 is a civil remedy provision, meaning that
court proceedings may be instituted under Part 4-1 to enforce it.311 The
remedies that the Federal Court or Federal Magistrates Court may grant
under s 545 include reinstatement,312 or an amount of compensation. Unlike
the position under the WR Act, there is no cap on a compensation award.313
The court may also impose a penalty under s 546.314 However, no unlawful
termination court application can generally be made until FWA has first
sought to resolve the dispute by private conference, and certified that its
efforts have been unsuccessful (s 779). FWA is empowered in such
proceedings to make costs orders against lawyers or paid agents (ss 780–
782), on the same basis as described above for unfair dismissal claims.
19.6
Remedies for Public Sector Workers
[19.82]
Public sector workers may challenge the fairness of any attempt to
dismiss them in a variety of ways. The principal avenue of redress is
usually provided by statutory arrangements which permit an appeal to an
internal body, and/or to an industrial tribunal, such as the Industrial
Relations Commission in New South Wales.315 It may also be possible to
seek judicial review of either the original decision to dismiss, or an appeal
tribunal’s ruling on that decision. The outcome may be an injunction to
restrain any effect being given to the dismissal.316 Or the applicant may ask
that the decision be treated as invalid and seek damages for what is in effect
308This is subject to s 772(2), which allows an employer to dismiss a worker because they
cannot meet the ‘inherent requirements’ of a position, or (in the case of a religious
institution) to avoid injury to religious susceptibilities. These defences are the same as
those found in s 351(2)(b) and (c): see [17.37].
309This reason is taken to exist where an employer abolishes the position of an employee who
is absent on parental leave, and their absence is one of the reasons for doing so (s 772(3)).
310See eg CFMEU v C E Marshall & Sons Pty Ltd (2007) 160 IR 223.
311See Chapter 16.2.
312See eg Laz v Downer Group Ltd (2000) 108 IR 244.
313Cf Vickery v Assetta [2004] EOC ¶93-330.
314See eg Stevenson v Murdoch Community Services Inc [2010] FCA 648.
315The NSW Industrial Relations Commission took over this function from the former
Government and Related Employees Appeal Tribunal in July 2010: see Industrial Relations
Amendment (Public Sector Appeals) Act 2010 (NSW).
316See eg Paras v Public Service Body Head of the Department of Infrastructure (2006) 152 IR 75.
46
WRONGFUL OR UNFAIR TERMINATION
a wrongful dismissal.317 However, such review is only available on
administrative law grounds such as jurisdictional error, denial of natural
justice, abuse of discretion, and so on.318 It must also be established for this
purpose that the employment is of a ‘public’ character – or, where the
employment is governed by federal law, that the decision to dismiss was
made ‘under an enactment’ within the meaning of s 3(1) of the
Administrative Decisions (Judicial Review) Act 1977 (Cth). While Australian
workers have not had the same difficulty as their British counterparts in this
respect,319 some problems have been encountered where a person is
employed under terms drawn from a statute and consensually incorporated
into the contract of employment. It has been held in this situation that the
terms have ‘contractual’ force only and that judicial review is thus
unavailable.320 A further problem for Australian workers is that the very
presence of comprehensive statutory appeal processes may be a reason for a
court to exercise its discretion not to review decisions taken within the
framework of those processes.321
[19.83]
A further option that may be available to federal or State public
sector employees is to pursue an action under the unfair dismissal
provisions in the FW Act or equivalent State legislation. It is a matter of
interpretation in each case as to whether they are eligible to lodge such a
claim.322 In some instances the comprehensive nature of the statutory
framework regulating the particular employment may be considered to
override any ‘general’ legislation on unfair dismissal.323 Even where this is
not so, the mere availability of a statutory right of ‘appeal or review’ may
have the effect in some jurisdictions of excluding any unfair dismissal
claim.324 In other instances, as under the ‘multiple actions’ provisions in the
FW Act,325 workers may effectively have a choice between invoking
whatever special procedures are available and instituting an unfair
dismissal claim: though once the election is made in favour of one
procedure, it is generally no longer possible to pursue the other.
317See eg Jarratt v Commissioner of Police (NSW) (2005) 224 CLR 44.
318See eg Piperitis v Transport Appeal Board (1990) 41 IR 325; R v Commissioner of Police; Ex parte
Ross (1991) 42 IR 206; Sydney Ferries v Morton [2010] NSWCA 156. See generally Aronson
et al 2009.
319See Smith G 1987: 158–69.
320See eg Australian Film Commission v Mabey (1985) 6 FCR 107; Australian National University v
Burns (1982) 43 ALR 25; and see also Whitehead v Griffith University [2003] 1 Qd R 220. Cf
Chittick v Ackland (1984) 53 ALR 143.
321See eg Beck v Thornett (1984) 6 ALN N209. See Smith G 1987: 169–73.
322See eg Re McIntyre; Ex parte Stannard (2004) 140 FCR 249; Re AIRC and Arends; Ex parte
Commonwealth (2005) 145 FCR 277.
323See eg North West County Council v Dunn (1971) 126 CLR 247; Ferdinands v Commissioner for
Public Employment (2006) 225 CLR 130. As to the latter decision, see Nguyen 2007.
324See eg Industrial Relations Act 1979 (WA) s 23(3)(d).
325See [19.53]–[19.54].
47
LABOUR LAW
19.7
Other Remedies for Unfair Termination
[19.84]
There are other laws, besides those already described in this
chapter, that may be used to raise specific problems of unfairness in relation
to dismissal. Many of these have already been discussed in Chapter 17,
including:
• measures prohibiting discrimination on the ground of gender, race
and other criteria;
 the general protections in Part 3-1 of the FW Act;
 statutes prohibiting the victimisation of whistleblowers; and
 legislation (especially in New South Wales) allowing relief to be
sought against unfairness in the terms or operation of a contract.
Other provisions worth noting in this connection include protection against
dismissal or other forms of victimisation for employees who assist in the
administration of occupational health and safety standards or who
complain of breaches of OHS legislation.326 Similar protection exists for
employees who claim or are entitled to claim workers compensation for a
work-related injury or illness.327 Although most of the relevant provisions
are found in State or Territory laws, they can arguably apply to national
system employers and employees, on the basis that they deal with the ‘nonexcluded’ matters of occupational health and safety or workers
compensation (FW Act s 27(1)(c),(2)).328 The position is even clearer in
relation to provisions that constrain an employer’s right to terminate the
employment of an apprentice or trainee for the duration of their training
arrangement. Prior approval of a designated authority or tribunal is
generally required, with the trainee or apprentice entitled to complain to the
tribunal if the employer does not act in accordance with the statutory
process.329 It is specifically provided that the FW Act is not intended to
override State or Territory laws that deal with the termination of a training
326Occupational Health and Safety Act 1991 (Cth) s 76; Occupational Health and Safety Act 2000
(NSW) s 23; Industrial Relations Act 1996 (NSW) s 210(1)(j); Occupational Health and Safety
Act 2004 (Vic) ss 76–78; Workplace Health and Safety Act 1995 (Qld) s 174; Occupational
Health, Safety and Welfare Act 1986 (SA) s 56; Occupational Safety and Health Act 1984 (WA)
s 56; Workplace Health and Safety Act 1995 (Tas) s 18; Work Safety Act 2008 (ACT) s 43;
Workplace Health and Safety Act 2007 (NT) s 93. See further the discussion of the Model
WHS Bill at [15.105]–[15.110]. See also Johnstone 2004a: 558–62.
327Workers Compensation Act 1987 (NSW) Pt 8; Accident Compensation Act 1985 (Vic) ss 242AA–
242AF; Workers’ Compensation and Rehabilitation Act 2003 (Qld) ss 232B, 232D; Workers
Rehabilitation and Compensation Act 1986 (SA) s 58C; Workers’ Compensation and Injury
Management Act 1981 (WA) s 84AA; Workers Rehabilitation and Compensation Act 1988 (Tas)
s 143L; Workers’ Compensation Act 1951 (ACT) s 105. These provisions vary in terms of the
extent to which they restrict the employer’s power to dismiss (or in some instances to
refuse re-employment to) an injured worker. See generally Purse 1998; Guthrie 2002b.
328See [5.36].
329Apprenticeship and Traineeship Act 2001 (NSW) s 15(1)(f), Pt 4; Education and Training Reform
Act 2006 (Vic) s 5.5.17; Industrial Relations Act 1999 (Qld) ss 138A, 139; Training and Skills
Development Act 2008 (SA) s 51; Vocational Education and Training Act 1996 (WA) s 60G;
Vocational Education and Training Act 1994 (Tas) ss 42, 68; Northern Territory Employment
and Training Act 1999 (NT) ss 57–59, 70.
48
WRONGFUL OR UNFAIR TERMINATION
contract, or of any employment contract associated with a training contract
(FW Act s 27(1)(b); FW Regs 2009 reg 1.13(a)–(aa)).
[19.85]
Finally, where an enterprise agreement regulates the termination
of employment in some way, it may be possible to use the dispute
resolution procedure in the agreement to raise issues concerning the
treatment of particular workers. Depending on the scope of the dispute
resolution provision,330 it may be possible to seek reinstatement or even
compensation for a dismissed employee.331 However, in the case of an
enterprise agreement made under the FW Act, this is subject to the
limitations imposed by s 194(c) and (d) of that Act.332 A term will be
unlawful to the extent that it purports to confer protection against unfair
dismissal on a worker who has not completed the minimum employment
period required under Part 3-2 of the Act. Nor, conversely, may it seek to
exclude that Part or modify it to the detriment of any person. There may
also be situations where the way in which an employer handles a dismissal
breaches certain procedural obligations laid down in an agreement. For
example, in Van Efferen v CMA Corp Ltd333 a worker successfully argued that
his employer had failed to follow a grievance process in his AWA in
determining to dismiss him. He was awarded damages of nearly $275,000,
on the basis that if the procedure had been followed he would have
remained in his job until the completion of the project on which he was
working. As noted in an earlier chapter, it may also be possible in this type
of case for an employee, or a union or inspector acting on their behalf, to
seek an injunction under s 545(2) restraining an employer from
implementing a dismissal in breach of the consultation or grievance
procedures laid down in an enterprise agreement.334
330Cf de Jonge v Australian Broadcasting Corp [2010] FWAFB 4869, where the applicant failed to
establish any jurisdiction for her claim.
331See eg NTEU v University of Wollongong (AIRC, PR945759, 15 February 2004).
332See [12.57], [18.40].
333(2009) 183 IR 319.
334See [16.36]. As noted there, however, such an injunction may not be sought in respect of a
transitional (ie, pre-Fair Work) agreement: TPCA Act Sch 16 item 17(a).
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