Nick Ruskin and Siobhan Mulcahy of Melbourne law firm Philips Fox Lawyers
give an overview of the issues surrounding the termination of employment in
Australia and explain how the law is governed at different levels and by
The law governing termination of employment in Australia is covered by
several jurisdictions – federal and state legislation, and common law. At
federal level, termination of employment is covered by the Workplace Relations
Act 1996 but the legislation generally does not apply to executive level staff.
Most states in Australia also have state legislation dealing with termination
of employment that covers employees under state awards or those earning less
than A$71,200, or just over £26,000 (this amount may vary from state to state
and is increased by the inflation rate 1 July each year).
Dismissed staff not covered by the legislation may look to common law for
As a general rule, both federal and state legislation make it unlawful to
harshly, unjustly or unreasonably dismiss an employee. There are also various
standards of procedural fairness that must be met when dismissing an employee.
The federal system
The Australian Industrial Relations Commission has jurisdiction to deal with
all issues relating to dismissals covered by the Workplace Relations Act.
There are several categories of employees excluded from making an
application under the Workplace Relations Act. These include:
– Employees serving a probationary period of up to three months or less
– Casual employees who have not been employed on a regular and continual
basis for more than 12 months
– Employees engaged on a fixed-term basis
– Trainees, and
– Employees who earn more than $71,200 and where employment is not governed
by Australian industrial "awards" or agreements made by the
Australian Industrial Relations Commission which legally bind the employer.
In cases of serious misconduct, where it would be unreasonable to require
the employer to retain the employee for the required notice period, the
employment may be terminated summarily, or without notice. In other cases, the
Workplace Relations Act provides that an employee must be given a certain
minimum notice period, which depends on age and length of service.
The Workplace Relations Act also requires that the employer shows a valid
reason for dismissal.
Valid reasons include the employee’s conduct or capacity (performance) or
the operational requirements of the employer’s business (redundancy).
The employer must establish that the reason is objectively justifiable. A
subjective decision or mere preference that things be done differently will not
be considered a valid reason for termination.
The Workplace Relations Act makes it illegal to terminate an employee for
any of the following reasons:
– Temporary absence due to illness, injury or parental leave
– Union membership or activity
– Non-membership of a union
– Acting as a staff representative
– Filing a complaint against an employer
– Anti-discrimination reasons including race, colour, sex, sexual
preference, age, physical or mental disability, marital status, family
responsibility, pregnancy, religion, political option, national extraction or
social origins, and
– Refusal to negotiate an Australian Workplace Agreement – that is, an
agreement made with an employee, approved by a government body and not through
If an employee is dismissed for one of these reasons the Federal Court can
hear the claim.
The Industrial Relations Commission will take account of whether the
employee was notified of the reason for termination and whether they were given
a chance to respond and put forward any mitigating circumstances. Commission
decisions indicate that an investigation must show genuine procedural fairness
and cannot be a mere "going through the motions" in order to entrap
Assessing whether procedural fairness has been accorded may extend to examining
the employer’s conduct leading up to the termination, including a transparent
warnings process. In cases where the process is extremely harsh or unfair, the
dismissal may be found to be harsh, unjust or unreasonable regardless of the
existence of a substantive reason. The commission bases its decisions on the
principle of "a fair go all round", a term actually set out in the
If an employee is successful in an unfair termination application, the
commission may order reinstatement or re-engagement with back pay or, where
reinstatement is impracticable, the payment of compensation to a maximum of six
months wages. The Federal Court can provide the same remedies in an unlawful
termination case except it can also impose a penalty of up to $10,000 (£3,700).
Industrial tribunals similar to the Australian Industrial Relations
Commission exist in most states.
The principles of state unfair dismissal legislation are broadly the same as
the principles of the federal system outlined above. In New South Wales and
Queensland, however, the law is extended to regulate "unfair"
contracts. The New South Wales Industrial Relations Commission recently awarded
A$10m (£3.67m) to an former senior executive of Microsoft applying its broad
jurisdiction to the facts of this case.
The NSW and Queensland commissions have jurisdiction to declare void or vary
contracts they find to be unfair. The jurisdiction covers contracts that are
unfair when they are made as well as contracts that operate unfairly. This
extends to situations where the contract operates unfairly at termination of
Employees who do not fall within state or federal legislation must look to
the terms of their employment contract and their interpretation at common law
to deal with any issues arising from the termination of their employment.
No questions of fairness or reasonableness will apply in these
circumstances. The amount of notice required by the employer will be as set out
in the contract. In the absence of an express notice provision, reasonable
notice is required.
In determining reasonable notice, a court will consider factors such as the
nature of the position and the skills required, location, length of service,
age and level of mobility in the employment market.
The Australian laws of termination clearly distinguish between employees who
are covered by legislation dealing with the unfairness of a dismissal and those
where employment is subject to the terms of the common law. The laws alter
frequently and a possible change to the federal government later this year may
result in a spate of changes.
Edited by Clare Murray, employment law partner at Fox Williams and editor
of www.hrlaw.co.uk , Fox Williams’ online
employment law information service