New Federal Unfair Dismissal And ‘Adverse Action’ Jurisdictions Begin

Various parts of the Fair Work Act come into effect on 1 July 2009. Among them are the provisions enacting the new federal unfair dismissal and 'adverse action' jurisdictions of Fair Work Australia (FWA).

The immediate practical implications for 'national system employers' (most commonly, trading companies and incorporated associations) are these:

Unfair dismissal

• Many more former employees will have access to the jurisdiction than before. In particular:

• From 1 July 2009, through the 'high income threshold', award-free employees earning more than $108,300 (up from $106,400) will be unable to make an unfair dismissal claim.

• Employees covered by an award or a related instrument (such as a collective agreement, AWA or ITEA) earning above the threshold will be able to make claims.

• The high income threshold will generally include the value of both monetary and non-monetary benefits provided to the employee during their former employment. In the absence of any agreed value relating to non-monetary benefits, FWA will be authorised to fix an estimated value in order to apply the threshold. Ideally, non-monetary benefits should be expressly valued in employment contracts and related paper-work, particularly for workers earning the threshold range.

• Other new limits on the new system include that:

Service before 1 July 2009 will count toward the minimum employment periods.

• For these purposes a 'small business employer' is one with fewer than 15 full time equivalent employees, to be determined by applying a complex formula spelt out in the legislation.

• Small business employers will be able to take advantage of the 'Small Business Fair Dismissal Code'. The Code, a simple document with six paragraphs, provides a series of steps which are intended to protect small business employers from unfair dismissal claims, where allegations of poor worker performance or serious misconduct are involved. In theory, a dismissal will not be unfair if the dismissal was consistent with the Code. More information about the Code, a copy of it, and a compliance checklist are available from the new Fair Work Australia website.

• Whether or not dismissal from a larger employer was unfair will depend on more widely ranging criteria including, for example, considerations of the size of the employer's enterprise and whether or not the employer had access to dedicated human resource management expertise.

• The time limit for bringing a claim will be reduced from 21 days to 14 days after the dismissal takes effect although, as in the former system, that time limit can be extended in some (quite limited) circumstances.

• The application fee payable to bring a claim will be $59.50, although FWA will be able to waive the fee in cases of 'serious hardship'.

• Claims will be determined by FWA in a process that, on paper, interferes more than the previously applicable processes. Among other things, FWA will have greater powers to determine dismissal disputes in the very early stages of the proceedings, and complete control over the course that proceedings will take. For example, FWA, and not the parties, will decide whether or not, in the absence of an early settlement, a claim should proceed to a full hearing.

• Parties to proceedings will be able to seek permission from FWA to be represented in the proceedings by a lawyer or paid agent. Professional representation will not be available as a right.

• The available remedies include orders for reinstatement (to the employee's former position), re-employment (to an alternative position) and/or payment of compensation up to six months pay.

• The general rule is that parties will have to pay their own costs associated with the prosecution or defence of an unfair dismissal claim, regardless of the outcome, although FWA will be able to make costs orders in limited circumstances.

Adverse action

A wide range of other provisions in the legislation also come into effect on 1 July. For example, changes will occur in the rules and procedures for enterprise bargaining, union rights of entry to workplaces and in connection with the regulation and enforcement of the Act. Most of the balance of the legislation will begin from 1 January 2010, most notably in the introduction from that date of the new federal safety net in the National Employment Standards and Modern Awards.

However, buried amongst the provisions beginning on 1 July are a series of rights to protection from a range of conduct bundled together under the heading of 'adverse action'. In general terms, the right to protection from 'adverse action' prevents one person discriminating against or victimising another because the second person has, or seeks to assert (or not assert) any one of several 'workplace rights'.

Protected parties include not only employees, but also people refused employment in certain circumstances ('prospective employees') and contractors and prospective contractors.

'Workplace rights' are very widely defined to include, for example, the right to initiate or participate in proceedings under a 'workplace law'. 'Workplace laws' include all federal and State legislation regulating the relationships between employers and employees including the Fair Work Act itself and the Independent Contractors Act.

State and federal anti-discrimination laws are expressly accommodated by separate provisions, which stop adverse action being taken against employees or prospective employees on a ground that would be unlawful under those laws such as race, sex, age or disability.

Dismissing an employee because the employee is temporarily absent from work because of illness or injury continues to be specifically unlawful.

'Adverse action' includes a very wide range of circumstances including:

• dismissing an employee or contractor;
• refusing to engage an employee or contractor; or
• altering the position of a worker (whether employee or contractor) to their prejudice.

The provisions generally replace those in the former legislation that prevent 'unlawful' termination of employment.

In some cases, dismissals will be litigated under the 'adverse action' provisions rather than under the 'unfair dismissal' provisions. In those cases:

• An application for relief must be filed with FWA within 60 days after the dismissal took effect (although, as in the unfair dismissal jurisdiction, this period can be extended in certain circumstances).
• While FWA will attempt to resolve such disputes through an initial conference, unresolved disputes will potentially find their way to one of the Court divisions of FWA in a 'general protections court application'. In most cases, such an application must be made within 14 days after FWA certifies that it has been unable to resolve the dispute. No application can be made until that certificate has been issued.
• The same restrictions upon representation in unfair dismissal proceedings apply while FWA is seeking to resolve the dispute – in other words, the FWA's permission is required. We doubt that there will be many cases where permission will be refused, because of the inherent complexity likely to be involved in most 'adverse action' applications. However, the parties will be automatically entitled to legal representation in disputes that proceed to a general protections court application.
• In most cases the onus of proof will be reversed, so that if an application alleges that a person took action for a particular reason or with a particular intent, that reason or intent will be presumed unless the person against whom the allegation is made proves otherwise.

• Available remedies include injunctive orders to stop or require certain conduct, orders for payment of compensation and interest, reinstatement, and for payment of civil penalties up to $6,600 in the case of individuals and $33,000 in the case of corporate entities.

• Unlike proceedings in the unfair dismissal jurisdiction, compensation is uncapped, and in many cases, orders can be sought against people other than the employer or prospective employer. For example, orders could be sought in some cases against individuals personally responsible for the relevant 'adverse action'.

• Again, the prospect for a costs order to be made is limited.

What now?

There is no need to panic. If you're a small business employer, make sure you familiarise yourself with the Small Business Fair Dismissal Code.

For all employers, broader application of the unfair dismissal jurisdiction requires a solid understanding of the requirements for procedural and substantive fairness in effecting dismissals. Similarly, more attention will need to be paid to process in redundancy based dismissals. If you're unsure of your obligations in these areas, or of what to do in any particular circumstance, seek qualified advice from a solicitor or industry association.

In broad terms, the risks for employers in the 'adverse action' provisions are not new. The way in which you should seek to manage those risks in the future will be the same as the way in which they should have been managed in the past. However, the provisions do create additional possibilities for litigation, and it is possible that the new jurisdiction conferred upon FWA will generate more formal dispute activity, particularly in the current economic climate.

Critical to avoiding claims (or liability upon claims) will be a thorough understanding of the industrial environment applicable to your workers (including potential workers). You will need to rigorously implement and apply policies and procedures associated with recruitment, equal opportunity, discrimination (including sexual harassment) and related dispute resolution processes.

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