In assessing an unfair dismissal claim, we would like to grasp how the alleged unfair dismissal of an employee, the process that occurs during the unfair dismissal application, the eventual conclusion of the process, and how it affects the financial capability of a company. It is common knowledge that the issue of unfair dismissal cannot occur between an employee and another employee. It definitely has to be between an aggrieved employee and an organization.
Whether an employee is alleging to have been dismissed without reasons, on false accusations or in a wrong manner. Either way, there are financial implications for the company involved.
For example, after an individual lodge an unfair dismissal application with the Fair Work Commission in Australia and the case is accepted, a copy of the application is sent to the company being accused of unfair dismissal. In which, such company has to provide a response, stating why the individual was dismissed or stating a jurisdictional objection, explaining why the case is not under the commission’s jurisdiction. Usually, the company would hire an advocate to make certain the claim of unfair dismissal or to ascertain that truly they have the legal backing to dismiss the employee.
This although would not be the first financial cost incurred by the company in relations to this dismissal. According to the Fair Work Act, usually, the employee must lodge a complaint within 21 days of dismissal. Therefore, it is possible that the company replaces such individual within those 21 days. The burden of hiring a new employee falls on the company. To hire a new employee might translate to increased payroll or increase in the cost of hiring.
After the individual now lodges an unfair dismissal application, the company needs to hire an advocate to plead their issue. This means that the company needs to pay a Human Resource/ Employment Relations Consultant of the lawyer for his/her services.
Experts Human Resource/ Employment Relations Consultant or lawyer can charge as much as $400+ per hour, depending on the experience and expertise. With some of these unfair dismissal cases that cannot reach an agreement at conciliation and end up dragging on for weeks and months, a company could pay well over $6,000 to lawyers depending on the hours worked and the complexities of the matter.
Not forgetting that if eventually the company is found guilty of unfair dismissal, they would have to pay a compensation fee or reinstate such employee. A company can be made to pay as much as half of the annual income of the dismissed employee if found guilty, depending on the compensation cap of the individual. Even if no compensation is required and both parties come to an agreement, whatever is agreed upon, the company has to pay.
With all these, it can be perceived that any company’s finances would be significantly affected in the case of unfair dismissal. Whether the company is found guilty or not, lawyers need to be paid whether they win the case or not. And when the individual cannot be reinstated, most times a hefty compensation is paid by the company. Organizations should always be careful when dismissing an employee and should do it according to the law to prevent a potential lawsuit and unnecessary expenses that tells on their financial books.
As the financial implications of most unfair dismissal claims for any company’s finances, it always results in deficits and not surplus.
If you choose to participate in conciliation, a Commission Conciliator will hold discussions between the employee and the employer to reach an agreed settlement. Most applications for unfair dismissal remedy settle at conciliation.
The conciliations are private, and the settlements may include:
- reinstatement (getting the job back)
- continuity (an order that it should be as though the dismissal did not take place)
- monetary settlement (eg lost pay or compensation)
- a statement of service (stating how long the employee worked for the employer and what they did)
- payment of owed entitlements
- an apology
- a non-disparagement agreement (where neither party can bad-mouth the other).
Some facts: More than 90% of unfair dismissal claims in 2017 were resolved before they reached a hearing involving a Fair Work Commissioner, but experts say disputes can still cost businesses significant time and money even if they never make it to the formal hearing stage.
The Fair Work Commission’s annual report in 2016-17 revealed 14,587 claims were made for unfair dismissal against Australian businesses in the 12 months leading up to June 30. On average, this is 280 claims a week.
Table 2: Unfair dismissal—conciliation outcomes, monetary payment
No. of matters
Percentage of settlements involving monetary payment
*A maximum of the monetary value of six months’ salary by way of compensation is payable under the Fair Work Act. Note, however, that the monetary amount may include payment for other issues, such as unpaid entitlements.
If you want to find out more about the Disciplinary process, we have developed an eBook that will guide you through the process step by step and provide tips and templates. For the month of March 2019 this eBook is on sale. Having the knowledge in the “how to” can be enough, if followed, to avoid or mitigate Unfair Dismissal Claims or at least defend them.