Dismissals in the workplace are challenging for both employers and employees. Two legal terms often come up in such discussions: unfair dismissal and wrongful dismissal. While these terms might sound similar, they are fundamentally different in their basis, criteria, and remedies. Understanding these differences is essential for employees and employers navigating workplace disputes.
Unfair Dismissal: A Statutory Claim
Unfair dismissal is governed by legislation, specifically the Fair Work Act 2009. It occurs when an employee’s dismissal is deemed harsh, unjust, or unreasonable by the Fair Work Commission (FWC). This type of claim evaluates the circumstances of the termination and whether due process was followed.
To qualify for an unfair dismissal claim, several criteria must be met:
- Employment Duration: Employees must have worked for at least six months with a national system employer. For small businesses (fewer than 15 employees), this threshold is 12 months.
- Employer Type: The employer must fall under the national system. State and local government employers are typically excluded.
- Salary Threshold: Employees earning below the high-income threshold or those covered by modern awards or enterprise agreements can lodge a claim.
The FWC considers factors like whether the employee was informed of the reason for dismissal, given a chance to respond, and whether procedural fairness was followed. Employers also need to demonstrate valid reasons for termination, especially in cases involving performance issues or misconduct.
Remedies for Unfair Dismissal
Employees who successfully prove unfair dismissal can receive two types of remedies: reinstatement or compensation. While reinstatement, returning the employee to their former position may seem like the ideal outcome, it is rare. Most cases result in compensation for lost income which is capped at a maximum of 26 weeks.
Wrongful Dismissal: A Breach of Contract
Unlike unfair dismissal, wrongful dismissal is a common law claim based on a breach of the employment contract. This occurs when an employer fails to comply with the terms of the contract, such as not providing the required notice period or terminating employment prematurely.
Common examples of wrongful dismissal include:
- Terminating employment without adhering to the notice period in the contract.
- Ending a fixed-term contract before its conclusion without justification.
- Failing to provide “reasonable notice” when a contract is silent on notice periods.
The focus here is not on whether the dismissal was fair but on whether the employer breached contractual obligations.
Remedies for Wrongful Dismissal
The primary remedy for wrongful dismissal is monetary compensation. Courts may award damages equivalent to the employee’s lost wages during the notice period or an implied “reasonable notice” period. The amount depends on factors such as the employee’s position, length of service, age, and the specific circumstances of the termination.
Notably, wrongful dismissal cases often fall under a costs jurisdiction, where the losing party typically pays the legal fees of the winning side. This contrasts with unfair dismissal claims under the Fair Work Act, where each party generally bears their own costs.
Key Differences Between the Two
The core difference between unfair dismissal and wrongful dismissal lies in their legal foundations:
- Unfair dismissal is a statutory claim, evaluated based on procedural fairness and the reasonableness of the termination.
- Wrongful dismissal is a contract-based claim, focused on whether the employer adhered to the terms of the employment agreement.
Unfair dismissal claims consider broader factors, including workplace policies, while wrongful dismissal strictly examines contract terms. Additionally, the remedies and jurisdictions for these claims differ, highlighting the need for tailored legal strategies in each case.
Final Thoughts
Dismissals can be emotionally and financially taxing. Whether an employee has grounds for an unfair or wrongful dismissal claim depends on the specific circumstances and the legal framework governing their employment. Seeking legal advice promptly is essential, as time limits may apply to lodge claims.