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Why employers should not be afraid to confront fruitless Unfair Dismissal claims

Disputes, Employment Law

Why employers should not be afraid to confront fruitless Unfair Dismissal claims – Two Case Notes

Two recent decisions in August 2012 at Fair Work Australia (FWA) highlight why businesses do not need to pay out large sums or duck for cover at the first sign of an Unfair Dismissal claim from former employees.  The key to Unfair Dismissal claims against employers is a shrewd assessment of the claimant’s chances of success.  If it is available, a jurisdictional argument can be a silver bullet for an employer facing an Unfair Dismissal claim.  One of the following decisions demonstrates a straightforward method to have the proceedings thrown out, whilst the other case could have achieved a better result by settlement.

What are jurisdiction issues?

The basic requirements for former employees to be eligible to make an Unfair Dismissal claim are:

1.     The Claim must be lodged with FWA within 14 days of receiving notice of the termination of employment;

2.     The employee cannot earn over $123,300 (excluding superannuation) in accordance with 333(1) of the Fair Work Act 2009 (the Act); and

3.     The employee must have been employed by the business for longer than 6 months, or 12 months if the business is a “small business employer”. Small business employers employ less than 15 full time workers.

The above jurisdictional restrictions can be used to defeat an Unfair Dismissal claim, even in circumstances where the employee would otherwise have a strong claim.

In Smith v Dock Enterprises [2012] FWA 6766 the claimant began working as a casual driver for the business, Dock Enterprises Pty Ltd (Dock Enterprises), in March 2011.  The claimant worked regularly for the business until March 2012 when his employment was terminated without the required written notice.  The business was a small business employer.  Accordingly, the business defended the claim on the basis that the worker was not eligible to make an Unfair Dismissal application, because he had not completed 12 months service.

There was some confusion as to the date the worker commenced work and was terminated.  As is often the case in employment matters, the evidence became a question of individual’s memories of events.  The Court found the employer’s evidence more reliable, and the employee’s application was dismissed because his employment fell short of the minimum service by 2 weeks.

In other cases the issues are not straightforward and the business can use the mandatory conciliation as an opportunity to settle the claim for a reasonable sum.  In the below case, the employer was ultimately unsuccessful at hearing.

In the case of Hillie v World Square Pub [2012] FWA 6806 the claimant has been a casual worker at a pub since July 2009.  The pub had been originally managed by Wanslea Grove Pty Ltd (Wanslea Grove), who abandoned the business on 26 August 2011.  A Mr Lucas began managing the pub for the owners on 29 August 2011 when the pub partially reopened.  The claimant reported for work on 29 August 2011 and apparently did not notice and was not informed of the change of employer.  Four months later, on 16 December 2011 the claimant’s employment was terminated.

The business argued that the claimant was not eligible to make a claim because she had been employed for less than 12 months.  Mr Lucas did not complete a formal transfer of the business, however FWA found the employer was bound to recognise the employee’s service to the previous employer, under section 311 of the Act and the authority of Peter Zabradac v Transclean Facilities Pty Ltd [2011] FWA 4492.  The Claimant commenced employment with the Mr Lucas within three months of the termination by Wanslea Grove and the work the claimant performed for the Mr Lucas was substantially the same as that performed for Wanslea Grove.  The Act permitted the Court to find that Mr Lucas’s business was connected with Wanslea Grove because Mr Lucas had an “arrangement” with Wanslea Grove for the beneficial use of some of its assets.

An Unfair Dismissal application will not protect a casual employee unless his/her work is characterised as “on a regular and systematic basis” under section 384 of the Act.  This exclusion did not apply to this claimant.  Accordingly, the claimant was considered a person protected from Unfair Dismissal and the application was relisted to hear the substantial issues.

The Court acknowledged that Mr Lucas had the opportunity to initially employ the claimant on probation. If Mr Lucas had issued the claimant with a short letter informing her of the change in business and explaining that service for Wanslea Grove would not be recognised as service for his company, the claimant would have been ineligible to apply for Unfair Dismissal.  In addition, Mr Lucas could have altered the claimant’s terms of employment to recognise she was more suited to a permanent part time employee, rather than a casual employee.  The business did not receive the benefit of retaining the claimant as a casual staff member, yet it was exposed to a potential claim for unpaid annual leave in an Unfair Dismissal application. This is an example where a legal assessment of the working relationship could have saved the business a litigation headache.

Take Away Points for Business

1.     If an Unfair Dismissal claim is commenced, consider if the claimant is eligible to make the claim under the jurisdictional limits outlined above; and

2.     If you take over another business, issue a letter to employees of the business clarifying whether service for the former owner will be considered service for your company, and if the employees will be on trial for a period.

Our experienced Employment Team is happy to assist Companies with each of the following steps:

1.     Enter employment contracts which accurately reflect your employment arrangements;

2.     When an employee becomes troublesome, take preventative action;

3.     If an Unfair Dismissal claim is commenced, do not panic;

4.     Seek advice to understand your legal position; and

5.     Explore settlement options before or at the conciliation.