Employers face a new unfair dismissal regime from 1 July this year, with Labor's new Fair Work Bill (the Bill) set to reshape this aspect of the industrial relations landscape in the post WorkChoices era.
Among the most significant changes is the abolition of the 101 employee threshold for unfair dismissal claims. As a result businesses of all sizes will soon fall within the unfair dismissal jurisdiction.
Employees of small businesses (less than 15 employees) will be able to bring an unfair dismissal claim where they have been employed for at least 12 months. For all other businesses the qualifying period is six months.
The grounds for unfair dismissal remain the same: that the termination of employment was 'harsh, unjust or unreasonable'. However, for the first time the refusal to allow a support person to attend dismissal meetings will be relevant when working out whether the dismissal was harsh, unjust or unreasonable in the circumstances.
In addition, employers will no longer be able to rely on the fact that the termination was for 'genuine operational reasons' in order to escape the operation of unfair dismissal laws. Instead, under the Bill, an employer must establish that the termination of the employee's employment was due to a 'genuine redundancy'.
The concept of a genuine redundancy will be familiar to most employers: a position is redundant if the employer no longer requires that job to be done by anyone. The Bill however introduces a new requirement to satisfy the 'genuine redundancy' test: that a termination is not a case of 'genuine redundancy' if it was reasonable for the employee to have been redeployed within the employer's enterprise or the enterprise of an 'associated entity' of the employer.
The meaning of 'associated entity' extends beyond related bodies corporate (holding and subsidiary companies, and companies which are both subsidiaries of the same holding company). For example, if your business has the 'capacity to control the financial and operating policies' of another entity, then that entity is an 'associated entity' and redeployment opportunities to that entity must be explored. The same is true, with some qualifications, where your business is capable of being controlled by another entity, or even where your business and another business are subject to control by a common third party.
Large employers are likely to find the redeployment requirement difficult to prove which may result in them taking a commercial approach to termination of employment. As a result, employers may be tempted to consider making ex gratia payments or paying 'go away money' in exchange for releases from liabilities under the unfair dismissal regime.
Anna Hobson, Lawyer, assisted with the preparation of this article.