Understanding the regulations and rules implemented by the Fair Work Commission can be tough when trying to run a business. Juggling all aspects needed to maintain compliance such as understanding what to pay your staff, what their entitlements are and how to handle issues when they arise in the workplace can be considerably daunting for business owners. However, mismanaging these areas can have significant consequences for businesses, and it’s important to know exactly what these could entail. In the period of 2020-2021 the Fair Work Ombudsman recovered underpayments totaling $148,374,054 for 69,735 workers. They also issued 513 infringement notices with $518,396 of on-the-spot fines to businesses who were engaging in breaches of awards.
In this blog, we will explain what the 3 most common Fair Work Claims are and when these might arise, to help you and your business understand the importance of compliance and hopefully be more aware of what high risk situations you may need to be cautious when managing.
Unfair Dismissal is defined under the Fair Work Act s.385 as where the Fair Work Commission finds that:
- The employee was dismissed, and
- The dismissal was harsh, unjust or unreasonable, and
- The dismissal was not a genuine case of redundancy, and
- Where the employee was employed by a small business, the dismissal was not consistent with the Small Business Fair Dismissal Code.
A small business is a business that employers fewer than 15 people, this includes casual staff members.
When determining if a dismissal was unfair, unjust, or unreasonable the Commission will take into consideration various factors, this can include:
- Whether there was a valid reason for the dismissal related to the persons capacity or conduct;
- Whether the person was notified of that reason;
- Whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person;
- Any unreasonable refusal by the employer to allow the employee to have a support persons;
- If the dismissal is related to unsatisfactory performance by the person – whether the person had been warned about that unsatisfactory performance before the dismissal;
- The degree to which the size of the employer’s enterprise would be likely to impact the procedures followed in effecting the dismissal;
- If the employer received any advice from external people E.g., Human Resources Manager, External HR provider; and
- Any other matters that the Commission considers relevant.
However, employees need to have met certain eligibility requirements to be able to make an Unfair Dismissal claim. Eligibility depends on exactly how much service the employee has with the business by the dismissal date. To make an unfair dismissal claim, they will have to have completed a minimum employment period of at least:
- 1 year – where the employer employs fewer than 15 employees (a small business)
- 6 months – where the employer employs 15 employees or more.
If a claim is successful, the business can be ordered to pay compensation to the individual or to give them their job back. The maximum amount of compensation an employee could receive is capped at the lower of either 6 months of an employees wages or $79,250 (although this amount changes on 1 July each year).
General Protections claims cover a wide range of matters, but the most common is where it is alleged that an employer took “adverse action” against an employee. Adverse action can include an employer threatening, organizing or taking action to dismiss an employee, injure them in their employment, alter their position to their detriment, or discriminate between them and other employees, on the basis of a prohibited reason that is covered under the general protection laws. An employer is not allowed to take adverse action against an employee for any of the following reasons:
Employees may be able to apply under the general protections if adverse action has been taken against them because:
- they have a workplace right;
- they have used a workplace right;
- they say they will use a workplace right;
- an employer wants to stop them using a workplace right;
- another person says they will use a workplace right for the employees benefit;
For an example, a workplace right might include protected entitlements such as the right to ask about their rate of pay, or to make an enquiry or complaint about their employment – like raising an employee grievance or putting in a bullying complaint. It can also include workplace rights such as the right to utilise their leave entitlements, like taking Sick Leave.
The law protects an employees right to participate in industrial activities, this includes unions or associations.
The law also protects employees and importantly, also potential employees, from discrimination at work. Employees may be able to apply under the general protections provisions if an employer takes adverse action against an employee (or a porspective employee within the recruiting stage) for the following reasons:
- Sexual orientation
- Physical or mental disability
- Marital status
- Family or carer responsibilities
- Political opinion
- Social origin
Importantly, once an employee has established that an employer has taken a form of adverse of action against an employee the onus is on the business to disprove that it was taken for an unlawful purpose. This highlights how vital it is to have documentation n place when managing any HR issues within your business. For example, contemporaneous notes recording why a decision was taken to dismiss someone, refuse a promotion, etc will be useful in defending a claim that what motivated the decision was prohibited by law.
Compensation for a successful claim is uncapped and can include compensating an employee for future monetary loss, hurt and humiliation, pain and suffering (so called “general damages”.
Finally, one of the most common claims that can arise for businesses is an underpayment claim. This is when an employee is not paid their minimum entitlements for the work they do or is disputing the payments that have been made to them. These entitlements may include their minimum rate of pay, overtime rates, penalty rates, payment for annual leave, leave loading, allowances or termination payments such as notice entitlements. Employees must be paid at least the minimum entitlements for the job they do and the industry they are in. These payments are typically going to depend on the applicable industrial instrument that covers them e.g., a modern award or an enterprise agreement, and these will have strict and quite detailed rules around what payments are applicable to your employees and when.
It is important to make sure as an employer you understand if there is an applicable award that applies to your business, or the employee’s occupation. This also includes ensuring the employee is covered under the correct award and at the appropriate classification level under that award for the job that they do. The employee’s classification level or pay rate may change, depending on qualifications, as they gain more experience or take on higher duties so this is important to ensure as a business that you taken into account and are consistently reviewing whether your employees pay is in line with their classification or award coverage.
Where an underpayment claim is successful, the business will need to backpay any outstanding amounts due to the employee and may also be subject to financial penalties. These claims can be made by an employee for up to 6 years.
An employee can either make a claim in a court or make a complaint to the Fair Work Ombudsman. The Ombudsman may elect to commence a further investigation, inquiry or take other steps to review the business to ascertain whether there are any other compliance issues regarding pay or entitlements. On occasion the FWO will do this even where no complaint has been raised (eg as part of a random audit).
As you may have gathered, there are significant risks to the business in failing to comply with workplace laws. However, compensation and monetary outcomes are not the only risk in failing to be compliant; these issues can also have a severe impact on a business’ reputation and relationship with employees. Considering the severity of the impact this can have, it is vital employers are endeavoring to manage staff compliantly and remain wary of when issues may be increasing the risk of one of these 3 claims being made. Employers should seek professional guidance when appropriate to assist in handling these matters in line with HR best practice.
If you require any assistance with understanding your obligation to employees, or managing these risks in your business then please reach out to the HR Connect team to see how we can assist in helping your business maintain workplace compliance.
About HR Connect
HR Connect is one of Australia’s leading providers of HR and workplace safety advice service, designed to help small business owners make confident and compliant business decisions.
The information provided in these blog articles is general in nature and is not intended to substitute for professional advice. If you are unsure about how this information applies to your specific situation we recommend you contact HR Connect for advice.