Where a permanent employee’s employment is terminated by their employer, the employee is entitled to a minimum period of notice set by the National Employment Standards in the Fair Work Act 2009 (Cth). This is sometimes supplanted by a more generous notice period set out in a modern award, enterprise agreement or contract of employment that applies to the employee. A payment equivalent to what the employee would have earned through the notice period can generally be “paid in lieu” of providing the notice period if the employee wishes to terminate employment immediately.
An exception to the obligation to provide a notice period (or payment in lieu) is where an employee is dismissed for “serious misconduct” which is defined in the Fair Work Regulations 2009 (Cth) to mean (in essence) an employee deliberately behaving in a way that is inconsistent with continuing their employment. Examples of serious misconduct include: causing serious and imminent risk to the health and safety of another person or to the reputation or profits of their employer’s business, theft, fraud, assault, sexual harassment or refusing to carry out a lawful and reasonable instruction that is part of the job. Dismissal without a notice period is often referred to as “summary dismissal”.
In short, where an employee is guilty of serious misconduct the law provides that they can be “summarily dismissed” without being provide a notice period.
That said, it is still important to follow a procedurally fair disciplinary process to carry out the dismissal if a claim for unfair dismissal is to be avoided.
Summary dismissal risks
Whilst a claim in unfair dismissal (for which an employee can be awarded maximum compensation of $79,250) is perhaps the most obvious way an employee might challenge a summary dismissal that they disagree with, there may be other avenues of challenge they will pursue as well or instead.
The case of Hurley v Security & Technology Services (NT) Pty Ltd (No 2) [2021] FedCFamC2G 387, where judgment was handed down earlier this month, is a useful reminder that where an employee is dismissed without being provided with a notice period, they can also challenge their employer for breaching their entitlement to a notice period under the National Employment Standards (NES).
This remedy is available regardless of whether the employee has rights to make an unfair dismissal claim or not (they may be excluded from the unfair dismissal regime because, for example, they do not have a long enough period of service to be eligible to make an unfair dismissal claim, or because they earn over the “high income threshold”).
Mr Hurley’s case concerned the summary dismissal of a CFO who was entitled to a 5 week notice period under the NES. The court found that the disciplinary process that led to his dismissal for acting in conflict with the company had not been fairly carried out and the employer’s finding that he had engaged in serious misconduct justifying instant dismissal was not warranted. The employer had therefore breached the NES by not providing a period of notice.
The maximum penalty for a single breach of the NES by an employer at the time of the dismissal was $63,000. In the circumstances Judge Street was satisfied a penalty of $50,000, being 80% of the maximum penalty was appropriate. The employer was also ordered to pay the employee’s legal costs.
The maximum penalty for breaching the NES is now (as of May 2022) $66,600 per contravention for companies (and $666,000 per contravention for companies where they are involved in “serious contraventions” i.e. part of a deliberate and systematic pattern of conduct affecting one or more people).
Individuals involved in contraventions (directors, HR managers, etc.) can be fined up to $13,320 per contravention or up to $133,200 per serious contravention.
Lessons for employers
Key takeaways from this case are:
- Remember that even permanent employees without unfair dismissal rights (those with short lengths of service and/or high earners) can claim for a breach of the NES entitlement to be provided with notice.
- This can also be claimed in addition to a claim for unfair dismissal.
- The penalties for breaching NES entitlements can be severe.
- The test for establishing serious misconduct for summary dismissal is high.
- Even if the employee admits that dismissal was justified, they can still succeed in a claim if it would have been more appropriate for them to be dismissed with a notice period / payment, rather than without one.
In light of the above, we would always advise that extreme caution is exercised before dismissing an employee without notice. Making a payment in lieu of notice, and avoiding the risk of a claim that notice should have been paid, will generally be the safest approach unless there is complete certainty that a case of serious misconduct exists.
Other articles that may interest you
No employment contract? Beware of “reasonable notice” of termination
Disclaimer
The information provided in these blog articles is general in nature and is not intended to substitute for professional/legal advice. If you are unsure about how this information applies to your specific situation we recommend you contact EI Legal for advice.