In part one and part two of our Employment Essentials Series we discussed procedural aspects of termination and the need for substantive fairness. In this third instalment we will discuss the various outcomes and ramifications for employers if they fail to settle an unfair dismissal claim before proceeding to a formal hearing and the potential fallout post proceedings.
The Fair Work Commission (FWC)’s Second Quarter Report (the Quarterly Report) reveals that 3,544 applications for unfair dismissal were made in the period from October 2016 to December 2016.
The majority of these matters were finalised without a decision by the FWC. This usually means that the parties had negotiated a confidential agreement, typically subject to the parties entering into a Deed of Release or Terms of Settlement.
However, those applications not settled or withdrawn by the applicant then proceed to hearing.
Proceeding to hearing
Having a matter proceed to hearing incurs both financial and non-financial costs for employers. The non financial costs can include loss of reputation, disruption to stakeholder relationships and unwanted media exposure.
The Ramifications
The Returning Employee
Reinstatement is the primary remedy for unfair dismissal claims, and though statistically rare, an employer can be ordered to reinstate an employee they unfairly dismissed. The Quarterly Report states that only 7 employees were reinstated in the period between October and December 2016.
An employee reinstated to the workplace will almost certainly cause a change in the relationship – not only with the reinstated employee but other employees in the workplace. For example, the person who made the decision to dismiss the now reinstated employee may no longer be respected in the workplace on the basis that his/her decision, according to the FWC, was wrong.
In smaller communities, where there are fewer businesses in the area, the employer may get a reputation for making poor decisions with respect to discipline and termination of employees, affecting the employer’s ability to successfully recruit future employees.
Further, the reinstated employee has won his or her case against the employer and returns to the workplace on that basis, potentially creating a difficult dynamic for any future performance management.
Employers should also be aware in circumstances where an employee has been reinstated that the FWC is likely to order back payment of wages so the employee does not suffer any loss and is put back into the employment as if the termination never happened.
Compensation
Under the Fair Work Act 2009 (Cth) (FW Act), if reinstatement is not a viable option, an employee may be compensated for the unfairness of the dismissal with up to 26 weeks pay.
Public reputation
Most FWC decisions are public record – the decision is published on the FWC website which can be accessed by anyone including media outlets.
Journalists can and do report on interesting unfair dismissal decisions without seeking the employer’s consent or comment as the decision is public. Further as a public record, a decision or reporting of it, will remain on the internet forever and could be searched by anyone who may be looking to apply to work or who is looking at dealing with the employer’s business.
Where to from here?
We are certainly not saying that all matters should be settled or that employers should always avoid a hearing. From time to time a point must be made by an employer and a public decision supportive of the employer can have benefits.
However, what we are saying is that a decision to engage in litigation of any kind should be carefully considered given the time, cost and other consequences of a public FWC decision that might not go in the employer’s favour.
All of the circumstances of each case should be carefully weighed before making the decision to proceed to hearing.
