10 unfair dismissal cases examined: Key lessons for SMEs

This piece was first published on April 15, 2013.

It’s a small business owner’s worst nightmare – an unfair dismissal case.

One of the biggest complaints among small businesses is that it’s too difficult to fire a rotten employee. Certainly enough cases have come before through the legal system over the past few years to provide some guidance to small businesses’ on whether they are likely to get hauled before the courts for a claim of unfair dismissal.

In many cases, the problem is the business in question hasn’t got everything in order. When unfair dismissal claims succeed it is often because an SME hasn’t done the legwork to give itself the best chance of success. The small business may be simply disorganised, or it misses steps in the legal checklist.

Rachel Drew, partner at TressCox Lawyers, says the area of unfair dismissal is always going to present interesting lessons for employers.

“It’s an interesting area just because of the variability of the individuals being employed and the reasons for certain actions taking place,” she says.

“The courts and commissioners are also quite careful to assess cases on their individual merit, so you might find that in two cases with similar circumstances, they might have different outcomes.”

While plenty of businesses love to complain about the unfair dismissal procedures, the fact is the Fair Work Commission takes a strict view on what constitutes unfair dismissal. The FWC dismisses more applications than its grants.

But where it does grant unfair dismissal, it outlines clear reasons for doing so. Many of these reasons are straightforward – a business has forgotten to document a certain procedure, for instance. If only for that missing piece, that business could have won.

“I’ll often look at a case, and think, ‘how did it come to that conclusion?’. And it’s usually because of the business’s conduct,” says Drew.

Several legal experts have told SmartCompany businesses often make a big mistake in preparing for unfair dismissal cases by forgetting to document disciplinary procedures, or not consulting employees before they are made redundant.

These are clear mistakes that should be avoided.

We’ve put together a list of 10 unfair dismissal cases from over the past year. From each case we’ve taken a lesson to apply to your business. They range from common sense – make a social media policy – to the seemingly obvious – actually turn up to your hearing.

Chances are good you may end up facing one of these cases. Learn from these cases, make sure you put in the hard yards, and avoid the small mistakes which could trip you up.

1. Late to work, early to fire

At first glance it makes sense as a rule of thumb. If your employee is late, then you should be able to fire them.

But not so, according to the Fair Work Commission. At least, not on the day it happens.

Take this case for instance, in which an employee of a wedding gown shop was fired by her employer, in part, for turning up to work late five separate times.

The company ran into trouble when the Fair Work Commission said the “continued failure to ensure that she attended work on time” didn’t constitute enough reason for “instant dismissal”.

It’s those words, “instant dismissal”, which are the problem. According to Andrew Douglas, partner at M&K Lawyers, you can’t simply fire someone instantly for turning up late. “It’s not necessarily warranting of immediate dismissal. It needs to be an aggregation of behaviour.”

If your employee is late, then you can fire them. But you need to have outlined clearly in your workplace policy showing up late is a serious offence, and each time it occurs, you need to give a warning. After a series of warnings, you may well have grounds for termination.

2. Messing around on social media

Social media has been great for most individuals.

For businesses, however, the story is a little different. Can employees use Facebook in the office? What about on phones? How about social media while you’re at work events – is that okay? There are so many rules and regulations.

One specific area that has been a lot of trouble is policing what employees say about their roles while off the job. And in this Linfox case, it became a significant problem.

The employee was discovered to have made some disparaging comments against two managers on Facebook – comments which the managers claimed were sexist and contained racial vilification.

Fair Work Australia granted the unfair dismissal application because the employee argued he didn’t know how public the comments were, and also pointed out his page had the highest level of privacy settings.

One of the major criticisms was that the business didn’t have a social media policy. People + Culture Strategies director Nichola Constant told SmartCompany that if the business did, its arguments may have been taken more seriously.

Develop a social media policy, and make sure you stick to it.

3. Lies, damned lies and sewage

SmartCompany covered one of the more unusual cases in unfair dismissal history lately.

The owner of a plumbing business was hit with an unfair dismissal claim from an employee, who claimed his managers had threatened him and forced him to write out a letter of resignation.

The owner of the company said the exact opposite happened – the employee showed up and produced his own resignation, which was accepted verbally.

Upon investigation, the Fair Work Commissioner found in favour of the business owner.

“I have great sympathy for the employer who has clearly conducted his business with great emphasis upon acting with honesty and integrity at all times,” the Commissioner said.

Although the company involved here has won the case, there is still a significant lesson for businesses when it comes to redundancy.

Douglas told SmartCompany at the time it’s not enough to just verbally accept a resignation. You need to have it in writing.

“No matter what happens, remember as an employer to act generously because it is the employer’s conduct that is first placed under scrutiny by any court,” he said.

4. I’m late, I’m late, for a very important Fair Work hearing

Earlier this year, a small art gallery in Western Australia was hit with an unfair dismissal claim.

But in the proceedings, the business didn’t even show up to conciliation. There was no reason given as to why. And when the Fair Work Commission attempted to contact the business owner, there was no response.

As a result, the Commissioner said he would “rely on and accept the evidence of the applicant”.

The lesson here is simple – just show up. The Fair Work Commission is likely to rule against you if it doesn’t have any evidence from your side.

Be responsive, show up and plead your case. Otherwise, you’ll have zero chance of winning anything.

5. Documenting discipline

One of the big problems a lot of businesses make is not properly documenting disciplinary decisions. It often comes back to bite them.

In a case which occurred earlier this year, a worker was fired after leaving a child unattended. Her workplace, a childcare centre, said this was in breach of the workplace code.

A key part of the case involved the business attempting to show it had previously disciplined the employee. But the ruling pointed out these issues were “not supported by any evidence”, and related to problems that occurred well before the specified incident.

If the business had been able to demonstrate evidence of those other disciplinary situations, the case may have been tipped in their favour.

At the time, Douglas told SmartCompany businesses need to document everything in as much detail as possible, or risk being caught out in court.

“It’s very common for employers to reach a level of frustration with an employee, and then a particular event occurs which warrants disciplinary action, which becomes the basis for the termination,” he said.

But the main point remains – documentation is always necessary.

6. The redundancy versus dismissal debate

Often a business may decide it wants to get rid of someone, and will choose to make a person redundant instead of firing them. They perceive it to be some sort of legal loophole.

Except that isn’t the case at all. As this case in February demonstrates, businesses which try to pass off a dismissal as a redundancy will be caught out.

This particular business found an employee was dismissed with a letter saying the decision was “not a reflection” of his performance. And while the business was able to demonstrate it was suffering cashflow problems making the position redundant, it was clear there was a desire to get rid of the person involved.

The biggest problem? The company didn’t consult with the employee before making the redundancy, and if it had, it may have been able to find another position.

“If that consultation requirement had been met it is possible that the discussions between the parties might have led to alternative solutions,” the company found.

The ramification is clear. Simply dismissing an employee and calling it a redundancy isn’t enough, and can leave you open to lawsuits. A redundancy has to follow a specific checklist, which is available here. Don’t make the same mistake.

7. No notice? No dismissal

Occasionally a business will want to dismiss an employee because they feel they’re doing a bad job.

But as this case shows, businesses simply can’t do that unless they have given the employee ample warning about their behaviour and then give them a chance to change it.

In this particular case, Danae Moumtzis of Donila Fashion Group was dismissed after allegations she wasn’t meeting product margins, and had been buying fabric that was too expensive.

But as the Commissioner pointed out, the company failed to follow a process where there were appropriate warnings about performance given, or even a chance to improve.

“The evidence does not establish that Ms Moumtzis has been warned about the unsatisfactory performance, at least to the extent that her performance was at risk and that her termination of employment may result…” the Commissioner found.

The lesson here? If an employee isn’t up to scratch, you need to tell them.

8. Too many grins

Every company has one – an employee who steps over the line just a little too far.

Earlier this year, the Fair Work Commission heard a case in which an employee of 15 years was dismissed for breaching workplace health and safety regulations.

But during a meeting about the incident, the Commission heard the employee’s manager told him to “get that f**ken [sic] smile off your face”, and said he was a “smart arse”.

But the Commissioner pointed out the business couldn’t just dismiss the employee based on that one incident, even if the employee was smiling and being rude.

“Perhaps due to a misunderstanding, as much as anything else, the meeting took a different course ending in a conclusion which was not intended at the outset, nor in my view justified at the end given what occurred.”

As legal expert Peter Vitale said at the time, decisions to fire someone need to be based on “evidence, rather than impulse”. Otherwise, you’re setting yourself up for disaster.

9. Beauty and the geek

It’s not often a business has a run-in with a reality television show, but that’s exactly what happened to the Bureau of Meteorology last year.

An employee, Adam Marshall, was sacked from his job. The BOM argued this was because he didn’t have enough medical evidence to suggest taking time away from work.

Marshall had been diagnosed as suffering traumatic stress symptoms after withdrawing from a work training program. The problem was a discrepancy between two different medical certificates, and the BOM said this was enough to terminate the job.

The situation was made even more complicated by the fact Marshall had applied to reality show Beauty and the Geek, and lied on his application when he said he didn’t have any medical problems.

The BOM said given the discrepancies in the certificates, this was enough to justify its decision. But the Commissioner said there was enough evidence contained in the certificates to provide evidence for his absence.

As Vitale said, the incident is a lesson for employers. When deciding to terminate an employee based on a medical matter, the evidence needs to be solid. You can’t just challenge a medical certificate without any sort of proof.

10. Consult the employee, or else

Plenty of businesses still don’t understand the difference between a dismissal, and a redundancy. And one point continues to trip them up – consulting the employee in question.

In this particular case, Leevan Harvey, an employee of hardware company UES International, was dismissed from his job, with the company claiming this was because his performance was “slow” and “less efficient” when compared to other employees.

But while the Fair Work Commission found there was a justifiable reason for his job being made redundant, the company still failed because it didn’t consult with Harvey. The law states if you want to declare a genuine redundancy, you need to do a number of things, including consulting with the employee.

A consultation with regard to a redundancy isn’t necessarily a complicated dialogue about the job. It simply gives the employee an opportunity to respond.

Experts warn if you don’t consult when you are required to do so, the Fair Work Commission will look more closely at other aspects of the case, which could end up hurting you. The message is clear – if you’re attempting to declare a redundancy, you need to consult with the employee first.