How much money can an employee make before they can no longer file for unfair dismissal? And does extending an employee’s probation period actually protect your organisation? A legal expert busts common myths about unfair dismissals.

Between assessing evidence, attending hearings and initiating conciliation, responding to unfair dismissal claims can cause serious headaches for employers. 

While most employers would be able to tell you that unfair dismissal occurs when an employee is terminated in a harsh, unjust or unreasonable manner, there are many more layers of complexity to the process that they should be educated about, says Amy Zhang, Team Leader and Executive Counsel at Harmers Workplace Lawyers.

“It’s important that employers are aware of the minimum requirements relating to unfair dismissal claims so they can take a preventive approach,” she says. 

“This also [allows them to] head off unmeritorious claims at the start.” 

Zhang spoke with HRM to unpack some of the most common myths and misconceptions around the unfair dismissal process and the fine print that HR should know about.

Myth #1: All overtime payments count towards the unfair dismissal earnings threshold.

In order to be eligible to file an unfair dismissal claim, employees’ earnings must fall below the high-income threshold prescribed by the Fair Work Act. The threshold currently sits at $162,000. 

However, there are often misconceptions among employers about the types of payments that can be considered ‘earnings’.

In a recent case, the FWC rejected an employer’s claim that a former employee was not eligible for unfair dismissal because his earnings exceeded the high-income threshold.

While the employee’s total income did push him over the threshold, the Commission ruled that some of it did not count towards his earnings because it came from overtime that was not guaranteed in his employment contract.

“The calculation of ‘earnings’ is prescribed in the Fair Work Act and does not include reimbursements, contributions to a superannuation fund and, in relation to [this case], payments which cannot be determined in advance,” says Zhang.

“The requirement to work overtime is obviously something that is contingent on the needs of the business which are subject to constant change.

“HR should ensure that employee earnings are set out very clearly in employment agreements. If an [overtime] payment is capable of being guaranteed, then that should be identified clearly in the employment agreement.”

“Probation is generally an opportunity for both parties to assess performance, but does not automatically mean that an employee is not protected from unfair dismissal.” – Amy Zhang, Team Leader and Executive Counsel at Harmers Workplace Lawyers

HR should also be aware that the high-income threshold may not always apply.

“Another misconception is that all employees who earn above the high-income threshold are automatically barred from filing an unfair dismissal claim. Again, this is not necessarily the case,” says Zhang.

“If an employee is covered by an industrial instrument, then there may be scope to file an unfair dismissal claim. This is a complex area, and legal advice should always be sought.”

Myth #2: There is a fixed claim time for unfair dismissals that cannot be extended.

The Fair Work Act stipulates that an unfair dismissal claim must be filed by the employee within 21 days of their termination. According to Zhang, this rule tends to be very strictly enforced by the Commission.

“It’s rare for the [FWC] to grant an extension,” she says. “However, it has been granted where an applicant has been ill (for most of the 21-day period) or where a representative error has occurred.

“The Commission will consider a number of factors, including the reason for delay, whether the employer will suffer any prejudice if an extension is granted, the merits of the application, when the applicant first became aware of their dismissal and general principles of fairness.”

Last year, HRM reported on an unfair dismissal case involving a worker who submitted her claim three days late, but was granted an extension by the FWC on account of her partner’s mental health issues.

In this case, the Commission also considered how the delay was compounded by the challenges presented by the worker’s dyslexia, which it said was likely to have “increased the degree of difficulty for the applicant in meeting the deadline to supply her paperwork”.

While cases like these are exceptions to a strict rule, employers should be wary that the FWC is willing to consider extenuating circumstances for extensions.

Myth #3: Employees can’t file for unfair dismissal if they are on an extended probation period.

A common source of confusion when it comes to unfair dismissals is the distinction between the minimum employment period and a probation period.

Current laws state that employees are entitled to file an unfair dismissal claim after six months of employment – the only exception being employees of small businesses (less than 15 staff), who have to wait 12 months before they can file a claim. 

Although probation periods often overlap with the minimum employment period, they do not have the same bearing on unfair dismissal claims, says Zhang.

“Probation is generally an opportunity for both parties to assess performance, but does not automatically mean that an employee is not protected from unfair dismissal,” she says. 

“It is common for most probation periods to extend for a period of six months, which correlates with the minimum employment period in the Fair Work Act. 

“However, if the period of probation identified in the employment agreement is 12 months, and an employee is terminated after the sixth month, then the employee can still file an unfair dismissal claim despite the existence of the [extended] probation period.”

On the flip side, employees who are taken off probation within the first six months of employment are still not eligible to file a claim until they have completed the minimum employment period, she says.

Read HRM’s article on probation and the minimum employment period.

In cases where an employee’s unfair dismissal claim is invalid for one of the reasons above, employers should not consider themselves ‘out of the woods’ if a claim is rejected, says Zhang.

“If an employee has not satisfied the minimum requirements under the Fair Work Act, they may have other causes of action available to them under the Fair Work Act, like a General Protections application,” she says.

“Accordingly, employers should always take a cautious approach to dismissal, even where an employee does not seem like they satisfy the jurisdictional threshold for protection from unfair dismissal.”

Thanks to Mariam Chalak for her contributions to this article.

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