Top 7 myths about employment law

There are some common myths about employment law that seem to arise frequently with both clients and non-employment lawyers alike. Here, I “myth bust” seven of the most common ones, writes Paul O’Halloran.

Paul O'Halloran • 13 April 2023 • Big Law

Three strikes and you’re out

There is a myth, particularly in the retail and hospitality industries, that an employee must be given three warnings before they can be dismissed. This is totally incorrect. Unfair dismissal laws contained in the Fair Work Act say absolutely nothing about the three-strike myth. Rather, section 387 of the FW Act provides eight criteria for considering whether a dismissal was “harsh, unjust or unreasonable” (for employees with access to unfair dismissal). This includes whether there was a “valid reason” for the dismissal related to the person’s capacity or conduct. In relation to unsatisfactory performance, a relevant consideration will be whether the person had been warned about that unsatisfactory performance before the dismissal.

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All post-employment restraints are unenforceable

Not always. Employment restraints of trade can discourage employees from leaving their position by restricting their ability to work in their chosen field for a period of time after their employment has ended. While it depends on the facts of each individual case, a carefully considered and drafted restraint of trade clause in a contract of employment may achieve this outcome. Unfortunately, many clauses in employment contracts I see are invalid and unenforceable because legal advice has not been obtained in this technical area of law at the time of entering into the contract.

Restraints of trade are not automatically enforceable. The starting position for such provisions is that they are void as against public policy. A court will uphold a restraint of trade clause as valid only if the former employer seeking to enforce it can establish that the restraint is no wider than reasonably necessary to protect the legitimate proprietary interests of the former employer.

An empirical study of the outcome of restraint of trade cases in Australian courts between 1989 and 2012 (by Hui Xian Chia and Ian Ramsay in 2016) found that employers were successful in enforcing an employment restraint of trade in 46.2 per cent of all cases. That is certainly quite a bit more than zero!

It is mandatory to have a support person at any disciplinary meeting with an employee

No. While it is probably best practice and pastoral to suggest a support person at any meeting at which an employee is facing disciplinary action, there is no positive obligation to offer one. In the context of unfair dismissals, when considering whether a dismissal was harsh, unjust or unreasonable, the Fair Work Commission will take into account (among other factors) any “unreasonable refusal” by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal.

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Highly paid employees are not covered by modern awards

Incorrect. While there is a high-income threshold in the FW Act (currently $162,000 per annum), it does not mean every employee paid above that amount is award free. If there is a classification for an employee’s role in a modern award, the modern award may apply (unless a guarantee of annual earnings has been made or an enterprise agreement covers them instead). For example, many pilots can earn about the high-income threshold but are still covered by the Air Pilots Award 2020 (meaning they may still have access to unfair dismissal laws).

If an employee is dismissed during a probationary period, they cannot bring a Fair Work Commission claim

Wrong. While it’s not possible to bring an unfair dismissal claim under the FW Act if an employee is dismissed during their “minimum employment period” (12 months for a small business or six months for a non-small business) unless exceptional circumstances are established, an employee can still file general protections claim even if they were employed for just one day if it is alleged the dismissal constitutes “adverse action” because of a “workplace right”. Common areas of adverse action include that the employee was dismissed because they exercised their right to make complaints or inquiries in relation to their employment, or because of the exercise of an industrial right protected under the FW Act. A reverse onus of proof operates in proceedings of this nature. Any such claim must be brought within 21 days of the dismissal.

If an employee wins an unfair dismissal claim, they will be reinstated

Incorrect. Reinstatement is the primary remedy for unfair dismissals under the FW Act, but it’s rarely actually ordered. Statistics from the Fair Work Commission’s annual report in recent years reveal that reinstatement is only awarded in about 6 per cent of cases. Generally, strong evidence that the relationship of trust and confidence has broken down between employer and employee will be persuasive in ensuring an undesired employee who wins an unfair dismissal claim is not reinstated (but instead receives compensation).

Provided a worker has an ABN, they can be classified as an independent contractor

No. If the worker has no detailed written agreement with the hirer of their services, then the worker could challenge the nature of the relationship and allege it to be one of employment. The High Court of Australia in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd held last year that “where the parties have comprehensively committed the terms of their relationship to a written contract, the validity of which is not in dispute, the characterisation of their relationship as one of employment or otherwise proceeds by reference to the rights and obligations of the parties under that contract”. Therefore, the terms and description of the relationship as reflected in the written agreement will have primacy, not whether the worker has a registered ABN.

Paul O’Halloran is an employment law partner at Dentons.

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