Unfair dismissal for residential builders (Australia)

What it is

Unfair dismissal is a claim brought to the Fair Work Commission by an employee who says their dismissal was harsh, unjust or unreasonable. It is governed by Part 3-2 of the Fair Work Act 2009 (Cth), sections 380 to 405. For residential builders, the risk sits highest with on-site direct employees such as carpenters, leading hands and apprentices. Sub-contractors and labour hire workers usually fall outside the regime.

The Commission cannot award general damages or hurt-feelings money. The two available remedies are reinstatement to the old job or compensation capped at 26 weeks of the worker's pay, with a hard ceiling of half the high-income threshold (about $87,500 for dismissals from 1 July 2024).

Who can be unfairly dismissed

An employee must clear three hurdles before the Commission will hear the merits.

Minimum employment period

A worker must have served the minimum employment period. For a builder with 15 or more employees the period is 6 months. For a smaller builder it is 12 months. The count includes regular and systematic casual employees, employees of associated entities and any other employees being dismissed at the same time. Probation periods inside a contract do not change the statutory minimum.

High income threshold

If the worker earns above the high income threshold ($175,000 from 1 July 2024) and is not covered by a modern award or enterprise agreement, they cannot bring an unfair dismissal claim. Most on-site residential workers sit well under the threshold and are also covered by the Building and Construction General On-site Award 2020, so they qualify.

Genuine redundancy

A dismissal is not unfair if it was a genuine redundancy. The Act treats a redundancy as genuine where the job is no longer needed, the builder followed any consultation duty in the award and the worker could not be redeployed within the business or any associated entity. Saying "redundancy" on a termination letter does not make it one.

The 21 day filing window

Section 394(2) requires the application to reach the Commission within 21 days after the dismissal takes effect. The Commission will only extend that window where there are exceptional circumstances, which is a high bar. Builders should diary the 21st day from the termination date for every dismissal so they know when the risk passes.

The Small Business Fair Dismissal Code

A builder with fewer than 15 employees at the time of dismissal can rely on the Small Business Fair Dismissal Code. If the Commission is satisfied the builder followed the Code, the dismissal is taken to be fair. The Code allows two pathways.

Summary dismissal for serious misconduct, which includes theft, fraud, assault and serious safety breaches. The builder must hold an honest belief on reasonable grounds that the conduct happened and was serious enough to warrant immediate termination.

Other dismissal requires a valid reason based on conduct or capacity, a clear warning that the job is at risk, a reasonable chance for the worker to fix the issue and the chance to have a support person at the discussion. Documenting each step matters more than ticking a checkbox.

Records that save the case

A builder who can produce the right paperwork wins more often than one who relies on memory. Keep:

• The signed contract and any policy acknowledgement
• Toolbox talks and induction sign-offs
• Written warnings dated and signed by the worker
• File notes from any performance or conduct discussion
• The termination letter setting out the reason and the notice paid

What it costs to get wrong

Compensation orders in the residential sector typically sit between 6 and 16 weeks of pay, plus the builder's own legal costs. A reinstatement order is rarer but possible. The reputational hit and the time pulled away from sites is often the bigger cost. Builders who run a clean process from offer through to termination almost never face an order.