Did you know that your salary can influence whether or not you’re eligible to be protected from unfair dismissal? Executives, who tend to be well remunerated in their roles, can often face limits on their ability to lodge an unfair dismissal claim.

Executives who earn above the specified salary cap and aren’t covered by a modern award or enterprise agreement won't have access to unfair dismissal remedies under the Fair Work Act (Section 382). 

What’s the salary cap?

Under the Fair Work Act, the high income threshold as of 1 July 2021 is $158,500. For dismissals prior to this date, the cap is $153,600. 

Those covered by a modern award or enterprise agreement may be excluded from this salary cap. Generally public sector executives working in academia or health will also be excluded due to the terms and conditions of their employment. 

Is this system fair for executives?

Typically, executives will have certain provisions in their contract to compensate for the fact that their employment can be terminated. This may include a notice period greater than the statutory minimum period which would need to be paid out on dismissal. 

It’s important that executives review their contracts on commencement of their employment to make sure they’re covered in the event of dismissal and to avoid any overly onerous restraints of trade. 

What recourse do executives have if they believe they have been dismissed unfairly?

Despite the limitations around unfair dismissal, there are still ways executives can take action for unlawful termination. 

Unlawful termination may apply when the executive is found to have been dismissed due to: 

• A temporary absence from work due to illness or injury 
• Trade union membership or participation 
• Non-membership of a trade union
• Acting or seeking to act as an employee representative
• Filing a complaint against the employer for the alleged violation of laws or regulations 
• Discrimination on the basis of race, colour, sex, sexual orientation, age, physical or mental disability, marital status, family or carer’s responsibilities, pregnancy, religion, political opinion, national extraction or social origin
• Maternity leave or parental leave
• A temporary absence from work for voluntary emergency management activity

What about breach of contract?

Another option may be to make a claim for breach of contract. This may occur if the executive doesn’t receive the correct payment for their notice period, bonus entitlements or share options. Another issue can be any restraints of trade set out in the contract which may not be valid. 

How can executives protect themselves? 

The best way executives can protect themselves against dismissal is to ensure they have a strong employment contract which affords them protections such as a longer notice period or an offset term to ensure any redundancy payment required to be paid by law may be offset against a payment in lieu of notice.

It’s best that executives have an employment lawyer review their employment contract on commencement of employment to ensure they’re protected, especially when on a high income. In the event of a dismissal, whereby the executive believes they were wrongfully terminated or haven’t received the entitlements set out in their contract, engaging an employment lawyer is the best recourse to recoup what may be owed. 

How can employers avoid any issues down the track? 

Employers should be careful that their employment contracts for executives don't potentially expose them to risks due to unfair terms. Examples include the inclusion of excessive restraint periods or inadequate compensation upon dismissal which could prompt executives to take legal action when dismissed. Consulting with an Employment Lawyer with experience in this area can ensure you minimise any risks.