Constructive Dismissal

Termination

Understanding reasons for dismissal

Being an employer comes with its set of tough obligations, one of them being dismissing an employee. Dismissal or termination can be extremely difficult, and you need to know your duties and rights before considering this drastic step. Dismissal is defined in the Fair Work Act 2009 (the Act), and there are many Fair Work Commission decisions to indicate that it can be risky for employers to terminate employment, so you must understand the circumstances in which it may be appropriate to dismiss an employee. In this guide, we highlight things to consider before dismissing an employee in Australia, and fair reasons for dismissal. Things to consider before dismissing an employee Review all relevant employment contracts, agreements, and awards that may affect the termination process. Ensure there are policies and procedures in place to govern dismissal and termination. These policies and procedures should be written and communicated to all employees regularly. Talk to employment relations experts before making any significant decisions. Know your responsibilities as an employer. You cannot dismiss anyone because of protected attributes such as race and religion – this is known as adverse action and may result in a general protections claim. Fair reasons for dismissal can still lead to claims that the dismissal was harsh, unjust or unreasonable. Fair reasons for dismissal As you would expect, employers should not dismiss employees without the appropriate grounds, as you are affecting someone’s livelihood. In several instances, say if an employee behaves badly, you may be tempted to end employment contracts simply as a reaction to the event. However, the Fair Work Commission has determined that you should not dismiss any employee without a valid, sound, and defensible reason given the circumstances, and a fair dismissal process, to minimise the risks of a subsequent unfair dismissal claim. Valid reasons for termination are required for all employees, especially for an employee who has access to unfair dismissal, for example, if they have been employed beyond the minimum employment period, which is either six or 12 months, depending on the size of the business. Valid reasons are varied and come under four key areas: Capacity – You may fairly dismiss an employee if they cannot meet the requirements of their role. You may fairly dismiss an employee if the tasks are essential, and the employee cannot fulfill their responsibilities. Some examples of capacity include: Failure to work as a team member. Failure to carry out tasks in a way that is safe for both employees and other workers. Failure to act in good faith and meet obligations of fidelity. Failure to meet productivity requirements. Failure to manage stressful situations. You must fairly assess which requirement is essential for your employee to display capacity. For example, if they are a remote employee working on individual projects then working as a team member may not necessarily apply to them. If the job requirements have changed since the employee was hired, then you need to review those changes before deciding to dismiss the employee in question. Poor performance – A poorly performing employee may be dismissed fairly. To avoid unfair dismissal claims, you must follow appropriate processes. Set clear and realistic expectations with an employee and monitor their performance regularly. If needed, consider implementing performance improvement plans or performance management plans. These plans will offer the employee opportunities to improve their performance. When dismissing an employee for poor performance, you must show that the dismissal was not harsh, unjust, or unreasonable. Serious misconduct – Another fair reason for dismissal includes serious misconduct. Serious misconduct entitles you to immediately dismiss an employee. You do not have to give notice in case of summary dismissal. Serious misconduct includes behaviour such as theft, sexual harassment, or other serious grounds. Before you dismiss an employee for serious misconduct, remember that: If the Small Business Fair Dismissal Code applies, you have a reasonable belief of the bad conduct. In all other situations, you used a process to confirm that serious misconduct did take place. Redundancy – You can make employees redundant if their role is no longer required. A genuine redundancy involves: Following any consultation process required by law You no longer need anyone to perform the role Paying required notice and entitlements to the employee Right to terminate an employment contract - In some instances, employers may have the right to terminate the employment contract. These clauses may allow you to terminate or dismiss an employee with notice. Other reasons for dismissal may be valid if the employee does not have access to an unfair dismissal claim, provided those reasons don’t give rise to a general protections claim. The Fair Work Act 2009 protects employees in various circumstances, including race, religion, industrial action, and discrimination, amongst others. Ways to dismiss an employee Regardless of the reason for the dismissal, when considering whether a dismissal is unfair, the Fair Work Commission will assess whether it is “harsh, unjust, or unreasonable”. What is harsh, unjust or unreasonable will depend on the circumstances of each case. In most cases, it is accepted that an employer must follow a procedurally fair process before terminating the employee where you give reasons for the proposed dismissal as well as an opportunity for the employee to respond. This is because both the reason for the dismissal and the process adopted in deciding to dismiss will be considered in determining whether a dismissal was a fair one. Ideally, a fair and transparent dismissal process would be outlined and described in the employee handbook. It should include notifying the employee in writing of the allegations against them in an invitation to a meeting to discuss the matter further and allow the employee to respond to the allegations. The employee should be provided with adequate time to prepare their response to the allegations and organise a support person. It’s best practice to have the meeting 24 – 48 hours after the employee has received the invitation to the disciplinary meeting. Employees facing dismissal should have the chance to defend their case, and you should consider their responses before deciding on the balance of probabilities whether the allegations are substantiated, (i.e. you believe based on the evidence and the employee’s responses that there is at least a 51% chance the allegations are true). Even then, a dismissal may still be considered harsh, unjust and unreasonable depending on the circumstances, and another outcome may be more appropriate. It is important to follow a procedurally fair process and make sure that you are only dismissing employees for valid reasons. If you do not, an employee may have grounds for a claim of unfair dismissal. As this is a complex area, we recommend you seek professional advice before considering dismissing an employee. We can help you better understand valid reasons for dismissal and put fair policies and procedures in place. Call our expert team for free initial advice. This article is for general information purposes only and does not constitute as business or legal advice and should not be relied upon as such. It does not take into consideration your specific business, industry or circumstances. You should seek legal or other professional advice regarding matters as they relate to you or your business. To the maximum extent permitted by law, Peninsula Group disclaim all liability for any errors or omissions contained in this information or any failure to update or correct this information. It is your responsibility to assess and verify the accuracy, completeness, and reliability of the information in this article.

Termination

Termination of Employment

When you start a business or hire people, termination may be the last thing on your mind. However, letting people go is an inescapable truth of managing staff. You need to understand the basics of termination of employment in Australia. Termination of employment is a delicate topic. In almost every situation, an employee does not welcome losing their job. Business owners and employers must understand employee entitlements and employer obligations set out in the Fair Work Act 2009 and other relevant legislation. Reasons for termination of employment Your employee can leave their job voluntarily for any reason if they give the notice stipulated in their employment agreement or contract. However, for involuntary termination you need to have valid and specific reasons. Broadly, reasons for terminating someone’s employment are one of the following: Misconduct – when an employee partakes in behaviour that is out of line with company policy, goes against the terms of an employment agreement, or is unlawful. Australian employees can be immediately dismissed for serious misconduct, which is defined by the Fair Work Act as wilfully risky behaviour that negatively impacts the business or threatens someone’s safety. Serious breaches of conduct can result in summary dismissal meaning immediate termination without a notice period or pay instead of notice. Poor performance - due to factors such as lack of skill, care, diligence, or quality. However, you can only dismiss someone for poor performance after you have issued warnings and made attempts to improve the performance. These attempts include training, Performance Improvement Plans, and Performance Management Plans. Capacity – reflects on an employee’s ability to fulfil the inherent requirements of their role. Redundancy – when an employer either decides they no longer need an employee’s job to be done by anyone, or the employer becomes insolvent or bankrupt. Probation - You can terminate an employee during the first 6 months of their employment without the need for a performance plan. But you should be mindful that anti-discrimination laws are not breached if considering termination during probation period. In most cases, it is accepted that an employer must follow a procedurally fair process before terminating the employee. This process will include reasons for the proposed dismissal as well as an opportunity for the employee to respond. This is because both the reason for the dismissal and the process adopted in deciding to dismiss will be considered in determining whether a dismissal was a fair one. You should write a letter outlining the reason why termination of employment is being considered and provide evidence. You can meet with the employee in person to share the letter or before sending them the letter and give them the opportunity to ask any questions. Terminating employment contracts An employment contract is a written agreement between an employer and the employee. It sets out enforceable terms and conditions that govern the employment relationship. The Fair Work Act provides minimum conditions and entitlements for employees in the National Employment Standards, and industrial instruments such as Modern Awards, or Registered Agreements. An Employment Contract must provide for at least these minimum conditions but can set out additional requirements regarding termination processes that should be considered. However, any disputes concerning an employment contract are generally enforceable under contract law, rather than through the Fair Work Commission. This means if an employer breaches the termination clauses in the employment contract when terminating an employee, the employee could lodge a claim under contract law as well as in employment law for unfair dismissal under the Fair Work Act, depending on the circumstances. Employment termination notice As outlined in the National Employment Standards, an employer must provide an employee with written notice of the day of termination. Employees must be given (or paid in lieu) the minimum amounts of notice set out in the NES or relevant industrial instrument. Below are outlined the minimum notice periods required to be given and their corresponding periods of employment. Period of continuous employment Minimum notice period Less than 1 year 1 week 1 - 3 years 2 weeks 3 - 5 years 3 weeks Over 5 years 4 weeks Despite the above, there are two scenarios in which there are extenuating circumstances and different periods of notice may apply. If an industrial instrument covering the employee or contract of employment specifies a longer notice period for termination, then it is the specified notice period that applies. The other is that if an employee is over the age of 45 and has worked for at least two years on the day that you give them notice, they are entitled to an extra week’s notice. Termination and notice periods While the National Employment Standards outline compulsory notice periods for employees being terminated, there are scenarios in which a notice period is not necessary. For instance, notice is not required to terminate casuals, employees employed for a fixed period (other than apprentices), employees doing seasonal work, or daily hire employees working in the building and construction or meat industries. There is also no necessity for a termination notice period if the employee is dismissed due to serious misconduct. Some examples of serious misconduct may include theft, fraud, assault, or refusing to carry out a lawful and reasonable instruction that is part of the job. But even though you do not have to give notice of termination of employment or pay instead of the notice period, in these circumstances, you do have to make sure the process is fair and pay out all outstanding entitlements, for example, payment for time worked or annual leave, though not always long service leave, depending on the State or Territory and applicable circumstances. As an employer, you should also know that if an employee thinks that they have been unfairly dismissed, or if they feel that their dismissal was not handled fairly, they can lodge an application for an unfair dismissal remedy. Final pay Final pay is what an employer owes an employee when their employment ends. An employer is obligated to ensure that the employee subject to the termination of employment receives their outstanding wages, including penalty rates and allowances (if applicable) and other paid entitlements, as well as any notice if the employee does work it. This is referred to as ‘final pay’.   If an employee has any outstanding annual leave or is entitled to redundancy pay or long service leave this should also be paid out in their final pay. An award, employment contract, enterprise agreement, or other registered agreements can specify when final pay must be paid. If it does not, the best practice is for an employee to be paid within 7 days of their employment ending or on the next scheduled payday. Managing termination of employment Australian employment legislation and policies can be complex and are ever-changing. Without any assistance, employers can find it difficult to juggle staff, inventory, running the business, and navigate fair dismissal policies. Peninsula’s advisers can help you understand the tricky process of hiring, onboarding, and termination of employment. You can call our team for initial advice 24/7.

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Understanding reasons for dismissal

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