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.