Ending a person’s employment can be a bit of a minefield. You know, disagreements, high emotions, personal grievance claims that can lead to mediation or court cases - the sorts of things all employers dearly want to avoid.
At MyHR we’ve seen plenty of stuff-ups in dismissal and termination procedures, whether by pure accident, miscalculation or haste. We’re all about making good choices, so when it comes to ending an employment relationship we’re here to help you weigh up the risks of each option and manage the situation accordingly.
With that in mind, we’ve created this article to highlight common mistakes employers make when ending employment and ways you can prevent them.
Hit the road, Jack!
Sure, you can tell an employee to clear their desk without further ado. We get it: the person may be a major disruption, unproductive, exasperating, and you can see no way to salvage the employment relationship.
But it’s not legal to fire someone without following due process, and statistics from the Employment Relations Authority tell us that it's more likely an employee will win a personal grievance case for unjustified disadvantage and/or dismissal than an employer.
Dismissal should always come after issuing a series of “fair and reasonable” written warnings following successive disciplinary procedures. You also need to formally detail how the employee needs to improve and give them time and support to do so.
If you are challenged, the courts will look at two key things: is the reason for the disciplinary process fair? And is the process you followed fair and reasonable?
In our experience, it’s the second thing that lets most businesses down. They skip a step or don’t take the time to escalate warnings and provide the employee time to improve, which creates procedural unfairness.
In a recent case, an employer was made to pay over $30,000 as they simply dismissed an employee via text.
Any old cause will do
This one is similar to the above but it’s worth its own entry, because you can’t fire someone just because they kept putting too much milk in their tea or some other minor infraction.
For a dismissal to hold up to scrutiny, you must have a justifiable and fair reason for your actions (the legal test is substantive justification, i.e. is this the action of a fair and reasonable employer?).
This means the reason can’t be personal. “I want to fire this person because they have blue hair,” isn't fair or reasonable. “I want to sack this person because they are a woman or Māori,” is straight up violating the Human Rights Act.
While employee behaviour can feel personal, remember it’s not, and reasons for disciplining can’t be either. It’s about the behaviour or performance, not the person.
In cases of serious misconduct, it has to be serious, e.g. the person deliberately put other workers in danger, took drugs at work, or sabotaged relationships with your clients. The legal threshold here is that it’s something that damages the relationship beyond repair - something which causes you to lose faith, trust, and confidence in the employee.
We quite often see managers wanting to fire someone for behaviour which, on the surface, isn’t that bad, e.g. a person not replying to their emails in a timely manner. What’s usually happening is that the unsatisfactory behaviour has been going on for months, the manager is at their wits’ end, and wants to jump straight to dismissal.
But there is a process here, which usually starts with an informal conversation about the employee’s behaviour and why it’s an issue (like, clients are complaining about not hearing back).
Our advice? Address things early and often so you don’t get yourself so frustrated you just want them out.
Sorry, you’re being made redundant
Nothing screams “personal grievance” quite like cooking up a redundancy situation to get rid of a troublesome employee!
Many employers misguidedly see redundancy as a short-cut to ending an employment relationship, but the law is very clear that termination and redundancy are two different things.
Redundancies occur at the end of the restructuring process, so you must have a sound business case, consult with affected employees on your proposal, consider their feedback in your decision-making, and explore all options for deploying the person (or people) in other roles.
The Employment Relations Authority has been awarding large settlements to employees because employers have made them redundant rather than following correct termination procedures. These sizable pay-outs are accompanied by hefty legal fees and the time it takes to deal with the case, so what was initially viewed as a short-cut becomes a really costly exercise.
If you have someone who isn’t behaving or performing as expected, you need to lean on the disciplinary process - a sham restructure will end up costing you more!
Read more about how restructuring to dismiss an employee can backfire
Either jump or get pushed!
Another classic is grinding an employee down until they have little option but to hand in their notice.
This is known as forced resignation (or more formally, constructive dismissal) and while it's not defined as such in the Employment Relations Act, it has been well established by case law.
There are 3 broad categories of constructive dismissal, when the employer either:
- Gives an employee a choice between resigning or being fired.
- Acts in a deliberate way (directly or indirectly) to force the employee into resigning.
- Acts so badly (by either breaching the terms of employment or treating the employee so unfairly) that the person feels they cannot stay in the job.
Getting rid of the person doesn’t have to be the aim. What matters is whether the employer’s actions, or lack of action, caused the employee to resign and whether this could’ve reasonably anticipated (and steps taken to resolve the issues so the employee didn’t feel resignation was their only option).
Employees who believe they have been constructively dismissed can raise a personal grievance for unjustified dismissal and claim for lost remuneration, humiliation, loss of dignity, and injury to feelings.
To put your organisation on solid ground, always try to resolve issues early, use appropriate processes for addressing poor performance or behaviour, and try to stay objective, even if the employment relationship has really gone south.
Also tread carefully when an employee resigns while you’re in the middle of a disciplinary process, and/or they have raised concerns that you have addressed. We generally recommend a “cooling off” period to ensure the employee cannot claim constructive dismissal.
It’s worth noting, however, that case law has established that if an employee very clearly states their resignation, especially in writing, you can take that at face value.
If you think an employee may have a case for a constructive dismissal, we recommend seeking expert advice.
My mind's made up (or, I haven't got time for this)
There are times when a situation appears so cut-and-dried, that termination of employment is a given. Money or company property may have gone missing and only one person could’ve been responsible. Two employees may have had a serious brawl that others saw and said one person deliberately started it.
But even in the most obvious cases of serious misconduct that warrant dismissal without notice (summary dismissal), you can’t make a judgement that leads to termination without investigating and then consulting with the employee.
Don’t approach the situation thinking you already know the facts. Look into things objectively to uncover what went, or is going, on. Talk to witnesses. Then when you have the facts (and evidence to back them up), present your concerns to the employee and consider their feedback in making your decision.
It’s important to not predetermine anything and consider not only the facts you have pulled together, but the employee’s explanation before making a decision.
If you just give them a formal warning or dismiss them without undergoing proper process, the employee will have a very strong case for personal grievance action.
You also need to give the employee time to consider the fairness of the termination terms and for you to consider their response before confirming the outcome.
The same goes if it appears the employee has abandoned their position - you have to make a extensive effort to contact them, record those attempts, and advise them of your intent to dismiss them before moving to do so.
If a person has been seriously injured and may not be able to return to work, you need to work with them to fully get to the bottom of their medical situation and prospects before you can propose dismissal due to medical incapacity or medical retirement.
Issuing verbal warnings
In a busy workplace, it’s not unusual for employers and managers to give verbal warnings during or after an informal discussion with an employee.
Again, case law has established that in order for a warning to be fair and valid, there has to be a formal consultation process prior to the warning being issued.
If you’re having an informal conversation, we recommend against using the word “warning” and instead, you should outline what the issue is, what you need the person to do differently, and the potential consequences e.g. if this happens again I may have to explore formal options.
Also, for a warning to “count” in terms of a stepped disciplinary approach, you need to have a written record. So if it’s a formal warning, provide a formal letter with a warning.
Not keeping records
Good note-keeping is a manager’s best friend! We know that verbal warnings count for very little, but before jumping into a disciplinary process you’ll typically have informal conversations with an employee. Keeping a record of these discussions is incredibly useful and could be the difference between the unwanted behaviour or performance continuing for weeks vs months.
Always remember that to take disciplinary action, you need a good reason and follow a good process. Using an earlier example, someone adding too much milk to their tea one time would not be a good reason. However, if you learned that this person was doing it purposely to waste resources, you may have a good reason. Even so, you can't move straight into issuing a warning. You would need to discuss this with the person, ask them to correct their behaviour, and outline any potential consequences.
If it continues happening, then you may be able to go into a disciplinary - as long as you have a clear pattern of events, documented times you have tried to correct the behaviour/provide support etc, and you’ve given them a fair and reasonable time to improve.
With seemingly minor or petty infractions this is so important, as they usually escalate and cause managers a huge amount of frustration and energy. Documenting this behaviour whenever it happens ensures you know clearly what’s going on, you have a record, and can deal with it effectively.
This is where the notes section on MyHR is so incredibly helpful. It’s time and date stamped so you can easily upload notes of your conversation, which could be useful in a future disciplinary process.
What say we settle this?
So what if you really want someone out of the business but don’t want to go through a lengthy formal process? What then?
This all depends on why you want them out? Usually, employers want to terminate a person’s employment for these reasons:
- They aren’t good at their job (performance).
- No one likes them or they kinda suck (conduct).
- We don't really know what they do and their role seems ineffective (restructure).
Because of this, you can almost always initiate an appropriate formal process with an employee. But if you can’t - or don’t want to - there are other options. Often referred to as a “without prejudice” conversation, this is an invitation for an employee to discuss an “off-the-record” exit package with you. This means you probably need to front up with some cash.
Many employers think that because it’s an “off-the-record” discussion, they can say whatever they like without fear of a personal grievance, but this is not the case. There are also a bunch of legal fish hooks. We have seen employees claiming they didn't understand the process and terminology, and therefore successfully raising a personal grievance.
If things end up in a “without prejudice” discussion, having begun a formal process can help you lower the settlement amount. It is also useful if the person involved is litigious or generally difficult. Using a “without prejudice” can speed up the overall process and get this person out of your business faster - but it will cost you.
Settling this way is not something we recommend, and you should get advice before initiating anything.
Didn't you read the company policy?
You may well have legal grounds for firing an employee because they repeatedly violated your organisation’s dress code, internet usage policy or code of conduct, but if they didn’t know about them (and the consequences for breaches) they could have a strong case to dispute it.
As we’ve said, you need a good reason to dismiss an employee and the person has the right to ask for a written statement about the reasons (this can be done up to 60 days after they find out and you must provide the statement within 14 days of their request).
Company policies and procedures are no use to anyone if they sit in a file somewhere and no one reads them. And every team member needs to clearly understand their contents.
We’ve seen plenty of policies (and employment agreements) that are gruellingly long and written with so much legal jargon (or pure “legalese”), that an average person can't understand them.
Keep your policies clear, concise, and relevant, and ensure every employee receives them when they start work. We also recommend getting them to sign the polices once they read them to verify they’ve done so (be on-hand to answer any questions). Do the same any time a policy is updated.
Using the MyHR digital document acceptance tool ensures you can send policies to all your employees and monitor who has read and signed them.
