Dismissing an employee is never easy. It’s a difficult day for the person you are “letting go” and it can also be tough news to deliver. However, sticking to some clear rules will make it easier on everyone and help you stay on the right side of the Fair Work Act.
It’s not legal to fire an employee on-the-spot in Australia, unless the action is so serious you must remove the employee from the business immediately. Doing so without taking steps to solve the problem first will leave you exposed to unfair dismissal claims.
The result could be that the Fair Work Commission (FWC) orders you to pay damages to the employee, or even reinstate them, which is not an ideal outcome.
The first step is to do your homework and make sure you’re well prepared.
We’ve pulled together some key information to help you understand your obligations and navigate the choppy waters of terminating an employment contract.
Keep it fair and reasonable
The Fair Work Act requires that termination process must not be harsh, unjust or unreasonable. This means you must have a valid reason and be able to clearly outline the reason for dismissing an employee. Reasons may include:
- Serious and/or repeated misconduct (e.g. theft or assault).
- Poor performance.
- Commercial reasons (redundancy).
- Incompatibility.
Whatever the reason, you must also be committed to fair process, which includes advising employee of the allegations, giving them a reasonable opportunity to respond, and keeping an open enough mind to consider the employee’s response before determining an appropriate outcome, which may include termination.
Be warned! Unfair dismissal claims are relatively cheap and easy for an employee to lodge, but expensive and time consuming to defend. That’s why it pays to do your homework and stay on the right side of the Fair Work Act.
Aside from the obvious legal risk, terminating employees without due process can do serious damage to your company reputation and culture, which will affect recruitment and employee retention and cohesion.
Choose the right response
Before doing anything to address alleged conduct or performance concerns, you need to consider how serious the employee’s breaches are and then choose an appropriate response.
Taking disciplinary action in the first instance may not be the best response for less serious matters, so employers should consider informal approaches to obtain the desired improvement in employee behaviour or performance.
As a rule, and particularly for less-serious matters, you should first consider informal counselling.
However, if informal approaches have already taken place and there has been no improvement or the matter is so serious that it requires a formal response, then a disciplinary process is essential.
Disciplinary process
The disciplinary process involves 3 main steps.
The first is to notify the employee of what has allegedly occurred. This is where you formally present your concerns to the employee in writing, notify them of the potential outcome of the alleged conduct and invite them to provide a response for you to consider. Best practice is to provide the employee with 24 to 48 hours in which to prepare a response.
The second step is the employee’s response. The employee’s response will generally occur in a disciplinary meeting. This involves the employee providing their side of the story for your consideration and you should allow them to bring a support person with them if they wish.
It’s important to minimise your own emotional response. You can give the employee some space to express their feelings, but remember, you are representing the company and are in control of the process. Getting into a heated exchange isn't in your best interests.
It's also important that you don’t make or announce a final decision then and there, and instead consider the employee’s response along with all the other information at hand before determining an appropriate outcome.
The third step is the outcome where you present the employee with your decision. Disciplinary outcomes may include:
- Written warning.
- Final written warning.
- Termination.
- Informal response, such as a reprimand.
- No action.
The appropriate outcome will largely be determined by considering the seriousness of the misconduct. For example, the Fair Work Regulations define serious misconduct and in such an instance, you may have reasonable grounds to terminate the employee without notice.
However, for matters that are less serious, it may be appropriate to consider other factors, such as the employee’s tenure, history, and whether they had been given advance notice that the conduct was inappropriate, such as through a policy.
Learn more about the disciplinary process.
Dismissal with notice or pay in lieu of notice
This should generally be reserved for serious breaches of the employment contract or in circumstances where an employee refuses or is unable to modify their behaviour.
In instances other than serious misconduct, when you notify an employee of their termination, you will either provide them notice of the termination date or decide to pay the employee in lieu of them working the notice period.
You should consult the employee’s contract, the National Employment Standards, or the relevant modern award to determine how much notice is required. Of course, any notification of termination should be in writing.
Summary dismissal
If serious misconduct is substantiated after a disciplinary process, then the employee may be summarily dismissed, meaning that the employee may be dismissed without notice or pay in lieu of notice.
Your first step should always be to look into the matter thoroughly and to identify what impact the misconduct had on the business. For example, the definition of serious misconduct is wilful and deliberate behaviour that is inconsistent with the continuation of the employment contract, or which causes serious and imminent risk to the reputation, viability or profitability of the business, or health and safety of a person. However, it’s not always clear whether the alleged conduct meets this threshold.
You should also consider suspending the employee from work while you investigate the matter and conduct the disciplinary process.
Ensure that the employee is aware that the alleged behaviour is considered serious misconduct and that they understand the ramifications of the conduct.
Remember, if the employee lodges an unfair dismissal claim, the onus shifts to the employer, and you will have to be able to prove fair and reasonable justification for your actions.
We recommend you get expert advice before taking any action.
