Terminating an employee – How to avoid business risk and personal stress

The termination of an employment relationship can carry risks for a business, especially if the employee doesn’t agree with the decision. Employer-initiated termination falls into two categories, dismissal of an employee or a genuine redundancy situation. As an example, an employee may be dismissal due to their continued poor performance whilst an employee can be made redundant due to their role no longer being needed within the business.

When terminating an employee, employers need to mindful of the two key forms of action an employee can take if they aren’t satisfied with the business’s decision. These are an Unfair Dismissal Claim or a General Protections claim.

The Fair Work Act 2009 outlines the general protections; which are the protected reasons which the employees cannot be dismissed for, or suffer adverse action, because of.

These include the employee’s:

• race, colour, sex, sexual orientation, disability, marital status, family or carer’s responsibility, pregnancy, religion, political opinion, or nation extraction/social origin
• Temporary absence from work due to illness or injury
• Trade union membership or non-membership or participation in industrial activity
• Being absent from work during maternity leave or other right
• Exercising or planning to exercise a workplace right
• Participating in proceedings against an employer

An example of a dismissal that violated the general protections legislation is outlined in the case Robinson v Western Union Business Solutions (Australia) Pty Ltd [2018] FCA 1913. In this case, the employer terminated the employee after a prolonged time away from the business due to mental health issues. It was found that this breached the Fair Work Act, resulting in the employee being granted compensation.

Under the Fair Work Act, employees cannot suffer and adverse actions, including dismissal, due to illness or injury, which extends and encompasses mental health conditions. Additionally, the employer cannot assume that the employee won’t be able to perform duties as they previously were, due to a mental health illness, or other form of illness or injury.

The Letter of Termination

Following a good process and providing clear and accurate reasoning for terminating an employee are examples of steps an employer can take to reduce the likelihood of a general protections or unfair dismissal claim.

Part of this includes providing the employee with a termination letter. A letter of termination is a formal document that gives the employee written notice that they are being dismissed.

Employers must deliver the written notice to the employee before the termination takes place. In the termination letter employers must:

• Outline the reasons for the termination of the employee’s employment
• Specify the notice period or if the employee will be paid in lieu (paid through their notice period, but not required to work) of that notice
• Advise the employee of the last day of work

If an employer moves to terminate an employee, a termination letter should only be provided to the employee following a thorough investigation and review process, which supports termination as the suitable outcome. When meeting with the employee, the employer should explain the reasons for termination and present them the opportunity to ask questions. It is also a good idea to keep a copy of the termination letter for your records.

Take a look at our Letter of Termination Template by clicking here.

Can you terminate an employee during probation?

Some employers hold the belief that an employee on a probationary period can be terminated without the same procedures as an employee with a longer period of service. Employers are still able to terminate an employee who is in their probationary period, however a reason for the dismissal should still be provided to the employee. Whilst employees undergoing probationary periods within the minimum employment period as per the Fair Work Act cannot access an unfair dismissal, employees can raise a general protections claim at any time during the employment relationship, including the recruitment phase. If a business doesn’t provide an unequivocal and clear reason for termination, it gives the opportunity for the employee to ‘make one up’, and the onus would be on the employer to disprove the reason provided by the employee if the employee was to pursue a general protections claim.

The probationary period is designed to give employers more freedom in assessing a new employees suitability to the role, and come the end of the probationary period, or prior, employers can::

• Offer ongoing employment,
• Extend the probationary period (if the award or agreement allows for that), and it is within the bounds of the minimum employment period, or
• End the employment

It would be very unlikely for an employee in a probationary period to be eligible to file an unfair dismissal claim because probationary periods rarely last over 6 months (or 12 months for small business employers), which is the minimum length an employee must be employed to file for an unfair dismissal. However, as general protections claims are uncapped, employers are encouraged to follow a good process and always provide a valid reason for termination – even in probation!

How do you terminate an employee?

Terminating an employee should only be done when your other options are exhausted. Terminating an employee without giving plenty of thought to other options can leave your business vulnerable to unfair dismissal claims. If you have reached the decision to dismiss an employee there are two methods:

• Summary dismissal
• Other dismissal

A summary dismissal is for serious breaches of conduct that warrants immediate dismissal. The process that you go through for a summary dismissal is straight forward:

1. Identify and investigate the serious misconduct
2. Discuss the misconduct with the employee, and seek the employee’s response to the allegations
3. If the outcome of the above two steps supports summary dismissal, create a termination letter
4. Meet with the employee and provide them with the termination letter if appropriate, or provide a copy via to the employee via alternative means.

Other dismissals encompass all types of dismissal that aren’t summary, including redundancy and dismissing an employee due to underperformance. For a redundancy you must:

1. Discuss with the employee about why they are going to be dismissed and why their role is being made redundant
2. Give the employee their notice of termination (which must be longer than the minimum notice period)

Employers are required to ensure that the redundancy is genuine, and that they have met the consultation provisions of an applicable industrial instrument before deciding to make a role redundant, or the employee may be eligible for unfair dismissal claim.

To dismiss an employee due to poor performance or behaviour, employers are required to follow a thorough process. A summary of a thorough counselling and discipline process would include::

1. Warning the employee that their behaviour or performance isn’t satisfactory. Set a plan so the employee is aware of their performance/behaviour expectations and has strategies to meet them.
2. Give the employee a reasonable amount of time to make changes to their performance/behaviour.
3. If their performance/behaviour doesn’t change, you should give the employee a warning. It is at your discretion as to whether this is the final warning.
4. If, once again, nothing changes and the company has exhausted all option, meet with the employee and explain to them that their employment will be terminated. A termination letter should follow this conversation

Terminating an employee checklist

Here are some key things that employers should do when in the process of terminating an employee in order to reduce the risk of an unfair dismissal or general protections claim:

• Record all meetings, warnings, termination details, and anything else to ensure as the employer, you can provide evidence of each step of the process.
• If an employee is dismissed for poor performance, it is good practice to meet with the employee to make them aware of their shortcomings, give them time to improve and possibly more warnings before terminating their employment.
• In a meeting, the employee should be invited to have a support person attend – employers cannot reasonably refuse a support person, as it is something the Fair Work Commission will look in legal proceedings.
• Employers must give them notice of termination before the date of termination. This must follow the minimum notice period covered in the National Employment Standards, depending on how long the employee has worked within the business, or if the notice provisions in the contract are more generous than the National Employment terms, the contract terms should be followed.
• Consider if there are alternatives to dismissal for the employee such as training or changing roles.