Employee Termination | Newcastle & Central Coast Lawyers

How do I legally terminate an employee?

Recently there has been an increase in the number of unfair dismissal and general protections applications filed in the Fair Work Commission. As a result, it is important for employers to carefully consider plans for termination to ensure any workplace termination is managed in accordance with the Fair Work Act 2009.

Good management of the termination process will enable your business to have the best defence in the event one of your employees brings a claim against you.

To offer the best protection, following the steps below for terminating your employees is important.

What happens if I am accused of Unfair Dismissal by an employee?

If an employee submits a claim for unfair dismissal, the Commission will be required to determine whether there were adequate and reasonable grounds for dismissal and whether the employee was provided with the opportunity to respond to any potential allegations that have been made against them. This is referred to as procedural fairness.

In failing to afford an employee procedural fairness, the termination may then be deemed unfair. These circumstances were addressed by the Full Bench in the decision of B, C and D v Australia Postal Corporation T/A Australia Post quoting Australian Meat Holdings Pty Ltd v McLauchlan:

“Nevertheless, it remains a bedrock principle in unfair dismissal jurisprudence of the Commission that a dismissal may be “harsh, unjust or unreasonable” notwithstanding the existence of a “valid reason” for the dismissal”

How do I ensure I am applying procedural fairness when dismissing and employee?

The best practice to offer the employee procedural fairness is to:

• Ensure that you disclose to the employee all adequate details as to the nature of the allegations against them,
• Provide the employee a reasonable opportunity to respond appropriately to all allegations, and
• Consider the employee's response before deciding to the employee’s detriment.

To avoid doubt, a decision should not be made concerning the employee throughout the duration of the meeting.

What are General Protections for Employees?

The Fair Work Act provides specific protections for employees which are designed to protect the employee’s workplace rights, association with unions, workplace discrimination and provide effective relief to persons who have been discriminated against, victimised, or have experienced unfair treatment.

Several general protections provisions aim to protect employees from adverse action taken against them for a particular prohibited reason. For a general protections dispute to occur, it must first be alleged that an adverse action has been taken as a result of an employee having exercised a workplace right or possessing an attribute that cannot be used to bring an adverse action against them.

Should an employee wish to submit a claim for breach of the general protection provisions, a reverse onus of proof applies. This meant that the employee would need to demonstrate to the Court that they elected to exercise a workplace right and were, as a result, subject to an adverse action because of, or substantially because of the exercise of the right. This includes instances where termination did not occur such as the issue of a warning or demotion. The onus of proof is then put onto the employer to convince the court that the adverse action did not result from an employee exercising a workplace right.

What is a workplace right?

A workplace right is defined in the Fair Work Act 2009 to be if the employee (or prospective employee, contractor, or prospective contractor):

(a). is entitled to the benefit of, or has a role or responsibility under, a workplace law, workplace instrument or order made by an industrial body; or

(b). to initiate, or participate in, a process or proceedings under a workplace law or instrument; or

(c). to make a complaint or inquiry:

(i). to a person or body having the capacity under a workplace law to seek compliance with that law or a workplace instrument; or

(ii). if the person is an employee--in relation to his or her employment.

How do I manage an employee’s termination if they could exercise a workplace right?

If you have made the decision to terminate an employee who may have, or will look to exercise a workplace right, you will need to carefully manage the employee and outline the exact concerns that you have and the reasons that you have made to terminate the contract. You should keep as many written records as possible, as these are important throughout the proceedings if required.

What is Serious Misconduct in the workplace?

An employee's employment may be terminated without notice or payment in lieu of notice in cases where the employee has engaged in serious misconduct. As per the Fair Work Regulation 1.07, serious misconduct is defined as:

(a). wilful or deliberate behaviour by an employee that is inconsistent with the continuation of the contract of employment;

(b). conduct that causes serious and imminent risk to:

(i). the health or safety of a person; or

(ii). the employer's business's reputation, viability or profitability.

Serious misconduct also captures any act by which the employee refuses to carry out a lawful and reasonable instruction that is consistent with the employee's contract of employment.

What actions are considered serious misconduct in the workplace?

The test for whether an act is classed as serious misconduct is whether the reason for dismissal was ‘sound, defensible or well-founded’ (Selvachandran v Peteron Plastics Pty Ltd [1995] IRCA 333). Each case is dependent on the facts of the matter and may require tailored advice from a solicitor as to whether the act is likely to be determined to be serious misconduct by a Court or Tribunal, however, the following actions are generally considered to be deemed serious misconduct:

1. Theft,
2. Fraud,
3. Breaches of safety (including sexual assault and ongoing bullying),
4. Damage to property or vandalism,
5. Intoxication in the workplace, or
6. Threats or acts of violence.

The loss of trust or confidence in an employee’s ability to complete their role is not a sufficient and valid reason to terminate their employment. There needs to be sufficient evidence and reasoning to support this loss of trust and confidence (Mammarella v Department of Parliamentary Services [2019] FWC 6340). For the loss of trust and confidence in an employee to be considered sufficient as reasoning for their termination, the employer will be required to present evidence that supports this conclusion to be sufficient in constituting serious misconduct.

In the circumstances that an employer elects to terminate an employee because of serious misconduct, they will be required to follow the procedural fairness steps and allow the employee the opportunity to provide a response to the employer's concerns.

What is Employee Underperformance?

Given the climate of the modern workplace, managing employee performance is an important aspect of a business to ensure organisational success. When employees exhibit clear signs of underperformance, this may further affect the productivity and morale of the team and the overall business outcomes.
Addressing this challenge requires a thoughtful and systematic approach that prioritises communication, feedback, and support. This article will delve into effective strategies for managing employee underperformance and fostering a culture of continuous improvement.

How do I manage Underperformance in the workplace?

1. Establish Clear Performance Expectations

Clear and well-communicated performance expectations are essential for managing employee underperformance. From the outset of an employee's tenure, defining job roles, responsibilities, and performance objectives is essential. It is recommended that employers have a detailed employment contract to ensure that their business is protected and a separate position description for each employee. The position description will provide an outline as to the roles and responsibilities of the employee and for each promotion, this will need to be amended. If there are issues relating to performance, it is likely that the Fair Work Commission will review the position description first to determine the expectations of the employee and whether they have been failing to perform.

2. Identify and Define Underperformance

The initial step for managing underperformance is identifying it. It is best practice that employers conduct regular monitoring of individual and team performance and then completing a comparison against the business's established goals and benchmarks. You should look for consistent patterns of missed deadlines, declining quality of work, or decreased productivity. When addressing underperformance, define the specific behaviours or outcomes that need improvement, as this will lay the groundwork for constructive feedback and action plans.

3. Engage in Constructive Feedback

Open and honest communication is key when addressing underperformance. Regular feedback sessions that focus on specific behaviours, actions, or outcomes will be effective in addressing and managing issues of underperformance. Constructive feedback should be provided to employees in a manner that identifies the situation of underperformance that requires improvement, the actions taken by the employee and the overall impact on the team. For the ongoing performance of the employee and the team, employers should ensure that they continue to have check-ins and access to an employee assistance program if they have one.

4. Identify the Cause of Underperformance

Underperformance often stems from a range of factors, such as skill gaps, lack of motivation, personal issues, or inadequate resources. Identifying the underlying causes is crucial to the formulation of a plan of action. To address underperformance, employers should conduct one-on-one discussions to understand the employee's perspective and challenges. Employers should not terminate the employee in this meeting but offer solutions to the underperformance.

5. Develop a Performance Improvement Plan (PIP)

A Performance Improvement Plan (PIP) can be an effective tool for persistent underperformance. A PIP is a structured process that outlines the performance gaps, specific goals, action steps, and a timeline for improvement. To develop a PIP, you will need to collaborate with the employee to create a realistic and achievable plan. Setting measurable objectives and providing the necessary resources, training, or support is important to help the employee succeed.

6. Mentoring and Support

Effective mentoring and support can play a pivotal role in managing underperformance. Adopt a mindset to guide employees through challenges and help them develop the skills they need to succeed. Provide regular feedback, offer guidance, and encourage self-assessment. By fostering a mentoring relationship, they empower employees to take ownership of their development and contribute positively to the team.

7. Monitor Progress and Adapt

Once a PIP is in place, it is important to monitor progress continuously. This can be completed through regular check-ins to discuss accomplishments, setbacks, and any adjustments needed to the plan. These conversations provide opportunities to offer ongoing support, make necessary modifications, and ensure that the employee remains aligned with organisational goals.

8. Recognise and Reward Improvement

Positive reinforcement is a powerful tool for motivating employees to overcome underperformance. When employees make progress, achieve milestones, or demonstrate improved performance, acknowledge, and celebrate their efforts.

9. Termination if Required

While most instances of underperformance can be resolved through effective communication and support, there may be cases where more serious action is required. If an employee consistently fails to meet performance expectations despite the best efforts, it may be necessary to explore alternative actions, such as reassignment, further training, or even considering employment termination. Termination will require an employer to have a further meeting with the employee to address why they have failed to meet the requirements of the PIP and ‘show cause’ why their employment should not be terminated. Employers should take the time to consider the employee’s response before making the decision to terminate their employment. The employee is entitled to have a support person present at the meeting.

What is Termination in Probation Period?

If the contract of employment has a designated probationary period (this is usually 6 months to coincide with the minimum employment period for unfair dismissal) employers can elect to terminate the employee without a requirement to manage the employee’s underperformance. Alternatively, to give the employee a chance to improve their performance, you can extend the probation period, but this will need to be done in accordance with the contract, usually in writing, signed by both parties.

It is important to note that if the employee has exercised a workplace right prior to the termination, they may still bring a general protections claim against the employer if they believe that the decision to terminate was the result of, or substantially because of the exercise of the right. There is no minimum employment period for a general protections claim. If the employee makes a disclosure, enquiry or complaint in relation to their employment prior to the employer's decision to terminate, it is important to ensure that the employer has sufficient documentary evidence to support a decision to terminate and that their correspondence with the employee is clear when articulating the reasons for termination.

How do I manage employees with health problems or disability?

Managing employees who are unable to work due to injury or disability (whether or not on workers' compensation) is difficult for all employers. An employee exercising their leave entitlements or making a workers' compensation claim is a workplace right under the general protections. This does not mean there is no option to terminate an injured employee, as businesses cannot be expected to maintain someone in a position if there is seemingly no opportunity for them to return to work. Therefore, the strategy to terminate an employee who takes this leave but is unable to return to work will need to be carefully managed.

Any termination due to an employee’s injury or disability may also breach the Disability Discrimination Act 1992. Injured employees have a right to return to work with suitable adjustments to be made by the employer. If the business cannot support the adjustments required to allow the employee to return to work, there will need to be sound business reasons why the adjustment could not be made supported by evidence.

Section 248 of the Workers Compensation Act 1987 (NSW) says that it is an offence for an employer to terminate an injured worker within six (6) months of the injury. Termination of the employee before six (6) months from the date of injury can lead to significant penalties for the business and difficulty in defending any potential unfair dismissal or general protections application.

An employer can still terminate an injured or ill employee for any other lawful reason, but the management becomes difficult. Courts often criticise employers for calling employees into disciplinary meetings when they are medically unfit for work as they will not likely be able to respond to the employer’s concerns effectively. This does not make the termination impossible but requires significantly more management from the employer when making this decision to terminate. Usually, this will require a reason why the termination could not wait for the employee to return to work.

What is a Redundancy?

Redundancy occurs when an employer no longer requires an employee’s job to be performed by anyone because of changes in the operational requirements of the business, and consultation with the employee has occurred (if required in the relevant modern award or enterprise agreement).

A redundancy cannot be considered a genuine redundancy if it would have been reasonable to have redeployed the employee to a new role within the business or an associated entity of the employer.

The consultation that employers must undertake with any employee that may be affected by the restructure (including employees that may not be terminated but whose employment will be subject to change) is to speak with them about your proposal and identify whether they can be redeployed in an alternative role in the company. If redeployment is not possible, the employer may then proceed down the redundancy path.

What is Termination in Accordance with Contract?

If the employee has a term in their contract that provides the right to terminate, an employer may be able to rely upon the terms of the contract. If you have a fixed term expiry of the contract, employers are not required to do anything other than notify the employee of the date the contract will terminate. This will not be deemed as a dismissal under either unfair dismissal or general protections claim.

If your contract provides a right to terminate (this may mirror the right to terminate under the modern award or national employment standards) employers will need to offer the employee procedural fairness and inform them of the reason to terminate the contract. Relying on a contractual right to terminate is not in itself a defence to an unfair dismissal or general protections claim.

Conclusion

Effectively managing the termination of an employee is crucial for employers as it will likely make the employee feel that they have had their voice heard prior to the decision to terminate their employment. Often effective communication can prevent a claim from being brought, however, in the case that the employee feels the decision was harsh or unjust, sufficient evidence and compliance with the Fair Work Act 2009 will provide the best protection for employers.

How can we help?

Fourtree Lawyers can provide advice in the management of the termination of an employee or alternatively act on your behalf if proceedings have been commenced. Phone 1300 529 444.