Termination and Redundancy Summary:
- Either the employee or the employer can terminate the employment.
- Fair work provisions outline the requirements for termination of employment, depending on the type of termination.
- An employer can be found to have dismissed an employee unfairly if they have initiated the termination (whether by fact or perception) and not followed a fair procedure, and/or kept appropriate documentation of the events and activities leading up to the termination.
Lawful Termination
Lawful termination of employment can occur by any one of:
- Reaching the end date of a fixed term employment contract.
- Resignation by the employee.
- Termination arising from serious misconduct.
- Termination arising from inadequate performance and/or general misconduct.
- Redundancy arising from the employer restructuring or changed business conditions.
The end of a fixed term contract
On the end date of a fixed term contract, unless an extension has been agreed, the employment contract comes to a natural end. The employer must pay to the employee any unpaid hours worked, plus any unused annual and long service leave to which the employee was entitled over the course of their employment. Note that there are rules that apply to the extension of fixed term contracts.
Termination through resignation
An employee can terminate employment through resignation. There are notice periods that apply in most awards that require the employee to provide the employer prior to the employee leaving employment. The notice period is typically based on the total length of time that the person has been employed by the employer. Where an employee leaves prior to the expiration of the notice period, then they forfeit any payment that would apply for working through that notice period.
Sometimes employers may require the employee to leave within the notice period. Usually this is for commercial reasons. When an employer requests an employee who has resigned to leave prior to the completion of their notice period, then the employer must pay the full notice period to the employee.
The employer must also pay the employee any unpaid hours worked, plus any unused annual and long service leave to which the employee was entitled over the course of their employment. Note that annual leave and long service leave would both continue to accrue to the employee during their notice period, unless the employee leaves voluntarily prior to the expiration of that period.
An employer can be found to have dismissed an employee unfairly if the resignation by the employee can be shown to be linked to certain behaviours of the employer, including unreasonable work requests, inappropriate procedures for dealing with grievances, and/or failing to provide a workplace environment that is conducive to the employee being able to effectively do their job. In such situations, although the onus is on the employee to demonstrate that their dismissal has been legally unfair, employers are required to provide formal evidence and statements.
Sometimes employers may require the employee to leave within the notice period. Usually this is for commercial reasons. When an employer requests an employee who has resigned to leave prior to the completion of their notice period, then the employer must pay the full notice period to the employee.
The employer must also pay the employee any unpaid hours worked, plus any unused annual and long service leave to which the employee was entitled over the course of their employment. Note that annual leave and long service leave would both continue to accrue to the employee during their notice period, unless the employee leaves voluntarily prior to the expiration of that period.
An employer can be found to have dismissed an employee unfairly if the resignation by the employee can be shown to be linked to certain behaviours of the employer, including unreasonable work requests, inappropriate procedures for dealing with grievances, and/or failing to provide a workplace environment that is conducive to the employee being able to effectively do their job. In such situations, although the onus is on the employee to demonstrate that their dismissal has been legally unfair, employers are required to provide formal evidence and statements.
Termination for serious misconduct
Serious misconduct is defined in the Fair Work Regulations. It is conduct that is wilful or deliberate and that is inconsistent with the continuation of employment and/or that causes serious and imminent risk to the health and safety of a person or the reputation, viability, or profitability of the employer's business. For dismissal for serious misconduct, the employer must be able to demonstrate that the reason for termination was "sound, defensible or well founded". The Fair Work Commission has published detailed information specific to dismissal for serious misconduct.
The employment contract can have a clause that stipulates that employment will be terminated immediately for misconduct which could include a serious breach of company policies or procedures.
When there have been allegations of misconduct then the employer must provide the employee with procedural fairness by undertaking a fair and impartial investigation of the employee's behaviour. Prior to dismissal the employer must have taken into consideration any mitigating factors that could have impacted the employee's behaviour and/or decisions.
Where employment is terminated for serious misconduct, then notice periods do not apply and are not payable by the employer. Upon termination the employer must pay the employee any unpaid hours worked, plus any unused annual and long service leave to which the employee was entitled over the course of their employment.
The employment contract can have a clause that stipulates that employment will be terminated immediately for misconduct which could include a serious breach of company policies or procedures.
When there have been allegations of misconduct then the employer must provide the employee with procedural fairness by undertaking a fair and impartial investigation of the employee's behaviour. Prior to dismissal the employer must have taken into consideration any mitigating factors that could have impacted the employee's behaviour and/or decisions.
Where employment is terminated for serious misconduct, then notice periods do not apply and are not payable by the employer. Upon termination the employer must pay the employee any unpaid hours worked, plus any unused annual and long service leave to which the employee was entitled over the course of their employment.
Termination for poor performance or general misconduct
Where the employer has concerns about an employee's performance or conduct, they should explain to the employee the manner in which the employee’s conduct or performance is not meeting the required standard. The employee must be given an opportunity to respond to the Line Manager’s concerns and will be given an opportunity to rectify his or her performance or conduct within a reasonable period of time, depending on the circumstances.
A record of the conversation should be kept by the employer. Such conversations can be documented in the My Discussions section in The H Factor system.
If the employee fails to rectify his/her conduct or performance within the required period, the employer should then request the employee to attend a meeting at which a written warning will be given. The written warning should:
The employer should then monitor the employee’s performance or conduct to determine whether he/she is making the required improvements.
In The H Factor system the Warnings function can be used to help with the performance management process. Create a warning and capture a record of the conversation. who was present, and allocate the corrective actions. The system can then be used to document the activities and whether those actions have been satisfactorily concluded. The system can track first and second warnings, the corrective actions, and also any other documentation that is relevant to the situation.
If the employee fails to meet the appropriate standard within the time allowed, the employer should then have a second meeting with the employee. The second meeting should replicate the first meeting. However, if the employee has not adequately explained their failure to remedy their poor performance or conduct, that continuing poor performance or conduct may lead to dismissal. Note that it is not a legal requirement that a third written warning be issued. Where the transgression is minor in nature, the employer may decide that it is appropriate to give a third warning.
Following the issuing of the second official warning, if the employee fails to remedy the fault within the time allotted, the employer should then initiate dismissal proceedings. That will involve requesting, in writing, that the employee attend an official meeting, where they are notified:
After listening to the employee's response, the employer should ask the employee to step outside so that they can consider their course of action.
If the employee’s response is considered to be adequate, the employer should inform the employee that they will remain employed but that the employee’s performance and/or conduct will continue to be closely monitored for a specified period of time.
If the employee’s response is considered inadequate, the employer has two options:
Note that references to the duties of the employer above, are typcially handled by the employees line manager or other person with the delegated authority.
Upon termination of employment for poor performance or general misconduct, the employer must pay to the employee any notice period that would apply under the relevant award, any unpaid hours worked by the employee, and any unused annual and long service leave to which the employee was entitled over the course of their employment. Note that annual leave and long service leave would both continue to accrue to the employee during their notice period.
Poor performance should not be a surprise to either the employer or the employee. Most difficult issues arise due to poor performance being allowed to fester without intervention, until eventually it becomes untenable. Having a regular and structured review process between the manager and the employee is important to identify issues quickly and help resolve them before they become an entrenched barrier to an effective working relationship. In The H Factor system the regular review of the job deliverables by the employee and their manager is designed to provide both parties with the opportunity to identify performance issues and barriers, and work together to resolve and overcome them. Having a demonstrable regular performance review process is a natural risk mitigation to unfair dismissal claims, in addition to the requirements outlined above.
A record of the conversation should be kept by the employer. Such conversations can be documented in the My Discussions section in The H Factor system.
If the employee fails to rectify his/her conduct or performance within the required period, the employer should then request the employee to attend a meeting at which a written warning will be given. The written warning should:
- State the problem.
- Refer to all previous conversations or other relevant documentation.
- Outline the corrective action(s) that are required of the employee.
- Describe what action will be taken if the employee does not remedy the problem (when issuing a first warning, the warning should state that if the problem is not remedied within a specified time then the employee will be issued with a further warning and may ultimately be dismissed).
- State that the written warning will be filed in the employee’s personal file.
The employer should then monitor the employee’s performance or conduct to determine whether he/she is making the required improvements.
In The H Factor system the Warnings function can be used to help with the performance management process. Create a warning and capture a record of the conversation. who was present, and allocate the corrective actions. The system can then be used to document the activities and whether those actions have been satisfactorily concluded. The system can track first and second warnings, the corrective actions, and also any other documentation that is relevant to the situation.
If the employee fails to meet the appropriate standard within the time allowed, the employer should then have a second meeting with the employee. The second meeting should replicate the first meeting. However, if the employee has not adequately explained their failure to remedy their poor performance or conduct, that continuing poor performance or conduct may lead to dismissal. Note that it is not a legal requirement that a third written warning be issued. Where the transgression is minor in nature, the employer may decide that it is appropriate to give a third warning.
Following the issuing of the second official warning, if the employee fails to remedy the fault within the time allotted, the employer should then initiate dismissal proceedings. That will involve requesting, in writing, that the employee attend an official meeting, where they are notified:
- that the employee’s conduct has not improved;
- the steps the employer has taken to remedy the problem in the past;
- the fact that the employee is entitled to be accompanied by a person of their choice (note this person cannot actively participate in the meeting but acts as support only); and
- the fact that, unless the employee can adequately explain his/her conduct or performance, then the employer may dismiss the employee.
After listening to the employee's response, the employer should ask the employee to step outside so that they can consider their course of action.
If the employee’s response is considered to be adequate, the employer should inform the employee that they will remain employed but that the employee’s performance and/or conduct will continue to be closely monitored for a specified period of time.
If the employee’s response is considered inadequate, the employer has two options:
- Issue the employee with a third and final written notice; or
- Orally inform the employee that he/she is to be dismissed and then follow that up with a written notice of termination. That notice should state the reasons for the dismissal, ie performance or conduct, and the history of warnings given previously.
Note that references to the duties of the employer above, are typcially handled by the employees line manager or other person with the delegated authority.
Upon termination of employment for poor performance or general misconduct, the employer must pay to the employee any notice period that would apply under the relevant award, any unpaid hours worked by the employee, and any unused annual and long service leave to which the employee was entitled over the course of their employment. Note that annual leave and long service leave would both continue to accrue to the employee during their notice period.
Poor performance should not be a surprise to either the employer or the employee. Most difficult issues arise due to poor performance being allowed to fester without intervention, until eventually it becomes untenable. Having a regular and structured review process between the manager and the employee is important to identify issues quickly and help resolve them before they become an entrenched barrier to an effective working relationship. In The H Factor system the regular review of the job deliverables by the employee and their manager is designed to provide both parties with the opportunity to identify performance issues and barriers, and work together to resolve and overcome them. Having a demonstrable regular performance review process is a natural risk mitigation to unfair dismissal claims, in addition to the requirements outlined above.
Termination by redundancy
Redundancy is when an employer no longer needs an employer's role to be done by anyone. There are requirements in the Fair Work provisions for employers to apply when making employees redundant.
Sometimes employers think it is easier to make an employee redundant, than it is to terminate for poor performance. This is not usually the case, and employers should be very conscious of the genuine reason for employment termination.
The Fair Work provisions outline a consultation requirement for employees who are being made redundant due to business restructuring or other changes. Note that this process begins prior to the notification to employees, and employers should have documentation of the changes, why they are necessary, the options under consideration, and the consultation process that has been applied.
The video below, produced by Fair Work, provides more information on the process and payment requirements for termination by redundancy.
Sometimes employers think it is easier to make an employee redundant, than it is to terminate for poor performance. This is not usually the case, and employers should be very conscious of the genuine reason for employment termination.
The Fair Work provisions outline a consultation requirement for employees who are being made redundant due to business restructuring or other changes. Note that this process begins prior to the notification to employees, and employers should have documentation of the changes, why they are necessary, the options under consideration, and the consultation process that has been applied.
The video below, produced by Fair Work, provides more information on the process and payment requirements for termination by redundancy.
