Involuntary Termination

Under the Fair Work Act 2009, an employee can be dismissed immediately for serious misconduct such as:

• theft
• fraud
• being intoxicated
• refusal to carry out a lawful and reasonable instruction
• assault.¹⁶

For a dismissal in these circumstances to be deemed legally fair, the employer should report the misconduct to the police, although this is not essential.

When an employee is dismissed instantly for serious misconduct, there is no notice of termination. The employer must pay all outstanding entitlements for time worked, annual leave, and long service leave.¹⁷

Key Point

An employer is not allowed to dismiss an employee:

• unfairly, or in a harsh, unjust or unreasonable way
• unlawfully.

Poor or underperformance is when an employee is not doing their job correctly. Or they are behaving unacceptably at work. It can include:

• not doing their job at all
• not following policies, procedures or rules
• unacceptable behaviour, for example, telling inappropriate jokes
• not working to the required standards
• disruptive or negative behaviour.

Poor performance is not the same as serious misconduct, as discussed in section 4.1. Under the Fair Work Act, serious misconduct can result in immediate dismissal.¹⁸

How to Prevent Poor Performance

Communication is the key to managing poor performance by preventing it from happening. Employers can take the following action to communicate what is required:

• describing expectations for performance outcomes and behaviour in position descriptions and a procedure
• addressing any issues as soon as they arise
• carrying out regular performance reviews

• encouraging employees to talk to their supervisor or Manager if they have questions or concerns.¹⁹

Arrange a meeting

The initial step to discussing a performance issue is to facilitate a private meeting. A private meeting with the employee may be arranged to discuss the issue, and warnings may be given if there is an insufficient improvement.

Key actions during this meeting include the following.

• Explain what the meeting is about.
• Invite the employee to bring a support person.
• Be clear about the issues or concerns and listen to each other.
• Explain the required performance clearly and ask for feedback and questions so the employee can clarify their understanding.
• Suggest strategies for improvement.
• Ensure both parties discuss and agree on a solution together, including clear and reasonable steps for improvement and a review date.
• Give the employee sufficient time to take any agreed action before the review date.
• Document the meeting and outcomes.
• Arrange for any additional training, mentoring or supervision needed.
• Hold regular follow-up meetings during the allotted time.

How to Issue Warnings

If the performance has not improved as required by the review date, it is best practice to give the employee a written warning before ending their employment. Considerations include:

• it is not a requirement to give three warnings or even one warning, but the employee must be made aware that the required performance is still not happening
• give the employee another chance, and time, to improve their performance
• explain clearly that if there is a continued lack of improvement, the result will be a dismissal, and when this may happen
• offer additional training or support as needed.

A written warning should:

• clearly state the reason for issuing it
• include full details of performance gap[s]
• explain clearly what needs to be done differently
• set a revised date for review
• be fair and reasonable in the circumstances.

According to Fair Work Australia, termination should only be considered a last resort. If it is necessary to dismiss the employee, ensure that they:

• are not being unfairly dismissed
• are given the correct notice of termination
• are given the proper final pay. (If necessary, seek advice from an employer association or lawyer.)²⁰

Case Study

Ella is a family counsellor with a local community health centre. She has been employed for three years and is a reliable and well-liked team member. However, in the past six months, Ella had regularly arrived late for morning appointments and called in sick at the last minute when she was rostered for a weekend shift.

When she arrives late on any morning, the Administrator has to reschedule her appointments for the rest of the day. This includes giving one or two of her appointments to other counsellors already working at capacity. When she calls in sick so late on the weekend, the Manager has to fill in because there is not enough time to schedule another counsellor.

Ella’s next performance review is in two months. The Manager talks with her privately, asking why her attendance has become unreliable and if Ella would like help with any issues. Ella explains that she has a new puppy that is difficult to control.

 The dog regularly escapes, and Ella has to look for her in the neighbourhood. Sometimes on weekends, the dog runs off to play with kids in a park at least two kilometres away. Trying to control the dog makes her late sometimes.

The Manager explains that she understands Ella’s problem and suggests she consider training options such as puppy school or hiring a dog walker. The Manager emphasises that Ella’s job role is essential for the 24-hour family support services provided by the centre, and there are clear procedures around counsellor attendance.

Ella promises to fix the problem before her performance review.

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Employees can be made redundant if their job role is no longer required or the employer becomes insolvent or bankrupt. When a position becomes redundant, the person in the role can either be:

• offered another appropriate job: redeployment
• not offered another job: retrenchment.

Employers may provide outplacement services to assist an employee in preparing for a new job after retrenchment.

Key Point

The Fair Work Act 2009 includes the following requirements to ensure a genuine redundancy. Specified reasons for the redundancy include:

• a job can be done by technology instead
• a sales or production has slowed down
• a business closes or relocates interstate or overseas
• a merger or takeover leads to a restructuring or reorganisation
• ensuring that the employee cannot reasonably be redeployed elsewhere in the company or any related business.
• Failure to offer appropriate or reasonable redeployment opportunities may result in an unfair dismissal claim, even if the reason for the redundancy is a specified one.

Definition of Reasonable Redeployment

Whether an offer of redeployment is reasonable or not often depends on the type of business and the employee’s skills. Reasonableness may also involve the following.

If possible, and if the Employer chooses to, appropriate redeployment should be a new role with similar pay and responsibilities. Available positions with lower status and income should also be offered. The employee can then accept or reject job roles as they wish.

Consulting with the employee about possible roles increases the likelihood of compliance. This may involve asking the employee to suggest opportunities that the employer may not have thought about or discussing any roles that may not be entirely suitable.

If no reasonable redeployment opportunities are available, the employer should prepare a business case to document the following.

• Roles that were considered; if these roles were offered to the employee, and if they were not, why.
• Details about other circumstances that could make redeployment difficult, such as workflow problems, fluctuating sales etc.
• Options for termination: retrenchment requirements or outplacement.

Retrenchment

An employee is retrenched when:

• their job is made redundant, and redeployment is not possible
• their employer becomes insolvent or bankrupt.

Retrenchment should never be seen as the employee’s fault.

Outplacement

Outplacement According to Investopedia,

Outplacement services help employees who are made redundant to find and move to another job. Services can be tailored to individuals or groups, including resume writing, job search and job coaching. Businesses may offer outplacement in-house, using existing HR skills. OR they might engage a specialist outplacement consultant.

There are costs and benefits involved in providing outplacement. Services could be included as part of an employee’s termination package, or an employee could pay for service themselves.

Employee benefits

Benefits for employees are both emotional and practical. Being part of an outplacement program can help with feelings of anger, insecurity and fear of change. Assistance and support with finding another job can be a positive experience.

Benefits for the employer include continuing a relationship with an employee, being seen as a compassionate business and reassuring remaining employees that everyone is valued. The cost of providing outplacement may prevent unfair dismissal claims. However, possible future outplacements need to be planned for and budgeted as part of total employment costs.

The following video is about the benefits of providing outplacement.

Requirements for termination notice and payment depend on an employee’s type of employment, length of employment and age. These requirements include:

• when notice and payment are required
• how notice should be given
• entitlements that should be paid out
• complaints and enquiries about non-payment of entitlements.

An employee's type of employment dictates whether notice and redundancy pay are required for termination. These requirements are summarised in the following table.

Key Point

Fair Work Australia stipulates those employees over 45 years old who have completed at least two years of service, when they receive notice should be given an extra weeks' notice, in most cases. 

How Notices Should be Given

Notice of termination must be given in writing and state the last day of the work date. The notice can be:

• given to the employee in person
• couriered to the employee’s last known address
• mailed-by pre-paid post to the employee's last known address.

An employer cannot terminate an employee without giving them the minimum required period of notice or payment instead of notice paid at the employee’s full pay rate for that time period. This is called payment in lieu of notice.

Final Pay Entitlements

When an employer terminates an employee’s employment, the following entitlements should be included in the final pay:

• outstanding wages or other remuneration
• pay in lieu of notice (if the employee doesn’t work during their notice period)
• accrued annual leave and, if eligible, long service leave entitlements
• the balance of any time off instead of overtime that has been accrued but not yet taken
• redundancy pay where the employee is retrenched and has at least one year’s service and the business employs 15 or more employees.

Complaints and Enquiries about Non-Payment of Entitlements

The Fair Work Ombudsman can answer questions about termination entitlements. Employees who believe they have been unfairly or unlawfully terminated can lodge a claim with the Fair Work Commission within 21 days of their termination date.

The amount of a redundancy payment depends on how long the employee has worked continuously for the business and the requirements under an award, workplace agreement or the National Employment Standards (NES).

Payment is calculated on the base pay rate for the employee’s ordinary hours. It does not include the following:

• incentives and bonuses
• loadings
• allowances
• overtime or penalty rates
• periods of unpaid leave
• any other amounts identified as separate payments for the employee.

Some small businesses do not need to pay redundancy payments. This depends on the industry and relevant awards under which employees are employed. The Fair Work Ombudsman website has a tool to identify if payment is needed and, if so, the number of weeks to be paid.

Case Study

Sam has been a manager in an international consulting company for seven years after being recruited to build a new service line involving online services and media.

Sam managed teams in several Australian states in the first four years of employment, completing online training and communication projects for large clients. Sam also mentored younger team members and provided on-the-job training to employees assigned from neighbouring countries to work in Australia.

An economic downturn meant fewer projects in Australia, and Sam relocated to another Asian country for two years to build the team there and manage new client work. Again, this was a successful deployment, and Sam met her objectives in preparing the overseas staff for future projects and handing them over to a local manager.

On returning to Australia, Sam realised that the economic situation had not improved. Sam discussed the situation with the divisional Director and considered resigning.

The Director offered a redundancy because the company could no longer offer projects in Sam’s area of expertise.

Sam accepted and left on good terms.

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Policy Businesses should prepare a procedure to explain their obligations and processes to be followed for redundancy, redeployment, retrenchment and outplacement. The process should include the following.

Abandoning a job is when an employee stop coming to work without explaining why and will not or cannot carry out their job duties. This is formally called abandonment of employment or the repudiation of the employment contract.

Before dismissing an employee for having abandoned their employment, employers must genuinely attempt to understand why the continued absence is happening. Genuine attempts involve more than simply trying to contact the employee.

The Fair Work Commission might consider job abandonment in some instances as a form of termination at the employer’s initiative. If an unfair dismissal claim is lodged, the employer must prove that reasonable efforts were made to find reasons for the continued absence.

For example, if a medical certificate has run out, an employer could check if a new certificate has been issued or a workers’ compensation claim has been lodged.

Protections Under workplace laws, unfair dismissal and unlawful termination, are different.

Let's recap the following definitions from Topic 1:

Term: Unfair Dismissal

definition: When an employee is dismissed in a harsh, unjust or unreasonable way.

term: Unlawful Dismissal

definition: When an employee is dismissed from their job for discriminatory reasons.

The Fair Work Act 2009 includes provisions for protection against both unfair and unlawful dismissal. These are administered by the Fair Work Ombudsman and the Fair Work Commission. Requirements for protection against unlawful termination are also included in state laws.

These apply to workers covered by state employment laws, including the following.

• State government employees in New South Wales, Queensland, Western Australia, South Australia and Tasmania.
• Local government employees in New South Wales, Queensland and South Australia.
• People employed by non-constituted corporations in Western Australia (for example, employees of sole traders, partnerships and trusts).

The Fair Work Commission considers a dismissal to be unfair if the employee:

• was made redundant, but it was not a genuine redundancy
• worked for a small business (15 or fewer employees), and the dismissal did not comply with the Small Business Fair Dismissal Code
• was dismissed in a way that was harsh, unjust or unreasonable.

The Fair Work Commission considers the following aspects of how a dismissal was carried out:

• was there a valid reason for the dismissal related to the employee’s performance capacity or conduct?
• was the employee notified of this reason and given a chance to respond?
• was the employee allowed to have a support person present during discussions about the dismissal? If not, was that unreasonable?
• had the employee already been warned about unsatisfactory performance?
• was the dismissal procedure used by the employer impacted by the size of the business, lack of dedicated HR management or expertise?
• are there any other matters that may be considered relevant for the dismissal?

Small Business Fair Dismissal Code

The Small Business Fair Dismissal Code helps protect employees in a small business (up to 15 employees) from unfair dismissal. The code is designed to assist with compliance tasks when dedicated HR skills are unavailable.

In summary, the code requires a small business with fewer than 15 employees to:

• warn an employee verbally or in writing, and explain when they are at risk of dismissal because:
• their performance needs to improve
• their conduct needs to improve or is not acceptable
• offer the employee the opportunity to have another person present at discussions about dismissal; this should not be a lawyer hired to act on behalf of the employee
• give the employee a chance to respond to the warning and reasonable time and opportunity to make the required changes
• provide additional training if needed, and ensure the employee understands what is required
• provide evidence of compliance with the code if the employee makes an unfair dismissal claim to the Fair Work Commission.

The Small Business Fair Dismissal Code does not apply when an employee is dismissed for serious misconduct.

Unlawful Termination

According to Fair Work Australia, unlawful termination includes termination related to discrimination. Discrimination relates to:

• a person’s race, sex, sexual orientation, age, mental or physical disability, marital status, family or carer’s responsibilities, pregnancy, religion, political opinion, social origin (unless where required for a job role)
• temporary absence from work because of illness or injury
• trade union membership, non-membership or participation in industrial activities
• being absent from work during maternity leave or other parental leave
• temporary absence from work because of voluntary emergency management activity
• exercising or planning to exercise a workplace right to make a complaint or inquiry about the person’s employment or participating in proceedings against an employer.

Key Point

In conjunction with management, compliance with unfair dismissal requirements in a larger organisation is an HR responsibility.

Small Business Claims and Support

Employees can lodge claims for unfair dismissal and unlawful termination with the Fair Work Commission. The Fair Work Commission offers free  advice for eligible employees and small business employers about terminations of employment, general protections and workplace bullying.

(This service (workplace bullying) is separate from the process for an employee lodging a claim). A claim must be lodged within 21 calendar days of the dismissal or termination.

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