Managing Employee Termination and Reducing Unfair Dismissal Risks 

Terminating an employee is a significant decision with legal implications. In the ACT, employers must comply with the Fair Work Act 2009 (Cth) (FWA), as well as internal policies and Enterprise Bargaining Agreement requirements. Following these instruments will greatly reduce the risk of unfair dismissal claims being filed, or succeeding, against an employer. For a termination to be lawful, both the reason for termination and the process followed must be just, fair and reasonable. What is considered by the Fair Work Commission (FWC) to be “just, fair and reasonable” will depend on the specific circumstances of each matter. This article outlines the practical steps that employers should strive to follow to achieve the best possible outcomes.  

1. Exhaust Internal Employee Management Mechanisms

A frequent mistake employers make is moving too quickly to termination without first addressing issues directly with the employee. 

Probation 

Most employment contracts include a probationary period, allowing employers to assess an employee’s skills and suitability for the role. During this time, the FWA limits employees’ ability to lodge unfair dismissal claims: 

• within 12 months of commencement for small businesses, or 

• within 6 months of commencement for larger businesses. 

Performance Management 

Where concerns arise after probation, it is essential that employers follow a structured performance management process, whether contained in policies or elsewhere, before attempting to terminate an employee.  

A proper performance management process will: 

• Ensure that the employee is aware of the conduct expected by the employer, and that the employee does not meet that standard. 

• Provide a fair and reasonable opportunity for the employee to improve, and meet the standard expected. 

Failure to follow a proper performance management process may result in a finding by the FWC that the employer failed to follow a fair process in its termination of employment. 

2. Establish Valid Reason for Dismissal

There may be several reasons that an employer considers in determining if dismissal is warranted. A dismissal must be based on a legitimate reason linked to the employee’s conduct, capacity, or operational requirements.  

Common grounds include: 

• Misconduct – Such as theft, safety breaches, repeated failure to follow site rules. Immediate dismissal may be warranted for serious misconduct, especially if outlined in your workplace policies. 

• Poor performance – Inability to meet role requirements despite training, guidance, and reasonable opportunities to improve. 

• Redundancy – The role is genuinely no longer required, and redeployment options have been considered but are not possible. 

Tip: Clearly document the reason for dismissal. Supporting evidence may include workplace policies and procedures, incident reports, performance records, formal written communications, and operational justifications. Well-documented evidence strengthens your position and demonstrates procedural fairness if the dismissal is reviewed by the FWC. 

3. Follow Fair and Reasonable Process

The FWC places heavy emphasis on how the dismissal was handled. To show procedural fairness, employers should:  

• Prepare and inform – Before requesting the employee to attend a meeting, make sure they understand the issue. Have you explained the concern or performance issue in advance? Have you consulted with them and outlined what you expect to discuss? For redundancies, have you clearly explained why the role is no longer required? 

• Allow engagement and support – Provide an employee with sufficient notice of any meeting to discuss concerns, clearly outline the concerns of the employer and inform the employee that disciplinary steps may include termination. Make it clear the employee can bring a support person to the meeting. It is essential that an employee be provided with a reasonable opportunity to consider the concerns raised by the employer and prepare a response. 

• Listen and consider their response – Give the employee a real chance to explain their side, raise any mitigating circumstances, or provide additional information. 

• Investigate if necessary – Gather facts, speak with witnesses, and review any documentation relevant to the issue. Make sure your findings are objective and based on evidence. 

• Document every step – Keep detailed notes of all meetings, warnings, and decisions. Documentation demonstrates procedural fairness and is critical if the FWC reviews the dismissal. 

Example: For performance issues, show the employee was made aware of the issue, formal reminders and warnings were given, and the employee was given an opportunity to rectify the issues such as improvement plans were implemented. For serious misconduct, show why immediate dismissal was justified. 

4. Comply with Notice and Entitlements

Employers must meet all legal obligations when finalising employment.  

• Observe notice periods or provide payment in lieu. 

• Pay all accrued entitlements, including annual leave, long service leave, and redundancy pay if applicable. 

• Additional requirements may be found in an Award, Enterprise Bargaining Agreement or employment contract. 

Tip: Errors in final pay are a common cause of further disputes and can lead to additional claims. 

5. Consider the Small Business Fair Dismissal Code

Employers with fewer than 15 employees must follow the Small Business Fair Dismissal Code. Compliance provides a statutory defence but does not replace the need for a valid reason and fair process.  

6. Maintain Comprehensive Records

Thorough documentation is your strongest defence.  

For example, keep: 

• Formal and written communications.  

• Employment contracts and policies. 

• Performance reviews and development plans. 

• Warnings and disciplinary outcomes. 

• Investigation notes and evidence. 

• Meeting notifications and notes. 

7. Act Promptly and Seek Advice

After a termination, employees have 21 days to lodge an unfair dismissal claim. If you are managing a potential termination, or if a claim has been brought against you, please contact the Master Builders ACT Workplace Relations team on (02) 6175 5900 or workplace@mba.org.au.