What can employers do to avoid an unfair dismissal claim?

Terminating an employee can be a complex matter that carries a risk of an unfair dismissal claim against the employer, no matter how careful you may be. When letting an employee go, it is important that it is done legally and in a fair, just and reasonable manner.

What is an unfair dismissal?

The Fair Work Act 2009 (Cth) (the Act) determines a dismissal to be unfair if the employee is terminated in a way which is determined to be harsh, unjust or unreasonable.

In determining what is harsh, unjust or unreasonable the criteria as set out by s.387 of the Act should be taken into account including, but not limited to whether –

• there was a valid reason for the termination
• the employee was notified of the reason
• the employee was provided an opportunity to respond to any reason related to the capacity or conduct of the person; and
• any warnings provided to the employee relating to the unsatisfactory performance or behaviour.

If you are a small business, that is employee less than 15 employees, separate guidelines will apply under the Small Business Fair Dismissal Code.

Who can make an unfair dismissal claim?

Any employee can make an unfair dismissal claim if they:

• have been employed with an employer for the minimum employment period; and
• are covered by a modern Award or enterprise agreement or earn less than the high income threshold which is $167,500 as of 1 July 2023.

In some circumstances casual employees may also be eligible to make an unfair dismissal claim if certain factors relating to their employment can be established.

An employee must make their claim with the Fair Work Commission within 21 days after being dismissed, unless it can be proven exceptional circumstances existed.

It is recommended that a fair and reasonable process is adopted when terminating any employee regardless of their eligibility to make a claim. This will assist in reducing the risk of an unfair or unlawful dismissal claim being made against you. The following tips may assist you in mitigating the risks of an unfair dismissal claim.

• Communication is key

Set clear performance expectations of your employees and ensure these are communicated. Keep employees updated on how they are performing on a regular basis so any issues can be resolved upfront in a timely manner. Open and honest communication about employer expectations and employee performance may help reduce feelings of hostility and or humiliation.

• Follow your workplace policies

Before you embark on addressing an employee’s behaviour or performance, consult your workplace policy. Failing to do so will increase the likelihood of a breach of contract or agreement. Don’t have a formal policy and procedure for dealing with employee performance issues, it would be advisable to at the very least put in writing to the employee –

• requests for any meeting regarding their employment
• opportunity to respond to any allegations of misconduct or performance issues
• ability to have a support person present during discussions; and
• any warnings issued to the employee, which should include consequences should performance not improve.

Keep good records

It is good practice for employers to keep records of all interactions with employees. Particularly those relating to any performance management or disciplinary issues and actions. This may include emails, meetings held and notes taken during meetings and any warning letters issued. Good records will help in the event you do have to defend an unfair dismissal claim.

Key takeaways

The decision and process for terminating an employee can take time and some effort.  It is always a good idea to get some advice before you decide to terminate and to also consider the following factors –

• Do you have a reason for termination that is valid and lawful
• The procedure you intend to follow, is it fair and reasonable; and
• Does the employee have access to unfair dismissal.

Did you know Master Builders can advocate for you?

If you need help defending an unfair dismissal claim the Workplace Relations and Legal team can help. As part of your membership the team can offer support and advocate on your behalf at conciliation, should you require. The team can also provide assistance, guidance and templates to assist you in the management of employee performance and behaviour. You can reach the team on (02) 6175 5000.