4 Legal Minefields to Avoid When Terminating Employment
Firing employees is probably one of the hardest things you’ll ever have to do as a business owner. It’s also one of the most litigious.
Unfortunately, in unfair dismissal cases, it’s typically not the facts that matter, but the process you follow. So, it’s important you know how to fire an employee so you don’t make the situation worse.
Minimise your exposure to costly unfair dismissal claims by deftly sidestepping these 4 legal minefields.
1. Firing employees for serious misconduct
Even if you catch an employee with their hand in the till, or on camera taking equipment from your office, you can’t fire anyone on the spot without legal consequences.
Without due process, you run the risk of claims for unfair dismissal, breach of employment contract, and even defamation.
So, no matter what the allegation, you must investigate it thoroughly and maintain records accordingly. It’s wise to get early legal advice on how to collect and retain relevant evidence, whether to involve the police, and how to ensure procedural fairness to the employee. This involves:
- Explaining the allegation to the employee
- Providing them with an opportunity to respond
- Allowing them to bring along a support person
Remember, even where you have conclusive evidence of a serious misdemeanour, you must not be tempted to abandon the process.
2. Termination for unsatisfactory performance
Likewise, when you’re handling cases of unsatisfactory performance, you must investigate the matter thoroughly and maintain records accordingly, before firing employees.
It’s important to first understand if there is a reason for their poor performance. A personal matter like financial stress could well be the culprit. And this may be something that you can manage as part of your employee wellness program. On the other hand, a poor attitude, or poor behaviour may be the sign of a toxic employee. Left unchecked, just one toxic employee can infect the whole bunch.
While it pays to respect the employee, it’s also crucial to adhere to any process that is set out in the Award, workplace agreement, or your own internal procedures.
The process involves:
- Documenting all aspects of the employee’s performance
- Providing appropriate verbal and written warnings
- Meeting with the employee to discuss the concerns
- Giving the employee adequate time to respond
- Developing a detailed performance improvement plan
The Fair Work Ombudsman has a checklist for employers to guide you through the process of identifying the problem, and figuring out how serious it is before you meet with the employee.
As a potential source of risk for accusations of bullying, this meeting should take place in a private and non-threatening location, and you must allow the employee to bring along a support person. Remember, with unsatisfactory performance, you must give the employee every opportunity to improve their performance before you consider dismissal.
All too often, businesses fail to follow their own processes. This typically delivers a fatal blow to any defence of an unfair dismissal claim.
3. Workplace policies as a basis for dismissal
Every business needs to have clear and easy to understand workplace policies. They set expectations regarding your employees’ conduct, and detail what is considered unacceptable workplace behaviour for matters like:
- anti-discrimination and unlawful sexual harassment
- unlawful bullying
- WHS risks
- social media use
But, it’s not enough to introduce workplace policies. You must ensure policies are applied consistently in your business. And you must enforce them. Without enforcement, your policies lack any legal authority. Enforcing policies is a matter of:
- formally communicating them to all employees, and providing training if required
- ensuring your employees sign a statement of understanding, and
- retaining the signed documents
Only with this level of documentation can you be sure your employees are bound by your workplace policies. If policies are applied inconsistently, or you fail to adequately enforce them, you won’t be able to rely on the terms of the policy as the basis for firing employees.
4. Termination through genuine redundancy
Whether an employee’s job is no longer required, or you’re relocating the business, making employees redundant is another legal minefield. If it’s a genuine redundancy, it’s never about an employee’s performance or conduct.
Whenever your business is undergoing major workplace change, it’s important to communicate regularly with all your employees. In fact, most Awards and registered agreements actually require employers to consult with employees regarding the coming changes.
Even with genuine redundancies, you still need to exercise caution and this means acting in accordance with the legislation. This includes carefully following any obligations outlined in the Award or enterprise agreement.
Of course, even when you follow these steps, an employee may feel their redundancy is unfair. In this case, you must be able to convince the Fair Work Commission that there has been a genuine redundancy. The Fair Work Act says there’s a genuine redundancy if:
- You no longer required the person’s job to be performed by anyone because of changes in the operational requirements (importantly, if you hire someone else to do the job, there will be no genuine redundancy), and
- You have complied with any obligation in an Award or enterprise agreement that applied to the employment to consult about the redundancy.
Procedural fairness is critical
As you can see, in any matter concerning firing employees, whether it’s because of poor performance, a bad attitude, poor conduct, or redundancy, procedural fairness and detailed records are always vital.
But ultimately, the best way to avoid liability for firing an employee, is to not have to fire them in the first place, so start by managing your employees’ performance.
The ATO is looking at the $500 million sharing economies, where Airbnb, Uber and other platforms allow thousands of Australians to cash in on spare rooms and parking spaces, lending their cars and driving people around.
If you’re an accountant or professional advisor, take heed of a recent decision by the Federal Circuit Court. You may be at risk of accessorial liability for your clients’ breaches of the Fair Work