Terminating an employment contract needs to be carefully managed in Australia. In this article, we describe how to terminate an employment contract.
There are a number of legal challenges that businesses can face if it is not done the right way and employees have easy and (generally speaking) low-cost avenues to pursue their employer if their employment comes to an (allegedly unlawful) end.
Author: Farrah Motley, Legal Principal of Prosper Law.
Here's a basic run-down of the legal framework in Australia: employment is (for the most part) governed by the Fair Work Act 2009 (Cth) and the Fair Work Regulations 2009 (Cth).
These laws set out the minimum national employment standards. In addition, certain groups of employees (for instance, administrative staff, architects, retail and tradespeople) are also covered by Modern Awards.
These Modern Awards set out the minimum standards for those groups of employees. There is also case law that sets out how those laws and Modern Awards apply in certain situations, as well as dealing with matters that those laws don't directly address.
Now let's look at some of the reasons why you might want to go down the employment termination route:
your employee is in their probation period and it's not working out;
your employee is not performing to the standard you require them to;
your employee has engaged in some kind of conduct which brings your business into disrepute;
your employee has acted inappropriately towards another staff member;
your employee has stolen from you or a customer; or
you don't have any work for the employee to do.
Number one: Your employee is in their probation period and it's not working out
This one can be easy, so long as your probation period is not longer than six months. If your employee has been employed for at least six months (yes - one day makes a difference so be careful!), they have the benefit of unfair dismissal protections in the Fair Work Act 2009 (Cth).
If they have been employed for less than six months, they don't have the benefit of unfair dismissal protection.
However, they may still bring a claim for adverse action, which can happen where the employee alleges that their employment has been terminated on the basis of a discriminatory reason (for instance, they made a workplace complaint or they are pregnant).
The problem with a claim for adverse action versus unfair dismissal is that the amount able to be claimed for unfair dismissal is limited to an amount equivalent to six months' pay, whereas adverse action has no limit!
Number two: Your employee is not performing to the standard you require them to
This one needs to be carefully managed. The employee must be "performance managed"; meaning, you must provide specific examples of poor performance, provide specific guidance on ways the employee can improve and meet your requirements, allow the employee to respond and enable a reasonable period of time for the employee to improve.
If this fails (and only after following a carefully mapped out process), only then can you think about proceeding to employment termination.
Number three: Your employee has engaged in some kind of conduct that brings your business into disrepute
This one may depend on the degree to which the conduct brings your business into disrepute and what policies your business has in place. If the conduct is bad enough (and you have an appropriately worded employment contract and policies), you may be able to summarily dismiss your employee.
This may also mean that you do not have to pay any notice period to your employee.
Number four: Your employee has acted inappropriately towards another staff member
Hopefully, your business has policies in place which deal with how your staff are meant to behave towards one another and your business actively enforces and supports those policies.
If your business does have appropriate policies in place, and depending on the conduct of the employee, you may be able to summarily dismiss your employee.
As set out above under "number three", this may also mean that you do not have to pay any notice period to your employee.
Number five: Your employee has stolen from you or a customer
Provided you can prove (on the balance of probabilities - because this is a civil matter, you're bound by the civil standard of proof, not the criminal one!) that your employee has stolen, you may choose to summarily dismiss your employee, report the matter to the police and pursue your employee for recovery.
It should be noted that you cannot deduct any amounts from final payments owing to your employees which represent an amount equivalent to the value of the stolen item. You must pay all outstanding entitlements, then pursue your employee separately.
Number six: You don't have any work for the employee to do or that role can be absorbed by one or more of your other employees
Here's where redundancy comes in. It's important to note that redundancy doesn't just come about because a person's role is no longer required to be performed by that person, but can also come about because you don't require that role to be performed by that specific employee because the duties can be absorbed by one or more of your other employees.
With redundancy, however, you need to be careful. If you don't follow the consultation and other requirements of the Fair Work Act 2009 (Cth) and any applicable Modern Award, your employee could argue that they were unfairly dismissed.
How can Prosper Law help?
If you would like any legal advice, documents or strategies to terminate an employment contract, contact the team at Prosper Law. We provide workplace legal advice to employers and employees.
Author: Farrah Motley | Legal Principal
PROSPER LAW - A Law Firm for Businesses
M: 0422 721 121
A: Suite No. 99, Level 54, One One One Eagle Street, Brisbane Queensland Australia
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