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Unfair dismissals – how employers can avoid the heat

A version of this article will be published in ‘My Business’ Magazine, August 2005

Engaging people to carry out work is one of the most common functions of a typical Australian business. Finding the right person for the job can be challenging, but also very rewarding. Ending the employment relationship can also be a challenging situation. The decision to dismiss an employee needs to be made very carefully and with due regard to the various ‘dismissal’ laws which have been created by both State and Commonwealth Parliaments. Some laws allow workers to make claims against their former employers where they believe they have been unfairly dismissed from their employment. Other laws set minimum notice periods which must be given in order to lawfully terminate the employment. Despite the complexity, there are some worthwhile steps that employers can take in order to reduce the likelihood of a claim against the business. Ensuring that the decision to terminate is supported by reasons based upon fact, and providing a person the opportunity to respond to allegations of poor performance or misconduct are examples of these steps.

Bringing an employment relationship to an end

Even the best of staff relationships can break down over time and it may be necessary for an employer to bring an employment relationship to an end. The decision to dismiss an employee may be necessary for a variety of reasons. For instance operational requirements of the business may have changed to such an extent that the position held by the employee is no longer required. Dismissal may be necessary because the performance of the employee is below acceptable standards. It may also be necessary to remove an employee because he/she has carried out a single act of serious and wilful misconduct.

John Stanton, Partner, says "Legal claims about the fairness of a dismissal are frequently made against employers. With few exceptions, the industrial tribunals across Australia are able to compensate and, in some cases, reinstate workers who have been unfairly dismissed from their employment. Therefore it’s not surprising that employers regularly cite unfair dismissal laws as being particularly challenging."

Good risk management practice

Defending a claim of unfair dismissal before a tribunal can be a time-consuming and frustrating exercise for business. Stanton suggests "It is good risk management practice for employers to ensure that the reasons used to support the dismissal are supported by reliable facts and the employee is given an opportunity to respond to any allegations of misconduct or poor performance."

Stanton explains that if the employment is to be terminated due to performance related reasons, the prudent employer will be satisfied that the employee has been given a fair and reasonable opportunity to improve before the decision is made to dismiss.

Warnings

Stanton recommends that an employer should carefully plan the approach if faced with the prospect of dismissing an employee. Clear and unambiguous written warnings are highly desirable. Warnings should be complemented by counselling if an employee has failed to measure up to the reasonable standards of the employer. Written warnings provide the employer with a physical record of the circumstances leading to employer action.

As Stanton explains "Warnings give the employer the opportunity to explain the reasoning behind the decision. This can serve the employer’s interests if the employer’s actions come under scrutiny in legal proceedings."

The benefit of written warnings is not just limited to the defence of unfair dismissal claims. In some jurisdictions, such as New South Wales, a workers compensation claim for psychological injury will be denied if it arises from the reasonable actions of the employer in response to the performance or conduct of the employee. Occupational health and safety considerations may also be relevant to the employer’s decision to discipline or dismiss an employee.

Regardless of the location in Australia, statutory laws require that employers provide safe and risk free workplaces. In New South Wales the employer must ensure the health and safety of people within the workplace. This is a strict obligation and discipline, or even dismissal, may be necessary in circumstances where an employee has acted to place people in the workplace at risk of illness or injury.

Whatever the cause of the dismissal, it will be in the employer’s interests to set out the reasons in writing using clear and unambiguous language.

What is an unfair dismissal?

An unfair dismissal is a claim brought by an employee who believes that his or her employment has been, or is about to be terminated by the employer in a “harsh, unreasonable or unjust” manner. The termination needs to be at the initiative of the employer, although it should be noted that a resignation may still be considered to be at the initiative of the employer if there has been pressure exerted on the employee to resign.

When is a dismissal considered unfair?

When determining the fairness or otherwise of a dismissal, the general approach adopted by the various commissions around Australia has been to consider two critical issues:

• Did a valid reason exist to dismiss the employee?
• Was a fair procedure followed by the employer in dismissing the employee?

In terms of a valid reason, mere allegations of misconduct or poor performance are not sufficient. An employer should investigate such allegations to ensure there is a basis in fact for the reason before dismissing the employee. Furthermore, the employer should be satisfied that dismissal is the appropriate penalty for the employee’s transgression.

In terms of following a fair procedure, a commission may consider a number of factors. While the following list is not exhaustive or prescriptive, such factors often include:

• Whether the employee was given a reason for the dismissal;
• If a reason was given, the nature of the reason and whether the employee was given an opportunity to make out a defence; and
• Whether the employee had previously been warned regarding poor performance or conduct.

In some cases it has been found that while a valid reason did exist to dismiss an employee, the dismissal was still unfair because a fair procedure was not followed by the employer.

If dismissal is found to be unfair - what can an employer expect?

If a dismissal is found to be unfair, an employer could be faced with the following:

• An order to reinstate the dismissed employee to his or her former position;
• An order to re-employ the dismissed employee to another position, if the employee’s former position is not available, or it is otherwise impracticable to do so;
• If both reinstatement and re-employment are considered impracticable, an order that the employer pay the dismissed employee compensation. Typically compensation is capped at up to an equivalent of what the employee had been paid by the employer in the six months prior to being dismissed.

In conclusion

If a working relationship does go off the rails an employer can't assume that a simple resolution will be found.

No employer wants to face an unfair dismissal claim. It's therefore important that a business' recruitment process provides a robust foundation for the future employment relationship.

A number of termination problems can be avoided simply by recruiting the right person for the job, and ensuring that the terms of the employment agreement establish the company's expectations of the individual right from the outset.

It also makes sound sense for a business to regularly review their staffing situation, each staff position and where there is a concern with a staff member, the original terms of their agreement. This should clearly identify the scope of the tasks that staff members were employed to perform, and the processes to follow if issues arise.

Avoiding Unfair Dismissal Seminar

Have you ever been frustrated because it seems to be too difficult to terminate an employee?

This seminar will address this question in an interactive format incorporating case studies, including:

• Steps to minimise legal risks of unfair dismissal - investigations, performance management and record keeping.
• What valid reasons exist for terminating an employee’s employment?
• An update on the proposed changes to unfair dismissal laws.
• Recent decisions concerning the way tribunals approach unfair dismissal matters.
  

These seminars will be held during August 2005 in Sydney, Parramatta and Melbourne.  For further details on these seminar, please click here.

John Stanton
Partner
Australian Business Lawyers
(02) 9458 7555
john.stanton@ablawyers.com.au