How to manage employee termination

Employment termination

Unfair Dismissal. Discrimination. Workplace Bullying. Adverse Action. Breach of Contract. These words are sure to send a chill down the spine of even the most experienced HR professional. But what do they have in common? As you may have guessed, they are all types of claims that can occur following employee termination.

The cost of bringing a claim can be relatively minor for an individual. But the cost of responding to the claim can be significant for you. Take the classic Unfair Dismissal as an example. All the employee is required to do is to fill out a relatively straightforward form and pay a measly $69.90 application fee to lodge their claim. But defending the claim is likely to cost you upwards of $3,500 in legal fees! And then there is your own valuable time, the emotional stress and the prospect of compensation to consider.

As well as the risk to the business, you must also consider your personal liability in relation to employee termination. Involvement in a contravention is treated the same way as an actual contravention under the Fair Work Act. This means that a person who is involved in a contravention will be taken to have actually committed a contravention and may be subject to hefty penalties; up to $10,800 per contravention!

The inconvenient truth is that you can’t stop someone from bringing a claim against you. But you can minimise this risk. So what are the key questions you should consider when managing employee termination?

  1. Do you have a valid reason?

People rely on their income to support themselves and their families. While they are employed, your workers will dedicate their time and effort towards ensuring the success of your business. It should therefore come as no surprise that not having a valid reason for termination will expose the business to numerous risks.

A valid reasons for employment termination relates to either the person’s performance, or their conduct. Performance-related reasons involve the person’s capacity to perform their role, like failing to meet KPI’s. On the other hand, issues concerning conduct relate to the person’s behaviour. This includes minor things like unauthorised use of their personal phone during work time, through to instances of serious misconduct which may include fraud, theft and risks to work health and safety.

  1. Is your reason defensible?

Whatever your reason for employee termination, you must ensure that it is defensible. You must be able to provide credible evidence in the event that your process is challenged.

Businesses generally operate with a high level of informality. You may have had numerous informal discussions, but your word will mean nothing without having any credible evidence to support you. You should always keep a file note of any important discussions. Alternatively, a short follow-up email simply reflecting what is discussed is a good way to obtain a written record.

  1. Was the person notified of the reason for termination? And did you provide them with an opportunity to respond?

It is important to afford procedural fairness when managing employee termination. All too often, employers jump the gun and terminate without providing the employee an opportunity to respond.

You should always consider the person’s explanation for their poor performance or misconduct. Providing the employee with an opportunity to respond will greatly reduce the risk of an Unfair Dismissal claim.

  1. Was the person allowed to bring a support person?

Contrary to what many people think, there is no right to bring a support person to a meeting involving employee termination. Nor do you have to organise a support person for the employee. Rather, any unreasonable refusal to allow the worker to bring a support person will count against you in the event of an Unfair Dismissal claim.

The courts have gone to great lengths to clarify that the role of a support person is to provide emotional support only. They are not there to act as an adviser or as an advocate of the employee. You should therefore avoid denying a request to bring a support person, without a valid reason, and clarify that person’s role should they attend.

  1. Did you issue a termination letter?

The Fair Work Act states that you must provide written notice of the day of termination. You are therefore required under the Act to issue a letter of termination.

This letter does not need to be overly detailed. It should simply confirm your decision to terminate effective from the date specified. Although you are not obliged to provide reasons, you should consider briefly outlining your reasons for employment termination so that these cannot be challenged at a later date.

  1. Do you want the person to work out their notice period?

The Fair Work Act also provides for a minimum period of notice of between one and five weeks, depending on the employee’s age and length of service. Under the Act, the employee can either work during this period of notice, or be paid the full rate of what they would have otherwise earned during this period of notice.

You should consider whether you really want the person to work out this notice period. Aside from being unproductive, there is also a risk that the employee will steal confidential and commercially sensitive information. You should do what is right for the business.

  1. Have you paid all outstanding entitlements?

Regardless of the reason for employee termination, you cannot unreasonably withhold employee entitlements. This includes unpaid wages, accrued annual leave, annual leave loading, long service leave and superannuation.

The Fair Work Ombudsman is quick to get involved where it believes an employee did not receive what they were owed. This will not only cause complications in relation to this employee, the Fair Work Ombudsman is likely to use such a situation as a reason to audit your business. And who knows what they will find! Our advice? Take care to ensure that the person is paid everything that they are owed.

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