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Terminating an employee is never easy.  In such circumstances, employers not only need to consider elements of fairness, but they also need to consider their legal obligations. In particular, termination can only legitimately occur in certain situations. This article details those circumstances an employer can lawfully issue a termination letter.

When Can You Issue a Termination Letter?

Under Australian law, an employer can formally terminate (in writing) the employment of a staff member in three circumstances:

  • For underperformance;
  • For serious misconduct; or
  • When making genuine redundancies.

What is Underperformance?

Underperformance occurs when an employee regularly doesn’t do their job properly. It can also happen if an employee behaves in an unacceptable manner in the workplace. Underperformance includes when an employee:

  • Does not carry out their work to the requisite standard or fails to do it at all;
  • Fails to follow workplace policies, procedures or rules;
  • Behaves unacceptably (e.g. tells inappropriate or offensive jokes); or
  • Behaves negatively or disruptively. For instance, routinely speaks negatively about their employer.

If an employee performs unsatisfactorily, an employer can eventually terminate their employment. However, the employer must follow the correct process before doing so. 

The employer should speak privately with the employee about their concerns and give the employee an opportunity to respond. The employee and employer should also devise a performance improvement plan. The plan sets out steps and strategies by which the employee can improve their performance. The plan should also set out clear and definable expectations that the employee must meet.

If poor performance continues, an employer could hold another meeting with the employee or consider altering their work duties. They can also issue the employee with a formal warning letter

If the employee’s underperformance does not subsequently improve, the employer can choose to give further warnings or move to a final employee warning letter that explains clearly that continued underperformance will result in termination.  If the employee’s performance remains unsatisfactory, the employer can then issue a termination letter.  

If an employer terminates an employee for underperformance, they are entitled to the correct period of notice and all pay entitlements.  The appropriate period of notice depends on the length of time that an employee has worked for their employer. 

Further, their final pay should include any relevant penalty rates, allowances and leave entitlements.  However, even if an employer follows all of these steps, an employee can still lodge an unfair dismissal claim.

What is Serious Misconduct?

An employer can also terminate an employee if they engage in serious misconduct. Serious misconduct is distinct from unacceptable behaviour. It involves behaviour that causes serious and imminent risk to the health and safety of another person or the reputation or profits of their employer’s enterprise. It also includes actions that are inconsistent with continuing their employment. Examples of serious misconduct include theft, assault, refusing to carry out their duties or fraud.

If an employer terminates a staff member for serious misconduct, they do not have to give any notice of termination. However, the employer must pay all outstanding entitlements including payment for hours worked and annual leave.

What is Redundancy?

Redundancy occurs when an employer doesn’t require anyone to do an employee’s job any longer. For example, if an employer purchases new equipment that can do the same job or suffers a slowdown in growth. Redundancy also occurs when an enterprise becomes bankrupt or insolvent.

Redundancy is genuine at law when an employer doesn’t need the job to be done by anyone anymore and follows all the appropriate consultation requirements outlined in the relevant award, enterprise agreement or employment contract. In such instances, an employee cannot lodge an unfair dismissal claim against the employer.   

The consultation requirements that can make a redundancy genuine must begin as soon as possible after management decides to make workplace changes. It involves notifying employees who may be affected by the proposed changes, providing information about the changes and their possible effects and discussing those steps the employer will take to avoid and minimise these adverse effects. The employer must also consider any ideas or suggestions on the part of staff regarding these changes.

If an employee becomes redundant, they must receive the appropriate notice period.  An employer is typically required to pay severance pay as well. The amount is directly related to the employee’s period of continuous service with the employer. However, not all redundant employees have the right to redundancy pay. These employees include:

  • Those whose period of continuous service is less than twelve months;
  • Casuals;
  • Those terminated on account of serious misconduct;
  • Apprentices;
  • Trainees employed only for the length of their training agreement;
  • Employees hired for a stated period, a particular season or an identified task or project; and
  • In some cases, employees of small businesses.

Key Takeaways

A termination letter is warranted in three circumstances. This includes underperformance, serious misconduct, and genuine redundancy. Employers need to ensure they follow the correct protocols and appropriate legal guidelines when terminating employees. This will mitigate any future risks that may arise.

If you require assistance with termination matters, LegalVision provides businesses with tailored online legal advice. It would be our pleasure to assist you. Call LegalVision’s employment lawyers today on 1300 544 755 or contact us on this page.


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