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Dismissing an employee can put you at risk of facing unfair dismissal claims, however careful you may be. Unfair dismissal is where you end employment in a harsh, unjust or unreasonable way. If the unfair dismissal claim against you is successful, you may be liable to make a payout of up to $79,250. This article outlines unfair dismissal and how you can avoid it when terminating employment.

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What is Unfair Dismissal?

The Fair Work Commission will deem a dismissal unfair if the dismissal was:

  • harsh, unjust or unreasonable;
  • not a case of genuine redundancy; and
  • in the instance where you are a small business with fifteen or fewer employees, you did not dismiss your employee according to the Small Business Fair Dismissal Code.

If you have 15 or fewer employees, you must dismiss an employee per the Small Business Fair Dismissal Code. In this way, you can avoid a claim for unfair dismissal. The Code states that you can dismiss an employee:

  • without a warning where your employee has committed serious misconduct, i.e. theft, violence, fraud and serious breaches of occupational health and safety procedures; or 
  • with a warning, if you dismiss an employee for a valid reason regarding their conduct or capacity in their job.

What is ‘Harsh, Unjust or Unreasonable?’ 

Although there is no clear-cut definition of harsh, unjust or unreasonable in the Fair Work Act, the Commission will consider whether you:

  • have a valid reason for dismissing your employee regarding their capacity and performance in the workplace;
  • make this reason clear to your employee before dismissal;
  • gave fair warning to your employee;
  • allowed your employee to respond to your warning; and
  • unreasonably refuse your employee’s request for a support person in a disciplinary meeting.

In a 2014 case, the FWC found that when IBM chose to dismiss one of its workers, it did so unfairly. IBM decided to dismiss the worker after management found the worker had made 141 improper expense claims for shifts he did not work. However, IBM chose to refuse the worker’s offer to repay the excessive funds. Additionally, the worker served IBM for seventeen years of service. As a result, the Commission found that IBM engaged in unfair dismissal.

Who Can Lodge a Claim for Unfair Dismissal?

An employee can lodge an unfair dismissal application with the Fair Work Commission within fourteen days of their dismissal. Additionally, your employee must:

You should note that some casual employees are eligible to lodge an unfair dismissal claim. This is on the basis that:

  • they complete the minimum employment period, meaning they work for at least twelve months for your business with fifteen employees or less or work for at least six months for your business with more than fifteen employees;
  • you employ them on a regular and systematic basis; and 
  • they had a reasonable expectation of ongoing employment.

Tips to Avoid Unfair Dismissal

If you dismiss an employee, you should consider the following points. Above all, however, it would be wise to seek legal advice before you terminate your employee’s employment. If in doubt, an employment lawyer can advise you on managing the dismissal to ensure it is lawful.

1. Have a Valid Reason for the Dismissal

You cannot dismiss an employee simply because you do not like them. Instead, you must have a valid reason for your employee’s lack of capacity or misconduct in the workplace. This can include their underperformance in the workplace or continual breaches of your workplace’s policies.

Additionally, you can dismiss an employee if they commit serious misconduct. Serious misconduct includes fraud, violence, theft or severe breaches of workplace health and safety laws. Finally, for small business owners with less than fifteen employees, you can terminate employment without notice where an employee commits serious misconduct.

2. Issue a Warning to Your Employee

If your employee is underperforming in the workplace, you should give them a written warning. The warning notice should:

  • confirm that you and your employee have discussed the issue of underperformance in a disciplinary meeting;
  • reiterate what you expect from your employee in their role; and
  • outline the potential consequences should your employee maintain their unsatisfactory conduct.

Furthermore, providing a written warning is essential when keeping a record of your employee’s performance. In addition, by maintaining a written record, you can later establish that you have undertaken a proper and fair disciplinary process if need be.

3. Allow Your Employee to Respond

Once you issue your employee a warning, you should give them ample opportunity to respond. This might mean that your employee:

  • objects or disagrees with the allegations within the warning; or
  • has a reasonable chance in rectifying the issue.

It would be best to meet with your employee to discuss the problem. You can then outline a solution with clear performance goals to ensure that your employee works to your standard.

Ultimately, allowing your employee to rectify the issue can help you avoid dismissal altogether. When it comes to rectifying the problem concerning workplace performance, you should consider providing your employee with additional training and support.

4. Offer Your Employee a Support Person 

Disciplinary meetings can be a confronting experience for your employee. This is because, in a disciplinary meeting, you will likely discuss your employee’s underperformance and its consequences.

Whilst the Fair Work Act does not require you to offer your employee a support person during disciplinary meetings, it is a good idea that you give them the option. By allowing your employee to have a support person present, you can help ensure that dismissal procedures are fair and considerate of your employee’s needs.

Key Takeaways

Unfair dismissal is where you end employment in a harsh, unjust or unreasonable way. To avoid a claim for unfair dismissal, you should:

  • seek legal advice before terminating employment;
  • have a lawful reason for dismissing your employee;
  • provide your employee with a warning and a reasonable opportunity to respond to the warning; and 
  • offer your employee a support person during disciplinary meetings. 

If you have trouble with an unfair dismissal claim, our experienced employment lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions

What is the Small Business Fair Dismissal Code?

Small businesses can avoid unfair dismissal claims if they follow the procedures of dismissal in the Code. Small businesses have fifteen or fewer employees.  

When can an employee file an unfair dismissal claim?

An employee has 21 days from the day their dismissal occurred to lodge a claim with the Fair Work Commission.


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