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Dismissing an employee is always a difficult decision to make. However, if you do need to let an employee go, then it’s critical to make sure you do so legally. Unfair Dismissal claims against employers are costly and problematic – but you can help avoid them by keeping the following three tips in mind.

What is Unfair Dismissal?

Unfair Dismissal is where an employer fires an employee in a way that is harsh, unjust or unreasonable. The Fair Work Act 2009 (‘the Act’), which governs unfair dismissal, applies to all private sector employers in all States and Territories except Western Australia. Under the Act, the Fair Work Commission may compel an employer to reinstate or compensate any employee who was dismissed unfairly.    

In deciding whether a dismissal was unfair, the Fair Work Commission may consider the following factors:

  • Whether there was a valid reason for the employee’s dismissal; and
  • Whether the employer’s conduct meets the guidelines set out by the Act.

However, small businesses with less than 15 employees will have separate guidelines under the Small Business Fair Dismissal Code.

(1) Communicate With Your Employee

Clearly communicating with your employee is essential in protecting yourself from unfair dismissal claims. By making it clear what you expect of your employees and how they are performing, you can resolve any performance issues up front and if not, prevent any feelings of hostility or humiliation. An employee might be less likely to bring an unfair dismissal claim if they feel you were open about your expectations. While there is no rule that an employer must give an employee a certain number of written warnings before dismissal, you are legally obliged to give an employee an opportunity to improve their performance or contest any allegation or explain any misconduct.

If you have a formal policy and procedure for dealing with your employees performance issues, you should ensure that you actually follow them. Failing to follow a policy you have communicated to your staff will increase the likelihood of you being in breach of the employment contract or agreement. For example, the court recently found that Qantas had acted unfairly in dismissing a long-serving customer service agent for changing flight bookings without charging additional fees. Although it was the airline’s policy to charge customers for changing bookings, other agents had done so previously without receiving warnings or being dismissed. Here, Qantas had failed to follow its disciplinary policy. If you don’t have a formal policy in place, you may want to consider putting one in place. A good starting point would be ensuring that you, in writing, provide an under-performing employee with the following: 

  • Warning of any meetings about their employment;
  • The opportunity to respond to allegations of their misconduct or performance;
  • The ability to have a support person with them during discussions about their employment; and
  • Notice that failure to improve their conduct will result in dismissal.

Employers are often found liable because they have not clearly informed employees about their potential dismissal.  

(2) Record Everything

The best way to ensure you are complying with the Act is to keep records of all your interactions with your employees. Regularly updating your employees’ HR files with records of any performance management or disciplinary actions will help you keep track of how your staff are performing as well as comply with your legal obligations. Records can include sending follow-up emails to meetings to confirm what you and your employee discussed, or taking notes during any meeting concerning an employee’s performance or misconduct. Furthermore, well-kept records will help you defend your actions if you face an unfair dismissal claim by an ex-employee.

(3) Make Sure Your Basis for Dismissal is Lawful

To avoid an unfair dismissal claim, you must ensure that the reason you are terminating an employee is lawful. That is, an employer should only dismiss an employee due to poor performance or misconduct. You cannot dismiss an employee simply because you don’t like the person! If you are dismissing an employee for misconduct, make sure you have investigated the misconduct and given the employee an opportunity to explain the conduct.

Under the Small Business Fair Dismissal Code (Code), if a small businesses employer has complied with the Code’s requirements, an unfair dismissal claim must be rejected. The Code is concise, and requires the following:

  • A dismissal will be fair where the employer has reasonable grounds to believe the employee was guilty of serious misconduct. Examples include theft, fraud, violence or a serious breach of health and safety requirements.
  • For other dismissals, an employer must give the employee a warning based on their performance or conduct, and that they risk dismissal if they don’t improve. They must also receive the opportunity to improve their performance or respond.
  • An employer allows an employee to have a person (other than a lawyer) to assist them in circumstances where dismissal is possible.
  • Provide evidence of compliance with the Code if an employee lodges an unfair dismissal claim.

Key Takeaways

To make sure you are fairly (and lawfully) dismissing an employee, ask yourself the following questions:

  1. Do you have a lawful basis for firing them?
  2. Have you clearly informed them of their poor performance or misconduct and warned them they may be dismissed, in writing?
  3. Have you given them the opportunity to respond and rectify the issue?
  4. Do you have a formal policy, and if so have you followed it?
  5. Do you have less than 15 employees? Have you followed the Small Business Fair Dismissal Code?


If you have any questions about dismissing an employee, get in touch with our employment team on 1300 544 755.


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