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As an employer, there can be a lot of uncertainty when dismissing an employee. Notably, different rules and notice periods can apply, and failure to follow these can bring a case for unlawful dismissal. To avoid this, it is wise to seek legal advice when dismissing an employee to ensure the termination runs smoothly. To help, here are some questions to ask a lawyer about lawful dismissal. 

What is the Difference Between Termination & Redundancy?

As an employer, you have different obligations when either terminating employment or making an employee redundant. So, you should clarify which rules apply when dismissing an employee. 

Termination refers to the end of employment for several reasons. Whether your employee resigns or you fire your employee due to poor performance, termination generally requires you to:

  • provide written notice of their last day of employment, except in the instance of serious misconduct; and
  • pay any outstanding wages and other employee entitlements still owing in the final pay. 

On the other hand, redundancy occurs if you decide your business no longer needs that job role. This can occur for many reasons like introducing new technology to your business or restructuring your company because a merger or takeover will occur. In this sense, the job role itself becomes redundant, not necessarily the employee. Nevertheless, your employee might have entitlements to redundancy payments. If so, you have to make these payments to a maximum of sixteen weeks’ pay. In any event, you should clarify what rules apply when dismissing an employee. 

Do I Have Lawful Grounds to Dismiss an Employee?

An employee can bring a claim for unfair dismissal if the Fair Work Commission considers the dismissal to be ‘harsh, unjust or unreasonable.’ Whether an employee can bring a claim for unfair dismissal generally depends on how long they were employed and what legal frameworks they are covered by.

For example, suppose you own a small business or have fewer than 15 employees. Here, an employee who has been employed for more than 12 months can file a claim for unfair dismissal if they:

  • are covered by an award or registered agreement; or
  • earnt less than the applicable threshold (from 1 July 2021, this is $158,500).

The same eligibility criteria apply for larger businesses, except employees need only to have worked for your business for at least six months.

Whilst there are no clear cut rules for what is a ‘harsh, unjust or unreasonable’ dismissal, you should avoid:

  • dismissing an employee without a valid reason;
  • failing to notify your employee of the reason for dismissal;
  • dismissing an employee based on reasons other than the employee’s performance;
  • failing to allow your employee to respond to the reason for dismissal; and
  • failing to give warnings to an employee where they failed to adhere to a performance improvement plan or breached company policy.

In any event, it would be best practice to seek the advice of a lawyer when terminating an employee. Doing so can ensure that you have strong grounds to terminate employment and avoid facing an unfair dismissal claim.

What Payments Am I Obligated To Make?

Whether you terminate employment or make an employee redundant, there may be some outstanding payments you need to make. Generally, if you make a lawful dismissal, you should include the following in the employee’s final pay:

If your employee believes that you have not paid all their entitlements in full, the Fair Work Ombudsman can investigate and take action. For this reason, you both must clarify and pay any outstanding entitlements to your employee upon termination.

Additionally, an employee who is covered by the Fair Work Act has at least one year of continuous service. Likewise, if your business employs 15 or more employees, an employee may have entitlements to redundancy payments. Whilst the number of redundancy payments required will vary, it is to a maximum of sixteen weeks’ pay.

However, not all employees are eligible for redundancy payments. For example, casual employees and employees who you terminate because of serious misconduct cannot receive redundancy payments. In any event, you should ask a lawyer whether you have obligations to make redundancy payments.

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Key Takeaways

When it comes to lawful dismissal of an employee, you should ask a lawyer whether you:

  • are terminating employment or making an employee redundant;
  • have lawful grounds to dismiss an employee; and
  • have any outstanding payment obligations.

If you need help understanding your rights around lawful dismissal, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions

What is serious misconduct?

Serious misconduct is where an employee deliberately acts in a manner inconsistent with their employment contract and causes serious risk to the health and safety of another person or the reputation of your business. Serious misconduct includes theft, intoxication at work and the refusal to carry out lawful and reasonable instructions consistent with their job description.

What is the Fair Work Commission?

The Fair Work Commission is an independent body that helps employees and employers maintain a fair and productive workplace. The Commission sets minimum wages, establishes awards, approves enterprise agreements and oversees disputes, including unfair dismissal claims. 

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