If you want to terminate an employee’s employment, a letter of termination will form part of this process. An employer should only terminate an employee’s employment once they provide written notice that specifies the termination date. Additionally, employers must comply with their obligations under the Fair Work Act 2009 (the Act) to duly warn the employee, identify the issues with their conduct, set out what is expected from the employee to retain their role, and what improvement is expected by and to be reviewed. However, these employer obligations do not apply in the instance of summary dismissal because of an employee’s serious misconduct. Nevertheless, this article sets out the termination of employment and the critical components of the relevant termination letter.
What Steps You Should Take Before Employment Termination
Before deciding to commence the process of terminating an employee, an employer needs to consider the reason for termination and the obligations they have under the Act. While operational requirements or performance-based issues are valid reasons for dismissal, employers must also ensure procedural fairness to employees during the termination process.
Otherwise, failure to terminate with valid reason and procedural fairness may result in an unfair dismissal claim brought by the terminated employee in the Fair Work Commission (the Commission).
Accordingly, employers must follow a well-documented process before any termination. In the context of performance management, this process includes:
- issuing verbal and written warnings to the employee in question;
- informing the employee that their employment is at risk; and
- providing them with an opportunity to improve.
In addition to meeting their obligations under the Act, employers should also consider:
- the relevant notice period to terminate (or make a payment in lieu of notice) per the employment contract or their length of continuous service for termination; and
- any outstanding entitlements you owe your employee upon termination including wages up to the last day of employment, payment in lieu of notice (if any), any accrued but unused annual leave, and any long service leave or redundancy pay entitlements (in the context of redundancy).
What is Summary Dismissal?
Summary dismissal refers to a dismissal on the spot without notice. During a summary dismissal, your employee’s termination has an immediate effect. Nevertheless, employers generally rely on summary dismissal in very serious circumstances. These circumstances may involve serious misconduct, which includes wilful or deliberate behaviour by an employee that causes a serious and imminent risk to:
- a person’s health and safety; or
- your business’s reputation, viability, or profitability.
Employers should be mindful that termination without notice, such as summary dismissal, is a drastic measure. Consequently, these circumstances should be taken very seriously, as repercussions flow from termination if an employee initiates an unfair dismissal claim in the Commission. If you are unsure whether your dismissal is fair, you should speak with an experienced employment lawyer.
Continue reading this article below the formSpeaking With the Employee About Their Misconduct
Employers should speak directly to an employee about their alleged misconduct. This will help the employer:
- understand the employee’s side of the story; and
- determine if there has been a misunderstanding or whether further information is required.
In addition, employers should make their intentions clear moving forward if there is genuine misconduct. This may include:
- terminating employment;
- providing a formal warning; or
- asking the employee to voluntarily leave the business.
Can My Employee Bring a Support Person?
Suppose the meeting is part of a formal procedure. In that case, the employee is generally entitled to be in the company of a ‘support person’ regardless of whether or not there was genuine misconduct. The support person could be a:
- family member;
- representative; or
- someone from the company’s human resources department.
However, employers can ‘reasonably’ refuse requests for a support person to be present. Nevertheless, when the Commission reviews claims for unfair dismissal, this is an essential factor that will be considered. Ultimately, employers should provide reasonable notice to allow an employee to arrange for a support person to be at a meeting that is part of a possible termination process.
Deciding on the Next Steps
As an employer, you should properly consider the conduct in question and make an informed decision regarding the employee’s position. Employers may wish to give a written warning to the employee and give them a chance to rectify their misconduct. Alternatively, the misconduct may be of such a serious nature that the employee must be terminated.
This can be a difficult decision to make for an employer, and it is a decision that can significantly impact your business. For this reason, it is advisable to speak with an experienced employment lawyer.
Preparing a Letter of Termination
You should prepare a termination letter if:
- you have confirmed that it is lawful to terminate an employee; or
- in the context of serious misconduct, the employee’s conduct warrants summary dismissal.
When preparing the document, it is essential to remember that a clear letter of termination will set out:
- when the employment relationship ends;
- on what grounds the employee’s employment is being terminated;
- whether there is a notice period (generally not in cases of serious misconduct);
- payments due to the employee on termination;
- any arrangements for the return of company property; and
- a reminder of any post-employment obligations the terminated employee has to the company.
Employers should keep a copy of any letters of termination in company records. After all, letters may be helpful if a terminated employee claims unfair dismissal with the Commission.
As an employer, understand your essential employment obligations with this free LegalVision factsheet.
Key Takeaways
Employers must follow the correct process when looking to terminate an employee, including preparing a letter of termination. Each set of circumstances will be unique, and it is advisable to seek legal advice if any potential serious misconduct is involved.
If you require assistance terminating an employee or 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
A letter of termination is a letter that you should provide your employees following verbal notice of their termination. It should set out the reasons for termination, confirm the employee’s final date of employment and set out any procedures to be taken before the employee’s last day of work.
This will depend on whether the employee’s employment contract includes a set notice period. If not, you must give your employee the minimum notice period in the Fair Work Act 2009. If your employee engages in serious misconduct, you may not need to give them any notice of termination (although this is a high bar).
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