How Do I Lawfully Dismiss an Employee?

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Table of Contents

• Carefully Consider Why You Want to Terminate the Employee
• Issue a Performance Improvement Plan (PIP)
• Provide Written Warnings
• Provide a Termination Notice
• Key Takeaways

As an employer, you may need to consider terminating an employee. However, you must stick to a well-planned and clearly documented dismissal process to protect yourself against legal action. Additionally, you should ensure that you have a valid reason for dismissal and have considered alternative action if applicable. This article will take you through the most appropriate way to lawfully dismiss an employee.

Carefully Consider Why You Want to Terminate the Employee

Dismissing an employee for the right reason is important. Operational requirements, such as where a position has become redundant, or performance issues are both valid reasons for taking steps to fire a member of your staff. However, a valid reason will not protect you against legal action if you dismiss an employee in a way that is: 

• harsh; 
• unjust; or 
• unreasonable. 

For example, even if your receptionist is not doing their job properly, it would be harsh to fire them without any warning or without attempting to communicate with them about their underperformance.

The reason for the termination has significant implications for your potential liability under the Fair Work Act 2009 (Cth). If you fire an employee in a harsh, unjust or unreasonable way, or you fabricated the redundancy for the purpose of making the termination appear reasonable, you may face an unfair dismissal claim. Employees who earn under $167,500 can apply to the Fair Work Commission within 21 days of being fired, which provides avenues for them to either: 

• ask for compensation; or 
• get their job back. 

It is important to note that not all employees will have access to an unfair dismissal claim. For example, it is not available to casual employees. 

Additionally, an employee may lodge a general protections claim against you if you dismiss them due to their: 

• personal attributes, such as their age, race, or gender; 
• participation in industrial action; or 
• absence from work for health reasons. 

In the event of a general protections claim, the Fair Work Commission will investigate the reasons why you fired the employee. If you fired the employee for one of the protected grounds, you have likely breached the Fair Work Act.

Issue a Performance Improvement Plan (PIP)

You should let your employee know why you are considering dismissing them, particularly in situations where the employee is underperforming. You should put your concerns to the employee and provide them with a chance to respond.

You may choose to meet with the employee in private and invite them to have a third party present during any meetings. It is a good idea to keep minutes and have all parties present sign these documents. You must give the employee an opportunity to respond to any allegations and carefully consider their responses before proceeding with any disciplinary action. Remember to keep a written record of any meetings you have with your employee.

You may try to manage the employee’s performance and counsel them to improve by creating a PIP. A PIP can be a useful tool to manage and improve an employee’s performance. A PIP is a document that clearly sets out areas where the employee’s performance is not meeting expectations and sets clear objectives that the employee needs to meet within a set period of time. A PIP should: 

• identify the key concerns of the employee’s performance; 
• set the required outcomes and objectives; 
• outline any strategies and support the employee will be provided; and 
• include relevant review dates. 

It is best practice to clearly state in the PIP that if the employee’s performance does not improve within the specific timeframe, they may be subject to disciplinary action, including termination.  You may also consider having the employee acknowledge in writing that they have received a PIP by signing the document.

Upon the end of the timeframe of the PIP, you should organise another meeting with your employee to determine whether or not their performance has improved. If it has not, you may consider: 

• extending the PIP; or 
• pursuing further disciplinary action. 

Provide Written Warnings

You may initially provide your employee with verbal warnings concerning their underperformance. However, you should also ensure that you keep a written record of any verbal warnings that you provide. 

After providing your employee with one or more verbal warnings, it is a good idea to set out the issues in writing and to give your employee the opportunity to respond. This is an important record that can come in handy if your employee challenges the dismissal. It creates transparency around your position and demonstrates your efforts to engage with the employee. Continue counselling them to remedy your concerns and carefully document all efforts to do so. 

Provide a Termination Notice

If warnings, counselling and performance management are unable to resolve the situation, any final decision to terminate should be set out in writing. This decision should not be made lightly, and you should consider obtaining legal advice before terminating an employee. 

The employment agreement, industrial award or the Act will contain the amount of notice you are required to provide.

Under the Fair Work Act, the following notice periods typically apply:

It is also possible that the employment agreement outlines a longer notice period. In this case, you must ensure that you provide the employee with the notice as specified in their agreement. 

However, where serious misconduct occurs, summary dismissal may be appropriate. Summary dismissal refers to the ability to dismiss an employee without notice. This can only be done in very specific circumstances, such as where the employee creates a serious and imminent risk to the health and safety of a person or to your business.

For example, in a 2008 case, the Fair Work Commission found that an employee who was employed as a store manager had engaged in serious misconduct. The employee drank and permitted a junior employee to drink two beers while on their lunch break, despite the company having a clear policy that stated that employees were not permitted to drink any alcohol during work hours. 

Key Takeaways

The ‘right’ way to terminate employment is largely dependent on sticking to a well-planned and clearly documented dismissal process. Steps which can help you to lawfully dismiss an employee include:

• carefully considering why you want to terminate employment and ensuring these reasons are just;
• issuing a PIP;
• providing written warnings; and
• providing notice of termination.

If you need assistance understanding how to lawfully dismiss an employee, 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.