In Short
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You cannot dismiss an employee simply because your relationship with them has soured. A valid reason based on conduct or capacity is required.
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Give the employee clear warnings, a chance to respond and improve, and document everything if performance is the issue.
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Follow notice-period rules (or summary dismissal for serious misconduct) and comply with the relevant dismissal code to avoid unfair dismissal claims.
Tips for Businesses
Keep a clear paper trail before any termination: set out performance expectations, record warnings and conversations, and ensure dismissal has a lawful reason. It is safer to invest in a performance improvement plan than to risk legal trouble.
For business owners, dismissing an employee who is underperforming or engaging in serious misconduct is an unsavoury yet essential task. However, before terminating a worker’s employment, it is important to ensure you are doing it legally. This article will outline key points to consider before you commit to termination, in order to legally dismiss your employee.
What is Lawful Dismissal?
You must ensure that you dismiss an employee for a lawful reason. When it comes to terminating someone’s employment, there are a few legal requirements you should keep in mind to avoid a claim for unfair dismissal.
Consider Alternatives
From the outset, you must note that dismissal should be your last resort to resolving issues regarding underperformance. Since you have invested time and money in training your employees, it may be inefficient to dismiss them and then look for substitutes.
For this reason, it might be worth addressing your employee’s underperformance in other ways before proceeding to dismissal. You could provide your employee with:
- notice of the issue; and
- a chance to respond and rectify it.
This may involve placing the employee on a formal performance improvement plan. This document should list where an employee is underperforming and where they can improve.
A well-documented performance improvement plan can assist you with defending an unfair dismissal claim, as it shows that the employee was given an opportunity to improve their performance before they were dismissed.
It is also important to put your employee on notice that their employment is at risk if their performance does not improve.
If your employee is not performing at the expected level, you may need to implement a performance improvement plan (PIP) to get them back on track. Our free PIP template will assist.
Ensure You Have a Valid Reasons for Dismissal
If, however, you decide that dismissal is necessary, you should ensure that you have a valid reason. This must relate to your employee’s capacity or conduct in the workplace. This can include:
- deliberate underperformance;
- continual breaches of workplace policies; or
- serious misconduct.
Some areas of serious misconduct include:
- fraud;
- violence;
- theft; and
- serious breaches of workplace health and safety laws.
Provide Warnings
If your employee is underperforming in the workplace, you can give them a written warning. The warning should:
- clarify the issue of underperformance;
- reiterate what you expect from your employee in their role; and
- outline the potential consequences should your employee maintain their unsatisfactory performance.
A record of the written warning will also protect you in the instance of an unfair dismissal claim.
Communicate With Your Employee
Once you warn your employee, you should give them an opportunity to respond to your claim. They might disagree with your observations or have an explanation for their behaviour. This can help you decide whether dismissal is necessary or if you should take an alternative action.
Additionally, you should give your employee a chance to rectify the issue. You can discuss this with them by scheduling disciplinary meetings and preparing a performance improvement plan. Additionally, as disciplinary meetings can be emotionally confronting, you may give them the option of having a support person present. A support person can be a:
- friend;
- family member;
- counsellor; or
- union representative.
How Much Notice Should I Provide?
If you decide to dismiss your employee, you must ensure that you:
- confirm the dismissal in writing; and
- provide the required notice period.
The notice period you must provide can be found in your employee’s contract or minimum requirements at law.
You must provide at least the following minimum notice periods:
| Length of Continuous Employment | Minimum Notice |
| Less than one year | One week |
| Between one and three years | Two weeks |
| Between three and five years | Three weeks |
| Over five years | Four weeks |
Where an employment contract outlines a longer notice period, you must provide your employee with the notice period outlined in the contract. Most employment contracts give employers the ability to make a payment in lieu of notice.
In cases of serious misconduct, you have the ability to dismiss your employee summarily. This means that you can dismiss them:
- immediately; and
- without notice.
Your business can only do this 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. It is important that you seek legal advice before dismissing an employee summarily.
Continue reading this article below the formWhat is Unfair Dismissal?
The Fair Work Commission (FWC) can find that you have unfairly dismissed an employee where:
- you terminated their employment in a way that was harsh, unjust or unreasonable;
- the dismissal was not a case of genuine redundancy; or
- if you are a small business, you failed to terminate your employee in line with the Small Business Fair Dismissal Code.
Some relevant circumstances the FWC will look at include whether you:
- gave your employee a fair warning of their dismissal;
- had a valid reason for dismissing your employee;
- made this reason clear to your employee;
- gave your employee the opportunity to respond; and
- refused your employee’s request for a support person.
Small Business Fair Dismissal Code
If you are an employer who runs a business with 14 employees or fewer, you should familiarise yourself with the Small Business Fair Dismissal Code (the Code). You must comply with the Code to fairly dismiss any employees.
Under the Code, you can dismiss an employee without notice if you believe that the employee has committed serious misconduct such as theft or violence. In all other instances where the dismissal relates to your employee’s underperformance, you must:
- have a valid reason based on an employee’s conduct or capacity to do the job;
- warn your employee verbally or in writing of the pending dismissal; and
- give your employee the opportunity to rectify the problem.
Who Can Lodge a Claim For Unfair Dismissal?
Your employee can make an unfair dismissal claim if they have:
- completed the minimum employment period;
- are covered by a modern award or an enterprise agreement; and
- earn less than the maximum high-income threshold, which is $167,500 from 1 July 2023.
Key Takeaways
Before you dismiss an employee for underperformance or serious misconduct, you should consider alternatives to termination. If you decide to dismiss them, you should:
- have a valid reason for the dismissal;
- provide your employee with notice of their potential dismissal;
- give your employee the opportunity to rectify the reason for the dismissal; and
- not have refused your employee’s request for a support person in disciplinary meetings.
If you are unsure about your obligations regarding legally dismissing employees, 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
Not necessarily. You cannot dismiss someone simply because you no longer get along. You must have a valid reason, such as poor performance or misconduct, and follow a fair and lawful process.
You should give clear feedback, set measurable improvement goals, and allow reasonable time for change. Document all discussions and warnings. If the employee still doesn’t improve, you can proceed with a lawful termination process.
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