Termination Of Employment
One of the most difficult things for employers to understand and manage within their organisations is termination of employment. That is, ending employees’ working arrangements with the business.
Termination of employment is a delicate aspect. In almost every situation, an employee does not welcome the prospect of losing their job. It is imperative for business owners and employers alike to understand employee’ entitlements and employer obligations as set out in the Fair Work Act 2009 and other relevant legislation.
Reasons for Employment Termination
There are many reasons why termination of employment may be necessary. However, in each case you must have a valid reason for the termination, which must be justifiable given the facts.
Broadly, reasons for terminating someone’s employment are one of the following:
Misconduct – when an employee partakes in behaviour that is out of line with company policy, goes against the terms of an employment agreement, or is unlawful.
Poor performance due to factors such as lack of skill, care, diligence or quality
Capacity – reflects employee’s ability to fulfil the inherent requirements of their role
Redundancy – when an employer either decides they no longer need an employee’s job to be done by anyone, or the employer becomes insolvent or bankrupt,
When considering whether a dismissal is unfair, the Fair Work Commission will assess whether it is “harsh, unjust or unreasonable”. What is harsh, unjust or unreasonable will depend on the circumstances of each case. In most cases, it is accepted that an employer must follow a procedurally fair process prior to terminating the Employee. This process will include reasons for the proposed dismissal as well as an opportunity for the employee to respond. This is because both the reason for the dismissal and the process adopted in coming to the decision to dismiss will be considered in determining whether a dismissal was a fair one.
In addition, you should provide employees with written notification that their employment has been terminated.
Terminating Employment Contracts
An employment contract is a written agreement between an employer and the employee. It sets out enforceable terms and conditions that govern the employment relationship.
The Fair Work Act provides minimum conditions and entitlements for employees in the National Employment Standards, and industrial instruments such as Modern Awards, or Registered Agreements. An Employment Contract must provide for at least these minimum conditions but can set out additional requirements regarding termination processes that should be taken into account.
However, any disputes concerning an employment contract are generally enforceable under contract law, rather than through the Fair Work Commission. This means that if an employer breaches the termination clauses in the employment contract when terminating an employee, they could lodge a claim in contract law as well in employment law for unfair dismissal under the Fair Work Act, depending on the circumstances.
Termination of employment can be difficult and complex. If you are considering terminating an employee, please call us for free initial advice on 1300 651 415.
Understanding Disciplinary Action
Understanding when and how to take disciplinary action against your employees is not easy. Our downloadable e-guide can help get you started.
Employment Termination Notice
As outlined in the National Employment Standards, an employer must provide an employee with written notice of the day of termination. Employees are required to be given (or paid in lieu) the minimum amounts of notice set out in the NES or relevant industrial instrument.
Below are outlined the minimum notice periods required to be given and their corresponding periods of employment.
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Despite the above there are two scenarios in which there are extenuating circumstances and different periods of notice may apply.
If an industrial instrument covering the employee or contract of employment specifies a longer notice period for termination, then it is the specified notice period which applies. The other is that if an employee is over the age of 45 and has worked for at least two years on the day that you give them notice, they are entitled to an extra week’s notice.
No Notice Period
While the National Employment Standards outline compulsory notice periods for employees being terminated, there are scenarios in which a notice period is not necessary. For instance, notice is not required to terminate casuals, employees employed for a fixed period of time (other than apprentices), employees doing seasonal work or daily hire employees working in the building and construction or meat industries.
There is also not a necessity for a termination notice period if the employee is being dismissed due to serious misconduct. Some examples of serious misconduct may include theft, fraud, assault, or refusing to carry out a lawful and reasonable instruction that is part of the job. But even though you do not have to give notice of termination or pay in lieu of the notice period, in these circumstances, you do have make sure the process is fair, and to pay out all outstanding entitlements, for example, payment for time worked or annual leave, though not always long service leave, depending on the State or Territory and applicable circumstances.
As an employer, you should also know that if an employee thinks that they have been unfairly dismissed, or if they feel that their dismissal was not handled fairly, they can lodge an application for unfair dismissal remedy.
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Final Pay
Final pay is what an employer owes an employee when their employment ends. An employer is obligated to ensure that the employee subject to the termination of employment receives their outstanding wages, including penalty rates and allowances (if applicable) and other paid entitlements, as well as any notice if the employee does work it. This is referred to as ‘final pay’.
If an employee has any outstanding annual leave or is entitled to redundancy pay or long service leave this should also be paid out in their final pay.
An award, employment contract, enterprise agreement or other registered agreements can specify when final pay must be paid. If it does not, the best practice is for an employee to be paid within 7 days of their employment ending or on the next scheduled pay day.
Employsure’s advisers can help you navigate the tricky process of ending someone’s employment. For peace of mind, please call our Support Line now on 1300 651 415.
Frequently Asked Questions
What is the termination process for employees?
Any termination process for employees should generally:
- Treat the employee in a fair and reasonable manner
- Have a valid reason for termination
- Include adequate consultation with the employee (if required) – i.e. give the employee adequate notice of the reason for dismissal in advance, allow them to respond, and take the responses into consideration
- Recognise, and include as part of the process if applicable, any alternatives to dismissal
Is termination of employment the same as being fired?
To be ‘fired’ is an informal way of referring to dismissal, usually for either poor performance or misconduct reasons. The terms ‘dismissal’ and ‘termination’ are the accepted formal terms used in Australian workplace relations legislation and by the Fair Work Commission.
Can I terminate an employee over the phone?
You can terminate an employee over the phone, but it will only be considered reasonable in very limited circumstances. If you are considering terminating an employee over the phone, you should seek professional advice. If the conversation regarding termination can reasonably take place in a more formal setting (e.g. face-to-face meeting), it is not recommended to terminate an employee over the phone or via email or text message.
How can an employment contract be terminated?
Employment contracts can be terminated in many ways. Following are some of the most common ways a contract can be terminated:
- By agreement e.g. Employee resignation
- For a fundamental breach of contract if the termination clause allows for it e.g. dismissal for serious misconduct
- Redundancy
- Expiration date of contract is reached if the contract is for a fixed term
Can I terminate an employment contract early?
Yes, an employer can terminate an employment contract early. In Australia, employment contracts are usually ongoing or permanent, so generally an employment contract can only be terminated ‘early’ in the case of a fixed-term employment contract, e.g. an employee is dismissed four months into a six-month contract. However, terminating a contract early still requires an employer to provide a valid reason why, and to engage in a fair process with the employee to avoid the risk of an unfair dismissal claim. In addition, early termination of a contract for specific period or time that does not have a clause allowing the contract to be ended before the end date, may require the employee to be paid out to the end of the fixed period.
Can an employee be terminated without notice?
Only in cases of serious misconduct can an employee be terminated without notice. Serious misconduct refers to wilful and deliberate behaviour in the workplace that is considered contrary to the employment agreement or causes a serious risk of imminent harm to the health and safety of others or the viability of the business, for example an illegal or dangerous activity.
What rights does a terminated employee have?
Most terminated employees have the right to lodge an unfair dismissal claim with the Fair Work Commission. If an unfair dismissal claim against you is lodged by a former employee, the Fair Work Commission may ask you to respond to the claim.
Does HR need to be present during a termination?
Your human resources team does not need to be present during a termination. However, if you have a HR team, they will likely understand the best practice processes to follow during a dismissal process. If you do not have a HR team, call Employsure. Employsure can assist you in better understanding termination and termination processes. Call us now on 1300 651 415 for free initial advice.
What determines unlawful termination?
Unlawful termination is a specific process for employees to raise a claim if they believe their termination was in contravention of the Fair Work Act.
This process is only available to employees who:
- Are not a national system employee, or
- Are a national system employee who is not eligible to make a general protections claim.
Unlawful terminations are different to unfair dismissal claims.
Examples of unlawful dismissal include dismissing someone because of their race, sex, colour, sexual preference, age, physical or mental disability, marital status, family or carer’s responsibilities, pregnancy, religion, political opinion, national extraction or social origin. It is also unlawful to terminate an employee’s employment if they are temporarily absent from work because of illness or injury, because of union involvement (or non-involvement) or because of absence from work during parental leave.
