Avoiding dismissal problems

This section covers: What is a dismissal? Nine steps for avoiding dismissal problems, Grounds for dismissal, When do you have a dismissal problem? What should you do when you have a dismissal problem? Think about dismissal every time you hire someone, Notice periods, Understanding the contract, Treat redundancy/retrenchment as a special case, Termination pay for the dismissed employee, and Dismissals that end up in court.

The information here covers:
  1. What is a dismissal?
  2. Grounds for dismissal
  3. When do you have a dismissal problem?
  4. What should you do?
  5. Think about dismissal every time you hire someone
  6. Notice periods
  7. Understanding the contract
  8. Redundancy as a special case
  9. Termination pay for the dismissed employee
  10. Dismissals that end up in court
  11. Key points
Unfair dismissal actions under the Fair Work Act are available to employees if the employer employs more than 15 employees. However, all employers should be keen to avoid dismissal problems as the repercussions are generally negative for a business.
 
1. What is a dismissal?
 
A dismissal is the termination or ending of an employment contract by an employer. There are many possible reasons for a dismissal, including:
  • The employee is guilty of serious and wilful misconduct and is summarily dismissed;
  • The employee is retrenched;
  • The employer opts not to renew a contract which has expired;
  • The business goes into liquidation or is wound up and the employees are dismissed;
  • The employee claims that the employer has altered the employment contract in an important respect and so effectively terminated the contract of employment — this is often referred to as a constructive dismissal. An example would be where a job is based in Sydney and the employer tells the employee that henceforth the job will be done in Adelaide and requires the employee to move to Adelaide.

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2. Nine steps for avoiding dismissal problems
 
Nine steps for employers to take to avoid dismissal problems are noted below. You will not completely solve all future problems, but you will avoid many unnecessary ones and generally have more time for running your business.
 
2.1 The pre-employment communication; the letter of offer and company policies and procedures
 
Be careful in specifying what you want and expect when you hire new employees. Having clear, unambiguous policies in place and making them known to all staff is an important first step. These policies, on a range of relevant workplace issues (including termination of employment), should be put in writing and made available to all staff. Make sure you refer to termination of employment provisions, at least stating the agreed period of notice. Also flag any behaviour that would constitute a serious breach of the employment contract and indicate the consequences.
 
The best way to pull the necessary information together is to compile a policies and procedures manual. This can be done by gathering the information gradually. Keep a file and note the rules and practices you want followed in your business when recruitment and termination are concerned. Over time you will cover most of the important areas. You can use this approach to any aspect of your employee relations policies and procedures. You do not have to incorporate policies manuals into employment contracts; in fact, for a number of reasons, it is wise not to do so. All you need do is to refer to the existence of the policies and be confident that the employee (or prospective employee) knows of their existence.
 
2.2 Probation period
 
It is usual to provide for a probationary period —the standard probationary period under the Fair Work Act is six months continuous service with the employer (or 12 months in the case of an employer with fewer than 15 employees).

The point of a probationary period is to allow both the employer and the employee a chance to assess each other and the job and decide if they wish to continue the relationship. There is no penalty for either party terminating the contract in the probationary period.
 
It is sometimes difficult to specify a reasonable probationary period for executives. If an executive took three months to find a job, it may be viewed as unfair to allow for termination of employment without compensation within the first three months of employment. Courts may consider that the employer in this case should have been more thorough in the selection process.
 
2.3 Make sure that it's clear who has the power to hire and fire
 
This simple communication allows all managers to know what they can and cannot do in relation to recruitment, discipline and termination. Employees likewise know who to answer to and who has the responsibility for what.
 
2.4 Keep a 'staff notes' journal or similar document
 
This is where you record information relevant to your relationship with your staff.
 
Get into the habit of keeping this sort of diary. It does not take long. After all, how could you keep track of the progress of a supply contract without paperwork?
 
Build this into your day. Note down any events, exchanges, promises, other undertakings and questions resolved or unresolved that may impact on employment relationships.
 
If this sounds like too much work, adopting the practice of (at least) taking down some brief notes whenever you have a private meeting with an employee. This will serve to jog your memory and may clear up any confusion in the future.
 
2.5 Give your line managers/supervisors some guidance and training
 
Some dismissals arise out of a simple clash of personalities. It's hard to avoid this sort of problem, but you can at least lessen it by helping your staff at the coalface to handle some of the controllable ones. So, for example, lead a new recruit into the management ranks by talking about what you expect and giving the new manager a chance to ask questions.
 
Another good idea is to allow the new manager to absorb the approach of a manager who does his/her job well. In other words, the new manager tags along for a while with the manager who is leaving. It means that the new manager may take a little time to settle in but it's a lot cheaper than fighting an unfair dismissal claim that should never have occurred.
 
2.6 Try to avoid on the spot or summary dismissals
 
These situations can be very difficult. An employee who commits a gross breach of his/her contract of employment will not be able to substantiate a case for unfair dismissal.
 
When an event of this nature occurs (eg an employee physically attacks a manager) there should be a procedure in place that requires another manager to become involved. If an incident occurs on a union site the relevant union official should be involved. The event(s) should be carefully spelt out and a record of the meeting kept. The senior manager should make a decision after hearing all parties.
 
In instances where an employee's actions are not wilful and deliberate, but rather constitute 'gross stupidity', summary dismissal may not be justified even if a valid reason exists for the termination of the employee. 
 
2.7 Do not delay the decision
 
There are only four possibilities when considering dismissal. Determine which is appropriate and act promptly:
  • Summary dismissal is justified;
  • Dismissal with notice is justified, but not summary dismissal;
  • Dismissal is not justified but a warning/reprimand in writing is justified;
  • There is no cause for dismissal and an apology is due to the employee.
2.8 Issue warning letters and keep copies and follow-up
 
Try counselling and guidance to improve performance. However, if this does not work you must express your concerns in writing. If you do not put your concerns in writing then it is hard to complain later if the problem occurs again.
 
How many warning letters? There is no strict rule but it is advisable to give two warning letters plus a final warning letter. If there is no improvement then the letter of dismissal is the final step.
 
Be certain to have made genuine attempts to improve the employee's performance in the areas outlined in the letters.
 
Try to avoid relying on verbal/oral warnings. It is easy to forget or leave out important issues when giving a verbal warning, or for the message to be misinterpreted by the employee.
 
Counselling and genuine assistance to employee. Employers are expected to genuinely attempt to improve the performance of an employee who is subject to a warning.
 
A considered approach and a proper monitoring of performance would be expected of the employee.
 
2.9 Give the employee a chance to state his/her case
 
Federal law requires this. Think about a dismissal as a court-room situation. This may sound extreme, but it is emphasises proceedings must be fairly conducted and must be seen to be so. The employer puts forward the reasons for dismissal and the employee has a chance to respond. This should happen at each stage of the disciplinary process leading to dismissal (if that is where it leads).

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3. Grounds for dismissal
 
While the federal Act does not explicitly set out what amounts to a valid reason for dismissal, it is specific in highlighting what does NOT constitute a justifiable ground for dismissal. They are a person’s:
  • race, colour, sex, sexual preference, age, physical or mental disability, marital status, family or carer’s responsibilities, pregnancy, religion, political opinion, national extraction or social origin,
  • engaging in lawful industrial activity, such as belonging to or participating in union activities, and
  • temporary absence from work because of personal illness or injury.
Sometimes it's hard to know if the above-list of prohibited reasons has been breached. A dismissal may breach the Act where a prohibited ground is found to be one of the reasons for termination.
 
Employers usually know whether a particular employee is doing a reasonable job or not. The point to make in the context of dismissal is that employers should express any dissatisfaction in terms of the employee's capacity or conduct or the operational requirements of the business.
 
Examples would be: 'due to your continued failure to keep required work hours as detailed to you on three separate occasions etc', or ' we have a strict no alcohol on site policy and this has been drawn to your attention on at least three occasions yet you have continued to breach this policy etc'.
 
When expressing your dissatisfaction with an employee, remember to keep a written record, particularly if issuing a verbal warning.

Employees excluded from unfair dismissal claims
 
It should be noted that certain groups of employees are excluded from making a claim for unfair dismissal, however, sometimes even these employees can mount a case if they can prove that they are wrongly categorised as one of the excluded categories

Excluded exmploees include:
  • an employee who is not covered by a modern award or enterprise agreement whose annual rate of earnings exceeds the “high income threshold” ($113,800 pa from 1 July 2010, indexed each July)
  • an employee who has not completed six months continuous service with the employer (or 12 months in the case of an employer with fewer than 15 employees)
  • an employee whose contract of employment is for a specified term, e.g. an apprenticeship, specified task or specified season
  • an employee subject to a training agreement and whose employment is limited to the duration of that agreement
  • an employee dismissed in a case of ‘genuine redundancy’
  • an employee of an employer with fewer than 15 full-time equivalent employees who has complied with the Small Business Fair Dismissal Code
  • a contractor.

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4. When do you have a dismissal problem?
 
You have a dismissal problem when an employee complains about disciplinary procedures or his/her dismissal.
 
You might also have a dismissal problem if you do not have a clear policy in place to avoid dismissal problems
 
Another circumstance possibly causing trouble is when the managers on-site with the power to dismiss are not familiar with the correct procedure.
 
An obvious situation that is a problem is where there is a poorly-performing employee, or an employee who is disruptive. This is where you must express your concerns in writing and follow up with a genuine attempt to improve the performance of the employee. Keep records carefully in such circumstances.

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5. What should you do?
 
A critical aspect is to keep accurate records. When a problem flares up it is usually too late to then try to put the evidence together. As noted above, treat dismissals like court matters; this means there should be accurate documentation demonstrating what has happened.
 
Keep careful records — write-up events as soon as possible after they occur. A helpful approach is to write a summary of every counselling/disciplinary discussion that takes place with an employee. The employee in question should be given a copy of the written summary and advised that if he or she disagrees with the summary then the employee may write his/her version of the discussion and a copy will be kept in HR files. In this way there is no suggestion of a biased report going unchecked and the employee clearly has the right to reply.
 
The termination interview should be conducted in the presence of witnesses — one for the employer and one for the employee — if the employee requests a witness to be present. The employer should briefly retell the story as to how this point has been reached and allow the employee to speak . The employer should be firm and make no admissions of unfair conduct. The employer can refer the employee to the termination letter for written confirmation of the employer's position. The employer should make a record of the interview, either as it progresses or immediately afterwards.
 
A possible complaint by the employee may be resolved at the workplace if the employer takes a little time to explain why the dismissal is taking place.
 
Heated exchanges should be avoided if at all possible. If they do occur then careful records should be kept.

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6. Think about dismissal every time you hire someone!
 
This is not meant as a negative statement, rather it indicates an employer should have plans and procedures in place to deal with unsuccessful appointments as well as successful ones.
 
You should always provide for a probationary period — except possibly in relation to executive employees whose position can be more fully spelt out in a written contract. The usual period is 3 months for wages staff but this may vary if a longer time is needed to assess an employee.

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7. Notice periods
 
You should also provide for the notice required to be given by the employer on termination. (This standard may apply to employees as well unless a shorter period is acceptable to an employer.)
 
The Federal standard which has been broadly adopted for award and agreement employees is:
  • Not more than one year — at least 1 week;
  • More than 1 year but not more than 3 years — at least 2 weeks;
  • More than 3 years but not more than 5 years — at least 3 weeks;
  • More than 5 years — at least 4 weeks.
Note that employees who are over 45 years of age and have worked 2 years or more are entitled to an extra week's notice.
 
Executive contracts are usually subject to at least one month's notice — the particular contract should be referred to.

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8. Understanding the contract
 
If there are any particularly important issues that could get an employee in trouble then these should be made clear in the letter of appointment. Such matters include the standard of dress required, the correct approach to customers etc. The crucial point is to communicate what is important.
 
Don't forget to review the terms of employment every 12 months or when there is a fundamental change to the contract in issue. If this is not done, the relevance of the terms of the letter may be doubtful at the time of termination. Changes to contracts must be agreed to by all parties concerned.

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9. Treat redundancy as a special case
 
The commencement of the National Employment Standards (NES) under the Fair Work Act means that a minimum entitlement to redundancy (or severance) pay applies to a broader category of employee than was previously the case.
 
Redundancy pay previously had only been a legal entitlement for award/agreement-covered employees, however, the NES now provides a statutory entitlement to redundancy pay for all full-time and part-time employees employed by a company that is not a small business, including award/agreement-free employees.

The NES redundancy pay scale does not apply to an employee’s termination of employment if, immediately before the time of the termination due to redundancy, or at the time when the person was given notice of the termination:
  • the employer employs less than 15 full-time employees
  • an employee has less than 12 months continuous service with the employer
  • the person is a casual employee
  • the employee is terminated because of serious misconduct
  • the employee is employed for a specified task, or a specified period of time, or a specified season
  • a training arrangement applies to the employee and his/her employment is for a specified period of time, or limited to the period of the training arrangement
  • the employee is an apprentice
  • an industry-specific redundancy scheme in a modern award applies to the employee or is incorporated into an enterprise agreement which applies to the employee.
As redundancies usually require consultation with the relevant union and/or the employees affected (and not all redundant employees may be retrenched), it is recommended that appropriate advice as to the best approach be sought.
 
An employee can still make an application for a remedy under unfair dismissal laws if he or she feels that the redundancy is unfair.
 
Consultation is an important feature of ensuring that a redundancy situation is handled appropriately. The onus is on the employer to provide consultation with employees and unions where relevant.

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10. Termination pay
 
Be careful with the termination pay of any employee, but especially careful with the termination pay of a dismissed employee.
 
The usual components to consider are:
  • Payment for work done up to termination (although some awards allow deductions when an employee resigns without notice);
  • Payment for annual and long service leave — both accrued and pro rata payment instead of notice if the employer decides to pay out the employee rather than having him/her work out the notice;
  • Severance pay in certain circumstances (some of which may be subject to special tax treatment);
  • Superannuation and other possible contractual rights.

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11. Dismissals that end up in court
 
If the matter cannot be settled in-house then a court or tribunal hearing is required to resolve it. In these situations, legal or IR expertise is essential. Gather the records and documents you have been keeping and sort the matter out with your adviser. The matter may be resolved at the conciliation stage.

Note: parties who agree to a settlement at the conciliation stage cannot later change their minds to avoid the terms of the settlement — see: Mr Hien Ngoc Dang v Worley Parsons Resources & Energy [2009] AIRC 513 (29 May 2009)
 
The court or tribunal can make orders for reinstatement and/or compensation. The process will start by trying to get the parties to agree on a settlement.

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12. Key Points
 
The principal point in the good management of dismissals is to avoid trouble.
 
If some basically simple steps are followed then trouble can be minimised. These steps are:
  • Specify (preferably in writing) what you expect of new employees — don't be vague;
  • Be sure that everyone on staff knows who has the power to hire and fire;
  • Put together a policies and procedures manual;
  • Keep records of relevant encounters/ meetings with any member of staff which directly impact on the future of their employment;
  • Provide training for line managers and supervisors;
  • Avoid summary dismissals if possible;
  • Issue warning letters, keep copies and follow-up;
  • Give the employee a chance to state his/her case;
  • Get help quickly if things go wrong;
  • Think about dismissal every time you hire someone. This means thinking about what might go wrong and providing for it in writing if possible. At a bare minimum, you should state the correct period of notice required from the employer and the employee and any unusual rules or practices that apply at your workplace.

For an extensive library of policies, agreements, forms, correspondence and checklists, designed to make human resources (HR) management easy for your business see our HR Advance website.

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