It is important that employers understand which employees have the protection of unfair dismissal and the most effective way to deal with poor performers.

The Fair Work Act 2009 (Cth) (FW Act) excludes the following employees from protection of unfair dismissal:

• If the employer is not a small business employer (15 or more employees) - an employee who is serving in the first six months of employment.
• If the employer is a small business employer (less than 15 employees) - an employee who is serving in the first 12 months of employment.
• If an employee is earning more than $145,400 per annum and is not covered by an award or enterprise agreement. This amount includes wages, agreed money value of non-monetary benefits and non statutory superannuation. This amount must also be a pre-guaranteed amount.
• An employee who has been dismissed due to genuine redundancy.
• An employee employed for a specific period of time, for a specific task or a specified season and the employment terminates at the end of the period, task or season.
• An employee to whom a training agreement applies, and the employment terminates at the end of the training arrangement.
• A casual employee who is not engaged on a regular and systematic basis and does not have a reasonable expectation of continuing employment with the employer.

Unfair dismissal is deemed to have occurred if:

1. the employee was dismissed;
2. the dismissal was harsh, unjust or unreasonable;
3. the dismissal was not a case of genuine redundancy; and
4. the dismissal was not consistent with the Small Business Fair Dismissal Code, where the employee was employed by a small business.

The Small Business Fair Dismissal Code is intended to create special arrangements for small businesses with less than 15 full employees (including any casual employed on a regular and systematic basis as well as working Directors earning a wage). If, when terminating an employee, a small business has complied with the code, the termination should be deemed fair by the Fair Work Commission.

The Small Business Fair Dismissal Code requires a simpler and shorter process to deal with an employee’s poor performance prior to proceeding toward termination. The code only requires that the employee is warned verbally that they are at risk of being dismissed if there is no improvement in their performance. The employee must be afforded a chance to respond and a reasonable chance to improve.

An employer who is not a small business should ensure a more thorough process of performance management than a small business employer in order to minimize the risk of an unfair dismissal claim. It is important to ensure that procedural fairness has been afforded to an employee during the performance management procedure. Procedural fairness involves letting the employee know specifically what they are doing wrong, giving them a ‘right of reply’, allowing them the opportunity to bring a support person, and affording them a reasonable opportunity to rectify the problem.

Whilst some employees may not have the protection of unfair dismissal and this may therefore simplify the procedure prior to the termination of an employee, it does not allow an employer an unrestricted right to terminate.

Employees who do not have the protection of unfair dismissal still have access to unlawful termination, discrimination, and to general protections claims. Employees may also take civil action against an employer for breach of contract.

It is important to note that the above information is specific to national system employers. Employees of non-constitutional corporations, regardless of the number of employees, will still have access to State unfair dismissal laws.

Unlawful termination

National system employees have access to unlawful termination claims under the FW Act. This is also extended to State system employee under section 772(1) of the FW Act.

The FW Act prescribes certain grounds of termination as unlawful. These include:

• temporary absence from work because of illness or injury
• membership or non-membership of a union
• seeking office or acting as an employee representative
• filing or participating in a complaint against the employer
• race, colour, sex, sexual preference, age, physical or mental disability, marital status, family responsibilities, pregnancy, religion, political opinion, national extraction or social origin - except if based on the inherent requirements of the position
• absence from work due to parental leave
• temporary absence from work because of the carrying out of voluntary emergency management activity.

These matters are conciliated by the Fair Work Commission, but are arbitrated in the Federal Court of Australia. The onus of proof rests on the employer, who must demonstrate that the employee was not terminated for a prohibited reason. Therefore, although an employee may not have the protection of unfair dismissal, an employer should ideally have documented evidence of a valid reason for any termination and have evidence of the procedural fairness afforded to the employee to assist in the defeat of any unlawful claim.

Further, it is imperative that an employee have a ‘right of reply’ before being terminated to ensure that the reason for the termination is not due to an unlawful ground. For example, an employee terminated for refusing to work extra shifts, may be able to make an unlawful dismissal claim if their inability to work these shifts was due to family responsibilities. If the employer did not give the employee a ‘right of reply’ before termination, the employer would not be aware that they were leaving themselves open to a claim for unlawful termination.

Notice required for lawful termination

In addition to the above, an employer must give the employee at least the following notice (or compensation in lieu) for the termination to be lawful:

Employee’s period of continuous service              *Notice period in weeks

Not more than 1 year....................................................1
More than 1 year but less than 3 ................................ 2
More than 3 years but less than 5 ...............................3
More than 5 years .......................................................4

*Increase the notice period by one week if the employee is more than 45 years old and has completed at least two years continuous service.

Certain employees are excluded from these notice periods. Contact our Employee Relations Advice Centre on (08) 9365 7660 for details.

Discrimination

An employee may also make a discrimination claim related to the termination of their employment.

State and federal legislation prohibits discrimination on the following grounds:

• sex or sexual harassment
• religion
• impairment
• family responsibility, relationship status or marital status
• intersex status
• race, ethnic origin or racial hatred
• pregnancy or potential pregnancy
• breastfeeding
• political opinion
• social origin
• age
• criminal record or spent convictions
• medical records
• sexual orientation
• trade union activity
• gender identity

An employee cannot be terminated on any of these grounds, unless the employee is unable to fulfil the inherent requirements of the job.

General protections claims

The FW Act contains a general protections provision which is aimed at protecting workplace rights, freedom of association and providing protection from workplace discrimination.

Under these provisions an employer must not take adverse action against an employee because they have a workplace right, they have exercised that right or intend to exercise that right.

‘Workplace rights’ refers to the entitlements that a person has under an award, agreement or law and is able to initiate a complaint or inquiry in relation to their employment under a workplace law.

‘Adverse action’ includes dismissing or refusing to employ someone, discriminating against someone or injuring someone in their employment, for example, by demoting them.

Where an employee believes that they have been dismissed in contravention of the general protections provision of the FW Act they may apply to the Fair Work Commission to deal with the dispute.

Common law claims for breach of contract

When terminating an employee, it is also important to ensure that the terms of the contract of employment are complied with. For example, if the employee’s contract states that three warnings will be given prior to termination, the employee should receive three warnings. If the employee is terminated without being adequately warned, they could make a common law claim for Breach of Contract in the Magistrate’s Court.

In addition to contractual terms, employer implemented policies often include the right to a fair procedure before termination.

Best practice

Given the risks of claims for unlawful termination, discrimination and breach of contract, many employers will choose to follow a fair process when terminating an employee. Aside from a risk management approach, many employers also recognise the importance of building a strong relationship with employees based on mutual trust and respect. Employees will be more likely to work hard and be loyal to an employer if they know they and their co-workers will be treated fairly.

Employers often like to be regarded as ‘employers of choice’. By following best practice, these employers will have a strategic advantage and potential employees will view them as favourable employers.

In addition, staff turnover can be costly. It makes financial sense to improve the performance of current employees rather than incur the cost of finding a replacement.

A fair procedure may include:

• letting the employee know specifically what they are doing wrong and where improvement is necessary; and
• giving the employee an opportunity to address these issues.

If their explanation is not acceptable:

• advise the employee of what is expected and the consequences of failure; and
• offer the employee assistance, such as training, counseling, mentoring or coaching.

Follow the discussion with the employee with a letter outlining what was discussed at the meeting. Allow them the time and resources to fix the problem before deciding whether to terminate their employment.

Many employers will also want to set in place a ‘Fair Treatment Process’ to ensure that employees have an avenue to follow if they feel they have been treated unfairly.

For further information contact the Employee Relations Advice Centre (08) 9365 7660 or email [email protected].