You are currently viewing Employee Termination: The Key Risks

Employee Termination: The Key Risks

The end of employment can be a difficult period and overwhelming for the employer and the employee, especially for small business owners with close contact with staff.

Employees are quite protected in Australia. Regardless of how the relationship may have ended, there is still the possibility the employee raises a complaint either with Fair Work or through the courts. 

Employees can make a number of claims against their former employer, including (but not limited to):

  1. Unfair dismissal (whether there was a valid reason and procedural fairness) – if proven, this can then involve reinstatement with back pay, up to 6 months compensation,
  2. Unlawful dismissal (most popular) – general protections – adverse action (uncapped amounts or subject to higher jurisdictional amounts)
  3. Discrimination – these claims are usually concerned about the reason for the dismissal – potentially uncapped compensation and civil penalties could apply to the business managers, directors, and HR personnel.
  4. Breach of contract (non-dismissal)
  5. Underpayment of wages and monies owing (non-dismissal)

These claims can be easily started by employees, with few barriers in place for them to proceed. Complaints must generally be filed within 21 days of dismissal but can be extended by the Fair Work Commission with little to no costs involved.

There are several situations which could also create further risks for Employers, such as:

  1. Casual employees have different circumstances and employer obligations – usually they don’t have expectations of ongoing shifts however regular and systematic casuals can be questionable as they do have access to unfair dismissal and processes which are similar to other permanent employees.
  2. Redundancy for those employees not covered by an award or enterprise agreement – This situation still involves some consultation with the Employee. It is best practice to follow similar processes as if an award or agreement applies as it reduces the risk of a dispute arising and whether a modern award applies or not.
  3. The number of warnings prior to dismissal can be contentious but depends on company policy being established and complied with, and the seriousness of the Employee’s behaviour. The proper sequence of warnings given can give some protection for an Employer against unfair dismissal claims.
  4. Abandonment of employment is ending employment at the Employee’s initiative – often they are absent for a certain amount of time (3 days) and contact has been tried certain number of times (3 times) by the Employer, and then businesses commonly accept this conduct as resignation of employment.
  5. Gardening leave – prevents high senior level of employee of doing any work for competitors in this period until the end of their contract. They are paid in this period. It protects the employer’s business.
  6. Probationary Employee dismissal can be risky as well. Probation periods usually align with the legislation and procedural dismissal fairness timelines of six months. It is helpful that you assess the Probationary Employee for performance over this six-month period to ensure a paper trail to mitigate against risks involved should you have to terminate their employment.

There is significant risk at ending the employment of an employee, so seek advice and ensure the risk is being reduced as much as possible.

Procedural fairness and chances for employee improvement can often be supported with documentations such as Performance Improvement Plans, both of which can be accessed through Performance Advantage and Suzanne Diprose.

Employment Law can be an unclear and dubious area. As such, we recommend getting pre-dismissal guidance, having policies in place, establishing a paper trail of evidence, and following the Fair Work legislation. For more information, contact us at:

Suzanne Diprose, Director
0408 897 079