This is the tenth part of a series of employment law articles by Whitehall Workplace Law discussing some of the legal and practical matters small businesses ought to consider in relation to the employment life cycle of an employee.
Part nine of the series, published on 22 January, looked at personal liability for breach of employment laws. This piece looks at how to successfully manage termination of employment issues. Whilst there are a number of risks to be navigated when managing termination of employment, employers do have the capacity to act when necessary
Employers should determine whether the relevant employee/s earn above the high-income threshold. For the financial year 2017-2018 this is $142,000.
Where an employee earns less than the high-income threshold or earns more than the high income threshold but they are covered by a modern award or an enterprise agreement applies to them, then (subject to some other exclusions) they will be able to make an unfair dismissal claim pursuant to the Fair Work Act 2009.
To make an unfair dismissal claim, the employee must also have been employed for the “minimum employment period” (which is 12 months if the business is a “small business employer” with fewer than 15 employees, or otherwise 6 months for larger employers). An employee will also be precluded from bringing a claim for unfair dismissal if the employer can establish that there was a genuine redundancy. This requires the employer to comply with any consultation obligations and consider redeployment.
Where an employee is protected by unfair dismissal laws, the employer must have a valid (sound and defensible) reason for the termination, allow the employee an opportunity to respond to the issues before the employer makes a final decision and consider the likely impact on the employee’s particular circumstances. Employers often fail and breach the unfair dismissal laws by implementing a rushed or ill-fitting standardised approach which fails to take into account the specific issues relating to the employee concerned. Where the Fair Work Commission (FWC) determines that an employee has been unfairly dismissed, reinstatement or compensation up to six months’ pay (capped at $71,000) can be ordered.
Adverse action and discrimination
Employers should avoid taking action to terminate an employee’s employment in response to their exercise, or proposed exercise, of any workplace right. This would include, for example, dismissing an employee because they raised a complaint relating to their pay rate or overtime pay. Similarly, it would be unlawful to terminate an employee’s employment because of an attribute protected under discrimination laws. In some cases, it can be lawful to terminate a person’s employment because they are unable to perform the inherent requirements of their pre-injury role following an injury, but this needs to be carefully managed. There is no cap on compensation for adverse or discrimination claims.
Employment contract and policies
Before taking steps to terminate an employee’s employment, employers should examine the relevant termination provisions as set out in the relevant contract. If there is no written contract a series of implied terms will apply, which in certain circumstances can provide generous rights to employees. It will also be necessary to check any relevant policies, particularly if they provide enforceable rights to the employee.
Depending on the nature of the employer’s business and work performed by the employee, the employee’s compliance with post-employment restraints may be another relevant issue. Employers may not be able to enforce post-employment restraints where the employer commits a fundamental breach of the employment contract, for example by providing insufficient notice or failing to pay a bonus or commission.
Jeremy Cousins, Principal, Whitehall Workplace Law