How to minimise risk of litigation when terminating an employee for misconduct

With the historic Royal Commission into banking wrapping up recently, the major financial institutions of Australia have seen a spate of unfair dismissal rulings levelled against them.

The significant increase in unfair dismissal claims is largely due to the Australian Banking Association’s new “conduct background check” protocol, which requires companies to share the reasons why an employee ended his or her previous employment with prospective employers.

Business owners can never fully eliminate the risk of an unfair dismissal claim. However, carrying out a correct “show cause” procedure will ensure that business owners minimise the risk of successful litigation.

Examples of conduct that may amount to serious misconduct include theft, dishonesty, sexual harassment bullying, discrimination and breaches of workplace health and safety. If the employee’s conduct falls into one of these categories, it is strongly recommended that business owners follow the below steps to minimise the risk of successful litigation against the business.

1. Undertake a thorough investigation

Terminating an employee needs to be a considered decision, not an impulsive one. You must thoroughly investigate the allegations that have been made against the employee.

Prior to commencing an investigation, a business owner should seek legal advice as to how the investigation should be conducted. This may also have implications as to whether the investigation report will be the subject of legal professional privilege.

Before issuing the employee with a “show cause” notice, the employer must satisfy the findings of the investigation warrant an explanation from the employee.

2. Meet with the employee

This is an opportunity to present the worker with the “show cause” notice, which sets out the alleged conduct engaged in by the employee and how that conduct may have breached material terms of the employment agreement and/or company policies.

The “show cause” notice will allow the employee one to five days to respond, depending on the nature of the conduct. Always provide the employee with an opportunity to have a support person present at this meeting.

3. Stand down the employee

Whether an employee should be stood down following the employer providing the “show cause” notice will depend on:

  • the nature of the allegations;
  • the size of the employer (i.e. is there another area that the employee can work during the investigation); and/or;
  • whether the accused employee’s attendance at the workplace will impact the impartial nature of any ongoing investigation (i.e. the prospect of retaliation or intimidation by the accused).

An employee should be stood down, on full pay, when the allegations are of a serious nature.

4. Arrange a second meeting

Once the written response has been received and considered by the employer or their legal representative, the employer should call a second meeting with the employee whereby his or her response to the allegations are discussed. At this time, the employer may determine that:

  • the employee should be given further time to provide additional information;
  • that the ongoing employment relationship is untenable;
  • that the employee has no case to answer; or,
  • the employee should be issued with a warning, which in some cases is a first and final warning.

If the employer is satisfied the alleged serious misconduct occurred, then the employer can provide the employee with a notice of termination. Again, the employee should be afforded an opportunity to have a support person present at this meeting.

Of course, this is a process no employer ever looks forward to undertaking, but these recommended steps will minimise the risk of successful litigation.

Lachlan Thorburn, employment and litigation expert, Bennett & Philp Lawyers

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