Australia: Terminating an employee -reducing the risks of unfair dismissal claims

Professional Updates Employment Law
Last Updated: 10 June 2011
Article by Brendan Taylor
  • Recent cases provide useful background on concept of unfairness in dismissal cases
  • Vital to have detailed records to form the basis of reasons for dismissal
  • Fairness is relevant in the reason for dismissal, but also in the process undertaken by the employer

The concept of 'a fair go all round' is the driving force behind the unfair dismissal legislation as enshrined in the Fair Work Act 2009 (Fair Work Act).1

This implies that the interests of all parties involved in a dispute over the termination of an employee must be balanced against each other.2 Specifically, the employer's interest in conducting an enterprise often needs to be balanced against protection of the employee from arbitrary termination.

Established case law surrounding unfair dismissal demonstrates that in deciding whether a dismissal is unfair, Fair Work Australia will consider not only whether a 'valid reason' existed for the termination of an employee but also whether the employee was afforded procedural fairness. In other words, whether the process that the employer undertook in coming to its decision to terminate was fair. It will also examine (in accordance with the Fair Work Act) whether in the circumstances in question, the dismissal was 'harsh, unjust or unreasonable'.

In the case of a small business, the court will also look at the Small Business Fair Dismissal Code.

Not all employees have unfair dismissal rights

The following general categories of employees are excluded from the federal unfair dismissal jurisdiction:

  • an employee who has not been 'dismissed' within the meaning of the Fair Work Act3
  • an employee who is not a 'national system employee' employed by a 'national system employer' as defined in the Fair Work Act.4 However with the recent referral by the states (with exception of Western Australia) of the vast majority of their industrial relations powers, this distinction has little relevance in the private sector other than in WA. In WA, employees of sole traders, partnerships and other employers who are not 'constitutional corporations', cannot access the federal unfair dismissal jurisdiction and will instead need to access their state system
  • an employee earning more than the high income threshold (currently $113,800) if not covered by an award, enterprise agreement or certain instruments which are listed in the transitional provisions5
  • an employee who has not lodged their application within 14 days (other than in 'exceptional circumstances')
  • an employee who has not served out a 'period of employment' for a 'minimum employment period' (as defined in the Fair Work Act6). It usually means 12 months for employees of 'small business employers' and six months for other employees
  • an employee dismissed due to 'genuine redundancy'. This term has a specific meaning in the Fair Work Act.7 For example a redundancy will not be a 'genuine redundancy' unless, among other things, the employer considered redeployment options
  • a casual employee not engaged on a regular and systematic basis with a reasonable expectation of continuing employment.

The Small Business Fair Dismissal Code

The Small Business Fair Dismissal Code8 (a Code created pursuant to the Fair Work Act) sets out some clear guidelines for 'small business employers' (businesses employing fewer than 15 employees) who wish to terminate an employee. It is intended that small businesses should have protection from unfair dismissal claims if they follow the Code or, in the words of Fair Work Australia, if 'compliance with the code is established on the part of a Small Business the [unfair dismissal] application must necessarily be dismissed without further consideration'.9

Even if relying on the Code, a small business employer will still need to have a 'valid reason' for a termination. However the Code allows the small business greater flexibility in respect of its obligations to ensure procedural fairness. For example, in a dismissal for a reason other than serious misconduct, the Code stipulates that an employee must have been previously warned 'verbally or preferably in writing' that they risk dismissal if there is no improvement. This is in contrast to findings of Fair Work Australia against larger businesses that an absence of written warnings is a denial of procedural fairness.10

Where a dismissal relates to serious misconduct, according to the Code, the employee does not need to be warned or given notice. Serious misconduct is described in the Code as including 'theft, fraud, violence, and serious breaches of occupational health and safety procedures'.

Fair Work Australia has produced a 'checklist' and the Code states that a completed checklist may be evidence of compliance with the Code. The value of the checklist has, however, been criticised by a Member of Fair Work Australia, O'Callaghan SDP, as being 'of dubious value as a determinant of whether the code has been complied with'.11

Given the Senior Deputy President's findings, small businesses would be well advised, in addition to using the checklist to provide and keep records of its compliance with the Code, including letters inviting the employee to disciplinary meetings, minutes of disciplinary meetings, warning letters and termination letters.

De Leon v Spice Temple Pty Ltd

Ms de Leon was employed as a full-time Reservations Assistant at the Rockpool Bar and Grill Restaurant in Sydney. Without warning or notice, Ms de Leon was called into a meeting with the General Manager and the Administration Manager.

At the meeting Ms de Leon was advised of a complaint which arose following a telephone inquiry from a major client about who had designed Rockpool. As Ms de Leon, who had taken the call, did not know the answer and as no one was available to answer the question, she offered to call the inquirer back or suggested that he might call back later.

Ms de Leon gave evidence that the General Manager did all the talking in the disciplinary meeting and that the meeting lasted less than ten minutes. Ms de Leon also gave evidence that she was too confused to provide an immediate response to the allegations and had not been asked if she would like to have a support person with her.

Rockpool submitted to Fair Work Australia that the phone incident was unacceptable and Ms de Leon was dismissed for misconduct. She was not provided with a dismissal letter.

Fair Work Australia found unfair dismissal

While Rockpool contended that Ms de Leon had been dismissed for misconduct, Fair Work Australia found there was no misconduct and in fact Ms de Leon's conduct did 'not come "within a bull's roar" of the commonly accepted definition of misconduct'.12

Rockpool had not investigated the incident and had concluded without any foundation that Ms de Leon's conduct was rude.

When the Administration Manager had organised the meeting with Ms de Leon, he had already been directed by the restaurant owner some hours before the meeting to dismiss Ms de Leon. Therefore 'the consequential meeting with the applicant was nothing more than a complete sham. The decision had already been made'.13

The unfairness was exacerbated because Ms Leon was:

  • not told of the reason for the meeting and was effectively 'ambushed' by the allegation that she had behaved inappropriately on the telephone
  • given no reasonable opportunity to respond to the allegation of misconduct
  • given no opportunity to have a support person present and
  • given no chance to compose herself and respond appropriately or at all to the allegation.

Rockpool's policy of not providing employees with copies of written warnings or dismissal letters unless requested, was totally unacceptable and a denial of procedural fairness.

Fair Work Australia considered that 'reinstatement is the primary remedy for an unfairly dismissed employee'14 but did not consider reinstatement to be appropriate in this case and instead awarded 12 weeks' pay.

Vong v Sika

In Vong v Sika Australia Pty Ltd [2010] FMCA 1021 (Vong v Sika), Mr Vong was a long serving employee at Sika, a producer of chemical products. Mr Vong attended a disciplinary meeting with Sika's HR Manager and brought along his union organiser. Before the HR Manager would begin the meeting she insisted that the union organiser sign a form to confirm that he was an observer only. He refused and the meeting broke down. The next day, the HR Manager again attempted to convene another disciplinary meeting and threatened to call the police when Mr Vong again brought along the union organiser. This meeting also did not continue. Mr Vong was later terminated.

The Federal Magistrates Court held that Mr Vong:

  • had a right to have the union representative present at the disciplinary meeting to represent and protect his interests and
  • was dismissed as a direct result of his insistence on having his union representative present as his representative at the disciplinary meeting.

The Federal Magistrates Court ultimately found that Sika's dismissal of Mr Vong breached the freedom of association provisions contained in the Workplace Relations Act 1996 (WRA), the forerunner of the Fair Work Act, which applied at the time.

While the freedom of association provisions as they were called in the then WRA, provide a different remedy to that of unfair dismissal, the above decision may be indicative of a judicial attitude towards representation at disciplinary meetings.

Section 387 of the Fair Work Act provides that one factor to be taken into account in determining whether a dismissal is unfair is whether an employee was denied having a support person present to assist at any discussions relating to the dismissal. Incidentally, such a factor was not specifically identified in the equivalent former unfair dismissal provisions in the Workplace Relations Act, as relevant to whether termination was unfair.

The language of s 387 of the Fair Work Act states a support person may 'assist in discussions'. What that expression means is unclear. The Small Business Fair Dismissal Code states that a support person should not be a lawyer 'acting in a professional capacity'.

Vong v Sika (albeit a decision under the WRA in relation to a different form of remedy) appears to have elevated the role of a support person who is also a union organiser to that of a representative entitled to (fully) speak for the employee at the disciplinary meeting. It will be interesting to see what relevance the Vong v Sika decision may have, if the issue of the right to representation in disciplinary proceedings is agitated in the context of an unfair dismissal claim under the Fair Work Act.

Lessons for employers

Employers should bear in mind the following.

Above all, make sure there is a valid reason for termination.

Investigate an incident fully before disciplining or terminating an employee.

Don't ambush an employee with a disciplinary meeting. An employee should preferably be invited to a disciplinary meeting by written invitation. The invitation should state the matters of concern or allegations against the employee and invite the employee to bring a support person.

At a disciplinary meeting allow the support person to assist in discussions (but not dominate them). Set the ground rules with the support person before the meeting.

Make sure that the employee is aware of everything that may inform a decision to take disciplinary action.

If the employee is warned, they should be given a written warning letter stating why they have been warned and detailing a plan for improvement. The warning letter should state that, if the plan is not met, further disciplinary action (including termination) may result. The warning letter should be created following the meeting and cover off the issues discussed.

If the employee is terminated they should be provided with a termination letter stating the reason for termination. It is generally advisable not to give the letter to the employee at the end of the meeting, on the basis that this may be evidence that the decision was already made before the meeting. Generally it is best practice to provide the termination letter within 24 hours of the termination meeting.

At the disciplinary meeting, always ask if there is any reason why the employee should not be terminated, to ensure that there is not an unknown circumstance (for example, an illness) which may throw the fairness of the termination into doubt.

Create a paper trail: provide termination letters, warning letters, invitations to disciplinary meetings, keep minutes of disciplinary meetings.

Brendan Taylor can be contacted on (02) 9233 5544 or by email at bjt@swaab.com.au.

Meritas is an established global alliance of independent, full-service law firms. Swaab Attorneys is a member of the Meritas network.

Notes

1. See s 381 (2) Fair Work Act and Re Loty and Holloway v Australian Workers Union [1971] AR NSW 95

2. See Owens R, Riley J and Murray J, 2011, The Law of Work (2nd Edition), Oxford University Press, p 483

3. s 386 Fair Work Act

4. ss 13 and 14 Fair Work Act

5. s 36 Fair Work (Transitional Provisions and Consequential Amendment) Act 2009

6. ss 383 and 384 Fair Work Act

7. s 389 Fair Work Act. See also Ralph S, 2009, 'Operational reasons to justify retrenchments replaced by genuine redundancy requirement', Keeping good companies, Vol 61 No 8, pp 492-494

8. Small Business Fair Dismissal Code and checklist available at www.fairwork.gov.au/ Templatesformschecklists/Small-Business-Fair-Dismissal-Code-2011.pdf [5 April 2011]

9. Mr N v The Bakery [2010] FWA 3096 , para [12]

10. Michelle De Leon v Spice Temple Pty Ltd [2010] FWA 2497

11. Mr NvThe Bakery, op cit, para [74]

12. op cit, para [33]

13. op cit, para [27]

14. op cit, para [37]

Swaab Attorneys was the highest ranking law firm and the 13th best place to work in Australia in the 2010 Business Review Weekly Best Places to Work Awards. The firm was a finalist in the 2010 BRW Client Choice Awards for client service and was named the winner in the 2009 Australasian Legal Business Employer of Choice Awards.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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