Underperforming employees can affect the bottom line and negatively impact a workplace culture. They drain management time and energy, lower customer satisfaction and undermine team morale. You may have reached a point where terminating an unsatisfactory team member’s employment becomes necessary. However, terminating an employee is not simple and you must manage the process so that the ex-employee does not have grounds for an unfair dismissal claim.
What is unfair dismissal?
Employees who have completed a minimum employment period are entitled to bring an unfair dismissal claim. A minimum employment period for a business with less than 15 staff is 12 months, for larger businesses it is 6 months. You should note these key dates for each employee.
Unfair dismissal occurs when an employee is terminated from employment in an ‘harsh, unjust or unreasonable manner’. It is not sufficient that you as an employer had a valid reason for terminating the employment. How the termination was carried out, whether the employee has had the opportunity to respond to and improve performance related issues, and the personal circumstances of the employee are all relevant factors.
If the ex-employee can show that their dismissal met any one of the three criteria of ‘harsh, unjust or unreasonable’ then the dismissal may be found to be unfair.
Poor performance vs misconduct
The two most common grounds for dismissal are poor performance and misconduct. There is a difference and the reason for the dismissal is important because employees have different entitlements to notice, pay and long service leave.
Employee misconduct is a deliberate breach of expected standards of behaviour as set out in workplace policies and procedures or their contract of employment. Poor performance is best characterised as conduct, which is neither wilful nor deliberate, but which does not meet an employer's expectations. The line between the two is not always clear, especially in cases where poor performance extends to a failure to follow relevant procedures which may relate to work health and safety.
As a rule of thumb, if an employee chooses not to comply with workplace expectations it likely to be misconduct. If an employee is unable to comply with workplace expectations due to lack of skills or training, the behaviour can be best characterised as poor performance.
Protecting yourself against an Unfair Dismissal Claim
1. Risk management
When defending an unfair dismissal claim, you must be able to show there was both a valid reason for the dismissal and that procedural fairness occurred in the termination of an employee. You will be greatly assisted in defending a claim if, as part of your risk management processes, you have:
- Clearly documented the nature of the job or function an employee was required to perform, your expectations and the key performance indicators (KPIs);
- Held periodic employee reviews at which those yardsticks were updated;
- Published and communicated workplace policies and procedures that set out the consequences of breaching internal rules and regulations;
- Ensured the employee agreed in writing to comply with the workplace policies and procedures; and
- Applied the policies and procedures consistently across your organisation.
If, an employee has underperformed, you will be able to demonstrate this against established metrics and show a termination was ‘just’.
2. Performance management
To ensure procedural fairness you must act ‘reasonably’ in the way you investigate and manage an underperformance issue as well as the nature of the conclusions you reach to terminate an employee.
Part of the process will involve giving the underperforming employee notice of their conduct. Written warnings are best. These should take the form of a discretely prepared letter addressed to the employee and issued in a private meeting where its contents can be discussed. Importantly, the employee must be invited to respond to the warning either personally or in writing. If the employee challenges the warning, you must conduct a proper workplace investigation.
There is no fixed number of warnings that you must give. However, the Fair Work Commission will look at the number and nature of the warnings given by an employer when assessing whether the termination was ‘harsh, unjust or unreasonable’.
Ensure you keep a record of every written warning letter given to the employee along with the minutes from the meeting where the letter was issued. This creates a contemporaneous record for you of the steps taken to discipline the employee in the event that the employee is subsequently terminated.
3. Performance management plan
A written warning letter should include an action plan of what steps the employee needs to take to remedy the issue and in what timeframe as well as what the employer will do to assist the employee. Employers should keep written records of how the performance management plan was implemented and its outcomes.
4. Termination procedure
If termination becomes necessary, it should occur face-to-face and in private. The employee must have the opportunity to have a support person at the meeting. A termination letter should be provided at the meeting, setting out the formal details of the employee’s termination and include:
- The reason for the employee’s termination, which should be brief and direct (ensure that there is a valid and concrete reason for the dismissal of the employee);
- The steps taken previously to discipline or correct the employee (including details of any written warnings);
- The length of the notice period that the employee is entitled to according to the employees’ contract or applicable legislation;
- Whether the employee is required to work during their notice period, or whether they will be paid in lieu of notice;
- The effective date of the employee’s termination (either immediately or the day after the last day of the employee’s notice period if they are required to continue working); and
- The amount of any unpaid accrued entitlements that will be paid to the employee on termination.
When you conduct the termination meeting:
- You should give the employee (and their support person) time to read the termination letter so that they understand the situation;
- Keep any subsequent discussion concise and factual. The message should be simple and consistent, i.e. the employee is being terminated because they have failed to address long-standing problems of which they were well aware;
- Notes should be taken during the termination meeting to create a record of what occurred in the event of future action by the employee;
- Ensure that the employee has the opportunity to respond if they are terminated; and
- Discuss logistical issues such as instructing the employee when and how to return work equipment and deal with existing work matters.
Depending on the personality of the employee and the nature of their role within your organisation, it may be appropriate to take steps to ensure security of yourself, other employees and business property. At a minimum, we recommend that you remove the employee’s access to computer systems and disable their access to work buildings and vehicles when their termination takes effect.
Summary
If you have a formal termination plan you can significantly reduce the risk of unfair dismissal claims. Seek advice early on if you anticipate problems and get professional assistance in conducting workplace investigations, drafting policies and procedures and ensuring employment contracts are compliant and comprehensive. This will minimise the time it takes to terminate an underperforming employee and the damage they can cause your organisation.
