4. Termination of employment

A contract of employment may be lawfully terminated in a number of ways. If your incorporated association needs to terminate an employee's employment, it is important to find out how the employment can be terminated and what procedures the association must follow in effecting that termination. It is advisable to obtain legal advice before terminating an employee's employment.

Some of the ways in which employment may come to an end are set out below.

4.1 Termination by operation of the law

A contract of employment may be terminated by operation of law, for example, if an employee dies.

4.2 Completion of the contract of employment

A contract of employment for a fixed-term, or for the completion of a certain task/project, ends automatically at the end of the period, or on completion of the task/project.

4.3 Termination by notice

Either party may terminate a contract of employment by giving the proper period of notice of termination. The period of notice may be set out in the employee's contract of employment or an applicable award or agreement.

In the absence of a right to terminate by giving a specified period of notice, an employee is entitled to 'reasonable notice'. This can often be a relatively long period of time, and will vary depending on the circumstances, including the employee's age, seniority and length of service. As a minimum, associations must comply with the notice requirements set out in the Commonwealth Workplace Relations Act. These are:

Employees over 45 years of age with two or more years' continuous service are entitled to a further one week's notice in addition to the above minimum entitlements.

These are minimum entitlements only. What is reasonable notice will differ between employees and must be considered in the circumstances of a particular employee's employment.

Payment in lieu of notice can be made in accordance with the provisions of the Workplace Relations Act. Alternatively, where an award or agreement applies that includes notice requirements, payment in lieu of notice is possible if it is specifically provided for in the award or agreement.

4.4 Termination by reason of redundancy

If an incorporated association in the Commonwealth industrial relations system has genuine operational reasons for terminating the employment of an employee (i.e. reasons of an economic, technological, structural or similar nature relating to the employer's business), an employee is not able to claim for unfair dismissal.

It is advisable for employers to meet other requirements concerning notice and fairness, including procedural requirements to consult with employees and, in some circumstances, their representative.

State and Commonwealth awards and agreements will often deal with matters concerning redundancy, including issues such as consultation with the employee, notice to and consultation with unions, possible redeployment opportunities (providing the employee with another position), redundancy payments and benefits. There are provisions contained in the Western Australian Minimum Conditions of Employment Act, which generally require employers to consult with an employee as soon as reasonably practicable after a decision has been made to terminate the employee's employment due to redundancy. There are also some consultation requirements under the Commonwealth Workplace Relations Act.

Associations should be clear that a position is no longer required before terminating employment by reason of redundancy. If an employee's employment is terminated on grounds of redundancy in circumstances where this is not a genuine reason for the termination, the association may be exposed to a claim of unfair dismissal.

4.5 Termination by breach of contract

A party may terminate a contract of employment in some circumstances if the other party breaches the contract of employment. Not every breach of contract will justify the termination of that contract. Whether a particular breach justifies termination will depend on the nature of the breach and the particular circumstances of the case.

Upon the termination of employment, an employer generally must pay to that employee, in addition to any requirements with respect to notice, an amount representative of his or her outstanding annual and long service leave entitlements (if any).

4.6 Summary (instant) dismissal

Some contracts of employment make allowance for instant termination of employment, that is, termination without notice, where an employee has been found to have engaged in serious misconduct. To justify summary dismissal, an employee's conduct generally has to be serious enough to strike at the heart of the employment relationship, such as conduct that destroys the employer-employee relationship of mutual trust and confidence. Examples of serious misconduct that may justify summary dismissal (depending on the circumstances) include:

• theft;
• use of illicit drugs in the workplace;
• criminal conduct, for example, assault; and
• fraudulent conduct.

It is important that any allegation of serious misconduct is investigated thoroughly and fairly, and that any allegations are substantiated by reference to clear evidence before an association terminates an employee's employment summarily for serious misconduct. A fair investigation should include the employee being given the right to reply to any allegation.

Employees whose employment is terminated summarily will usually still be entitled to payment in relation to their outstanding annual and long service leave entitlements.

4.7 Unlawful termination

The unlawful termination provisions are part of the Commonwealth Workplace Relations Act, but also apply generally to employees in the State system. Termination of a contract of employment is unlawful if it is terminated for a prohibited reason, or if proper notice is not given. Regardless of whether they fall under the Commonwealth or State jurisdictions, associations must not breach these provisions.

Prohibited reasons include:

• union membership, reasonable participation in union activities, or non-membership;
• prohibited grounds of discrimination;
• temporary absence from work because of illness or injury; and
• absence from work during maternity or parental leave.

In addition to the above provisions, there are provisions in the Workplace Relations Act that require incorporated associations to comply with specific consultation requirements prior to terminating employment, including informing Centrelink if terminating 15 or more employees for reasons of structural or economic change.

4.8 Unfair dismissal

There are unfair dismissal laws in both the State and Commonwealth industrial relations systems. In Western Australia, the term 'unfair dismissal' refers to a termination of employment in circumstances that are 'harsh, oppressive or unfair'. Under the Commonwealth law, an unfair dismissal occurs when an employee's termination is 'harsh, unjust or unreasonable'.

Under both systems, the focus is on both the substantive 'fairness' of the decision to terminate the employment, and the process by which the decision to terminate employment was reached and communicated to the employee (procedural fairness). Key elements of procedural fairness include:

• notifying the employee of reasons for termination of employment;
• giving the employee an opportunity to respond before any final decision is made; and
• if employment is to be terminated for reasons, such as repeated misconduct or poor performance, advising the employee of the issues and giving the employee an opportunity to improve prior to termination (eg. by way of warnings, counselling).

Employees are generally entitled to be told if their work performance is not satisfactory, given a chance to implement change and be warned if their performance is still unsatisfactory.

When discussing performance issues with an employee, it is important that each party is clear on:

• the status of the discussions;
• the mutual expectations of each party; and
• agreed outcomes and consequences of the discussion.

Written records of discussions that are clear and simple and signed by both parties act as ongoing documentation of the process for both the employer and employee. It is essential for employers to keep well-documented and up-to-date records that may later be used to support decisions about an employee's ongoing employment.

4.8.1 Exclusions from access to unfair dismissal laws

Certain employees are excluded from access to unfair dismissal legislation.

Under the 'Work Choices' amendments to the Workplace Relations Act, only the employees of organisations that are constitutional corporations with more than 100 employees are able to lodge claims of unfair dismissal. This potentially means that employees of all but the largest incorporated associations would be excluded, but this does not permit associations to terminate employees for reasons that are discriminatory, e.g. because of race, ethnicity, religion, gender, sexual orientation etc.

In addition, the Workplace Relations Act generally excludes certain types of employees from making a claim of unlawful termination based on a failure to provide proper notice. These include an employee who, at the time of termination:

• was engaged under a contract of employment for a specified period of time, or a contract of employment to perform a specified task;
• was serving a probation period;
• was a trainee employed under a traineeship agreement, or an approved traineeship for a specified period;
• was a casual employee employed for less than 12 months; or
• was not covered by an award or Commonwealth agreement, and whose annual rate of remuneration was more than $101,300 (this figure is subject to indexation).

Under the Western Australian system, a non-award employee whose contract of employment provides for a salary exceeding $111,800 per annum is excluded from bringing an application of unfair dismissal.

4.9 Exit interviews

An exiting employee has valuable knowledge on the role in which they have been employed. Many incorporated associations will have an exit procedure, which invites the employee to give feedback on their role and on the organisation as a whole.

An exit interview or survey can also be used to:

• document the employee's assessment of the role and the resources required for adequately fulfilling that role;
• discuss any issues that the organisation should be aware of as an employer;
• invite the employee to provide feedback on organisational issues as a whole;
• check that arrangements have been made for completion of any existing workload, return association assets, make changeover arrangements or other exiting requirements; and
• provide the exiting employee with a sense of appreciation and acknowledgment of the contributions he/she has made to the association.