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.
- Termination by operation of law: for example if an employee dies.
- Completion of the contract: an employment contract 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.
- 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.
- 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.
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.
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.
An association tells its receptionist that he has been made redundant because it no longer needs a receptionist. A week after leaving, the ex-employee notices that the Association is advertising for a 'customer service officer', whose job description is virtually identical to his receptionist's job description. Depending on the circumstances, the termination of the receptionist's employment may give rise to a claim of unfair dismissal.
Summary (instant) dismissal
Some contracts of employment make allowance for instant termination of employment (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 include:
- 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.
Employees whose employment is terminated summarily will usually still be entitled to payment in relation to their outstanding annual and long service leave entitlements.
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;
- absence from work during maternity or parental leave; and
- filing a complaint, or participating in proceedings against an employer.
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;
- 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.
Certain employees are excluded from access to unfair dismissal legislation.
For information regarding exclusions under the national workplace relations system associations should contact the Fair Work Commission, or call on 1300 799 675.
Under the Western Australian system, a non-award employee whose contract of employment provides for a salary exceeding $153,900 per annum is excluded from bringing an application of unfair dismissal.
This figure is subject to change annually, so check the website for the current prescribed amount.
An exiting employee has valuable knowledge on the role in which they have been employed. Exit interviews invite the employee to provide information and feedback about:
- their role within the organisation;
- the resources required to adequately fulfil the role;
- issues the organisation should be aware of as an employer; and
arrangements that have been made for existing workloads and changeover or transition periods.