Five common myths around termination of employment
The award doesn’t apply because we pay above the award and restraints are never enforceable. Have you heard this before?
In this article, we discuss another five workplace myths and provide further clarity on the rights and obligations of employers and employees.
‘I need to give an employee three warnings before terminating their employment’: Giving three warnings before terminating an employee’s employment is not required by law. And in the case of employees that fall outside of the unfair dismissal jurisdiction, prior warnings may not even be a relevant consideration.
However, for employees covered by the unfair dismissal jurisdiction, it is true that previous warnings about an employee’s conduct or performance will assist an employer in defending an unfair dismissal claim to prove that the termination has not been harsh, unjust or unreasonable.
Whilst we recommend employers warn their employees that if their conduct or performance does not improve their employment might be terminated, there is no requirement on the number of warnings that an employer needs to give before terminating an employee’s employment.
There will also be occasions when an employer can dismiss an employee without previous warnings, such as for serious misconduct. Additionally, company policies may set out a specific termination process, including the number of warnings that employers may need to issue before termination. Ideally however, disciplinary policies should allow employers the discretion to adopt processes as appropriate in each circumstance as discussed below.
Termination policy
‘I need a termination policy’: Employers should not have termination policies that establish set processes that must be followed strictly when terminating an employee’s employment.
Employers that have a disciplinary policy should ensure that the policy has enough discretion to allow them to adopt processes as appropriate in each circumstance.
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The risk of having set disciplinary processes is that, if not followed, despite the employer having a valid reason for terminating an employee’s employment, the employee may argue that they have not been afforded procedural fairness.
‘I have to offer an employee the opportunity to bring a support person to every meeting’: Under the Fair Work Act 2009 (Cth) (FW Act), an employer does not have a positive obligation to offer an employee the opportunity to bring a support person to every meeting.
Support persons are relevant for employees who fall within the unfair dismissal jurisdiction. This is because the FW Act states that in considering whether a dismissal was harsh, unjust or unreasonable, the Fair Work Commission must take into account any unreasonable refusal if an employee requests to bring a support person to any discussions relating to dismissal.
Despite this, it can be considered best practice to offer employees the opportunity to have a support person present at meetings that do not involve dismissal, or where employees are not able to make unfair dismissal claims in the first place.
Restraints of trade
‘Restraints are not enforceable’: Restraints of trade seek to prevent employees from engaging in a range of competitive activities during and after their employment. It is common for more senior employees to have contracts that contain restraint clauses.
Whilst it is true that the starting point at law is that post-employment restraints of trade are ‘void’ (or ‘unenforceable’), courts can (and often do) find that a restraint is valid and enforceable if the employer has established that, at the time the clause was entered into, the clause was reasonable to protect the employer’s legitimate business interests and the scope of the restraint is not wider than would be necessary to protect those interests.
Amongst other considerations, when determining what is reasonable to protect the employer’s legitimate business interests, the relevant court will consider the scope of the restraint by reference to its duration and any applicable geographical area. A court is unlikely to enforce a restraint of trade that is considered too long or that is, from a geographical perspective, too wide.
Enforceability may also depend on the governing law that applies to the restraint, with proceedings issued in New South Wales giving employers the benefit of the Restraint of Trade Act 1976 (NSW) which allows courts additional discretion when considering the enforceability of a restraint.
‘Terminating an employee’s employment on the basis of serious misconduct is easy’: This is not necessarily the case, particularly for employees who have access to the unfair dismissal jurisdiction. Finding that an employee has engaged in serious misconduct carries a high threshold. Even when the threshold has been met and there is a valid reason for dismissal, an employer cannot simply dismiss the employee without following a fair process.
The employer will be required to put the allegations to the employee for a response. Depending on the nature of the allegations and any witnesses, the employer may suspend the employee, conduct an investigation into the allegations and allow the employee to respond to the allegations. Failure to follow a procedurally fair process can expose the employer to various legal risks, such as an unfair dismissal claim.