Your HR System and Smarts for SME Success

How to avoid an unfair dismissal claim

An unfair dismissal claim can often follow the termination of an employee. So, what happens if you wind up before the Fair Work Commission?

It’s not difficult for an employee to make an unfair dismissal claim – after all, it only costs $68.60 to lodge with the Fair Work Commission (FWC). Plus, the employee doesn’t even need legal representation.

Which is why having a HR information system that guarantees compliance and sets out performance management guidelines for you to follow can save a lot of time, money and stress.

A good HR system will make sure you have two key elements covered when terminating an employee:

  1. You have a valid reason for ending the employment.

Employees are usually terminated for either serious misconduct, misconduct or poor performance.

Valid reason is often more easily established in serious misconduct cases because there is a clear cut reason for the dismissal such as theft, intoxication, making threats to a coworker or disparaging the employer.

However, it can be more difficult to pin point a valid reason for misconduct or poor performance. This is because the dismissal is usually for a variety of reasons such as not hitting targets, not doing certain aspects of the job properly, or failing to achieve the corporate objectives of your business. These things together can form a valid reason.

  1. You afford the employee procedural fairness.

In short, this means the dismissal is fair and reasonable – mainly, you inform the employee of your concerns and give them an opportunity to improve before moving towards termination.

Don’t forget, you can also avoid a claim if the termination happens during the minimum employment period. For businesses with more than 15 employees it’s six months, while businesses with less than 15 it’s 12 months.

To help you keep track, DiffuzeHR diarises probationary periods for each employee. This way you know exactly when you can part ways without risk of an unfair dismissal claim if the appointment is not working out.

But, if someone does lodge a claim against you, here’s what you need to know.

Firstly, what is an unfair dismissal?

The national workplace relations tribunal outlines: an unfair dismissal occurs where an employee makes an unfair dismissal remedy application and the Fair Work Commission (FWC) finds that:

  • the employee was dismissed, and
  • the dismissal was harsh, unjust or unreasonable, and
  • the dismissal was not a case of genuine redundancy, and
  • the dismissal was not consistent with the Small Business Fair Dismissal Code, where the employee was employed by a small business.

Secondly, how can you defend an unfair dismissal claim before the FWC?

These are the key ways to prove you had valid reason and procedural fairness:

  • Demonstrate you clearly set out what the performance requirements were to the employee, which they did not meet.
  • Prove those performance requirements were reasonable, and that they were applied consistently.
  • Show you met with the employee and outlined their employment was in jeopardy because of the allegations of poor performance.
  • Prove the employee had an opportunity to respond and improve, including access to additional counselling and/or training.
  • Illustrate the employee was allowed to bring in a union official or support person of their choice.
  • Indicate the employee knew that their employment was potentially at risk via written correspondence. This constitutes a warning. Remember, it’s not law to provide three strikes, although it’s a good rule of thumb for showing procedural fairness in a performance-based termination.

Not to be relied upon as legal advice.



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Barry Lehrer

Having run my own small business for over twenty years, I understand one of the biggest challenges is protecting your business from potentially damaging personnel or HR issues. That’s why I developed Diffuze.

Category: HR Admin, HR Legal

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