How To Avoid An Unfair Dismissal Claim

July 10, 2024

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In the 2021-22 period, the Fair Work Commission (FWC) processed 34,122 claim applications spanning various categories. Over 38%, or 13,096 applications, were for unfair dismissal claims. The high number of unfair dismissal claims shows how prevalent this issue is and how it can impact both employees and employers.

In this guide, we will provide tips on how to avoid an unfair dismissal claim. By the end, you will better understand the steps you can take to protect yourself and your business from potential legal action.

Have A Well-Drafted Employment Contract

A well-drafted employment contract is essential for setting clear expectations between the employer and the employee. This contract should comprehensively outline the standards of performance and conduct expected from the employee, providing a solid foundation for the employment relationship. By specifying roles, responsibilities, and company expectations in detail, both parties clearly understand what is required, reducing the likelihood of misunderstandings or disputes. Furthermore, documenting these expectations can serve as a vital reference point in the event of any disagreements or disciplinary actions, thus safeguarding the interests of both the employer and the employee.

In addition to the employment contract, companies must develop and maintain a comprehensive set of policies that detail the procedures to be followed when standards are breached. These policies should include clear guidelines on disciplinary actions and the process for addressing performance issues. It is crucial to ensure that these documents are communicated effectively and are easily accessible to all staff.

By doing so, employees are aware of the consequences of failing to meet expectations and the company’s steps to address such issues. Also, keeping copies of employment contracts and ensuring that employees acknowledge receipt of company policies can provide a strong defense in the event of an unfair dismissal claim, demonstrating that the company has taken reasonable steps to inform and guide employees throughout their employment.

HR & Equality Training

SMEs lacking an understanding of employment law or without access to an internal HR department can face significant challenges when confronted with allegations of unfair dismissal. Without proper understanding and procedures, employers risk making decisions that could be seen as hasty or uninformed, leading to potential legal repercussions.

Employers must ensure that any dismissal is thoroughly thought through and not a reactionary measure to an employee’s actions. Employers must take the time to document performance issues, provide warnings, and offer support for improvement before considering termination. Moreover, having a clear, well-communicated process in place can significantly protect against claims of unfair treatment.

Training for all staff members involved in the dismissal process is critical to ensuring such actions are conducted legally and fairly. Comprehensive training in employment law and the company’s specific procedures means those responsible for making dismissal decisions are well-informed about legal requirements and best practices.

Also, offering all staff equality and discrimination training can help create a more inclusive and respectful workplace environment. This proactive approach reduces the likelihood of discriminatory issues arising and potentially avoids the need for a tribunal by demonstrating the company’s commitment to fairness and legal compliance. Investing in proper training and understanding could save an SME from costly and time-consuming legal disputes.

Ensure You Have Fair Reasons for Dismissal

Under the Fair Work Act 2009, there are five fair reasons for dismissal that employers must adhere to ensure legality and fairness:

  • Conduct/Misconduct: This reason pertains to an employee’s behaviour that is deemed unacceptable or inappropriate. Examples include violating company policies, engaging in dishonest activities, or exhibiting disruptive behaviour. Employers must document instances of misconduct and provide the employee with warnings or opportunities to improve before proceeding with dismissal.
  • Performance: When an employee consistently fails to meet the required standards of their role, despite receiving guidance, support, and opportunities to improve, dismissal on the grounds of performance may be justified. Employers must ensure a clear performance management process, including regular reviews and documented feedback.
  • Redundancy: Redundancy occurs when an employer needs to reduce its workforce due to business restructuring, technological advancements, or a decline in work demand. Employers must follow a fair redundancy process, consider all alternatives, and provide appropriate consultation and support to affected employees.
  • Statutory Illegality or Breach of a Statutory Restriction: This reason applies when continued employment would result in the employee or employer breaking the law. An example is when an employee loses a necessary qualification or work permit that is essential for their role. Employers must verify and document these requirements to support this reason for dismissal.
  • Some Other Substantial Reason: This is a catch-all category for situations not covered by the other reasons but considered fair and substantial. Examples might include a significant conflict of interest or the breakdown of trust and confidence. Employers must carefully assess and document the specific circumstances to justify this reason for dismissal appropriately.

You can protect yourself against legal risks and maintain a respectful and lawful workplace by applying these reasons correctly and fairly.

 Issue a Warning to Your Employee

Following a structured approach that emphasizes two key stages, informal and formal warnings, is imperative when addressing performance issues. Initially, an employer should engage the employee in an informal conversation to discuss areas of concern and provide constructive feedback to facilitate improvement. This dialogue should be supportive, identify specific performance gaps, and mutually agree on a plan of action. Additional resources such as training opportunities or mentoring can also be beneficial at this stage. Documenting this conversation ensures a clear record of the issues discussed and the actions agreed upon should further steps become necessary.

If performance does not improve following an informal warning, the next step is to issue a formal written warning. This document must outline the specific performance issues, their impact on the business, and the steps the employee must take to meet expectations. It should also include a timeline for improvement and detail any further support offered to the employee. Formal warnings should be delivered privately, allowing employees to express their views and ask questions.

Employees should be aware of the consequences of continued underperformance, which could ultimately lead to dismissal. This transparent and systematic approach not only safeguards the business from legal complications but also provides a fair opportunity for employees to rectify their performance issues.

Allow Your Employee to Respond

Once you have sent a warning to an employee, it is important to allow them the opportunity to respond. This could include scheduling a meeting for the employee to discuss their perspective and any challenges they may face in meeting expectations. Listening to your employee’s thoughts and concerns can provide valuable insight into the root cause of underperformance and allow you to work together toward a solution.

Monitor Progress and Provide Support

Disciplinary meetings often present a challenging experience for employees. They primarily focus on matters of underperformance and the possible repercussions of failing to enhance their performance. These conversations can stir stress and foster feelings of anxiety and uncertainty. It is crucial to handle such meetings with utmost sensitivity and a distinct goal, aiming to assist the employee in recognizing the areas requiring improvement.

While the Fair Work Act does not mandate offering a support person during these meetings, providing this option is a good practice. Allowing a support person to be present can ease the emotional burden on the employee, ensuring they feel supported during a challenging time.

Also, it helps create a transparent and fair process, demonstrating the employer’s commitment to handling the situation considerately and professionally. This additional layer of support can foster a more constructive dialogue and assist in working towards a solution that benefits both the employee and the organisation.

Final Thoughts

Handling disciplinary meetings and performance-enhancing conversations with sensitivity and support is essential. Demonstrating a genuine commitment to employee welfare fosters a positive working environment and mitigates the risk of disputes escalating to unfair dismissal claims. Notably, 76% of unfair dismissal cases involve monetary compensation paid by the employer. A majority of the cases are settled by conciliation. You can avoid these costly and time-consuming legal proceedings by adopting fair practices and maintaining open communication channels.

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