Termination of employment is an area of law that should not be taken lightly, as seen in the recent High Court decision of Elisha v Vision Australia [2024] HCA 50 concerned the award of significant damages against the employer for a “sham” termination.
The Decision makes it incumbent on employers to make sure that their termination of employment process and procedures are correct.
In this article we will discuss some common forms of sham termination of employment and how to avoid the expense and embarrassment as an employer of being brought before the Fair Work Commission and suffering an award of damages. For employees, we will flag the signs to look out for if you have been, or are in the process of being unfairly terminated.
Sham Redundancies
Sham redundancies are when an employee is dismissed from employment on the grounds of redundancy to disguise another unlawful reason. For example, because the employee has made complaints about matters relating to their employment, personal conflicts or temporary illness or injury. A strong indicator that the redundancy is a sham will be where the actual position is filled by someone else or advertised following the termination of employment. In other words, there was no genuine change of operational requirements.
To avoid any characterisation of a non-genuine redundancy an employer should be able to provide evidence that:
- There is a genuine operational change where the role is no longer required (such as an internal report or review of operations).
- There has been consultation with the employee as required by any relevant award or agreement.
- There has been consideration of alternative employment within the organisation.
- That the choice of employee was non-discriminatory.
Sham Investigations About Performance and Workplace Conduct Issues
Where an employer does in fact have genuine grounds to consider dismissing an employee on performance or conduct grounds, it is essential that the investigation and termination of employment process is conducted lawfully.
A failure to do so, whether through deterioration of the relationship, urgency or financial pressures will often result in protracted and expense dispute resolution or even court proceedings. An investigation or process which is conducted with the purpose of reaching a pre-determined outcome will often lead to a claim of adverse action or an unfair dismissal. Good grounds or reasons for dismissal can be defeated by a flawed process and failure to afford procedural fairness.
To avoid such an outcome, employers should afford substantive and procedural fairness and conduct themselves with transparency, as far as possible.
This includes:
- Engaging where possible external and professional investigators to interview and take statements from relevant parties without any preconceived outcomes.
- Providing a copy of the report to the employee.
- Telling them that the report goes to their employment status and that discipline, suspension or termination may be an outcome.
- Asking them to consider and respond to the report (and proving a reasonable time to do so).
- Giving notice of a meeting to discuss the report and response.
- Allowing a support person to attend.
- Allowing the employee to properly respond to the allegations against them formally and in writing.
- Giving proper consideration to the response. This means conducting the meeting properly and recording or taking accurate minutes of the meeting.
- Informing the employee of your consideration of the response and your ultimate decision.
Serious misconduct where there are no doubts about the employee’s breaches can be treated differently, for example by summary dismissal and termination of employment, but there should be clear and undisputed facts and evidence.
Constructive Dismissals
The Fair Work Act 2009 (Cth) (the ‘FW Act’) provides that an employee will be taken to have been ‘dismissed’ by the employer if they resign because of particular conduct or a particular course of conduct engaged in by the employer. This may occur where the employee can show that they were pressured to resign and show that employment was effectively terminated ‘at the initiative of the employer’, because the employer’s conduct led to a situation where they felt compelled to resign. In some cases, an employer may not actually say that the employment is terminated as explicitly as “you’re fired,” but may still force the employee to resign because of the things they say or do. The employer may also expressly direct the employee to resign, failing which they will be sacked. Often, these type of “constructive dismissals” are preceded by a period of warnings, oral or written, about performance issues.
This is a complex area and it is important that an employer gets further advice about performance management procedure and especially for a higher level employee.
Disciplinary Proceedings
In Elisha, the trial judge described the disciplinary process which led to the termination of employment as a “sham and a disgrace.”
These strong words were used to describe a very poor process in which the evidence against the employee was selectively and very poorly gathered and presented, contrary evidence was not accepted, and the due process required under the terms of the employer’s own disciplinary process was not followed.
If the conduct of the employee is such that a disciplinary hearing is required, care should be taken to ensure that it accords and complies with any written procedure and that every relevant factor of conduct is properly and fairly put to the employee to allow a response. There should be a proper consideration of the employee’s response. There should be no evidence of any pre-determination of an outcome such as a pre-prepared letter of termination.
Under the Fair Work Act, if the employee does request to have a support person present you should allow them to do so.
A Warning About Warning
The purpose of a warning to an employee is to advise them that their work performance or conduct is unsatisfactory, why it is unsatisfactory and to put them on notice to improve it.
Obviously, as set out above, the basis for issuance of any such warning ought to be properly investigated and established following process affording procedural fairness.
The warning should also give a reasonable period to allow the conduct or performance to be improved, depending upon the issue, and a date to review the performance or conduct issue.
Warnings may be given verbally or in writing, but we recommend to employers that the warning:
- Be raised in a formal meeting in the first instance.
- Be recorded in writing and sent to the employee.
- Contain adequate details of the issue of complaint.
- State what is required to meet expectations.
- Give a date for a review meeting.
- Be acknowledged by having the employee provide a dated and signed copy.
It is a common misconception (but nonetheless good practice) that an employer must provide 3 warnings before a valid dismissal.
A written warning given properly containing details does however, address the issue of fairness and should contain clearly the opportunity to improve performance or modify conduct.
The employer should always allow the employee to respond and properly and fairly consider the response.
If the warning was given wrongly-based on incorrect facts or unfounded allegations, it should be withdrawn.
A Word About Workplace Practice, Culture and ESG
Often times, an employer can overlook or underestimate the impact of a claim in the workplace (successful or otherwise) on the internal culture and reputation of the employer itself.
Aside from issues of employee retention, HR professionals acknowledge that recruitment of quality staff can be problematic in an organisation which fails to meet appropriate standards of managing and termination of staff.
Repeated and reported claims and unhappy and revolving staff can impact culture and performance of others and productivity. Employees who having seen events unfold next to them and are in fear of losing their positions and unfair treatment and lack of processes are not likely to be loyal and productive employees.
In addition, the principles of Environmental, Social and Governance (ESG) issues are real and powerful considerations. Where ESG is a factor in whether a business wins new work by tender or otherwise, a reputation and record of a “best practice” workplace can be a key factor in winning lucrative work. A poor reputation and a record of claims, successful or otherwise can be the difference between a winning culture and winning workplace.
How We Can Help
These are just a few brief examples of how an employer can minimise any grounds for action against them for termination of employment, or at least to give good grounds to defend or settle any such claims. Often, claims for unfair or unlawful dismissal or adverse action can be settled in a mediation, but the risk of high awards of damages adds additional incentive to take legal advice to try to avoid such claims.
If you are considering a termination of employment, particularly of a senior and high value employee, we can assist you in reviewing the issues, presenting practical advice and real options to get the process right or to defend any claims which may be brought.
The legal costs of doing so, can be far outweighed by an award of damages against you. To discuss termination of employment, contact Michael Sing today on 07 3009 8444 or by email at [email protected] to arrange a time to discuss your options.
