Terminating an Employee – Five Mistakes to Avoid
Terminating employment is one of the most sensitive and high-risk aspects of managing a team. While most employers aim to get it right, even well-resourced businesses can slip up in ways that open the door to Fair Work claims, reputational harm, or workplace unrest. Here are five common termination mistakes to avoid:
1. Not Having a Valid Reason
The Fair Work Act 2009 (Cth) requires that a dismissal be based on a valid reason, such as poor performance or conduct. Vague or poorly articulated reasons, such as ‘not a good fit’ or ‘just not working out’ rarely hold up if challenged. Employers should ensure clear documentation exists to support the decision, particularly for misconduct or performance-based terminations.
2. Ignoring Procedural Fairness
Even with a valid reason, the dismissal may still be considered unfair if the process is flawed. Failing to give the employee an opportunity to respond to allegations, not allowing a support person to be present during any meetings, or rushing through an investigation can all create procedural fairness issues. A flawed process is one of the most common reasons otherwise lawful terminations unravel in the Fair Work Commission (FWC).
3. Terminating Without Considering Risk Triggers
Certain circumstances significantly increase legal risk. These include dismissing employees who have recently taken protected leave (eg. parental, personal, or workers compensation), raised a complaint, or disclosed a disability. These scenarios may give rise to general protections claims, which are more serious than unfair dismissal (in terms of the potential compensation that can be awarded) and do not require a minimum employment period to be served by the employee.
4. Overlooking Award and Contractual Obligations
Redundancy payments, notice periods, accrued leave, and termination clauses in employment contracts and enterprise agreements must all be carefully reviewed before actioning a dismissal. Many employers underestimate how easily an award can be overlooked, or otherwise misinterpret modern award provisions. Over-reliance on templated, ‘off the shelf’ contracts that are not specifically tailored to the employer’s business can also lead to gaps in compliance.
5. Failing to Manage the Broader Impact
Terminations don’t occur in a vacuum. Poor communication or heavy-handed exits can damage morale, disrupt teams, or even deter future talent from seeking employment in a business. Employers should manage exits respectfully and consider a communications strategy, especially where the employee has been in a public/client-facing or leadership role.
Getting dismissals wrong isn’t just a legal risk for the business, it’s a strategic and cultural misstep. Employers should ensure line managers are trained, HR processes are sound, and legal advice is sought where risk factors exist. An upfront investment in a fair and lawful process is always cheaper than defending a claim after the fact.
Have questions about terminating an employee or want to chat about a current challenging situation in your business?