Unfortunately, the employment relationship is not always a smooth ride. For various reasons, employees may decide to resign, employers may decide to dismiss the employee, or the parties may both agree together for employment to end. Termination can be tricky and unpleasant for all parties. This EMA Note sets out some key tips to keep things as amicable as they can be and avoid disputes when employment ends.
Employment and Culture
The first tip comes well before termination of employment, and that is creating and maintaining a positive workplace culture. A negative workplace culture can promote employee misconduct (including bullying, harassment, and discrimination). Conversely, a positive workplace culture usually results in greater job satisfaction,[1] which will likely result in fewer issues in the employment relationship.
While there will always be some level of labour turnover, maintaining a positive workplace culture will likely lessen the need for either employees or employers to terminate employment.
Employer Dismissals
When terminating an employee’s employment, employers must ensure that:
- termination is only for a lawful reason;
- employment is terminated consistently with the terms of the employment contract and any applicable modern award and enterprise agreement; and
- termination is consistent with any applicable legislative terms.
A key tip here is to ensure that notice of termination (or payment in lieu of notice) is given consistently with the Fair Work Act 2009 (Cth). When giving notice of termination, the Fair Work Act requires that the day of termination cannot be before the day that notice is given in writing. Alternatively, the employer can terminate employment if they have paid in lieu of the notice period.
When giving notice, the employer must ensure that the employee receives the written notice of termination. Ideally, this should be done in person, both so the employer knows that the employee has received the written notice, and also so that the termination can be communicated to the employee (which is more humane than not communicating in person).
There are various Fair Work Commission decisions dealing with employers terminating their employees by text message, with the consensus being that it is callous to do so. The effect is that even where employers have had valid reasons for termination, the dismissal has been determined to be unfair because it was communicated by text message.
Additional matters to ensure are:
- If you are terminating employment because of behavioural issues, have you properly investigated the matter and offered the employee procedural fairness?
- If you are terminating employment because of performance issues, have you addressed those issues with the employee and given them a reasonable chance to improve and a clear understanding that termination may result?
- If you are terminating an executive-level employee’s employment, are you complying with any additional rules you may have under relevant legislation or your company constitution?
- If you are making payment instead of providing notice, have you made payment before employment is terminated?
- If you are terminating employment because you no longer need the employee’s job to be performed by anyone, have you complied with your obligations relating to redundancy?
Employee Resignations
Employees resign for various reasons, from career progression to general dissatisfaction in the current job. Employees may resign verbally or in writing, and may offer reasons for their resignation.
In almost all circumstances, where an employee has resigned, the employer should communicate to the employee in writing so it can confirm matters such as:
- whether the employer needs the employee to work out their notice period or whether it will make payment instead of the notice period;
- whether there is any company property or outstanding amounts owed to the employer and how that will be treated;
- what the employee’s accrued entitlements are; and
- any other matters that need to be finalised before resignation.
Any such steps must be consistent with legislation, the employee’s contract, and any applicable modern award or enterprise agreement. For example, there may be limitations on an employer’s ability to withhold wages if the employee does not give the required notice.
If an employee resigns but does not state a notice period or end date, you should check their relevant award/agreement and contract to see how much notice they are required to provide, and when you write back to them confirm that date.
It is somewhat common for employers to want to respond to employees to ‘accept’ their resignation. At least in Australia, employers cannot stop an employee from resigning—once the employee gives notice of termination, it’s locked in unless both parties agree otherwise. However, acknowledging receipt of the resignation with the above-described matters is good practice and makes sure both parties are clear about what is happening and when.
Termination by Agreement or at Neither Party’s Initiative
In some instances, the employee and employer may agree for employment to end. In this case, because termination is at neither party’s initiative, the minimum notice requirements of the Fair Work Act and modern awards/enterprise agreements are unlikely to apply. However, if the employer has instigated this agreed termination, there is a risk that it would be objectively seen as termination of employment at the employer’s initiative.
Sometimes, parties agree on a set termination date in their contracts (which could be after a certain period or after the completion of a specific task). There are several legislative provisions limiting the use of fixed-term contracts for national system employers and employees; and various cases describing some of the risks associated with fixed-term contracts. If you want to engage an employee on fixed-term contracts, we recommend you seek advice first to ensure the engagement will be compliant from the outset with the Fair Work Act.
Otherwise, there are rare occasions where an employment contract may be ‘frustrated’—meaning the parties cannot continue to perform under the contract because of reasons outside their contemplation or control. In practice, an employment contract is rarely frustrated, and we do not recommend employers claim that an employee’s contract has been frustrated without seeking advice.
[1] See eg Jigjiddorj et al, ‘Relationship between Organizational Culture, Employee Satisfaction and Organizational Commitment’ (Conference Paper No 90(3):02004, International Conference on Entrepreneurial Competencies in a Changing World (ECCW 2020), January 2021).
Require further information/assistance?
This EMA Note is not comprehensive advice about your situation and does not cover all your obligations. If you require further information or advice, please contact your Consultant.
EMA Consulting is not a law firm and therefore does not provide legal advice or services. The information contained within this document and associated material is general in nature and should not be relied upon. If you require specific advice on a particular matter, we recommend that you contact EMAC on 08 8203 1700. Subject to the matter at hand, your EMAC Consultant may recommend that you obtain formal legal advice. If formal legal advice is required, upon your written instruction EMAC will brief your matter to a legal practitioner for this purpose. The contents of this document and associated materials do not represent legal advice.