Termination & Redundancy

The employment relationship can end for a variety of reasons. For employees, the process to end employment is relatively simple – they usually just need to provide a written resignation and serve out the applicable notice period.

However, for employers things are generally a bit more complicated and the termination process may be more drawn out, depending on the reasons for the termination, the terms of the employment contract and any applicable workplace legislation. It is always a good idea to get legal advice before taking steps to end an employee’s employment.

What is termination?

Generally, employers can bring an employee’s employment to an end in the following circumstances:

  • Where an employee has engaged in some sort of misconduct
  • For poor performance
  • For redundancy reasons, if the employer no longer wishes the employer’s job to be done by anyone
  • Where the employee has seriously breached a term of the employment contract
  • In accordance with any termination provisions in the employment contract

Except in cases of serious misconduct, under the National Employment Standards (NES), an employer terminating an employee’s employment is required to give the employee notice of the termination (so the employment will end at the end of the notice period) or pay the employee in lieu of the notice to bring the employment to an end earlier. The NES sets out the statutory notice periods, which depend on the employee’s length of service. The employment contract can also include notice periods, provided the notice in the contract is not less than the minimum statutory notice periods.

Employees may also be protected from unfair dismissal, in which case, any termination will need to follow the fair dismissal process set out in the Fair Work Act.  A fair dismissal provides an employee with procedural fairness, including being notified of the reasons for the dismissal and provided with an opportunity to respond to the reasons before the dismissal takes effect.

Disputes may arise if there is no valid reason for the termination, the termination process is unfair, or the employee can establish the dismissal was discriminatory or because the employee had a workplace right.  It is very important for employers to follow a fair termination process and make sure the reasons for the termination are sound and lawful to minimize the risk of legal action.  At Mackenzie Workplace Law, we can help employers implement a fair dismissal process.  We can also advise employees on whether they have grounds to make an unfair dismissal application if the termination process was not conducted fairly.

What is serious misconduct?

Serious misconduct is defined in the Fair Work Regulations to include wilful and deliberate behaviour by an employee that is inconsistent with the continuation of the employment contract, and which causes serious and imminent risk to the health and safety of a person or the reputation, viability or profitability of the employer’s business.

Specific examples of serious misconduct include:

  • Theft
  • Fraud
  • Assault
  • Sexual harassment
  • Intoxication at work
  • Refusing to carry out a lawful and reasonable direction

If an employee has engaged in serious misconduct, their employment can be terminated immediately and there is no requirement to give notice.  We strongly recommend employers seek legal advice before terminating employment for serious misconduct as the risks of an unfair dismissal claim are high if the conduct is not actually serious enough to warrant immediate dismissal.

What is redundancy?

Redundancy is where the employer no longer wants the employee’s job to be done by anyone.

Redundancy usually happens where a business needs to restructure and downsize due to an economic downturn or the introduction of new technology which is more efficient and requires less employees.  Redundancies can also occur when there is a sale of business, merger or takeover and the new employer no longer requires the same number of employees to work in the business.  If a business shuts down or becomes insolvent, the employees will also be made redundant.

If an employee’s dismissal is a genuine redundancy, the employee will not be able to make an unfair dismissal claim.

A genuine redundancy occurs where:

  • an employee’s job no longer needs to be done by anyone
  • the employer has complied with relevant consultation requirements in an award or enterprise agreement covering the employee and
  • the employee could not be redeployed to another position in the business

A redundancy is not genuine if the employer:

  • still requires an employee to do the job previously undertaken by that employee, for example, hires someone else to do the job
  • fails to consult with employees about the redundancy in accordance with the consultation provisions in an award or enterprise agreement or
  • could have reasonably given the employee another job within the business or associated entity

How do I calculate redundancy pay entitlements?

Except for casual employees, employees covered by the Fair Work Act with more than one year of continuous service, are entitled to redundancy pay. An employee’s redundancy payment will depend on the length of their continuous service and base rate of pay.

The NES sets out the minimum redundancy pay entitlements based on length of service up to a period of 10 years.

The relevant period of service equals the period during which the employee has worked, excluding any period of unauthorised absence, unpaid leave, or unpaid authorised absence.

Help for employers and employees

If you are an employer, it is always best practice to seek legal advice before dismissing an employee or undergoing a corporate restructure. Certain processes must be followed when terminating employees and it is important for the employer to understand the circumstances that constitute a genuine redundancy and serious misconduct.

If you are an employee confronting a workplace issue such as termination, you will likely be feeling anxious and possibly confused about your legal rights. If you are uncertain whether the termination of your employment was lawful, or a genuine redundancy, or if you are facing disciplinary action, we recommend you obtain advice from our experienced team to ensure your rights are protected.

If you need assistance, contact us at [email protected] or call (02) 5127 5261 for expert legal advice.