HR's Role in Ending Employment Lawfully

This article summarises the key themes from ABLA’s webinar on HR’s role in ending employment lawfully. It captures the practical guidance discussed during the session, including why termination decisions are attracting greater scrutiny, how employers should approach different exit pathways, and what steps can reduce legal risk.

Why termination decisions are under greater scrutiny

The use of artificial intelligence has resulted in a significant increase in workplace claims, including general protections and unfair dismissal applications. This means employers should expect more termination decisions to be tested, even where the decision appears straightforward.

While no termination process is perfect, employers can reduce risk by getting as close as possible to a fair, well-evidenced and well-documented process. Problems often arise before the termination meeting itself, particularly where the real reason for dismissal has not been clearly identified or recorded.

Start with the real reason for the exit

Before choosing a termination pathway, employers should identify the real reason the employment relationship is ending. Employers should not choose the path that appears easiest and then try to fit the facts around it. For example, redundancy should not be used to solve a performance problem.

The main employer-initiated pathways covered in this webinar were performance, misconduct, medical incapacity and redundancy. Each pathway involves different evidence, different processes and different legal risks. If circumstances change, employers may need to change pathways, but they should start the new process properly rather than carrying momentum from one pathway into another.

Employee-initiated exits: resignation and abandonment

Resignation is the most common form of employee-initiated exit. Employers should confirm that the resignation is genuine, voluntary and not made in the heat of the moment. Where there is any doubt, the safest approach is to confirm the employee’s intention in writing once emotions have cooled.

Constructive dismissal is where an employee resigns but later argues they had no real choice because of the employer’s conduct. In such cases, the resignation may be treated as having occurred at the employer’s initiative.

Abandonment of employment is rare and often misunderstood. Employers should not assume abandonment simply because an employee has failed to attend work for a short period. The process should usually begin with welfare checks and repeated attempts to contact the employee before moving towards any formal position that employment has been abandoned.

Performance-based termination

For performance concerns, employers should be able to show that expectations were clearly communicated, that the employee was told where they were falling short, and that they were given a reasonable opportunity to improve. A performance improvement plan can be useful, but it is not always mandatory, particularly for senior employees or where clear performance expectations already exist.

Even where an employer does not use a formal performance improvement plan, documentation remains important. Written records of expectations, warnings, meetings and outcomes can help show that the decision was made for a legitimate reason.

Employers should consider the value of a show cause process. This gives the employee an opportunity to respond before a final decision is made. Employers should genuinely consider the response before deciding whether to proceed with termination.

Misconduct and serious misconduct

Misconduct is a common area of risk. Not all misconduct will justify dismissal, and there is no fixed formula requiring a set number of warnings before termination. The seriousness of the conduct, the evidence available, the employee’s response and the employer’s policies will all be relevant.

Employers should check the relevant policy or procedure before relying on it. Sometimes a workplace policy does not say what the employer assumes it says. Where the employer relies on a policy breach, the policy should support the allegation. This is a timely reminder to review your policies and procedures regularly to ensure they can support the employer’s position.

Summary dismissal is a high bar. Conduct such as harassment, bullying or serious misconduct can vary in severity, and employers should be careful not to treat lesser conduct as automatically justifying immediate dismissal without notice. Consistency is also important: if similar conduct has been treated less seriously in the past, that may undermine the employer’s position.

Medical incapacity

Termination on medical grounds is different because it does not involve fault. The key question is whether the employee can perform the inherent requirements of their role. Employers should avoid making their own medical assessments and should instead rely on appropriate medical evidence.

Workers compensation material alone may not be sufficient for a medical termination decision. In many cases, employers will need independent medical evidence or evidence from the employee’s treating doctor. As with other termination pathways, a show cause process based on the available medical evidence will often be appropriate.

Redundancy and redeployment

A genuine redundancy occurs where the employer no longer requires the job to be performed by anyone. The focus is on the role, not the individual. Employers should also consider any consultation obligations under an applicable modern award, enterprise agreement or other industrial instrument.

Even where there is no strict consultation obligation, consultation may still be best practice. Meaningful consultation involves giving the employee enough information to respond, allowing sufficient time for feedback, and genuinely considering what the employee says before making a final decision.

Redeployment must also be considered. It is important the employer takes a broad view of redeployment opportunities, including roles within associated entities and, in some circumstances, work being performed by contractors. Employers should avoid assuming an employee would not be interested in a role without first putting the opportunity to them.

Procedural fairness matters

Procedural fairness generally requires the employer to put the substance of the concern to the employee, give them a meaningful opportunity to respond, and genuinely consider that response before making a decision.

Procedural fairness is not simply a matter of issuing a set number of warnings. The more important question is whether the employee understood the concerns, had enough information to respond and had a genuine opportunity to be heard.

There are several cases before the courts that highlight that employers should follow their own policies and procedures, particularly where those documents form part of the employment contract. Poorly managed termination processes can create additional legal and human risk.

When health issues arise during a process

It is an increasingly common situation where performance management, misconduct processes or investigations intersect with psychological health concerns or workers compensation claims. Performance management itself can be a psychosocial hazard if not handled appropriately.

If an employee raises a psychological health concern, goes on stress leave or lodges a workers compensation claim during a process, employers should pause and reassess. This does not necessarily mean the process can never continue, but it may be necessary to obtain medical information, consider adjustments, and ensure it is safe and reasonable to proceed.

Possible adjustments may include shorter meetings, more breaks, different meeting times or other supports that reduce unnecessary stress. The key is to avoid exacerbating an injury or creating the impression that the employer is pressing ahead regardless of the employee’s health.

The general protections risk

General protections claims are a major risk because they are not subject to the same access limits as unfair dismissal claims. There is no minimum employment period, no high-income threshold barrier, and no statutory compensation cap in the same way. The reverse onus also means the employer must be able to prove the decision was not made for an unlawful reason.

Employers should proactively consider whether an employee might allege the decision was linked to a complaint, parental leave, a workplace right, a workers compensation claim, illness, pregnancy or another protected attribute or activity. Even if the decision is lawful, employers should be able to clearly explain and evidence the legitimate reason for it.

It is recommended that the decision-making be limited to the people who genuinely need to be involved. The more people involved in the decision, the more evidence may be required about what was in each person’s mind.

Negotiated exits and without prejudice discussions

Negotiated exits are becoming more common, particularly where employers want to reduce the risk and cost of a contested process. A without prejudice discussion is not a magic phrase that can be used in any situation. There generally needs to be some form of dispute or issue on foot before the protection is available.

Employers should also know what will happen if the employee does not agree to the proposed exit. A negotiated exit should not be the only plan. There must be a lawful alternative pathway, such as continuing an investigation, performance process, redundancy consultation or other appropriate process.

If money is being paid in exchange for a release of claims, it is recommended that the employer document the agreement in a deed of release. Employees should be given a reasonable opportunity to consider the deed and obtain advice before signing. A period of at least 48 hours is recommended as a general guide, although circumstances may vary.

Termination checklist

When considering termination, use the following questions to confirm this is the right path:

• Why is the employment ending?
• What evidence supports that reason?
• What process has been followed?
• Has the employee had a meaningful opportunity to respond?
• Are there alternative explanations the employee may raise?
• Could the decision be explained clearly to the Fair Work Commission, Federal Circuit and Family Court or Federal Court if challenged?

The key message is that lawful termination requires clarity, evidence, patience and communication. Employers should identify the real reason for the exit, choose the correct pathway, document the process, give the employee a fair opportunity to respond and ensure the final decision can be explained with confidence if challenged.

Listen to the full recording of the Ending Employment webinar for additional information and additional content.