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Tips to minimise the risk of a lawsuit when dismissing employees

Claims of unfair dismissal can be costly for employers, but there are strategic ways to minimise the risk of litigation, writes Lachlan Thorburn.

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With the historic royal commission into banking recently wrapping up, some of Australia’s biggest listed companies have seen a spate of unfair dismissal rulings levelled against them.

The significant increase in unfair dismissal claims in the industry is largely due to the Australian Banking Association’s new ‘conduct background check’ protocol, which requires the employer to share the reasons why an employee ended his or her previous employment.

As a specialist in commercial law and industrial relations at Bennett & Philp, I believe that companies can never fully eliminate the risk of an unfair dismissal claim following the termination of an employee. However, if you carry out a correct ‘show cause’ procedure as a business owner, you can minimise the risk of successful litigation.

Once an employer learns of serious misconduct behavior, you need to take swift and decisive action, raise any allegations to the employee, allow the employee to respond to the allegations and then decide if the employment relationship can continue.

Examples of serious misconduct can include anything from theft, dishonesty, IP breach and sexual harassment to bullying, discrimination and breaches of workplace health and safety. If the employee’s conduct falls into one of these categories, business owners should follow my below steps to minimise the risk of successful litigation against the business.

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  1. Undertake a thorough investigation

Terminating an employee in your business needs to be a considered decision, not an impulsive one. You must thoroughly investigate the allegations that have been made against the employee.

Prior to commencing an investigation, business owners need to seek legal advice as to how the investigation should be conducted. This may also have implications as to whether the investigation report will be the subject of legal professional privilege.

Before issuing the employee with a ‘show cause’ notice, you must be satisfied the findings of the investigation warrant an explanation from the employee.

  1. Meet with the employee

This is an opportunity to present the worker with the ‘show cause’ notice, which sets out the alleged conduct engaged in by the employee and how that conduct may have breached material terms of the employment agreement and/or company policies.

The ‘show cause’ notice will allow the employee 1 to 5 days to respond, depending on the nature of the conduct. Always provide the employee with an opportunity to have a support person present at this meeting.

  1. Stand down the employee

Whether an employee should be stood down following the employer providing the ‘show cause’ notice will depend on:

  1. the nature of the allegations;
  2. the size of your company (i.e. is there another area that the employee can work during the investigation); and/or
  3. whether the accused employee’s attendance at the workplace will impact the impartial nature of any ongoing investigation (i.e. the prospect of retaliation or intimidation by the accused).

An employee should be stood down, on full pay, when the allegations are of a serious nature.

  1. Arrange a second meeting

Once the written response has been received and considered by you as the employer, or your legal representative, you should call a second meeting with the employee whereby his or her response to the allegations are discussed. At this time, you may determine that:

  1. the employee should be given further time to provide additional information;
  2. that the ongoing employment relationship is untenable;
  3. that the employee has no case to answer; or
  4. the employee should be issued with a warning, which in some cases is a first and final warning.

If you are satisfied the alleged serious misconduct occurred, then you can provide the employee with a notice of termination. Again, the employee should be afforded an opportunity to have a support person present at this meeting.

Of course, this is a process no business owner ever looks forward to undertaking, but these recommended steps will minimise the risk of successful litigation.

By Bennett & Philp’s Lachlan Thorburn