Terminating a worker’s employment contract is a serious step; it is never pleasant and potentially poses many difficulties. For an employer, poor management of the process can result in damaging publicity, loss of time and resources defending an unfair contract or unfair dismissal claim by the employee and finally potential penalties imposed by the Industrial Relations Commission or other court of relevant jurisdiction.

Employees often claim that they were not afforded procedural fairness before their contract of employment was terminated. To minimise the risk of a court or tribunal finding this should seriously consider implementing the following procedure before actually terminating the employee contract.

1. Ensure your organisation provides employees with policies clearly setting out the organisation’s expectations with respect to work performance and acceptable behaviour at work. It is also a good idea to provide written procedures for dealing with poor performance.
2. Consult colleagues and HR with respect to the problem at its very earliest stages to ensure a balanced perspective is maintained.
3. Identify what the poor performance actually is and the possible reasons behind it. Are the reasons personal or are they founded in the organisation (for example, have the objectives of the employee’s role been properly described to the employee and has the employee been properly trained in the role)?
4. Talk to the employee about the problem and its possible causes and discuss potential strategies to solve the problem, for example, further training and supervision if the problem is organisational or compassionate leave if the problem is personal. Ensure that these discussions are not conducted in such a way as to intimidate the employee – making them feel part of the solution is often half the battle.
5. Understand that you cannot expect a full turnaround in performance overnight. Continue any informal process you have agreed on with the employee for a reasonable period of time, making sure that the employee is made aware of the consequences of a failure to improve.
6. More formal disciplinary procedures will have to be implemented if the informal process has not resulted in improvement. Interview the employee and provide him or her with a formal warning. Advise the employee that they can have a witness present and have a witness present yourself to provide support in the event that what was actually said is ever challenged.
7. At least one verbal and two written warnings should be provided before an employee’s contract is terminated. This is not applicable to those situations in which the employee is guilty of serious misconduct and a decision has been made to summarily dismiss them.
8. All verbal warnings should be documented, dated and signed by all parties present at the discussion. They should also refer to previous warnings, naming who was present when the allegation was discussed and giving details of the allegation.
9. A copy of all warnings should be retained by the employer and a copy given to the employee. If the employee refuses to sign the warning, a copy should be retained on file. Remember that warnings have a limited life span depending on the offence.

10. The first written warning must advise the employee of the details of the conduct causing concern, the required conduct or performance and the consequences of non-improvement. In the case of misconduct, it is useful to point to the policy, which you claim the employee has breached.

11. 11. The final warning should clearly state the consequences of non-improvement.

• If there is still no improvement, the employee’s contract can be formally terminated.

Whatever your reasons for termination, it is a good idea to always:

1. establish if the organisation is prepared to defend the matter should it be subject to wrongful dismissal proceedings in the relevant tribunal.
2. ensure a senior person from the organisation has investigated the cost of recruiting and training a replacements employee; and
3. clearly document the process leading up to the employee’s termination.

Prepared by:
Peter Townsend BS, LLB, FAICD
Peter Townsend Business Lawyers

The Clarence Street Professional Group
Level 3 – 222 Clarence Street
SYDNEY NSW 2000

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