Safeguarding Your Business from Unfair Dismissal Claims

Dismissing an employee is a challenging decision for any business owner. While it’s perfectly acceptable to terminate an employee for valid reasons such as poor performance or absenteeism, it’s crucial to ensure that the dismissal is carried out legally. Failure to do so can result in costly unfair dismissal claims.

To protect your business from such claims, it’s important to follow these steps before proceeding with a dismissal:

  1. Effective Communication: Clear communication within the organisation is vital. It helps prevent misunderstandings and creates a transparent environment. Ensure that your disciplinary procedures are well communicated and, if possible, provided in a handbook. It also shows all employees that you as a business owner have integrity and this can create loyalty. 

  2. Policies and Procedures: Your employee handbook should include your company’s policies and the legal framework. This serves as a reference in case of any claims and should be designed to accommodate organisational changes. This will include a policy surrounding performance management. It is important to not only have these policies but also to ensure that you are implementing them and following them. 

  3. Performance Indicators: Setting Key Performance Indicators (KPIs) helps evaluate an employee’s performance objectively. This is essential for maintaining a positive work atmosphere and avoiding future disputes. It also ensures that any decision you make is fact-based and can be defended in the case of unfair dismissal claims. 

  4. Record-Keeping: Always have an impartial witness during performance-related discussions and document all employee interactions. These records are crucial in defending against unfair dismissal claims. You do not want to get yourself into a situation of one persons word over another – never an easy one. 

  5. Thorough Investigation: Before dismissing an employee, ensure you have all the facts. If necessary, consider hiring an external investigator to ensure the dismissal is justified and fair. When doing an investigation make sure that you come to an unbias decision and rely on relevant facts – stay away from personal opinions or temptations to take one persons word over another. 

  6. Opportunity to Respond: Give the employee a chance to explain or improve their performance before making a final decision on dismissal. This is all about providing a fair process and letting the person respond. There may be a plausible explanation for any behaviour/ performance decline etc. Be careful about making any predetermined outcomes or taking any steps indicating a predetermined outcome. This will open up a procedurally unfair process and a likelihood of a dismissal being deemed harsh and unfair. 

By following these guidelines, you can reduce the risk of facing unfair dismissal claims and ensure that your business is protected.

What is an unfair dismissal?

Unfair dismissal is when an employee is dismissed from their job in a harsh, unjust or unreasonable manner.

The Fair Work Commission may consider an employee has been unfairly dismissed if:

  • the person was dismissed
  • the dismissal was harsh, unjust or unreasonable
  • the dismissal was not a case of genuine redundancy
  • the employee worked for a small business and the dismissal was not done according to the Small Business Fair Dismissal Code.


What is harsh, unjust or unreasonable?

The Fair Work Commission will decide if a dismissal is harsh, unjust or unreasonable, and they consider all of the following circumstances:

  • was there was a valid reason for the dismissal related to the employee’s capacity or conduct
  • was the employee notified of that reason and given an opportunity to respond
  • if the employer didn’t allow the employee to have a support person present at any discussions about the dismissal, was that unreasonable
  • whether the employee had been previously warned that their performance was unsatisfactory
  • If the size of the business, or lack of dedicated human resource management specialists or expertise impacted on the procedures that the employer followed when they dismissed the employee, and
  • any other matters that the Fair Work Commission considers relevant.

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