Termination of employment

Grounds for termination

May an employer dismiss an employee for any reason or must there be ‘cause’? How is cause defined under the applicable statute or regulation?

An employer may dismiss an employee for any reason provided the minimum period of notice set out below is provided. However, the dismissal is open to challenge under unfair dismissal legislation if the termination cannot be substantively justified on the basis of a ‘valid reason’, such as unsatisfactory performance, misconduct or changes to the operational requirements of the business, or was executed in a procedurally unjust manner.

Notice

Must notice of termination be given prior to dismissal? May an employer provide pay in lieu of notice?

Minimum statutory notice periods apply under the FW Act, based on length of service, as follows.

 Employee’s period of continuous service with the employer at the end of the day the notice is givenPeriod  
1Not more than 1 year1 week
2More than 1 year but not more than 3 years2 weeks
3More than 3 years but not more than 5 years3 weeks
4More than 5 years4 weeks

 

An additional one week’s notice applies where the employee is over 45 years old and has completed at least two years of continuous service with the employer.

To end employment, an employer must give the employee written notice of the last date of employment or payment in lieu of notice. Longer notice requirements may apply under an industrial instrument, contract or policy. In the absence of an express provision, a longer term may be implied requiring the provision of reasonable notice.

In which circumstances may an employer dismiss an employee without notice or payment in lieu of notice?

Serious misconduct can warrant summary dismissal without notice or payment, such as in the case of dishonesty, fraud or other serious conduct that impacts significantly on the employer’s interests, operations or reputation so as to amount to a repudiatory breach of contract. Summary termination in those circumstances arises as a matter of common law, although many employment contracts also specify the circumstances where summary dismissal may arise. The FW Act sets out examples of conduct that may constitute serious misconduct, such as being intoxicated at work or refusing to follow lawful and reasonable instructions.

Severance pay

Is there any legislation establishing the right to severance pay upon termination of employment? How is severance pay calculated?

The FW Act sets out a scale of severance pay based on years of service as the minimum entitlement for all employees, including senior management. The amount of severance pay is based on the base rate of pay for ordinary hours of work and excludes bonuses and other discretionary entitlements. For service before the commencement of this regime in 2010 to be taken into account in calculating an employee’s severance pay entitlements, the employee must have had an existing entitlement to severance pay under an industrial instrument, contract or policy.

Procedure

Are there any procedural requirements for dismissing an employee?

Procedural factors are relevant in determining whether a dismissal is unfair, including whether the employee was notified of the reason for termination and given an opportunity to respond and, in the case of unsatisfactory performance, whether the employee was made aware of performance concerns and given an opportunity to improve. Where an employee’s employment is being terminated on the ground of redundancy, and the employee is eligible to make an unfair dismissal claim, the redundancy must be ‘genuine’. For a redundancy to be considered genuine, the employee's job must no longer be required to be performed by anyone because of changes to operational requirements, and an employer must have followed any consultation requirements contained in an applicable award or enterprise agreement and considered reasonable redeployment opportunities.

Employee protections

In what circumstances are employees protected from dismissal?

In addition to the protections offered by the unfair dismissal regime, employees are protected under the FW Act from discriminatory dismissals, dismissals relating to their union activities or the assertion of workplace rights or where the dismissal is because of a temporary absence from work owing to illness or injury.

Mass terminations and collective dismissals

Are there special rules for mass terminations or collective dismissals?

Where a decision to terminate on the basis of economic, technological or structural factors will affect 15 or more employees, an employer must notify the relevant trade union representatives and give notice to the government employment agency (the Department of Human Services – Centrelink). Specific consultation obligations also apply when a decision has been made by an employer to implement major changes in a workplace.

Class and collective actions

Are class or collective actions allowed or may employees only assert labour and employment claims on an individual basis?

In general, employment claims in relation to unfair dismissal, discriminatory treatment, harassment or breach of contract are pursued as individual rather than collective actions. However, some aspects relating indirectly to the termination of an individual’s employment, such as the failure to consult regarding redundancies, may be pursued as collective actions. The negotiation of terms and conditions at work under a new or varied enterprise agreement is also pursued collectively.

Mandatory retirement age

Does the law in your jurisdiction allow employers to impose a mandatory retirement age? If so, at what age and under what limitations?

The general rule is that specifying a mandatory retirement age is not permitted in Australia under anti-discrimination laws, although there are some legislative schemes that still allow for some forms of mandatory retirement. Specific exemptions also apply in relation to certain professions, such as judges and defence force personnel.