Employers need to pay attention to the following issues when a termination of employment occurs:
- the termination must be lawful, eg not in breach of dismissal, equal opportunity or other legislation, and in compliance with any award or agreement that covers the employee;
- the date and reasons for termination must be clear to both parties – whoever initiates the termination (employer or employee) should do so in writing, although this is not mandatory;
- compliance with notice periods required by legislation, awards, or contract (whichever is the most generous) eg a resigning employee must give the required period of notice and a dismissed or retrenched employee must receive at least the minimum period of notice required by law, or payment in lieu of that notice;
- employees must receive payment of their accrued entitlements, such as payment for untaken annual and long service leave;
- employers must meet documentation requirements – these may include keeping employment and payroll records of termination, giving the employee a detailed statement of his/her termination entitlements and calculations, providing certificates of service where required, notifying external agencies where required (such as Centrelink for some redundancies and workers compensation insurers where injured employees are involved); and
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the employer should collect any employer property issued to the employee before the employee leaves (such as vehicles, mobile phones, credit cards, business cards, uniforms, product samples, security/access cards, etc).
Practical point: Consider termination issues before the employee starts work
Address the termination of employment process at the pre-employment stage by carefully drafting the employment contract. Make sure you refer to termination of employment provisions in the contract, at least stating the agreed period of notice by each party.
In addition, have clear, unambiguous written policies covering conduct in the workplace, covering a wide range of issues such as workplace safety, sexual harassment, dress requirements, use of email and employer’s property, attendance/timekeeping, termination procedures and other relevant issues. These policies should flag any conduct that would be a serious breach of the employment contract and indicate the consequences of a breach.
Equal opportunity laws affect unlawful dismissal
Federal and State equal opportunity and anti-discrimination legislation sets out a wide range of grounds of discrimination in employment situations that are unlawful. Ensure you are familiar with the provisions of the legislation that cover your employees.
Minimum notice periods for dismissed employees
The Federal standard minimum notice periods, which also apply widely elsewhere (eg in many awards and agreements) are as follows:
- If employee employed for one year or less - at least 1 week
- More than 1 year but not more than 3 years - at least 2 weeks
- More than 3 years but not more than 5 years - at least 3 weeks
- More than 5 years - at least 4 weeks
- (Note that employees who are over 45 years of age and have worked 2 years or more are entitled to receive an extra week's notice, but do not have to provide extra notice to the employer.)
- Executive and other contracts are usually subject to at least one month's notice – however, refer to the particular contract. If the contract is silent as to notice, reasonable notice will be implied. Reasonable notice is a vague term and can be very substantial in some circumstances.
Notice is not normally required for casual employees (apart from one hour’s notice, as they are paid by the hour), although long-term casual employees may qualify for some other entitlements (see below). For fixed-term and fixed-project employees, the contract will specify a date or event (eg completion of a project) upon which the contract ends, but you need to check the contract in case it has any other provisions, eg for termination before the specified date/event occurs.
Redundancy severance payments
For employees of corporations with less than 15 employees, generally no extra severance pay in addition to the minimum notice requirements is payable. For most other award covered employees, the employer will have to pay severance pay to retrenched employees in compliance with a minimum scale set out either in legislation or awards/agreements.
Get things in writing
If an employee resigns or retires, ask him/her to confirm it in writing. If the employee cannot or will not confirm in writing, issue a letter confirming that you accept the verbal resignation/retirement.
If you dismiss an employee, issue a letter confirming the dismissal and briefly explaining the reasons for it. If there are events that led up to the dismissal, keep records of them as well.
It is important to set out in writing the actual date of termination of employment.
The employee should receive a written statement of termination entitlements. This statement sets out calculations for each component – ordinary pay, severance pay, leave payments, other payments and tax deducted.
Notify other affected parties
Where the employee is involved in a workers compensation or other insurance-related issues, seek advice in advance of the dismissal and keep your insurers informed during the process, preferably in writing. . Inform other people who will be affected by the employee’s departure, such as other employees or external people who regularly deal with the employee.
Return of company property
You need to prepare a checklist of any property issued to the employee, to ensure that everything is returned upon termination of employment.
References
You do not have to provide an employee with a reference, unless there is an award, agreement or individual provision that requires it. If an employee requests an Employment Separation Certificate (for example because he/she will be applying for social security benefits), you must provide one.
If you do provide a reference, you have a duty of care to ensure that all details of employment are correct, and that the contents do not misrepresent (either favourably or unfavourably) the employee’s work or standard of performance and are not defamatory to the employee.
If it’s an ‘unusual’ type of termination…
Some types of termination situations only happen rarely. These may include abandonment of employment by the employee, repudiation of the employment contract by either employer or employee, death of the employee, or the employee is unable to continue working (or to resume work), because of long-term injury or illness. Many of these situations will require specific procedures to be followed. Employers who encounter them should seek further advice from their employer association or a legal adviser.
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