Considering terminating an employee’s employment in the aftermath of COVID-19?

Considering terminating an employee’s employment in the aftermath of COVID-19?

With thousands of Australian businesses crippled by coronavirus, many employers are faced with tough decisions about termination of employment

As 2020 continues, we grapple with the coronavirus crisis and its severe impact upon our society, the economy, businesses and employment. Many businesses have closed, either due to ongoing COVID-19 restrictions or low/no cash flow. As a result, businesses have found themselves in the unfortunate position of considering termination of their employees’ employment.

In May 2020, there was a spike in unfair dismissal complaints to the Fair Work Commission by employees whose employment had been terminated with no or little warning. However, regardless of their financial situation due to the effects of COVID-19, employers must adhere to their obligations pursuant to the Fair Work Act (Cth) 2009. For those businesses who are considering termination of an employee’s employment, they must act in accordance with the permitted reasons in the Act.

The general reasons for termination of employment are considered below and the changes COVID-19 has meant to businesses considering termination of an employee’s employment.

Termination of employment due to redundancy

As an employer, you may decide to make an employee’s position redundant in the following circumstances:

  • Response to business downturn or closure;
  • The employer no longer requires an employee’s role within the business due to a restructure or change in business needs

Before terminating any roles within your businesses employment, you must consider redeploying the employee to another suitable role within the business. For example, could the employee continue to perform their duties working from home, or is there another suitable role for them elsewhere in the business, e.g. within another department?

If you choose to make an employee redundant, the employee will be entitled to:

  • Redundancy pay, depending on their length of service; and
  • Other outstanding entitlements owed to them (under their employment contract, enterprise agreement or modern award)

You should provide written notice of the termination to the employee in accordance with their employment contract, enterprise agreement or modern award (as applicable).

Termination of employment whilst an employee is stood down or on leave

If you terminate an employee’s employment while they are stood down or on leave, as an employer you must:

  • Provide written notice of the termination;
  • Allow the employee to return to work during their notice period to collect personal items;
  • Make any necessary redundancy payments.

 If the termination of employment is by way of a redundancy and the termination is to have immediate effect, you must pay the employee notice, outstanding entitlements and redundancy pay as soon as practical and inform the employee if there is a delay to payment (e.g. waiting for the usual pay run).

 Termination of employment due to performance issues

If you are considering termination of an employee’s employment due to performance, you should consider:

  • Whether you have given the employee notice of the reason for termination?
  • Whether the employee has had an opportunity to respond?
  • Whether the employee has received warnings about their conduct?
  • Whether you have given the employee a chance to have a support person at any face-to-face discussions about their dismissal?

Unlawful termination of employment

You cannot terminate someone’s employment due to:

  • Temporary absence due to illness (including coronavirus) or injury
  • Discrimination
  • For a reason that is harsh, unjust or unreasonable
  • In a way that is seen as harsh, unjust or unreasonable
  • Other protected workplace rights
  • Refusal to download or use the COVIDSafe App
  • The need to quarantine or self-isolate under a workplace health and safety law
  • Testing positive to COVID-19 or is associated with or related to a person who has tested positive to COVID-19

Has COVID-19 changed everything?

Since March 2020, the COVID-19 pandemic has significantly impacted the nature of business, requiring many employees, contractors and business owners to work from home. In these circumstances, making the decision to terminate someone’s employment requires careful consideration.

Understandably businesses have been challenged by the economic impacts caused by COVID-19, which has compelled businesses to close the physical doors and downsize taking steps to ensure the financial viability of the business. However, if you are terminating an employee’s employment by way of redundancy, as tempting as it may be during these difficult times, after all these times are unprecedented, the termination by redundancy needs to be genuine, as the case of Freebain1 before the Fair Work Commission, decided in in July 2020.

An unfair dismissal claim was was made by an Adminstrative Assistant (Applicant) after being made redundant by her employer, a professional financial services firm (Respondent) in April 2020. ¹Prior to making the role redundant, the Respondent held a meeting with all employees to inform them that the Respondent was looking at ways to maintain the financial viability of the business. The Respondent held a meeting with the Applicant to inform her that her role would be made redundant and amongst other matters, informed the Applicant that based on the Respondent’s calculations (and the calculations were shown to her during the meeting), she was financially better off not being employed and receiving the government JobSeeker payment instead. After her dismissal, the Applicant filed a unfair dismissal claim asserting a non-genuine redundancy.

In considering the claim for a non-genuine redundancy, Deputy President Saunders determined the Applicant would have been eligible for JobKeeper payments from the Respondent if she remained employed up until the office she was in was closed down on 18 May 2020, and he further made orders to grant her a payment equivalent to the JobKeeper amount she would have received had she remained employed by the Respondent.

If you decide to terminate an employee’s employment, after arranging to discuss this with your employeeyou must make records (file notes) of all your conversations with the employee during which you discuss:

  • Their position
  • Issues
  • Conduct
  • Possible termination of employmentHow the employee responded during the discussion
  • Any other relevant issues concerning their employment

If you do decide to terminate employment (either by way of redundancy or due to poor performance), in the event a claim is made and you are required to defend your position that the termination was lawful, you should keep all records and details of discussions with the employee in respect of the termination of employment.

Before you decide on termination of employment, we recommend that you seek our legal advice. Contact us to find out more.

This article was written by Litigation lawyer, Linda Luc.


DISCLAIMER: We accept no responsibility for any action taken after reading this article. It is intended as a guide only and is not a substitute for the expert legal advice you can receive from marshalls+dent+wilmoth and other relevant experts.

¹ Rachael Freebairn v Dandiie Pty Ltd ATF the DM & IT Moore Family Trust, TJL Business Advisors Pty Ltd ATF the Lumtin Family Trust, and Profitwatch Pty Ltd ATF the Rosemark Trust T/A TJL Business Advisors and Accountants [2020] FWC 3915 (27 July 2020).