Performance Management and Ending Employment: How much procedural fairness is enough?

by Rob Stevenson

A.           INTRODUCTION

What is this thing called “procedural fairness”?[1]  Wilcox CJ explained it in these terms:

 “The relevant principle is that a person should not exercise legal power over another, to that person’s disadvantage and for a reason personal to him or her, without first affording the affected person an opportunity to present a case.  .  . .  It represents part of what Australian call ‘a fair go’.”[2]

It is important to provide employees with procedural fairness in deciding whether to terminate their employment because:

1.     It’s the right thing to do, reflects management best practice and helps foster a positive workplace culture;

2.     It is a key element in defending any statutory unfair dismissal claim that may be commenced by an ex employee;

3.     It often plays a significant part in an employer being able to demonstrate that a termination of employment did not occur for a reason prohibited by the law such as unlawful discrimination or the exercise of a workplace right.

If the significance of procedural fairness is accepted, then the second question is “How much is enough?”  As with many aspects of the law, the answer is that “It depends”.  By referring to several recent statutory unfair dismissal cases, this paper seeks to highlight and illustrate the pitfalls to be avoided and practical lessons in applying the concept of procedural fairness in termination of employment situations based particularly on performance issues. 

B.         THE BEGINNING

Employment is usually ended for one of the following reasons:

1.     resignation;

2.     redundancy;

3.     misconduct; or

4.     failure to perform to the employer’s requirements.[3]

Most legal claims arising out of termination of employment still take the form of a statutory unfair dismissal claim under the Fair Work Act 2009 (FW Act”)This type of claim is commenced in the Fair Work Commission (“FWC”) and there is a 21 day time limit on commencing the claim after termination occurs.[1]   The FWC can order reinstatement and/or compensation of up to 6 months wages for loss of income.  The FWC’s process involves an initial telephone conciliation conference between the parties and a FWC conciliator.  If that is not successful in resolving the matter, a hearing will generally be scheduled before a Commissioner and directions will be made for the filing of written evidence by the parties.  The unfair dismissal jurisdiction is generally an “own costs” jurisdiction.  

A dismissal will be unfair under the FW Act  if the dismissal:

 

  • was harsh, unjust or unreasonable; and
  • was not consistent with the Small Business Fair Dismissal Code (if the employer has less than 15 employees); and
  • was not a case of genuine redundancy.[2]

 

There is a lot of case law about the meaning of the words “harsh, unjust or unreasonable” but essentially a common sense approach is adopted so that “a fair go all round” is accorded to both the employer and employee concerned.[3]  In considering whether a dismissal was harsh, unjust or unreasonable, the FWC must take into account:

  1. whether there was a valid reason for the dismissal related to the person’s capacity or conduct (including its effect on the safety and welfare of other employees); and
  2. whether the person was notified of that reason; and
  3. whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person; and
  4. any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal; and
  5. if the dismissal related to unsatisfactory performance – whether the person had been warned about that unsatisfactory performance before the dismissal; and
  6. the degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal; and
  7. the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal; and
  8. any other matters that the Commission considers relevant .[4]

The FWC will consider both whether the dismissal was procedurally fair and substantively fair.  From a procedural point of view, it is relevant whether the employee has been given procedural fairness (sometimes called “natural justice”).  The basics of procedural fairness involve:

a.     allegations or issues being put to an employee in sufficient detail;

b.    the employee being allowed to respond appropriately; and

c.     any response being taken into account before a decision is made about termination.

Apart from considering whether a dismissal was procedurally fair, the Commission will consider whether the dismissal was substantively fair, i.e. procedural fairness might have been given to the employee but the decision to terminate was itself unfair or not called for in the circumstances or some lesser penalty than termination would have been more appropriate.  

Whilst this paper does not consider the issue of whether a valid reason for termination exists in detail, it should be remembered that this is a pre requisite to any termination and no amount of procedural fairness can overcome the absence of a valid reason.  On the other hand though, terminations have in many cases been found to be unfair on the basis that, despite the existence of a valid reason for termination, the employee has not been given procedural fairness.

Please contact Rob Stevenson for the remainder of this paper.

[1] There are also jurisdictional requirements in relation to remuneration and an arbitrary minimum employment period.

[2] Section 385 FW Act

[3] Section 381(2).  Also see In re Loty and Holloway v Australian Workers’ Union [1971] AR (NSW) 95.

[4] Section 387 FW Act


[1] Sometimes called “natural justice”.

[2] Nicolson v heaven & Earth Gallery Pty Ltd (1994) 126 ALR 233

[3] For the purpose of this paper, fixed or short term casual employment relationships are not considered.



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