Termination of employment: Employers' and employees' rights and obligations

Anthony Drake, Senior Associate | May 2003

Personal grievance claims make up the bulk of the Employment Relations Authority's workload. Most are resolved through the mediation process before reaching the Authority. In the cases which go to hearing at the Authority more than half succeed. Given the success rate, it is not surprising that the number of employees who file personal grievances in the Authority continues to rise. This trend makes it even more important for employers to be aware of the direction the law is taking and the conduct which the law expects of them.

Serious misconduct

There are many reasons for dismissing an employee. These range from the most serious offences, such as theft or assault which may justify instant dismissal, to less serious offences, such as unsatisfactory work conduct, which should be preceded by warnings before dismissal. Unfortunately, the legislation does not set out what conduct may justify summary dismissal and what may warrant a warning. Sometimes, employment agreements specify serious misconduct which may result in summary dismissal. In all cases, the employer must decide whether the employee's conduct was sufficiently serious so as to amount to a repudiation of their employment.

In order for an employer to successfully justify a dismissal, it must show that there was substantive justification (i.e. good reason) and it was carried out in a procedurally fair way.

In many cases, the Authority and Court are reluctant to substitute their judgment for the employer's in assessing whether dismissal is the appropriate action.

In focusing on the procedural fairness aspects of terminating employment summarily, the steps to be taken can be summarised as follows:

• The employer must have carried out a thorough investigation into the allegations of misconduct.
  
  
• The employee must be given an opportunity to respond to the allegations.
  
  
• The employer's evaluation of both the evidence and the employee's response must not have been predetermined or biased.
  
  
• The penalty chosen by the employer must not have been so disproportionate as to be considered unduly oppressive.

Suspending an employee (on pay) during an investigation may be appropriate. Such action allows the employer to investigate the matter fully and properly and consider its decision. It should be noted, however, that suspension is not appropriate in every case.

In the majority of cases where the dismissal is held to have been unjustified, the reason relied upon by the Authority and Court has been the breach of procedural fairness.

Poor performance

The Authority and Court have consistently emphasised the importance of procedural fairness when considering dismissal in cases of alleged poor performance. While each case must be assessed on its own merits, the cases have provided a comprehensive example of what should be done in cases of alleged poor performance. In particular:

• An employer's concerns must be genuine and warranted. The employer should be able to point to documented evidence of its concerns.
  
  
• If people involved in the decision making process have a clear personal interest, they should be quick to disqualify themselves in participating in any discussion of the issue.
  
  
• Employees should be informed of the employer's dissatisfaction and given adequate time to respond. What is adequate time will depend on the severity of the concerns.
  
  
• If any employment agreement sets out the performance appraisal process, then it is essential that the process is followed.
  
  
• Employees need to be given a real opportunity to address the problems that are identified, and improve their performance.
  
  
• If an employee has been given adequate time to address and correct the problems and they have failed to do so, then the employer needs to meet again with the employee and put them on notice that they are at risk of having their employment terminated, (i.e. a final warning).
  
  
• If after a final warning the employee's employment has not improved and remains unsatisfactory, the employer may have good reason to dismiss the employee.
  
  
• Before a decision to dismiss is made, the employer must consider the employee's work history and any explanations offered by the employee.

A formal written warning is essential in instances of misconduct not warranting summary dismissal or poor performance. Such warnings must clearly state:

1. The nature of the concerns;
   
   
2. What the consequences will be if the concerns are not addressed and corrected to a realistic level;
   
   
3. The date when these concerns need to be rectified; and
   
   
4. The fact that it is a formal warning. If it is a final warning then this also must be stated.

If the decision to dismiss is eventually reached, then the reasons for that dismissal must be communicated clearly to the employee.

Conclusion

The law relating to personal grievances focuses on the principles of reasonableness and fair treatment. Employers who follow the appropriate procedural steps can minimise the impact of a personal grievance action.