A worker may be dismissed with immediate effect if they are in serious breach of their obligations, subject to compliance with the employment agreement and other applicable law. Employers proposing to dismiss an employee need to carefully examine their obligations and the circumstances leading to the proposed dismissal.
Termination of employment is not a pleasant experience for anyone. In some instances, an employer may find themselves with no choice, and where those circumstances are sufficiently serious, a summary dismissal may be in order.
It is important for employers to understand their obligations with respect to summary dismissal. This is a risky area of law. Employees have rights that must be respected and a wrong move could end up costing a business much more than anticipated.
The key question for an employer is if appropriate grounds exist for summary dismissal. This article will examine this question. Advice should be obtained and this article will not give you enough information to make a decision in this area.
Laws that apply to a termination of employment
Termination of employment may occur for many different reasons. An employee may resign, be dismissed, or their position may be made redundant. Both State and Commonwealth legislation may apply to employment, as well as any applicable awards, industrial agreements, and the employment agreement itself. Each applicable obligation will determine the steps to be taken by an employer in relation to a specific dismissal.
Termination of employment is based on the law of contract. At common law, a contract may be terminated in response to a breach of an essential term, a fundamental breach, or repudiation. Repudiation occurs where a party indicates that it is unwilling or unable to perform its obligations in a significant respect. This may be shown where there are a series of minor breaches which taken together show a disregard for the obligations imposed by a contract.
What is a Serious Breach?
For an employer to exercise the power of summary dismissal under common law, there must be a serious breach of a term of employment, and that term may be express or implied.
The following may amount to grounds for summary dismissal under common law:
- Serious misconduct ( positive, intentional, or wilful wrongdoing);
- Wilful refusal to obey a lawful and reasonable instruction; and
- incompetence and neglect.
If an employer proposes to dismiss an employee for a serious breach, it must make an assessment of the conduct said to justify dismissal. Case law provides guidance on which circumstances are sufficiently serious. In Rankin v Marine Power  VSC 150. a manager’s negligent supervision of an overseas operation was held to be a breach of duty but not sufficiently serious to justify summary dismissal. In that case, the employer was ordered to pay the employee the amount of $169,612.35 representing damages for failure to provide proper notice and accrued long service leave entitlements.
Where a breach by an employee has occurred, it is important for an employer to make an assessment and to take appropriate action. A failure by an employer to act on breaches by an employee may be taken to be a waiver of the employer’s right to terminate the employee for those breaches.
There are also statutory definitions and obligations to consider. There are a number of references to serious misconduct in the Fair Work Act 2009 (Cth) and Fair Work Regulations 2009 (Cth). These statutory definitions and obligations are important as they determine the subsequent rights of a dismissed employee.
Relevant statutory obligations were discussed in the case of Sharp v BCS Infrastructure Support Pty Limited  FWCFB 1033:
The relevance of the definition of “serious misconduct” in reg.1.07 to the matter is also, with respect, obscure. Section 12 of the Act contains a definition of “serious misconduct” for the purposes of the Act which simply cross-refers to reg.1.07. Apart from s.12 itself, the expression “serious misconduct” is used in only three places in the Act. In s.123(1)(b), a dismissal for serious misconduct is a circumstance in which the notice and redundancy entitlement provisions of Pt 2-2 Div 11 are not applicable; in s.534(1)(b) a dismissal for serious misconduct is one to which the requirements for notification and consultation in Pt 3-6 Div 2 do not apply; and in s.789(1)(b) a dismissal for serious misconduct is one in relation to which the requirements established by Pt 6-4 Div 3 for notification and consultation do not apply. The expression “serious misconduct” is not used anywhere in Pt 3-2, Unfair Dismissal, of the Act. Section 392(3) requires the Commission, in relation to the award of compensation for an unfair dismissal, to reduce the amount that it would otherwise order by an appropriate amount where it is “satisfied that the misconduct of a person contributed to the employer’s decision to dismiss the person”. However, it is clear that conduct may constitute “misconduct” for the purpose of s.392(3) without necessarily being “serious misconduct”. The expression is used in the Small Business Fair Dismissal Code, but that had no application in this case (and it is at least highly doubtful in any event whether the reg.1.07 definition applies to the Small Business Fair Dismissal Code). Reg.1.07 therefore had no work to do in the application of the provisions of Pt 3-2 to the circumstances of this case.
If you are an employer considering a summary dismissal, you should review the following resources:
- The Small Business Fair Dismissal Code provides protection against unfair dismissal claims, where an employer follows the Code. The Commission will deem a dismissal to be fair if the employer follows the Code and can provide evidence of this. A small business is defined as any business with fewer than 15 employees;
- The Fair Work Commission’s Unfair Dismissal Benchbook; and
- The Fair Work Commission website
Summary dismissal is a complex area of law. There will be circumstances that justify a summary dismissal but an employer should carefully examine those circumstances against the applicable law before taking action. A failure by an employer to act on breaches by an employee may be taken to be a waiver of the employer’s right to terminate the employee for those breaches.
When examining obligations of an employer, applicable statutory obligations should be examined followed by the employment contract and any applicable award or industrial agreement. Only then can an employer understand their obligations with respect to termination.
Please contact us if you have any questions on the above.