Terminating employment during probation – why you should provide a reason
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Terminating employment during probation – why you should provide a reason - May 2019

Terminating employment during probation – why you should provide a reason - May 2019

Most employment contracts contain a probation clause stating that, during the probation period (usually 3 to 6 months from the employment commencement date), either party can terminate the employment by providing one week’s notice. Even if there is no probation clause, or no employment contract, a minimum employment period applies before an employee is eligible to make a claim for unfair dismissal.

For a small business with less than 15 employees that minimum period is 12 months; for others it is 6 months. The practical effect of this is that the employer can terminate the employment without cause during the minimum period simply by providing the required notice.

However, many employers do not realise that there is no minimum employment period for other types of claims such as adverse action and discrimination claims. If an employee is terminated and believes that the reason falls within the general protections provisions, they are entitled to bring an adverse action claim, with the onus then falling on the employer to show that the reason for termination was not unlawful.

In a recent case before the Federal Circuit Court[1], the employer terminated an employee during her probationary period. The termination letter provided no reason for the decision and the employer refused to provide the employee with a reason when she asked for an explanation stating that it was not legally obliged to give one. The disgruntled employee made an adverse action claim on the basis that part of the reason she was dismissed was because she had complained about various issues within the workplace.

Judge Manousaridis stated as follows:

"There is no evidence before me that suggests (the employer) has made any enquiries about why it contravened the FW Act in the manner I have found, and whether there is a need for it to carry out any steps to minimise the risk of its contravening the FW Act again".

"In these circumstances, the penalty that is to be assessed should include an element for specific deterrence to encourage (the employer) to review its procedures and, if reasonably necessary, to revise the procedures to reduce the risk of contravening the FW Act in the future."

The employer was ordered to pay the employee $30,000 in compensation and penalties based on the unlawful dismissal and the failure of the employer to consider changes in its processes that would minimise the risk of the conduct occurring again.

Lessons for Employers

  • If considering termination of an employee during the probation period, check the minimum employment period under the Fair Work Act to ensure you are not exposed to an unfair dismissal claim
  • Ensure the termination is not for a “prohibited reason” such as exercise of a workplace right
  • Always provide a reason for termination during probation periods- this does not have to be detailed but can simply refer to poor conduct or performance
  • Always provide a written termination letter that refers to the lawful reason for dismissal
  • In the event the employee brings a claim anyway, the termination letter provides you with evidence of the lawful reason for dismissal and reduces the ability of the employee to speculate there were other (unlawful) reasons at play.

 

Summary

While there is no legal obligation to provide a reason for dismissal of an employee during their probation period, best practice is to provide one in the interests of minimising the risk of an adverse action claim. A recent Federal Circuit Court case provides an example of what can go wrong when no reason is provided.

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