With unfair dismissal claims against employers reaching 18,000 each year across Australia, some employers may decide to keep an underperforming employee employed, rather than to dismiss the employee and possibly be liable to pay more than $85,000 in compensation.

Despite the risk, there are steps that you as an employer can take to protect yourself and significantly improve your chances of successfully defending an unfair dismissal claim, and these steps are listed below:

1. Make sure you have a valid reason for the dismissal relating to the employee’s capacity or conduct – this means that the reason for the proposed dismissal must be “sound, defensible or well founded”, and it CANNOT be a reason that is “capricious, fanciful, spiteful or prejudiced”.
2. Make sure you notify the employee of that reason – it should be noted that the notification of the valid reason needs to be given to the employee BEFORE the decision to terminate is made.
3. Make sure the employee is given an opportunity to respond to any reason related to their capacity or conduct – again, it should be noted that the opportunity to respond needs to be given to the employee BEFORE the decision to terminate is made. Having a pre-drafted termination letter in your possession at the beginning of a meeting that may result in an employee’s termination will almost always adversely affect your position as an employer if the matter later proceeds to a formal unfair dismissal hearing.
4. Allow the employee to have a support person present to assist at any discussions relating to dismissal – note that there is no positive obligation on an employer to offer an employee to have a support person present – the law will only consider any unreasonable refusal by the employer to allow the employee to have a support person present.
5. If the employee’s performance has previously been unsatisfactory, make sure you have warned the employee in writing – warnings must identify the relevant aspect of the employee’s performance which is of concern to the employer, and a mere ‘exhortation’ to improve will not be sufficient. The warning must also make it clear that the employee’s employment is at risk unless performance improves.