In your letter: Termination of employment letters

A termination of employment letter serves a significant purpose in bringing the employment relationship to an end.

Termination letters are frequently relied upon by employers and employees alike when a claim for unfair dismissal is made. Given their tendency to arise in legal proceedings, it is important that these documents are correct, provide as much detail as possible and meet the requirements under the Fair Work Act 2009 (Cth) (FW Act).

Termination date and notice

The termination letter must serve its purpose – that is, it must clearly specify that the employment has been terminated and state the day on which the termination of employment comes into effect.

Section 117 of the FW Act provides that an employer must give the employee written notice of the day of the termination of employment, that is, the day the employee’s employment ends. The date of the termination letter (written notice) must reflect the actual date the notice is given and the termination date cannot be before the written notice is given.

Notice of termination of employment should, to the extent it is reasonably practicable, be given to an employee by delivering it personally by hand. Alternatively, the notice may be left or sent to the employee’s last known address (ideally, by registered post).

Where notice of termination of employment is to be given to the employee, the termination letter should set out the minimum period of notice and whether the notice:

  • Is given in time – that is, the employee is to work through their notice period and the employment will end at the end of the notice period; or
  • Is to be paid in lieu – that is, the employee is not required to work their notice period, the employment will end immediately and an amount equivalent to the notice period will be paid to the employee.

Written confirmation should be provided to the employee soon after the employee is advised of their dismissal so that there is little dispute about when the dismissal takes effect.

For example, in Porter v Ramdhas Poli Pty Ltd [2019] FWC 5681, an employee argued that she was protected from unfair dismissal because she had received notice of termination in a letter sent by email on 10 May 2019 and that, by that date, she had met the minimum employment period. However, the Fair Work Commission (FWC) found that the employee was told in a meeting on 3 May 2019 that her employment would cease and that this was confirmed in an email dated 5 May 2019. The FWC dismissed the employee’s application as she was actually dismissed prior to the completion of the minimum employment period and was therefore not protected from unfair dismissal.

Reason for termination

The termination letter should also set out the reason for the employee’s dismissal. To this end, it must correctly reflect the valid reason for the termination of the employee’s employment.

Notifying an employee of the reason for the termination of their employment is a basic tenet of procedural fairness. An employee must be notified of the valid reason for the termination of their employment before the decision is made and they must be provided with an opportunity to respond.

Under section 387 of the FW Act, when considering whether a dismissal was harsh, the FWC must take into account whether there was a valid reason for dismissal and whether the person was notified of that reason.

For example, in Khan v Oakleigh Fruit Barn [2019] FWC 3458, the FWC found that the employee was not notified of the reason for her dismissal. The uncontested evidence provided by the employee was that she was told at the end of a shift that she would only be required for another two weeks and to look for another job. When the employee asked why, she was advised that the owner was not happy with her. At the employee’s request, she was provided with a letter confirming the termination of her employment which again did not specify a reason for her dismissal.

The FWC found that the employee was unfairly dismissed due to the employer’s “significant failures” which included a lack of valid reason and failure to notify the employee of the valid reason before the decision was made to dismiss her. The FWC ordered the employer to pay the employee $4,522.82 (gross) plus superannuation.

Other matters

Employers may wish to include in their termination letter the requirement for the employee to return company property (keys, uniform, documentation etc) and if relevant, remind the employee of their continuing obligations in relation to the non-disclosure of confidential information and other post-employment conduct, as further risk mitigation measures.

Lessons for employers

Employers should take care when drafting termination letters. Clear termination letters avoid confusion in relation to key dates and reasons for dismissal which may arise if a dispute about the dismissal later arises.

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