There are good reasons to always provide reasons for terminating employment

Key Points: 

• With adverse action claims on the rise it is important to do everything you can to protect yourself against allegations that you have terminated an employee’s employment because of a prohibited reason.

• If an employee has made complaints about their employment then this risk escalates.

• Any decision to terminate needs to be well-founded and documented and the decision maker(s) need to be prepared to give evidence to back this up to prove that any prohibited reason did not influence the decision making process.

There is a commonly held view that if an employer is terminating an employee’s employment during their probation period or under a contract of employment that enables them to terminate at any time with notice there is no need to provide reasons in these circumstances. However, as demonstrated in a recent Federal Circuit Court decision [1] (and yet to be determined in relation to the termination of Michelle Guthrie by the ABC) employers do so at their peril in the current climate of adverse action claims being on the rise.

In the decision of Pacheco-Hernandez the employment of the beauty salon supervisor was terminated 5 months into her 6 month probation period with the letter of termination providing no explanation for the termination. When a reason was sought the employer’s HR manager said words to the effect of “we are not legally obligated to give an explanation if we do not wish to do so”.

Ms Pacheco-Fernandez commenced adverse action proceedings claiming that her employment was terminated because she had made a statement in relation to a fellow employee’s workers’ compensation claim and had made various complaints in relation to her employment.

As is often the case in these matters there was no difficulty in finding that adverse action had been taken by the employer in terminating Ms Pacheco-Fernandez’s employment and that she had exercised various workplace rights. The real issue was whether the adverse action was taken because of the exercise of these workplace rights. The rebuttable presumption in section 361(1) of the Fair Work Act (“the Act”) meant it was up to the employer to prove that the substantial and operative reason(s) for termination did not include the exercise of these workplace rights.

In the absence of the decision maker providing clear evidence as to the reasons for the termination it was found that the employer did not discharge its onus of proving that the complaints made by the employee in relation to her employment were not a substantial and operative reason for the termination. This finding was bolstered by the fact that only one of the two relevant decision makers gave evidence and the decision maker who did give evidence did not give clear evidence as to what her reasons were for deciding to terminate Ms Pacheco-Fernandez’s employment and therefore that the reasons did not include the complaints made by the employee.

Lessons to be learned from this decision

• If you have a probation review policy then ensure it is followed in deciding to terminate an employee during probation
• If you do not have a probation review policy then it is worth having one
• Your probation review policy should require an assessment to be undertaken and documented prior to the expiration of the probation period. If a decision is made to terminate employment on the basis of not passing probation then the reasons for this decision should also be documented and should not include any prohibited reasons under the general protection provisions of the Act. This requires the reasons to be specific and related to performance or conduct issues that do not stem from any complaints made by the employee
• If these steps have been followed there should be no reason not to provide the employee with the reason(s) for the termination
• If the decision is challenged then it is critical that the decision maker is willing to provide evidence to confirm the rationale behind the decision and that any prohibited reasons alleged by the employee where either not known by the decision maker or did not influence the decision
• Similar considerations will apply in situations where a clause in an employment contract that permits termination for any reason with notice is relied upon. You will be better protected if there is a basis for termination that does not include a prohibited reason and this reason is provided to the employee and documented as being the basis for the termination.

If you need assistance navigating this minefield we are happy to assist.