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As a startup owner, you need to know what constitutes unfair dismissal and how to avoid it. After all, it is legal to dismiss an employee from your startup, but only when the dismissal is justified. This article will outline unfair dismissal for your startup and when you can dismiss an employee.
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Before You Dismiss an Employee
Dismissing an employee is a severe step, and you could affect how an employee lives. Hence, you must carefully consider the situation before dismissing an employee, including:
- alternatives to dismissal;
- mitigating factors;
- if company rules are clear;
- whether you contributed to the issue in any way;
- if you warned them before on the same or similar issue; and
- how long they have worked for you.
You should only be considering dismissal if:
- the employee’s performance has not improved even though you have made attempts to improve performance through a performance management plan;
- the employee has a trial period of up to 90 days in their employment contract, and you would be dismissing them during the trial period;
- you have warned your employee of the misconduct, and their behaviour is not improving, causing you to lose trust in them; or
- you believe that the employee’s single act of misconduct is severe and that you have lost confidence in them to do the job.
What is a Fair Dismissal?
A justified dismissal refers to what a fair and reasonable employer would have done in the circumstances at the time. Whether a dismissal is fair depends on several factors. For example, a dismissal may be justified if the employee engaged in serious misconduct.
In situations where you believe the employee is guilty of misconduct, you need to give warnings and an opportunity for the employee to change their conduct. Misconduct may include:
- regularly staying away from work without good reason;
- taking unauthorised leave;
- unsatisfactory work performance;
- sending offensive emails;
- abusive language; and
- misconduct outside work hours, such as being convicted of a criminal offence.
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Fair Dismissal Process
If you dismiss an employee for a good reason, you must follow a fair dismissal process under the Employment Relations Act. The Employment Relations Authority (ERA) will decide whether the process was fair by considering whether:
- you investigated the allegations against the employee;
- your concerns were adequately communicated to the employee;
- the employee had a reasonable opportunity to respond to your concerns;
- you considered the employee’s explanation with an open mind before dismissing them; and
- your actions were those of a fair and reasonable employer, considering all the circumstances at the time the decision was made.
During the process, you must follow any relevant clauses in the employment contract and your workplace policies. In addition, you will need to give notice to the employee of their dismissal.
What is an Unfair Dismissal?
An unjustified dismissal is when you dismiss an employee for the reason that is not fair. You cannot dismiss an employee because:
- they are a member of a trade union;
- they take parental leave or adoption leave;
- of age, gender, race, ethnicity, religion or sexual orientation;
- they try to enforce their right to receive minimum wage; and
- they expose your company’s wrongdoings by engaging in whistleblowing.
If you do not resolve the situation, the employee can apply to the ERA. The ERA will try to resolve the dispute. Although a hearing in the ERA is less formal than a court, it will decide based on the evidence and employment law. For example, if an employer dismissed the employee, they must show that the decision was justified and the correct legal process was followed. Once the ERA has made its decision, either party can appeal to the Employment Court within 28 days of the determination if they do not agree with the decision.
Remedies for Unfair Dismissal
The ERA can order you to provide a remedy to the employee if the dismissal is unjustified. Remedies can include:
- reinstatement of the employee to their position;
- reimbursement for lost wages, benefits, or other money lost as a result of the dismissal;
- compensation for hurt, mental and emotional distress, humiliation and loss of dignity; and
- costs such as legal expenses.
Key Takeaways
The decision to dismiss an employee needs careful consideration, and you should consider other alternatives before taking this step. A fair dismissal may include findings of serious misconduct or misconduct against the employee. You cannot dismiss an employee for reasons such as family status, race, age, or gender. When dismissing an employee, you must carry out a fair process and provide the employee with warnings and an opportunity to change. Ultimately, several remedies are available for unfair dismissals, such as compensation, reimbursement, and costs.
If you need help understanding what an unfair dismissal means for your startup, you can contact our experienced employment lawyers to assist as part of our LegalVision membership. You will have unlimited access to lawyers who can answer your questions and draft and review your documents for a low monthly fee. Call us today at 0800 005 570 or visit our membership page.
Frequently Asked Questions
A dismissal will be unjustified if you fire an employee for reasons such as parental leave, association with a trade union, or an employee trying to exercise their rights by making a Health & Safety complaint.
If the ERA finds the dismissal is unfair, it may order you to rehire the employee and pay reimbursement for lost wages, compensation, or costs.
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