When a customer is assaulted on your premises, stock goes missing from the warehouse, or an employee turns up to work intoxicated, the natural response is to terminate their employment immediately. The law allows this in limited circumstances: serious misconduct can justify dismissing an employee without notice. But "without notice" does not mean "without process", and the difference between a lawful summary dismissal and a successful unfair dismissal claim usually comes down to the steps you take between discovering the conduct and making the decision.
Follow the process set out below and you should end up with the employee's employment lawfully terminated, no notice or payment in lieu required, and a written record that explains and defends the decision. What many employers assume is that serious misconduct means whatever the employer decides it is. It does not. The definition sits in the Fair Work Regulations, and if the employee challenges the dismissal, the Fair Work Commission (FWC) will test both whether the conduct actually happened and whether your process was fair.
Before you start: the prerequisites
Work through this checklist before you dismiss anyone for serious misconduct. Each item is something you should be able to tick off, and the first two are where employers most often go wrong.
- The conduct meets the legal definition: Under reg 1.07 of the Fair Work Regulations 2009 (Cth) (the Regulations), serious misconduct is wilful or deliberate behaviour that is inconsistent with the continuation of the contract of employment, or conduct that causes a serious and imminent risk to the health or safety of a person or to the reputation, viability or profitability of your business. The regulation also lists examples: theft, fraud, assault or sexual harassment in the course of employment, being intoxicated at work, and refusing to carry out a lawful and reasonable instruction that is consistent with the employee's contract.
- The listed examples are not automatic grounds: The regulation lets an employee argue that their conduct, in the circumstances, was not serious enough to make continuing employment through a notice period unreasonable. A one-off lapse, conduct that was explainable, or behaviour that did not really threaten your business may not meet the bar even if it looks like one of the examples.
- You have evidence, not just suspicion: Witness statements, documents, CCTV footage, transaction records and time sheets. A dismissal based on a hunch is a dismissal that fails on the first question the FWC asks: was there a valid reason related to the employee's conduct.
- You know whether the employee is protected from unfair dismissal: An employee needs a minimum employment period of six months, or twelve months if you are a small business employer with fewer than fifteen employees, before they can bring an unfair dismissal claim. They must also be covered by an award or enterprise agreement, or earn below the high income threshold that the FWC publishes each year. None of this stops you dismissing, but it tells you how much scrutiny the process will face.
- You know which code applies to you: If you employ fewer than fifteen people, the Small Business Fair Dismissal Code applies, and complying with it is your defence to an unfair dismissal claim. The Code treats it as fair to dismiss without notice or warning when you believe on reasonable grounds that the employee's conduct is sufficiently serious to justify immediate dismissal.
- You have a plan for the investigation period: The usual option is suspension on full pay while you gather evidence and interview witnesses. Suspending without pay generally needs a contractual or award basis, so do not assume you can dock pay while you investigate.
The dismissal process, step by step
The sequence below follows the order the law effectively imposes on you. Each step produces something you will need later, whether the employee accepts the dismissal or lodges a claim.
Step 1: Investigate the allegations before you form a view
Your first job is to establish what actually happened. Interview the witnesses, review the documents and records, and look for anything that supports or undercuts the allegation. Keep a record of what you reviewed and what each witness said, because the FWC will want to see that the decision was based on evidence gathered at the time, not reconstructed later.
- Collect witness statements in writing, with dates and signatures where practical.
- Preserve the evidence: secure the CCTV footage, the documents and the records before they are altered or deleted.
- Consider suspending the employee on full pay while the investigation runs, particularly if they might interfere with witnesses or evidence, or if they work with customers or money.
- Do not interview the employee as part of a witness sweep and then treat their account as the basis for dismissal. The employee gets their own chance to respond, and that comes at the right stage of the process.
Step 2: Put the specific allegations to the employee in a meeting
Once you have a factual picture, arrange a meeting and tell the employee what it is about. Let them bring a support person, and have someone present to take notes so there is an agreed record of what was said.
At the meeting, work through the allegations one at a time. State precisely what you believe the employee did, when and where it happened, and put the evidence in front of them: the witness statement, the photograph, the record of the transaction. This step does double duty. It gives the employee the information they need to respond, and it gives you the notification of the reason for dismissal that the FWC requires. Under s 387 of the Fair Work Act 2009 (Cth) (the Act), the FWC must consider whether the employee was notified of the reason for the dismissal and given an opportunity to respond, and whether you unreasonably refused to allow a support person at discussions about the dismissal.
- Confirm the meeting time and purpose in writing beforehand.
- Remind the employee they can bring a support person. Refusing a reasonable request is a factor the FWC weighs against you.
- Have a note-taker present, and have the employee confirm the notes afterwards where you can.
Step 3: Give the employee a genuine chance to respond
The employee may respond in the meeting, or ask for time to provide a written response. Give them that time. A response can change the picture: the employee may produce a medical certificate explaining the behaviour, show that the missing stock was logged, or point to a colleague who saw something different.
When you receive the response, make sure you understand it, and confirm your understanding back to the employee in writing. This is the step employers most often short-circuit, because it can feel like the employee is simply making excuses. Treat the response as information, weigh it against the evidence you gathered in step 1, and let it alter your conclusion if that is where the evidence leads.
Step 4: Make the decision on the evidence
Decide on the material before you, and decide reasonably promptly. The FWC does not impose a strict deadline, but a decision that drags on for weeks, or one that ignores the employee's response, looks less like a considered outcome and more like a foregone conclusion.
The legal test is whether there was a valid reason for the dismissal related to the employee's conduct. That means the conduct must actually have occurred, on the balance of probabilities, and it must be conduct that justifies dismissal. Write down the reasons you reached the decision, the evidence you relied on, and how you dealt with the employee's response. This note is the backbone of your defence if the dismissal is challenged.
Step 5: Confirm the dismissal in writing and pay what is owed
For serious misconduct, the Act does not require you to give notice or payment in lieu. Section 117 of the Act normally requires written notice of the day of termination and either the minimum period of notice or payment in lieu, but s 123(1)(b) disapplies that Division where employment is terminated because of serious misconduct. This is what people mean by summary dismissal: the employment ends immediately.
That does not mean you can end the employment informally. Confirm the dismissal in writing, state the day the employment ends, and set out the reasons for the decision. Then pay what is owed: under s 90(2) of the Act, untaken annual leave must be paid out when employment ends, and long service leave may also be payable depending on your state or territory scheme.
Where employers typically get held up in this process:
- Dismissing on the spot, before investigating: Even where serious misconduct clearly occurred, a dismissal without any investigation or chance to respond can be found harsh, unjust or unreasonable, and compensation can be ordered against you.
- Treating the listed examples as automatic: Theft or intoxication looks clear cut, but the employee may be able to show the conduct was not serious enough to make employment through a notice period unreasonable. Test each case against the facts.
- Relying on hearsay instead of evidence: "Everyone knows what he did" is not a valid reason. Witness statements, records and documents are.
- Ignoring the Small Business Fair Dismissal Code: A small business that follows the Code is protected from unfair dismissal claims. One that does not can lose a claim even where the misconduct was real.
Where a lawyer helps
The process above is manageable in-house for a clear-cut case, but there are points where a lawyer's involvement materially changes the risk profile:
- Testing the definition: Whether particular conduct meets the definition of serious misconduct, and whether it is serious enough in the circumstances, is a judgment call that a lawyer can assess against the regulation and comparable FWC decisions.
- Running the investigation and the meeting: A lawyer can help you plan the interview questions, review the witness statements, and make sure the meeting and the response stage are conducted so the record supports the decision.
- Drafting the termination letter: The reasons you put in writing become the case you have to defend. A lawyer can draft the letter so the reasons are accurate, complete and tied to the evidence.
- Assessing the unfair dismissal risk: Eligibility, the high income threshold, the small business code and the strength of the evidence all feed into whether a claim is likely, and what it might cost.
- Responding to a claim: An employee has 21 days after the dismissal takes effect to apply to the FWC for an unfair dismissal remedy, though the FWC can allow more time in exceptional circumstances. A lawyer can prepare the response, negotiate a settlement, or defend the claim at a hearing.
Give the employee a genuine chance to respond before you decide
The step that most often decides whether a summary dismissal survives scrutiny is not the dismissal itself, and it is not even the definition of serious misconduct. It is whether you gave the employee a real opportunity to respond to the specific allegations, with a support person available, before you made up your mind. The FWC is required to weigh that factor under s 387 of the Act, and a dismissal that follows a fair process, on evidence gathered and tested, is very difficult to overturn even where a claim is lodged.
In short: confirm the conduct meets the definition of serious misconduct under the Regulations, investigate and keep the evidence, put the allegations to the employee and let them respond, decide on the evidence, and confirm the dismissal in writing without notice but with all entitlements paid. Each step builds the record that protects the decision, and the record is what survives the 21-day window for an unfair dismissal application.