How Do I Manage an Employee Disciplinary Process Properly?

Co-authored by Tazrian Hossain

Key Takeouts:

• Procedural fairness is essential when managing employee underperformance or misconduct and can significantly reduce the risk of unfair dismissal claims.

• A compliant disciplinary process should include clear allegations, the right to a support person, a genuine opportunity to respond, and appropriate warnings where required.

• Even when there is a valid reason for dismissal, procedural mistakes can result in costly compensation orders.

• Consistent, well-documented disciplinary processes help employers make confident decisions while protecting their business from legal risk.

 

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Managing underperformance or misconduct is one of the toughest responsibilities a manager faces. When an employee isn’t meeting expectations, it’s easy to let frustration drive the timeline. However, acting impulsively can expose your business to severe legal risk.

In New South Wales (NSW), standard employment relationships are governed by the national workplace relations system under the Fair Work Act 2009 (Cht). If a disciplinary process for employees is handled poorly, an employee may lodge an unfair dismissal claim, arguing that their termination was ‘harsh, unjust or unreasonable’.  To protect your business and act fairly, you must master Procedural Fairness.

 

What is Procedural Fairness?

Procedural fairness (often called natural justice) focuses on how a decision is made, rather than just the final decision itself. Under Section 387 of the Fair Work Act, when deciding if a dismissal was unfair, the Fair Work Commission (FWC) will look closely at whether the employer followed a just process, particularly whether the employee was provided a reasonable opportunity to be heard before a decision affecting their employment is made.

 

The Golden Rules of a Proper Employee Disciplinary Process

To ensure your process withstands legal scrutiny, every formal disciplinary action should follow these four essential stages:

Phase 1: Clear Allegation & Adequate Notice 

You cannot simply call an employee into an office and blindside them with generic complaints. You must provide them with the specific details of the underperformance or misconduct. Put the allegations in writing. Cite specific dates, policy breaches, or missed KPIs. Provide the employee with reasonable notice (usually at least 24 – 48 hours) before a formal disciplinary meeting so they can prepare their response.

Phase 2: The Right to a Support Person 

Under the Fair Work Act, an employer must not unreasonably refuse an employee’s request to have a support person present in a disciplinary meeting. Explicitly state in your meeting invitation letter that the employee is welcome to bring a support person (such as a colleague, friend or union representative)

Phase 3: A Genuine Opportunity to Respond

A disciplinary meeting is an opportunity for the employee to give their side of the story. You must enter the meeting with an open mind, explain the issues, and listen. Do not pre-determine the outcome. If you prepare a termination letter before hearing the employee’s explanation, you have violated procedural fairness.

Phase 4: Warning & Time to Improve

If the issue relates to performance rather than serious misconduct like theft or fraud, you must give the employee a clear warning and a reasonable window of time to improve. Implementing a structured Performance Improvement Plan (PIP) is standard practice.

 

How to Tell the Difference Between What is Fair and Unfair

To understand how procedural slip-ups can be detrimental to your organisation, take a look at the following cases demonstrating what is considered a fair process, and what is unfair.

Unfair disciplinary processes 

Jimenez v Accent Group T/A Platypus Shoes (Australia) Pty Ltd [2016] FWC 5141

The Case: A store manager was summarily dismissed (fired on the spot without notice) for serious misconduct involving multiple allegations, including failing to properly record cash for a shoe sale.

The Ruling: The Commission actually agreed that the employer had a valid reason to dismiss the employee because the cash mishandling constituted serious misconduct. However, the employer made a critical error: they allowed the employee to keep working shifts after the investigation concluded, before suddenly executing the summary dismissal.

The FWC held that allowing him to continue working was inconsistent with treating the behavior as immediate “summary dismissal” misconduct. Because of these procedural flaws, what should have been a perfectly lawful termination was ruled unreasonable and unjust, and the employer was ordered to pay compensation.

Fair disciplinary processes

Hill v Cobham Aviation Services Pty Ltd [2019] FWC 7875

The Case: A long-serving manager with 13 years of service began exhibiting sporadic performance and conduct issues, culminating in a heated incident where he leaned over an office partition and verbally abused a colleague over an invoice disagreement. The employer launched an investigation and issued a formal disciplinary letter.

The process was paused for five weeks while the employee took personal leave for health reasons (depression). When he returned, the employer attempted to hold a disciplinary meeting, but the employee became loud and aggressive. Rather than firing him on the spot, the employer halted the meeting to prevent escalation, rescheduled it, and arranged for both security and an Employee Assistance Program (EAP) counsellor to be available. At the final meeting, the employee showed no remorse and was dismissed for breaching the Code of Conduct.

The Ruling: The employee claimed unfair dismissal, arguing his conduct was tied to his mental health challenges. The FWC dismissed his claim, ruling the termination was entirely lawful. The Commission noted that unacceptable conduct, even if occasional, warrants dismissal if repeated and not remediated.

Crucially, the FWC found the employer’s response to his depression was highly respectful, offering time off and counselling, and noted that the employee provided no evidence that his illness caused the outbursts.

 

The Key Takeaway

Having a valid, legally justifiable reason to discipline or terminate an employee means very little if your execution is impulsive or reactive. Ultimately, defending your business against a costly claim requires striking a balance between firm boundary-setting and meticulous patience.

You should document every warning, outline allegations transparently, and provide the employee with a genuine, timely opportunity to respond. As the Platypus Shoes case demonstrates, having an open-and-shut case of employee misconduct will not save you if your internal actions are inconsistent or rushed. Conversely, the Cobam Aviation case proves that procedural fairness is not a shield that protects poorly behaving employees forever. Rather, it is a transparent framework that allows employers to act firmly. By taking a breath, accommodating personal leave, offering an EAP counsellor, and calmly resetting the meeting when things escalated, the aviation company built a legally bulletproof defence.

Whilst every case is different. The key is to always be proactive, not reactive. Create a system for your business that works every time so steps are not missed and you can protect your business.

Coutts can assist you with your employment law needs. From advisory to implementation, the best way to ensure you are compliant is to assist you.

 

 

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