Alex is Sprintlaw's co-founder and principal lawyer. Alex previously worked at a top-tier firm as a lawyer specialising in technology and media contracts, and founded a digital agency which he sold in 2015.
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Every business will encounter a disgruntled employee at some point. It can be stressful, time-consuming and, if mismanaged, risky from a legal and reputational standpoint.
The good news? With a calm, structured process and the right documents in place, you can address concerns early, meet your obligations under Australian law and protect your workplace culture.
In this guide, we walk through how to spot the early signs, what your legal duties look like, and a step-by-step approach you can follow to manage a disgruntled employee fairly and lawfully.
What Is A Disgruntled Employee (And Why It Matters)?
In simple terms, a “disgruntled employee” is a team member who is dissatisfied or upset with their role, treatment or workplace. This can show up as frustration, withdrawal, decreased performance or conflict with colleagues.
Left unaddressed, it can escalate into misconduct allegations, mental health risks, breaches of confidentiality, or claims under the Fair Work Act 2009 (Cth). Morale and productivity take a hit, and you may face legal exposure if processes aren’t followed.
Acting early and consistently-guided by your policies and employment contracts-usually leads to a better outcome for everyone.
Early Warning Signs And Root Causes
Spotting problems early gives you the best chance to resolve them quickly. Common signs include:
- Noticeable drop in performance or care in work quality
- Increased absenteeism or lateness
- Negative or confrontational communication with colleagues or clients
- Resistance to instructions or changes
- Leaking sensitive information or posting critical content online
Typical drivers sit behind the behaviour:
- Role confusion or workload issues
- Conflicts with a manager or teammate
- Perception of unfair treatment, pay or recognition
- Personal or health challenges, including stress or burnout
- Change fatigue (new systems, restructures, or leadership changes)
Your goal is to understand what’s really happening, then choose the right support and process to move forward.
What Are Your Legal Obligations As An Employer?
When dealing with a disgruntled employee, there are several legal touchpoints to consider. Managing them well reduces your risk of disputes and claims.
Fair Work And Procedural Fairness
Employees are entitled to a fair process, especially where performance or conduct concerns may lead to warnings or dismissal. This usually includes clear communication of issues, a chance to respond, reasonable support, and time to improve.
Work Health And Safety (Including Mental Health)
You must ensure, so far as is reasonably practicable, the health and safety of workers. That includes psychosocial risks. If stress or mental health is a factor, explore reasonable adjustments and support. For practical guidance, it helps to consider your Fair Work obligations regarding employee mental health alongside your WHS duties.
Discrimination And Adverse Action
Performance and conduct decisions must not be made for prohibited reasons (for example, because of a protected attribute or because an employee exercised a workplace right). Keep decisions tied to documented performance or behaviour, and follow a consistent process.
Confidentiality And Company Property
Protect confidential information and IP through contracts and policies. If tensions rise, reinforce expectations around data security, device use and communications. Where appropriate, employers may lawfully review business systems, noting the nuances around employer access to employee emails.
Investigation Requirements
Allegations of misconduct or bullying should be addressed through a fair, evidence-based investigation. In some cases, you may need to temporarily remove the employee from the workplace while you investigate-see the rules for standing down an employee pending investigation.
Step-By-Step Plan To Manage A Disgruntled Employee
Every situation is unique, but this structured approach will help you act fairly, consistently and lawfully.
Step 1: Stabilise The Situation And Assess Risk
If there are immediate risks (safety, harassment, data security, client harm), address them first. That could mean adjusting duties, changing access permissions, or separating parties temporarily.
Keep the tone calm and factual. This isn’t a disciplinary finding-it’s a short-term control while you assess next steps.
Step 2: Gather Facts And Document Everything
Collect relevant documents, emails, performance metrics and witness accounts. Keep notes of all meetings and decisions. Documenting the process is crucial if the matter later escalates to a claim or requires formal action.
Step 3: Have A Private, Respectful Conversation
Schedule a confidential meeting. Explain the concerns with specific examples, listen to the employee’s perspective, and explore the root cause. Confirm what support is available (for example, adjustments, coaching or EAP) and outline the next steps clearly.
Step 4: Manage Performance With A Fair Process
If the concern is performance-related, set clear expectations, KPIs and timelines for improvement. A supportive, structured process is essential. Many employers use a documented plan and follow the principles in a robust performance management process.
Follow through with regular check-ins and put outcomes in writing. Keep things practical and measurable.
Step 5: Investigate Misconduct Properly
If the issue involves alleged misconduct (e.g. bullying, dishonesty, harassment, or serious policy breaches), conduct a fair investigation. Give the employee a chance to respond to specific allegations and any evidence. Where appropriate, use a formal letter to outline the concerns and invite a response-many businesses rely on a well-drafted show cause letter for this step.
Keep the investigation proportionate to the issue and aim for clear findings before deciding on any outcome.
Step 6: Decide On A Fair Outcome (And Communicate It Clearly)
Depending on your findings, outcomes may include training, coaching, a warning, role changes or a performance improvement plan. If dismissal is on the table, ensure procedural fairness and check notice entitlements, award/enterprise agreement obligations, and risks of unfair dismissal or general protections claims.
Where needed, you might consider using garden leave during notice periods to protect clients, data and team stability. In more sensitive exits, some businesses include tailored non-disparagement commitments; see how non-disparagement agreements are used in Australia.
Policies, Contracts And Tools That Reduce Risk
Strong, tailored documents help you set expectations early and handle issues consistently. The right framework also makes it easier to demonstrate fairness if a matter escalates.
- Employment Contract: Sets out duties, confidentiality, performance standards, notice, and post-employment obligations. Ensure terms align with any applicable award or enterprise agreement.
- Workplace Policies: Clear policies on performance, conduct, bullying/harassment, equal opportunity, leave, technology use, and complaints handling show staff what’s expected and how issues will be addressed.
- Performance Management Framework: A documented approach to setting expectations, monitoring progress and issuing warnings supports consistency and procedural fairness.
- Show Cause Letter: A fair way to put concerns to an employee and invite their response before a decision is made about disciplinary action.
- Garden Leave Clause: Lets you require an employee to stay away from work (while being paid) during notice periods, helping protect customers and confidential information.
- Non-Disparagement/Communications Provisions: Useful in negotiated exits to set expectations around public statements and protect brand reputation.
- Stand Down Guidance: Knowing when you can lawfully stand someone down pending investigation helps you manage risk while staying compliant.
- Termination Documents: A consistent suite (notice, reasons, final pay detail, return-of-property checklist) reduces errors and helps you close out the relationship cleanly.
These tools don’t replace good leadership and communication-but they do give you a clear roadmap when a situation becomes challenging.
Handling Sensitive Scenarios: Practical Tips
When Mental Health Is In Play
Approach conversations with empathy and focus on support and safety. Consider reasonable adjustments (duties, hours, location) and make sure any performance processes are fair and considerate. It’s also worth revisiting your systems against your mental health obligations.
If You Need To Remove Someone From The Workplace
Use the least intrusive option that still mitigates risk. Sometimes that’s temporary reassignment or working from home; at other times, a lawful stand down or a carefully managed garden leave period is appropriate. Document your reasoning and revisit it regularly.
Social Media And Reputation Risks
Remind staff of confidentiality and conduct obligations, including acceptable online behaviour. Consider whether any non-disparagement undertakings (especially in exit arrangements) are proportionate and enforceable.
Email, Devices And Data
If you need to audit communications for a workplace issue, check your policies and apply a lawful, proportionate approach to access-there are specific considerations around employer access to employee emails, privacy expectations and device ownership.
When Termination Becomes Necessary: Avoiding Unfair Dismissal Risks
Sometimes, despite best efforts, the employment relationship can’t be repaired. If dismissal is contemplated, focus on process and documentation.
Follow A Fair Process
- Put concerns to the employee with enough detail to respond (often via a show cause letter).
- Allow a support person if requested.
- Consider any response and evidence before deciding.
- Decide on proportionate, consistent outcomes.
Timing, communication and documentation will be critical if a dismissal is later challenged as harsh, unjust or unreasonable.
Check Notice, Pay And Entitlements
Confirm minimum notice (or pay in lieu), outstanding leave, award entitlements and any contractual bonuses or commissions. If you opt to pay out notice, ensure the approach aligns with your policies and any award obligations-see the details around payment in lieu of notice.
Probationary Periods Still Need Care
Shorter service can reduce the risk of unfair dismissal claims, but it doesn’t remove all legal exposure (for example, general protections). Keeping a fair process is still wise-here’s an overview of termination during probation in Australia.
Close Out Properly
Use a consistent checklist to collect property, revoke access, confirm confidentiality and clarify post-employment obligations. Many businesses rely on an employee termination documents suite to standardise this step and avoid gaps.
Proactive Prevention: Build A Culture That Reduces Disputes
While no workplace is conflict-free, prevention is powerful. A few practical levers can reduce the likelihood and impact of disputes:
- Onboarding that sets clear expectations and values
- Regular one-on-ones and coaching (not just annual reviews)
- Transparent role descriptions, KPIs and feedback loops
- Clear, up-to-date policies that staff can actually find and understand
- Early intervention when behaviour or performance trends change
- Psychologically safe practices that encourage raising issues early
Good processes don’t make tough conversations easy-but they do make them fair, consistent and less risky.
Key Takeaways
- A disgruntled employee is a signal to act early-understand the root cause, stabilise risks and follow a fair, documented process.
- Know your legal duties across Fair Work, WHS (including mental health), discrimination and confidentiality, and keep decisions evidence-based.
- Use a step-by-step approach: assess risk, gather facts, hold a respectful meeting, manage performance fairly, investigate misconduct properly, and decide on proportionate outcomes.
- Robust documents help: an Employment Contract, Workplace Policies, show cause letters, garden leave and a reliable termination pack all reduce risk.
- If termination is necessary, focus on procedural fairness, notice and entitlements, and clear close-out steps to minimise unfair dismissal exposure.
- Prevention matters: clear expectations, regular feedback and psychologically safe practices reduce disputes and improve outcomes.
If you’d like a consultation on managing a disgruntled employee or putting the right documents and policies in place, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
