Employee Issues and Managing Performance

What is the Small Business Fair Dismissal Code?

July 26, 2021

The Small Business Fair Dismissal Code (the ‘Code’) only applies to small businesses as defined under the Fair Work Act 2009 (Cth), which are those with fewer than 15 employees. In addition, for small businesses, employees are not entitled to claim Unfair Dismissal in the first 12 months of their employment. It is therefore important that small businesses ensure employee dismissals are consistent with the Code to avoid getting involved in an unfair dismissal case which may go against them.

The code provides a framework for small businesses to follow when dismissing employees. However, it is important to note, that the ‘Code’ does not grant small businesses some form of mystical protection. Rather, it acts as more of a guideline, which when followed, will lessen the likelihood of a dismissal being deemed unfair. While there are some technical distinctions from the general unfair dismissal considerations, most of those distinctions are more academic than practical protections for small business owners.

Types of dismissal and termination

There are generally two types of dismissal – ‘summary’ and ‘other’. Small businesses must be aware of the different obligations for both.

A Summary (or instant) dismissal is where an employer dismisses an employee for serious misconduct, including violence/assault, theft, fraud, or serious breaches of Work Health and Safety, for example.

If an employer, on reasonable grounds, determines an employee has engaged in these activities, immediate dismissal can be justified. However, the height of the bar for the seriousness of the misconduct should be considered to be a high one, such that in cases of alleged theft, fraud, or violence, it is assumed the employer would ordinarily report the matter to the police, if they have sufficient reasons to do so.

‘Other Dismissal’ covers ongoing employee performance, behaviour and conduct related dismissals. An example of this is an employee’s performance not improving despite being given training, disciplinary meetings and warnings, leading to the eventual dismissal.

The small business must still provide the employee with the opportunity to respond to the allegations against them and to improve their performance / behaviour. Typically, it will be expected the business will provide the employee with extra training, assisting them in meeting the required performance standards and giving them a clear understanding of the employer’s expectations.

There are also Procedural Matters which the small business must follow to comply with the Code. One example is that an employee should be afforded the opportunity to have a support person present with them, as long as they are not a lawyer acting in a professional capacity.

Take a look at the Small Business Fair Dismissal Code

The Small Business Fair Dismissal Code checklist is meant to assist small businesses in assessing and recording their reasons for dismissing an employee. Whilst it isn’t a requirement for employers to actually fill out the checklist as a form, it is still significantly in the interest of small businesses to lean heavily on, complete and keep the checklist as evidence of their compliance with the Code.

The Fair Work Ombudsman’s Small Business Fair Dismissal Code can be found here.

Here are some unfair dismissal cases from the Fair Work Commission

The Fair Work Commission website has a range of unfair dismissal cases that the public can look through, illustrating real-life application of the Small Business Fair Dismissal Code. We have selected 3 from the Fair Work Commission unfair dismissal cases, designed to give an insight into different types of situations and dismissals. Some notable cases are:

The first case we selected was McKenna v Home Theatre Group Pty Lt T/A Home Theatre Group. In that case, the employer decided to terminate the employee for serious misconduct. The employee then sent emails disparaging the Managing Director to a significant client and to other members of staff. Due to the employee’s actions in sending out the emails, the business’s reputation faced serious and imminent risk of harm. As the employer used the Code in the dismissal, the Commission deemed the dismissal to be fair.

The second case was Shaw v Pat Thomas Memorial Community House Inc. In this case, the employer dismissed the employee for contacting the Department of Child Protection, going against a written direction and warning. Through the trial, no evidence of this direction was found. The employer also failed to give the employee a chance to respond to the allegations. Therefore, the dismissal was found to be unfair and inconsistent with the code.

The following two cases illustrate that even having the Commission determine compliance with the Code is no straight forward matter.

Example 1) Strict reliance on the code does not guarantee protection from Unfair Dismissal

Miller v Urban Pedaler T/A Urban Pedaler. In this case, a workshop manager was dismissed due to poor performance. Concerns about the employee’s performance were raised informally and the employee was provided a formal letter advising him that his employment was at risk. Four days later the employee was suspended and had his employment terminated.

Initially, the Commissioner deemed that the employer followed the Code and therefore the dismissal was fair and genuine. However, on appeal, the Full Bench did not consider the four days between the formal warning and eventual dismissal to be enough time to present the employee with a reasonable chance to improve his performance, making the dismissal unfair.

Example 2) Determining ‘reasonable belief’ is not always clear before the Commission

Kirsten Suttie v Lloyd & Co. In this case, the employer learnt that an employee had made comments disparaging the employer. As a result, the employee in question had their email account reviewed, resulting in the employee’s employment being terminated.

The initial decision handed down by the Commissioner found that the belief the employer had given to the tip off, giving way to a more comprehensive, secondary investigation, was unreasonable. As a result, the dismissal was deemed to be unfair. However on appeal, the Full Bench overturned the decision, stating that “the reliance he placed on matters within his direct knowledge establish that Mr Lloyd’s belief was on reasonable grounds”, which was the true test for the purposes of the Code.

Looking for more?

The Small Business Fair Dismissal Code is a tool for all small businesses to utilise, however there is only so much that it can do. Developing a deeper understanding of your rights and obligations as an employer is more effective way of avoiding any non-compliance issues with the Code in the longer term.

Our ER consultants are well equipped to provide you with clear and effective advice on how to avoid making mistakes when terminating staff and protect your business from unfair dismissal claims. Take a look at our WorkShield packages to see how you can get access to our consultant’s expert advice among other features designed to support your business.

Unfair dismissal claims can be extremely damaging to your business. Not only do they involve significant cost and distraction to you and your business, but they can also damage your brand’s reputation. Take a look at our Ultimate Guide to Avoiding Unfair Dismissals here. It will ensure that you know exactly what you are trying to avoid and strategies on how to avoid it.