As an employer running a small business, it’s crucial to be well-versed in the rules surrounding dismissals. On average, 15% of all unfair dismissals claims made during 2023 and early 2024 have been in small businesses. The risk of a successful claim against your business may be substantial in damaging your reputation and finances. In this blog post we revisit the Small Business Fair Dismissal Code, and discuss how you can reduce the risk and damage of an unfair dismissal claim on your small business.
What is the Small Business Fair Dismissal Code?
This is a legislative code designed to assist small businesses with less than 15 employees in managing employee terminations fairly. It provides a guide for employers to follow when managing poor work performance and misconduct that may lead to the dismissal of employees, ensuring that the process is fair to you and the employee. If you, as an employer, have followed the Code, then the dismissal of an employee will be deemed to be fair.
Key Elements of the Small Business Fair Dismissal Code
Note: an employee must have 12 months of continuous service to be eligible to make an unfair dismissal claim
Summary Dismissal
In the case of serious misconduct, an employee may be dismissed without notice or warning (e.g., where the employee commits theft, fraud, violence etc.). In order for the dismissal to be fair you will need to hold the belief that:
- the employee was the person who committed those actions
- the conduct was serious, and
- the conduct would justify immediate dismissal.
Importantly, the belief must be held on reasonable grounds. This means that there is an expectation that you should investigate the matter and provide the employee with an opportunity to respond prior to dismissal.
Note: the FWC does not need to determine whether the employer was right or wrong, but just that they held this belief on reasonable grounds.
Other Dismissals
If the actions by the employee do not justify summary dismissal, small businesses are generally required to follow the same procedures as any other business. This includes that the following requirements should be satisfied:
Valid Reasons for Dismissal– Under the Code, a dismissal is considered fair if it is based on valid reasons, such as poor performance, misconduct, or genuine operational reasons. Employers must ensure that the reasons for dismissal are lawful and reasonable.
Procedural Fairness– Employers must afford employees procedural fairness throughout the dismissal process. This includes providing employees with written notice of termination and an opportunity to respond to any allegations against them. In addition, all disciplinary procedures provided for in their relevant contract, award or enterprise agreement must be adhered to.
Warnings– Prior to dismissal, employers must give employees warnings (verbal or written) and opportunities to improve their performance or conduct, except in cases of serious misconduct.
Ensuring transparency around unsatisfactory performance
Consultation – Employers are encouraged to engage in open and honest communication with employees regarding performance or conduct issues. Consulting with employees can help identify solutions and prevent the need for termination.
Record-Keeping– Employers should maintain detailed records of all communication and actions related to employee performance and termination. Accurate record-keeping can serve as evidence of procedural fairness in the event of disputes.
Mitigating the Risk of Unfair Dismissal Claims:
Employers should:
- Familiarize yourself with the Code and ensure compliance with all the requirements discussed above.
- In the case of summary dismissal, the belief that serious misconduct has occurred must be made on reasonable grounds.
- Maintain clear and consistent communication with employees regarding performance expectations and conduct standards.
- Document all performance issues, disciplinary actions, and termination procedures meticulously.
- Provide employees with reasonable opportunities to improve before resorting to termination.
- Act in good faith and avoid making decisions based on personal biases or discriminatory motives.
Note: Compliance with the Small Business Fair Dismissal Code is not the the last word on dismissal. Dismissals based on discriminatory grounds (e.g., race, gender, or disability) or in retaliation for exercising workplace rights are unlawful and can also result in legal action. Therefore, it is important to have up to date policies and procedures on all aspects of the employment relationship.
For more information regarding the application of the code to your business contact us