What is the Small Business Fair Dismissal Code?

A business is a small business employer if it employs fewer than 15 employees at the time of the dismissal of the employee for misconduct or poor performance. Even though small business employers may be exempted from unfair dismissal, the Fair Work Act 2009 (the “Act”) prescribes that a small business employer must comply with the Small Business Fair Dismissal Code (the “Code”) when dismissing an employee. A small business employer will be required to provide evidence of compliance with the Code if the employee makes a claim for unfair dismissal to the Fair Work  Commission.

The Code may be found on the Fair Work Commission website (www.fwc.gov.au) and consists of a checklist that must be followed by a small business to ensure that they comply with the unfair dismissal laws.

A small business employer is not bound to follow the Code when dismissing an employee if the employee in question has been employed for less than 12 months.

Generally, there are two situations which arise where the Code is relevant: summary dismissal (that is, termination without notice) and ordinary dismissal with notice.

In short, the Code says that in cases of summary dismissal, there must be an allegation of serious misconducts which warrants dismissal. In the case of termination with notice, a warning must be given before termination and the employee should be given a chance to rectify their performance.

Summary Dismissal

Summary dismissal is when an employee terminates an employee’s employment without providing notice.The Code deems it to be fair to dismiss an employee without notice or warning if the employer believes, on reasonable grounds, that the employee’s conduct is sufficiently serious to justify termination. Such conduct may include:

  • theft;
  • fraud;
  • violence; and/or
  • serious breaches of occupational health and safety procedures.

The Act does not require the employer to prove that the alleged conduct occurred. The employer may be required to provide evidence to prove that they held the belief. The employer must only establish that they had reasonable grounds to hold the belief. Such evidence may include inquiries or investigations that the employer undertook which may have resulted in the establishment of the belief.

Other Dismissal

In most other cases, such as dismissal for poor performance, the employer must provide the employee with notice or warning that they may be dismissed. The reason for the notice must be both valid and based on the employees conduct and/or capacity to their job.

The Code states that, unless the employee is dismissed summarily, the employee must be warned that if he/she does not improve then they may be dismissed. While the Code provides that the warning may be verbal, it is preferable if the warning is reduced to writing and it is prudent to keep copies of any documents in relation to the dismissal as these documents may be required later on to prove the employer took the right actions to comply with the Code.

The employee then must be given a reasonable time in which to respond to the warning and/or rectify the problem/issue. This step may require the employer providing additional training and/or ensuring that the employee is fully aware of his/her job expectations.

After reasonable time has lapsed, and the employer has not been satisfied by the employee’s response and/or progress, the employment contract may be terminated.

Recent Cases

McKenna v Home Theatre Group P/L t/a Home Theatre Group [2012] FWA 9309

The employee’s employment was terminated by a small business employer for serious misconduct. The employer alleged that the employee sent emails that disparaged the Managing Director to another staff member and a business contact of her employer.

It was held that there was a reasonable basis to conclude that the emails caused serious and imminent risk to the reputation of the employer’s business and that this amounted to serious misconduct. It was further held that the employer had complied with the Code and the dismissal was not unfair.

Wiederroth v Alegna Health Centre [2013] FWC 1642

Ms Wiederroth was dismissed by her employer for “gross misconduct”. The employer alleged that Ms Wiederroth was using company time to use the internet for personal use. The employer then proceeded to terminate Ms Wiederroth’s employment by sending her a text message, and a letter advising her that the dismissal was effective immediately.

The Fair Work Commission found that Ms Wiederroth did not (and the employer could not have had reasonably believed that she did) engage in the alleged conduct. The FWC also found the employer did not provide sufficient notice and therefore Ms Weiderroth’s termination did not comply with the alternative method of dismissal (“other dismissal”) set out in the Code.

If you are a small business employer, or an employee employed by one, and would like advice regarding the Code, please contact us to speak to one of our employment lawyers.

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