Small Business and the Fair Dismissal Code

Joe Degabriele, Senior Consultant – The HR Department

Since the introduction in July 2009 of the Fair Dismissal Code for “small business employers”, there has been some confusion amongst small to medium sized businesses as to what the provisions mean and who the provisions cover. This article seeks to clear up some of the confusion around ‘unfair dismissal’.

The Fair Work Act defines ‘small business employer’ as a business employing fewer than 15 employees (calculated on a simple headcount of all employees including casual employees who are employed on a regular and systematic basis).
Employees who are terminated by a small business employer cannot make a claim to Fair Work Australia for unfair dismissal if dismissed in the first 12 months of their employment. If the employee is dismissed after being employed for one year the employer has to demonstrate that they followed the Small Business Fair Dismissal Code for the dismissal to be deemed “fair”. (See Code at

An employer can dismiss an employee without notice or warning for serious misconduct such as theft, fraud, violence and serious breaches of work health and safety procedures; for all other matters employers need to follow the Fair Dismissal Code.

When does a dismissal satisfy the Fair Dismissal Code?

• There needs to be a valid reason for the termination e.g. redundancy, serious misconduct or poor conduct or performance. Genuinely redundant employees cannot bring a claim for unfair dismissal.

• The employee must be warned verbally or preferably in writing, that there is a risk of being dismissed if there is no improvement in their performance.

• The employee needs to be given an opportunity to respond to the warning and given a reasonable opportunity to rectify the problem (or improve). That opportunity to improve may mean that the employer needs to provide additional training and ensure that the employee knows the employer’s job expectations.

• Also during these discussions the employee can have another person present to assist, however, that person cannot be a lawyer nor is their role to be an advocate for the employee – their role is purely as a support.

So in brief, for small business employers to comply with the Fair Dismissal Code their employees must be:

1. Informed of their failings
2. Allowed to have a support person at the meeting if they choose too
3. Allowed to respond to the issues
4. Provided with an opportunity to improve with the employer’s support

Faced with a claim for unfair dismissal the small business employer will be required to provide evidence that they followed the Code including evidence that a warning has been given (except in cases of summary dismissal).

The code reinforces good employment practices whether or not the business is small. To get the best out of your employees – it pays to talk to them and engage them so that they understand their job and how best to perform it to meet expectations.

If the employee is dismissed after 12 months the Fair Work Commission can hear an unfair dismissal claim made by the employee.

The Commission will arrange an informal conciliation conference (normally a telephone conference) to help both sides resolve the dispute by agreement. If the dispute cannot be resolved a formal conference or hearing will be held at a later date (sometimes up to 3-5 months later).

If the Fair Work Commission finds that the dismissal was unfair, the small business can be ordered to reinstate the employee or pay compensation, up to 26 weeks’ pay (maximum amount of $61,650).

So the consequence of not following the steps set out in the Fair Dismissal Code could potentially be a lot more disruptive to the small business than spending a little bit of time talking to the employee who is not meeting your expectations.

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