Small Business and Unfair Dismissal; the Effect of Codified Protections

Section 385 defines an unfair dismissal as:

            “A person has been unfairly dismissed if the FWC is satisfied that:

                      (a)  the person has been dismissed; and

                      (b)  the dismissal was harsh, unjust or unreasonable; and

 (c)  the dismissal was not consistent with the Small Business Fair Dismissal Code; and

                      (d)  the dismissal was not a case of genuine redundancy.

 Note: For the definition of consistent with the Small Business Fair Dismissal Code : see section 388.”

This definition of unfair dismissal provides clear exception to small business employers through the ratification of the Small Business Fair Dismissal Code (the Code). The underlining principle behind the implementation of the Code is to alleviate some pressure posed by the risk of unfair dismissal claims on eligible small business Employers.

Ultimately, the process of dismissing an employee within a small business can be extremely complicated. Accordingly, the Act and the Code uniformly recognise the unique challenges involved in running a small business which are likely to have less resources than their larger counterparts.

Small Business classification

The Act provides explanation as to what constitutes a ‘small business employer’ for the purposes of the legislation. Pursuant to section 23 of the Act, a business which employs fewer than 15 employees at one time is defined as a ‘small business’. Further, the Act clarifies that casual employees are not included in the employee count unless they are employed on a regular and systematic basis.

Small Business and the Implication of the Code

Section 388 of the Act implements the following:

“(1)  The Minister may, by legislative instrument, declare a Small Business Fair Dismissal Code.

(2)  A person’s dismissal was consistent with the Small Business Fair Dismissal Code if:

 (a)  immediately before the time of the dismissal or at the time the person was given notice of the dismissal (whichever happened first), the person’s employer was a small business employer; and

 (b)  the employer complied with the Small Business Fair Dismissal Code in relation to the dismissal.”

Consequently, section 385 and 388 coupled together to provide a defence available to small business employers against certain claims of unfair dismissal; if the Code is complied with then unfair dismissal laws may not be applicable.

Unlike larger businesses which can be subjected to an unfair dismissal claim from employees employed for 6 months or longer, employees of a small business need to be employed for 12 months or over to be eligible to bring about a claim.

Further, the Code will be considered by the Fair Work Commission (the FWC) first, and if not complied with, attention will turn to whether the dismissal was ‘harsh, unjust or unreasonable’. Therefore, compliance with the Code provides a complete defence to a claim of unfair dismissal; if a small business employer complies with the requirements set out in the Code, the FWC will not find the dismissal unfair, and the requirement to consider whether the dismissal was ‘harsh, unjust or unreasonable’ is removed.[1]

The high-income threshold remains relevant to all unfair dismissal claims.

Compliance with the Code

 In order for an employer to effect dismissal consistent with the Code, they must:

1. Provide notice of dismissal; and
2. In the case of summary dismissal, hold a reasonable belief that the employee engaged in some form of serious misconduct; or
3. In relation to dismissal resulting from unsatisfactory conduct, performance or incapacity, provide warning prior to the dismissal including reasons for the dismissal, an opportunity to respond and provision of an opportunity to improve.

The Australian Government has published the Small Business Fair Dismissal Code Checklist to simplify and summarise the legislative requirements for eligible employers.

 Concluding remarks

Ultimately, your employees are your biggest asset. Therefore, the implementation of established practice, effective management of staff and ensuring you understand and meet your obligations under Australian workplace law should be an employer’s absolute priority.

Appropriately managing human resources from the ground up can not only prevent the need to engage in costly litigation, but it will also maximise your business’s overall performance by improving your ability to attract and retain the best staff, increase staff performance and engagement, minimise costs associated with staff turnover, and improve your ability to manage and grow your business.

Accordingly, Saines Legal is a full-service, specialist employment law firm available to provide tailored advice and guidance in relation to any workplace issues. We have also developed a small business retainer package designed to provide complete employment support at a fixed weekly fee, affording our small business clients complete peace of mind regarding workplace legal obligations and insurance against the costs of any unexpected issues. Do not hesitate to contact us via info@saineslegal.com.au or (07) 3324 1055, to organise a consultation.

Disclaimer

The contents of this article are general in nature and is for information purposes only. The content of this article does not constitute legal advice and should not be used as such. Should you require assistance with a specific legal matter, it is recommended that you seek appropriate advice.

Authors Emma Marshall (Lawyer) and Nigel Saines (Principal)

[1] Jingmin Zeng v Vectus Biosystems Ltd [2015] FWC 5536.