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Unfair Dismissal under the Small Business Fair Dismissal Code

January 2011

What is the Small Business Fair Dismissal Code

As of 1 January 2010, private sector employees are protected by the new national industrial relations system, the Fair Work Act, while public sector employees are covered by the state industrial relations system. 

The Small Business Fair Dismissal Code is a new national workplace system designed to assist small businesses and their employees and works in conjunction with the Fair Work Act 2009.

The new system provides that the minimum employment period is now twelve (12) months (instead of the original six (6)) and that an employee cannot make a claim for unfair dismissal within this twelve (12) month period.

The system also recognises that Small Businesses are unlikely to have expert Human Resources staff and aims to assist employers ensure that any valid dismissals are not considered to be unfair.  This is done via the Dismissal Code Checklist, discussed below. 

What constitutes a Small Business?

Under the Code, a small business is considered to be any business where the employer employs less than fifteen (15) full-time equivalent employees. Please note that this number can include employees of related entities.

Application for Unfair Dismissal Remedy

An employee has fourteen (14) days from the date of the dismissal coming into effect to lodge an application to Fair Work Australia.  Applications are made to Fair Work Australia as part of the new national scheme.  Unfair Dismissal is determined to have occurred when an employee applies to Fair Work Australia and it is determined that:

  • The employee was dismissed; and
  • The dismissal was harsh, unjust or unreasonable; and
  • The dismissal was not the case of genuine redundancy; and
  • In the case of the employer being a small business, where the dismissal was not consistent with the Small Business Fair Dismissal Code.

For small businesses, for an employee to be eligible to make an unfair dismissal remedy application the employee must have:

  • Completed a minimum employment period of at least one (1) year; and
  • Be covered by an award agreement if they earn more than $113,800.00 a year.

In what circumstances is conduct likely to be found Harsh/Unjust/Unreasonable?

In determining whether the employee’s dismissal was harsh, unjust or unreasonable, Fair Work Australia is required to consider the following:

  1. Whether there was a valid reason for the dismissal related to the person’s capacity or conduct; and
  2. Whether the person was notified of that reason; and
  3. Whether the person was given an opportunity to respond to any reason related to capacity or conduct of the person; and
  4. Any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal; and
  5. If the dismissal related to unsatisfactory performance by the person whether the person had been warned about that unsatisfactory performance before the dismissal;
  6. The degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal.

How can you prevent a claim for Unfair Dismissal?

Steps you can take

  1. Ensure that you have a valid reason for dismissing the employee and that you maintain a written record to substantiate your reasons; and
  2. Giving the employee written notification of these reasons prior to dismissal and affording the employee an opportunity to respond and rectify; and
  3. Allowing a person to have a support person present during any performance reviews where dismissal is going to be discussed. 

Usage of the Small Business Fair Dismissal Code Checklist

The Australian Government has provided a checklist for small business operators as a guide to complying with the Small Business Fair Dismissal Code.  It is recommended that employers use this checklist and keep a copy of the completed checklist on file in the event of a future action. 

Please be aware that filling in this checklist does not necessarily mean that the Code has been complied with, it acts as a guide only.

Please Note: The information contained in this article is general in nature and cannot be regarded as anything more than general comment. Readers of this article should not act on the basis of this comment without consulting one of iLaw’s legal practitioners who will consider their particular circumstances