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What is the Small Business Fair Dismissal Code?

07/02/2022

Employees are protected from unfair dismissal under the Fair Work Act 2009 (Cth), provided their salary is under the high-income threshold and a minimum employment period has been met. For employees of small businesses, the minimum employment period to file an unfair dismissal application is 12 months.

An employer is considered a small business if it employs fewer than 15 employees at the time of the dismissal. This number should include the dismissed employee and any other employees dismissed at the same time, but does not include casual employees unless they are employed on a regular and systematic basis.

When a small business dismisses an employee, the Fair Work Commission will consider whether the dismissal was consistent with the Small Business Fair Dismissal Code (the Code). If the Fair Work Commission is satisfied that the Code has been complied with by the employer, then the dismissal will not ordinarily be found to be unfair.

It is up to the small business employer to prove that they have complied with the Code. To be consistent with the Code they must, among other things:

  • Believe on reasonable grounds the employee’s conduct is serious enough to justify summary dismissal, or
  • In circumstances of unsatisfactory performance, conduct or capacity, provide the employee with warning that failure to improve could result in dismissal.

What would be considered grounds for summary dismissal?

Fraud, violence, sexual harassment, or serious breaches of occupational health and safety procedures are identified in The Code as examples of serious misconduct which would warrant summary dismissal. Employers need to be able to establish they had reasonable grounds to believe serious misconduct had occurred by the employee, such as evidence of inquiries or investigations undertaken.

In the case of Sergeev v Butterfly Systems P/L [2020] FWC 5217, an employee of a small business was dismissed via text message within two hours of refusal to attend work. The employer argued that refusal to work was a failure to comply with a reasonable direction and, therefore, sufficient grounds for summary dismissal. The Fair Work Commission found the decision to dismiss the employee within two hours of the alleged misconduct showed a lack of investigation by the employer. Further, the dismissal via text message did not provide an adequate opportunity for the employee to respond. In its decision, the Fair Work Commission deemed the dismissal harsh, unjust, and unfair because the conduct was not serious enough to warrant summary dismissal.

What is the process for dismissals not involving serious misconduct?

In circumstances where summary dismissal would not be appropriate, the employee must be provided with a valid reason their employment is at risk based on their performance, conduct or capacity to do their job. Employees should be notified of any allegations verbally or preferably in writing and given a reasonable chance to respond to and rectify the issue before a dismissal occurs. Employees must also be allowed to have another person present for any discussions between the employer and employee about matters concerning dismissal.