A comprehensive review of the Small Business Fair Dismissal Code (the Code) has recently been handed down by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), Kate Carnell. The role of the ASBFEO is as an independent advocate for small business owners, which was launched in 2016. Since then, the focus the ASBFEO has been to support small businesses and family enterprises to enable them to grow and thrive.

The original intent of the Small Business Fair Dismissal Code is documented in the review as:

The Code will be tailored to the needs of small business and will be reduced to a clear and concise reference to help these employers meet their obligations under Labor’s simpler unfair dismissal system. Where a small business employer has genuinely complied with the Code, the dismissal will be considered a fair dismissal.

The Code came into effect in 2009. In those 10 years, the Code has been challenged by lawyers and occasionally by the Fair Work Commission, which has reduced the comfort that by following the guide of the Small Business Fair Dismissal Code, a dismissal would then be deemed fair.

According to the ASBFEO report, the overarching finding is that the Code and its accompanying checklist is not delivering what was intended.

The ASBFEO report made 15 recommendations for amendment of the Code and its checklist, specifically:

1.Establish separate processes that would ensure a dismissal is fair when ending employment on the following specific grounds:

  • serious misconduct (according to a new definition based on the FW Regulations);
  • conduct (other than serious misconduct) and performance; and
  • redundancy.

2. Define serious misconduct based on the definition in the FW Regulations and, in particular, deem that serious misconduct includes:

  • wilful or deliberate behaviour by an employee that is inconsistent with the continuation of the contract of employment;
  • causing serious and imminent risk to the health or safety of the employee or others;
  • causing serious and imminent risk to the reputation, viability or profitability of the business;
  • theft;
  • fraud;
  • assault or violence;
  • intoxication at work;
  • the refusal or failure to carry out a lawful and reasonable instruction consistent with the employee’s contract of employment.

3. Remove application of the Code in the case of dismissal on the grounds of capacity. The Department of Jobs and Small Business should support the development of guidance, in partnership with industry and employer representatives, to help small business employers navigate situations related to capacity.

4. Provide separate Checklists included in the Code for each of the covered grounds which can be applied to demonstrate that a dismissal is fair.

5. Remove qualifying language (i.e. references to ‘reasonable belief’ and ‘reasonable chance’) that is open to contest and interpretation. Prescribe clear steps that a small business employer can follow and therefore know with certainty whether they have complied with the Code.

6. Clearly explain the meaning of ‘small business employer’ in the Code so an employer can identify whether they are able to apply it.

7. Clarify that not following the Code will not in itself result in an unfair dismissal finding.

8. Explain how to calculate the minimum employment period.

9. Actively promote the Code via FWO and industry partnerships to increase small business understanding and awareness of it.

10. The FWO to establish and host a dedicated, consistent, shared small business resource centre that makes available information on the Code, its application and requirements in a user friendly form, in collaboration with the Commission. This resource centre should also link up to the Commission’s website and use consistent language.

11. The Commission to establish a dedicated Small Business Dismissal Code ‘handbook’.

12. The FWO to make its services available to businesses outside of existing operational hours and investigate the viability of a phone back service such as that made available to small businesses by the Australian Tax Office.

13. The Form F2 to identify whether the applicant (i.e. former employee) believes they were employed by an employer employing fewer than 15 employees at the time of the dismissal. These applications to be considered as relating to a small business and be referred to the Small Business Division of the Commission.

14. A dedicated Small Business Division of the Commission to be established to deal with claims made against small business employers. This division should appoint dedicated case managers, with appropriate experience, and establish a triage process for the management of these claims.

15. The Commission to publish data in relation to unfair dismissal claims made against small business employers, including:

  • the number of claims identifying the respondent (employer) as employing fewer than 15 employees;
  • the number of small business employer respondents relying on the Code as an objection to an application;
  • the outcome of those claims;
  • whether the parties were represented or unrepresented. This data should be made available in the Commission’s annual report.

We know that most employers approach the Small Business Fair Dismissal Code with good intentions, so an amended Code and Checklist that provides more certainty and keeps unfair dismissal claims without merit out of the Fair Work Commission would be welcomed by many small business employers.

To read the complete ASBFEO report, you can find it here: https://www.asbfeo.gov.au/sites/default/files/documents/ASBFEO%20FINAL%20AUGUST%202019.pdf

If you need help with your employment obligations, our experienced Workplace Partners are here to help. Just give us a call on 1300 766 380.

*This is general information only and doesn’t take your specific circumstances into account.