Small Business Deserves Better Protection from Unfair Dismissal Claims


The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) has released a report[1] calling for sweeping changes to the Small Business Fair Dismissal Code (Code), following a review of the Code and its accompanying Checklist.



In Depth

The Code applies to small businesses employing fewer than 15 employees. If the employer follows the Code when dismissing an employee, the dismissal may be deemed to be fair.

The ASBFEO’s review is comprehensive and takes into account the policy objectives of various stakeholders along with the Explanatory Statement to the Code.

The overarching finding of the report was that the Code and Checklist are not working as intended and should be amended to better meet their intended functions and policy objectives.

In addition to improved education and awareness, and changes to some of the Fair Work Commission processes to deal with claims made against small business employers, the ASBFEO recommended the following changes to the Code and Checklist:

  1. Establish separate processes that would ensure a dismissal is fair when ending employment on specified grounds;
  2. Define serious misconduct based on the definition in the FW Regulations and, in particular, deem that serious misconduct includes conduct specifically defined;
  3. Remove application of the Code in the case of dismissal on the grounds of 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. [2]

The Report annexes a proposed new Code and Checklist adopting the changes that have been recommended.

Should the recommended changes be implemented, the ASBFEO’s intention is to ensure small business employers have certainty about a dismissal being classified as a fair dismissal without the need to meet legal tests or incur the expense of litigation. The changes aim to provide better, more specific definitions around the reasons and grounds for dismissal that determine whether a dismissal is fair, and the process that is required, so that if the criteria are met there is greater certainty around the dismissal being fair and less likelihood of a claim by a disgruntled employee. Further, in the event that there is a claim involving a small business employer, the report recommends the establishment of a Small Business Division within the Fair Work Commission so that these claims are appropriately managed.

Along with small business around Australia, we will be monitoring developments in this area to see how the report is received and whether the recommended changes are adopted.


[1] ASBFEO, Review of the Small Business Fair Dismissal Code August 2019

[2] Ibid, page 8

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