Understanding the Small Business Fair Dismissal Code: what you need to know

In Australia, small business employers must follow the Small Business Fair Dismissal Code when terminating an employee. If they don’t, impacted employees may be able to bring an unfair dismissal claim before the Fair Work Commission.

What Is the Small Business Fair Dismissal Code?

The Small Business Fair Dismissal Code (the Code) is a set of guidelines that small business employers must follow when dismissing an employee. If your employer has fewer than 15 employees, they must ensure that your dismissal complies with the Code. If it does not, you could have been unfairly dismissed. There are two main ways a small business employer can dismiss an employee under the Code:

1. Summary Dismissal (Immediate Dismissal)

2. Other Dismissal (Dismissal with Notice)

1. Summary Dismissal: Immediate Termination for Serious Misconduct

Your employer can immediately terminate your employment without notice if they reasonably believe you engaged in serious misconduct. This includes:

• Theft

• Fraud

• Violence

• Serious breaches of occupational health and safety procedures

• Sexual harassment

However, just because your employer believes you have done something wrong doesn’t automatically mean your dismissal was fair. To be lawful, the employer must show they had a reasonable basis for their belief, which is usually demonstrated through an investigation or evidence-gathering process.

In McKenna v Home Theatre Group Pty Ltd, an employee was fired for sending emails that were critical of the company’s Managing Director. The Fair Work Commission ruled that this was serious misconduct because it posed a risk to the company’s reputation. The dismissal was found to be consistent with the Code.

On the other hand, if your employer fires you without reasonable grounds, you may be able to challenge your dismissal. In Steri-Flow Filtration (Aust) Pty Ltd v Erskine, an employee was initially ruled to have been unfairly dismissed because the employer did not conduct a reasonable investigation before firing him.

2. Other Dismissal: When Notice and Warnings Are Required

If your dismissal is not due to serious misconduct, your employer must follow a fair process before letting you go. This means:

• Giving you a valid reason for dismissal (related to your performance or conduct)

• Providing a warning that your job is at risk

• Allowing you a chance to improve (such as offering additional training or clarifying expectations)

• Giving you an opportunity to respond

In Puri v Sydney Strata Pty Limited, an employee was dismissed for poor performance after receiving multiple warnings. The Fair Work Commission found that the employer followed the Code and that the dismissal was not unfair.

However, if your employer fails to warn you or doesn’t allow you to respond, your dismissal may be unfair. In Shaw v Pat Thomas Memorial Community House Inc, the employee was dismissed for allegedly breaching a direction, but there was no evidence that this direction even existed. The Commission ruled that the employer did not comply with the Code, making the dismissal unfair.

Procedural Requirements: Your Rights During the Dismissal Process

Even if an employer has a valid reason for dismissal, they must follow procedural fairness rules:

• You have the right to have a support person present in any meeting about your dismissal (but not a lawyer acting in a professional capacity).

• If you claim unfair dismissal, the employer must prove that they complied with the Code.