Small Business Fair Dismissal Code

The Small Business Fair Dismissal Code (SBFDC) is a set of guidelines that small business employers in Australia can follow to ensure that they are not unfairly dismissing their employees.

What is a small business employer?

An employer is a small business employer if it employs fewer than 15 employees at the relevant time. All employees (including the dismissed employee/s and those employed by associated entities) are counted. Casual employees are not counted unless they are regular casual employees.

When will a dismissal be consistent with the SBFDC?

Section 388 of the Fair Work Act 2009 (Cth) (FW Act) provides that a person’s dismissal is consistent with the SBFDC if, immediately before the time of the dismissal or at the time the person was given notice of the dismissal (whichever happens first), the employer was a small business employer and the employer complied with the SBFDC in relation to the dismissal.

In the case of a small business employer, a person has not been unfairly dismissed if the FWC is satisfied that the dismissal was consistent with the SBFDC.

How can an employer ensure that they have followed the SBFDC?

A small business employer must give the employee a reason why they are at risk of being dismissed. The reason must be a valid reason based on the employee’s conduct or capacity to do the job. It is recommended that the employee is warned in writing that they are at risk of being dismissed if there is no improvement.

The small business employer must provide the employee with an opportunity to respond to the warning and give the employee a reasonable chance to rectify the problem.

In discussions with an employee in circumstances where dismissal is possible, the employee can have a support person present to assist them.

A small business employer will be required to provide evidence of compliance with the SBFDC if the employee makes an unfair dismissal claim to the FWC, including evidence that a warning has been given (except in cases of summary dismissal).

Can an employee still be dismissed for serious misconduct?

The SBFDC states that it is fair to dismiss an employee without notice or warning when the employer believes on reasonable grounds that the employee’s conduct is sufficiently serious to justify immediate dismissal. Serious misconduct includes theft, fraud, violence, serious breaches of workplace health and safety procedures and sexual harassment.

Small business complied with the SBFDC

In Puri v Sydney Strata Pty Ltd [2012] FWA 7317 (27 August 2012), the employee, Mr Puri, made an application for an unfair dismissal remedy.

It was determined that the SBFDC applied as the business was a small business employer. The employee was issued a notice of termination with the heading “Other Dismissal”.

Mr Puri was warned on several occasions about his performance, through both formal and informal communications. The warnings covered matters including Mr Puri’s method of speaking to clients and other employees, his poor attention to detail and other concerns including time keeping and activities performed while at work during business hours. These issues resulted in loss of business for Sydney Strata (the employer).

A formal written warning was provided on 30 January 2012 followed by a discussion the following day in which the circumstances of Mr Puri’s portfolio and the loss of certain properties on the portfolio were drawn to his attention.

Mr Puri was given an opportunity to address the matters of concern. However, less than three weeks after this initial discussion, Sydney Strata received further complaints regarding the administration of certain properties within Mr Puri’s responsibility. These complaints were investigated and the employer spoke to Mr Puri about these further complaints. There was also evidence that Mr Puri’s manager inspected the property himself and considered all of those matters in coming to a decision to terminate Mr Puri’s employment.

The FWC was satisfied that Sydney Strata had given Mr Puri a reason as to why he was at risk of being dismissed. The reason for the termination was also communicated and there was a valid reason for the termination based on Mr Puri’s conduct and prior warnings, including the warning letter that was issued on 30 January 2012.

It was held that the employer had complied with the SBFDC and the dismissal was not unfair.

Small business did not comply with the SBFDC

In Whiffen v Sense Rugby Pty Ltd [2023] FWC 2516, Ms Whiffen (the employee) was employed in the position of Senior Administration and Reception for Sense Rugby (the employer). In June 2022, there was another employee in the same role, and the two employees had a job share arrangement.

In June 2023, Ms Whiffen agreed to handover the task of holiday group bookings and enquiries to her colleague. A separation of duties was agreed between the pair and confirmed in a meeting with the employer.

However, following the handover of the holiday group bookings task, Ms Whiffen continued to be involved in these duties, including following up with her colleague about missing clients and even suggesting a reversal of the handover agreement. The colleague complained to the employer about Ms Whiffen’s interference.

On 20 June 2023, the employer issued Ms Whiffen with a warning for not following processes, noting that while her intent may not have been malicious, her actions were considered bullying as it showed a lack of trust in her colleague.

Ms Whiffen was sent the warning letter through the employer’s HR software program on 21 June 2023. The letter stated that Ms Whiffen was not to complete tasks or follow up on tasks which were not her areas of responsibility.

On 26 June 2023, Ms Whiffen received enquiries from clients to make a holiday group booking and proceeded to complete the bookings. She then emailed her colleague to advise that the bookings had been made.

Again, the colleague complained to the employer about Ms Whiffen’s interference. The employer wrote to Ms Whiffen asking why she had completed the bookings and did not follow the formal process. The employer explained to Ms Whiffen that it had been discussed in the meeting that all holiday group enquiries were to be sent to her colleague so that such enquiries could be handled by one person. The employer invited Ms Whiffen to a meeting on 29 June 2023 where she was dismissed due to her “continuous lack of engagement with processes”, concerns about her conduct toward other team members and completing tasks she was specifically requested not to do.

The FWC noted that as a small business employer, compliance with the SBFDC was required. As mentioned above, the SBFDC requires that for dismissals other than for serious misconduct, a small business employer must give a warning to the employee that they are at risk of being dismissed.

The FWC found that while the employer warned Ms Whiffen for not following processes, it did not warn her that her employment was at risk of termination if she did not improve her conduct. The FWC noted that at most, Ms Whiffen was advised that if she did not follow instructions, it would lead to performance management and would have serious consequences. The FWC determined that this language was insufficient to comply with the SBFDC and the dismissal was therefore inconsistent with the SBFDC.

The FWC found that there was a valid reason for dismissal and the employee was given an opportunity to respond however the process followed by the employer was inadequate because the HR software program which was used to issue the warning letter and prepare the termination letter did not put the employee on notice that the meetings were disciplinary in nature. The employer also did not comply with its own Code of Conduct policy or its performance improvement policy. It was found that Ms Whiffen was unfairly dismissed.

Lessons for small business employers

The SBFDC helps ensure fair treatment for employees and employers.

In situations where termination of employment is being considered, and the dismissal is not related to serious misconduct, small business employers should provide clear warnings to the employee. The employee should be informed that their employment is at risk of being terminated if there is no improvement in their behaviour or performance. The employee should also be given an opportunity to rectify the concerns raised by their employer.

Further assistance

Small business employers can seek assistance through either the Fair Work Commission or the Fair Work Ombudsman.

The Fair Work Commission provides resources and information about the SBFDC on their website. They also handle unfair dismissal claims where they determine whether the employer’s actions followed the code.

The Fair Work Ombudsman offers tools, resources and information that small businesses might need through their Small Business Showcase.