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Small Business Fair Dismissal Code - Termination Of Employment Rules For Small Business Under The Fair Work Act 2009 (Cth.)

Date: July 30, 2010

Authors: Michael Pickering B.A., LL.B. (Hons.), LL.M., M. A.

One of the significant changes made to unfair dismissal laws by the Rudd Government under the Fair Work Act 2009 was the introduction of the Small Business Fair Dismissal Code (“the Code”).   The Code included a check list for employers to complete when terminating employment.   Small employers hoped that by complying with the check list, it would be easier to dismiss staff.

This article shows that this expectation has not been fulfilled. 

Fair Work Australia, which was the statutory authority created under the Fair Work Act reforms to replace the Conciliation and Arbitration Commission, has recently directed that a detailed and thorough investigation of all of the circumstances of dismissal must occur before determining whether an employee may or may not bring a claim for unfair dismissal.    In 2009, in French v. Lufra Investments Pty Ltd trading as Best Weston Lufra Hotels, an employer sought to rely upon the Code to justify terminating employment on the grounds of serious misconduct. Commissioner Deegan of Fair Work Australia held that the actions by the employee did not constitute willful or deliberate behaviour, or conduct serious enough to justify summary dismissal.   The termination of a long-serving employee was therefore inconsistent with the Code, even though the employer had complied with the Codes’ contents.

In Mr. N v. The Bakery in 2010, Senior Deputy President O’Callaghan questioned the value of the Code when warning employers against using the check list attached to the Code.   The Senior Deputy President stated that the list did not accurately reflect the steps an employer should take in order to comply with the Code. Mr. N’s case turned on failure by the employer to inform the employee that he had a right to a support person at a meeting where he was asked to respond to allegations of misconduct.   The employer failed to give this information, despite completing the check list.   Fair Work Australia decided it was not sufficient for an employer to comply with the Code if the dismissal was harsh even if not unjust or unreasonable. 

In Alevansky v. Thought Equity Motion Corporated, Vice President Graham Watson in 2010 decided that the Code did not deal with redundancy dismissals even though many employers believed that the Code would provide protection against a claim in circumstances where employment ceased upon the grounds of redundancy.   The employer in the Alevansky case sought to rely upon the Code by arguing that an employer needs only to assert that the dismissal was a genuine redundancy. Vice President Watson of Fair Work Australia disagreed and held that the Code did not deal with dismissals on the basis of redundancy.

In summary, Fair Work Australia has made it clear that small employers will need to give careful consideration to the circumstances in which terminations are effected.   Such terminations of employment will not only need to comply with the Code but will also need to ensure that they are not harsh and not merely not unjust or unreasonable. Small employers would be wise to ensure that they seek appropriate legal advice prior to the termination or the making redundant of employees, particularly those who have served the small business for some period of time.   Care will need to be taken to ensure that any termination also accords with any applicable industrial instrument such as an award, enterprise bargaining agreement or contract.

This article is intended only to provide a summary of the subject matter covered. It does not purport to be comprehensive or to render legal advice. No reader should act on the basis of any matter contained in this article without first obtaining specific professional advice.

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