Changing the code

Raft of recommendations made to help small businesses meet ‘ambiguous’ fair dismissal obligations 

Fairness and removal of ambiguity are the crucial outcomes for small business from an overhaul of the Federal Small Business Fair Dismissal Code, a review has found.  

The Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, this week handed down a comprehensive review of the code, recommending a suite of changes to help small business employers meet their obligations.

Ms Carnell, a former ACT Pharmacy Guild president and ACT Chief Minister, said the Small Business Fair Dismissal Code in its current form was not working in the way it was originally intended.

“It is ambiguous and open to interpretation, particularly by lawyers, which means too many small businesses are being pulled into unfair dismissal hearings which are costly and impact productivity,” Ms Carnell said.

Since coming into effect in 2009, the interpretation of the Code has been challenged by lawyers and, on occasion, Members of the Commission, the review preamble stated.

“As a result, small business employers cannot be certain that following the Code will mean a dismissal will be deemed fair”.

The review made 15 recommendations, covering amendments to the existing code and checklist, education and awareness, and altering Fair Work Commission processes.

These include:

  • Establishing separate processes that would ensure a dismissal is fair when ending employment on the specific grounds of serious misconduct (according to a new definition based on the FW Regulations), conduct (other than serious misconduct) and performance; and redundancy
  • Provide separate Checklists included in the Code for each of the covered grounds which can be applied to demonstrate that a dismissal is fair.
  • Remove qualifying language (i.e. references to ‘reasonable belief’ and ‘reasonable
    chance’) that is open to contest and interpretation
  • Clearly explain the meaning of ‘small business employer’ in the Code so an employer can identify whether they are able to apply it.
  • Establishing a dedicated Small Business Dismissal Code ‘handbook’

“Our recommendations aim to make the Code easier for small business employers to comply with and make it easier for the Commission to rely on the improved definitions and clarified requirements,” the review preamble states.

“We believe our recommendations will better enable the Code to achieve its original intent – that if small business employers comply with the Code when dismissing an employee, that dismissal will be deemed fair”.

Ms Carnell said the recommended amendments and checklists were designed to guide a small business employer through a fair dismissal process, not to make the dismissal process easier.    

“We know that small businesses do not make the decision to end a worker’s employment lightly,” she said.

“Small businesses can’t afford to engage in costly and stressful legal action. They don’t have the support of a HR department when faced with the difficult decision to end a staff member’s employment.” 

“That’s why it’s critical for the code to drive fairness, and set out clear expectations for small business employers”.

A spokesperson for the Pharmacy Guild of Australia said the Guild was “supportive of the Carnell Review on unfair dismissals as they affect small businesses”. 

“It is not about making it easier to sack people, rather, the recommendations in this review aim to give small business operators clear guidelines to deliver certainty around complying with the code,” the spokesperson said.

The review can be accessed here

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