The Fair Dismissal Code

The new Fair Work Bill, which passed through Parliament on 20 March 2009 (Fair Work Legislation Finally Passed by Senate) has re-written the rules on unfair dismissal.

From 1 July 2009, the provision under WorkChoices which protected employers with 100 or less employees from unfair dismissal claims will no longer apply. That means that a much larger number of employees will be entitled to make unfair dismissal claims.

When is a dismissal unfair?

Unfair dismissal occurs when a termination is “harsh, unjust or unreasonable.” Key factors here are whether a valid reason for termination exists and was provided to the employee, and whether the employee was given the chance to respond to the allegations. If a position is genuinely made redundant, the dismissal of the employee will not be unfair.

Can an unfair dismissal claim be brought against a small business?

The good news is that two new rules apply to give concessions to small businesses. The Government says this is in recognition of the fact that small businesses usually do not have designated HR teams and cannot offer alternative jobs to employees. A small business employer will be defined as one with less than 15 full-time equivalent positions, excluding casuals who are not employed on a regular and systematic basis.

Concessions for Small Business

1. Extension of Qualifying Period: Small businesses will benefit from a doubling of the qualifying period for new employees from six months to twelve months during which employees will not be able to make a claim for unfair dismissal. The qualifying period will remain as six months for larger businesses.

2. Dismissal will be fair if the Fair Dismissal Code is followed: The Fair Work Bill introduces a Small Business Fair Dismissal Code which, if followed, will deem dismissals to be fair. The Code is a simple six paragraph document, which deals with summary dismissal, other dismissals, and rocedural matters. A copy of the Code can be downloaded here.

The Code comes with a checklist which employers are encouraged to fill out at the time of termination. If the checklist is completed correctly, it will be strong evidence that the dismissal was carried out in line with the Code.

How will the Code work?

It will not be clear until July 2009 how the Code and the checklist will be used in unfair dismissal proceedings. It is likely that Fair Work Australia (“FWA” – the new body which will deal with unfair dismissal claims) will investigate Code compliance as an initial step in unfair dismissal claims. If FWA is satisfied that the employer meets the definition of small business, and the Code has been followed, it will dismiss the claim.

Exclusions from making an unfair dismissal claim

Certain employees are still barred from making unfair dismissal claims. Casuals (other than casuals who have been engaged on a regular and systematic basis and have a reasonable expectation of ongoing work) cannot make a claim for unfair dismissal. Nor can seasonal employees, workers employed for specific tasks or fixed periods, or employees still in their qualifying period.

Conclusion

Small businesses which can prove that they followed the new Small Business Fair Dismissal Code will successfully defend any unfair dismissal claims brought against them after 1 July 2009.

Although the Code is designed for small businesses with less than fifteen employees, it is a clear guide of what the Government considers to be a fair and just process to follow when terminating staff. Businesses with more than fifteen employees should at least abide by the Code when terminating staff, but would preferably create and implement policies and procedures which clearly set out a just termination process.

Authors: Natalie Novak and Richard Scougall