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What’s The Small Business Fair Dismissal Code?

What’s The Small Business Fair Dismissal Code?

How the Small Business Fair Dismissal Code could affect your business

24th October 2018

Many people who run businesses aren’t aware that there are different rules relating to unfair dismissal if you’re a small business, and it goes without saying that small businesses and larger companies have different goals and different needs when it comes to employees. In 2009, the Federal Government introduced the Small Business Fair Dismissal Code to provide clarification on an employer’s obligations when it comes to dismissing an employee.

Here we will take a look at the key provisions of this code and how to know whether it applies to you.

What defines a small business?

The precise definition of ‘small business’ differs amongst different Australian government agencies. For example, the Australian Bureau of Statistics (ABS) defines a ‘small business’ as a business that employs fewer than 20 people, although for ASIC this number is 50. Codes applying to smaller businesses have previously applied to businesses with fewer than 100 employees, though this has since been revised. Currently for matters related to employment, Fair Work Australia defines a small business as a business with 15 employees or fewer and it is only to these types of businesses that the Small Business Fair Dismissal Code applies.

Unfair dismissal

Under the Small Business Fair Dismissal Code, an employee can only make a claim for unfair dismissal if they have been employed by the small business for 12 months or more. Prior to this, an employee cannot make any claim for unfair dismissal. If an employee has been employed at the business for more than 12 months, an employer is required to give a formal warning before dismissing an employee.

Summary dismissal

An employee can be dismissed without notice or warning where they have engaged in conduct serious enough to justify it. Serious misconduct includes the employee engaging in criminal activity whilst on the job, such as theft or assault and the Code recommends, but does not require, that an employer report these allegations to the police. If you’re unsure of whether an employee’s conduct is sufficient to justify summary dismissal, it is worth speaking with an employment lawyer to ensure that you comply with the national requirements.

Why have the small business fair dismissal code?

The Code was introduced in 2009 to make workplace legislation more business-friendly and to encourage small businesses to employ more workers. This Code was introduced after Work Choices was instituted (and mostly wound back) to attempt to balance the rights of employees and employers. The Code was also introduced in an attempt to try and combat the high number of illegitimate unfair dismissal claims, and claims of this type are now capped at 6 months’ pay being awarded to an employee who is found to have been unfairly dismissed.

Small businesses make up the majority of employers of Australians, so it stands to reason that there should be laws that encourage them to employ more people. So long as you adhere to the code, and follow the checklist provided, an employee will not have a legitimate claim for unfair dismissal against you.

Want more information? Contact a LawPath consultant on 1800529728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest legal marketplace. 


Jackie Olling

Jackie is the Content Manager at Lawpath and manages the content team. She has a Law/Arts (Politics) degree from Macquarie University and is an admitted solicitor in the Supreme Court of NSW. She's interested in how technology can help shape the future legal landscape.