Australian Small Business And Family Enterprise Ombudsman Calls For Fair Dismissal Code Reform

Published August 07, 2019 (last updated June 3, 2022) -

The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) yesterday handed down a comprehensive Review of the Small Business Fair Dismissal Code, recommending a suite of changes to help small business employers meet their obligations.

Kate Carnell, from the ASBFEO said that “the interpretation of the Code has been challenged by lawyers and, on occasion, members of the commission”.

“Put simply, the Small Business Fair Dismissal Code in its current form is not working the way it was originally intended,” Ms Carnell said.

“As a result, small business employers cannot be certain that following the Code will mean a dismissal will be deemed fair,” it wrote in its official review document, unveiled in Canberra today (6 August).

According to the review’s final report, “Codes and checklists are by their nature intended to deliver a level of certainty and this will typically favour prescription over flexible principles that are ‘open to interpretation’,” it said.

“However, the current Code makes it difficult for a small business to determine which provisions of the Code apply to their circumstances.”

“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 that most business employers are “hard-working Australians with good intentions”, but the current regulatory framework does not provide the guidance they need to be able to do the right thing.

“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 an 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.”

Ms Carnell said that in the first three months of 2019 alone, 3,583 unfair dismissal claims were lodged with the Fair Work Commission.

While most were settled during mediation, 172 claims went to the commission for a verdict, where 65 per cent were dismissed on the grounds that they lacked merit or were legally invalid, which she said meant they should never have progressed to the extent that they did.

“By taking the ambiguous language out of the Code such as ‘reasonable grounds,’ ‘valid reason’ and ‘reasonable chance’ and improving the checklist questions, small businesses will be in a much better position to comply,” she said.

“We want the Code to work, so that small businesses are doing the right thing and there’s less need to engage lawyers.”

Ed Mallett, founder and Managing Director of Employsure, welcomed the ASBEFO proposed changes and agreed there is a critical need for a revised Code for millions of small, family businesses.

Mr Mallett said, “There has been a growing need to reform the Code. Employing new employees is not in itself a difficult process, however if the employment relationship breaks down it can become a complex nightmare for a small business – best described as industrial divorce.”

The changes to the Code proposed by Ms Carnell would provide clarity and fairness to the dismissal process for both employers and employees.”

“One of the key aspects of the changes proposed by Ms Carnell is the need for small business employers to know how to follow a fair process when terminating an employee’s employment. Employers require clearer guidelines on what is required to carry out a legal dismissal.”

In an Employsure commissioned survey with small business employers, 68 per cent of respondents said workplace laws are poorly explained by regulators and three-quarters believe they are poorly communicated.

Unfair dismissal laws are being looked at as part of the federal government’s workplace rules review, with Industrial Relations Minister Christian Porter describing the area as being “ripe for improvement”.

The full report, Review of the Small Business Fair Dismissal Code, can be accessed from the ASBFEO website.

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