EXPLANATORY STATEMENT
Issued by authority of the
Minister for Employment and Workplace Relations
Fair Work Act 2009
Subsection 388(1)
Small Business Fair Dismissal Code
Subsection 388(1) of the Fair Work Act 2009 provides that the Minister may, by legislative instrument, declare a Small Business Fair Dismissal Code (the Code).
A Code declared under subsection 388(1) of the Fair Work Act 2009 is a legislative instrument for the purposes of the Legislative Instruments Act 2003. The Code commences on 1 July 2009 being the same day as the commencement of subsection 388(1) of the Fair Work Act 2009.
The Government undertook extensive consultation in developing the Code. The Government consulted with peak union and employer bodies and State and Territory officials. In February 2008, the Government established several advisory groups to consider the proposed changes to the workplace relations system, including the Small Business Working Group (SBWG) to specifically consider the Code. The SBWG was chaired by the Hon Dr Craig Emerson MP, Minister for Small Business, Independent Contractors and the Service Economy, and comprised small business representatives. The SBWG met several times to provide input into the Code’s development. The Code was also considered by the Business Advisory Group and the Union Working Group on Unfair Dismissal.
The Code recognises the special circumstances of small business employers by providing separate, simple rules for small business employers to follow when dismissing an employee. If a small business employer complies with the Code when dismissing an employee, the dismissal will be considered fair. Small business employers who do not comply with the Code will be subject to the unfair dismissal provisions of the Fair Work Act 2009 as they apply generally. A small business employer is defined in section 23 of the Fair Work Act 2009, or in accordance with the Fair Work (Transitional and Consequential Amendments) Act 2009 for dismissals that occur before 1 January 2011.
The Code sets out the circumstances in which a summary dismissal (a dismissal without notice or warning) is warranted, including cases of theft, fraud and violence.
For under-performing employees, the Code simply requires the employer to give the employee a valid reason, based on the employee’s conduct or capacity to do the job, why the employee is at risk of being dismissed and a reasonable chance to rectify the problem.
The Code does not require multiple warnings. It is desirable, but not necessary, for a warning to be in writing. The Code also sets out some procedural matters, including evidentiary requirements.
Overview
The Fair Work Act 2009, enacted by the Commonwealth Parliament, sought to address the need for a streamlined dismissal process for small business employers by introducing the Small Business Fair Dismissal Code. This legislative instrument was developed following extensive consultations with peak union and employer bodies, State and Territory officials, and small business representatives. The Code, which commenced on 1 July 2009, provides separate, simple rules tailored to the unique circumstances of small businesses, aiming to ensure fair dismissal practices while alleviating some of the procedural burdens typically associated with dismissal processes. The overarching policy objective is to provide a clear and accessible framework for small business employers to follow, ensuring that if they adhere to the Code, their dismissals will be considered fair, thereby protecting both employers and employees within the small business sector.
Scope and Application
The Small Business Fair Dismissal Code, declared under the Fair Work Act 2009, applies specifically to small business employers as defined in section 23 of the Act or under the Fair Work (Transitional and Consequential Amendments) Act 2009 for dismissals occurring before 1 January 2011. This legislation is designed to provide clear and simplified rules for small business employers when dismissing employees, ensuring that if they adhere to the Code, the dismissal will be considered fair. Conversely, non-compliance with the Code will subject the employer to the general unfair dismissal provisions of the Fair Work Act 2009. The Code’s geographic reach is national, applying across Australia, and it was developed through extensive consultation with various stakeholders, including peak union and employer bodies, State and Territory officials, and advisory groups such as the Small Business Working Group. The Code sets specific circumstances under which a summary dismissal without notice or warning is justified, such as in cases of theft, fraud, or violence, and outlines procedures for addressing under-performance, requiring employers to provide valid reasons and opportunities for rectification without the necessity of multiple warnings.
Key Provisions
The Small Business Fair Dismissal Code (the Code), declared under subsection 388(1) of the Fair Work Act 2009, provides distinct rules for small business employers to follow when dismissing employees, aiming to recognise the special circumstances of small businesses. Specifically, section 23 of the Fair Work Act 2009 defines what constitutes a small business employer, while the Fair Work (Transitional and Consequential Amendments) Act 2009 provides the definition for dismissals occurring before 1 January 2011. The Code outlines circumstances where a summary dismissal is appropriate, such as cases of theft, fraud, or violence. Additionally, for employees underperforming, the employer must provide a valid reason for the risk of dismissal based on the employee's conduct or capacity, and allow a reasonable opportunity to rectify the issue. Importantly, the Code does not mandate multiple warnings, although it is advisable for any warning to be in writing. Furthermore, the Code details certain procedural matters and evidentiary requirements.
The obligations imposed by the Code on small business employers include providing a valid reason for dismissal when it is due to underperformance, giving the employee a reasonable chance to rectify the issue, and following the procedural requirements specified in the Code. Employers must ensure that the dismissal complies with the provisions of the Code to be considered fair. Non-compliance with the Code means the dismissal will be subject to the general unfair dismissal provisions of the Fair Work Act 2009.
Failure to comply with the requirements of the Small Business Fair Dismissal Code can lead to serious consequences for small business employers. If a dismissal does not adhere to the provisions of the Code, it will be considered an unfair dismissal under the Fair Work Act 2009. Employees who believe they have been unfairly dismissed may apply to the Fair Work Commission for remediation. The Fair Work Act 2009 does not specify particular penalties for breaches of the Code, but penalties for unfair dismissal can include reinstatement, compensation, and other remedies. The maximum penalties for unfair dismissal are determined by the Fair Work Commission and can vary based on the circumstances of the case.