Small businesses warned to watch out for unfair dismissal rule change

Employers have been warned to be aware of a change in the definition of what constitutes a small business under unfair dismissal laws that quietly came into place on January 1.

When the Labor Government’s Fair Work regime first came into place in mid-2009, the laws stipulated that the first 18 months, companies with 15 or less full-time equivalent staff members could rely on the Government’s Small Business Fair Dismissal Code when dismissing a staff member.

However, on January 1, this changed to a simpler headcount test – only companies with 15 or less staff, regardless of whether they are full- or part-time or casual, can now rely on the Fair Dismissal Code.

IR lawyer Peter Vitale says businesses that employ a number of casuals or part-timers – such as firms in retail or hospitality – may find their status has changed.

“Really this is one of those things that has been ticking away in the legislation and no-one has given it much thought,” he says.

“It will clearly have an effect on those employers who have a high ratio of casuals and part-timers to permanent staff.”

However, whether affected employers will actually need to change their IR policies and procedures is another question altogether.

As SmartCompany has pointed out over the last 12 months, the workplace umpire Fair Work Australia has found the Code to be deficient in some areas, such as the fact it does not mention that that terminated staff have a right to have a support person present during discussions.

Vitale says companies of all sizes – whether they have one employee or 1,000 – would be unwise to view the checklist as anything other than a guide to the sorts of things an employer must do in a termination process, such as abiding by genuine redundancy rules and offering employees performance management, retraining, and an adequate period to improve their performance.

Vitale says it has been shown the Code offers “no relief” when a termination is contested before Fair Work Australia.

“Given the uncertainties that are thrown up by the small business fair dismissal code, I don’t believe you would be advising a small employer to behave any differently to a larger employer.”

“It provides a guideline and in some respects reflects what larger employers are required to do but I would still be advising any employer to take advice and consider their processes prior to termination.”