Benefits of the small business code in the FWA

Small business is starting to see the benefits of the small business code in the Fair Work Act (FWA). The FWA has a more generous approach to both the process and threshold tests for summary dismissal. Small businesses (ie. businesses with less than 15 full-time equivalent employees) are subject to a Small Business Fair Dismissal Code:

1. You may summarily dismiss without notice if you “believe on reasonable grounds” an employee’s conduct is sufficiently serious to justify dismissal.

2. Examples of such serious misconduct could include theft, fraud, violence and serious breaches of OHS. This is not an exclusive list but gives you a sense of what is serious.

3. If it is not a summary dismissal – you must have a valid reason for dismissal.

4. Further, the employee must have been given a warning and opportunity to rectify the conduct. This could involve training but clearly requires you to have clear and reasonable expectations and ensure the employee understands such expectations.

5. The employee should be offered to have a person present as a supporter at the discipline meeting.

This is much simpler than the complexity that confronts larger employers.

In the recent case of Khammaneechan v Nanakhon, the summary dismissal requirements were tested. The result was heartening for all small business owners.

Mr Khammaneechan was a cook and senior staff member at the Banana Tree Café. The owner of the café undertook an audit of payments and it became evident that on the days Mr Khammaneechan worked, money had been taken. The owner confronted Mr Khammaneechan about the theft, threatened to report to the police and laid out his evidence. Mr Khammaneechan did not deny the theft, offered to repay it but questioned whether the owner believed he took the money. At the proceedings before Fair Work Australia, Mr Khammaneechan denied the theft, said he was concerned by the lack of trust from the owner but otherwise agreed with the facts above.

The owner further investigated the matter and then summarily terminated Mr Khammaneechan. Fair Work Australia held:

1. The owner need not report the matter to police.

2. The owner did have a reasonable belief of wrongdoing based on the paper trail.

3. Mr Khammaneechan did not disabuse the owner of his wrongly held belief (if it was wrongly held) and in fact offered to pay.

4. As a result, irrespective of the true nature of what did occur, the termination was upheld as lawful because the owner had at the time of the dismissal a reasonable belief that Mr Khammaneechan had wrongfully taken the money.

This case advises all small employers that if you:

1. Investigate and hold objective and compelling evidence;

2. Put the evidence to the employee; and

3. Properly weigh the employee’s response

You can safely terminate the employee’s employment – even if afterwards you are shown to be wrong.

Andrew Douglas is the Principal of Macpherson + Kelley Lawyers. Andrew is an experienced commercial litigation and workplace lawyer, who acts both as a solicitor and advocate.