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Unfair dismissal laws introduce new definition for ‘small business’ placing more business owners under the ambit of unfair dismissal laws


As of 1 January 2011, more Australian companies will now find themselves included under the national government definition of “small businesses”, which means countless more entrepreneurs will now need to follow federal rules against unfair dismissal.

And though details of the law change were known for months, it will no doubt catch many business owners unaware.

In a nutshell, the Labor government changed the definition of a small business from a company with 15 or less full-time equivalent employees to a one with 15 or fewer workers based on a simple headcount. Part-timers and seasonal workers now fall within the total.

The change places more business — and more workers — under the guidelines and protections of the Small Business Fair Dismissal Code. Some of the key points in the code:

  • Employees dismissed because their position is no longer needed, or because of an economic downturn — cannot claim unfair dismissal. Of course, if the employer turns right around and fills the position, it would be tough to call that position a redundancy, and the employee may gain the right to file a claim.
  • An employer can dismiss an employee without warning or notice if the employers sees reasonable grounds for serious misconduct. The latter can be defined as theft, fraud, violence or egregious breaches of health and safety rules.
  • An employer must give the employee a reason why he or she is at risk of losing a job. The warning, preferably in writing, should give the worker time to respond and possibly straighten out the problem.
  • If an employer schedules a discussion with an employee in which dismissal is possible, the employee has the right to have a third person present. That person can’t be acting as the employee’s lawyer.

One of the interesting things about the code is just that — it’s a set of guidelines, not law. No one is going to be thrown behind bars for not following them. But business owners who flaunt the code run the risk of losing numerous battles with workplace umpire Fair Work Australia.

And another caveat — following the code sometimes isn’t enough for a business owner. Fair Work Australia has shown in some rulings that the board feels the code doesn’t go far enough in protecting the worker. The takeaway — go the extra mile with your employee relations, but be prepared to absorb the blow should a worker-boss relationship turn sour.

Image by Sreejith K