Small Business Fair Dismissal Code “does not work” says ombudsman

Small Business and Family Enterprise Ombudsman calls for overhaul of Small Business Fair Dismissal Code.

The Small Business Fair Dismissal Code is not working, says the Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, who is calling for an overhaul of current regulations.

Carnell handed down a  review of the Small Business Fair Dismissal Code this week, recommending a suite of changes to help small business employers meet their obligations.

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

“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.

Carnell said the vast majority of small business operators are hard-working Australians with good intentions.

“The recommendations in this review aim to give small business operators clear guidelines to deliver certainty around complying with the code. Importantly – the recommended amendments and checklists are designed to guide a small business employer through a fair dismissal process, not to make the dismissal process easier.

Research by the Fair Work Commission has found one of the key challenges for small business operators was attracting and retaining good staff and that good employees were highly valued.

“Small businesses can’t afford to engage in costly and stressful legal action. They don’t have the support of a HR department when faced with the difficult decision to end a staff member’s employment,” said Carnell.

“That’s why it’s critical for the code to drive fairness and set out clear expectations for small business employers.

According to figures released by the Fair Work Commission, during the first three months of this year it received 3583 unfair dismissal applications.

Most were settled during mediation. But for 172 cases that were presented to the Commission, 111 (65 per cent) were dismissed because they were without merit or deemed legally invalid, meaning they should not have gone to the Commission in the first place.

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

The review contains recommendations in the following areas:     

  • Amendments to ensure the code meets its intended functions and objectives and provides certainty on what is required of small business employers to ensure a dismissal is fair
  • Improving small business education and awareness in relation to the Code and checklists to help them meet their obligations
  • Clarifying the unfair dismissal claims process for small business employers and employees.

Workforce Guardian general manager Charles Watson told INCLEAN although the report purports to state the sentiment of small businesses in Australia in its recommendations, “unless the relevant federal minister has an appetite for actual legislative change to the Fair Work Act, the recommendations will go nowhere.”

“The Small Business Fair Dismissal Code can be seen to be ambiguous given its broad and general drafting, although it is a mistake to view it as anything more than a guideline,” Watson said.

“Since its inception in 2009 every interested party and ambulance chaser has sought to debate, over-complicate, interpret and reinterpret what should only be viewed as a simple guideline for small businesses to follow if they have to terminate an employee.

“Most of the time if a small business has followed the code, they can evidence to the Fair Work Commission that they have been fair and reasonable towards the employee if the employee makes an unfair dismissal claim.”

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