Small business unfairly hampered by fair dismissal code, Ombudsman says

The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell has handed down a comprehensive review of the Small Business Fair Dismissal Code, recommending a suite of changes to help small business employers, including those catering to the early childhood education and care (ECEC) sector, meet their obligations.

 

Ms Carnell was blunt in her appraisal of the Small Business Fair Dismissal Code in its current form, saying “put simply (it) is not working in the way it was originally intended.” 

 

The Code, Ms Carnell said, “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”.

 

“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.”

 

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, she added.  

 

“We know that small businesses do not make the decision to end a worker’s employment lightly. Research by the Fair Work Commission found one of the key challenges for small business operators was attracting and retaining good staff and that good employees were highly valued.”

 

Ms Carnell’s comments reflect the staffing challenges faced in the ECEC sector. The president of the South Australian branch of the Australian Childcare Alliance, Kerry Mahony recently spoke to The Adelaide Advertiser about staffing challenges, saying “I have no idea what’s in the minds of the people who are making the (development) applications because I can’t see how they are going to meet requirements in enrolments, let alone staffing requirements.”

 

Ms Carnell noted the challenges posed by protracted legal action, saying “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.”

 

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

 

Figures released by the Fair Work Commission show that during the first three months of this year 3,583 unfair dismissal applications were received. While most were settled during mediation, 172 cases were presented to the commission, of which 111 (65 per cent) were dismissed without merit, or because they were 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,” Ms 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.

 

In April 2018, the ASBFEO released its report Workplace Relations- Simplification for Small Business. That report recommended ASBFEO lead a review of the Small Business Fair Dismissal Code and checklist.

 

For more information, or to access the report, please see here.