The information provided below is general in nature and should not be relied upon legal advice. You should call 03 5445 1000 and speak to a lawyer at OFRM about your particular circumstances.

Reducing the risk of unfair dismissal claims for small business

Does your business have 14 employees or less? And if so, do you comply with your obligations regarding termination of your employees? Many small businesses are under the misconception that they as a small business employer do not fall under unfair dismissal legislation. While it is true that in some circumstances small businesses are exempt from unfair dismissal, this is not necessarily the case for you.

If an employee has been employed by your organisation for more than 12 months and they believe their termination was unfair, they are able to bring a claim for unfair dismissal. In some circumstances, an employee's dismissal may found unfair by Fair Work Australia who will then make a ruling in favour of the employee. You, as the small business owner, may be ordered to pay the terminated employee significant compensation and damages.

To assist small businesses in ensuring their staff are fairly treated during the termination process, small businesses are required to follow the Small Business Fair Dismissal Code. The Code outlines the procedure an organisation needs to follow for a dismissal by a small business to be deemed to be fair.

If your business termination procedure does not comply with this Code, your procedure needs to be amended as soon as possible. Your small business may also need to develop a Human Resource Policy and Procedure, review or create Employment Contracts for your staff, outlining their obligations as well as yours and that you are aware of and complete the Small Business Fair Dismissal Checklist (part of the Code), every time an employee is terminated.

Terminating an employee is always difficult, but small businesses can limit the likelihood of a successful unfair dismissal claim only in circumstances where the termination has taken place in line with the unfair dismissal code.

Small business employers can download a copy of the Small Business Fair Dismissal Code from the Fair Work Ombudsman's Unfair dismissal page.