Fair Work Australia senior deputy vice president has raised more questions as to whether the Small Business Fair Dismissal Code that is designed to help protect companies with fewer than 15 employees from unfair dismissal claims actually gives small business owners a complete understanding of unfair dismissal laws.
Just days after it was revealed that a senior FWA official had described the Small Business Fair Dismissal Code Checklist as “deficient” in that it does not explain the employees have the right to a support person present during termination discussions, a new case involving the Code’s description of genuine redundancy provisions has also surfaced.
In a decision handed down in April and subsequently appealed against, Senior Deputy President Ian Watson found a company that terminated a worker because of an economic downturn in the automotive sector has unfairly dismissed the staff member because it did not make reasonable efforts to redeploy her.
Watson says the employer, Motor Solutions, claimed to have been following advice presented in the Government’s Small Business Fair Dismissal Code, which states “employees who have been dismissed because of a business downturn or their position is no longer needed cannot bring a claim for unfair dismissal”.
However, Watson said in his judgement “the passage relied on appears to me to be of an introductory nature” and summarised sections of the Fair Work Act.
“The Code itself does not appear to me to deal with terminations on the ground of redundancy,” Watson wrote.
IR lawyer Peter Vitale says the decision is more evidence that small business owners should not rely too heavily on the Code, which he says do not provide enough detail of all the matters that need to be considered when trying to avoid an unfair dismissal.
“What the Code does not do is relieve small business of the need to understand what their legal obligations are,” Vitale says.
“In terms of the onus on them there is very little difference between small business and larger businesses.”
That assessment is at odds with the Government’s intention. Upon launching the Code in September 2008, Federal Workplace Minister Julia Gillard promised a “simple guide to get through the process of” dismissal.
“To dismiss someone fairly after 12 months the employer will have to comply with a simple and short six-paragraph Fair Dismissal Code for Small Business,” she said in a speech to the National Press Club.
“And of course, if an employee is made redundant because of a business downturn or their position is no longer needed, it is not grounds for unfair dismissal.”
However, the recent decisions suggest the issue of unfair dismissal is too complex to be wrapped in a short Code and Checklist.
Vitale says the big question over the Code was always how Fair Work Australia would apply it – would the body vet unfair dismissal claims such that only those where non-compliance with the Code would proceed to a hearing, or would all issues proceed to a hearing?
Vitale says FWA is clearly pursuing the latter option, which means one of the Code’s initial aims – to reduce the administrative burden on SMEs – isn’t being met.
“What really are the objectives of having the Code? If the idea is to have small employers less likely to be found to have unfairly dismissed someone after a lengthy hearing, then that’s what they’ve achieved. If the idea it to reduce administrative burden on smaller employers, they haven’t made much of an advance.”
However, it remains unclear exactly who is in the position to revise the Code and Checklist in light of the problems highlighted by Fair Work Australia.
Earlier this week, SmartCompany asked the Minister’s office if it would be reviewing the Code, and was told to direct all questions to FWA.
However, FWA says the Code is a Government document and it could only be changed by the Government.
SmartCompany has since asked the Minister’s office who is responsible for revisions to the Code, but is yet to receive a response.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
