Unfair dismissal claims against a small business

If you’re faced with an unfair dismissal claim, make sure you have the peace of mind of knowing you’ve complied with the Small Business Fair Dismissal Code.

A sales consultant’s unfair dismissal claim has failed after the Fair Work Commission found the employer had complied with the Small Business Fair Dismissal Code. The consultant had failed to meet his sales budget on several occasions before the company took action to dismiss him.

The sales consultant worked for an engineering firm and his role was to visit prospective clients with the aim of designing and selling manual handling equipment. He was expected to generate $500,000 in sales income per year.

While the sales consultant’s figures were promising at first, this started to change after the first 12 months of employment. The employer met with the sales consultant to discuss his spiralling performance, and offered advice and assistance to help “turn things around”.

The following year, the sales consultant’s figures were $195,487 in sales income. This led to another meeting with the employer. When his sales figures did not improve, the sales consultant’s employment was terminated. He then proceeded to claim that he had been unfairly dismissed.

The Fair Work Commission found that the respondent was a small business (i.e. a business with 14 or fewer employees) and that the dismissal was consistent with the Small Business Fair Dismissal Code. The Code sets out rules and procedures that must be followed when a small business wants to terminate an employee outside the 12-month minimum employment period.

Consistent with the Code, the Fair Work Commission found that:

  • The sales consultant had been advised that he was at risk of being dismissed if his sales figures didn’t improve
  • There was a valid reason for dismissing the sales consultant as he was not performing to the required standards
  • Although the warning given was verbal only, there was no requirement under the Code for it to be in writing or for it to be a formal affair. Alerting the sales consultant to the possibility that he would be ‘let go’ if things did not improve satisfied the need for a warning
  • The sales consultant was provided with a chance to respond on both occasions when his performance was challenged and given an opportunity to improve his performance. He was also offered additional assistance and training.

When does the Code apply?

Small agency owners, with 14 or fewer employees, need to be able to show compliance with the Small Business Fair Dismissal Code if terminating an employee outside the statutory 12-month termination protection period. Once the employee has been employed for 12 months, the Code comes into play and must be observed.

For agencies with 15 or more employees, the Code does not apply. The age-old principles of substantive and procedural fairness will apply to these agencies where termination of the employee occurs outside the relevant statutory protection period.

Read the Code

You can find the Small Business Fair Dismissal Code by logging into the REEF People Management System. Simply go to the ‘Library’ section under the ‘Termination’ tab.