Redundancies and small businesses

Redundancies and small business employers

Businesses which a truly small business employers are not required to pay statutory redundancy pay under the Fair Work Act; see sec 121(1)(b).

Small business employers are however subject to the unfair dismissal provisions of the Act, except that the rules for dismissals by small business employer are different than those which apply to non- small business employers  and it is a complete jurisdictional defence to an unfair dismissal case against a small business employer if it can show that it complied with the Small Business Fair Dismissal Code (sec 388).

The SBFDC contains the following provisions;

“Small Business Fair Dismissal Code


The Small Business Fair Dismissal Code comes into operation on 1 July 2009.

Summary Dismissal

It is fair for an employer to dismiss an employee without notice or warning when the employer believes on reasonable grounds that the employee’s conduct is sufficiently serious to justify immediate dismissal. Serious misconduct includes theft, fraud, violence and serious breaches of occupational health and safety procedures. For a dismissal to be deemed fair it is sufficient, though not essential, that an allegation of theft, fraud or violence be reported to the police. Of course, the employer must have reasonable grounds for making the report.

Other Dismissal

In other cases, the small business employer must give the employee a reason why he or she is at risk of being dismissed. The reason must be a valid reason based on the employee’s conduct or capacity to do the job.

The employee must be warned verbally or preferably in writing, that he or she risks being dismissed if there is no improvement.

The small business employer must provide the employee with an opportunity to respond to the warning and give the employee a reasonable chance to rectify the problem, having regard to the employee’s response. Rectifying the problem might involve the employer providing additional training and ensuring the employee knows the employer’s job expectations.

Procedural Matters

In discussions with an employee in circumstances where dismissal is possible, the employee can have another person present to assist. However, the other person cannot be a lawyer acting in a professional capacity.

A small business employer will be required to provide evidence of compliance with the Code if the employee makes a claim for unfair dismissal to Fair Work Australia, including evidence that a warning has been given (except in cases of summary dismissal). Evidence may include a completed checklist, copies of written warning(s), a statement of termination or signed witness statements.”

What, then, is inter-relationship between the SBFDC and small business employers when an employee’s positon is rendered redundant?

Well, the answer is very little. The Code deals with dismissals by small business employers based upon the capacity or conduct of an employee. Self evidently then, a dismissal by a small business employer cased upon a genuine redundancy has nothing to do with the Code.

“As can be seen from the text of the Code, it endeavours to codify particular dismissal circumstances involving an employee’s conduct or capacity to perform the job for which they are engaged. The Code is silent in respect to circumstances involving a dismissal which was made because of the employer’s financial circumstances and which was not connected with the employee’s conduct, capacity, or performance of their work.

In this instance, there was no suggestion that the dismissal of the applicant was connected with any unsatisfactory conduct, capacity or performance of his work. The dismissal of the applicant was made entirely because of the financial circumstances of the business operation of the employer, and the identification of a redistribution of the work that the applicant performed.

Consequently, although the respondent employer is a small business employer as defined in the Act, the Code has no particular relevant operation in regards to the circumstances of the dismissal of the applicant. However, in a general sense, the procedural requirements that can be identified in various parts of the text of the Code, reflect a broad requirement to provide employees with a process that ensures that any dismissal includes reasonable consultation, and an opportunity for discussion prior to finalisation and implementation of the dismissal.”

The Commissioner went on to conclude that the dismissal was relevantly unfair since the employer had not complied with the consultation provisions of the relevant award and consequently could not rely upon the small business fair dismissal code nor the genuine redundancy jurisdiction defence to the claim.

Hall v The Whole Box n Dice (2018) FWC 3521 delivered 20 June 2018 per Cambridge C