Serious misconduct and small business employers

These passages from an unfair dismissal case set out the legal principles which are involved when determining whether a small business employer has met the statutory requirements which condition the availability of the jurisdictional defence in a serious misconduct case.

“6 Was there compliance with the Code?

6.1 Legislative framework

[86] Section 396 of the Act provides that before considering the merits of an unfair dismissal

application, the Commission must determine, amongst other matters, whether a dismissal was

consistent with the Code. This is perhaps unsurprising given that s 385 of the Act sets out that

a person has been unfairly dismissed if, in part, the Commission is satisfied that the dismissal

was not consisted with the Code.92

[87] A person has not been unfairly dismissed where the dismissal is consistent with the

Code. It is useful to set out s 388 of the Act:

388 The Small Business Fair Dismissal Code

(1) The Minister may, by legislative instrument, declare a Small Business Fair Dismissal Code.

(2) A person’s dismissal was consistent with the Small Business Fair Dismissal Code if:

(a) immediately before the time of the dismissal or at the time the person was given

notice of the dismissal (whichever happened first), the person’s employer was a small

business employer; and

(b) the employer complied with the Small Business Fair Dismissal Code in relation to

the dismissal.

[88] The Code is only relevant if the employer is a small business as defined in s 23 of the

Act. That section provides that ‘[a] national system employer is a small business employer at

a particular time if the employer employs fewer than 15 employees at that time’. It is not in

dispute that the Respondent was a ‘small business employer’ at the time of the Applicant’s


[89] The Code provides:

[2023] FWC 304


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


[90] The ‘Summary Dismissal’ section of the Code clearly applies to dismissals that have

‘immediate effect’ as that term is understood by reference to the decision in Chen v Australian

Catering Solutions Pty Ltd,

93 and are not dismissals on notice.94 However, as explained in

Ryman v Thrash Pty Ltd (Ryman), an immediate dismissal may include a dismissal with a

payment in lieu of notice which nevertheless is intended to have immediate effect.95

[91] In Ryman, the Full Bench provided a useful synopsis of the proper approach to the

construction and application of the Summary Dismissal aspect of the Code and its interaction

with reg 1.07 of the Fair Work Regulations 2009 (Cth) (the Regulations).96

That decision has

been subsequently followed in Grandbridge Ltd v Wiburd97 and TIOBE Pty Ltd v Chen.


[92] In Ryman, the Full Bench considered the meaning of ‘summary dismissal’ and said that

it referred to a dismissal without notice arising from ‘a breach of an essential term of the

employment contract, a serious breach of a non-essential term of the contract, or conduct

manifesting an intention not to be bound by the contract in the future on the part of the


[2023] FWC 304


[93] However, it is not the case that under the Code the Commission must be satisfied that

serious misconduct was the basis for the dismissal.100

Rather, there needs to be a consideration

whether, at the time of dismissal, the employer held a belief that the employee’s conduct was

sufficiently serious to justify immediate dismissal and one must also consider whether that

belief was based on reasonable grounds.


This element, which has been described as the

second element,102 incorporates the concept that the employer has carried out a reasonable

investigation into the matter.103

It is not necessary to determine whether the employer was

correct in the belief that it held.104

Whether the employer had ‘reasonable grounds’ for the

relevant belief is of course to be determined objectively.105

[94] The focus on ‘serious misconduct’ must be taken as identifying the subject matter and

it appears to be accepted that this term gleans its meaning from s 12 of the Act and thereafter

reg 1.07 of the Regulations.


[95] If an applicant’s dismissal was consistent with the Code, it cannot be considered unfair

within the meaning of the Act.”


Bailey v TC TL VU Nguyen Pty Ltd T/A Nannup Family Bakery [2023] FWC 304 delivered 6 April 2023 per Beaumont DP