The “rubric of relevance”; how the small business fair dismissal code works

“The purpose behind the existence of the Small Business Fair Dismissal Code is to treat a dismissal as a fair dismissal if the employer acts in a way which is consistent with the Code. In enacting s.388 and 396 of the Act Parliament has clearly given the Minister the ability to create and declare a Code which enables an employer to dismiss an employee in circumstances which would be considered to be unfair if s.387 applied. In fact the Code does just that.
The Code permits an employer to summarily dismiss an employee without objectively establishing that the employee has engaged in conduct which would justify summary dismissal. All that is required under the Code is that the employer subjectively believes that the employee conduct is sufficiently serious to justify immediate dismissal and that such subjective belief is based on reasonable grounds.
In practice this means that a summary dismissal which would abysmally fail an objective test, such as is required under s.387, would be considered to be a fair dismissal if the employer is a small business employer and the employer subjectively believes on reasonable grounds that the employees conduct is sufficiently serious to justify immediate dismissal.
The purpose of the Code is to clearly relieve small business employers of the need to comply with the requirement not to unfairly dismiss an employee within the meaning of s.387 of the Act.
The proper focus, therefore, is to consider whether (the Respondent employer in this case) believed on reasonable grounds that the conduct of the Applicant was sufficiently serious to justify immediate dismissal. There is no requirement (and in fact it is not permitted) for the Commission to be satisfied that the conduct of the Applicant would justify immediate dismissal.
The focus in the present matter must therefore be on whether Mr Shaun Lloyd’s belief that the Applicant’s conduct was sufficiently serious to justify immediate dismissal, was a belief held on reasonable grounds.
In Pinawin T/A Rose Vi.Hair.Face.Body v Domingo, a Full Bench considered the summary dismissal provisions of the Code as follows:
“[25] There have been few decisions discussing the requirements of the relevant paragraph of the Small Business Fair Dismissal Code in Australia and no Full Bench cases. Commissioner Deegan in French v Lufra Investment expressed her conclusion on consistency with this part of the Small Business Fair Dismissal Code as follows:
‘[41] The respondent appeared to argue that the applicant’s conduct was serious misconduct as it was “wilful and deliberate behaviour by an employee that is inconsistent with the contract of employment”. I am not satisfied that the applicant’s conduct in initially refusing to restore the shed to its former state or refusing to discuss the matter with Ms Holland some short time later was, in all the circumstances “wilful or deliberate behaviour” or in fact conduct so serious as to justify summary dismissal. I will expand on my reasons for reaching this conclusion in dealing with the matter of whether the dismissal was harsh, unjust or unreasonable. As summary dismissal was not warranted in this case the dismissal was inconsistent with the Code.’
In our view this approach is not consistent with the requirements of the Small Business Fair Dismissal Code as it equates the test in the Code with a determination by the tribunal of whether summary dismissal was warranted.
Deputy President Bartel in Narong Khammaneechan v Nanakhon Pty Ltd ATF Nanakhon Trading Trust T/A Banana Tree Cafe said:
‘[60] At the outset it is appropriate to note that unlike a consideration of the dismissal of an employee of a business that is not a small business employer, the function of FWA is not to determine on the evidence whether there was a valid reason for dismissal. That is, the exercise in the present matter does not involve a finding on the evidence as to whether the applicant did or did not steal the money. The application of the Small Business Fair Dismissal Code involves a determination as to whether there were reasonable grounds on which the respondent reached the view that the applicant’s conduct was serious enough to justify immediate dismissal. As such, the determination is to be based on the knowledge available to the employer at the time of the dismissal, and necessarily involves an assessment of the reasonableness of the steps taken by the employer to gather relevant information on which the decision to dismiss was based.’
Senior Deputy President O’Callaghan in Harley v Rosecrest Asset Pty Ltd T/A Can Do International said:
“[8] For an employer to believe on reasonable grounds that the employee’s conduct is sufficiently serious to justify immediate dismissal, it is firstly necessary for the employer to establish that the employer did in fact hold the belief that as a matter of fact that (i) the conduct was by the employee; (ii) the conduct was serious; and (iii) that the conduct justified immediate dismissal. This is to be contrasted to the provisions of s.387(a) where FWA, in determining whether there was a valid reason for the dismissal, must find whether the conduct in fact occurred.
[9] Secondly, it is necessary for the employer to establish that there are reasonable grounds for the employer holding the belief. It is thus necessary for the employer to establish a basis for the belief held which is reasonable. In this regard it would usually be necessary for the employer to establish what inquires or investigations were made to support a basis for holding the belief. It would also ordinarily be expected that the belief held be put to the employee, even though the grounds for holding it may not be. Failure to make sufficient inquiries or to put the accusation to the employee in many circumstances might lead to a view that there were no reasonable grounds for the belief to be held.”
We believe that the approach and observations in these two decisions are correct. There are two steps in the process of determining whether this aspect of the Small Business Fair Dismissal Code is satisfied. First, 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. Secondly it is necessary to consider whether that belief was based on reasonable grounds. The second element incorporates the concept that the employer has carried out a reasonable investigation into the matter. It is not necessary to determine whether the employer was correct in the belief that it held.
[30] Acting reasonably does not require a single course of action. Different employers may approach the matter differently and form different conclusions, perhaps giving more benefit of any doubt, but still be acting reasonably. The legislation requires a consideration of whether the particular employer, in determining its course of action in relation to the employee at the time of dismissal, carried out a reasonable investigation, and reached a reasonable conclusion in all the circumstances. Those circumstances include the experience and resources of the small business employer concerned.”

As far as it goes the conclusion drawn by the Full Bench in relation to the second element of the two step process is undoubtedly correct – “The second element incorporates the concept that the employer has carried out a reasonable investigation into the matter.”
However the concept of reasonable grounds includes much more than the concept that the employer has carried out a reasonable investigation into the matter.
In McKinnon v Secretary, Department of Treasury, Gleeson CJ and Kirby J in dissent said:
“9.… statutes which confer a power conditioned upon the existence of reasonable grounds for a state of mind such as suspicion, or belief, are common. Powers of search and seizure, or arrest, are often conditioned in that way. Downes J referred to the decision of this Court in George v Rockett where it was said:
‘When a statute prescribes that there must be ‘reasonable grounds’ for a state of mind – including suspicion and belief – it requires the existence of facts which are sufficient to induce that state of mind in a reasonable person.’
10. This is an objective test. George v Rockett was concerned with Queensland legislation empowering the issue of a search warrant if there were reasonable grounds for suspecting that there was incriminating evidence in a house. The statutory formula, however, is widely used. The point of the objectivity of such a test, when it is necessary to consider whether a primary decision-maker had reasonable grounds for a given state of mind, is that the question is not whether the primary decision-maker thinks he or she has reasonable grounds.

11. To decide whether it was reasonably open to a decision-maker, on the evidence, to make a judgment such as ………..whether the known facts are sufficient to induce in a reasonable person a suspicion or belief that someone is guilty of a crime ….. involves an evaluation of the known facts, circumstances and considerations which may bear rationally upon the issue in question. A judgment as to whether information or argument bears rationally upon a question is also a familiar exercise. It is usually discussed by courts under the rubric of relevance. If a piece of information, or an opinion, or an argument, can have no rational bearing upon a question for decision, it is irrelevant, and must be left out of further consideration. Otherwise, being relevant, just decision-making requires that it be taken into account.
12. Where a …state of mind (such as suspicion, or belief, or satisfaction) involves an interplay of observation (of objective facts and circumstances), opinion, and judgment (which may involve an evaluation of matters such as reasonableness of conduct, or of the public interest), the question whether there are reasonable grounds for such a ….state of mind requires a consideration of all relevant matters and an assessment of the reasonableness of the …state of mind having regard to all relevant considerations. Suppose the question is whether there are reasonable grounds for suspecting that A killed B. Suppose that A is a person of violent propensity, who had a motive to kill B, and had declared an intention to do so. Let it be assumed that those three facts are incontestable. In the absence of any other facts they may lead to a conclusion that there are reasonable grounds for suspecting that A killed B. Suppose, however, that A has an undisputed alibi. The first three facts then cease to constitute reasonable grounds for the suspicion. The question cannot be answered without considering all four facts. It is not a hypothetical question. It is a question to be answered in the light of all the known circumstances.”
In the same matter, Hayne J, as part of the majority, said:
“59. The appellant sought support for the first step in these submissions from what was said by this Court in George v Rockett. But that case concerned a very different legislative provision which governed a Justice’s issuing of a warrant where there were “reasonable grounds for suspecting” certain matters. In that context, the references to inducing a particular state of mind are apposite. But the question presented by s 58(5) makes no reference to the state of mind of any person. It asks whether there exist reasonable grounds for a claim that has been made. And it may seriously be doubted that the understanding of the Tribunal’s task is assisted by injecting notions of persuasion or satisfaction of the kind with which George v Rockett was concerned. Such notions are unhelpful in this context because they all too readily may be understood as requiring the Tribunal to make its own assessment of where the public interest lies. That is not what s 58(5) permits or requires. It requires an assessment of the grounds for the conclusion that disclosure is not in the public interest. Do reasonable grounds exist for that conclusion?
As the plain language of the Code makes clear, and as correctly described by the Full Bench in Pinawan, it is necessary to consider whether the employer’s belief was based on reasonable grounds. The decision of the High Court in George v Rockett is directly on point in establishing the reasonable grounds.
Thus whether Mr Shaun Lloyd held his beliefs on reasonable grounds requires “the existence of facts which are sufficient to induce that state of mind in a reasonable person”. Determining whether such facts exist requires the Commission to not only consider the concept that the employer has carried out a reasonable investigation into the matter, but also to apply an objective test in relation to the reasonable grounds. “The point of the objectivity of such a test, when it is necessary to consider whether a primary decision-maker had reasonable grounds for a given state of mind, is that the question is not whether the primary decision-maker thinks he or she has reasonable grounds.”
In all of the circumstances of this case it is absolutely clear that Mr Shaun Lloyd had no reasonable grounds for believing that the Applicant’s conduct was sufficiently serious to justify immediate dismissal.”
Suttie v Lloyd & Co Pty Ltd (2015) FWC 4242 delivered 14 July 2015 per- Ryan C