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How Small Business Can Avoid An Unfair Dismissal Claim

How small business can avoid an unfair dismissal claim

The best way to avoid an unfair dismissal claim is to take preventative measures – right from the moment you hire a worker.

Dismissing an employee is never easy to do, particularly for small business owners.

In a company with fewer than 15 employees, relationships tend to be more intimate due to the small number of workers within the business.

When a dismissal occurs emotions can run high causing the situation to be more difficult than usual.

Do you qualify as a small business?

Dismissals from a small business must follow the Small Business Fair Dismissal Code.

To qualify as a small business, you must have less than 15 employees, including the employee or employees being dismissed.

What type of dismissal?

An employee can either be summarily dismissed or dismissed for a number of reasons that need to be defined.

Serious misconduct is usually grounds for immediate dismissal.

These include things like:

  • Theft
  • Fraud
  • Violence
  • Serious violations of occupational and safety issues

Other reasons for sacking an employee can because of less serious actions, including:

  • Poor work performance
  • High absenteeism
  • Inappropriate conduct

Take preventative steps right from the start

Regardless of the reason for dismissal, it is crucial that small business owners take steps to prevent unfair dismissal claims in the first place – and they should do that from the moment they first hire an employee.

Here are some steps small businesses should include in their hiring procedures to clarify the nature, expectations and compensation structure of the position being offered.

  1. Clarify the job requirements in writing and provide a printed copy to the new employee
  2. Review the requirements verbally
  3. Provide the employee with a copy of the employment handbook
  4. Require the employee to read and sign a statement that they have read the provided handbook
  5. Define the expected working hours/days
  6. State the rate of compensation
  7. Identify the nature of the position; full time, part time, permanent, casual, contract employee
  8. Review available benefits including superannuation, vacation, sick and holiday time, and personal and family leave available

After hiring the new staff member, it is also a good idea to make sure they know the process of performance review, warnings for poor work, absences and expectations of employee conduct.

They should also be made aware of how to make a formal complaint if they have a work grievance.

As an employer, you must be prepared to address any issues raised in a timely manner.

How to performance manage an employee

If a worker is not performing to expectations, it is important to address the issues immediately.

The following steps are a guide:

  1. Ask the employee to meet with two or more management personnel in a confidential setting
  2. Clearly outline the reason(s) for the warning
  3. Explain the consequences of the act/action continuing – including the number of warnings that will be given before any action will be taken – including retraining or even dismissal
  4. Provide the employee with a written explanation of the warning and the expected consequences if the behaviour does not change

The dismissal must be fair

If you are going to take the step of dismissing an employee, it is important that the dismissal is fair.

In order for it to be considered fair, one or more of the following requirements must be met:

  1. The employee resigns of their own choosing
  2. Adequate warning was given to the employee (in their employment review) of the issues surrounding the dismissal
  3. The employee should be given an opportunity to respond to any allegations, preferably in writing
  4. If the position becomes a genuine redundancy

Legal requirements of an unfair dismissal claim

There are some technical legal requirements for an employee to lodge an unfair dismissal claim against your business.

If these requirements are not met, it might be possible that the claim can be dismissed.

  1. The claim must be filed within 21 days of the dismissal
  2. The dismissal must be proved as harsh, unjust or unreasonable
  3. There must be no evidence of job elimination due to redundancy
  4. A violation of the Small Business Code occurred
  5. The employee must meet the minimum employment period (12 months)

Always seek expert advice

To ensure your small business is protected from an unfair dismissal claim, you should always seek expert legal advice.

Employer Advisors are experienced professionals who can assist you with workplace investigations and performance management of difficult employees.

A small investment before you take the step of dismissing an employee will save you time and money and an appearance in the Fair Work Commission.


If you need assistance with performance management, or are planning on dismissing an employee, we can help.

Please call our team at Employer Advisors on

1300 853 837

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