Workplace relations reform update: Fair Dismissal Code for Small Business

In a major speech, Minister for Employment and Workplace Relations The Hon Julia Gillard MP has outlined important details of the government’s workplace reform program including:

  • the AIRC has published exposure drafts of a number of Modern Awards. Australia’s new Modern Awards will be finalised and in operation from 1 January 2010.
  • To keep the minimum wages in Modern Awards up to date, minimum wages and associated casual leave loadings will be reviewed every year by a specialist Minimum Wages Panel within Fair Work Australia.
  • Fair Work Australia will review Modern Awards every four years . The first such review is set to take place in 2014.
  • employees of a small business of fewer than 15 employees will only be able to claim for unfair dismissal after they have been employed for at least 12 months.
  • To dismiss someone fairly after 12 months the employer will have to comply with a simple and short six-paragraph Fair Dismissal Code for Small Business.

Fair Dismissal Code for Small Business
"Employees will  still face legitimate summary dismissal for serious misconduct such as theft, fraud, violence and serious breaches of Occupational Health and Safety procedures.

If an employee is made redundant because of a business downturn or their position is no longer needed, it is not grounds for unfair dismissal.

But where dismissal is justified the Code  requires the employer to:

  • give the employee a warning, based on a reason that validly relates to the employee’s conduct or capacity to do the job; and
  • provide a reasonable opportunity for the employee to improve his or her performance.

Multiple warnings are not required. There is no requirement for "three strikes and you’re out". It is desirable, but not necessary, for a warning to be in writing.

As long as employers comply with this Code, the dismissal will be held to be fair. But if an employer doesn’t comply, and sacks an employee after 12 months harshly or unfairly, compensation will follow.

Compensation will, however, be capped at six months’ pay with the full amount only available for the most serious cases.

All such disputes will be overseen by Fair Work Australia using fast and informal processes and legal representation will be allowed only in exceptional circumstances."

The new workplace relations system will commence on 1 January 2010.

The new bargaining framework, unfair dismissals and associated protections will come into force six months earlier on 1 July 2009.

It is expected that legislation will be introduced into Parliament by November and may not be passed, subject to Senate approval, until early 2009.

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