How to avoid Unfair Dismissals in a Small Business

The Fair Work Act establishes rules about terminating employment in a lawful and fair manner. Although there are many reasons employment can end, workplace laws set out the required procedure to follow in order to avoid the unfair dismissal of an employee. Whether the employer’s business was is a large or small business is relevant.

What is considered an Unfair Dismissal?

The Fair Work Commission (“the Commission”) may consider the termination of an employee to be unfair if:

  1. The dismissal was harsh, unjust or unreasonable;  
  2. The dismissal was not a case of genuine redundancy; or 
  3. The employee worked for a small business and the dismissal was not undertaken according to the Small Business Fair Dismissal Code (“the Code”).

What is harsh, unjust or unreasonable?   

There are many factors the Commission will consider when deciding if a dismissal is harsh, unjust or unreasonable. Some of these factors include: 

  1. Whether there was a valid reason for the dismissal related to the employee’s capacity or conduct; 
  2. Whether the employee was notified of that reason; 
  3. Whether the employee was given an opportunity to respond to those reasons; 
  4. Where the dismissal related to unsatisfactory performance by the employee, whether the employee had been warned about that performance before the dismissal;  
  5. Any other matters the Commission considers relevant.  

Small Business Fair Dismissal Code

If an employee worked for a small business, the dismissal must be undertaken according to the Code. The Commission will consider factors that might have impacted an employer’s ability to follow a fair process in dismissing the employee.

Whilst small businesses may not have the same resources as a larger enterprise, the conduct engaged in the dismissal must remain fair. As such, the Code sets out the following procedures that small businesses should follow to avoid an unfair dismissal:

  1. Clearly warn the employee that they were not doing the job properly and would have to improve their conduct or performance, or otherwise be dismissed;
  2. Provide the employee with reasonable time to improve their conduct or performance;
  3. Offer to provide the employee with any training or opportunity to develop their skills;
  4. Prior to the dismissal, tell the employee the reason for the dismissal and give them an opportunity to respond; and
  5. Keep any records of warnings made to the employee or of discussions on how their conduct or performance could be improved.

Contact W Legal Group

One of the ways the Fair Work Ombudsman suggests managing under-performance or misconduct is by using performance improvement plan or warning letters. If you want to find out more about avoiding unfair dismissal or managing performance at your business, contact us at

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