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Protecting your SME when an employee leaves - Dynamic Business

By Alan J. McDonald


Small businesses and startups face as much risk in employment as larger enterprises but they are often less well-equipped to address these issues. When working in a small business, people tend to form strong personal relationships and employers plan to retain staff. Sometimes, however, businesses need to dismiss staff for a number of reasons.

While larger employers have human resource departments and sophisticated policies to assist with the dismissal procedure smaller business often have less experience and expertise which increases the risk of legal claims. Whenever a small business determines that it must move on from an employee it needs to ensure that it fulfils its legal obligations in order to protect itself from any legal action.

The first issue that businesses face when conducting dismissals is clearly communicating the reason for dismissal. If an employer has a genuine reason for a dismissal this should be communicated because often an employee’s biggest concern is that they were unsure of the reason they were moved on. If an employer can calmly explain the reason this goes a long way to avoiding a legal claim whereas stating something like the employee was “not the right fit” will most likely inflame the situation.

The next issue for small business is being aware of the claims that can be made. Generally, these claims are to the Fair Work Commission as an unfair dismissal or general protections application.

First, for an employee of a business under 15 employees to be able to make an unfair dismissal claim he or she must be employed for at least 12 months. Assuming this requirement is met, the Commission will consider whether the Small Business Unfair Dismissal Code under the Fair Work Act 2009 (Cth) has been complied with. The Code states that if an employer wishes to terminate employment for a reason other than serious misconduct 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.

Regardless of unfair dismissal restrictions, any employee (with any length of service) can make a general protections application alleging that their dismissal was for a prohibited reason. Prohibited reasons include discriminating against an employee for reasons such as race, sexual orientation, age, physical or mental disability, marital status family or carer’s responsibilities, pregnancy, religion or political opinion or dismissing an employee because they exercised a workplace right. In order to guard against these claim employers should limit any dismissal to reasons of performance and/or conduct and communicate this reason clearly.

Generally speaking, a simple way that small businesses or startups can safeguard themselves from legal action is to keep well documented notes on employees.  By keeping notes of any issues that arise in relation to the employee’s conduct or performance throughout the duration of their employment an employer can defend its decision to terminate an employee.  Similarly, notes should be recorded at all formal disciplinary meetings. If small businesses don’t have appropriate documentation to support the reasons for dismissal they leave themselves open for legal recourse.

Finally, employers should educate themselves on the laws that apply to their business and develop and enforce policies and procedures which are consistent with these laws.

Reference: Protecting your SME when an employee leaves, Dynamic Business, Friday 6th April 2018.