For small businesses in Australia, terminating an employee can be a legal minefield. The Small Business Fair Dismissal Code (the Code) provides specific guidance to help employers with fewer than 15 employees manage dismissals fairly and legally. Following the Code correctly can act as a complete defence to an unfair dismissal claim at the Fair Work Commission (FWC).
This guide, prepared by our employment law team, explains the Code’s requirements, how to apply them, common mistakes to avoid, and how recent legal developments affect small business employers.
This guide is current to June 2025.
Key Takeaways
Applies to businesses with fewer than 15 employees (including regular casuals and associated entities).
Protects employers from unfair dismissal claims if the Code is correctly followed.
Allows for summary dismissal (without notice) for serious misconduct.
For other dismissals, employers must give valid reasons, warnings, and an opportunity to respond.
Redundancies must be genuine, and consultation is often required.
Procedural fairness is essential, even for small businesses.
What is the Small Business Fair Dismissal Code?
The Small Business Fair Dismissal Code is a legislative instrument under section 388 of the Fair Work Act 2009 (Cth). It sets out the minimum requirements for lawfully dismissing an employee in a small business, providing a balance between operational flexibility for employers and protection for employees.
If the dismissal complies with the Code, the Fair Work Commission must find that the dismissal was not unfair – regardless of other circumstances.
For a broader understanding of your legal obligations as an employer, read our guide to the Fair Work Act.
Who Does the Code Apply To?
Small Business Employers
A small business employer is defined as one with fewer than 15 employees at the time of the dismissal. This count includes:
Full-time and part-time employees
Casual employees (if employed on a regular and systematic basis)
Employees of associated entities (e.g. related companies under the same control)
Eligible Employees
To bring a claim under the Fair Work Act, an employee must:
Have at least 12 months of continuous service
Be employed regularly and systematically (casuals included only if regular)
Not be excluded under a modern award or enterprise agreement clause
Summary Dismissal Under the Code
Summary dismissal (termination without notice) is permitted if the employer reasonably believes the employee’s conduct is serious enough to justify it. Examples of serious misconduct include:
- Theft
- Fraud
- Assault or threats of violence
- Serious breaches of workplace health and safety
Employers must genuinely hold this belief and have reasonable grounds, supported by inquiries or investigations. Reporting to police is not essential but may strengthen the employer’s position.
Dismissals for Performance or Conduct Issues
If the reason for dismissal does not involve serious misconduct, the Code requires that:
The employee is clearly warned that they risk being dismissed (preferably in writing).
The employee is given a chance to respond to the issues raised.
The employee is provided with an opportunity to improve, which may include extra training, feedback, or support.
The employee may bring a support person to any disciplinary meeting (not acting as a lawyer).
All steps should be well documented to prove compliance. Evidence includes written warnings or notes of verbal warnings, termination letters and witness statements.
Find out when you can terminate employment for less serious (minor) issues in our article.
Redundancy and the Code
Redundancy is only considered fair under the Code if it is genuine, meaning:
The employer no longer requires the role due to changes in business needs
There is consultation, if required under an award or agreement
Redeployment options are considered, even within associated entities
Failure to follow these steps may make a redundancy vulnerable to a claim.
Learn how to assess suitable alternative roles and reduce redundancy risks in our article.
Documentation & Procedural Fairness
Even small businesses must keep records, such as:
Warning letters or meeting notes
Termination letters
Notes from any investigations
A completed Small Business Fair Dismissal Code Checklist
Procedural fairness remains critical. The FWC regularly rules against small employers who fail to give warnings or act reasonably – even if misconduct is proven.
Recent Case Example (2025)
In Fuller v Madison Branson Lawyers (2025), the FWC ruled in favour of a small employer who dismissed a solicitor for falsely claiming sick leave to attend a football match. The employer followed the Code, including that they (1) investigated, (2) formed a reasonable belief, and (3) documented the misconduct. The dismissal was upheld as lawful and fair under the Code.
Practical Steps for Employers
To ensure compliance with the Small Business Fair Dismissal Code and reduce the risk of unfair dismissal claims, small business employers should follow these practical steps:
- Review employee numbers regularly to confirm small business status
- Establish clear disciplinary and performance management procedures
- Keep thorough records of warnings and discussions
- Ensure compliance with consultation requirements for redundancies
- Use the Small Business Fair Dismissal Code checklist for each dismissal
If you are a small business owner or employee seeking advice on dismissals, compliance with the Small Business Fair Dismissal Code, or defending unfair dismissal claims, contact our experienced team today for tailored assistance.
Frequently Asked Questions
Do casual employees have unfair dismissal protections?
Casual employees are protected if employed on a regular and systematic basis for at least 12 months by a small business employer. Irregular casuals are not protected under the unfair dismissal laws.
Do warnings have to be in writing?
No, written warnings are not mandatory but are strongly recommended for evidentiary purposes. Verbal warnings should be documented through notes or witness statements.
Can I dismiss an employee for misconduct outside work, such as domestic violence?
Yes, dismissal may be lawful if the off-duty conduct impacts job performance, workplace safety, or business reputation. The connection to employment must be established and clear.
Want practical advice on how to manage different dismissal situations? Explore common employment termination scenarios and procedures.
What is a ‘genuine redundancy’?
A genuine redundancy occurs when an employer no longer requires the role to be performed and has complied with consultation obligations. Redeployment options must also be considered.
What evidence do I need to defend an unfair dismissal claim?
Employers should provide:
- Completed Code checklist
- Copies of warnings (written or notes of verbal)
- Statements of termination
- Witness statements
Can a lawyer be a support person at a dismissal meeting?
Yes, a lawyer may attend as a support person, if they act solely as emotional or personal support. They must not act in their professional capacity. This means that they cannot advocate, speak on the employee’s behalf, or provide legal arguments during the meeting.
