Employee Law Tips for Small Businesses - Hiring & Firing

Small Biz Matters – a half hour program each week where you can work ON your business rather than IN it.
with Alexi Boyd from Boyd Office Management Services
Date: 27 June 2017

Today on Small Biz Matters we’ve brought in an expert on Employment Law; Michelle Archer from Archer Law practice based in Hornsby. It's a topic I’ve long wanted to discuss and I’m please to welcome a true, local expert on the subject. So welcome to the show and thanks for sharing all of your knowledge with us this morning.

A: Michelle, can you tell me a little bit about background and what led you to this career path?

M: brief description of previous experience in the field and the sort of businesses you’ve worked with over the years.

A: And Michelle, can you give me a brief overview of the Fair Work Act and how it relates to small business?

The Fair Work Act (“FWA”) is a Federal Government Act which regulates employment and industrial relations in Australia.  The Act applies to nearly all employers in NSW except NSW public servants, some NSW Government agencies and local Councils.  Most employment and industrial matters are dealt with in the Act.   The Act defines a small business employer as being fewer than 15 employees.  Some of the rights and obligation of employers under the Act are different depending on whether you are a small business or not

One aspect which is particularly misunderstood is that of the process of Hiring and Firing of staff and this is why we’re covering this topic today. The unfair dismissal laws in particular can be a bit of a roadblock for small business and can actually make them think twice about hiring that perfect employee. For many its another example of excessive red tape. But, is it all that bad?

Part 1 – Hiring

A: Now, we’ve covered the area of employment contracts  previously on Small Biz but I have to admit we didn’t consult an expert such as yourself; so can you give us some tips about what we should consider before hiring new staff?

M: When hiring employees a business has both statutory obligations to its employees and contractual obligation.  Statutory obligations are found in the Fair Work Act and also in Awards or other Acts such as the Long Service Leave Act.

The Fair Work Act provides some minimum entitlements which are referred to as the National Employment Standards or NES.  There are 10 terms and conditions in the NES, including:

1.      A maximum working week of 38 hours for full time employees plus “reasonable additional hours”.

2.      A right to request flexible working arrangements.

3.      12 months unpaid Parental and adoption leave, with the right to request an additional 12 months.

4.      Four weeks paid annual leave (pro rated for part time).

5.      Ten days paid personal/carer’s leave (pro rated for part time), two days paid compassionate leave for each permissible occasion, and two days unpaid carer’s leave for each permissible occasion.

6.      Community service leave for jury service or activities dealing with emergencies or natural disasters (this leave is unpaid except for jury service).

7.      Long service leave – (there is an entitlement to long service leave in the NES but the actual granting and payment of Long service leave is governed by the Long Service leave Act in NSW).

8.      Public holidays and the entitlement to be paid when working on those days.

9.      Notice of termination and redundancy pay.  (Note redundancy pay is not required to be paid by a small business employer)

10.  The right for new employees to receive a copy of the Fair Work Information Statement,

Employers also have to work out whether an Award applies to their Employees so having a good job description is very helpful as you need to know the type of work your employee is going to perform in order to work out if an Award will apply.   (See my attached presentation)

A: And what about an  agreement,  or contract? Should small business have a contract with their employees or just rely on the Award?

M: It is important to have an employment contract even if the employee is covered by an award. The contract can cover things like

·      Remuneration, including any bonus or commission schemes and superannuation;

·      Probationary periods,

·      Protection of confidential information,

·      Notice periods,

·      Post-employment restraints.

·      Compliance with the employer’s policies (although it is important to exclude the policies from being contractual terms).

A: And when we met recently you mentioned a document that ALL new employees should be supplied with at the point of employment which was the Fair Work Information Statement – I’ll be honest and say I had no idea about this regulation. Can you please explain what’s covered in a Fair Work Information Statement and where employers can find one?

The Fair Work Information Statement is a two page document which sets out information regarding the National Employment Standards, and also provides information on things like the right to request flexible working arrangements, Modern Awards and other workplace rights.  It also provides contact details for the Fair Work Ombudsman and the Fair Work Commission.  You can find the Fair Work Information Statement by going to www.fairwork.gov.au or you can just google “Fair Work Information Statement”.

Part 2 – Firing

A: So, as an expert in Employment Law, if I say the words “You’re Fired!” what does that term make you think on:

M: Well the first thing it makes me as an employment lawyer think of is “Why?”  Different scenarios can arise depending on why an employer terminated the employee.  For example, if an employee is guilty of some really serious misconduct then the employer has the right to terminate that employee on the spot without warning or notice.  But if it is not serious misconduct, then we have to look to see if the employer was justified in terminating that person’s employment.  For example, is it a redundancy, has the business been sold to someone else, is that person being terminated for performance reasons.

A: Firstly Michelle, let’s talk about unfair dismissal and the misconceptions that small business owners may have regarding this. Do you think is it more of a misinterpretation, or a lack of awareness as to their obligations?

M: In my experience both employees and employers have a lack of awareness of what claims can be made under the unfair dismissal laws.  Employees always think they are able to claim more than they actually can and Employers worry about hiring new staff because of unfair dismissal laws but there are some important hurdles for employees claiming unfair dismissal, such as:

·       employees of small business cannot claim unfair dismissal in the first twelve months of employment or if their earnings is above the high income threshold (which is presently $136,700).

·       Also, they cannot claim they have been unfairly dismissed if their job has been terminated for reasons of genuine redundancy.  If the role has been terminated because of redundancy, then a small business employer is not obliged to make redundancy payments under the Fair Work Act.

·       They must prove that their dismissal was harsh, unjust or unreasonable.

·       Small business Employers also have access to the Small Business Fair Dismissal Code which provides a checklist of what to do in the event of termination.  If the Employer can show they have followed the Code then the employee will not be able to claim unfair dismissal.  The Code can also be found on the Fair Work Ombudsman’s website.

-       Even if the employee is successful in their claim, the Fair Work Commission has  two options, it can reinstate the person to their previous role, which is quite rare, or they can award compensation.  The most that can be awarded is no more than six months of the employee’s salary or one half of the high income threshold, whichever is higher.  And that is the maximum, most decisions of the FWC are less than that.

A: As my regular listeners would know we’re all about solid processes and procedures here at Small Biz Matters, so what can businesses do to protect themselves when setting this all up?

M:   They should first have good job descriptions and make sure that their employees know what their job is and what are the expectations around it.  You should document everything.  If you have to counsel an employee about their performance, even if it is informally or without giving a warning, make sure you take file notes of your discussions.  For more formal interviews, you should have witnesses to the meeting and allow your employee a support person as well.

Also, you should have policies around such important matters as occupational health and safety, internet and email usage and bullying/harassment. But more importantly you should make sure that your employees know about the policies and that they are enforced for everyone including the owners and managers.  Having written policies is a great idea but they are of no help if everyone just ignores them.

A: In your opinion, are the unfair dismissal laws really there to protect businesses, employees or both?

M: I think the Act has tried to strike a balance between the interests of business and employees but I do think there is a level of misunderstanding in the community about what rights people have under the unfair dismissal regime.  A lot of businesses don’t know for example about the 12 month minimum employment period or the salary caps which can make some employees ineligible for unfair dismissal.

A: Is unfair dismissal all we have to worry about?  Are there any other claims employees can make?

M: Unfair dismissal is the most common claim that an unhappy employee would make but employers must also consider other potential claims if they are thinking of terminating an employee who may be ineligible to claim unfair dismissal.  For example there are laws in the FWA against discrimination on the basis of race, colour, sex, sexual orientation, age, physical or mental disability, marital status, family or carer's responsibilities, pregnancy, religion, political opinion, national extraction or social origin.  Employers are also not allowed to act against employees because they have a workplace right, for example if an employee has a right to take leave, then employers cannot terminate them for reason of them taking or proposing to take that leave.  These claims are not subject to same eligibility criteria so employers must also be careful not to discriminate unfairly against their employees.

A: And where can businesses get more info on unfair dismissal if they’re in need of good advice?

M: It is always a good idea to get good advice from a lawyer experience in employment law early.  Waiting too long can cost more in the long run.  Employers can also contact the  Fair Work Ombudsman or their website for further information.