A Full Bench of Fair Work Australia (FWA)
recently handed down the first full bench decision to consider the
requirements of the Small Business Fair Dismissal Code
(Code). The Code applies to small business
employers with less than 15 employees. If an employee of a small
business is dismissed in accordance with the Code, the dismissal
will not be unfair.
In the decision, the Full Bench found that the termination of a
hairdresser by his employer for drug taking that impacted on the
employee's capacity to perform his work was consistent with the
Code. In doing so, the Full Bench overturned the decision of FWA at
first instance, which found that the employee had been unfairly
dismissed and awarded the employee 3 weeks' pay.
The employer, a small hairdressing salon in Sydney, became
concerned about one of its hairdresser's ability to perform his
role as a hairdresser, in particular, the employee's
unprofessional appearance and apparent behavioural issues. On 9 May
2011, the employer told the employee that it was dissatisfied with
his attitude and asked him to start looking for another job.
In the early hours of 19 May 2011, the employee showed up at the
house of the owners of the business. The employee claimed that he
had been poisoned and that his apartment was on fire. The owners
were concerned, and went with the employee back to his house.
There, they found no evidence of a fire. The same night, one of the
business owners overheard a conversation allegedly revealing that
the employee had been using recreational drugs for an extended
period of time.
On 23 May 2011, the employer summarily terminated the
employment. The reason given to the employee at the time was that
'the business was not doing so well due to the financial
crisis'. In evidence, it emerged that the real reason for
the dismissal was the employee's drug use and its impact on the
employee's capacity and conduct at work.
Summary of principles set out by the Full Bench
The Full Bench emphasised that employers generally do not have
the right to control or regulate an employee's out of hours
conduct, however, if an employee's conduct outside the
workplace has a significant and adverse effect on the workplace
then the consequences can be a legitimate concern to the
The Full Bench also set out two steps required to determine
whether the Code has been satisfied in cases of summary dismissal
for serious misconduct by a small business employer:
first, there needs to be consideration of whether, at the time
of dismissal, the employer held a belief that the employee's
conduct was sufficiently serious to justify immediate
second, it is necessary to consider whether that belief was
based on reasonable grounds, incorporating the concept that the
employer should have carried out a reasonable investigation into
Key lessons for employers
While the Full Bench emphasised that its decision should not be
seen as one that would necessarily be reached in all cases
involving out of hours misconduct or drug-taking, the case
highlights that out of hours conduct that has a significant and
adverse effect on the workplace can constitute reasonable grounds
for termination of employment.
A reasonable investigation into alleged serious misconduct for
the purpose of determining whether or not to summarily dismiss
pursuant to the Code should usually include, at least, discussion
with the employee about the perceived serious misconduct, and a
demonstration that the employer has had regard to the response
given by the employee in relation to the alleged serious
Long experience representing many of Australia's leading employers has taught us that in employment litigation the identity of an employee's representative is a major factor in how employee litigation runs.
Australian employees receive certain entitlements (such as annual leave and superannuation) where contractors do not.
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