An unfair dismissal claim can seriously damage a small business’ revenue and its reputation. While workers have the right to lodge these complaints, there are ways employers can protect their organisations from being at the wrong end of one.

A key way is to ensure you conduct a risk assessment and that your business coverage includes management liability insurance.

What determines unfair dismissal?

There are different rules governing small businesses, due to the substantial impact that a successful case can have.

It is the Fair Work Commission that decides whether or not the instance is an unfair dismissal. When an employee feels they were asked to leave their role in a harsh, unjust or unreasonable way, they are able to take their case to the Fair Work Commission. Employees must apply to the commission no longer than 21 days after their dismissal.

There are different rules governing small businesses due to the substantial impact that a successful case can have on a smaller company’s bottom line.

For example, workers employed at business with fewer than 15 employees must have worked there for at least a year before being eligible for unfair dismissal. For any other company, workers only need to have been working there for six months.

What can employers do?                                                                                                 

Despite the different conditions in place, an unfair dismissal case can still adversely affect your business’ ability to continue. Here are three ways to protect your company.

Unfair dismissal cases can cost businesses a significant amount.

1) Procedures

Having exact processes in place as well as detailed paperwork can help clear up misunderstandings. A paper trail that openly shows written warnings can protect a company from being at the wrong end of dismissal lawsuit.

2) Employment practices liability

As part of risk assessment, a company should have management liability insurance to protect themselves against false claims from workers. As every organisation has different insurance needs, taking to a specialist brokerage is the best way to ensure your company has the right coverage.

Completing loss prevention strategies such as business insurance can often reduce the extent of the risk along with the cost of your premium.

3) Conciliatory measures

The Fair Work Commission recommends an informal conversation, a conciliation, in order to reach a settlement. This can greatly reduce the costs and time of an actual hearing, and the commission estimates that four out of five cases are concluded at this stage.

If you’re concerned about what your business insurance covers, contact one of the brokers at MGA for advice on the best way to protect your company.