How to Handle a Workplace Disciplinary Process Without Getting Sued: A 2026 Guide for Small Business Owners
If you run a small business in Australia, chances are you didn't get into it because you love HR paperwork. But when an employee's performance slips, or a complaint lands on your desk, how you handle it can be the difference between a quiet resolution and an unfair dismissal claim at the Fair Work Commission.
2026 has brought a wave of employment law changes — payday super, casual conversion reforms, the right to disconnect, and clearer rules around workplace sexual harassment and dismissal. All of it points to the same conclusion: Fair Work compliance is no longer something small businesses can wing. Disciplinary and grievance processes, in particular, are where most small employers get caught out.
Here's a practical, no-jargon guide to getting it right.
The 3 Most Common Disciplinary Mistakes Small Businesses Make
1. Skipping the investigation step
The single biggest mistake we see is business owners jumping straight from "an issue happened" to "you're fired" — without ever properly investigating what actually occurred. Even if you're confident about what happened, the Fair Work Commission expects to see that you took reasonable steps to establish the facts before acting.
2. Not giving the employee a genuine chance to respond
"Procedural fairness" isn't a box-ticking exercise — it means the employee needs to actually understand what they're accused of, and have a real opportunity to respond before any decision is made. A disciplinary meeting where the outcome was already decided beforehand won't hold up if challenged.
3. Inconsistent or undocumented processes
If you've verbally warned one employee about lateness but issued written warnings to another for the same thing, that inconsistency can become a real problem in a dispute. Verbal conversations that aren't documented anywhere are, for legal purposes, conversations that didn't happen.
Step-by-Step: Running a Compliant Disciplinary Process
Step 1: Investigate first, act second Gather the facts before forming a view. Speak to relevant witnesses, review any relevant records (rosters, emails, CCTV if applicable), and keep notes as you go.
Step 2: Issue a clear "show cause" letter or meeting invite Let the employee know, in writing, what the concern is, and give them reasonable notice to prepare. Vague allegations ("your attitude has been an issue") won't cut it — be specific.
Step 3: Hold the meeting properly Give the employee a genuine chance to explain their side. Let them bring a support person if they ask. Listen — don't just wait for your turn to speak.
Step 4: Consider the response before deciding This is the step most businesses skip. Take the time between the meeting and the outcome to genuinely weigh what was said, rather than confirming a decision you'd already made.
Step 5: Communicate the outcome in writing Whether it's a warning, a performance improvement plan, or termination, put it in writing, reference the process you followed, and keep a copy on file.
Step 6: Keep records for at least 7 years Fair Work Ombudsman recordkeeping obligations mean disciplinary records, warnings, and related correspondence should be retained well beyond the employment relationship ending.
Grievance Handling: What "Procedural Fairness" Actually Means
When an employee raises a grievance — whether it's about a colleague, a manager, or workplace conduct — the same fairness principles apply, just in reverse. You're not disciplining the person raising the complaint; you're investigating what they've raised, fairly and confidentially.
Recent amendments to the Fair Work Act have clarified that workplace sexual harassment can be valid grounds for dismissal of the person responsible — which raises the stakes for getting the investigation right on both sides. A poorly handled grievance investigation can expose your business to risk regardless of the outcome, whether that's a claim from the complainant that nothing was done, or a claim from the accused that they weren't treated fairly.
Good grievance handling generally means:
Acknowledging the complaint promptly, ideally within a few business days
Keeping the details confidential to those who genuinely need to know
Investigating impartially — consider using an external party if the complaint involves a manager or owner
Communicating the outcome to the complainant, even if some details must stay confidential
Following up after the fact to check the issue hasn't resurfaced
A Quick Compliance Checklist
Before you start any disciplinary or grievance process, ask yourself:
Have I gathered the facts before forming a conclusion?
Has the employee been told, clearly and in writing, what the issue is?
Have they had a genuine opportunity to respond?
Am I treating this consistently with how similar issues have been handled before?
Is everything being documented as I go?
Do I understand the relevant award or enterprise agreement obligations for this employee?
When to Bring in a Consultant
Some situations are straightforward enough to manage internally with a good checklist. Others — particularly grievances involving harassment or bullying allegations, disputes involving long-tenured staff, or anything where you suspect the outcome could end up at the Fair Work Commission — are worth getting expert input on before you act, not after.
Getting it wrong doesn't just risk a claim; it risks morale, reputation, and the time it takes to manage a dispute instead of running your business.
At Employment Circle, we help small businesses navigate exactly these situations — from drafting show-cause letters to running independent grievance investigations. If you're dealing with a disciplinary issue or unsure whether your process will hold up, get in touch with our team before you take the next step.
This article is general information only and does not constitute legal advice. Every workplace situation is different — speak with an HR professional about your specific circumstances.