The research problem addressed in this study is to determine what effect current labour legislation has on small and medium enterprises (SME’s), in particular with regard to handling conflict and disciplinary procedures in the workplace. To achieve this objective a literature study was undertaken to ascertain what labour relations practices are recommended and/or enforced by law. The literature study included a look at the effect of conflict on the workforce and the resultant cause and effect of the stress that conflict causes. The literature study was then used to develop a questionnaire to test the degree to which small to medium sized business managers, in the coastal city of George in the Western Cape, complied with the law and application of the necessary regulations governing labour relations. The empirical study results indicated a healthy adherence to labour legislation in general. The results indicated that the role-players, namely owners and managers of small to medium sized businesses, had valid arguments both for and against the weight of the labour legislation imposed on small businesses. Those businesses that had not indicated a strict adherence to regulation run the risk of costly fines and penalties being imposed on them. Such enterprises would do well to employ an independent consultant to “audit” and update employee records on a regular (6 monthly) basis. Failure to take the time to have all the correct documentation prepared could result in costly labour disputes and government intervention, which far outweighs the cost of a professional ensuring that all the necessary paperwork is correct and in place