It is always bemusing to hear right wing commentators like Gerard Henderson complain about the burden that unfair dismissal laws place upon employers. Henderson, in his most recent column in the Sydney Morning Herald, claims that the laws provide "a real disincentive for small business operators to give a long-term welfare recipient a job" and "makes it harder to terminate employees for poor performance". In fact, the laws provide very little real protection for most employees, and there is no huge bucket of money at the end of the process.
Firstly, the reality is that most unfair dismissal claims either settle for a few weeks pay or fizzle out at the conciliation stage. According to Fair Work Australia’s (FWA) yearly report, 14,897 unfair dismissal applications were filed in the year ending June 2011. Of those, 76 per cent were resolved during the conciliation process. These figures are consistent with the resolution rate for the last 10 years (either as FWA or the former Australian Industrial Relations Tribunal).
Conciliation is very informal in nature and is usually conducted over the phone. Up to this point proceedings can generally be conducted without legal representation (that includes the employee and employer).
Out of the 14,897 matters for last year, only 517 matters went on to hearing. Most of the unfair dismissal claims that I have been involved with over the years settle, at best, for a small number of weeks pay at, or shortly after, the conciliation. That is usually the case even where there is a strong case for the Applicant, given the cost of running a matter to a full hearing in FWA.
Secondly, not all employees have access to FWA in the first place. While the Fair Work Act does capture quite a large part of the working population, not all employees fall under its jurisdiction. There are three main criteria you must meet in order to be an employee within FWA’s jurisdiction. If you earn over $118,100 you are generally out (there goes almost everyone employed in the lucrative parts of the mining sector). Secondly, you have to have been employed for a minimum period of 12 months (for employers that have fewer than 15 employees, or six months for employers that have more than 15 employees).
Lastly, you have to be an "employee" as defined by the Act. The Act excludes employees who are state government employees in most states, a local government employee in some states, a contractor, a contracted trainee, employed by a non corporate entity in WA, a seasonal employee or employed under a contract for a specified period of time.
A third reason why it is difficult to succeed under the Act, is that an employee is only successful in their application if the termination is found to be unfair, unjust or unreasonable. The legislation outlines a number of criteria that FWA must take into account in deciding whether it was unfair, unjust or unreasonable. Of the 517 matters that went to hearing last year, the numbers are pretty even. The tribunal was satisfied 154 times, while 165 matters did not satisfy the FWA.
Other matters were dismissed due to a number of reasons including that the termination was found to be a genuine redundancy or the employee was not classified as an employee as defined under the Act. Interestingly, 66 matters were dismissed for being out of time. The legislation’s reduction in the time allowed to file an application from 21 days (as under the former Workplace Relations Act) to 14 days under the new Act appears to be having the desired effect.
One of the most prominent arguments made by anti-unfair dismissal law commentators such as Henderson is that the laws create a heavy administrative burden for business. Obviously if a matter does go to hearing it does create a heavy administrative burden for that particular employer. However, given that there are over 11 million people employed in Australia, 517 cases cannot be seen as disproportionately burdensome to the employers of this country.
The current legislation basically provides two remedies: either the return of the position or a similar position, or up to six months pay. Of the 154 matters that were successful for the employee at hearing, 122 were given compensation and 25 reinstated. The maximum compensation payable is six months pay, but this remedy is usually only provided where an employee has adequate financial backing (usually from their union) so that they are able to push their case as far as a hearing.
FWA is a bear your own costs jurisdiction, which means that even if you are successful you have to pay your own legal costs. For example, someone earning $800 per week could be awarded the maximum of $20,800 after a three day hearing. By the time their legal costs come out of any award, they will have very little, if anything, left.
Henderson’s claim that the Act makes it harder for employers to terminate an employee for work performance is a significant exaggeration. The legislation only requires the employer to have notified the employee of the inadequate performance before the dismissal. This provides the employee time to rectify their performance which seems to be in accordance with the then Employment Minister, Julia Gillard’s, purpose of the Act which was, ostensibly, to be "…based on the enduring principle of fairness…".
If work performance is the real reason for termination, it seems inconceivable that an employer would not have raised the issue with the employer for the six to 12 months that the employee would presumably have been working.
While the Labor government promised to bring back balance into industrial relations, the effect of the unfair dismissal part of its legislation is exactly the opposite: Labor rather effectively drafted the unfair dismissal laws to ensure that there is little incentive for any employee to pursue a claim. It is not easy to see just how providing minimalistic protection for employees will prevent employers from terminating someone.
As industrial relations returns to public debate on the back of the Qantas dispute, expect to hear much more from right wing commentators like Henderson about the evils of the unfair dismissal laws. Just don’t expect them to actually provide any data to support their arguments.
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