Shorten Plays It Safe On IR


Labor’s initial response to the recommendations of the review of the Fair Work Act indicates the Government intends to tinker with its industrial relations system rather than enact wholesale changes.

Late last year, Workplace Relations Minister Bill Shorten appointed a panel of three experts to conduct a review of the Fair Work Act, which commenced operation in 2009. The review was finalised in July and found that the Fair Work Act was operating broadly as intended, as I wrote in New Matilda at the time.

Although the review rejected several of the overblown assertions made by employer groups that major changes to the industrial relations framework were necessary, 53 recommendations for reform were proposed. These included changes to individual flexibility agreements, streamlining of the unfair dismissal process and fixing some issues relating to enterprise bargaining.

When the report was released to the public in August, the Government announced that prior to responding it would consult further with a range of stakeholders. The Government has now indicated the recommendations that will be addressed in its "first tranche response".

Most of the Government’s initial response will fix bugs in the legislation. However, in a press conference on 15 October 2012, Minister for Workplace Relations Bill Shorten also provided some insight into additional amendments that the Government will make to the unfair dismissal system. Although likely to elicit fervent criticism, many of these changes will not have far-reaching ramifications.

The review panel accepted employers’ claims that there was a problem with the volume of frivolous or unmeritorious unfair dismissal claims being made by disgruntled employees. Many of the employer-side submissions made to the review panel argued that frivolous claims present a particular difficulty for small and medium-sized businesses because settling at an early stage in the proceedings will often prove less costly than defending such a claim.

While frivolous claims are undoubtedly a part of the unfair dismissal system, the evidence doesn’t truly indicate the extent of the problem, a point acknowledged by the review panel. For example, a high rate of settlement will not necessarily indicate the phenomenon of the payment of "go away" money — businesses may be settling at an early state in the proceedings based on commercial considerations rather than the applicant’s prospects of success.

The review panel suggested two major reforms to address the problem of unmeritorious claims and Minister Shorten has indicated that the Labor government intends to adopt both. The first is to allow Fair Work Australia greater discretionary powers to dismiss applications, such as when an applicant fails to attend a proceeding or fails to comply with an order.

The second amendment relates to the awarding of costs. Unfair dismissal currently is a "no costs" jurisdiction, which means that each party bears their own costs. While the Fair Work Act currently provides Fair Work Australia with limited powers to make costs orders, this provision is rarely invoked because of the high legal threshold a party seeking costs has to overcome.

Rather than making the unfair dismissal regime a costs jurisdiction — a position advocated by some employer groups — the review suggested lowering the current threshold to empower Fair Work Australia to make a costs order against a party acting unreasonably. The review argued that the range of circumstances in which Fair Work Australia should be able to grant a costs order included when a party unreasonably refuses to discontinue proceedings, rejects a reasonable offer of settlement or causes the other party to unnecessarily incur costs.

The review did not recommend making unfair dismissal a costs jurisdiction, because according to the panel, this would hinder employees’ access to justice to challenge an unfair dismissal. The government has indicated that it intends to adopt the more moderate path advocated by the review panel.

Finally, the government will align the time periods for bringing unfair dismissal and general protection claims to 21 days; a position which has support from across the spectrum.

The early changes flagged to the unfair dismissal regime — which should be introduced into Parliament before the end of the year — are intended to appease employers and the small business lobby. At the same time, the government has also introduced legislation into parliament which would protect the terms and conditions of state public sector employees affected by the wave of outsourcing likely to be undertaken by Liberal-National state government in the coming months.

By simultaneously addressing both employer and union concerns, Labor can continue to claim that the notion of balance is the hallmark of its industrial relations project.

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