||Issue No. 132||19 April 2002|
Interview: Generation Next
Legal: We’re All Terrorists Now
Unions: Holding the Baby
International: Taking It To The Streets
History: Off the Wall
Economics: Financing International Development
Satire: Queen Mum's Life Tragically Cut Short
Review: Return of The People’s Parliament
Poetry: Silent Night
The Locker Room
Week in Review
Where's the Silver Tail?
The Politics of Unfair Dismissal
What do we mean when we talk about exempting employees of small businesses from the protection of Commonwealth unfair dismissal law? As the legislation acknowledges, it means taking away the right to a "fair go" which basically means a right to speak in your own defence before being given the sack.
A right, one would think, which would not be the cause of economic grief and even catastrophe.
I think fair-minded people would agree that you do not take away the rights of anyone let alone some of the most marginalised and vulnerable members of the workforce without compelling reasons. Do they exist?
Less than 0.3% of small businesses in Australia experience a federal unfair dismissal claim each year.
Less than 1.5% of small businesses which operate under the federal system experience a federal unfair dismissal claim each year.
Last financial year, the federal Commission made 42 orders for reinstatement, and 96 orders for compensation, against all businesses.
In the last 5 years there have been a total of 131 re-instatements by the federal Commission.
While, until recently, specific figures regarding small business have not been taken the best estimates are that about 33% of claims filed under the federal system would be in relation to small businesses. This is because to come under the laws a business must be both incorporated and a respondent to a federal award. In summary it does not apply to those businesses run by mums and dads as partnerships or to sole traders.
Accordingly, of the 138 cases that were granted a remedy last year it could be generously assumed that about 35 involved a small business.
Those employer organisations that are more interested in outcome than politics have put to me that a more pressing concern is the lack of national uniformity in this area.
That concern is valid - a small business proprietor is more likely to be the subject of an unfair dismissal action under state law than under federal law. Outside Victoria, there were 2534 claims filed against all businesses (large and small) in the federal system but there were 8,485 filed under state laws.
The Government's proposed legislation, which is basically a carve-out, would significantly impede the development of uniform national standards and procedures.
It is convenient for the Government to overlook these facts - they always stand in the way of a political campaign.
Last weekend, at the Federal Council of the Liberal Party, the Government tried to put unfair dismissal back in the headlines.
In his speech, the Prime Minister issued a "warning" to Labor and the Democrats that if they voted down the Government's exclusion of small business employees, the Government would simply re-introduce the Bill.
No one here would have failed to realise that the Bill is intended to be a double-dissolution trigger.
But it was refreshing to hear the Prime Minister finally acknowledge the fact.
Tony Abbott had already admitted as much by saying that the Bill was non-negotiable.
So the Government that brought you the "Tampa Election" now wants to give you the "Unfair Dismissal Election".
I can see the poster: "We will decide who is sacked in Australia and the circumstances in which they are sacked."
Of course, the Government denies that its proposed denial of unfair dismissal remedies to small business employees is simply a political tactic.
It would like us to believe that it is an employment policy.
Normally when a Government puts up an employment policy, it offers some evidence that it will work.
With all the resources and expertise of the Treasury and the Department of Employment and Workplace Relations at its disposal, you would think the Government could have commissioned some modelling or other research.
After all, its supposed employment policy has a significant potential downside. The economic arguments are not all one sided.
The last report of the Australian Industrial Relations Court showed that most claims of unfair dismissal were filed by those on incomes of less than $35,000 per annum. Let there be no mistake - it is these people and their families that will suffer the collateral damage of the Government's campaign against trade unions.
Employees of small businesses could no longer feel secure in the knowledge that they could not be dismissed without being given a fair go in answering their employers' concerns.
And any decline in employment security finds expression in employees' patterns of income, consumption, saving and investment. The simple truth is that when making important economic decisions, people look at how secure their job is.
It also finds expression in employees' relationship with their employer. It becomes much harder to build trust and co-operation if employees know their employer can dismiss them without warning. And without trust and co-operation, it becomes harder to manage changes in the business - changes which might enhance productivity and growth.
For five years, the challenge has been there - to come up with some evidence that the exclusion of small business employees is good economic policy.
And for five years, the Government has shirked it.
Most, if not all, of you would be familiar with last year's Federal Court decision in Hamzy v Tricon International Restaurants.
In what must be one of the most catastrophic blunders ever made on behalf of the Commonwealth in litigation, the Government decided to try to persuade the Court with expert evidence that if casual employees with less than 12 months' service were not excluded from unfair dismissal laws, employment growth would be adversely affected.
The Court, having been invited by the Government to make findings on the issue, was forced to conclude that there was no evidence to support this assertion.
The Court even suggested one way of testing it - that somebody look at the effect on employment of unfair dismissal provisions as they gradually appeared in awards industry-by-industry in the 1980s.
That data is clearly available.
But you don't even have to go back that far. Just look at the 1990s. After the unfair dismissal provisions were introduced into the Federal Act in 1993, we actually experienced a period of rapid employment growth. The Government's expert witness conceded that employment growth primarily resulted from broader economic determinates, not whether someone was entitled to a right to be heard before they were sacked.
I suspect that the Government will ignore the Court's reasonable suggestion. Facts can only get in the way of a political campaign.
Out of curiosity, we asked the Treasury during February's Senate Estimates hearings whether it had done any research at all on the effect of unfair dismissal laws.
The answers we got were depressing.
In the hearings, the Treasury officer was quite happy to assert that productivity improvements in the late 1990s were due to the Government's changes to the labour market.
But when questioned to provide a little empirical detail, the officer replied in classic hand-waving Treasury-speak:
"Conceptually we all agree that particular types of reforms will deliver particular types of productivity improvements, but how you quantify those and attempt to identify them in isolation is very difficult. In fact, I would go further and say it is probably impossible."
In the absence of other evidence, the Government has been forced to rely on selected business surveys which purport to show that businesses will not hire because they believe they cannot fire.
Of course, they never acknowledge the surveys, such as the most recent survey by the accounting body CPA Australia, in which unfair dismissal barely rates a mention among respondents.
What these surveys also tend to find is that anxiety about unfair dismissal laws tends to be fuelled by anecdote rather than fact.
The CPA study found that more than half of small businesses surveyed believed that they could not terminate the services of an employee even if found guilty of theft or if the business was failing.
The Government must bear much of the responsibility for this.
Its scare campaign on unfair dismissal has been relentless.
We recognise that any anxiety that exists about this issue needs to be addressed, rather than stoked.
One of the proposals we will make to the Government when the Bill comes before the Senate is that the Federal Government, in consultation with the States and Territories, produce an information package about sound recruitment and dismissal practices and disseminate it as widely as possible in the small business community.
On its website, the Department of Workplace Relations advertises for $26 a publication called Hiring or Firing - Are You Complying?
If you haven't heard of it, I'm not surprised. We will be asking for sales figures during the Budget Estimates process.
We say it should be rewritten as an information package in consultation with the states and territories, to provide information about the interaction of federal and state laws. As the debate about national uniformity of industrial laws progresses, it is important for the Commonwealth to adopt a co-operative and consultative approach with the States and Territories.
This information package should be made available for free and should be more actively promoted by the Government.
This is a simple, practical measure that has been adopted in the human rights area and would help take away anxiety and empower employers with the knowledge they need to comply with the law of dismissal and avoid any procedural challenge.
Labor's approach to unfair dismissal is guided by three central principles:
1. Unfair dismissal laws are as much educative as regulatory. Their development over two decades has been vital in promoting the concept of a fair go and a mutual obligation of good faith in the workplace.
2. Unfair dismissal laws should be workable and accessible for employers and employees. We recognise there are still problems of cost and procedure, and the Parliament should address them.
3. Unfair dismissal laws are designed to promote employment security. Changes to unfair dismissal laws should not erode employment security by stripping employees of the right to a fair go.
The Government's exclusion of small business employees fails this test badly.
In intent and effect, it creates two classes of employees - those with an entitlement to a fair go and those without. Those in the latter group will experience greater job insecurity. As a matter of public policy how can the Government justify a situation where employees working side by side have differing rights depending on whether they are employed under a federal or state award.
It makes it less likely that the Commonwealth could reach agreement with the States on harmonization of this important area of our industrial laws.
This is very much a case of not wishing for something too much because you might get it. The Government's legislation is expressed to exclude only the remedies in the unfair dismissal provisions contained in the Workplace Relations Act. Small businesses would be exposed to more expensive and unpredictable common law contract claims.
Of course, it is possible that the Government is happy for small business to take its chances with the common law. It is fair to say the Government is fond of the common law, particularly as a means of retribution for industrial action.
In 1986, Peter Costello waxed lyrical in an address to the HR Nicholls Society:
"The common law which applies to all citizens, individuals, companies and other legal entities such as trade unions, represents the one last area where litigants can obtain justice from ordinary civil courts."
How right he was. Let me read from a 2001 decision of the House of Lords, one of the Treasurer's beloved ordinary civil courts, called Johnson v Unisys:
"These considerations are testimony to the need for implied terms in contracts of employment protecting employees from harsh and unacceptable employment practices. This is particularly important in the light of the greater pressures on employees due to the progressive deregulation of the labour market, the privatisation of public services, and the globalisation of product and financial markets. ... The need for protection of employees through their contractual rights, express and implied by law, is markedly greater than in the past."
This shows how foolish the Government is to place its hopes in the romantic notion of a nineteenth century common law court which sees no difference between an ordinary commercial contract and a contract of employment.
Modern common law courts are alive to the realities of the labour market and basic human rights. Australian courts have assumed that the common law concept of a mutual obligation of good faith in employment contracts is part of Australian law. It also appears that Australian common law courts recognise an implied term that an employer will not engage in conduct that seriously undermines or destroys the trust and confidence inherent in the employment relationship.
There is no doubt in my mind that in an appropriate case, the common law would provide a remedy to a dismissed employee in those circumstances.
But it would not before several small business employers had been dragged through expensive and time-consuming litigation, thanks to the Government's decision to exclude them from the Commission.
Labor, on the other hand, has always thought it is better to retain the same unfair dismissal system for everyone, but explore ways to make it more workable and accessible for all parties.
We did so with our amendments to unfair dismissal laws in 1994 and 1995.
In addition to the information package, Labor is looking at three other ways to improve the operation of the laws for both employers and employees.
Firstly, without limiting its discretion to conduct its proceedings as it sees fit, we would like the Commission to give greater consideration to whether it permits legal representation in Commission proceedings, or whether settlement would be better facilitated if it has more direct access to the parties.
We are concerned that too many settlements result in low payments to workers because of substantial legal costs.
We believe that this is an area in which the trade union movement can play an important role. It is fair to say that some unions, for whatever reason, refer to law firms many matters that would be much more effectively handled by the union itself. A union, with its knowledge of the workplace, will in many cases be better placed than a law firm to evaluate the merits of the case and to conduct negotiations with the employer. I acknowledge that there is a debate within the union movement about the allocation of scarce resources between organizing and service provision, but I firmly believe that the service unions can provide in this area significantly enhances job security and would enhance membership recruitment.
The second area we are considering is the regulation of paid agents appearing in the Commission to ensure that they observe high ethical standards of conduct and advice. South Australia and Western Australia have regulation, and Queensland is looking at it. There have been recent calls for such regulation in New South Wales. Certainly, a lot of the complaints we have heard about unfair dismissal stem from the conduct of certain paid agents.
And thirdly, we think there should be greater use of electronic means of communication, whether telephone or videolink, particularly at the procedural and conciliation stages of a case. For example, it would help a regional small business employer if he or she could participate in a conference by telephone or video link, rather than having to travel to a capital city and be away from the business for up to two days. Of course, there would be limits to this freedom, such as where a party is giving contentious evidence in an arbitration.
We have also put our view about the Government's other Bill dealing with termination of employment, the Fair Termination Bill.
We do not support the enactment of a filing fee.
The filing fee was first introduced by the Government by regulation in 1996. It claimed then, as it does now, to be acting to deter frivolous and vexatious applications.
But as the Access to Justice Advisory Committee observed in its report in 1994, and as Labor pointed out when we moved to disallow the fee in 1996, filing fees are a blunt instrument, with a real potential to deny access to justice. A person with a substantial claim and limited resources may well be deterred, while a person with a frivolous claim and ample resources would not be.
The real motive of the Government in seeking to enact the fee is to remove it from parliamentary scrutiny. Presently, the fee is contained in a regulation that will cease to have effect on 31 December 2003. It is quite extraordinary for a filing fee to be prescribed in legislation passed by Parliament.
Given the potential for any court fee to act as a barrier to justice, it is appropriate that the Government remain accountable to Parliament when imposing them.
We also do not support a 12 month exclusion of casual employees.
Labor first introduced a 6 month exclusion in 1994 to address employer concerns that they could be sued by a genuinely short-term casual employee who could have no realistic expectation of continuing employment.
In doing so, Labor aimed to strike a balance between the legitimate need of some businesses for short-term casual labour, and the need to ensure that unfair dismissal laws did not provide an artificial incentive to hold employees as casuals rather than offering them more secure employment if the business could afford it.
When the Government moved in 1996 to extend the 6 month exclusion to 12 months, we moved to disallow the regulation.
In a deal struck at the eleventh hour, the Democrats allowed the Government's amendment to stand. However, the Democrats did so on one important condition - that the Minister review the regulations after 12 months and that the Democrats be given an opportunity to review empirical evidence of the operation of the exclusion after that period.
It is now approximately 48 months since that occurred. It will be very interesting to see what work the Department has done on this issue when the Bill is examined by the Senate Committee.
It is important to be clear about the impact of a 12 month exclusion.
Australia is close to leading the world in the trend towards casualization of the workforce.
According to the ABS, in 1982 there were 700,000 casual employees in Australia. By the turn of the millenium, there were 2.1 million. Casual employees now represent approximately one quarter of the labour force.
On the most recent ABS figures, from November 1998, 59% of casuals had more than 12 months service with their current employer, 21% had more than 5 years, and 10% had more than 10 years.
The reasons for this trend are complex and its consequences are profound. It is regrettable that this Government has shown no interest in exploring them.
Labor's approach continues to be that federal legislation should not provide an artificial incentive to employers to prolong the period in which a person is employed as a casual unnecessarily.
This Government professes to be concerned about the distorting effects of government regulation on people's economic behaviour.
We say that the Government's 12 month exclusion has precisely such an effect.
If a casual employee has been working for 6 months and has every expectation their employment will continue indefinitely, it is likely that the Government's 12 month exclusion is playing some part in the employer's decision to maintain the employee's casual status.
The Government will probably claim it has addressed this concern by denying the benefit of the exclusion to an employer where a substantial purpose of holding the employee as a casual is to avoid their obligations under the Act. As I recall, this exemption was extracted from the Government in 1996.
Labor does not regard this as an adequate protection. Firstly, a 12 month exclusion sends the wrong message to employers, and this provision does nothing to correct that message. Secondly, the provision only has any real effect if an employee can persuade the Commission, or a court, after lengthy evidence and argument, that of all the reasons advanced by the employer for keeping the employee's status as casual, a substantial purpose was to avoid the operation of the Act. We do not think it will realistically avoid artificial casualization.
For these reasons, Labor will move an amendment to restore the 6 month exclusion. Our amendment will also allow this period to be reduced by agreement between an employer and employee in an award or certified agreement. This is consistent with the Government's own principle of allowing employers and employees to agree on terms of employment in the workplace.
The organisers of this conference have asked me to say something about fixed-term employees.
The Government's Fair Termination Bill proposes to exclude employees "engaged under a contract of employment for a specified period of time".
We are alive to the fact that this exclusion does not impose any limit on the period of time, or require that the period of time be reasonable.
Under Labor, the regulations originally required that the period of time to be reasonable. They were later amended by Labor to require the period to be less than six months.
Again, the reason for this was simple. There has to be a balance between the legitimate need of a business to engage an employee for a specified term, and the need to avoid giving businesses an artificial incentive to avoid their obligations under unfair dismissal legislation by placing an employee on a fixed-term contract, when in reality their employment will be ongoing.
Even the Productivity Commission has recognised this. In its research paper on fixed-term employment published in February this year, the Commission acknowledged:
"an employer may believe that they can terminate a fixed-term employee at any point during their contract without the employee being able to take legal action for unfair dismissal. The employer may therefore perceive that fixed-term contract employees are less costly than ongoing employees to terminate."
In 1996, the Coalition Government removed the 6 month requirement from the regulations. To the Coalition's way of thinking, it makes no difference if an employee is engaged for a period of six months or six years - they should all be denied access to remedies for unfair dismissal.
Labor moved to disallow the removal of the 6 month requirement from the regulations, but the Democrats allowed it.
If not for recent court decisions we would have been inclined to have adopted a similar position because as I mentioned mentioned earlier, we do not think the "substantial purpose" provision meets our concern.
We note, however, that courts have taken a sensible and realistic view of whether an employee has been engaged on a contract for a specified period of time. For example, they have taken the view that the exclusion might not apply to an employee engaged under a contract which contains a power to dismiss the employee with notice, nor to an employee who has been engaged continuously under a series of fixed-term contracts.
We also note the paucity of systematic and ongoing data on the use of fixed-term contracts. It was a matter usefully addressed in the Australian Workplace Industrial Relations Survey in 1995. It is essential that the Government carries out another such survey in the near future and ensures that the survey examines this issue.
Because the courts have taken a sensible approach to the issue - in contrast to the Government - Labor will not move an amendment to this provision. Given the liberal and practical approach which has been taken by the Courts based on the wording of the current legislation there is always a danger that a revision of that wording may have unforseen consequences.
However, we will continue to examine the extent to which the Coalition's provision has the perverse effect of encouraging the use of fixed-term contracts to circumvent unfair dismissal legislation.
In conclusion, the Government is fond of making the claim that the assumption behind the unfair dismissal laws is that "all bosses are bastards".
We all know that this is nonsense.
You might as well claim that occupational health and safety laws assume that bosses want to injure their employees.
You might as well also claim that anti-discrimination laws assume that all employers want to discriminate against minorities.
You might also argue that laws to protect workers with family responsibilities assume that all employers are heartless and are not interested in family values.
Clearly this is a sham argument. The purpose of these laws is to set standards as much as to regulate.
The termination of employment provisions in the Workplace Relations Act implement our obligations under the ILO Convention on Termination of Employment.
The Government is still implacably hostile towards the ILO. It seems to forget it is a tripartite body.
The termination of employment provisions play an important role in promoting trust and fairness in Australian workplaces.
At the federal level, this process began with the Termination, Change and Redundancy Case and the gradual insertion of TCR provisions into awards in the 1980s.
In that context, excluding small business employees would be a terrible gesture. It says to them, "you should be grateful just to have a job. You are hired to be subservient and at all times you remain instantly expendable".
The provisions also contribute significantly to employment security. Tony Abbott appears to regard employment security as a luxury Australia cannot afford. We say it is an essential ingredient in productivity and economic growth.
Excluding small business employees can only diminish job security.
Labor has indicated it will propose and support measures that genuinely improve the operation of unfair dismissal laws for employers and employees.
So far the Government has only shown an interest in the politics of unfair dismissal.
Hopefully, once it has its double-dissolution trigger, the Government will realise it needs some policies that have support outside the HR Nicholls Society and it will look at genuine reforms based on a uniform national standard of "a fair go all round".
Delivered to the AWU Conference on Unfair Dismissals in Mealboure today
|Search All Issues | Latest Issue | Previous Issues | Print Latest Issue|
© 1999-2002 Workers Online