Monday, October 10, 2011

The procedural fairness of unfair dismissal

There has been considerable agitation by previous Howard Government Ministers to re-animate the corpse of WorkChoices with calls for the Liberal Party to consider further changes to the industrial relations system.  The current shadow minister for Industrial Relations, Senator Eric Abetz was quick to hose down the potential restoration of WorkChoices, however, he could not help but throw in the usual Liberal Party lines attacking the current Fair Work system. In particular Sen. Abetz alluded to a "burgeoning industry" of "go-away money" to settle unfair dismissal claims.

Unfair dismissal has been a particular focus of the Coalition, often stating that is is a brake on employment, despite evidence to the contrary. It is worthwhile to examine the Fair Work regime of unfair dismissal to see just how 'unfair' unfair dismissal actually is to the employer.

A person is protected from unfair dismissal if they have been employed for the minimum employment period (between six months and one year) and if they are covered by a modern award, enterprise agreement and are under the high-income threshold.

Unfair dismmissal comprises of the following elements:

(a) the person has been dismissed; and

(b) the dismissal was harsh, unjust or unreasonable; and

(c) the dismissal was not consistent with the Small Business Fair Dismissal Code; and

(d) the dismissal was not a case of genuine redundancy.

So, in the case of a small business, there is a simple way to avoid any claim, and one would imagine that if a larger business followed the Code and employee would have difficulty proving that the dismissal was unfair, unjust or unreasonable.

The fair dismissal code merely applies the principles of procedural fairness to dismissal situations. The principles of procedural fairness require that a person has a fair hearing, free from bias, a decision based on evidence and an ability for the person affected to respond.

So in the industrial context, a person who is to be dismissed should be dismissed on the basis of evidence and also allow a person who is affected by a decision to know the accusation against them and to respond.

At its most basic, the code requires that an employer makes the employee aware that there is a problem with their performance and give them a chance to respond an rectify the problem. It does not protect an employee who has committed serious misconduct such as theft, fraud or occupational health and safety breaches.

The ability of an employee to have the chance to be informed of and respond to any identified performance problems is consistent with the principles of procedural fairness, so it is not unreasonable to apply this administrative burden on business.

So one must question where this burgeoning industry of "go-away" money is coming from.

Firstly, it is likely that this "industry" is being fed by small businesses not following the code, preferring to summarily dismiss under-performing or disliked employees due to a disconnect between the employers perceptions of serious misconduct and those that are actually proscribed by the law.

Secondly,  it is likely that employers and employees are coming to a settlement outside of the remedies imposed by Fair Work Australia (FWA) rulings because the most frequent remedy for unfair dismissal is that of reinstatement rather than compensation (except where the relationship has soured to such an extent that it is impractical). If this is the case, then the employers themselves are choosing to "pay out" employees (something which they probably could have done before going down the dismissal route). This is not imposed by the Fair Work regime, it is created by employers who have not dismissed employees correctly.

Ultimately it is up to businesses to follow the law, and considering that the law only incorporates the principles of procedural fairness and natural justice, it is hardly onerous. Furthermore this only really relates to summary  dismissal, there is nothing that prevents an employer from dismissing an employee so long as the necessary notice is given (or pay in lieu of notice) and entitlements are paid out.

What businesses are really after is the ability to avoid their responsibilities for notice and entitlements as they do not see these as part of the total pay package to which employees are entitled - putting it under the guise of not being able to sack under-performing employees.

The media too, is rife with stories of seemingly outrageous conduct by employees successfully being appealed to Fair Work Australia. However, when one actually looks past the media reporting to the actual facts of the case, it is often the employer who has been unfair, unjust or unreasonable or merely has not provided evidence.

It is not an unreasonable burden on business that they treat their employees fairly, nor is it unreasonable to expect them to follow the law. What is unreasonable is that businesses expect that the law ought to be changed to allow them to sack at will for whatever reason and avoid paying entitlements - all under the guise of 'flexibility'.