Oh no, you’re back again
Fair Work Australia has yet to issue a decision in relation to an unfair dismissal claim under the new legislative regime. However employers can expect a new level of litigation by individual employees.
The question remains hanging: will the system deliver on the Rudd government's pledge to eliminate "go-away money"?
Small business must follow guidelines
Small business gets some relief. Employers who employ less than 15 employees will be able to show that a dismissal is "fair" if they can demonstrate compliance with the Small Business Fair Dismissal Code.
The code comes with a checklist of steps to take prior to terminating an employee. Employers, whether they are big, medium or small would be well advised to follow the basic rules outlined in the checklist. Arguably, a dismissal which doesn't comply with the code, regardless of the size of the employer, will be unfair.
New processes for larger employers
For larger employers, it remains to be seen whether the practices of Fair Work Australia actually do discourage claims with little or no merit. About 90% of claims that were lodged with the Commission under the old regime were settled with employers paying extra money. Many claims that did not reach the commission were also settled by paying the employee extra money to "go away."
So how is the new system faring? There are mixed views so far. Thirty specialist conciliators were appointed from applications, believed to be as high as 1000.
Many conciliations are being conducted by telephone with mixed views from participants about the effectiveness of this approach. There is no hard evidence yet that settlements are costing employers less money.
Our experience is the conciliation process is not much different than old process.
Tried and true rules
In terms of what happens prior to dismissing an employee, larger employers in particular should stick to familiar practices which have been developed in response to decisions of the courts and industrial tribunals over many years:
- You may be able to terminate without any warnings if the employee is guilty of serious misconduct, such as theft or attending work inebriated. As the employer it is still your job to conduct a proper investigation to get adequate proof of the offence and give the employee a chance to respond to the allegations;
- If the employee's conduct falls short of being "serious" misconduct, you must provide them with warnings, an opportunity to respond to the warnings (including a reasonable opportunity to have a support person present at any meetings). You need to be clear that continued poor performance or conduct may lead to termination of employment;
- You must give employees a reasonable opportunity to improve their performance or conduct and provide them with the support or coaching which will help them to do so.
- One warning might be enough depending on how serious the conduct of the employee is. By the same token three warnings might not be enough.
- The new legislation is drafted in a way which places a greater emphasis on re-instatement as the primary remedy for unfair dismissal. Keep this in mind prior to making a final decision to terminate an employee.
- Before you make a final decision, give the employee a chance to respond. Many employers have made the mistake of going into a final meeting with the employee having already made the decision to terminate without giving the employee the final stage of "procedural fairness".
Remember, the members of Fair Work Australia were previously members of the Australian Industrial Relations Commission. They are likely to make decisions in unfair dismissal cases in a similar way. And that's not a criticism - the substance of the legislation remains pretty much the same.
Who's out, who's in:
The key changes are about who can and cannot make a claim. Among those who are excluded from making a claim are:
- Employees not covered by an award or an enterprise agreement, earning more than $108,300. Unlike previous law, this does not include compulsory employer superannuation contributions.
- Irregular casual employees.
- Some trainees and apprentices.
- Employees engaged for a fixed term or a fixed task.
- Employees who have been made redundant, provided the employer has taken steps to try and redeploy the employee, including within related companies.
- Employees who have been employed for less than 6 months, or for a small employer, less than 12 months.
Adverse action claims
One area where a rise in litigation can be expected is the "General Protections" provisions of the Fair Work Act. Employment lawyers are talking up the potential for claims in this area and it's not hard to see why:
- An employee can claim that "adverse action" has been taken against them for a prohibited reason. Adverse actions are defined broadly and include "altering the position of the employee to the employee's prejudice." A prohibited reason for doing so might be that the employee "is entitled to the benefit of... a workplace law, workplace instrument or order made by an industrial body."
- Adverse actions include discrimination on similar grounds to those covered by existing anti-discrimination legislation.
- Unlike other anti-discrimination laws, it's up to the employer to prove that the adverse action was not taken for a prohibited reason
- These laws also have penalty provisions, meaning an employer can be subject to a maximum fine per offence of $6,600. The Fair Work Ombudsman has already shown a willingness to get involved in this type of litigation and has set up an internal unit to deal with discrimination complaints.
Lessons for employers:
- Unfair dismissals and other forms of litigation by individual employees are back;
- Review and tighten up your processes - make sure responsible managers have been properly educated about the changes;
- Make sure you have at least two people at any meeting with an employee and document everything
Peter Vitale is the principal of CCI Lawyers.