Unfair dismissal stats reveal 93% never make it to a formal hearing: What are the costs to businesses?

More than 90% of unfair dismissal claims over the past year were resolved before they reached a hearing involving a Fair Work Commissioner, but experts say disputes can still cost businesses significant time and money even if they never make it to the formal hearing stage.

The Fair Work Commission’s annual report for 2016-17 reveals 14,587 claims were made for unfair dismissal against Australian businesses in the 12 months leading up to June 30. On average, this is 280 claims a week.

The commission has highlighted unfair dismissals as the most common type of dispute it deals with each year, with 40% of all its complaints related to employees challenging dismissals.

However, 93% of these cases were resolved before ever getting in front of a Commissioner, being either “resolved informally by agreement of the parties” or because the applicant dropped the claim.

Over the past year, 8,880 matters were settled via an informal conciliation, which sees a specialist staff member conduct a conference between the employer and the worker to come up with a solution to a dispute.

In 62% of these cases the solution involved “both monetary and non-monetary items” being agreed upon as a solution, but employees were very unlikely to get their jobs back in this process, with less than 1% being reinstated to their roles.

More employees received a monetary payout from a conciliation compared to the previous year, with 7,194 employees receiving a payout over the past 12 months, compared with 6,859 last year. In 84% of cases, the payout was less than $6,000.

Numbers consistent, but some businesses unprepared

Workplace lawyer Peter Vitale says the number of unfair dismissal claims resolved before the point of a formal Fair Work hearing has stayed consistent over the past few years, but observes some businesses still aren’t completely prepared to early stage conciliation meetings.

Once an unfair dismissal claim is made, the commission can ask the employer to respond with information about the circumstances for the dismissal and why they believe it was valid.

A conciliation conference is then scheduled, usually by phone, which provides both parties the opportunity to discuss the case with a Fair Work Commission representative, as an “off the record discussion where the parties are given the opportunity to state their case and negotiate a settlement”, Vitale explains. 

While employers are not required to lodge formal evidence at this stage, and the aim is to resolve the issue in the best way for all parties at this stage, Vitale says in his experience businesses tend not to seek external advice from a lawyer until after conciliation.

This case results in some businesses not being sure what they should offer in this initial meeting.

“I suspect there are a very substantial number of very small businesses who don’t seek advice up to that point.”

“That may mean that they [offer to pay the applicant] in cases where there are no merits, or they offer more money than the decision warrants,” Vitale says. 

Vitale advises businesses to always think about the longer term costs of pursuing a matter beyond conciliation, including the disruption to their business in the long-run.

Getting external advice early could be useful in these cases, as well as taking a step back after a claim is made to evaluate what the potential impacts of taking it beyond conciliation might be.

“Consider all of the costs, not just the monetary costs – the cost of disruption to the business, management time, the cost of external advisors. All of these things need to be very carefully considered and weighed up.”

Make sure the commission is involved

Council of Small Business Australia (COSBOA) chief executive Peter Strong says the Fair Work Commission is trying to streamline the process as much as possible for businesses, and warns employers if they are contacted by a former worker with a claim of unfair dismissal directly, they should get the commission involved.

He says there are cases where businesses are threatened directly by a former worker, and employers often don’t know what to do next.

“If someone comes to you and says ‘I’m gonna get ya’, contact the Fair Work Commission and contact them straight away,” Strong says. 

This will ensure a business can check their rights and obligations, instead of hearing demands from a worker that do not come through the formal channels. 

There are still some cases that exist of employers paying out workers simply to end a claim process, Strong says, and while these are not incredibly frequent, they do substantially hurt businesses.

“When this happens to an employer, it’s really not a good thing. If we’ve done nothing wrong and have to pay – that’s really, really wrong,” he says.

He advises businesses contact the commission or COSBOA with any concerns about unfair dismissal.

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