Close the unfair dismissal back door

The introduction of WorkChoices prompted sacked employees to seek compensation in other ways. There are ways to protect against it. BY MIKE PRESTON

Sacking staff will never be easy, but after the Howard Government moved a year ago to protect businesses with fewer than 100 employees from unfair dismissal claims, many business owners hoped some of the heat had been taken out of hiring and firing.

Twelve months on business representatives and lawyers agree that the WorkChoices laws have contributed to a substantial decline in the number of unfair dismissal claims. However, sacked workers are finding new ways to get their day in court that can leave employers more out of pocket than ever before, they say.

The industrial landscape has changed, and from an employer’s point of view it is not all for the better.

The debate rages

The debate on unfair dismissal laws will continue during the lead-up to this year’s federal election and with good reason: it is one of the few issues on which there is a substantial policy difference between Labor and the coalition.

Labor has stuck to its promise to rip up WorkChoices, arguing there is little evidence to support the Government’s view that the unfair dismissal changes have contributed to Australia’s low unemployment levels.

Outside the political sphere, however, there is general agreement that WorkChoices has been effective in protecting businesses below the 100 employee threshold from unfair dismissal claims.

Commerce Queensland’s manager of workplace relations services, Stephen Nance, says the 100 or more unfair dismissal claims he would usually deal with on behalf of businesses each year has fallen to fewer than 10 since WorkChoices was introduced.

Nance says the reforms have changed attitudes to hiring more than firing. “The skills shortage means businesses don’t want to sack people if they can manage performance, but businesses are a lot more confident in hiring new people knowing they can terminate somebody without ending up in court.”

And it is not just employer groups claiming unfair dismissal claims have fallen off. Michael Sayers, an associate with union lawyers Slater & Gordon, says he has seen a 50% drop in claims over the past year.

“Many workers just think they’ve got no rights and don’t even bother getting advice about a possible claim,” he says.

Employees are finding new ways to claim

Although the decline in unfair dismissal numbers is good news for business, there is growing evidence that sacked workers are instead seeking payouts under anti-discrimination and breach-of-contract laws that apply to ALL businesses, regardless of size.

Discrimination claims can be made if a person has been dismissed for reasons including race, gender, union membership or pregnancy, and breach of contract claims usually involve allegations of underpayment of accrued entitlements or sums in lieu of notice.

Human Rights and Equal Opportunity Commission figures show that employment-related discrimination claims in the federal system increased by 62% (from 170 to 278) in the first few months after WorkChoices came into effect.

Significantly, the number of unsuccessful claims during this period shot up by a massive 484% (from 26 to 126), suggesting an exodus of claimants from unfair dismissal to the much narrower discrimination jurisdiction.

Harmers Workplace Lawyers managing partner Joydeep Hor says he has seen a doubling in requests for advice from businesses facing possible discrimination and contractual claims in the time since the WorkChoices regime commenced.

“Contracts claims in particular have picked up; people who worked for a (sales) commission or who can claim for underpayment in relation to annual leave are a walk-up start for a denial of contractual benefits claim,” Hor says.

New employer obligations arising out of a recent decision in the New South Wales Supreme Court mean breach-of-contract claims are likely to become more common and more expensive, according to Melbourne workplace lawyer Rob Jackson. (See our Legal update: Are contracts opening the way for unfair dismissal claims?)

First the first time in Australia, the court ruled that employers can be sued if they breach duties of “good faith” and “mutual trust and confidence” they owe to employees, a decision Jackson says could open the floodgates to a new wave of claims.

And to make matters worse, Jackson says, the more formal nature of discrimination and contract claims means they will often result in more time lost, higher legal costs and bigger payouts.

Claim-proof your business

Feeling nervous? Don’t. Jackson says a few simple measures can go a long way to protecting your business’ exposure to discrimination and breach of contract claims.

Minimising the risk of discrimination claims is all about developing good equal opportunity workplace policy, Jackson says. He recommends that businesses:

• Implement a policy that deals with equal opportunity matters, including sexual harassment and racial discrimination.
• Make sure equal opportunity policies form part of each employee’s employment contract.
• Implement a ‘no bullying’ policy.
• Conduct annual EO training for all staff and introductory training for new staff.
• Create a code of conduct for all employees.
• Implement a clear internet and email policy for all employees.
• Ensure each employee signs of on all policies and codes of conduct.
• If there is a union presence at your workplace, be aware of your rights and obligations to provide access to union officials and your obligation not discriminate against union members.
• Ensure your disciplinary procedures are not applied in a way that could contravene anti-discrimination laws.

For breach-of-contract claims, it is possible to just about eliminate the risk of major payouts by ensuring all employees have carefully drafted employment contracts. Jackson recommends business owners:

• Ensure the method for accrual and payment of all forms of leave are clearly explained in the contract and consistent with applicable laws.
• Find out which awards and minimum wage orders apply to their employees and ensure that contracts are consistent with them.
• Ensure pre-employment representations as to pay and conditions are not misleading – in some circumstances, they can form part of the employment contract.
• Include a notice period that complies with minimum standards legislation is included in each contract.
• Understand any employee entitlement to options or shares and ensure it is clearly set out in the contract. It is particularly important that the consequences of cancellation of share options or termination of the employee before exercise of the options is dealt with.

Read about how to sack staff legally in our Growth Resources: Managing People section.