Law changes needed to fix ‘illogical’ unfair dismissal decisions, says former Fair Work vice-president Graeme Watson

A former vice-president of the Fair Work Commission says legislative reform is the only answer for protecting employers against unfair dismissal decisions that defy “logic”.

In an opinion article published by Fairfax this morning, Graeme Watson, who called out the”dysfunctional” nature of the commission’s processes when he quit his role in January, says the Commission “has departed from the notion of determining whether an employer’s actions were reasonable” in deciding unfair dismissal cases.

Comparing Australia’s industrial relations system to international examples, Watson says the UK’s approach of considering whether an employer acted “within a band of reasonable responses” is a more sensible alternative to the Fair Work Commission’s approach, which determines both the fairness of process and whether the impact on an employee is harsh or not.

“The result is a series of Catch-22 situations” where despite doing the right thing, employers can be asked to pay compensation or reinstate the employee, Watson says.

“Legislative reform has become necessary.”

Council of Small Business Australia chief executive Peter Strong says many in the the business community continue to feel the outcome of unfair dismissal cases “depends on the opinion of the commissioner you get at the time”.

“You might get one person who’s said you’ve followed all the rules, but I don’t like the impact on the person involved, therefore you can’t do it,” Strong says.

The unpredictability of case outcomes is a significant worry for SMEs, Strong says. While legislative reform may be a challenge, he suggests moving towards having commissioners consider the impact of the situation on the employer, and what choices they reasonably had available to them.

The current framework involves a commissioner decide on whether a dismissal was unjust and whether it was harsh given the employee’s circumstances, and Strong says the impact of the situation on the business owner should also be considered.

“First of all, the penance is they have to go to court — they’ve done nothing wrong and all of a sudden it causes time and money and distress on the individual. But there’s no consideration for the employer, who is also also a person — yet they don’t count,” Strong says.

Scott Barklamb, director of workplace relations at the Australian Chamber of Commerce and Industry, says the current framework needs to do more to reflect “what a reasonable person” would have done.

“Far too many dismissals are contested on the basis of procedure, and I think we would fairly say [what is determined as] “harsh” has been given too much emphasis,” Barklamb says.

“We want to see action in this area — it’s one of the principal areas that businesses of all sizes call on for reform.”

Read more: Kate Carnell on why the Fair Work Act an “albatross around the neck” of small business

Employer success rate a concern

In his article, Watson highlights figures from Fair Work Commission annual reports suggesting that while employers were successful 60% of the time in unfair dismissal cases prior to 2013, this number dropped to below 40% in 2015-16.

However, there were fewer unfair dismissal cases lodged in 2015-16 than in 2012-13, and the number of these cases is not increasing but has remained steady over the past four years, at an average of 14,733.

Watson argues that inconsistency in the Fair Work Commission’s decisions is contribute to the number of unfair dismissal applications lodged each year, as well as the number of appeals and settlements.

“The choice for an employer when faced with an unfair dismissal application is either an expensive settlement or a costly and disruptive case with an uncertain outcome,” he said.

“The operation of the remedy rewards applicants regardless of the merits of their case and punishes employers regardless of the fairness of their actions.”

Business owners have previously told SmartCompany they feel the deck is increasingly stacked against them in these cases, citing confusion over why they have to pay compensation to workers in cases where they saw no other choice but to terminate.

The managing director of lighting company LED Technologies said earlier this year the $6000 in compensation he was ordered to pay for sacking an employee over an offensive Facebook post was the “best money” he’d spent all year because it meant putting the stressful situation behind him.

“Would I change [firing the staff member]? No,” he said at the time.

While calls for legislative reform continue, the government’s recent priorities have been more focused on amending the Fair Work Act to protect vulnerable workers, rather than changing dispute resolution processes.

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