Submission 167 Australian Council of Trade Unions Workplace Relations Framework Public inquiry

'Go away money'?

The term 'go away money' is a term that employers sometimes use to describe paying money to settle an unfair dismissal application in conciliation. The use of the phrase is emotive, pejorative and unfair to the overwhelming majority of applicants in the system. Whilst there are probably situations where ‘go away money’ is paid, it would be wrong to suggest that the FW Act UD system is afflicted by this problem more than any other comparable jurisdiction.

The two remedies that are available to an applicant under the FW Act UD regime are reinstatement and compensation. These remedies are contained in s390 and s391 of the FW Act. Hence these two remedies at the arbitration stage strongly influence applicants and respondents when participating in conciliation in an effort to settle a claim.

It must be borne in mind that there is nothing unusual or inherently undesirable in litigation being settled prior to a final hearing of merits. Indeed, much of the law reform agenda in Australia in recent decades has been in the direction of encouraging the settlement of litigation prior to final hearing. In practice, this occurs with most courts and tribunals offering some form of conciliation or mediation service, and in many cases, providing incentives for settlement, such as linking costs orders to standards of reasonable behaviour during the litigation process.

The FW Commission likewise offers a conciliation service. According to statistics kept by the FW Commission, the conciliation service commenced operating by conducting phone conciliations on a national basis. Most conciliation conferences are conducted within a 90 minute time frame⁶⁴⁷. There is no requirement for legal representation, and many parties are self-represented⁶⁴⁸. According to the FW Commission the amounts of compensation agreed in settlement discussions is relatively small with 49% of monetary payments below $4000 and 79% below $8000.⁶⁴⁹ It should also be noted that this data does not distinguish between the payment of compensation and payment of outstanding entitlements that may form part of an agreed settlement outcome.

However, it needs to be understood that payment of compensation in conciliation is only one type of settlement outcome. Again, the data produced by the FW Commission shows the following settlement outcomes:

• 
  17% involve a monetary amount of compensation;
  
• 
  18% are settled for no monetary compensation;
  
• 
  43% are settled for monetary and non-monetary compensation;
  
• 
  <1% are reinstated and involve monetary compensation.
  

There is no reliable evidence concerning the extent of any ‘go away money’ problem and certainly, sensationalist reporting of individual anecdotes do not meet the definition of reliable evidence. In this regard it is worth repeating at length what the 2012 Review Panel Report had to say about the complexities of this issue and the difficulties with simplistic, knee-jerk responses:

We do not doubt that employers continue to make a commercial decision to pay an amount to an applicant to settle an unfair dismissal claim, and that the factors identified by Forsyth and Stewart and others contribute to this approach. In some cases, the employer may genuinely consider that the application has no merit, but is convinced that settling the claim for a small or nominal amount is preferable to incurring significantly higher costs in defending it. In other cases, an employer may be advised (or form the view) that the applicant has some prospects of success, and will weigh this up in determining whether to settle and for how much. As has been noted, these are practices that existed under the legislation before the FW Act, and almost certainly exist under other small claim jurisdictions where costs do not necessarily follow the outcome.

We accept comments made by unions in face-to-face consultations that they do not tend to pursue cases where they assess that there is little or no merit. This is likely to be partly based on an efficient use of union resources, as well as an appreciation of the limits to compensation available (particularly where the individual member is not seeking reinstatement). In our consultations with the legal profession, one law firm said that many features of the system influenced them to caution individuals against pursuing claims.

As we have already noted, it is difficult to assess the extent to which employers are settling claims in conciliation by paying money when they believe the claim is without substance (and perhaps, additionally, it is without substance as a matter of objective assessment). It is not surprising that this might become a feature (though to what extent is another question) of a legal process in which one party can seek a remedy against another party using processes that are comparatively informal, inexpensive and where the grant of the remedy is likely to depend upon a subjective evaluation of criteria which are fairly broadly expressed. We accept that it is undesirable that payments of this character are made.

Ultimately, however, the various proposals by mainly employer interests to avoid this appear to be either a solution with potentially unacceptable indirect consequences (for example, increasing filing fees) or unlikely to be effective in addressing the issue. An example of the latter was a suggestion there might be some preliminary assessment on the papers. We were anxious, in our consultations, to explore options for reducing or avoiding the phenomenon of ‘go away money’. However, as some employer groups conceded in discussion, earlier attempts in other jurisdictions (Victoria was given as an example) to filter out unmeritorious claims by a preliminary assessment on the papers had not proved particularly successful.

We think that to the extent there is a solution, it lies in the FWA processes and procedures. An employer would be more likely to settle an unmeritorious claim by agreeing to pay compensation during conciliation if the employer believed that to contest the claim would be a drawn out, time consuming and potentially expensive process. An employer would be less likely to do so if the contest was dealt with quickly, efficiently and as cheaply as possible. We discuss existing procedures later in this chapter and make some recommendations to improve them, including some that we think will help to address the ‘go away money’ issue.

In its 2013/2014 Annual Report, the FW Commission notes a significant number of UD applications that have been dismissed under s587 of the FW Act (frivolous, vexatious, no reasonable prospects) and s399A (failure of unfair dismissal applicant to comply with FW Commission directions, etc.). The FW Commission report notes that the administrative framework to capture data in relation to decisions issued under these sections was not available for 2012/2013, but that is not surprising given that s399A did not commence operating until 1 January 2013. Nonetheless, the total number of applications dismissed under either s399A or 587 of the FW Act over the reported period is 363 cases, a significant proportion of the 1200 cases that was disposed of by arbitration. These figures indicate that it is likely that the new provision under s399A of the FW Act, combined with the increasingly vigorous application of the tests in s587 will play a major role in weeding out unmeritorious UD claims.

Finally, as to the recent changes to the FW Act providing an increased ability of the FW Commission to award costs in certain cases (ss400A, 4001(1A)), it is too early to provide a definitive assessment of the effect of the changes. It is clearly the case that the issuing of costs against a party, or indeed a representative of a party, remains rare in the UD jurisdiction. However there have been recent decisions by the FW Commission that indicate that there may be an increase in the number of costs decisions issued against parties, or their legal representatives in coming years.⁶⁵⁰