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

Source: ABS 6306.0 - Employee Earnings and Hours, Australia, May 2014 

The ABS categories do not distinguish between employees on individual arrangements that use awards as the basis for setting pay and those paid over-award.

As discussed elsewhere in this submission, the relationship between modern awards and other methods of setting pay is complicated. The aggregate data tends to conceal the extent to which individual arrangements replicate terms and conditions contained in modern awards. Indeed research conducted by FWC confirms that for many employees, there is very little benefit (in terms of pay) to being on an individual arrangement.⁶¹⁴

Further, it is not possible to draw any conclusions about the extent to which the method of setting pay explains differences in employee earnings without controlling for other variables such as the number of hours worked, the employees skills, qualifications and experience and the industry in which the business operates.

18	Employment Protections: (1) Unfair Dismissal

The purpose of the unfair dismissal (‘UD’) laws as currently found in the FW Act can be explained by reference to both international and domestically derived purposes.

The original introduction of Commonwealth laws conferring UD protections upon private sector employees relied heavily on Australia’s international labour standard obligations as providing both a normative rationale for UD legislation, as well as a workable constitutional underpinning.⁶¹⁵ Australia’s original UD and unlawful dismissal laws were enacted in large part to further Australia’s obligations under the Termination of Employment Convention 1982. However, as a result of the High Court judgment in Victoria v the Commonwealth,⁶¹⁶ the constitutional basis for the early tranche of UD laws was significantly curtailed, leading to a narrowing of the categories of employees who were subject to the UD laws.

Nonetheless, adherence to international labour obligations, including the Termination of Employment Convention 1982, remains an important part of the FW Act provisions dealing with UD. Therefore, the conformity of the UD provisions with the overarching purpose of ILO Conventions, remains a valid basis upon which to judge the success or otherwise of these laws.

As to the domestically derived purposes, the Explanatory Memorandum (‘EM’) accompanying the Fair Work Bill 2008 makes these plain. Amongst other things, the EM claimed the following standards where met in the new statutory framework:

"It provides genuine unfair dismissal protections for employees with a quick, flexible and informal process, an emphasis on re-instatement and a Fair Dismissal Code for small business.⁶¹⁷"

And:

"unfair dismissal laws which balance the rights of the employees to be protected from unfair dismissal with the need for employers' particularly small business, to fairly and efficiently manage their workforce; ...⁶¹⁸"

These aspirations are reflected in the wording of the Objects of Part 3-2 of the FW Act expressed in s381 of the FW Act. Amongst the amendments introduced by the FW Act to achieve these objectives were the following:

• 
  Removal of the cap restricting access to the UD jurisdiction to employees of enterprises of 100 or more employees;
  
• 
  Providing protection to casual employees provided they meet the test of being employed on a regular and systematic basis.
  
• 
  A qualifying period of 12 months for small business employees and 6 months for all other employees;
  
• 
  Implementation of a high income cap which would exclude high income earners, unless their employment was regulated by an award or agreement;
  
• 
  Introduction of a Small Business Fair Dismissal Code to assist small business in dealing with the termination of an employee.⁶¹⁹
  

Underlying this formal legal framework is the human reality that the UD laws are intended to regulate. It has long been observed that an individual’s job and workplace relationships are amongst the most important elements in his or her life, ranking only behind the closest personal family relationships.⁶²⁰ Work provides dignity, meaning and a sense of identity to employees, and conversely, unemployment can lead to depression, shame and social exclusion.⁶²¹ It is not surprising therefore, that termination of employment, particularly if felt by the employee to be unfair, arbitrary or capricious can have catastrophic effects on individuals and their families.

This is why an effective and equitable unfair dismissal regime is essential to a modern, advanced democracy such as Australia. In the last 30 years, Australia has moved beyond the notion that it is an employer’s prerogative to hire and fire at will. Few would now disagree with the proposition that decisions as important as that to terminate someone’s employment should be subject to valid reasons and reasonable standards and procedures and if the decision to terminate does not objectively meet these criteria, then the employee should have an accessible and effective remedy.

The UD provisions of the FW Act substantially meets this objective, but are far from optimal.

First, as we elaborate below, the balance in the UD laws still places too great an emphasis on managerial prerogative over issues of substantive fairness to employees in matters where ‘operational reasons’ are used to justify termination. In particular, the inability of employees to challenge the selection criteria used by an employer to select him or her for redundancy remains a serious defect in the UD laws.

Second, although reinstatement is intended as the primary remedy⁶²² in cases of unfair dismissal, the number of employees reinstated by the FW Commission is pathetically small compared to the other outcomes identified. For example, in reporting year 2013/2014, the FW Commission reported that, nationwide, only 34 employees out of a total of 1200 applications that proceeded to arbitration were reinstated.⁶²³ Clearly, there is a systemic issue where the primary remedy identified in the FW Act is applied in only a very small minority of cases.

The ACTU believes that there are administrative and case management issues associated with the UD system that are contributing to the low number of reinstatements. These include:

• 
  A telephone conciliation system that has an emphasis in concluding matters quickly and without further proceedings, including any opportunity for face to face conciliation or mediation.
  
• 
  The sometimes excessive delays in listing matters for arbitration after conciliation has failed.
  
• 
  The seeming inability of members of the FW Commission to rein in the legalism, costs and complexity in the UD system by too readily allowing legal representation of parties (principally employers) in proceedings.
  

The ACTU believes that these factors have contributed to large numbers of meritorious UD applications not proceeding to arbitration. We submit that the UD laws can operate more effectively and fairly via a mixture of relatively minor legislative reform and a review of administrative and case management arrangements utilised by the FW Commission.