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

Merit tests and exemptions

An applicant may make an application for an unfair dismissal remedy pursuant to s394 of the FW Act. The FW Commission must determine an application for unfair dismissal by reviewing the criteria set out in s385 of the FW Act and decide whether a dismissal was harsh, unjust and unreasonable. Amongst other things, the FW Commission must also have regard to whether a termination was consistent with the Small Business Fair Dismissal Code and/or whether the termination was a case of genuine redundancy.

The FW Commission in considering whether it is satisfied that a dismissal was harsh, unjust or unreasonable, must then take into account the criteria advanced in s387⁶³² of the FW Act, beginning with whether the termination was for a valid reason relating to conduct or capacity.

The tests laid down in the legislation have been the subject of significant judicial and arbitral consideration over a significant period of time.⁶³³ The tests or criteria contained in the FW Act have provided a framework for consideration of unfair dismissal applications that is well understood and relatively flexible.

The tests can be broadly summarised as follows:

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  Whether the dismissal was harsh or unfair because the employee was not actually guilty of the misconduct the employer acted on;
  
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  Whether the dismissal was harsh or unfair because of the economic and personal consequences to the employee as a result of being terminated;
  
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  Whether the dismissal was harsh or unfair because the employee was not afforded procedural fairness;
  
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  Whether the dismissal was harsh or unfair because the outcome is disproportionate to the gravity of the misconduct to which the employer reacted (in other words, the punishment does not fit the ‘crime’); or
  
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  Whether the dismissal was harsh or unfair because the evidence or material before the employer did not support the conclusion that termination should necessarily result.
  

In applying these tests, it has been held that the role of the FW Commission is not to stand in the shoes of the employer, but to conduct its own forensic analysis of the facts to determine if the conclusion reached by the employer can be properly supported by relevant facts and evidence.⁶³⁴

The tests in s387 of the FW Act generally provide a common sense and flexible approach to determining unfairness in employment termination. However, there has been a degree of rigidity and lack of clarity introduced into the framework of s387 by two FW Commission Full Bench decisions concerning the approach to be adopted in situations where an employer has failed in its jurisdictional defence of ‘genuine redundancy’ and the FW Commission is called to consider whether the decision was harsh and unfair.

In these circumstances, the FW Commission has found that the matters set out at s.387(a), (b), (c) & (e) of the FW Act are not relevant and are to be regarded as neutral factors. This is because these matters are only relevant where the dismissal is related to the person’s capacity or conduct.⁶³⁵

The Full Bench in UES appears to be authority for the point that the only matters that can possibly be considered pursuant to s387(h) of the FW Act (‘’any other matters that the FWC considers relevant’’) are the criteria in s389 of the FW Act that were unmet.⁶³⁶ In other words, if the dismissal was held not to be genuine redundancy because the employer failed to meet its obligation to consult under s389(1)(b), then the only matter that can be considered in determining whether the dismissal was harsh, unjust or unreasonable was that failure to consult. This would mean a range of matters – the most obvious being the selection criteria used to terminate the employee – could not be considered in determining whether the dismissal was harsh, unjust or unreasonable.

In our view, such an interpretation is open to real doubt as it appears contrary to broad discretion reposed in s387(h).⁶³⁷ Interestingly, while not put in these terms, it appears that the Full Bench in Ventyx did not adopt such a restricted meaning of s.387(h) of the FW Act. In that case, the Full Bench found that the dismissal was not a genuine redundancy because of the employer’s failure to meet its obligation to consult.⁶³⁸ The Full Bench then conducted a rehearing that considered criteria broader than the redundancy related criteria.⁶³⁹

Clearly, the criteria in s387 of the FW Act should be applied in a practical and common sense manner that keeps in mind the essentially beneficial purpose of the UD laws. This means that artificial constraints on the exercise of the FW Commission’s jurisdiction in determining UD claims should be avoided and the current lack of clarity relating to the operation of the FW Act in circumstances where an employer’s genuine redundancy defence has failed is addressed.

Exclusions from UD protection

The current exemptions to unfair dismissal laws are in two categories. One category relates to types of employees, the other relates to qualifying periods.

The following types of worker are not covered by the UD laws:

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  contractors;
  
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  employees who resign and were not forced to do so by their employer;
  
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  employees employed for a specified time, task or season that has come to an end;
  
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  trainees at the end of their training arrangement;
  
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  employees who were demoted with no significant reduction in status or pay.
  

The following qualifying periods apply:

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  To have access to the jurisdiction in any regard, an employee must have been employed with their employer for at least 6 months to make an application for an unfair dismissal remedy;
  
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  An employee must have worked for an employer either for 6 months in the case of a large business or 12 months in the case of a small business to gain access to the jurisdiction;
  
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  In the case of a casual employee, have regular and systematic employment on the same basis and a reasonable expectation of continuing work;
  
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  An employee engaged for a specified task, period of time or season, in some circumstances, may have access to the jurisdiction if all of the criteria set out above have been met.
  

The exemptions as cited above are generally appropriate with the following qualifications.

First, it is the view of the ACTU that the differential qualifying period for employees engaged by “small business” and other employers is unjustified and inequitable. It is clear from article 2 of the Termination of Employment Convention 1982 that any qualifying period of employment inserted into national laws intended to give effect to the Convention must be of “reasonable duration”. The existing qualifying period of 12 months for small business employees is too long, particularly as the purported reason for a qualifying period is to enable an employer to assess the capacity and conduct of an employee.⁶⁴⁰ Given that a qualifying period of six months is regarded as being sufficient to assess the capabilities of an employee in a non-small business context, which by definition, involves a larger number of employees, it seems illogical that an employer in a small business (with presumably, more direct contact with and knowledge of his or her employees) should not be able to make an assessment of an employee’s capacity and/or conduct within a six month qualifying period.

In addition, the ACTU is also concerned about the situation of employees who are employed on a series of consecutive fixed term contracts. Fixed term contracts are a relatively common feature of the Australian workforce and are endemic in certain industries and sectors, such as tertiary education, information technology, community services and health. Many of these employees are, for all practical purposes, permanent employees with years of continuous service with a single employer, subject only to periodic renewal of their fixed term employment contracts. There seems no justifiable reason to exclude such employees from UD protections. However, a strict application of the exemption in s386(2)(a) to such situations would lead to this result, notwithstanding that individual members of the FW Commission (or its predecessor) have expressed a willingness to look beyond the formality of the “contract” to examine the underlying reality of the employment relationship.⁶⁴¹

It appears to us that the proper approach to excluding potential ‘wind-fall’ claims in relation to employees with genuine fixed term contracts, is not to restrict access to UD protection, but to link potential remedies in such cases to a realistic expectation of what the employee could have expected by way of ongoing employment, regardless of the formal terms of the contract. This would at least remove the anomalous situation where employees engaged on a series of casual contracts of employment seem to have more ready access to UD than employees on consecutive fixed term employment contracts.