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

Disproportionate effects on particular groups of employees

There does not appear to be any reliable data available dealing with this issue, other than perhaps statistics that correlates location with unemployment rates and industry. Clearly, unemployment caused by an involuntary employer termination is likely to have a greater effect on employees located in an area with relatively higher unemployment profile. Similarly, an employee who is terminated from employment in an industry or occupation that is subject to structural decline, is likely to face significant challenges in adjustment and obtaining further employment, either in that industry or elsewhere.

Ultimately however, the position of a worker terminated involuntarily in the circumstances described above is likely to be similar to other workers terminated for reason of redundancy, other than the worker dismissed for a conduct or capacity related issue will not have the benefit of redundancy pay to cushion the economic effects of termination. This fact reinforces the need to provide broad access to the UD system so that an employee that is terminated harshly, or unfairly, is able to have some chance of reinstatement, or if not that, is able to obtain some monetary compensation for the loss of ongoing employment.

Main grounds and claims

The main grounds upon which an employee can sustain a claim that he or she has been unfairly dismissed has been canvassed in the question above relating to whether the current 'tests' for unfair dismissal are appropriate.

An application for an unfair dismissal remedy can only be successful if the FW Commission finds that an employee's termination was harsh, unjust or unreasonable⁶⁵¹. These grounds are set out in s387 of the FW Act, and have been in existence in one form or another for over 30 years.

Importantly, if, upon its own assessment in dealing with an application, a FW Commission member finds that there was no valid reason relating to conduct or capacity for the termination of an employee, an applicant is more likely to be reinstated, as the reason for the termination, may either not exist, or be found to be capricious or fanciful.⁶⁵²

Generally speaking, where the FW Commission finds that the termination of employment is to be upheld because there is a valid reason for terminating the employee but there are procedural fairness defects in the way in which the employer has dealt with the termination, compensation payments are more likely to be awarded.⁶⁵³ Reinstatement has also been awarded, albeit very rarely, when the FW Commission has determined that the procedural fairness defects have been so serious, that it warranted overturning the dismissal.⁶⁵⁴

In short, the types of claims that are likely to succeed are those that specifically address the criterion in s387 of the FW Act on the basis of a sound evidentiary footing.

International comparisons

A common point of comparison for Australia are the member states of the Organisation for Economic Cooperation and Development (‘OECD’). As the ‘club’ of advanced industrialised countries, OECD member states can be a relevant and useful comparison point. However, caution also needs to be exercised in any comparison given the sometimes very significant differences that exist, even amongst OECD nations, in terms of political arrangements, economic structures and legal frameworks.

Market based economies are characterised by a continuous reallocation of labor resources. New firms are created; existing firms expand, contract or shut down. In that process large numbers of jobs are created and destroyed. New job seekers will enter the market and fill new job vacancies, whilst workers will change jobs or leave employment. Job displacement represents a non-negligible proportion of these flows in many OECD countries.⁶⁵⁵ When a worker is dismissed a worker will lose income, tenure related entitlements and potentially accumulated job specific skills and experience.⁶⁵⁶

The OECD regularly measures employment protection for workers across the OECD countries. In 2013 a review of employment protection measurers was undertaken. The review included measuring employment protection provisions across OECD and G20 countries. Below we extract relevant findings of the OECD report in respect of two areas; first, the rules governing termination of employment (referred to in the Report as “difficulty of dismissal”); and second, the remedies that exist for employees who are unfairly terminated.

“Difficulty of dismissal”

Almost all OECD and G20 countries have legislated remedies for unfair individual dismissals, but the way that statutory or customary law defines what is fair or unfair differs markedly across all countries.

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  In Chile or Indonesia, dismissal for bad individual performance or unsuitability is unfair for ordinary employees except in the case of serious fault;
  
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  In Mexico and the Russian Federation, dismissal for unsuitability is possible but severely restricted to permanent physical or mental disability;
  
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  In Spain, worker capability is a sufficient ground for dismissal only in cases of unfitness or lack of adaptation to technological changes;
  
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  In Norway, the law allows dismissal for personal motives, but is restricted to material breach of employment contract (disloyalty, persistent absenteeism etc);
  
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  Dismissals for redundancy will be considered unfair if the worker could have been redeployed within the same company (e.g. Australia, Estonia, France, Germany, Italy, Norway and Sweden);
  
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  Worker capability and redundancy are considered fair grounds for dismissal within limited substantial additional conditions in almost one half of the OECD countries;
  
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  In most common-law countries, courts are inclined to consider redundancies as fair provided that they do not hide disguised personal reasons and procedural requirements are respected.⁶⁵⁷
  

There are other components that are also measured when determining whether protection from unfair dismissal for workers is adequate. Things such as time periods for lodgement, qualifying periods and other legal and cost prescriptions are also factored in. In analysing the degree of difficulty, for termination of a worker the following factors are taken into account:

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  Definition of justified or unfair dismissal;
  
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  Length of trial period;
  
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  Compensation following unfair dismissal;
  
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  Possibility of reinstatement following unfair dismissal; and
  
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  Maximum time for claim.
  

According to the 2013 OECD Report, the relative difficulty of dismissal across OECD countries shows that dismissal of individual workers is easiest in Canada, Denmark, Poland, Switzerland, Turkey, the UK and the USA. By contrast dismissal appears more difficult or uncertain in Chile, Finland, France, Italy, Mexico, Norway and Portugal. Amongst the broader G20 countries, China, India, Indonesia and the Russian Federation stand out as countries where dismissal is particularly difficult.⁶⁵⁸ Australia is marginally lower than average in terms of the degree of protection provided to workers in respect of unfair dismissal.

In summary, the UD system under the FW Act does not stand out as unusually protective of workers by reference to standards applying generally in OECD or G20 nations. Whilst there are peculiarities in some of the language and concepts used in Australia (for example, the term “fair go all round” would not doubt bemuse those not familiar with the Australian vernacular), the UD system under the FW Act is unremarkable as a whole and slightly less beneficial to employees than the average.