Unfair dismissal: the new laws
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Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion.
Briefing Paper No. 02/1998 by Honor Figgis
|This briefing paper examines recent changes to the law of unfair dismissal in New South Wales and the Commonwealth, and considers how the two systems are likely to interact. There is also some discussion of the effect of unfair dismissal laws on job creation. The main points are:
- The general approach of both the Federal and NSW unfair dismissal legislation is to provide a fair go all round' for employers and employees (pp 5 and 11).
- The Commonwealth Workplace Relations Act 1996 sets up two distinct schemes for protection against termination of employment: an unfair dismissal' scheme, available only to certain classes of employees under federal awards or agreements, that provides remedies for dismissals that are harsh, unjust or unreasonable; and an unlawful dismissal' scheme, widely available to Australian employees, that provides remedies for dismissals that contravene requirements for the lawful termination of employment. The Federal Government has drawn back from the broad regulation of unfair dismissals that was a feature of industrial relations legislation under the former Labor Government. The current Federal Government has narrowed the scope of its unfair dismissal laws, has reduced its reliance on the external affairs power in the Commonwealth Constitution, and has encouraged co-operation between the federal and State unfair dismissal systems (pp 5-9).
- The New South Wales <Industrial Relations Act 1996 carries forward the unfair dismissal system from the previous Industrial Relations Act 1991, with some changes to the scheme aimed at improving its operation. The most important change is the expansion in the class of employees who can claim for unfair dismissal. The unfair dismissal provisions now apply to employees in NSW who are: employed in the public service; employed under a NSW award or agreement; or employed without an award or agreement and earning less than the specified rate of remuneration. The NSW unfair dismissal provisions do not apply to employees under federal awards or, it seems, federal agreements. Some employees employed by an unincorporated body under a federal award or agreement do not have access to either the federal or the NSW unfair dismissal systems (pp 10-12).
- The interaction of the federal and NSW employment termination systems continues to create complexity and raise difficult jurisdictional questions. These problems lead to pressure to introduce a single industrial relations system, like Victoria. However, neither the current NSW or Federal Governments are likely to withdraw from the field of employment termination (pp 12-17).
- As a result of the legislative changes, there has been a substantial increase in unfair dismissal claims under the NSW Act, and a decrease in claims in the Federal jurisdiction (p 15).
- Both the Federal and NSW legislation excludes certain kinds of employees, such as probationary employees or those on fixed-term contracts, from unfair dismissal claims. The Federal Government is currently attempting to exclude employees who work for a small business. The object of the exclusion is to avoid exposure of small businesses to unfair dismissal claims, in the interests of encouraging small businesses to take on more employees. It is argued that small business employers are particularly deterred by unfair dismissal laws from taking on new workers (p 17).
- Most of the evidence that unfair dismissal laws are a disincentive to employment is anecdotal, or based on surveys of the perceptions of employers of impediments to job growth. There seems to be little empirical evidence on the extent to which unfair dismissal laws affect employment rates, whether in small, medium or large businesses (pp 17-18).
- Even if a small business exemption is introduced into the federal unfair dismissal legislation, it is likely to have little impact on small business in New South Wales. Most small business employees in New South Wales are covered by State awards, and these employees do not have access to the federal unfair dismissal provisions. A broad exemption of NSW small business employers from the unfair dismissal laws requires legislation by NSW complementing the proposed Commonwealth exemption (pp 18-19).
- Unfair dismissal laws, both State and federal, are likely to remain in a state of flux in coming years. The issues which will continue to prompt controversy and perhaps change include: the role of Commonwealth legislation; and the balance which should be reached between the interests of employers and employees. For example, in what circumstances should reinstatement rather than compensation be the remedy for unfair dismissal? Should an employer's financial viability be relevant to the question of compensation? What classes of employees should be excluded from unfair dismissal laws? (pp 20-21).