The Unfinished Business of Unfair Dismissal

If you want to know why unemployment is stuck at over 8% -- just look at the sorry saga of unfair dismissal regulation.

Up until the early 1990s unfair dismissal was not a big issue.  The number of claims were modest.  Moreover, there was general satisfaction on the part of employees and employers with the way things were handled.

The Unions, however, did not like the state of affairs.  As pay-back for services rendered during the 1993 election, they got their way with the Industrial Relations Reform (sic) Act of 1994.

This legislation used an obscure international agreement (one not ratified by Federal Parliament) to give the Commonwealth jurisdiction over the issue.  It put in place a highly complex process which emphasised formal compliance with detailed procedures.  It allowed claimants to jump between the Commonwealth and State awards in search of the most favourable process.  And it took responsibility for adjudicating claims away from tribunals to specialist courts.

The legislation predictably, was a disaster for employers -- particularly small business -- and for the unemployed.  On the other hand, it gave the employed and the unions a boost and proved to be gold mine for lawyers.

Following its passage, there was a massive shift in claims away from states to the federal jurisdiction and a large overall increase in the number of claims.  The impact was particularly hard on small businesses.  They not only got hit with a disproportionate number of the claims, but were less able to fight the claims and more prone to getting caught on silly procedural issues.  Not surprisingly, small business put the clampers on employing new people.

The lucky people who already had a job benefited by what was, in effect, an additional redundancy payment.  Given the high cost of fighting claims and the fact that the courts overwhelmingly came down on the side of the workers (78% of claims decided in favour of the employees), most businesses -- again particularly small businesses -- settled no matter what the merits of the case were.

Union leaders benefited not only because they were able to provide another perk to their members, but also because the legislation gave them another tool in the on-going fight against the "boss".

In short, the Act was another example of the insiders -- the employed and the unions -- benefiting at the expense of the outsiders -- the unemployed.

The Howard Government has repeatedly tried shift the balance more in favour of small business and unemployed.  However, their efforts have been stymied by the Labor Party and the Democrats in the Senate.

Some beneficial changes were introduced via the Workplace Relations Act 1996.  Jurisdiction shopping was stopped and responsibility was shifted back to the tribunal.  These changes initially led to a large -- 25% -- drop in unfair dismissal claims.

However, claims soon began to rise again.  The Government responded with a new set of amendments which the defenders of privilege in the Senate dutifully knocked back.

There the situation rests, with up to 10% of all businesses claiming to be cutting their work force for fear of legal action and adding to the ranks of the unemployed.

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