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Workplace Relations Amendment (Termination of Employment) Bill 2000
Date Introduced: 27 June 2000
House: House of Representatives
Portfolio: Employment, Workplace Relations and Small Business
Commencement: On or within 6 months of receiving Royal Assent
According to the Minister's Second Reading Speech, the Bill contains a range of provisions which will:
- reinforce disincentives to speculative and unmeritorious unfair dismissal claims
- introduce greater rigour into processing claims for remedy against dismissal by the Australian Industrial Relations Commission, and
- remove unnecessary procedural burdens that such applications place on employers.
The Bill thus 'addresses some procedural problems that have become evident during the operation of the Act'.
The key provisions of the Workplace Relations Amendment (Termination of Employment) Bill 2000 were initially contained in Schedule 7 of the Workplace Relations Legislation Amendment (More Jobs Better Pay) Bill 1999. This Bill passed the House of Representatives on 29 September. It was introduced into the Senate on 14 October 1999(1). The Senate Employment Workplace Relations Small Business and Education Legislation Committee reported on the Bill on 29 November 1999. The 'More Jobs Better Pay' Bill has not passed the Senate. The Workplace Relations Amendment (Termination of Employment) Bill 2000 would amend Division 3 Part VIA of the Workplace Relations Act 1996 (WR Act).
The More Jobs Better Pay Implementation Paper proposed the following reforms to the termination provisions:
Further amendments to the termination of employment provisions will also be considered to ease the burden that unfair dismissal applications impose on employers, to reinforce disincentives to speculative and unmeritorious unfair dismissal claims and to introduce greater rigour into the processing by the AIRC of unfair dismissal applications. This consideration arises from the implementation of More Jobs, Better Pay, implementation of the Government's response in December 1998 to the Review of the Unfair Dismissal Laws and issues raised in the Report of the Senate Committee on Employment, Workplace Relations, Small Business and Education on the Workplace Relations Amendment (Unfair Dismissals) Bill 1998.
Proposed amendments include (without being exhaustive) tightening of circumstances in which extensions of time may be granted for lodging applications; limiting the circumstances in which resignation can be regarded as constructive dismissal; broadening the circumstances in which costs may be awarded against applicants (or their advisers) who unreasonably pursue applications or abuse process; requiring the AIRC, after conciliation, to make a written assessment of the merits of an application, with arbitration of the matter being prohibited if the AIRC's assessment is that the application is unlikely to succeed.
The Majority Report of the Senate Employment Committee on the Workplace Relations Amendment (Unfair Dismissals) Bill 1998 made the following observations on the matter of cost:
The Committee notes the criticisms levelled by witnesses at the current cost awarding arrangements. It notes that costs may only be awarded against employees where a claim is found to be frivolous or vexatious. The Committee notes that the legislation currently requires the Commission, when awarding costs against an employer, to take into account the impact of the order on the financial viability of the business. The Committee believes that there should be a greater onus on the Commission to establish at the conciliation stage the merits of a former employee's case. The Committee believes that costs should be awarded against an employee who loses a case, and that similar considerations to those contained under
section 170CH of the Workplace Relations Act, be taken into account by the Commission when making an order in favour of an employer. The Committee believes that this too will provide a deterrent against frivolous claims The Committee notes concerns that employers may drag out an arbitration by presenting more witnesses to discourage employees from pursing their claim. However, the Committee believes that the Commission has a responsibility to conduct proceedings appropriately and should, from experience, be able to judge when either party is abusing the process. The Committee believes that the Commission should also be given the power to reprimand lawyers and law firms which it considers are recklessly engaging in 'contingency fee' cases which, if the Committee's previous recommendation is supported, could place an employee in the position of having to pay costs even though they may have engaged the lawyer on a 'no win, no fee' basis.(2)
The broad aim of reforming the termination provisions of the WR Act were outlined in Mr Reith's Second Reading Speech for the 'More Jobs, Better Pay' Bill in June 1999:
The burden on employers, especially small and medium businesses, of unfair dismissal applications will be further eased through reforms to discourage speculative and unmeritorious claims and introduce greater rigour into their processing. Access to costs will be widened, contingency fees disclosed and the Commission will be required, at the conciliation stage, to make a recommendation as to the appropriate settlement or discontinuance of the matter, having regard to the merits of the case. Constructive dismissal claims, where employees resign but claim unfair dismissal, will be tightened.(3)
Schedule 7 of the 'More Jobs Better Pay' Bill , according to its Explanatory Memorandum proposed:
- preventing forum-shopping by employees who are entitled to a federal unfair dismissal remedy, through the amendment of existing subsection 152(1A) and the insertion of new section 170CCA
- limiting the discretion of the Commission and the Federal Court of Australia to grant extensions of time for lodgment of applications in respect of both 'unfair' and 'unlawful' dismissal
- qualifying the definition of 'termination at the initiative of the employer' to limit access to a remedy in respect of termination of employment for employees who have resigned, except in certain circumstances
- making it clear that a respondent to an application under section 170CE can seek to have a motion for dismissal of the application for want of jurisdiction dealt with at any time
- limiting the Commission's jurisdiction to find that a termination of employment is harsh, unjust or unreasonable (ie. unfair) where the employer can establish that the termination (or terminations) were required on operational grounds
- conferring power on the Commission to prevent an applicant for an unfair dismissal remedy proceeding to arbitration unless the Commission certifies, on the balance of probabilities, that the application is likely to succeed at arbitration
- conferring power on the Commission to require a representative who has been retained pursuant to a contingency fee agreement or costs arrangement to disclose that fact to the Commission
- conferring express power on the Commission to dismiss an application in respect of a termination of employment if the applicant fails to attend a proceeding
- widening access to costs orders and clarify that costs can be awarded in jurisdictional, costs and appeal proceedings
- conferring power on the Commission (if it sees fit) to require an applicant to lodge an amount as security for any costs that might be awarded against him or her
- preventing an applicant from making two applications in relation to the same termination of employment, and
- introducing a new Subdivision G in Division 3 of Part VIA, containing a prohibition on advisers from encouraging applicants to institute or continue speculative or unmeritorious proceedings.
The Government reintroduces these provisions in the Workplace Relations Amendment (Termination of Employment) Bill 2000 with few changes. The Bill attempts to address the reported situation of employers being forced to pay 'hush' money to litigious employees by modifying Commission procedures, particularly the payment of a security upfront in case of the applicant later having to pay the respondent's costs. It will allow applications for costs against a legal practitioner whose conduct had resulted in the employer incurring costs unnecessarily. The Minister in his Second Reading Speech commented on a suggestion from the Commission that a reconsideration of the limits currently imposed by the current costs provisions may be in the interests of justice. In this case, the Minister commented on the iniquitous situation of an employer successfully defending the former employee's application for a remedy but still having to meet $8 000 in legal costs.(4) The Bill attempts to reduce speculative claims by employees, sometimes 'encouraged' by lawyers on contingency fees. The Bill proposes to insert a new series of provisions, which will contain a prohibition on advisers from encouraging people from instituting or pursuing speculative or unmeritorious unfair dismissal claims. Where an adviser contravenes this prohibition, a respondent to an unfair dismissal claim will be able to apply to the Federal Court for a penalty. The Bill gives the Commission the discretion to require an applicant who is seeking a remedy in respect of termination of employment to provide security for costs. This will also serve as a disincentive to unmeritorious or speculative claims. A very useful account of the current cost provisions of the WR Act as (infrequently) used in termination proceedings can be found in the CCH Australian Labour Law Reporter (by Mark Irving).(5)
- Schedule 1 Part 1Item 5 repeals section 152(1A) concerning access of 'excluded' federal award employees to State termination provisions. The explanatory memorandum suggests that the provision is no longer needed as federal award termination clauses can no longer contain extensive provisions on termination, and thus no longer cover the field.
- Item 6 introduces new section 170CCA which reflects the Commonwealth's intention that Division 3 of Part VlA (the termination provisions of the WR Act) 'covers the field' for unfair dismissal applications for certain employees. These are:
- Commonwealth public sector employees, and federal award employees:
- employed by corporations, or
- those working in interstate or international trade and commerce, or
- those working within a Territory.
Such employees are excluded from making a termination application under State jurisdiction. Item 8 inserts new subsection 170CD(1A) which excludes a person engaged under a contract for services in the definition of an employee. Item 9 inserts new subsection 170CD(1B) which excludes demotion in employment from the definition of a termination of employment if the demotion does not involve a significant reduction in remuneration. Item 11 repeals and replaces subsection 170CE(8) stipulating that the Commission may accept an application that is lodged out of time only if the Commission is satisfied that it would be equitable to accept the application. New subsection 170CE(8A) directs the Commission to have regard to specified circumstances which would allow an out of time application to be considered. Item 12 inserts subsection 170CEA(1) allows a respondent to move for the dismissal of an application under section 170CE on the ground that the application is outside the jurisdiction of the Commission at any time. Subsection 170CE(2) requires the Commission to deal with the application before other considerations. Item 13 repeals and replaces subsection 170CF(2)(b) and adds subsection 170CF(2)(aa). These new sections require that at the conciliation stage, the Commission indicates to the parties whether an application for an unfair (harsh unjust or unreasonable) dismissal remedy is likely to succeed, and on which ground the application is likely to succeed. It must also indicate its assessment of the merits of the matter (New subsection 17OCF2(b)) Item 14 adds subsection 170CF(3) which allows the Commission to invite additional information if it has considered that the unfair dismissal application is likely to fail at the arbitration stage. New subsection 170CF(4) requires the Commission to issue a certificate stating that the application is likely to fail. Subsection 170CF(5) determines that where a certificate is issued, the application is dismissed. Item 15 repeals and replaces subsection 170CFA(1) and requires that the applicant make an election to proceed to arbitration where: even though the Commission has issued a certificate stating that conciliation on one of the prescribed grounds is unlikely to be unsuccessful, it has also stated that on the balance of probabilities the claim is likely to succeed. Item 16 amends subsection 170CFA(2) to allow an applicant to make an election to proceed an application to arbitration in respect of an unfair dismissal which appears successful, but where the Commission's certificate has also indicated that the application is likely to fail concerning an alleged contravention of section 170CM (failure to provide notice). The applicant can also elect to proceed to a Court (re section 170CM) and/or proceed to arbitration for the unfair dismissal or discontinue the application. Item 17 introduces new subsection 170CFA(2A) proposes that where the Commission determines that unfair dismissal conciliation is unlikely to succeed and the application is unlikely to succeed at arbitration, the applicant can proceed the 'lack of adequate notice' part of the application in a court of competent jurisdiction. The unfair dismissal part of the application is however dismissed. Item 18 amends subsection 170CFA(3) and allows an election by applicant who alleges: a) unfair dismissal and b) that the dismissal was made on a prohibited reason (eg the applicant's trade union membership/activity) and c) that the employer did not notify redundancies (15 or more) and d) the dismissal breached an order made by the Commission concerning separation. The applicant can elect to proceed the unfair dismissal part (where the Commission has determined it is likely to succeed) or proceed the other aspects of the application in the Federal Court, or discontinue both. Item 19 inserts new section 170CFA(3A) which allows the applicant to elect to commence proceedings in the Federal Court concerning the 'unlawful' parts of the application [section 170CFA(3)], even though the Commission has issued a certificate indicating such a course is unlikely to be successful. Under this provision the Commission will indicate that the unfair dismissal part of the application has, or is likely to fail. The application in respect of unfair dismissal is dismissed. Item 20 amends existing subsection 170CFA(5) and allows an applicant to make an election to pursue an unfair dismissal application to arbitration where the Commission has indicated it may succeed. Where the Commission has indicated that parts of the same application are likely to fail in respect issues such as lack of notice, or, eg. the applicant's trade union membership, or a termination order or termination notification, the applicant may elect to proceed that part of the application concerning lack of notice to a court of competent jurisdiction as well as pursuing the unfair dismissal application with the Commission. Or, apply to the Federal Court in respect of all matters other than the unfair dismissal. Or do nothing. Item 21 inserts subsection 170CFA(5A) which allows an applicant seeking remedy against dismissal on the grounds prescribed in subsection 170CFA(5) to apply to a court of competent jurisdiction re the period of notice part of the application and/or apply to the Federal Court on the other parts of the application, ie concerning alleged breaches of prohibited grounds, or do nothing. The part of the application concerning unfair dismissal is dismissed. Item 24 repeals section 170CFA(8) removing an applicant's ability to apply for an extension of time to proceed either to arbitration for a remedy for a harsh etc dismissal, or to the Federal Court in respect of an unlawful and/or inadequate notice termination. Item 25 proposes the repeal of section 170CG(3)(a) which removes the reference to a valid reason for termination based on the employer's operational requirements. Item 26 adds to the matters which the Commission must have regard to in determining a harsh etc dismissal within subsection 170CG(3)(d). As well as the reasons listed, the Commission would have to give regard to the degree that the size of the employer's business would have on procedures followed (or not followed) in making the termination. Item 27 adds subsection 170CG(4) which prevents the termination of an employee or a group of employees on the ground of the operational requirements of the employer's undertaking being regarded as harsh, unjust or unreasonable, unless the circumstances are exceptional. Item 29 adds subsection 170CH(7A) which excludes from any compensation payment (in lieu of reinstatement) a component for shock, distress or humiliation. (refer also Item 38 re awards the Court can make). Item 30 adds section 170CIA(1) requiring the Commission to ask representatives of applicants (for a termination remedy) to disclose any 'costs' arrangements. Subsection 170CIA(2) requires any contingency fee agreements of legal practitioners to be disclosed. Subsection 170CIB allows the Commission to dismiss an application if applicant fails to attend. Item 31 repeals and replaces subsections 170CJ(2), (3), (4) and (5). New subsection 170 CJ(2) allows the Commission to order costs against the (initial) applicant (first party) who began an application under section 170CE and did so in circumstances where it should have been reasonably apparent to the first party that there was not a substantial prospect of success in relation to the application or proceeding. New subsection 170CJ(3) allows an order for costs by the respondent against the applicant where he has acted unreasonably in failing to discontinue the proceeding. Subsection 170CJ(4) allows costs to be made against the applicant because of his unreasonable act or omission in connection with the conduct of the proceeding. Subsection 170CJ(5) requires the application for costs to be made 14 days after the discontinuance under section 170CE. New subsection 170CJ(5A) allows a schedule of costs to be prescribed re expenditure incurred by the (initial) respondent. Item 34 inserts section 170CJA which allows the Commission to order an applicant under section 170CE to give security for the payment of costs that may be awarded against the applicant in exceptional circumstances. Item 36 repeals and replaces subsection 170CP(7) allowing the Court to accept an application that is lodged out of time only if the Court is satisfied that it would be equitable to accept the application. Criteria for the Court to consider are also specified. Item 39 inserts section 170HBA which prevents second applications under section 170CE concerning the same termination. Item 40 adds Subdivision G at the end of Division 3 of Part VIA. Under section 170HE advisers are not to encourage applicants to make, or to pursue, an unfair termination application if, on the facts that have been disclosed that there was no reasonable prospect of success in respect of the application. Section 170HG establishes a reverse onus of proof allowing the initial respondent applying for the order who makes a prima facie case that the course of action followed by the adviser contravened that section. The course of action will be taken to have contravened that section unless the adviser can establish to the contrary on the balance of probabilities. Section170HI outlines the orders that the Court may make which include: a penalty of not more than $10,000 if the adviser is a body corporate; or if the adviser is not a body corporate a penalty of not more than $2,000.
The government would welcome further Senate scrutiny provided that such a committee will review the Bill in order to achieve a scheme that truly ensures a 'fair go all round'.(6)
The Bill's proposals (as contained in the 'More Jobs Better Pay' Bill) are discussed in the Senate's Employment Committee Report on the Bill.(7) (Senate Report). The Government Majority Report on the termination of employment proposals is found under chapter 8 (page 91), the Opposition Minority Report from page 351 and Senator Murray's report for the Australian Democrats at page 396. These later references provide the source for the criticisms of the Bill's main provisions:
- Taken as a whole the provisions restrict an applicant's access to a remedy
- The provisions limiting federal award employees access to State termination provisions is unfair given that they have been excluded under the Federal WR Act, and the States may legislate to include this group (as has occurred in NSW)
- The current tests rests on constructive dismissal being a dismissal forced on the employee by the conduct of the employer already requires strong evidence
- The Bill's 'applications out of time' provisions remove the Commission's discretion to consider an out of time application but only allowing an extension of time be granted if the circumstances of the late lodgement are "exceptional", meaning that the Commission may not consider the substantive merits of the application due to the out of time constraint
- The proposal to prevent applicants from proceeding to arbitration if the Commission has certified that the claim in respect of harsh, unjust or reasonable termination is unlikely to succeed will have the effect of transforming initial conciliation proceedings into mini-hearings with, most likely, evidence being put. Amendments to the termination provisions in late 1995 sought to move away from this procedure to a less formal one. Also in at least one matter, the Commission has already alerted to the consequences of a party pressing with an application where a certificate under the existing regime, has been issued
- On operational requirements: terminations made on the basis on operational reasons (particularly the size of the employer's operation) are not to be taken as harsh, unjust or unreasonable. The concern is the lower employment protection standard being afforded mainly to small business in this provision
- On 'no win no fee' arrangements: such arrangements are not illegal and may attract a person who has recently lost a job and lost an income source. Legal firms offer the same arrangement in respect of other matters than termination
- Awarding costs against the applicant where it should have appeared that there was no reasonable chance of success will act to sway applicants against seeking a remedy irrespective of merit. The lodgement of security costs will act as a further deterrent, and
- The proposal for fines for representatives who encourage unmeritorious or speculative proceedings, with the onus on the representative to prove that this did not occur once a prima facie case has been made out, is an interference in the relationship between representatives and clients.
On this last point, it may be that the Government is testing the waters for an expansion of similar measures such as fines against practitioners representing vexatious clients in other areas of government administration. The measure to penalise advisers and legal representatives is unusual but no doubt would have appeal to government and the federal bureaucracy in areas such as: social welfare benefit appeals, immigration applications, refugee determination appeals, and elsewhere. There is precedent where government tests the waters in one area then expands the application. For example, the expansion of mutual obligation principles to those beyond the pilot 'young and able' unemployed group to other welfare beneficiaries. Such a potential was alluded to in a previous Bills Digest:
... a major reason behind the proposed (Work for the Dole) scheme is that it is not unreasonable for people receiving benefits to do something in return for those benefits if they are able to do so. Logically, it can be argued that this reasoning should apply to all those in receipt of government benefits and not just the unemployed ... the logic could be extended to married non-working mothers with school age children who would be able to perform work in return for benefits such as family allowance. (8)
As the Government currently draws up a response to recommendations of the McClure Report on work and the receipt benefits such as sole mother pensions and disability pensions, we can appreciate that the Digest's comments were merely before their time. The proposal to penalise advisers and legal representatives will set an important precedent. The Government justifies the changes to termination provisions on the basis of securing the 'fair go all-round test'. This test is referenced in the WR Act and is there to guide the Commission in its consideration of the merits and other aspects of an appeal against a termination. The principle was expounded in an unfair dismissal case involving staff of the NSW branch of the Australian Workers Union in 1971, and a key element of the 'fair go all-round' approach was that the tribunal should not have its discretion fettered, as Justice Sheldon then commented:
In my view, the use of the old adjectives, with their overtones from other jurisdictions, tends to distort this basically simple approach in that they can be strained to mean that an employer can be less than fair in exercising his right to dismiss and yet stand outside the permissible area within which an industrial authority in its discretion may act ... The less fetters there are on the discretion the better ... but it is all-important that it should be exercised soundly. The objective in these cases is always industrial justice and to this end weight must be given in varying degrees according to the requirements of each case to the importance but not the inviolability of the right of the employer to manage his business, the nature and quality of the work in question, the circumstances surrounding the dismissal and the likely practical outcome if an order of reinstatement is made. (9)
It is difficult sustain the argument that the Bill allows the Commission to use its discretion in an unfettered way as implied in that case (Loty and Holloway), or that industrial justice will be uniformly well served. Senator Murray has provided the Senate with documentation on the decline of termination applications in the federal jurisdiction since their high point of 1995/96.(10) It is likely that the Bill will assist in continuing the downward trend of termination of employment applications should it become law.
- In his Second Reading Speech for this Bill, the Minister inadvertently refers to the 'More Jobs Better Pay' Bill passing the House of Representatives on 14 October 1999. This is not correct.
- Senate Employment, Workplace Relations, Small Business and Education Legislation Committee: Consideration of the Provisions of the Workplace Relations Amendment (Unfair Dismissals) Bill 1998, pp. 24-25.
- The Hon Peter Reith MP Second Reading Speech for the 'More Jobs Better Pay' Bill, Hansard, 30 June 1999 p. 7852.
- 'Reith pledges costs action' Workforce, 5 May 2000.
- Mark Irving, 'CCH Australian Labour Law Reporter, 'The awarding of legal costs by the AIRC' [ 85-027]
- The Hon Peter Reith MP, Second Reading Speech: The Workplace Relations Amendment (Termination of Employment) Bill 2000, House of Representatives Hansard, p. 18323.
- Senate Employment, Workplace Relations, Small Business and Education Legislation Committee, Consideration of the Provisions of the Workplace Relations Legislation Amendment (More Jobs, Better Pay) Bill 1999.
- Bills Digest no. 136, 1996-97, Social Security Legislation Amendment (Work for the Dole) Bill 1997.http://www.aph.gov.au/library/pubs/bd/1996-97/97bd136.htm
- Re Loty and Holloway v Australian Workers Union (1971) 1971AILR 142, in Australian Labour Law Reporter 47 153.
- Senate Hansard, 14 August 2000, p. 15036.
4 September 2000
Bills Digest Service
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