This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Contact Officer and Copyright Details
Workplace Relations Amendment (Unfair
Dismissals) Bill 1998
Date Introduced: 12 November 1998
House: House of Representatives
Portfolio: Employment, Workplace Relations and Small
Commencement: On Royal Assent
The Bill seeks to amend the Workplace
Relations Act 1996:
- to exclude new employees (other than apprentices and trainees)
of businesses with 15 or fewer employees from federal unfair
- to establish a six month qualifying period of employment for
new employees (other than trainees or apprentices) wanting to use
the unfair dismissal regime.
The Bill will not affect the scope of State
unfair dismissal laws.
The Bill will not affect the federal laws
dealing with unlawful dismissal.
The Bill will affect the rights of employees
hired after the date that the Act comes into effect but does not
prejudice the rights of employees engaged before that date.
The proposal to establish a general qualifying
or probationary period for access to federal unfair dismissal laws
is new. The proposal to exempt smaller businesses from federal
unfair dismissal laws is not.
The small business exemption was last considered
by the Parliament as recently as 25 March 1998 when the Senate
rejected the Workplace Relations Amendment Bill [No.2] (the
There has been no substantive change to the
membership of the Senate since the recommitted Bill was defeated.
The Government, however, argues that its victory in the 3 October
1998 election has provided it with a fresh mandate to proceed with
this legislation as a matter of priority.(1)
As noted above, the proposed changes affect
federal 'unfair dismissal' laws but do not alter federal laws
making termination of employment unlawful in certain cases. This is
an important distinction and requires some clarification.
'Unfair dismissal' refers to those situations
where the employer's conduct in bringing the employment
relationship to an end can be characterised as 'harsh, unjust or
unreasonable'. Actions for unfair dismissal are instituted in the
Australian Industrial Relations Commission ('AIRC' or 'the
Commission') which under the present law must give weight to the
interests of the employer and the dismissed worker in determining
both the merits of the case and any remedy granted.
'Unlawful' (as opposed to 'unfair') dismissal
includes dismissal for discriminatory reasons such as sexual
preference, age, union membership and family responsibilities. It
is also unlawful to dismiss a worker because they engaged in
protected (lawful) industrial action in negotiating a new certified
agreement or Australian Workplace Agreement. Allegations of
unlawful dismissal are initiated in the AIRC. The Commission must
seek to resolve a claim by conciliation before determining whether
to refer it to the Federal Court of Australia.(2)
History of Exclusions and Exemption
Proposals to reduce the scope of federal unfair
dismissal laws have been canvassed frequently by the Parliament
over the past 5 years.
The Keating Government passed the first
significant piece of federal legislation dealing with the
termination of employment. That law, the Industrial Relations
Reform Act 1993 (the 1993 Reform Act), came into effect on 30
March 1994, amending the principal Act, the Industrial
Relations Act 1988 (the IR Act).(3)
Prior to March 1994, workers covered by State
awards had enjoyed access to statutory and award based remedies for
some years but approximately 40 percent of Australian workers, ie
those in the federal system, did not have access to similar
remedies. Workers in the federal industrial stream could not gain
access to State tribunals and their rights were constrained by
constitutional limits on the jurisdiction of federal courts and
industrial tribunals. Some avenues of redress, including the AIRC's
willingness to exercise a de facto jurisdiction, were
available but even these were cumbersome and relatively time
In a jurisdictional sense, the 1993 Reform Act
went from one extreme to another, extending minimum protections to
all workers and also effectively establishing federal primacy over
the pre-existing State-based systems in relation to termination of
The other major feature of the 1993 Reform Act
was that it created a rights based regime, rather than one entirely
dependent on discretionary standards and remedies.
Thus, as first enacted, the federal legislative
scheme dominated the field, was both rights-based and
Regulations made on 29 March 1994 excluded some
fixed term, casual and probationary employees from the federal
regime.(4) These exemptions were extended and clarified by further
regulations made on 9 November 1994(5) thus denying protection to:
(a) persons employed for a fixed term of less than 6
months, (b) employees engaged to perform a specific
task, (c) probationary employees whose period of probation
was determined prior to hiring and to instances where the
probationary period was reasonable in the circumstances,
(d) some casual, including daily hire, employees, (e)
specified classes of trainees, and (f) persons engaged
under the Australian Federal Police Act 1979.
In the interim, the IR Act 1988 was amended by
the Industrial Relations Amendment Act (No.2) 1994 (with
effect from June 1994) addressing some employer concerns regarding
access to the new federal remedies. Specifically, the June 1994
amendments restricted access to termination provisions and set
upper limits on the level of compensation that could be
From 30 June 1994, the Industrial Relations
Court of Australia's unfair dismissal jurisdiction did not extend
to workers who earned in excess of $60 000 per annum (indexed) who
were not covered by a federal or State award.
A second major amendment 'capped' the amount of
compensation payable to employees dismissed in contravention of the
1993 Reform Act. (After the passage of the 1993 reforms, monetary
compensation was available where reinstatement was judged
impracticable.) Following the 1994 amendments, the Australian
Industrial Relations Court could only award up to six months'
salary as compensation in the case of employees covered by awards
and not more than $30 000 or six months' remuneration (whichever is
the lower) for non award employees as compensation for unfair
dismissal. This amount was also indexed.
A third modification to the 1993 provisions
confined the onus of proof imposed on employers to those matters
concerning the giving of valid reasons for dismissal and for
proving that none of the legislatively prohibited grounds for
dismissal formed the (real) reason for the dismissal. In all other
respects, the onus of proof rested with the employee. This
evidentiary requirement also operated to discourage some workers
from seeking remedial relief under the system.
In the face of continuing employer opposition,
the Keating Government further amended the law (with effect from 15
January 1996) providing that:
- the termination of employment provisions of the Act would not
apply where there was an alternative available under another law
that satisfied the requirements of ILO Convention No.158 relating
to termination of employment
- the Industrial Relations Court of Australia must consider all
the circumstances of the case in deciding what remedy (if any)
should be granted.(6)
The latter change was designed to lessen
employer concerns that the legislation placed too much weight on
procedural fairness and not enough on the substantive merits of
The Howard Government was elected in March 1996
with a clear policy commitment to further amend the federal
termination laws to ensure that they provided a 'fair go all
round'. The Coalition's policy manifesto, Better Pay for Better
Work, described the existing law as '...far too detailed, too
prescriptive and too legalistic and hence a disincentive to
The Workplace Relations and Other Legislation
Amendment Bill 1996 (WROLA) was introduced on 23 May 1996 and
subsequently enacted on 31 December 1996.
The significant changes made to unfair dismissal
laws by WROLA included:
- The jurisdiction of the Industrial Relations Court of Australia
was removed to the Federal Court.
- The jurisdiction of the federal tribunal to hear unfair
dismissal claims was reduced.
- The definition of 'fairness' was changed. Before awarding a
remedy (if any) to the employee, account must be taken of the
ongoing interests of all the parties. This is encapsulated in the
slogan 'a fair go all round'. Allied with this, there was a
're-balancing' of the statutory test to ensure that 'procedural
fairness' is only one factor in determining whether a dismissal is
- Separate streams for handling unfair and unlawful dismissals
- The power of the AIRC to award costs against employees was
dramatically increased and was coupled to a compulsory conciliation
- A standard $50.00 filing fee was introduced.
Whilst the Workplace Relations Bill was still
before the Parliament, the High Court held that the prohibition in
the IR Act 1988 on 'harsh, unjust, or unreasonable' (ie 'unfair')
dismissals set out in subsection 170DE(2) of the Act was invalid.
The provision had sought to rely on the external affairs power.
However, the High Court held that there was not a sufficient
connection between the relevant provisions of the IR Act and the
relevant international instruments.(8)
The WROLA retained the expression 'harsh, unjust
and unreasonable' in relation to unfair dismissals but confined the
operation of the federal statute to a narrower field. Thus only
Commonwealth employees, federal award employees employed
by foreign, financial and trading corporations, Territory
employees, some employees engaged in interstate and
overseas trade, and (latterly) Victorian workers were
covered federally. Even a proportion of federal award employees
were no longer covered by the federal law. Ultimately, the five
remaining State systems were not subject to the overriding
operation of the federal law as was previously the case.
As to 'unlawful dismissal', Subdivision C of
Division 3 of Part VIA of the Principal Act currently provides
grounds for relief where a termination breaches the minimum notice
requirement (section 170CM) or is for a prohibited reason such as
age, race, union membership or non membership etc (section 170CK).
WROLA also extended the IR Act's list of prohibited grounds by
making it unlawful to dismiss an employee for refusing to negotiate
in connection with, make, sign, extend, vary or terminate an
Australian Workplace Agreement [section 170CK(2)]. Proceedings for
unlawful dismissal are comparatively rare. (They now taken in the
Federal Court of Australia, or in the case of notice requirement,
in a court of competent jurisdiction. WROLA left remedies for
unlawful dismissal much the same as under those available under the
Regulations were made on 11 December 1996
imposing additional restrictions on the classes of employee
protected from unfair dismissal.(9) On 26 March 1997, the Senate
debated the disallowance of the 11 December 1996 regulations,
questioning the policy of excluding such wide classes of employee
from the Act by regulation. Contrasting the effect of the
regulations with exclusions made under the previous law critics,
including Senator Jacinta Collins, noted that:
- from November 1994, only employees hired for a specified period
which did not exceed six months were excluded from the protection
offered by the federal unfair dismissal law. (It was asserted that
the 11 December 1996 regulations reverted to the pre-November 1994
position and excluded all employees hired for a 'specified
- the new regulations deny protection to casual employees until
they have been engaged as such for a continuous period of 12
months. Under the previous law, casuals with six months service or
longer with an employer were protected,
- under the pre-1996 regulations the maximum length of a
probationary period of employment was not defined. However, such a
period could not be 'unreasonable'. (The courts have held that in
some cases a reasonable period of probation would not extend beyond
a week or two depending on the task being performed.) The 11
December 1996 regulations deem any period of probation up to 3
months to be reasonable,
- the restriction on terminating employees defined as
'temporarily absent' from work due to illness or injury is also
eroded. Employees are now subject to lawful dismissal where they
are absent from work for a continuous period of 3 months (or for
more than 3 months in a period of 12 months) except where they are
in receipt of paid sick leave, and
- the new regulations introduced the foreshadowed filing fee of
$50.00 (a measure contemplated by the 1996 amendments and fully
debated by the Parliament and agreed by the Parliament, ie
contentious but not a surprise).
The essence of these criticisms was that the
regulations reduced the rights of some workers and did not conform
to the terms of the relevant international treaty in that they made
it easier for employers to structure their employment relations to
avoid their legal obligations.(10)
The Opposition failed in its attempt to disallow
the 11 December 1996 regulations.(11)
On 24 March 1997, Prime Minister Howard issued a
Statement entitled More Time for Business which responded
to the report of the Small Business Deregulation Task Force chaired
by Mr Charlie Bell, the Managing Director of 'McDonalds'. The
Statement promised new regulations to exclude from the reach of
federal unfair dismissal laws, employees who have less than a
year's continuous service, and who work for a small business with
no more than 15 employees.(12)
Regulations were made on 30 April 1997 to give
effect to the Prime Minister's undertaking and were to commence on
1 July 1997.(13)
On 26 June 1997, noting the prospect that the
Regulations may be disallowed, Minister Reith introduced further
legislation stating in his Second Reading Speech that:
a regulation has already been made under the
Workplace Relations Act 1996, to give effect to the
exemption, with effect from 1 July 1997. But that regulation is
subject to motion of disallowance in the Senate - which must be
dealt with this week. If that motion is withdrawn or defeated, then
this Bill will be withdrawn from the notice paper. But if that
motion is carried, then this Bill will proceed.
On 26 June 1997, the Senate disallowed the
regulations exempting small business.(14)
The disallowance motion was moved by Australian
Democrat Spokesperson, Senator Andrew Murray, who amongst other
things, claimed that the regulations breached the Government's
election commitments(15) and were also contrary to the agreement
made between the Government and the Australian Democrats which had
allowed the passage of WROLA.(16)
The disallowance motion was also supported by
the ALP, Senator Harradine and Senator Margetts.
Senator Harradine also indicated his opposition
to the 'foreshadowed' Bill.(17)
That Bill, the Workplace Relations Bill 1997 was
first introduced into the House of Representatives on 26 June 1997
and was passed unamended the following day. The Bill was then
introduced into the Senate on 1 September 1997, having been
referred to the Senate Economics Legislation Committee on 28 August
In mid July 1997, it was reported that the Prime
Minister would be prepared to seek a double dissolution if the
Senate were to fail to pass the present Bill.(18) Not surprisingly,
discussion of the Bill was coloured by speculation that it might
ultimately be used to trigger a double dissolution election.
The Public Service Bill 1997, introduced in the
House of Representatives on 26 June 1997, also dealt with proposed
exclusions from unfair dismissal laws. That Bill provided that
Departmental Secretaries, Agency Heads and members of the Senior
Executive Service could not seek relief under the termination of
employment provisions (Division 3 of Part VIA) of the Workplace
Relations Act 1996. This would have excluded senior
Commonwealth officials from the protections of unfair and unlawful
dismissal provisions of the Workplace Relations Act. This feature
of the Public Service Bill also proved contentious as did the Bill
itself, which was twice passed by the Senate but with amendments
which were unacceptable to the Government.(19)
The Report of the Senate Economics Legislation
Committee was tabled on 20 October 1997 with the Government
majority on the Committee recommending passage of the Workplace
Relations Bill 1997. Dissenting minority Reports were issued by ALP
and Australian Democrat members of the Committee.(20)
On 21 October 1997, the Workplace Relations Bill
1997 was defeated at the Second Reading in the Senate.
Legislation identical to the Bill defeated on 21
October 1997, ie proposing an exemption for smaller businesses from
federal unfair dismissal laws, was introduced in the House of
Representatives on 26 November 1997 and was ultimately defeated in
the Senate on 25 March 1998.
Basis of Policy Commitment
As suggested earlier, Minister Reith has stated
that the initiatives contained in this Bill were specifically
outlined by the Coalition parties during the recent federal
election campaign. The Coalition Policy document More Jobs,
Better Pay is the source for this commitment(21) and clearly
indicates that both key elements of this Bill would be
For its part, the Australian Labor Party has
consistently and openly opposed the thrust of the Howard
Government's changes to unfair dismissal laws.(23)
As part of his Second Reading Speech, Minister
Reith contended that the Government has a fresh mandate for the
changes being pursued.
Claims and counter claims regarding electoral
mandates, however, are not canvassed here.
Access to federal unfair dismissal laws is
First, the federal law only covers those classes
of employee listed in section 170CB of the Workplace Relations
Act 1996. Still further classes of worker are then excluded by
regulation, such as high income earners, some temporary employees,
some trainees and some contractors etc (see above).
Principally this means that not even all federal
award employees have access to these provisions. The main generic
groups that do have access are:
- Commonwealth public sector workers
- employees who work in a federal Territory or in
- persons employed under a federal award and who are employed by
a 'constitutional corporation', and
- certain defined classes of worker principally engaged in
inter-state and overseas trade and commerce.(25)
('Constitutional corporations' are 'foreign
corporations' and those domestically formed companies which are
regarded as carrying on financial or trading activities within the
meaning of section 51(xx) of the Australian Constitution.)
Specific exceptions contained in this Bill add
to the list of statutory exclusions although it is worth noting
that the Bill has been drafted to ensure that the existing rights
of apprentices and trainees engaged under relevant training
agreements are not further diminished.(26)
It is, however, unclear just how many workers
are presently covered by federal unfair dismissal laws and indeed
how many workers will be affected by the proposed changes.
In answer to Question on Notice (No.2940) from
Mr Robert McClelland, Minister Reith in part responded:
(2) It is not possible to specify the number of
small businesses which would directly benefit from the Government's
proposed exemption from unfair dismissal laws for small businesses
as the operation of the provisions, according to the criteria
outlined above, would depend on the details of the
interrelationship between federal and State legislation, in each
State, at the relevant time.(27)
As ABS figures can provide only a rough guide to
the number of persons employed by small businesses that come within
the federal unfair dismissal jurisdiction, some form of proxy
measure must be used to estimate the number of workers or
businesses likely to be affected by the Bill. This is because the
ABS figures for small business include businesses with more than 15
employees and because the federal unfair dismissal law does not
cover all small businesses. In any event, other measures are needed
to 'get a handle' on the legislation's present and future
The ABS definition of small business is
different to that used in the Bill in that the former:
- excludes agricultural enterprises
- covers non-manufacturing industries employing less than 20
- applies to manufacturing industries employing less than 100
Using the ABS measure, there are about 900,000
small businesses in Australia, representing about 97 percent of all
businesses and employing about 50 percent of the total non
agricultural private sector workforce.(29) ABS data also show that
as at May 1998, employers with fewer than 20 employees
employed a total of 2 090 300 wage and salary earners. This is out
of a total number of employees in Australia at the same time of
The ABS has also recorded that about 51 percent
or about 245 000 of small (employing) businesses are incorporated
and that there a further 409 100 small businesses which are non
employing (eg sole proprietorships or partnerships with no
employees). The latter group is also largely
At face value, these figures suggest that a
significant number of workers may be covered by the Act and
therefore affected by the Bill. However, when account is taken of
various existing statutory and regulatory exclusions, the number of
businesses and employees affected shrinks considerably. For
instance, all the unincorporated and non employing firms referred
to above (except mostly those resident in Victoria or the
Territories) will generally not be covered by federal unfair
dismissal laws and hence are not affected by the Bill.
Figures supplied by Mr Reith's Department for
the period January to August 1998 show that about 46 percent of a
total of 11 074 unfair dismissal claims were lodged in the federal
system. Departmental figures also show that only about 35 percent
of federal claims lodged between December 1997 and
September 1998 related to businesses employing 15 or fewer
Making a best guess estimate from the available
survey data, it is likely that less than 25 percent of Australian
businesses will be affected by the proposed small business
exemption. This is (again) because most businesses with fewer than
16 employees are unincorporated (ie sole traders and partnerships)
and therefore not covered by federal unfair dismissal laws.
The figure of 25 percent is 'rubbery' and may
indeed over-estimate the number of businesses affected by the 15
employee cut-off proposed in the Bill. Using the ABS definitions
and figures, 83 percent of small businesses and 80 percent of all
businesses have less than 5 employees.(32) This group, 'micro
businesses', has relatively few employees but account for a high
proportion of employment in the small business sector. It is also
this same class of very small firms which employ a high proportion
of workers employed by small business, ie about 50 percent.(33) It
is also the group that employs 0-4 workers which is most unlikely
to be incorporated and covered by a federal award and therefore
outside the scope of the federal unfair dismissal regime.
For constitutional reasons, however, federal
coverage of small and micro business will be higher in Victoria and
the Territories and this will tend bolster the coverage.
Another way of looking at the scale of the
problem is to compare the number of unfair dismal claims in a given
period with the level of labour market turn-over. Again, these
figures should be treated as indicative.
Full year figures for the number of unfair
dismissal claims have not been supplied by the Department of
Employment, Workplace Relations and Small Business but some readers
may find the following rough annual estimates a useful guide to the
magnitude of the issue.
For 1998, if present trends continue, there will
be about 16 000 unfair dismissal claims lodged nationally of which
about 7 500 will come before the federal tribunal. Of the likely 7
500 federal claims, about 2 500 will be made against employers
employing fewer than 16 staff.
ABS Labour Mobility statistics show
that about 1.1 million Australians change jobs every 12 months and
just over 1 million will change employer. The same survey shows
that in the 12 months to February 1998, there were 1.275 million
job leavers of whom over 185,000 stated that they left their job
due to unsatisfactory working conditions.(34)
In terms of the proposed six month exemption,
about 1.2 million of the 8.4 million persons in work as at February
1998 had been in their current job for less than 6 months.(35)
Six Month Qualifying Period
This proposed exclusion does not affect persons
already employed on the date that the proposed amendments come into
effect. However, persons who presently would be able to access
federal unfair dismissal remedies, but who start work or change
employers after the Bill becomes law, may be disadvantaged.
The qualifying period applies to all workers
otherwise within federal jurisdiction, not just those employed by
Persons Employed by Smaller Businesses
The small business exclusion may be relied on by
employers with 15 or fewer permanent workers.
Put another way, the Bill may affect the
existing rights of persons employed by businesses with no more than
15 permanent employees.
The cut-off figure may include the dismissed
employee themselves and certain types of casual worker. For the
purposes of establishing the size of the business, only those
casual employees who have been engaged 'on a regular and systematic
basis for a sequence of periods of employment of at least 12
months' by the business are included in any count of persons
Pros and Cons
Supporters of the Bill argue
that the proposed small business exemptions:
- are necessary to ensure the continuing growth in employment in
- are consistent with the Government's stated policy which was
fully canvassed prior to the 1996 and 1998 General Elections
- reflect special burdens carried by small business in defending
unfair dismissal claims (Larger businesses have greater expertise
for establishing recruitment and termination procedures whilst
small business can find that just defending unfair claims places
intolerable strains on their resources.)
- do not affect the rights of existing employees
- do not diminish the rights of apprentices or approved
- do not extend to cases of alleged unlawful dismissal
- are consistent with exemptions available under the
International Labour Organization's Termination of Employment
- mirror the precedents (for the size of business excluded)
established by the Wran Government's Employment Protection Act
1982 (NSW) and the decision of the then Australian
Conciliation and Arbitration Commission in the 1984 Termination,
Change and Redundancy Test Case
- are supported by the findings of the Senate Economics
Legislation Committee Report on the 1997 Bill and by surveys of
small business, and
- have been recently re-endorsed by the electorate.
In his Second Reading Speech introducing the
Workplace Relations Bill 1997 [No.2], Minister Reith referred to a
number of surveys of business groups supporting the Bill. He also
endorsed claims that the Bill's passage would spur job creation.
For instance, he drew attention to a questionnaire on unfair
dismissal in the Yellow Pages Small Business Index Survey conducted
from 30 October 1997 to 12 November 1997, and noted:
This is the largest economic survey of small
business in Australia, it focuses specifically on small
business with 19 or fewer employees. Approximately 1,200 randomly
selected proprietors of small business were covered by the
In this survey, 79 percent of proprietors
thought that business would be better off if they were exempted
from unfair dismissal laws. 33 percent of small business reported
that they would have been more likely to recruit new employees if
they had been exempted from unfair dismissal laws in 1996 and 1997.
And 38 percent of small businesses reported that they would be more
likely to recruit new employees if they were exempted from the
current unfair dismissal laws. (36)
In his Second Reading Speech for the present
Bill, Minister Reith again was able to draw on copious support from
business. He again highlighted survey evidence pointing to strongly
held perceptions that the law requires further amendment along the
lines being pursued here.
Departmental figures for the period 31 December
1996 to 30 October 1998 also tend to suggest that a significant
proportion of unfair dismissal claims are made against small
business (about 35 percent) and that a not insubstantial portion of
total claims were made without a reasonable expectation of
Critics of the proposed
exemptions argue that the changes are inequitable, unnecessary and
at odds with Australia's obligations at international law.
The principal argument going to the fairness of
the changes is that they leave a significant section of the
workforce without basic protections enjoyed by workers employed by
medium to large businesses (including workers in comparable
Further, it may be argued that proposed changes
to unfair dismissal laws will only have a marginal impact on the
viability of most small businesses. Insufficient capital, poor
management, general inexperience and predatory conduct by
competitors are arguably more pressing problems for small business
(and indeed for the job prospects of persons employed by small
Critics of the proposals may argue that all
employers should take reasonable care in selecting staff and that
workers should not be dismissed capriciously. Arguably, these are
sound generic business principles which should apply to all firms
irrespective of their size.
Similarly, the Bill readily accepts that an
action for unfair dismissal may harm the employer, but does not
acknowledge the likely effect on the worker of losing his or her
Excluding some businesses from the federal law
a priori ousts the jurisdiction of third parties who may
be able to resolve the matter by conciliation. This is not only
likely to produce unfair results but is also bad industrial
The Bill assumes that size is a universal proxy
for profitability or capacity to pay. This need not be so. The Bill
(in effect) says that in every instance where the employer is a
small business, the business is less well placed to carry the costs
of a breakdown in the employment relationship than the dismissed
worker. Only in some instances will this be true.
It has been suggested the Bill may encourage
some employers to create artificial business entities to avoid the
law by reducing the nominal size of their workforce below the
With continuing high levels of unemployment, the
removal of access to unfair dismissal remedies further enhances the
already considerable bargaining power of many employers. This, it
may also be argued, undermines the basis for genuine/free
collective agreement making.
To the extent that the provision does actually
advantage small businesses, it gives them an unfair competitive
edge over other businesses (including those which may employ as few
as 16 workers).
It is arguable that the changes already enacted
by the present and the previous government have sufficiently
redressed any imbalance in the legislation against employers.
General changes to the termination of employment
law since June 1994 have advantaged all employers, and small
business has benefited as much as other businesses.
Spurious actions are now less of a problem for
all businesses as there has been a marked decline in the number of
claims in recent years.
Early figures from the then Department of
Workplace Relations and Small Business comparing the period
January-August 1997 (under the Reith law) with the January-August
1996 period (under the last version of the Keating law) showed a
national decline of about 20 percent in the number of
unfair/unlawful dismissal applications lodged. Similarly, the
number of applications in the federal jurisdiction fell from 9 864
in January-August 1996 to 4 492 in January-August 1997.(38)
Later figures, comparing the first six months of
1998 with the first six months of 1996, show that the general
decline in applications in the federal system had been sustained
with a fall of about 46 percent over the comparable period in
Figures showing the number of unfair dismissal
claims arbitrated on the merits between December 1996 and October
1998 show that 75 percent of the 722 matters determined were
decided in favour of the employee applicant.(40) Subject to certain
qualifiers, this would suggest that a significant proportion of the
claims made under the Act cannot be regarded as spurious or as
being made for an improper purpose.
Whilst the reasons for these apparent trends may
be argued, what seems clear is that the Howard Government's laws
have had an impact on the number of allegations of unfair treatment
being made against employers, particularly employers in the federal
arena and that the need for a further paring back of access to the
system may be overstated.
Critics of the present proposals might also
argue that changes to the general law have not only reduced levels
of litigation, but have also lowered the risk to all employers of
being subject to an adverse finding. Relevant factors include:
- the 'fair go all round test' formalised under WROLA reduces the
importance of procedural fairness in determining cases and to some
degree lessens the attendant requirements for excessive record
keeping (etc) by employers in connection with the dismissal
- remedies of reinstatement or (capped) compensation are no
longer available to a dismissed worker as of right even
where the termination is found to be harsh, unjust or unreasonable.
The AIRC, in making an order of compensation, must have regard,
among other things, to the effect that the order may have on the
viability of the employer's business [section 170CH(7)]
- as the present Government has claimed, introducing a filing fee
and extending the Commission's capacity to award costs appears to
have gone some way to shielding employers - small and large - from
unreasonable claims, and
- the extension of the former legislation's exclusions in respect
of casual, fixed-term and probationary employees also works to the
advantage of some employers (including, of course, small
Lastly, and on a slightly different tack, it is
arguable that the alleged mischief created by the 1993 Reform Act
(including that done to small business) was always overstated. It
will be recalled that amongst the claims made by employers were
- the legislation encouraged too many claims, many of which were
'try-ons' and simply unjustifiable, representing increased pressure
in terms of legal costs and time on employers, and(41)
- the law cost jobs (the Executive Director of the NSW Employers
Federation, Garry Brack, was reported as suggesting that the
anecdotal evidence indicated that the unfair dismissal laws may
have dissuaded Australia's small business from creating an extra
100,000 to 200,000 jobs).(42)
Such claims, by their nature, are easily made
but not so readily tested. Similarly, surveys of business attitudes
to the law may say more about business perceptions and aspirations
than they do about the actual effect of the legislation.
In its 1995-1996 Annual Report, the
Industrial Relations Court of Australia provided a detailed
critique of many of the employer criticisms of the previous law.
The Report provides the statistical support for the claims of Chief
Justice Wilcox during the 1996 Election campaign that the then law
was generally 'working well' and that the main problem was the bad
conduct and sloppy human resource management practices of some
employers. Comments in the Industrial Relations Court's 1995-96
Annual Report include the following:
- the controversy was fuelled by a degree of deliberate
- the previous Government did not make a major effort to explain
and justify the new laws, hence public perceptions were able to be
- in 1994-95 only 928 (or 12 percent) of the finalised cases were
resolved either at or after trial with the corresponding figures
for 1995-96 being 1605 and 15.8 percent (ie most cases did not come
- from late 1995 onwards, the total number of unfair dismissal
applications represented only about 2 percent of total involuntary
- employers had a good success rate under the old
- contrary to some suggestions, people who bring unfair dismissal
claims represent a fairly normal cross-section of the
- although ABS figures show that 91.7 percent of employers have
fewer than 20 employees, a survey of employers involved in unfair
dismissals showed that only 33 percent of respondents were small
businesses (had fewer than 20 employees), ie small business is
under-represented in unfair dismissal actions,(43)
- the median amount of compensation awarded was $6 000.00 and the
average cost of defending a claim less than $5 000.00.(44)
Subject to the important qualification that
legitimate concerns about the threatened or improper use of the
remedy as a bargaining tactic, what emerges from the Industrial
Relations Court of Australia's findings is that the 'problems'
caused by the 1993 legislation may have been exaggerated. Again,
this not to deny the strength of some of the anecdotal evidence
cited by employers and employer organisations.
The Court's identification of the apparent
under-representation of small businesses in termination matters
coming before the tribunals is particularly interesting in the
context of the Bill as are its reported findings on the processing
of claims under the old and new laws.
In its Annual Report for 1996-97, the Industrial
Relations Court of Australia highlighted major outcomes in the
federal jurisdiction as follows:
- 74 percent of unfair dismissal claims cases were settled by
- 75 percent of cases were finalised within six months, 99
percent within 12 months
- 62 percent of trials were completed in one day, 84 percent
within two days
- 58 percent of contested cases were decided in favour of the
employee, 42 percent favouring the employer
- reinstatement of the employee was ordered in 7.5 percent of
contested cases, and
- the median amount of compensation awarded was around $6
These findings should, of course, be read
together with later data collected by the Department of Employment
Workplace Relations and Small Business referred to, in part,
Lastly, those who argue the changes are largely
unnecessary would also suggest that as a fraction of labour market
turnover/job separations, the proportion of unfair dismissal claims
is quite small (see above).
Australia ratified the ILO Convention on the
Termination of Employment, 1982 (Convention No.158) on 26 February
Having ratified such a Convention, the
Commonwealth undertakes to ensure that Australian domestic law and
practice remain in conformity with the terms of (what is in effect)
the treaty and with the relevant international jurisprudence.
There may need to be some further consideration
of whether the proposed exemption for small businesses from the
unfair dismissal laws is at odds with Convention No.158.
The relevant substantive provisions of
Convention No.158 are articles 2(5) and 2(6).(46)
Article 2(5) provides:
In so far as necessary, measures may be taken by
the competent authority or through the appropriate machinery in a
country, after consultation with the organizations of employers and
workers concerned, where such exist, to exclude from the
application of this Convention or certain provisions thereof other
limited categories of employed persons in respect of which special
problems of a substantial nature arise in the light of the
particular conditions of employment of the workers concerned or
the size or the nature of the undertaking that employs
them. (emphasis added)
It is arguable that the broad exclusions from
the Act contemplated by the Bill go beyond '...limited categories
of employed persons in respect of which special problems of a
substantive nature exist...' referred to in article 2(5) of the
Convention. An exclusion exempting businesses in a particular
industry engaging a relatively small number of workers would
probably conform to the Convention. A more general provision may
also conform but the chances of a conflict arising increase with
the number of workers who are excluded. Much will turn on the
intended effect of article 2(1) and how that clause is interpreted.
The structure of article 2 suggests a broad reach for the
Convention with limited exceptions only being allowed to the
fundamental principle that the Convention 'applies to all branches
of economic activity and to all employed persons'.(47)
Current ILO thinking seems to run counter to a
restrictive view of article 2(5). The International Labour
Conference Report of the 82nd Session (1995) instances only a
handful of countries where unfair dismissal laws have limited
application to firms with relatively few employees.(48) Of these,
two of the four countries mentioned employ very limited exceptions.
One applies to firms with 4 workers (Republic of Korea), the other
to 6 workers (Germany). Austrian practice is tied to other
legislation and Sri Lanka sets the bar at 15 workers.(49)
Lastly, Article 2(6) provides that:
Each Member which ratifies this Convention shall
list in the first report on the application of the Convention
submitted under article 22 of the Constitution of the International
Labour Organization any categories which may have been excluded in
pursuance of paragraphs 4 and 5 of this Article, giving the reasons
for such exclusion, and shall state in subsequent reports the
position of its law and practice regarding the categories excluded,
and the extent to which effect has been given or is proposed to be
given to the Convention in respect of such categories.
It has been argued that article 2(6) does not
allow for subsequent exclusions once the first article 22 report
has been made.(50) A leading commentator on industrial law, Breen
Creighton, has noted that:
Given that Australia submitted its first report
on Convention No.158 in September 1995, this means that it would
not now be permissible in terms of the Convention to adopt
regulations under section 170CC(1)(d) or (e) to exclude categories
of workers (for example those whose employers employed fewer than
five employees) - even though it would have been quite in order to
do so before the first report was submitted.(51)
For its part, the Government takes the view that
its proposed changes conform with the Convention.
The substance of the Bill is contained in a
single schedule and that schedule contains a single item.
The proposed amendment is complex and builds on
what is already a very complex set of provisions.
Sources of potential confusion include
distinction between 'unfair' and 'unlawful' dismissal,(52) the
scope of existing exclusions, jurisdictional issues and the style
in which the Act and the amendment have been drafted.
To assist the reader, a number of basic features
of the Bill are restated here even though they have been touched on
For those relying on the Explanatory Memorandum,
it may be noted that the Bill appears to do what the Memorandum (in
simpler terms) says that it sets out to do. What the Explanatory
Memorandum does not do is list the exclusions that will continue to
apply whether or not this Bill is enacted into law. To further
assist the reader, the main legislative exclusions already in place
are listed above under the subheading 'Persons Affected'. The scope
of the exclusions made by regulation is examined in the section of
this Digest dealing with the history of the legislation. A further
and more detailed list of exclusions is contained in the CCH
Research Manual of Industrial Law (at page 86,003).
Schedule 1 provides for the
small business exemption by amending section 170CE of the Principal
The new provision exempts employers from the
unfair dismissal provisions of the Workplace Relations Act
1996 in relation to any person engaged after the commencement
of this Act where:
- that person was not an apprentice or a trainee,
- the business employs no more than 15 persons.
The relevant time for calculating the threshold
number of employees for jurisdictional purposes is either the time
that notice was given by the employer to the dismissed worker or
the time that the contract of employment ceases (whichever happens
In calculating the number of persons engaged by
the employer at the time that notice is given or dismissal is
effected, the dismissed worker is included. However, casual workers
who are not engaged on 'a regular and systematic basis for a
sequence of periods of employment of at least 12 months' are not
included in the count.
Schedule 1 also prevents
employees newly hired after the Bill is enacted from using the
federal unfair dismissal regime until they have been engaged by
their employer for a period of at least six months.
In relation to the 6 months qualifying period,
the Act will only protect persons who have been engaged by the same
employer for a 'continuous' period of 6 months. New
subsection 170CE(5A) provides that what constitutes
'continuous service' will be defined by regulation.
As noted in the Explanatory Memorandum, the Bill
seeks to maintain the existing rights of apprentices and certain
trainees. The Bill does not, however, expand those rights by
restoring access to the federal jurisdiction of those apprentices
and trainees excluded by other provisions in the Act or the
- Hon Peter Reith, Second Reading Speech, Hansard, 12
November 1998, p 243.
- It is generally acknowledged that relatively few actions will
be brought for 'unlawful dismissal'. Refer Chief Justice Murray
Wilcox, 'Dismissal: A Fair Go All Round', Speech to Workplace
Relations Act Conference, Brisbane 14 March 1997, p 10.
- The 1993 Reform Act amended but did not rename the
Industrial Relations Act 1988 (the IR Act 1988 ). The IR
Act was later to be heavily amended and renamed by legislation
introduced by the Howard Government and is now titled the
Workplace Relations Act 1996 (referred to here as either
the Workplace Relations Act or the Principal Act).
- Statutory Rules 1994, No. 79.
- Statutory Rules 1994, No. 386.
- Industrial Relations and Other Legislation Amendment Act
- page 11.
- Victoria v Commonwealth (1996) 138 ALR 129.
- Statutory Rules 1996, No.307.
- Not withstanding sub-regulation 30B(2) which seeks to prevent
conduct deliberately aimed at escaping the operation of the Act.
- Senate, Hansard, 26 March 1997, pp 2573-2580.
- page 85.
- Statutory Rules 1997, No. 101.
- Senate, Hansard, p 5287.
- Senator Murray has alleged that Mr Reith had given a commitment
during the election campaign (SMH, 20 February 1996) that
there would be no small business exemption from the unfair
dismissal law. Senate, Hansard, 26 June 1997, p 5278.
- Canberra Times, 25 August 1997.
- Sydney Morning Herald, 17 July 1997 and
Canberra Times, 21 July 1997.
- The Public Service Bill 1997 was laid aside by the House of
Representatives on 5 December 1997, the House rejecting 52 non
Government amendments made by the Senate on 19 November 1997. An
identical Bill, the Public Service Bill 1997 [No.2] met a similar
fate for similar reasons in the House of Representatives on 6 April
- Australian Senate, Consideration of the Legislation
Referred to the Committee: Workplace Relations Amendment Bill
1997, October 1997.
- Hansard, op cit, p 243.
- Refer pages 4, 14 and 19 at
- ALP, Kim Beazley's Plan for The Nation, 'A Better Plan
for Industrial Relations', September 1998, pp 145-146.
- In late 1996 the Victorian and Commonwealth Governments passed
complementary laws effectively transferring jurisdiction over a
broad range of industrial matters to the Commonwealth.
Commonwealth Powers (Industrial Relations) Act 1996 (Vic) and
Workplace Relations and Other Legislation Amendment Act (No.2)
1996 (Cwth). Termination of employment was one of those
matters referred to the Commonwealth.
- The termination of employment provisions also rely to varying
degrees on the territories power, the external affairs power, the
trade and commerce power and the self-government powers of the
- Hence, unincorporated bodies such as sole traders and
partnerships are not presently subject to the federal unfair
dismissal regime and will accordingly not need to rely on the
proposed exemption. Many corporations not bound by federal awards
will also not need to rely on the proposed exemption as they are
not presently subject to federal unfair dismissal laws.
- House of Representatives, Hansard, 15 July 1998, p
- ABS, Catalogue No. 1321.0, Small Business in Australia
1997, 28 May 1998.
- Ibid, pp 8 and 38.
- ABS, Catalogue No. 6248, Wage and Salary Earners, 22
- ABS, Catalogue No. 1321.0, Small Business in Australia
1997, 28 May 1998, pp 10, 14 and 163
- ABS, Catalogue No. 1321.0, Small Business in Australia
1997, 28 May 1998, pp 80-81.
- Ibid. p 81.
- ABS, Catalogue N0. 6209, Labour Mobility, 30 July
- Ibid, p 8.
- House of Representatives, Hansard, 26 November 1997, p
- Department of Employment, Workplace Relations and Small
Business figures 20 November 1998.
- Answers provided to Senator Andrew Murray by Department of
Workplace Relations and Small Business. See Australian Senate,
Consideration of the Legislation Referred to the Committee:
Workplace Relations Amendment Bill 1997, October 1997 Appendix
- Department of Employment, Workplace Relations and Small
Business, op cit, 20 November 1998.
- Bryan Noakes, President of the Australian Chamber of Commerce
and Industry (ACCI), Sydney Morning Herald, 28 February
- Australian Financial Review, 11 April 1995.
- These figures appear still to be broadly correct.
- See Report, especially pp 5-6 and 41.
- Back cover of Annual Report.
- Pre-existing exemptions covering casual workers, probationary
employees and fixed term employees come within Article 2 paragraph
- But again, this is an argument, not a concluded view. Other
approaches to the interpretation of the Article would also need to
- However, it may be noted, although this does not have a direct
bearing on the intended effect of the relevant articles, that as at
December 1997 only 28 of 174 ILO members had ratified Convention
- ILO, Protection Against Unjustified Dismissal, Geneva,
1995, pp 27-29.
- Ibid, p 30.
- 'The Workplace Relations Act in International Perspective',
Australian Journal of Labour Law, April 1997, pp 31-49, at
- The term 'termination' is used to encompass both
26 November 1998
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