The Australian, July 4, 2017
Unfair dismissal laws are creating unfair outcomes for employers and employees who do the right thing.
Employers overwhelmingly want to do the right thing by their staff. They value their employees and want to create a working environment that helps them attract and retain good people. This includes establishing a culture of high performance and productivity, and ensuring all employees are treated fairly. But our laws are making this a real challenge for employers.
Under today’s unfair dismissal regime, employers are compensating and having to reinstate employees who have bullied or harassed and even assaulted their colleagues. This puts the safety of others in the workplace at serious risk and sends a terrible message to the victims of this behaviour.
Our laws need to strike a better balance between an employer’s ability to manage in the best interests of all the people in the workplace and the individual rights of an employee. We need the focus to go back on to fairness and away from process.
When the Productivity Commission reviewed our workplace relations framework in 2015 it found “the most problematic aspect of the current legislation is that an employee who has clearly breached the normal expectations of appropriate work behaviour may nevertheless be deemed to have been unfairly dismissed because of procedural lapses by the employer”.
The Productivity Commission cited an example where an employer dismissed two employees after they assaulted their supervisor. The commission concluded that the physical assault was a valid reason for dismissal, but that the employer’s failure to follow certain administrative procedures meant that the dismissals were therefore unfair.
Unfair to whom? To the person who was assaulted? To the employer who is expected to maintain and enforce acceptable standards of conduct? To the rest of the workforce who do the right thing and expect their colleagues to treat them with respect?
Unfortunately, this is not an isolated example. This situation should not be allowed to stand. The law needs to change. The Productivity Commission was right to find that the Fair Work Act should be amended so that “procedural errors alone are not sufficient to award compensation or restore employment in what would otherwise be regarded as a valid dismissal”.
There is evidence that the cost to a small business of defending a claim can reach as high as $20,000. It is no surprise, then, that “go away money” is a persistent feature of our workplace relations system. Employers are deciding it is cheaper to pay the employee who has done the wrong thing than to incur the cost, time, inconvenience and stress of legal proceedings.
For everyone else in the workplace, this sends the wrong message that justice does not prevail and that there will be no serious consequences for misconduct.
As it stands the system does not tell employers how they should deal with these issues without risking a costly claim. It does not make it clear how they should grapple with their duties under work health and safety laws, anti-discrimination laws and anti-bullying laws.
The Productivity Commission has found that unfair dismissal laws, if tipped too far in favour of protecting an individual employee, “can lead to underperformance and reduced productivity”. This impacts the people in the workplace who carry the burden of team members who have let them down.
For a small business, the risk and cost of defending a claim is simply too great, and so too is the cost of a poor-performing employee. It is also unfair on their colleagues, where a small team carries the work of the person who is not performing. This has been recognised in other countries, including Germany, where small businesses are exempt from unfair dismissal laws. There is a strong case for an exemption for Australian businesses with fewer than 20 employees.
Unfair dismissal laws have a negative impact on employment decisions. Employers weigh the potential cost of a claim when making hiring decisions. They become more cautious about who they hire. Unfortunately that means people out of the labour market are less likely to get a look in. The system is failing 729,000 Australians looking for a job.
We need to rebalance our unfair dismissal laws so that employers who act fairly and in the interests of their entire workforce are not penalised. We need to remove rules that focus on the fairness of process rather than the fairness of the outcomes. We need to reset the system so that it encourages employers to hire more people. That would be fair.
James Pearson is chief executive of the Australian Chamber of Commerce and Industry.