AS THE Productivity Commission continues its comprehensive review of Australia’s workplace system, AREEA is breaking down its comprehensive submission in our Weekly News Update, one key issue at a time.

With the Economic Case for Reform; Protected Industrial Action; and Union Right of Entry all covered in recent editions – this week we delve into a complex area of the Fair Work Act 2009 fraught with liabilities and legal costs – employee protections.

Employee protections are an important part of the employment safety net. However, such measures, including unfair dismissal and adverse action, must be balanced, proportionate, transparent, practical and navigable for both employers and employees.

AREEA’s submission entitled Getting Back on Track: Delivering the Workplace Relations Framework Australia Needs, supported by research from KPMG, details reforms in this area to minimise the growing number of unmeritorious claims, more clearly define the link between workplace rights and adverse action claims, and cap the currently unlimited compensation for successful claims.

At the heart of these recommendations is a vision for a clearer system which provides more reliable signals to when employers can and cannot discipline and dismiss employees.

Unfair dismissal

Unfair dismissal laws must balance the needs of businesses and employees while trying to establish procedures that are quick, flexible and informal. Unfair dismissal provisions are created so that if a dismissal is found to be unfair, then the appropriate remedy can be applied.

However, AREEA argues that the FW Act’s unfair dismissal rules have had the effect of encouraging speculative claims and have in many instances seen the FWC encroach on areas that should be left to managerial decisions as to what is best for the enterprise.

According to AREEA’s submission, the propensity for litigation is one of the most significant weaknesses of the current system.

“The jurisdiction is a growing one, with twice as many claims being brought now as under the previous WR system,” AREEA submits.

“In many cases employees who have engaged in serious misconduct undermining trust in the employment relationship have been able to seek reinstatement, some of them successfully. Employee protections are well taken care of in this area, it is employer protections that are lacking.”

KPMG’s research report, Workplace Relations and the Competitiveness of the Australian Resources Sector, shows unfair dismissal claims have recently skyrocketed and that the ‘speculative nature’ of proceedings is largely ineffective.

“The number of unfair dismissal claims per year prior to the Fair Work Act taking effect were around 4,000 or 6,000 which has now risen to around 15,000 a year,” KPMG notes.

The cost impost is also significant, with one AREEA members reportedly losing $250,000 in legal fees to six unfair dismissal claims made against the organisation. This serves further to highlight the complicated nature of the current framework.

“Since its creation, unfair dismissal has caused significant angst for employers not simply because it created new rights to litigate dismissal, cost money, saw dismissed employees reinstated, nor simply because it was new,” AREEA’s submission says.

“The system needs to be more practical and navigable. Employers need to be able to know what to do and not do to keep themselves out of litigation, and to then be able to keep themselves out of litigation.”

General Protections / Adverse Action

Even more controversial than the Act’s unfair dismissal laws, says AREEA, are the general protections provisions, notably including adverse action. Adverse action claims are a new addition to Australia’s workplace system under the Fair Work laws and pose a serious and escalating challenge to resource industry employers.

“These provisions disturb well understood and complied-with protections of fundamental rights and replace them with a system that invites creative and strategic litigation and which is unduly costly and unpredictable to operate under,” AREEA argues.

“A number of recent cases have demonstrated that legitimate actions by employers are being challenged before the courts and that motives are being automatically ascribed to employers’ behaviour that are not necessarily there.

“Even where claims of adverse action against employers have ultimately failed, they have still come at a significant cost to employers. While the evidence confirms that adverse action claims are on the rise, it is not only unions that are driving the increase, as employee awareness of their ability to bring claims and receive pay-outs grows.”

AREEA submits to the PC Review that clearer laws around exactly the type of claims that can be brought under this jurisdiction will stop it functioning in the current ‘open slather’ way.

“Reforms in this area should look at containing the number of unmeritorious claims, defining clearly the required nexus between a workplace right and the alleged adverse action, and capping the currently unlimited compensation that can be awarded for successful claims,” AREEA says.

Supporting competitiveness and sustainability

In its submission to the Productivity Commission’s review, AREEA recommends a range of changes to address the challenges of current employee protections, including unfair dismissal and adverse action.

With its reforms enacted, AREEA argues that employment protections can be balanced, proportional and practical to adapt to an evolving business environment. Such reforms are based on the notions that:

• The best employee protection is working for a productive, competitive, sustainable enterprise that is supported in its capacity to do business by national employment regulation.
• Where employment protection measures (such as in relation to unfair dismissal, adverse action, workplace bullying) are imposed they need to be balanced, proportional and practical to accord with what a workplace relations system needs to deliver for the economy and labour market in which it operates.
• There needs to be greater capacity to retain jobs by revisiting agreed entitlements where businesses and jobs are under genuine threat.

To read more about the resource industry’s reform priorities regarding employee protections, read AREEA’s submission to the Productivity Commission in full, available here.

To read the supporting KPMG research report, click here.