Ideas@TheCentre
Dismissal amendments won’t stop go-away money
Upcoming amendments to unfair dismissal laws would benefit small businesses by providing ‘a disincentive for frivolous or vexatious unfair dismissal claims,’ announced federal Workplace Minister Bill Shorten last Tuesday.
These changes, which are based on the recommendations in the government’s review of the Fair Work Act, may seem sensible at first glance. In reality, they are insignificant and will make no measurable difference for small business employers paying go-away money to avoid a full trial (arbitration).
The most substantial change is that if an employee unreasonably rejects a settlement offer from the employer, or if the employee unreasonably inflicts costs onto the employer, Fair Work Australia (FWA) can order the employee to pay the cost of arbitration.
First, FWA already has that power, and uses it, to reject frivolous or vexatious claims. The changes simply allow FWA to impose a penalty for these claims. Second, of the 517 claims arbitrated by FWA in 2010–11, only eight were rejected for being frivolous or vexatious. The amendments would only affect those eight claims.
Frivolous or vexatious claims generally do not go to arbitration. Their value is in the settlement money employees can extract at conciliation (an informal preliminary conference). This settlement, or go-away, money is the cost employers pay to avoid the legal and time costs of arbitration.
Enabling FWA to make cost orders against employees at arbitration won’t reduce the number of frivolous or vexatious claims; it will only reinforce the pressure on employees to settle at conciliation.
Real reforms to unfair dismissal laws need to address the entire process of unfair dismissal claims – from the application process (including the cost) to conciliation and arbitration – and the wider effects of unfair dismissal laws on employment.
Alexander Philipatos is a Policy Analyst at The Centre for Independent Studies.
