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Strict law relating to unfair dismissal is not welcomed by some while others say it is workable.

KAREN SNOWDON: Today a feature on what one employer has called the worst piece of legislation ever drafted - the Federal Government's unfair dismissal laws.

Over the past 16 months the unfair dismissal legislation has been called complex, unbalanced and unworkable. The Act's emphasis on procedure which stipulates strict laws to follow when terminating employment was seen as a threat to business. Many employers lost cases on procedural grounds despite being told by the court their reasons for dismissing workers were warranted. Compensation was often paid to employees after they were sacked for offences like misconduct, theft and even safety breaches.

Last month with the new Accord Mark VIII finalised and a Federal election looming, the Government couldn't ignore the noise anymore, finally making major concessions to employer groups.

In this report Tim Latham looks at what impact the latest changes will have on business and how people are dismissed from their job.

LAURIE BRERETON: We believe, I repeat, that these alterations will make a fair system fairer still; a good system better yet.

UNIDENTIFIED: Basically the legislation has to be changed. You've got to take those steps away where there are three warnings for the one thing within a 12 month period otherwise you have no grounds of dismissal. Go back and work on the book again, Laurie, because you haven't got a right yet.

TIM LATHAM: Ever since the Government announced its Industrial Relations Reform Act in March last year, Laurie Brereton has faced a barrage of criticism over the Federal Government's unfair dismissal laws. His first two changes did little to stop the protests but Mr Brereton was adamant throughout May that no significant changes would be made to the Act until after the next Federal election. Four weeks later the Minister for Industrial Relations announced to Parliament a major revamp of the dismissal laws.

ANDREW STEWART: The main reason for these changes was in response to a very effective political campaign by the employer groups. They certainly claimed that the legislation was very unfair in its operation. I think a balanced assessment of the legislation would be that it certainly had some problems but probably problems for both sides. And certainly there was no way that some of the hysteria that we've heard from the employer groups about not being able to dismiss anybody there's no doubt that that was way off the mark.

TIM LATHAM: Law Professor at Flinders University, Andrew Stewart, who says the Government's changes just add further complexity to an already complicated piece of legislation.

ANDREW STEWART: I don't think that you would find any industrial lawyer or industrial relations practitioner in this country who would be prepared to say that this current piece of legislation - forgetting its content, just in terms of the way it's put together and the amount of detail it contains, is a good piece of legislation - it isn't.

TIM LATHAM: The backlash from the country's many employer groups centred on the legislation being too favourable to workers and too onerous on employers. In other words, it was simply unfair and they claimed it was costing jobs. Garry Brack is head of the New South Wales Employers Federation.

GARRY BRACK: Well firstly, there's been a massive increase in the volume of these cases, that's clear. The technicality of the law has increased dramatically; the uncertainty of employers' positions has certain risen very sharply; the administrative burden placed on employers and, particularly small ones, has grown enormously such that those who've now had exposure to the legislation through unfair dismissal cases in the Federal Court are commonly, not universally, but commonly saying that, they simply will not employ additional people unless they absolutely have to and even then they'll think again about it. And its turned this area of law, away from one in which there was, at least historically, reputed to be a kind of balancing of the competing interests of employers and employees in these dismissal circumstances, into one where it certainly tilted very heavily against the interests of employers.

TIM LATHAM: But Assistant Secretary of the ACTU, Tim Pallas, says the latest amendments to the Act have dealt with employers' complaints.

TIM PALLAS: Well I think, not only are they out of date but most employer organisations would recognise that they are out of date. I think essentially, the reason we're hearing those criticisms is: one, the politics of the unfair dismissal provisions and; two, those employers who are actually coming out with these sort of criticisms don't actually believe that workers should have a right to seek review of a court or the Commission, to ensure that their employer acts lawfully in the removal of their employment.

Essentially it comes down to this: Before the Act was introduced, there was no entitlement for any worker under a Federal Award that was reasonably accessible to ensure that an employer acted lawfully and properly. Now that the legislation has been introduced there is that obligation and there are, at least some employers in the community, who would like to go back to the bad old days when they could remove somebody's employment without having to be answerable to anybody.

Now, I don't think too many Australians think that's fair. I am glad to see that many employer groups have come out and welcomed the changes and even said that they can live with the legislation as it operates. One, in particular, is the ACCI and the MTIA. Now they are not small employer organisations that you could dismiss. They are organisations who have seen the nature of the legislation in its totality and the changes and they say that they can live with it. So I think that essentially the legislation, in its revised form, now has a broad measure of consensus and those who continue to criticise it really have no commitment to allowing ordinary working people the right to ensure that their employer acts lawfully and fairly.

TIM LATHAM: The Government's changes to the dismissal laws address the areas which upset employers the most. Firstly, provided they comply with the ILO or International Labour Convention on terminations the States will be able to hear Federal dismissal cases. Secondly, in an attempt to deal with the courts' backlog of 3,000 cases, a process of voluntary arbitration will be established allowing cases to be heard by the faster-moving Commission. It's hoped voluntary arbitration will reduce costs and simplify procedures. But the change which will have the biggest effect is Mr Brereton's softening of the procedural fairness rules. Procedural fairness was the main principle underlying the original legislation and as interpreted by the court, meant how a person was sacked was more important than why. Now the court is a little more flexible and can give some weight to the original reason for the dismissal.

LAURIE BRERETON: ... and fourthly, Mr Speaker, I might say that this is a measure that's been welcomed by the States and welcomed overwhelmingly and fourthly, Mr Speaker, in respect of the question of procedural fairness, the last and indeed a very important provision, will provide for the court for those matters that eventually go to the court to have to provide for consideration of all the circumstances of the case. We believe, I repeat, that these alterations will make a fair system fairer still; a good system better yet.

TIM LATHAM: Even though Brereton's changes are designed to make the legislation work better, some employers have already changed the way they operate to reduce their chances of ending up in court.

One New South Wales businessman, who doesn't want to be named, lost an unfair dismissal case on procedural grounds. He sacked one employee for a serious safety breach after the worker despatched unsafe equipment. He had already warned him twice his job was on the line, the third time he sacked him. The employer hadn't followed correct procedure because he didn't give the worker a chance to defend himself against accusations of misconduct. The case went before the Commission and the employer paid out between $7,000 and $10,000 in compensation. The experience, says the employer, taught him what he calls, a cheap lesson.

UNIDENTIFIED: It taught me not to employ people in staff. So the average Joe Bloggs worker - their job security is no longer.

TIM LATHAM: Their job security has been affected by this unfair dismissal Act?

UNIDENTIFIED: By the fact that now casual staff will be employed.

TIM LATHAM: So is that your aim - to employ casual staff only?

UNIDENTIFIED: I will only employ casual staff from this point on. It costs me more on the initial stages but a lot less later on.

TIM LATHAM: And you're trying to avoid the legislation there, are you?

UNIDENTIFIED: I am avoiding three things. I am avoiding sick leave, which is a major problem in Australia and also overseas, but generally in Australia sick leave is a major problem, it creates a huge deficit for businesses. I am also avoiding scheduling around holidays - I no longer have to do that and I am also avoiding unfair dismissals. Although casuals are entitled to an unfair dismissal tribunal, it's not often the case.

TIM LATHAM: Isn't that a paranoid response from an employer who perhaps got burnt?

UNIDENTIFIED: Give me a paranoid situation and I'll give you a paranoid response.

TIM LATHAM: So you agree that you are trying to avoid the problem that you ran into with your unfair dismissal case?

UNIDENTIFIED: Absolutely. My pockets are empty.

TIM LATHAM: And you have no problems with employing casuals and feeling that you don't have a responsibility to offer permanent employment.

UNIDENTIFIED: No. I think the right of a responsibility to offer people permanent employment went out the door quite some years ago.

TIM LATHAM: Before this legislation came into place?

UNIDENTIFIED: Yes, before the legislation came into place but there are many nails to nail a coffin lid shut.

TIM LATHAM: And this was the final one for you?

UNIDENTIFIED: Well, it's still not the final one, I've yet to sell my business. But yes, this was one of the last ones.

TIM LATHAM: Is it fair to say that you're very bitter about your business and running the business now since the unfair dismissal case you were involved in?

UNIDENTIFIED: No, no. I wouldn't say that I am bitter about running the business. I am bitter of the fact that I got taken for unfair dismissal on the terms and conditions that I was because they are extenuating circumstances behind why the guy was dismissed, one of which is bastardisation of staff which occurred prior to the dismissal and general lack of attention to work.

TIM LATHAM: Are you aware that these rules have now been somewhat changed and that the substance of the case is now to be taken into account as with the procedure?

UNIDENTIFIED: Yes, I wait with bated breath to see the outcome.

TIM LATHAM: You don't believe that that will prevent outcomes where procedural fairness in the past has been followed very rigidly?

UNIDENTIFIED: Yes. I think it's got to go a lot further than what it has. Basically the procedural fairness is still there and must be attended to. The law still does say the procedural fairness must be followed in all these cases. They haven't changed that. They haven't changed the legislation.

TIM LATHAM: A New South Wales employer of 35 staff who wishes not to be named.

Ron McCallum, a law professor at Sydney University, believes the changes will weaken the legislation and undermines the very principles it was built upon - those of the ILO Convention, which regards procedure in terminations as fundamental.

RON MCCALLUM: It matters in the sense that we want people to be treated with dignity and we want employers not to do it in the future. We want to re-educate the workforce. What does it matter if people are spoken to in a harassing or sexist manner? We think it does matter. We're concerned about procedures, we're concerned about process.

The Government and the ACTU, on this aspect, have sold out to the employers for their own pragmatic political reasons. If the Government and the ACTU want to lessen the protection of workers, if the ACTU want to lessen the dignity in which workers are treated in this country, so be it. I still adhere to the law which is based upon the ILO Convention, which was passed by a two-thirds majority of the ILO employers, government and employee reps, which says that procedure and dignity are important.

TIM LATHAM: But procedure still needs to be followed, doesn't it? It still has to be considered by the court. It's just that the court needs now to consider all the facts and legally isn't that a more balanced view?

RON MCCALLUM: No I don't think it's a more balanced view.

TIM LATHAM: Why is that?

RON MCCALLUM: Because it simply gets us down to whether or not a dismissal in all the circumstances was unfair. I am concerned about employer and worker re-education. I am not concerned about what happened at the end of the day. I am concerned that people are treated fairly with dignity.

TIM LATHAM: But won't that still happen?

RON MCCALLUM: No, because employers will know that if they slip up on procedure at the end of the day, if they push the matter hard enough they are not likely to get a remedy put against them and it loses it educative effect.

TIM LATHAM: Do you think they were learning? Do you thing employers were gaining from the strict procedural fairness that they had to follow things to the rule and it was, if you like, adding to a better employment environment?

RON MCCALLUM: I am certain it was. The requirements to give warnings and to ask people do they have a defence to their conduct - that's all we're saying. We're not even requiring you to put things in writing. We're saying: Let the employee give a defence. They are simply minimalist procedural aspects which any human resources department in any corporation would tell you, is the appropriate way.

We've seen the laws watered down now on two occasions, down the slippery slope. I say, enough is enough. Of course, we can live with the laws. Any law that allows some form of termination remedy is better than no law. What I am saying is that we are moving from a better law to a worse law.

TIM LATHAM: Ron McCallum, Professor of Law at Sydney University and a member of the New South Wales Government taskforce responsible for re-drafting the State legislation.

The Federal Minister for Industrial Relations, Laurie Brereton, was invited to discuss these issues on the program, but the declined to be interviewed, so the defence of the legislation is left to the ACTU. Assistant Secretary, Tim Pallas, supports the Government's changes and believes the legislation is now better balanced.

TIM PALLAS: No, there hasn't been any erosion of worker protections. What we've had is a removal of the unduly legalistic interpretation of the procedures that the employer has to apply. Nobody has been suggesting - certainly nobody from the trade union movement - that that was ever the intention, that an employer had to get it perfectly right and the court shouldn't take into account the circumstances that surrounded the termination.

TIM LATHAM: But that is what has happened up to date - up until these changes, hasn't it? that procedural fairness has been followed very strictly by judicial registrars in court.

TIM PALLAS: I think it's fair to say that that is in fact a legitimate criticism. It's one that the trade union movement acknowledged and it's one that we agreed with the Government to move quickly to rectify. We're not about preserving an untenable or an unsustainable jurisdiction. What we're about is ensuring that there's effective protections and fair protections for everybody. It was always a view of the trade union movement and, I believe the view of the Government, that the substance of the change was to deal with unfair dismissals exactly the same way that every State industrial tribunal has been dealing with them for the last couple of decades and that is: in an effective, in a practical and a quick, efficient manner.

ANDREW STEWART: Since 1988 when the Industrial Relations Act was first introduced, the size of that statute has, I would say, almost doubled. Year after year we're getting amendments which are getting more and more complex. Industrial laws, it's not just the Federal laws - you can say the same thing about many of the State laws as well - they are becoming more and more like the Tax Act. They are becoming harder and harder to understand, attempting to over-regulate in many cases and they, in the end, impose a great deal of cost on everyone who uses the system, on anyone who wants to litigate, on anyone who wants to seek advice. Really it's the lawyers who've been the winner out of the industrial relations system for the last few years.

TIM LATHAM: Flinders University law professor, Andrew Stewart.

But do the right thing and you won't face any problems - that's the advice from the Chief Justice of the Industrial Relations Court, Murray Wilcox. The court was set up as part of last year's reform Act and it's where unfair dismissal cases are heard if they fail in conciliation.

In this interview with the PM program in June, the Chief Justice says: Procedural fairness is no great hurdle to business.

MURRAY WILCOX:My advice to employers is that if you are thinking of terminating somebody's employment, to think about why you're doing it and is this something that is related to the way that employee has performed or some action of the employee. If the answer is 'yes it is', then what you have to do is just tell the person that you're thinking of terminating their job and give them an opportunity of explaining themselves. Now, if you do that you give them a fair opportunity and you do listen to them and think about what they've said before you make a final decision. Then you've got no problems about procedural unfairness because that's all the Act requires. It doesn't require it to be in writing, it doesn't require it to be like a mini-trial. It does require you though to be frank with people.

That's, I think, the main message the employers need to understand. Beyond that, don't sack somebody unless you've got a reason for it - well, you wouldn't anyway I suppose - and give them the notice that they are entitled to, unless it is a case of serious of misconduct. If you do that there's no perils in this legislation.

TIM LATHAM: But when you talk with employers, even those who win their cases, they say there are perils every step of the way. One of them being confusion between State and Federal jurisdictions.

Bosmac is a machinery business for the mining and agricultural industry in Parkes, Central New South Wales.

Bosmac dismissed an employee for gross misconduct after he refused to work overtime on weekends, even though it was a condition of his State Award. The case began 14 months ago and went all the way to the Court's Chief Justice, who ruled the company had followed correct procedure and acted fairly in their dismissal.

The company is now fighting the court in what's become a test-case over how many weeks notice the dismissed worker should have got. Under the State Award it's one week, but because the case was heard under the Federal dismissal laws, the court's told them to pay four weeks notice, which comes to about $1,200.

The company's manager, Robert Eshman, has written to Laurie Brereton several times about his frustration over State and Federal jurisdiction. He does believer, however, the Minister's latest amendments are heading in the right direction.

ROBERT ESHMAN: I think the legislation went overboard originally and now Mr Brereton is only trying to rectify the situation. He's still got a long way to go to rectify it, but I think we're in a situation where a company can operate for many, many years under a given Award, under a given Act of Parliament and then have it completely rescinded by another 'higher court' is one would like to call it that, to me it's just crazy.

TIM LATHAM: What about the common call from many employers that it's too hard to sack someone; it's too difficult; we can't sack people anymore?

ROBERT ESHMAN: It's not difficult to sack people, let's get that straight. I think, under the Act, provided one takes the necessary steps the sackings can be made, employment can be terminated. Nine times out of ten it is for a just and valid reason. Ninety-nine times out of 100 there is no repercussions. It's that one case in 100 where somebody has some misguided information to say that, oh, they can get more money because of long-service leave or something else, they'll just try it. And I think, as I said before, the legal profession get a lot of mileage out of it in terms of monetary gain.

TIM LATHAM: Well, how onerous was it for you as the employer, to dismiss that person?

ROBERT ESHMAN: The onerous was complete. We have to fully completely justify why we terminated the employment.

TIM LATHAM: And was it difficult to justify that?

ROBERT ESHMAN: No, no not really. Just a fair bit of time and expense being involved in the courts in Sydney, trips and what have you, a lot of telephone calls, a lot of documentation backwards and forwards to the Employers Federation. We just had to document everything we said and did.

TIM LATHAM: So would you hesitate again if you had to dismiss a worker you were unhappy with?

ROBERT ESHMAN: That is a problem area now. If a judicial registrar says we are correct, if on their appeal the Chief Justice says we are correct but we have to pay the Federal notice period - we are still correct however - why are then we not allowed or are we are not able to recover costs? I mean, this whole situation I would estimate has cost Bosmac in excess of $10,000.

TIM LATHAM: One of the many lessons Robert Eshman has learnt from his company's unfair dismissal case is to be more careful in the hiring process and he concedes, that it may in the long-run actually improve the business.

ROBERT ESHMAN:Particularly in hiring or firing, we are going to be extremely careful and very selective in the hiring process. We will have to become more aware, if not critical, of a potential applicant's personality. In other words, I think we've got to start looking at the person's temperament before we employ him. I think our industrial relations policy has to be such that we have to start looking more at some behavioural patterns.

TIM LATHAM: And do you think that's a beneficial thing? I mean, well, do you think that that will be a good thing for your business?

ROBERT ESHMAN: I think, ultimately it could be but it's not the type of thing we want forced upon us by some legislation.

New South Wales employer representative, Garry Brack, says the legislation has drastically changed employers' attitudes to taking on staff. He claims it's cost between 100,000 and 200,000 jobs.

GARRY BRACK: I've spoken now, over the last 13 months or so, to a lot of small-business groups and every time this question is raised, they are the ones who say: We are not employing, either because of their personal exposure or because of somebody they know. Now, given that uniform response, not universal, but uniform response, we are saying that when you start to look at the numbers of small businesses across Australia - it is not just a New South Wales phenomenon obviously, it's Australia-wide - and you see every time that a small business gets involved with this legislation, they simply say it's too hard.

TIM LATHAM: It's too hard to sack somebody?

GARRY BRACK: Not just too hard to sack them, but what are the implications of that? It means they have to spend time counselling, re-training, devising systems that are fool-proof, mollycoddling in circumstances where historically the common law would have said they had a perfect to right to terminate. So too hard to sack, too unfair in the way it is portrayed for smaller businesses and then in the end, too big a risk to those businesses. Many of them are saying: Look, we'd rather stay small than put somebody else on.

TIM LATHAM: In another attempt to avoid the costs involved in unfair dismissal claims, lawyer, Andrew Stewart says, many employers are simply paying out money regardless of the circumstances of the case.

ANDREW STEWART: When you have uncertainty as to the principles that are to be applied; and uncertainty as to how judges or judicial registrars will approach these cases; it encourages parties to settle claims, whether they are well founded or not. And it's a concerning aspect that the system that we're probably seeing unfounded claims being settled for the payment of one or two thousand dollars, whatever it might be.

I mean, I know for a fact that there are a number of employers who are being advised by their lawyers that, look, whatever the circumstances of the claim, pay something because it will save you an enormous amount of cost if this claim is pursued.

TIM LATHAM: And is that an example of a piece of legislation doing its job or just an efficient way of dealing with the Act?

ANDREW STEWART: Well, I don't feel that's an efficient system in the slightest because what you're doing in effect is, putting a tax on dismissals. In other words, you're just requiring the employers to pay up something.

The other problem is that you're not getting the positive effect of the legislation.

TIM LATHAM: Laurie Brereton's changes to the Federal dismissal laws are to be debated in the August Parliament. The Government is confident its taken the heat out of the debate and come up with a more workable system. But out there in the workplace where it matters most, the debate is still raging as to whether it's a better or a fairer law.

GARRY BRACK: Well, the problem with the changes is that they could possibly go far enough but future experience is going to tell us whether in fact they do. We've still got judicial registrars in there to run the cases. For my money you ought to get rid of the judicial registrars altogether. They are part of the source of the problem with this Federal legislation. There are adventurous decisions being made by them almost every day of the week and cumulative obligations being placed upon employers as to the very nature of procedural fairness and what employers have to do to adequately comply with the legislation, such that it's very difficult, if not in some circumstances almost impossible.

RON MCCALLUM: People build their lives around jobs: What I have depends upon my job. We don't own our house, we don't own our car. A job is a line of credit. A job gives workers satisfaction. We all like, at the end of the day, a job well done. We invest time, energy and education into a job. It's very important. Therefore it's of even greater importance that when our employment has to be terminated, it's terminated for proper reasons and in a fair manner.

KAREN SNOWDON: Professor in Industrial Law at Sydney University, Ron McCallum and before him, Garry Brack, head of the New South Wales Employers Federation.