ACU (Australian Catholic University)

Insight

Issue 5, Winter 2012

Revealing a rise in unfair dismissal claims

Revealing rise_content

Fair Work was established 2009 to replace Work Choices as Australia’s federal workplace tribunal. Research by Professor Paul Oslington, has found the number of unfair dismissal claims has risen under this system. Margie Dimech speaks to the ACU economics professor to find out why. 

The number of unfair dismissal claims taken by employees has risen under Labor’s Fair Work Act, according to research by ACU’s Professor Paul Oslington and Benoit Freyens, from the University of Canberra.

The number of unfair dismissal claims lodged under the Fair Work Act has risen to about 17,000 per year, with claimant success rates increasing from 33 per cent under WorkChoices to 51 per cent under the Fair Work Act.

“The research was conducted via a large database constructed by Ben Freyens and our research assistant, ACU student Natalie Easter, which lists every case going back 20 years,” explained Professor Oslington.

“Using this database, in conjunction with data from our previous research, allowed us to compare the impact of unfair dismissal regulation of the Workplace Relations Act, WorkChoices, and the current Fair Work Act.

“Our strongest findings are that lodgements have increased markedly under Fair Work compared to WorkChoices, and that employee success rates are much higher under Fair Work.

“This is probably because of increased access to the system. WorkChoices excluded anyone who was employed in a workplace with less than 100 employees. Also under the Fair Work Act a lot of people who had been covered under state jurisdiction were moved to a federal jurisdiction,” Professor Oslington said.

The rise in success rates under the Fair Work Act was also attributed to the inclusion of small business cases to the system.

“Small business is always going to have a greater vulnerability, because they just don’t have the large HR function that bigger companies do. “They’re going to get it wrong procedurally and on average loose more cases. It’s part of being a small business,” Professor Oslington said.

He explained that despite the different in number of cases and success rates, payouts were much the same under all of the three regimes, averaging about 12 weeks pay, with payouts capped at six months.

“One of the interesting sidelines was the bunching of payouts around particular figures, which we feel flows from the incoherence of the Sprigg test used by judges to calculate compensation amounts. A better economically-based procedure for calculating expected future earnings of a dismissed worker is required.”

The regulation of dismissals has been one of the most controversial public policy issues in Australia in recent years. Debate over regulation of dismissals has been intense in recent years, and renewed in the lead up to the 2012 review of the operation of the Fair Work Act.

The research, which built on previous work by Professor Oslington and Benoit Freyens, aimed to enrich the evidence base for making policy judgments about dismissal regulation.

“There have been some attempts to quantify the costs and employment impacts of unfair dismissal regulation in Australia, however, we lacked an evidential basis for comparisons of the costs and impact of the different regimes,” said Professor Oslington.

 No other country has changed dismissal regulation as radically as Australia has done – twice over a short period of time, claims Professor Oslington. “This has created a unique natural experiment and an opportunity for researchers to understand the economic effects of dismissal regulation.

“Unfair dismissal is a huge public policy area in Australia and in other countries. We have very little hard evidence on the economic impact; the impact on wages, unemployment and equity of unfair dismissal regulation.

“We’re interested in the productivity and equity effects of dismissal regulation and we plan to look at this more closely over the next couple of years.”

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