Employee claims continue to rise, and employers are losing

by Stephanie Zillman06 Sep 2012

Just over half of all unfair dismissal claims arbitrated by Fair Work Australia are being resolved in the employee’s favour, and the sheer number of claims has also greatly increased in comparison to claims brought forward under previous workplace relations systems, research has found.

Conducted by the Australian Catholic University and the University of Canberra, the research indicates that some 17,000 unfair dismissal claims are now being processed each year compared to about 6,000 under Work Choices, and about 7,000 under the previous Workplace Relations Act provisions.

That employee claims is on the increase is a sentiment echoed by law firm Norton Rose, who in August 2012 alone were involved in 20 adverse actions claims, and seven unfair dismissal claims across their Australian practices – a figure which is quite high, partner Sarah Ralph told HC. Ralph suggested that, in part, this may be as a result of economic uncertainty. “Across our practice, in the last six to nine months we’ve certainly seen a rise in employee claims – unfair dismissal, adverse actions and even a rise in discrimination and harassment claims, but particularly adverse action and unfair dismissal,” Ralph said. She added that after a consideration of the available statistics, it’s quite clear that some of the barriers which once may have prevented people from bringing forward claims under the old act don’t exist now.

According to the academic study, both the number of claims and the success rate has indeed dramatically increased under the current industrial relations system. Key research findings included:

  • Claimant success rates have increased from 33% under Work Choices to 51% under the Fair Work Act.
  • The employee success rate is  41% in businesses with over 100 employees
  • Some aspects of Work Choices such as the definition of a redundancy had an effect on the success rate

The researchers argued that successful claims have risen principally because small businesses (under 100 employees) are now included in the system and they are more likely to get decisions wrong because of their lack of HR expertise.

However, the researchers calculated that businesses with more than 100 employees are still more likely to have a successful unfair dismissal claim against them than ever before. Additionally, the adverse action provisions* of the act have greatly increased the scope for employees to lodge a claim, and these are said to be of particular concern to employers because of the different burden of proof, possibility of personal liability, and discretional compensation. Payouts are much the same under all of the three regimes, and on average are 12 weeks’ pay. Notably, payouts are limited to the equivalent of six months of the dismissed employee’s annual salary.

Importantly, the research only analysed claims that went to arbitration. Additionally, the researchers said that the impacts on productivity – lower turnover reducing workforce quality or reduced threat of dismissal reducing effort – are very difficult to model and even more difficult to estimate empirically.

*This provision in the Fair Work Act prohibits taking “adverse action” against an employee, prospective employee, independent contractor, union or employer, because they have exercised or are entitled to exercise a workplace right.


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