Unfair dismissal claims on the up, and employees are winning

by Stephanie Zillman20 Mar 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, according to new research.

Conducted by the Australian Catholic University and the University of Canberra, the research indicates that 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.

Both the number of claims and the success rate has 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 argue 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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  • by Maureen 20/03/2012 3:17:11 PM

    In relation to Unfair Dismissal claims - I don't believe the system is broken, I think that employers need to be much more careful and HR needs to be more active in their workplaces. Many decisions I read say that the company had dedicated HR specialists but they weren't used by the decision maker to assist with the termination process.
    HR, it's time time to speak up!

  • by Peter Scullin Director Health Link Consultants 20/03/2012 3:23:06 PM

    The attached HC Online article on unfair dismissals provides living proof that the Gillard Government just don't get it when it comes to workplace relations. Until the so called "Fair Work Act is amended or replaced the current unfair dismissal arrangements can only lead to more & more SME employers not recruiting or replacing employees.

  • by Russell; Give Life Center 20/03/2012 4:08:45 PM

    Interesting article but not unexpected, I don't think it has much to do with Work Choices or previous Workplace Relations Acts as such. I would hazard a guess that it comes down more to people make haphazard decisions in relation to their employee's. If you fire someone without consideration of what you have done to prepare them for their role or without giving people opportunity to correct their behaviour then you deserve to be brought to account. H.R. is about using a resource, that being humans, people need to be treated fairly, if you dont do this then you might wind up being accused of being unfair in your dismissal.
    If you dont want to be unfair in your dismissal of an employee, spend time, ensure that they have been given the opportunity to improve, if they cant then reassess your employment practices such as recruitment. There are enough good potential employees out there that you can ensure you have the right one, don't blame them when you choose the wrong one.

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