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Employers experiencing record losses in unfair dismissal system

Employers' success rate in the unfair dismissal system has hit historic lows, falling below 40 per cent for the first time.
The surprise drop in the last financial year contrasts to the 60 per cent success rate that employers have enjoyed over the past 15 years and has prompted a senior former Fair Work Commission member to warn the system's uncertainty is threatening employment.
According to Fair Work reports, arbitrated unfair dismissal claims found to be "fair" or in the employer's favour fell from 46 per cent to 39.6 per cent in 2015-16.
Employers have enjoyed a success rate of between 50 and 60 per cent since 2003, reaching highs under WorkChoices before starting to drop back when the Fair Work Act was introduced in 2009.
However, since 2013 the rate has fallen below 50 per cent, hitting 48 per cent in 2013-14 and 46 per cent in 2014-15.
At the same time, appeals of unfair dismissals have almost doubled, from 79 in 2013-14 to 139 in 2015-16.
University of Canberra Associate Professor of Economics Benoit Freyens said he was "quite surprised" by the latest figures and said it would be employers' lowest success rate since at least 2001 when the rate was about 50 per cent.

Variability in decision outcomes

But he noted the Coalition had been in power for three years at the time and the current unfair dismissal rules were similar to under the Howard government.
"Certainly the Fair Work Act hasn't made it any easier [for employees] compared to the Workplace Relations Act 1996."
However, he pointed out his past analyses of the system had found the backgrounds of commission members, whether employer or employee, accounted for a 10 per cent variability in decision outcomes.
"The difference is not massive, but it's still quite significant."
Former FWC vice-president Graeme Watson, who resigned from the commission this year, agreed it was the way that the laws were applied, not the laws themselves, that was largely to blame.
He said the commission had departed from determining whether employers' actions were reasonable to whether "misconduct occurred based on evidence led several months after the event".
"The broad nature of the tribunal's discretion means that arbitrated outcomes can vary considerably depending on the FWC member who hears the case," he has written in The Australian Financial Review.

Deterrent to employment

As a result, employers were faced with "either an expensive settlement or a costly and disruptive case with an uncertain outcome".
Mr Watson said the operation of the laws was "acting as a deterrent to employment" and legislative reform was necessary to provide "clear standards of fairness".
The Coalition's new appointments to the commission, most of whom did not start until early 2016, do not appear to have had a significant effect on outcomes so far, with the employer success rate still at lows of about 42 per cent from July to December 2016.
Australian Mines and Metals Association chief executive Steve Knott said "it is concerning that certain FWC members are taking on the role of activist social justice warriors by seeking to substitute their view of the world for that of employers".
"Our system needs to get back to the basics where if a valid reason for termination exists and due process is followed, an employer should be supported in its decisions," he said.
But University of Adelaide Professor Andrew Stewart cautioned against any rush to judgment, saying the number of arbitrated claims the success rate was based on was "way too small" from which to draw conclusions.
Only about 350 applications out of almost 15,000 make it past the commission's settlement and mediation processes every year.
"From those, you have two unpredictable pools of cases," he said. "You've got the genuinely hard cases where no one can be sure where the commission will go, and you've got cases where the person persists with pursuing a claim against advice."
"Many of them are difficult to determine the outcome."
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Location: Sydney NSW, Australia

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