In a submission to “relevant government ministers” via the Small Business Association of Australia (SBAA), HR firm Employsure pushed for two key reforms to the unfair dismissal process, which they suggested provide greater clarity and fairness for the nation’s SME employers.
One involves the Fair Work Commission being given the power to dismiss ineligible claims before they reach the conciliation stage, which Employsure managing director Ed Mallett suggested is heavily geared towards encouraging businesses to offer “go away” money.
“Under the current process, every unfair dismissal claim made against an employer in the Fair Work Commission is listed for a conciliation,” Mr Mallett said.
“At this conciliation, a small business owner is required to attend and respond and, in most cases, offer a monetary amount to settle the matter. It is our experience that this offer of a monetary settlement is actively promoted at the conciliation to make the matter ‘go away’.
“We recommend an amendment whereby claims made by ineligible applicants can be reviewed and dismissed by the Fair Work Commission before progressing to conciliation, thus saving small business owners time and unnecessary expense, as well as avoiding the unnecessary promotion of ‘go away’ settlements.”
The second push is for the application fee charged by the commission to lodge an unfair dismissal claim.
“As it stands, an employee is able to file an unfair dismissal claim in the Fair Work Commission for a small fee of $71.90 (which is waived in cases of financial hardship). In a no costs jurisdiction, this means an employee can bring a claim that is without prospects of success and is unlikely to suffer the consequences of having to pay the other party’s legal costs,” he said.
“This encourages employers to settle, as it is often the cheaper option than proceeding to arbitration or a hearing. Not only is this unfair, it has created a cottage industry of no win, no fee lawyers who prey on recently dismissed employees at the expense of small business owners, knowing that they are likely to receive ‘go away’ money, even where prospects of success are low.”
According to Mr Mallett, such a problem could be addressed by hiking the application fee, as a deterrent against applicants lodging “unmeritorious claims”.
Most unfair dismissal claims settle prior to formal hearings
The Fair Work Commission’s latest quarterly report (for January to March 2019) on unfair dismissals showed that a total of 3,583 applications had been lodged over the three-month period.
More than two-thirds were finalised either before (697 or 19.5 per cent) or at conciliation (2,068 or 57.7 per cent).
Just 172 claims progressed to a formal determination being made by the commission, its data showed.
Of those, the vast majority — 81.4 per cent — were dismissed, for various reasons.
Compliance costs adding up
In its submission, Employsure said that of the 24,000 business clients it serves nationally, a quarter are spending between six and 10 hours each week on employment regulation, with a similar proportion (26 per cent) estimating the cost of compliance at between $10,000 and $30,000 each. One in five suggested their cost of compliance is even greater.
The proposal comes just days after the Australian Small Business and Family Enterprise Ombudsman determined that the specific code for small businesses is “not delivering what was intended” in terms of simplifying the rules around employee dismissals.
Both the SBAA and the office of federal employment minister Michaelia Cash have been approached for comment on the proposal.
My Business has also asked Employsure to outline what it considers would be a reasonable price for the application fee to achieve the desired deterrence against unmeritorious claims.