There’s been an awful lot of discussion about the Howard government’s proposed IR reforms from various, left–leaning bloggers and at Catallaxy from a more right of centre viewpoint. I deplore the stripping away of basic employment terms and conditions too, and as a passionate federalist (a rare breed, it seems) I’m disgusted by the Coalition’s trashing of essential attributes of Australia’s democratic constitutional order.
But I have a different perspective on the proposed abolition of wrongful termination laws for small and medium sized businesses. It flows partly from having been an employer myself for almost 15 years, and from acting as a lawyer in numerous industrial relations wrongful termination cases, for both employers and workers.
The employers included Aboriginal organisations in poor, remote communities, and on more than one occasion I witnessed the extent to which the wrongful termination laws could be misused by bludging, unscrupulous white employees to extort large amounts of money out of the poorest members of the Australian community.
Most small business proprietors can’t be characterised as quite that poor or needy, but typically they work extraordinarily long hours at a very low effective hourly rate of pay for the privilege of being their own boss, and more often than not they have their family home and assets and life savings on the line to the bank as security for a working overdraft.
Trade union officials and left-leaning academics may think it’s a fantastic social justice protective measure to force small business owners to jump through expensive, time-wasting, productivity-draining hoops before they can sack even the most useless worker, but theirs isn’t the only perspective. In fact it isn’t even the perspective of the other workers in small business workplaces. They resent just as much as the boss their fellow workers who don’t pull their weight. Sometimes more, because they carry the can for bludging colleagues in a more direct sense.
I only ever sacked three employees during my time in private enterprise. One was a bookkeeper who was embezzling from the office account in significant amounts. The other two occurred when all the other employees approached us after work and said that not only were my partner and I being too generous in giving problem employees multiple chances to lift their game, but if we didn’t show some intestinal fortitude and sack the offending employees then they might all resign! In both situations, the employees’ judgment proved better than ours. After summoning the courage to sack them, we discovered that both dismissed employees had been doing bugger-all work for the previous several months, secreting uncompleted paperwork in locked drawers of their desks while spending most of the day writing personal letters or composing (very bad) poetry and short stories on their computer screens to give a superficial impression of being busy. Luckily, both incidents occurred shortly before the Hawke government’s wrongful termination laws were introduced, or we might well have suffered a much grislier fate.
Most small business employers aren’t callous mongrels who sack workers unfairly or at the drop of a hat to gain a sense of power. They’re not even wannabe Donald Trumps who impose impossibly high performance standards and summarily sack employees who fail to reach them. In a small-medium sized workplace, the consequences of sacking a worker unfairly are profound and very disruptive. The HR Nicholls Society might have been keen on extracting productivity through instilling a sense of fear and insecurity in the workforce, but it doesn’t work in the real world of small business.
The great majority of small business owners are fair, hard-working people who like and respect their employees and are in turn liked and respected by them. In many cases, they’re mates in a real sense. That’s one of the major reasons why most people working in small business see no reason to belong to a trade union.
I don’t think it was a great idea to impose a wrongful termination regulatory regime on small-medium businesses, where employers must follow complex procedures before they can sack a worker, and their decision is then reviewed and possibly reversed by a government-appointed IR Commissioner who by definition can’t know the dynamics or personalities of the workplace, or understand the particular competitive pressures that drove the employer to make the decision.
The system is certainly considerably fairer since the Howard government came to power and introduced the “fair go all round” test in wrongful terminations. Before that it was almost impossible to dismiss even the laziest or most inept or divisive employee without paying out huge amounts in compensation or legal fees or both. But even now, smaller businesses simply don’t have the time or resources to negotiate the procedural minefield of the institutionalised IR system.
Moreover, in a globalised economy where a business proprietor must be in a position to respond instantly and flexibly to competition from cheaper imports, it just doesn’t make sense to institutionalise rigidity and lack of control in a business’s single largest area of overheads. Failure to respond quickly may mean that everyone in the business ends up on the dole queue, at the same time as the employer loses his house and everything else he’s spent a lifetime working to build up.
There’s no doubt that those sorts of competitive pressures have been major drivers of the wholesale move towards workforce casualisation over the last 15 years or so, not to mention the “outsourcing” phenomenon where employers turn their workforces into “sub-contractors” and eliminate not only exposure to wrongful termination laws but also annual and sick leave, superannuation co-contributions and a raft of other hard-won terms and conditions. One very likely benefit of abolishing the wrongful termination laws, especially in a tightening labour market where even the callous minority of employers are discovering that they must cherish good workers and not treat them as disposable commodities or units of production, is that we will see a move away from casualisation and back towards full-time employment.
Should we have a statutory wrongful termination system to protect workers against the small minority of greedy, unfair employers? I think not. We certainly need a system requiring a reasonable minimum notice period or pay in lieu thereof. Say 2 weeks for every year of service, with a minimum of 6-8 weeks so sacked employees can survive until they find another job or qualify for unemployment benefits.
And we also need a far more effective and less punitive system of skills retraining and income support, especially for long-term unemployed and older retrenched workers. Mark Bahnisch has an excellent post on this topic this morning. But the point is that the burden of these social justice measures should be borne by the society as a whole. It isn’t reasonable to expect individual small businesses to be sheltered workshops for infirm, slow, lazy or inebriated workers. In fact it isn’t even possible in the real world, and legislative attempts to enforce such a system merely drive employers towards drastic solutions like casualisation and outsourcing.
The problem with the Howard government’s approach is that they’re not going to implement meaningful reforms in skills retraining programs, nor embrace more constructive and non-punitive income support schemes, nor are they going to resist the temptation to strip away basic employee terms and conditions. But that doesn’t change the fact that the Hawke government’s wrongful termination laws were misconceived from the outset, and their abolition for all but large businesses is well overdue.
PS – Employment lawyer Chris McArdle has an interesting article in this morning’s SMH, where he argues that abolition of wrongful termination laws will simply cause disgruntled sacked workers to resort to state anti-discrimination tribunals or the common law courts (where they would claim that they had received inadequate notice under old common law principles).
He’s right to an extent, and it’s an aspect the Howard government would need to address. Even now it’s not uncommon for sacked workers to utilise anti-discrimination tribunals as an alternative or fallback compensation option, even though both types of tribunal have safegaurds to try to prevent such forum-shopping. Spurious attempts to claim that a sacking took place as a result of racial or gender bias or disability or whatever will usually eventually fail, but only after substantial uncertainty and time-wasting (not unlike the experience many employers have in industrial tribunals in disproving trumped-up claims of wrongful dismissal). The federal government will need to implement a system requiring closer and early scrutiny of any anti-discrimination claim arising from a dismissal situation, and will need to override state anti-discrimination laws in that respect (although one would hope – forlornly no doubt – that they will instead work constructively wih the states to introduce some balance and commonsense into a badly flawed system).
As for recourse to common law, it’s certainly true that it was always an option to sue seeeking damages for inadequate notice of termination. But contrary to McArdle’s suggestion, the common law was fairly stable and predictable prior to introduction of the Hawke wrongful termination laws. In most cases a standard like 2 weeks notice or pay in lieu for every year of employment was held to be “reasonable”; the system was manageable. There’s no reason why we shouldn’t be able to return to such a system, albeit with stronger protections requiring a longer minimum period of notice of termination, and better income support and retraining schemes.
Although McArdle has a point, his article is somewhat exaggerated special pleading by a member of the IR club who sees his meal ticket about to be clipped.