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.
I can’t speak for the trade union officials, but I doubt that many left-leaning academics ‘think it’s a fantastic social justice protective measure to force small business owners to jump through expensive, time-wasting, productivity-draining hoops’. In fact, most would be familiar with cases of outrageous shirkers and psyochpaths who have managed to abuse the system in the manner you describe. Also, your point about co-workers being as resentful as bosses would resonate with just about everybody.
The basic concept of unfair dismissal, and the goal of limiting, nontheless seems unassailable. Suppose a person pulls up stumps and moves his family interstate, say, for a new job, which he really likes. One day the boss is in a bad mood, has several crises going on at once, fails to communicate an instruction adequately (perhaps via a third person), then perhaps misinterprets something he sees or hears the new employee do or say, so he loses his temper and sacks him on the spot, leaving him jobless in an alien location. This is unfair, and there ought to be some redress.
The question is why the existing system seems so bad at distinguishing genuine unfair dismisals -which may indeed be rare – from the justified ones. From what I’ve heard, the red tape isn’t that arduous in cases where the sacked worker accepts his fate. But when he goes to the Commission, I gather the employer can always count on having to fork out, either a smaller sum agreed in mediation or a larger one if the dispute goes to court.
So it remains a bit of a mystery to me why the process needs to be so skewed in favour the shirkers and psychopaths, and why a few minor reforms, shifting the balance a little, wouldn’t be feasible.
James
Your specific example of a worker recruited interstate could be addressed by specific legislative provisions requiring the employer to pay the cost of repatriation to point of recruitment in case of dismissal. Indeed any sensibly drafted employment contract contains such provisions anyway. I think it would be better to address particular areas of obvious unfairness by specific remedial legislation, rather than having a global statutory regime giving anyone who is sacked the right to drag the employer through an IR Commission hearing.
I don’t know if you saw the article in the Fin last week by an Industrial lawyer about common law remedies for dismissal in contract, but he suggested two HoL decisions from 2004 which sought to extend the doctrine of “unsconsionable contract” to employment law might mean, if adopted in Australia, and he pointed to High Court decisions on contract which tended in the same direction, the common law might end up providing a stronger disincentive to termination of employment than the currently available statutory remedies.
It’s a pity the bloody Fin’s not online!
Unconscionable – nasty word to spell!
James is putting an extreme case, but the principle holds. Company owners do take against people, individuals are scapegoated, and employees can be ruled by fear.
It is one thing to say rational management works by fair rules, but questions of power and authority get in the way. I am sure we have all seen otherwise reasonable managers get into pissing contests, and decide that they are in control on THEIR patch. Indeed, the rhetoric is about “the manager’s right to manage”. After all, we are mammals driven by issues of power and dominance.
I reckon we have a large scale cultural problem about a general inability to manage well, in which the institutional solutions are driven by this problem. So we end up with unfair dismissal legislation, and apparently binding contracts, and HR departments that are just management thugs, and hot lawyers who simply tell dismissed staff to sue.
In other words, unfair dismissal law and contracts are very bad instruments to create amity and justice in the workplace. Maybe both sides would be better off with a system of mediators, like the Platonic vision of the Family Court, of which the real thing is just a pale imitation.
The irony is that the now apparently totally discredited institutions of arbitration and conciliation provided a system of mediation rather than an adversarial model – most unfair dismissal cases are conciliated. This is further improved in Queensland (sorry, Ken!) by prohibiting the parties from having legal representation – they are represented instead by industrial advocates who are more solution driven than the adversarial model of one side wins.
Mark
I don’t have any problem at all with keeping lawyers out of a system that aims at achieving a fair mediated solution. I was retained by the NT Anti-Discrimination Commission for years before “retiring” to academia, and its long-time Commissioner had a very strong view, with which I agreed, that lawyers should mostly be kept out of proceedings on both sides to avoid kneejerk adversarial posturing. I’m prepared to accept that the same might be a good idea in the industrial arena, although I’d take a fair bit of convincing that union (or employer group) industrial advocates are necessarily much more conciliatory than lawyers. It certainly hasn’t been true of most of my acquaintances in that field.
The AWIRs surveys that Reithy abolished showed that most of the employers were very much in the Theory X mould and nowhere to be seen on the Theory Y line.
This means when the new laws come into operation the greatest beneficiaries wil be A Current Affair, TT and to a lesser extent the 7.30 report.
Once this becoms obvious the terror in Sydney will have a daily story.
You wouldn’t consider translating that comment into English, would you Homer? Or have I missed something?
Trackback replacement:
http://52nd.blogspot.com/2005/05/theyre-liberals-what-did-you-expect.html
sorry Ken I thought Douglas Mc Gregor’s theory was now folklore.
Essentially THeory x employers are hard and Theory Y employers are soft in a very expurgated form of the theory.
Before Reithy abolished those wondeful AWIRS surveys on the workplace in Australia we had evidence that employers in Asutralia were not soft at all indeed quite the opposite.
One finding I will never forget was the statement one employee had no idea why some people got flicked and others stayed.
Thus these laws will produce fodder for A current Affair et al.
I’m with you Ken – or at least I am until I see a good argument that I shouldn’t be. Why is it so rare to see the analogy with Family Law raised?
The fact that we don’t think it very helpful to get lawyers in on the question of who was ‘at fault’ in marriage breakdown doesn’t mean that we think that there is no such thing as fault or we want to ditch basic standards of behaviour.
It means that we think that on balance lawyers won’t help and that people have to sort their own arrangements out with each other. I can’t imagine anything worse than hanging around working for an employer that tried to sack me.
I couldn’t agree more that Australian management isn’t much chop. But I don’t think lawyers are going to make them better.
I might sympathise more with workers than I do with management, and I might sympathise more with tenants than with landlors. But that doesn’t lead me to support laws against unfair dismissal (unless around tightly constrained circumstances of the kind that James Farell has pointed out) any more than it leads me to support rent control.
Homer: I think you’ve simplified Theory X and Theory Y a little too much — you make it sound like there are no redeeming factors for Theory X employers.
Theory X implies an authoritarian boss who applies a traditional command-and-control structure, believes that workers need to be directed or they will slack off, etc. etc.
Theory Y implies an inclusive, consultative boss who believes that all workers want to do an honest day’s work if possible.
There are times and places for both. Theory Y is becoming both useful as Western societies move increasing to knowledge-based work. This is necessary since it is impossible to “force” people to utilise their skillsets and knowledge (and you don’t have these skills, otherwise you wouldn’t have hired them in the first place).
However, a manager who displays clear leadership and rigidly assigns tasks (Theory X) is still appropriate in a variety of situations.
If hiring and firing seems arbitrary, that doesn’t demonstrate a Theory X mentality, just bad management skills.
Ken, industrial advocates tend to posture in public and deal in private but the QIRC is very good on keeping things calm – and rational. Conciliation is a feature of almost every case that is heard by the Commission, and failure to agree – leading to arbitration – is rare.
That’s why Queensland has a strike rate a third of Victoria’s – where of course the highly legalistic Federal model is in force since Kennett ceded the IR powers.
Queensland also has innovative provisions with regard to gender equity and minimum conditions – and the system enjoys broad support from employers in the State.
But it’ll all be swept away because of Howard’s obsessions with unions and his hubris.
Interesting to see Lawrence Springborg, the Qld Opposition Leader, opposing the Feds today on two grounds – he supports the Qld system and he asked rhetorically – what will conservatives think when Martin Ferguson is Federal IR Minister?
Howard’s bill could be in trouble as Queensland Senator-elect Barnaby Joyce is leaning towards voting against it:
http://larvatusprodeo.redrag.net/2005/05/30/go-maroons/
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.
This assertion dramatically loads the bases in your favour Ken, but you supply no evidence whatsoever. If we are going to decide policy by personal anecdote, many lifetimes ago I regularly fronted up to conciliation committees on behalf of bosses who hadn’t practiced even the barest concession to natural justice in dismissing their workers. I will concede I have had a couple of good bosses, compared with a vast majority of dickheads (see The Office), but can see no reason why the vast majority should be privileged because of the rare exception.
Employers, not employees, are now responsible for most of the long running disputes in Australia, according to research by Chris Briggs at Sydney University. In particular, he points to increasing use of unilateral lock-outs of workers, including for situations where the justification seems tendentious, such as in forcing workers to sign AWA’s (non-union workplace agreements). Sometimes lock-outs have been used against workers who had no involvement in disputes.
http://www.acirrt.com/pubs/WP95.pdf
I expect that university research would be biased towards the Left politically, and thus would be reluctant to trust in the validity of its results.
“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.”
Must say, this looks somewhat fanciful too. I’d be interested to know of a real world case where an employer couldn’t sack people fast enough to save himself under conditions of globalisation.
EP, it is true that university research as such doesn’t mean much these days. In respect of the Briggs paper, though, it comes out of the ACIRRT centre, which is highly regarded, relentlessly fact-based and which has considerable expertise in this area. Briggs simply uses available data to draw conclusions.
What’s more, there are lessons in his paper relevant to the IR reforms. He points out that lock-outs are generally invoked by firms in troubled markets when they have ulterior motives to reduce labour costs. Lock-outs impose significant costs on such firms, including damaging their image, but generally do reduce wages.
The effect of the IR reforms will be to allow firms to undertake similar wage cutting exercises without any impediments. This effectively represents a transfer of wealth from workers to shareholders, and it’s these aspects of the IR reforms that need to be examined.
It is obviously not good business to be hiring and dismissing willy nilly. However, it is equally destabilizing to continue to employ people who are not performing the work for which they have been contracted. It is in an employer’s self-interest to jump through hoops in order to accomodate a worker, because sometimes points of view matter and can enrich and consolidate the culture of a workplace.
I also think it is reasonable though, that having come to the realisation that a worker is a non-productive member of the organisation, an employer can act decisively to dismiss that worker.
My problem is; What does protect workers from the bully employers who find people expendable?
Is there no legislation that can do both, protect employers and vulnerable employees? Individual contracts? but then I guess if someone needs work badly they will agree to anything and hope for the best.
Winners and losers in the market. Maybe that is what our taxes are for. To help the ones who aren’t good at money.
Stephen, fair go of course it was a simplification. It was a sentence.
Thanks for the perspective Ken. Even so, the current laws offer little protection to employees from bad employers.
I’ve seen my friends bullied out of jobs or dismissed without warning and without reason. In one case, from a mid-sized organisation that prides itself on moral integrity.
I can’t see how the new laws encourage an increase the sum total of good in Australian society – they simply seem to tip the playing field in favour of employers over employees. Bad employers win. Good employers win. Bad employees lose. Good employees lose.
Unless one holds the view that employers are intrinsically more likely to be good people than employees, I reckon it’s a zero sum game.
Last year I was the chair of a community organisation facing an unfair dismissal suit from a dangerously incompetent worker who, egged on by a combative spouse, would not either rise to the conditions we had set, or admit failure. We paid a lot of money and spent 8 months making that problem go away. It set our organisation back a year. My friend runs a shop and has untold difficulties getting rid of slack arse staff. I do understand how terrifying and draining it can be.
But I’m with Chris. I’ve worked in umpteen organisations. I’ve worked in so many casual jobs where I’ve understood that the work was ‘no strings attached’, and known I could walk out (or be walked out by management) at any time. No unfair dismissals in those cases. The work’s not there, you get laid off, or the boss just says he won’t call you again. Simple.
From ‘permanent’ or contract work, I have been unfairly dismissed once and been quite fairly dismissed once (but all my problems began with a personality clash). I’ve seen the writing on the wall and jumped a few times. (I hasten to add, I’m a good worker). I’ve also witnessed many unfair dismissals, that have left big scars on myself and on the organisations I was with.
I’m curious as to why people here (including Ken) are throwing around the word ‘contract’, without apparently perceiving the relevance of that particular term to the whole issue of hiring and firing. Simply put, if you have a good contract, you can ensure that people are meeting mutually acceptable targets, and can put them on warnings and get rid of them.
In my mind most unfair dismissals are basically cases of unfair recruitment and unfair workplace management. In many workplaces employment contracts are essentially verbal, which leaves employers wide open if they try to terminate the contract. They will suffer in a ‘he said she said’ situation. In the case I’ve mentioned, the previous management had failed to either draw up a list of duties, provide induction, maintain performance appraisals or even check references. The employee was entitled to argue that we hadn’t outlined what we’d expected, so we couldn’t terminate the job because the employee had not met those expectations.
You do always get employees who try one on. But the boss has the upper hand and controls the pay packet. While the boss carried much of the risk, he also takes home most of the profits. It’s up to the boss to set the tone, put some work into proper recruitment and employee management and be fair from the beginning. If you do that you have little to fear from the weak unfair dismissal laws already in place.
Naomi
You make some excellent points. However I’m not claiming there’s no such thing as a bad boss, nor that it wouldn’t be a nice idea if we could design a workable system to protect workers from bad bosses. But the history of the system to date suggests we probably can’t. Any system is going to need some way of distinguishing between a bad boss and a good boss, and a bad worker and a good one who’s been treated unfairly. That inevitably means a fairly prolonged, bureaucratic, legalistic process involving hearing and evaluating evidence, at least as a fallback where parties can’t reach agreement in informal mediation. And even the informal mediation by definition takes place against a backdrop of calculation of cost and benefit and risk.
So why not as far as possible get rid of the bureaucratic process and simply provide for a fixed system requiring relatively generous payment in lieu of notice (as well as cost of repatriation to place of recruitment and other obvious compensatory factors), and simply not worry about apportioning blame for the breakdown of an employment relationship? It’s the family law analogy again. Small business is by nature an insecure environment. Two thirds of businesses go broke within 2 years of startup. These businesses simply can’t offer employees a security they don’t possess themselves, and if we try to impose a system that provides it, employers simply route around it by resorting to casualisation, outsourcing etc.
Moreover, like marriage, there’s no point in forcing parties to stay together when the relationship has irretrievably broken down, and no point in ascribing fault either. Invariably there will be fault on both sides anyway, but even where one party is overwhelmingly to blame there’s still no point in forcing them to stay together when things have become poisonous. You can do it in a large company by shifting the problematic worker to another area, but in a small-medium business that usually won’t be possible.
Far better to have a system for clear, fixed and fairly generous compensatory payments to the employee when the workplace relationship breaks down, along with extensive government-provided retraining and job-finding services for sacked workers. I would even suggest that a system providing for automatic payment of (say) 3 months pay in lieu of notice (except in cases of serious misconduct like embezzlement), and even more for long-term employees, without any need for giving or proving a particular ground for dismissal, would be preferable and cheaper than the current system, and favoured by most employers and employees alike. Employers would be able to calculate with precision the cost of getting rid of a troublesome employee versus living with them and trying to improve their performance, and sacked employees would have enough money to tide them over while they found other employment or got themselves onto Newstart and retraining.
For sure. I certainly don’t feel that trying to force parties into a bad marriage would work. Once it’s done it’s impossible to go back. It would be fairer and possibly cheaper in the long run to pay people out, but I find it hard to imagine that employers would brook such financial imposition. It would add significantly to employment on-costs without improving the satisfaction of either employer or employee. No-fault dismissal just wouldn’t wash with most folk. As someone said in the Herald on Monday, the IRC is a cheap small claims court, and an effective one. It does offer the possibility of resolution to both parties. Why ditch it?
I used to do a bit of employment law back just after the unfair dismissal laws came into force during Labor (indeed, I used to work with Chris McArdle, but more on that soon).
I usually worked for employers and, while many of them complained about having to give warnings etc concerning performace level, very rarely did the employers (when pushed) consider it unfair for those procedures to be followed. Most of them would have followed it anyway, although less formally which could cause problems.
The main problem with the unfair dismissal system was that all employees could take action and force the employer to incur costs even if the claim had no merit. And this happened because it was hard – almost impossible – to get costs from the employee if they lost. Thus a no lose situation for the employee.
However – as a litigation lawyer the first thing I say to a defendant who is upset at being sued is ‘you can never stop anyone suing you. All you can do is prove that they are wrong’.
Taking away rights or forcing people into alternate court systems wont of itself change unmeritorious cases (since those people never had a case anyway under the existing legislation). What is most likely to change things is the potential for adverse costs orders increasing the risk of bringing a claim; but also decreasing the potential for a meritorious case to be brought.
The existing IR tribunal but with a low but fixed costs order if you lose (say $1000 or $1500) would stop a lot of cases. If you have a good case, the risk is not so high as to be a deterrent, but if you are trying it on then it might cause you to think twice.
Of course, it may well remain cheaper for an employer to pay the person $2000 to go away than to pay legal fees.
Keeping lawyers out of the process is fine, so long as there is no imbalance of power ie unskilled low language ability vs the 20yr experienced industrial officer working for the large company.
As for Chris McArdle – I think it unfair to say his views are based a meal ticket being clipped. Chris’ work doesnt involve very many unfair dismissal cases, which are pretty small stuff. He works in the ‘big end’ of town on enterprise agreements and executive contracts etc. The changes probably won’t affect him too much. However, I believe he is a good right wing (Catholic) Labor boy – which might have had some influence.