A costly solution for small business

Even before WorkChoices, the unfair dismissal remedy in the federal Workplace Relations Act was heavily skewed in favour of employers. However, the availability of the remedy at federal and state level had an impact on how employers behaved when they considered dismissing employees. Notions such as natural justice and a fair go created a workplace culture in which employers regularly communicated performance issues with employees. Sound HR practices became the order of the day even in smaller enterprises.

Many of my own employer-clients used to refer to a "three strikes and you're out" rule. In fact, no such rule existed in any federal unfair dismissal laws. Unfair dismissal laws created a climate in which the values of fair go became standard business practice.

The unfair dismissal regime under WorkChoices may well undermine this workplace culture among employers whose workers are excluded from making an unfair dismissal claim. Howard suggests that the removal of a large number of Australian workers from the unfair dismissal jurisdiction is a major factor in lowering unemployment and creating 276,000 new jobs. He told Radio National on April 12 that "there is a greater incentive for small business to take on new staff now that the threat of unfair dismissal action has been removed".

Many labour market economists disagree. Still, economists rarely agree on anything. Let's look at it from a simple layman's perspective.

Imagine how the average punter's spending patterns would change if they felt less security in employment. If you knew your boss employed fewer than 100 employees, would you risk making long-term financial commitments? Or would you be looking for a new job with a larger company?

If you managed to find work with a not-so-small business, you'd be waiting until your six-month exclusion period expired. But you can still be sacked provided your boss cites "genuine operational reasons", even if it was only one of numerous factors in his decision.

With so many employees unable to access unfair dismissal (and with so many plaintiff personal injury lawyers desperately looking for work), already other options are being tested. All are far more expensive for employers to defend than an unfair dismissal claim. We might end up with a situation where a larger business ends up paying less in legal fees than a smaller business for the same kind of dismissal.

All of which makes one wonder whether having a less employee-friendly unfair dismissal remedy will really help small businesses and the economy.