Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697633308027.pdf (Australia)
COMMONWEALTH OF AUSTRALIA Official Committee Hansard SENATE EMPLOYMENT, WORKPLACE RELATIONS AND EDUCATION LEGISLATION COMMITTEE Reference: Workplace Relations Amendment (Termination of Employment) Bill 2002 MONDAY, 24 FEBRUARY 2003 M E L B O U R N E BY AUTHORITY OF THE SENATE INTERNET The Proof and Official Hansard transcripts of Senate committee hearings, some House of Representatives committee hearings and some joint com- mittee hearings are available on the Internet.
Some House of Representa- tives committees and some joint committees make available only Official Hansard transcripts.
The Internet address is: http://www.aph.gov.au/hansard To search the parliamentary database, go to: http://search.aph.gov.au WITNESSES ANDERSON, Mr Alex, Assistant Secretary, Strategic Policy Branch, Workplace Relations Policy and Legal Group, Department of Employment and Workplace Relations ................................................................................................................................. 42 ANDERSON, Mr Peter Christian, Director, Workplace Policy, Australian Chamber of Commerce and Industry ....................................................................................................... 11 HARRIS, Mr Christopher, Adviser, Workplace Relations, Australian Chamber of Commerce and Industry ....................................................................................................... 11 HOY, Mr Rex Jeffery, Group Manager, Workplace Relations Policy and Legal Group, Department of Employment and Workplace Relations ..................................................... 42 LENNON, Mr Mark Roy Robert, Assistant Secretary, Labor Council of New South Wales....................................................................................................................................... 31 MARASCO, Mr Renato, Senior Adviser, Workplace Services, Australian Industry Group ...................................................................................................................................... 25 REDFORD, Mr Ben, Solicitor, JobWatch............................................................................. 1 RUBINSTEIN, Ms Linda Esther, Senior Industrial Officer, Australian Council of Trade Unions ..................................................................................................................................... 31 SMITH, Mr Stephen Thomas, Director, National Industrial Relations, Australian Industry Group ...................................................................................................................... 25 SMYTHE, Mr James Edward, Chief Counsel, Workplace Relations Policy and Legal Group, Department of Employment and Workplace Relations ........................................ 42 Monday, 24 February 2003 SENATE—Legislation EWRE 1 SENATE EMPLOYMENT, WORKPLACE RELATIONS, AND EDUCATION LEGISLATION COMMITTEE Monday, 24 February 2003 Members: Senator Tierney (Chair), Senator George Campbell (Deputy Chair), Senators Barnett, Carr, Johnston and Stott Despoja Senators in attendance: Senators George Campbell, Marshall, Murray and Santoro Committee met at 9.32 a.m. REDFORD, Mr Ben, Solicitor, JobWatch CHAIR—I declare open this public hearing of the Senate Employment, Workplace Relations and Education Legislation Committee.
On 11 December 2002 the Senate referred the provisions of the Workplace Relations Amendment (Termination of Employment) Bill 2002 to this committee.
The bill would amend the Workplace Relations Act 1996 to extend the operation of the federal unfair dismissal system through the use of the corporation power in section 51(xx) of the Constitution, improve the operation of the federal unfair dismissal laws in their application to small business and make a number of other improvements to the way in which these laws operate.
Before we commence taking evidence today, I wish to state for the record that all witnesses appearing before the committee are protected by parliamentary privilege with respect to the evidence provided.

Parliamentary privilege refers to a special right and immunity attached to the parliament, its members and others that is necessary for the discharge of the parliamentary functions without obstruction and fear of prosecution.
Any act by any person which operates to the disadvantage of a witness on account of evidence given before the Senate or any of its committees is treated as a breach of privilege.

I welcome all observers to this public hearing.

I welcome our first witness from JobWatch.

The committee has before it your submission, which the committee has numbered seven.

Are there any changes you wish to make to the submission?

Mr Redford—No.
Mr Redford—No.

CHAIR—The committee prefers all evidence to be given in public but should you at any stage wish to give your evidence, part of your evidence or answers to specific questions in camera, you may ask to do so and the committee will consider your request.

I point out that such evidence may subsequently be made public by order of the Senate.

I now invite you to make a brief opening statement.
Mr Redford—I appear on behalf of JobWatch, which is a community legal centre located here in Melbourne which provides advice to and advocates on behalf of Victorian workers.

While we are funded by the Victorian state government, we are not a part of government; we are an independent community organisation.

We conduct a telephone advice service, which is open from nine to five, five days a week.

We also have a small legal practice, of which I am a part.
We represent disadvantaged workers in matters such as unfair dismissal cases, issues arising out of the operation of antidiscrimination legislation, wage recoveries and so on.

It is EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION EWRE 2 SENATE—Legislation Monday, 24 February 2003 from that perspective that I have made a submission to this committee and wish to comment on it today.
We would like to take this opportunity to again voice our opposition to legislative reform to the federal unfair dismissal scheme that would limit access to it for employees of small business.

We have expressed our opposition to these sorts of proposals in the past in submissions such as that to the Workplace Relations Amendment (Fair Termination) Bill 2002 and bills such as the Workplace Relations Legislation Amendment (More Jobs, Better Pay) Bill 1999.
In the past, these submissions have focused on the basic injustice of small business specific proposals in relation to unfair dismissal legislation, and we have repeated those sorts of objections in the submission we have made to this bill.

But we have also focused in this submission on some of the more technical deficiencies that we see in this bill.
In particular, we have argued that while proposals which would restrict access to unfair dismissal for employees of small business are unjust, and in our view illogical, we have put the contention that any changes to the federal unfair dismissal scheme, whether they are aimed at small business employees or not, should be focused on providing less confusion, more simplicity and should streamline the dispute resolution process that is provided by this part of the act.

In our view, this bill does not do that.


It does not simplify or improve the current system; it further complicates it.

That is the theme of our submission: that the bill would simply proliferate existing confusions and add more.

I would like to take this opportunity to go even one step further.

In our view it is not just the form of the bill itself that could cause confusion.

The very existence of this bill is causing confusion.
This is the seventh attempt made by this government at small business reforms to the unfair dismissal scheme.

While each time these attempts have failed in the parliament they have whipped up controversy in varying degrees each time they have come up and in our view are causing genuine confusion in work places.
I can only tell this to you anecdotally but it is my experience that some small business employers on occasion incorrectly think that a small business exclusion already exists and, indeed, some workers have come to me under that impression.

I can provide an example.

I must say, though, that the example that I wish to provide is a matter that is currently being litigated in the Australian Industrial Relations Commission so I need to be careful about saying too much.
But I currently act for a worker who has an unfair dismissal application before the commission.

The nature of the case is not important but, very quickly, it is an unfair dismissal claim that also has a fairly substantial wage recovery element to it.

One of the main purposes of the claim as made was to, through the mediation process provided by the unfair dismissal scheme, hopefully recover the substantial wages that we say are owing to my client in this matter.
One conciliation conference has already been held.

As you would be aware, my client, to attend that conference, was required to take valuable time out of her search for work but equally the respondent to the application had to take valuable time out of the running of his business.

Both parties have employed legal representatives and have incurred cost in that way.

Another conference is scheduled.

After this, there is a jurisdictional matter, so a jurisdictional hearing will be held.
If the commission sees the matter our way and the application proceeds, we will then have another hearing: a substantive hearing to hear the application.

In reality, this matter should have settled at the first conciliation conference.

It did not, because the employer believed that the commission had no power over small business claims.
In a piece of correspondence lodged with the commission and sent to me it said: EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION Monday, 24 February 2003 SENATE—Legislation EWRE 3 I understand that the IRC has no jurisdiction over small business claims and that these cases can be dismissed if wrongly brought before the commission.

In my view, the matter should have settled.

It did not, because of confusion caused by an inadvertent belief that small businesses are exempt from unfair dismissal laws.
So, in addition to the points I have made in the submission before you, I would also like to make the point that these constant attempts are not helping; they are hindering and, as I said, they are causing genuine confusion in workplaces.

I would submit that this bill should be opposed and that any further attempts to introduce these sorts of changes should be considered very carefully in the light of that confusion.

CHAIR—Thank you, Mr Redford.

Do you have any questions, Senator Murray?


Senator MURRAY—Despite the movement of Victoria into the federal jurisdiction—and, therefore, the movement of state dismissal cases into the federal jurisdiction—the reforms to unfair dismissal laws in 1996 resulted in a reduction in unfair dismissal claims of 46 per cent.

The next time there was major change was in September 2001.

Those reform changes were principally in terms of time and process costs.

They resulted in a further reduction of 12 per cent.
In Victoria, for the 12 months ending November 2001, the total number of federal unfair dismissal applications—and, of course, that covers the state in your sense—was 4,829.

The latest figure I have for the 12 months ending November 2002 is 4,344.

In other words, there was a reduction of around 500.
My question to you is this: your body opposed the 2001 changes; have you felt that those changes have actually resulted in unfairness or have you felt that the result was that many more genuine applicants are now being dealt with, as opposed to in the past?

Mr Redford—It is difficult to answer because there were a number of changes at the end of 2001.

Perhaps I will just focus on one in particular: the introduction of the automatic qualifying period.

Senator MURRAY—It is regarded as the default period.
Mr Redford—I do not know whether that reform was the main cause of the reduction, but certainly through my experience that is the major change of 2001 that comes to mind, so it may be that that is one of the reforms that is more responsible for the reduction.

If that is the case, I would say that in many scenarios that is unfair in my experience because I and my organisation still support a probationary period that is agreed by the parties and that the parties know about before employment commences.
I think that is that is one of the unfair aspects of the automatic qualifying period reform that came in at the end of 2001.

Often an employee will come to me and say, ‘I have been what I think is unfairly dismissed,’ and I will say, ‘Do you have a probationary period?’ and the employee will say, ‘No’.
I then have to say, ‘Unfortunately, you’re still caught by an automatic exemption even though you didn’t know about it.’ I think it is unfair if that is one of the applications that would have gone forward before the reforms.

I think it would have because, if it was an unfair dismissal, no probationary period would mean that the employee is eligible.

It is unfair if an employee does not—and, mostly, employees do not—know about the existence of the qualifying period.
Senator MURRAY—I forgot to bring with me my schedule which compares state and federal jurisdictions, but my memory is that in Queensland it is a six-month qualifying period—which is the same as this bill is recommending.

My memory is also that most states have a qualifying period.

So you would like that change throughout Australia?

EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION EWRE 4 SENATE—Legislation Monday, 24 February 2003 Mr Redford—I can really only comment on the Victorian situation.
But, yes, I support a qualifying or probationary period of reasonable length.

I think that it has been established over time that ‘reasonable’ is three months unless there are other circumstances at play.

I support a period like that where it is clearly agreed between the parties—where the parties know about it before the employment commences.

Prior to the existence of the automatic qualifying period in the federal jurisdiction that was the case.

I am not sure about the Queensland matter.


My understanding is that the qualifying period reform that came in at the end of 2001 was in fact a replication of the Queensland system.

My best guess would be that the Queensland system provides for a length of three months.

Senator MURRAY—I am sure that is wrong.

Mr Redford—I concede the point.

Senator MURRAY—The Labor government brought in a six-month period.

Senator SANTORO—It was reduced from 12 months to six months.
Senator MURRAY—The reason I ask these questions in this way is that my personal experience of JobWatch is that it is a very committed and diligent—if somewhat under- resourced—operation.

Nevertheless, its opposition to change in this area has been quite consistent.
I wondered if experience of a change has meant that you have shifted your position and recognised that other areas of change—limiting the rights of demoted employees to seek a remedy; tightening the test for granting extensions of time to make termination and employment applications; requiring the commission to deal with jurisdictional objections before referring a claim to reconciliation and a number of other changes—which you were not on side with but which you are now on side with in terms of your experience.
Mr Redford—Some of those changes have made no difference.

The jurisdictional one is a good example.

In my experience of the manner in which jurisdictional objections are dealt with, the only change has been a new form—an R21A form—which provides a respondent to an unfair dismissal claim with a form that they can fill out to move that the application be dismissed.

But the jurisdictional objection is still heard and determined in a hearing, just like it was before.
So I would say that that reform has not really had any impact.

The reform that applied to demotions—that is, where the question of unfair dismissal arises in relation to a demotion—is that it will not be an unfair dismissal unless there is a significant reduction in remuneration or hours of the employee.

Arguably, the reform has created some considerable confusion.
What I am trying to say is that we still do not know what ‘significant’ means so we still do not know whether or not a demotion will be an unfair dismissal, because the question of what ‘significant reduction’ means has not been determined by the commission.

I would certainly say that, given that we do not know what ‘significant’ means, that provision would not dissuade you from making an unfair dismissal claim if you thought there was genuine unfairness, because ‘significant’ could be anything.
Senator MURRAY—Mr Redford, are you aware that the intention of this bill to use the constitutional corporations extension of coverage will mean that a large number of employees in Victoria who do not presently have access to unfair dismissal law will now have access—in other words, that people who do not have access to the provisions of the act will now be covered and able to get access?
Mr Redford—I made the point in the submission that we did not wish to comment on that part of the bill because we did not see it as having any application to Victorian workers.

EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION Monday, 24 February 2003 SENATE—Legislation EWRE 5 Senator MURRAY—If you are not covered by an award or you do not fall into the jurisdiction which allows you to get access to the act in the first place, you are just subject to common law provisions on contractual obligations.
This bill allows you to get coverage.

My understanding is that anything up to 800,000 workers in Australia are not covered by state or federal workplace relations or industrial relations law, and this is a means by which more people will get coverage—to this particular aspect of the law, at least.
Mr Redford—I am not saying you are wrong, because it may well be that my not giving this part of the bill much attention means that I am not informed enough to really comment on it, but my understanding is that only those Victorian workers who are caught by an exemption provided by the federal unfair dismissal scheme fall outside its jurisdiction.

Senator MURRAY—We will leave it there.

That is fair enough.

Mr Redford—It is a matter that perhaps should be checked.
Senator GEORGE CAMPBELL—Senator Murray used figures with respect to the reduction in the number of unfair dismissal claims across various jurisdictions.

Are you aware if any research or analysis has been done to establish what the circumstances are behind the reduction in those claims?
Is it attributable, for example, to a lot of the information that is now being fed by various bodies like the CPA to small businesses about how to go about engaging employees and how to meet their employment regulation obligations, or is it simply that these other legislative reforms which Senator Murray referred to have kicked in and removed some of the problems in the area?
Mr Redford—Because I am a lawyer I do not get into the research side of it much but, as you are aware, I have referred to some research in the submission.

To be honest, if there has been a reduction I do not know why there has been a reduction.

Perhaps the only piece of research that I would raise for your consideration is that done by Don Harding from the University of Melbourne—The effect of unfair dismissal laws on small and medium sized businesses.
There is a question in that survey relating to the reforms to the unfair dismissal scheme that occurred at the end of 2001.

That research indicates that those reforms have had a minimal impact on business generally—if, indeed, they know about those reforms.

Your question was essentially about research and whether there has been any done on the issue.

The only research I know of—focused on the question of the impact of things like those reforms—found that those reforms had no impact.
If there is in any stock to be put in that sort of research—and again, because I am not a researcher I do not know much about it—it indicates that those reforms are not responsible for the reduction, which leaves us with the question: what is responsible for it?

As I said, I do not know.

Senator GEORGE CAMPBELL—In paragraph 14.3 of your submission you state: The proposed legislation will have a particular detrimental effect on the rights of Victorian and Territory workers.
In what way do you see that effect being detrimental on those workers as opposed to workers generally in all states?

I assume that you are saying that the detrimental effect on them is different to that on workers in other states.

Does JobWatch keep any statistics?

Of the people that you have represented in this area, would you be aware of how many have come from unincorporated organisations as opposed to corporations?
Mr Redford—In relation to that last question no, we do not keep statistics on that matter and I would not know.
In relation to the claim in our submission that this bill ‘will have a particular detrimental effect on the rights of Victorian and Territory workers’—that is simply a reference to some statistics that indicate that a large proportion of Victorian workers are EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION EWRE 6 SENATE—Legislation Monday, 24 February 2003 employed by small business and, therefore, if this bill was passed, would be disadvantaged— they would suffer from a restriction on access to the unfair dismissal scheme.
We have also identified an underclass of Victorian workers who are not covered by federal awards, who are caught by schedule 1A of the Workplace Relations Act and who, we argue, suffer particular disadvantage when compared to other workers in Australia because they have such a low level of industrial protection.

Victorian workers would be caught by this bill and would be particularly disadvantaged if this bill was passed.

It is just another disadvantage that they would suffer from.
Senator GEORGE CAMPBELL—Do you have any evidence, or does JobWatch have any of evidence, that businesses are likely to reduce, casualise or segment their work forces to ensure that they come within the scope of the definition of small business?

What particular areas of the work force do you think are most likely at risk in this sort of proposal?

Mr Redford—We do not have any evidence of it; this is an observation that I make.
If unfair dismissal laws are such a burden on business—a point that we do not concede—and something that business is concerned about, surely businesses that have the opportunity to take themselves outside the operation of the scheme would do so?

One of the ways they could do it under this bill would be to increase their number of short-term casuals.

Anecdotally it happens in relation to the operation of the casual exclusion that already exists.
Casual employees with less than 12 months service currently cannot make unfair dismissal claims.

Casual employees who find themselves moving from less than 12 months service to more than 12 months service sometimes find themselves inexplicably dismissed.

I should say that I do not think that goes on a lot because I don’t think unfair dismissal is that much of an issue for small business that they would bother.
But, if it is an issue for some businesses, what really concerns me about the definition of small business in this bill is that it creates a positive incentive for those types of businesses to take themselves outside the operation of the act by increasing the number of insecure work arrangements that they have in their operation.

I think you might see it in businesses like the hospitality industry, which has a higher proportion of casual employees already.

Hospitality is one that comes to mind.


Senator GEORGE CAMPBELL—Hospitality has a high proportion of young people as well.

Mr Redford—Yes, absolutely.

They are the ones who would be targeted and used as this sort of rotating workforce that goes from one business to another after 12 months simply to take those businesses outside the operation of the act.
I think it is a real flaw in this bill because, although it is focused on small businesses, you have to realise that it is possible it will operate in respect of businesses that are not small by any stretch of the imagination.

It would be easy for a medium-sized business with, say, 40 employees to simply make 30 of them casual and make sure that they do not last more than 12 months.

There is no impediment for that sort of strategy.


Senator GEORGE CAMPBELL—That is very common in the retail industry, isn’t it?

They have high proportions of casual workers.

Mr Redford—That would be another perfect example.

I made reference to anecdotal experience of the way the casual exclusion is abused.

I might make similar reference to the way the traineeship exclusion is abused in an industry such as retail.
As you are aware, some trainees cannot make applications for unfair dismissal, because they are excluded.

As I said before, sometimes you find that trainees are inexplicably dismissed just prior to the end of their traineeship, as they are preparing to move into full-time employment, because they will be caught by unfair dismissal.
EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION Monday, 24 February 2003 SENATE—Legislation EWRE 7 Senator SANTORO—Mr Redford, I will put to you the example of Queensland, where there was quite extensive experience in terms of the application of unfair dismissal laws which had a probationary period of 12 months for businesses with under 15 employees.
Should this bill make it safely through both houses of federal parliament, I would like to provide you with some assurance that, to the best of my knowledge, there is no anecdotal or other evidence that suggests that there was a massive downsizing through a process of casualisation in that state during the 2½ years that those laws applied.
To the best of my knowledge, no evidence has been produced within that state’s industrial relations commission either during the time that I was responsible for running the system or, more recently, during the application of the Labor Party’s laws.

That issue has not been raised as a serious issue of concern.

I supply that opinion not only to reassure you but also to inform the committee.
If there is evidence, I would be very interested to hear it, because there is an unfair dismissal regime operating under the current Labor government in Queensland where, if that were an issue, it would be a matter of debate.

I submit that example to you as some form of reassurance.

You raised before the point that employees are often disadvantaged because they are ignorant of the probationary conditions that apply to their employment.
In your experience, what percentage of employees are not made aware that they would be on a probationary period?

Mr Redford—To start with, I make the distinction between the qualifying period and the probationary period.

I make that distinction on the basis that a qualifying period, which is the new regime, is an automatic exclusion applying only to unfair dismissal.
Before that qualifying period exemption we had the probationary period exemption, which still exists, which is different in the sense that it needed to be agreed to before the employment commenced and it needed to be of reasonable length—generally, it was for three months.

Sometimes you found that an employee did not know that they were on probation and you attacked the exclusion on that basis.
You lodged the unfair dismissal claim, fully expecting that there would be an objection on the basis of probation, and then you put an argument to the commission that the employee did not know about it so it was not agreed to in advance and, therefore, was not valid.

That happened sometimes but not often.

I distinguish that situation from the operation of the qualifying period.

I would say that, generally, very few workers know about the existence of the automatic qualifying period.
I think workers are familiar with the concept of probation and, provided they are told about it before the employment starts, they are comfortable with it.

But the idea that there is this automatic, unsaid exemption in the first three months, where you can be sacked for anything, is not something that many workers realise.

Senator SANTORO—In my experience before entering the Senate I dealt with a lot of small businesses, particularly in retailing and the aged care industry.
From an injury risk management point of view, I had to review the induction processes and modules that were contained within the hiring function of those small businesses.

My experience in Queensland was that, in fact, new employees were made very much aware that a probationary period applied.
In most cases, both the employees and the employer—or the immediate supervisor, at least—signed off on an induction process that had that knowledge pretty much instilled formally within the contract, if I can call it that.

Mr Redford—I think that is good practice, and good businesses do it.

Senator SANTORO—I am suggesting to you that, from my experience over approximately 18 months, it was pretty much the overwhelming practice.
EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION EWRE 8 SENATE—Legislation Monday, 24 February 2003 Mr Redford—We may have had different experiences.

My experience is not that it is overwhelming, particularly in small business, but I certainly agree that good businesses do it.

I think it should be encouraged, and that is why I have a problem with the automatic qualifying period.

You have created a situation where the incentive for putting these matters in writing no longer exists.
A lot of businesses, believe me, are taking advantage of it and scrapping the contract because they do not need it any more.

Senator SANTORO—In terms of the three-month versus the six-month probationary period, you seem to favour the three-month option.

Why is that?

Mr Redford—I suppose that is because I liked the system where parties would agree on the probation before the employment started.
It would be clear and reasonable, in the sense that the act provides that the period should not exceed three months unless there are exceptional circumstances in play.

I liked the flexibility that that sort of system provided.

That is why I do not like six months.

Six months can be fair and reasonable in some circumstances but in many circumstances it is not.

In many circumstances there is no justification.


It is manifestly unjust to be able to dismiss a worker after four or five months of employment without so much as a by your leave.

I would probably say that even after one month that would be the case but we had a system which provided for three months and we had a facility to extend it if appropriate and I thought that was a good system.

That is still our system and it should be kept.


CHAIR—There is a general direction in this bill to move to more federal coverage.

In Victoria you have had that for some time.

Could you comment on your experience in relation to simplifying IR systems and whether you feel that is the way we should go in this country.

Mr Redford—If you do not mind, I would like to confine my comment on that.

CHAIR—It is from your Victorian experience.

Mr Redford—Yes, I understand what you are saying.


All I can say is that we support the concept of a unitary simplified system at JobWatch.

We support the concept of it, with the qualification that there are different proposals around about how it could work and we would make comment on each of those proposals individually.

In relation to this bill, I simply have not looked at it because it did not have an effect on our constituents.

CHAIR—Thank you.
CHAIR—Thank you.

You made a statement when you were answering questions from Senator Campbell that you did not concede that there was a disadvantage to small business in the way the current laws are configured, where small businesses cannot get the exemption which we have been trying for here.

I think this is our fourth set of hearings on this matter.
Given that you have said you do not concede a disadvantage to small business, I just want to quote a recent Melbourne Institute of Applied Economic and Social Research study.

I do not know if you are aware of this one.

It showed the cost to small and medium sized business of complying with unfair dismissal laws was at least $1.3 billion a year and the laws have played a part in the loss of over 77,000 jobs from small and medium business.
I wonder how you reconcile that research with your statement to us verbally that you did not concede disadvantage to small business.

Mr Redford—I read the survey.

There have been some comments about that survey in relation to push polling and leading questions and all that sort of thing.

I noticed in it that the professor did make a real attempt to try and explain that the point of his survey was to avoid leading questions but I do not know whether he really succeeded.
Having said that, I do not really want to get into the research side of it much because I am a lawyer and not a researcher, as I said.

The only thing I would say is that I do not understand EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION Monday, 24 February 2003 SENATE—Legislation EWRE 9 the relevance of the comments about the cost of the system.

You could do surveys on the cost of the system of workers compensation that various jurisdictions have.
You could do surveys on the cost of wages that various businesses have.

Businesses suffer cost.

If the unfair dismissal system is justified, then the cost is justified.

So the fact that there might be a couple of zeros after the figure is irrelevant.

It is going to cost money.

I did not understand the point that that survey tried to make about this billion dollar figure.

I do not think it was news to anyone that regulation on business costs money.
CHAIR—I suppose our point on the push towards getting some exemption for small businesses is that larger businesses often have human resource departments; experts who can manage these things.

If you are employing two or three people the businessman is often trying to survive.

He is not a human resource expert.

This takes an enormous amount of his time; trauma; legal costs, possibly.

If he is working on the edge, it can drive him under.
I have received a lot of anecdotal evidence from small businesses who have been through that situation.

So, maybe the analogy where you say it is a cost like buying supplies as a cost is not quite correct.

In a lot of circumstances where the action is not warranted, it is an unfair cost to that business—particularly if it drives him broke.

Mr Redford—I do not like the human resources person argument.

Our unfair dismissal system is about a fair go all around.
The commission has already said about those new proposals that require the commission to consider the existence of a human resources professional in the business that that should not absolve the business of the responsibility to provide a fair go all around.

It was a good point to make, but it was an obvious one.

Businesses with only two employees can still provide their workers with an explanation as to why they are being dismissed.

So I do not think that argument holds a lot of weight.
I think good small business people agonise over the decision to dismiss workers and do it in a fair and conscientious way and do it mindful of the severe effect that termination of employment can have on a person.

That is my answer to that second question about costs.

It is a matter of perspective.


I do not have a problem with a system that costs businesses money if the point of the system is to protect against a procedural and substantive unfairness that is earth shattering for many ordinary Australians.

That is the point of unfair dismissal.

It is to provide a system that encourages and sometimes forces employers to carry out these decisions in a fair way to minimise what is a devastating event in the lives of some people.
CHAIR—In that case, how do we protect the employer who is subject to a frivolous or vexatious claim?

In other words, the person clearly should be dismissed on the basis of stealing or whatever, but they go through all these processes and put the business through costs and trauma.

That, it is claimed, has the effect of putting a brake on businesses expanding employment.

How do you protect against that?


Mr Redford—If you wanted to protect business against every frivolous claim that is made against it, one thing you could do is exempt the business from everything: tax, workers’ compensation—every type of claim.

CHAIR—No, my point was, what do you do in those circumstances.
To give an example, a woman works for a fruit shop and is allowed to take home fruit that is sometimes just about to turn, but she puts in peanuts and chocolates and a whole of things and is caught red-handed stealing those items.

That particular businessman was put through a lot of cost and trauma over something that was clearly a case for dismissal.

I am talking about those sorts of claims.


Mr Redford—I submit that you have to have a process that emphasises settlement and conciliation as the primary dispute resolution mechanism, because that way you minimise EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION EWRE 10 SENATE—Legislation Monday, 24 February 2003 cost and you make it quick.

But, at the end of the day, you have to provide a system that can analyse that evidence and make decision on it.

There is no other way.


CHAIR—Finally, on the probation question—and Senator Santoro did deal with this is to some extent—there was three months, 12 months and now there seems to be a move toward six months across the country.

But you are objecting to that.

What is your figure on probation?

Mr Redford—As I said, I am not sure whether there is a move towards six months—I am not sure whether that movement is there.
I draw in particular on my experience with the Australian Industrial Relations Commission and the view consistently expressed by commissioners that, if a probationary period is going to be longer than three months, special circumstances need to apply.

Sometimes the commission recognises that those circumstances apply but often it does not.

I may have referred in my submission to comments that some commissioners have made about justifying a probationary period of longer than three months.
One decision that comes to mind is a very recent one by the New South Wales Industrial Relations Commission—I do not have the name of the case, I am sorry—which recognised that a probationary period of any length occurring after a transmission of business was not justified.

So I am not sure whether I entirely agree with you that there is a move towards six months, and I have not seen enough situations that justify something longer than three months to support it.
CHAIR—To give you an example, we senators are a bit like small businesspeople; we employ about three people.

You put someone on and you think they are going to make it— their skills will develop.

You get to three months and you have to make a decision.

Fortunately, we have a provision whereby we can extend it by another two months.
I find that very useful because, when they have to develop skills, I find three months too short to tell whether they can actually do the job and show that they have developed the skills.

There have been examples where I have extended and at the end of five months, under our provisions, have had a much clearer view of which way to go.

Mr Redford—You can do that under the current system.
You can provide for a probationary period of three months but advise the worker that there is a possibility that it might be extended at the end of three months, and if at the end of three months you need to extend it you can.

CHAIR—That is why I was talking about a longer period.
Mr Redford—But I make the point that if you did not have that scenario—if you had a three-month probation and that was it—and you got to four or five months and thought, ‘This isn’t working out,’ all the unfair dismissal system asks you to do is provide your worker with a fair go all round before you decide to terminate his or her employment.

CHAIR—Thank you for appearing this morning.


EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION Monday, 24 February 2003 SENATE—Legislation EWRE 11 [10.25 a.m.] ANDERSON, Mr Peter Christian, Director, Workplace Policy, Australian Chamber of Commerce and Industry HARRIS, Mr Christopher, Adviser, Workplace Relations, Australian Chamber of Commerce and Industry CHAIR—Welcome.

The committee has before it submission no.16.

Are there any changes you wish to make?

Mr P. Anderson—No.
Mr P. Anderson—No.

CHAIR—The committee prefers all evidence to be given in public, but if at any time you wish to give any evidence, part of evidence or answers to any questions in camera, you may make the request and the committee will consider it, but such evidence may subsequently be made public by order of the Senate.

I now invite you to make a brief opening statement.

Mr P. Anderson—It is pleasant to be back before the committee on unfair dismissal matters.

CHAIR—You have great expertise.


Mr P. Anderson—We have attended a number of hearings where unfair dismissal reform in Australia has been discussed and, as you can see from our submission, we draw in part from some of our previous submissions.

We do not wish to repeat some of the points we made previously unless they are necessary or pertinent to this bill.

I would like to make a couple of remarks by way of opening comment to describe the parameters of ACCI’s consideration of this bill.
We have made a substantial submission to the committee in the past, as I said, and during the course of last year that submission outlined some 19 or 20 possible policy and procedural amendments which could be made to federal unfair dismissal laws.

A number of those in part or in whole are reflected in the provisions of the Workplace Relations Amendment (Termination of Employment) Bill 2002 before the committee.
Since we were last before the committee on unfair dismissal matters, four developments have occurred which we certainly think have been relevant in respect of the debate.

Firstly, the minister made a speech in the middle of last year to the food and grocery manufacturers where he raised the issue of a single unfair dismissal system operating in Australia.

That policy issue certainly pricked the ears up within the employer community and focused our attention on it.
Secondly, we at ACCI released in August last year a compendium of material by way of case studies entitled Unfair dismissal—evidence of the need for reform, which has been previously provided to committee members.

If members do not have a copy of that to refer to in the course of their deliberations on this bill, we can make further copies available.

It is relevant to this bill because it provides some examples of where we say the unfair dismissal system is coming up with some unbalanced results.
We are also aware of the report in October of last year of a considerable research project by the Melbourne Institute of Applied Economics on these issues.

Finally, we released in November last year our workplace relations blueprint, which in part identified termination of employment and unfair dismissal matters as an area of continuing employer concern.
However, since we were here previously, there have been some parliamentary dealings with the unfair dismissal issues: the eligibility of casuals to make claims was retained at 12 months through the fair termination bill at the end of last year; the small business exemption EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION EWRE 12 SENATE—Legislation Monday, 24 February 2003 bill did not go through as senators would know and would have debated; and then this bill was introduced on 13 November, together with the more recent development of the committee’s report on small business employment, which also had some useful observations to make on unfair dismissal issues.
From a business perspective all of those developments mean that, over the last 12 months, whilst we have not gone backwards in any structural way in terms of unfair dismissal issues, we have not really gone too far forwards in terms of unfair dismissal debate.

This bill is an opportunity for a fresh look at the unfair dismissal laws in Australia in terms of both their structure and their policy and procedural aspects.

We see this bill as containing two key elements.


It contains a range of measures which would relieve the burden of at least some of the more difficult aspects of unfair dismissal laws on some businesses—and they are welcomed.

There are also proposals in the bill to alter the constitutional coverage of federal laws.

I will comment on both of those by way of a very quick overview.
We support the policy and procedural changes that are proposed in this bill but we argue that they could go further in two ways.

Firstly, there should be some additional matters dealt with in this bill, particularly in relation to extensions of time.

As our submission outlines, there is still an ongoing problem in the jurisdiction with extensions of time and the test that is used for the extension of time cases.
We believe that is a matter that ought to be addressed by the parliament—and sooner rather than later.

Secondly, some of the proposals in the bill are specific to small business—and that is proper and understandable—but there are a couple which could also apply more generally to businesses.

I particularly refer to the proposal for a six-month qualifying period.

I am more than happy to answer questions about the six-month qualifying period—either generally or as it would relate to small business.
In supporting those changes I would like to say that employers do not seek to dismiss their employees capriciously.

When they employ staff employers seek to develop long-term relationships with those staff, to the extent that the business can sustain those relationships.

It would be wrong for anyone to approach a consideration of these issues with a view that employers are arguing for clean slate rights to dismiss staff capriciously.
That is not the practice of industry generally and it is certainly not something that we at ACCI support.

As to the constitutional provisions, our submission points out that we give some qualified support to the proposal in the bill to apply the corporations law more directly in the federal unfair dismissal system.

We have multiple systems in Australia: we have a federal system applying in each state, plus a state system—except here in Victoria and in the territories.
So, in almost all the Australian jurisdictions there are multiple systems applying at the one time.

That raises problems of jurisdictional coverage.

Our workplace relations blueprint, which we issued last November, points to some of those problems.

We do, however, have some qualifications about the issue.

We have had a lot of discussion within ACCI about this proposal.

It is quite a substantial proposal in its own right and has given rise to a lot of debate and discussion within the employer ranks.
The qualification we have particularly highlighted is that if we are going to have this proposal implemented we need to make sure that there is no loophole where persons who are brought into the federal system can move back into the state systems.

We know that the federal system has a range of exclusions from its operation.

Those exclusions are there in order to establish some policy balance in the federal laws and exclude casuals for a period of 12 months of employment before they can make claims.
We do not want a situation where persons excluded under the expanded federal laws would be able to rely on a state unfair dismissal law in order to make a EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION Monday, 24 February 2003 SENATE—Legislation EWRE 13 claim, because from an employer’s point of view getting a change to the federal law would be a pyrrhic victory if the employer still had to face a state unfair dismissal jurisdiction.

The bill seeks to do that in the detail of its provisions.
On our analysis of them the provisions look quite sound in terms of trying to prevent that loophole arising.

There are a couple of aspects of wording that we see as needing improvement in those provisions and if the committee wants me to go to those provisions I am happy to do that.

Another qualification we put on our position on this proposal was that it ought to be accompanied by changes which would address some of the procedural and process issues in the jurisdiction.
This bill does that, and that is why it has our qualified support.

I say that because, for employers who operate wholly within a jurisdiction and do not operate nationally, the source of the unfair dismissal law is not so much of an issue.
The real issue for them is the impost that the unfair dismissal law imposes on them, particularly in cases where they are brought before an unfair dismissal tribunal in the commission on a matter which they do not think is justified and where they are put to the expense of having to defend themselves.

For that cohort of businesses, the more important issue of relief from the burden of unfair dismissal laws as distinct from the source of the laws.
So it is appropriate for both of those issues to be addressed by the parliament, they are in part in this bill.

Therefore, it has our support.
We also say in our submission that the issue of looking at a single or a more unified unfair dismissal law—which will not create a single system but will create a broader federal scope—should be accompanied by progressive examination of the issue more broadly in a workplace relations system, because we still have many areas of jurisdiction or overlap and some of the anomalies that have arisen in the unfair dismissal area, which are outlined in the explanatory memorandum to this bill, also apply in other areas of the workplace relations system.
Senator MURRAY—In item 63 on page 14 of your submission, you make this remark: However employers operating only in one jurisdiction will see no immediate impact on their business (but some may nonetheless see conceptual merit in the proposal).

I recall that Breaking the Gridlock noted the number of workers in Australia not covered under either federal or state systems, which would mean that they only have access to the courts through common law processes.
This bill seeks to nearly double the coverage of employees.

It seems to me that quite a high number of those employees not presently covered by state and federal awards, even in just one jurisdiction, may well be picked up.

Would you see that as bad or good for business?

Mr P. Anderson—I agree that that is likely to be the result of this change—you will pick up some of those award free areas.
It is perhaps not as significant in this bill as it is in the Breaking the Gridlock concept at large because of the eligibility criteria in the unfair dismissal system for making claims.

There is a cut-off at a certain remuneration ceiling and the like.

I think the figure in this bill would not be as large as the 20-odd per cent of people who Breaking the Gridlock estimated are not covered by any of the formal systems and would be covered by a corporations based system.
Is it a good thing from a business point of view?

We do not particularly like the idea of unfair dismissal laws becoming more pervasive.

Unfair dismissal laws are a problem for businesses.

The more pervasive they are, the greater potential problem they are.

This change extends the breadth of unfair dismissal laws even into some areas that state systems may not have picked up.

If you are going to do that, you also need to look at the regulatory content of the system.
If you are going to expand its breadth, then you need to lessen the depth of the regulatory burdens that the system imposes.

Because the bill does that, it is worthy of support.

EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION EWRE 14 SENATE—Legislation Monday, 24 February 2003 Our previous experience as employers with a more national unfair dismissal system was in 1993.
That was an unhappy experience for employers, because the expanded federal system was accompanied by some very heavy regulatory imposts—reversing burdens of proof and those things—which, fortunately, are now rectified to a large extent.

So we cannot, as employers, give an unqualified tick to a national structure, because we had an unhappy experience with a more national structure a decade ago.
If we are going to move to a national structure—and there are lots of advantages in doing that—then we need to make sure that the regulatory content does not create the same difficulties and backlash from an employer point of view.

We can trace back a lot of the perceptions that employers have about the operation of unfair dismissal laws to some of those negative experiences of 10 years ago.
Senator MURRAY—I cannot recall exactly where it was within the papers—I think it was in a couple of places—but I noticed a commentary that this could be the precursor to the extension of the federal law into other areas.

On that basis, the states may see fit to challenge this in the High Court to see just how far that can go.

If the states did challenge the coverage provisions if they were passed, would the ACCI welcome or support that challenge?
Would you be interested to see just how far federal workplace relations law can extend?

Mr P. Anderson—I do not think we would want to see that challenge occur.

The use of the corporations power in the workplace relations system is a net positive—there is no question about that.

The corporations power provides one of the real tools for a simpler industrial relations system in Australia, and it underpins some of the agreement making provisions of the Workplace Relations Act.
It would be dreadful if the High Court all of a sudden said that the corporations power in the Constitution cannot justify so many aspects of the workplace relations system, including unfair dismissal laws.

If there is this change at a national level, rather than looking at constitutional challenges, the best thing the states could do would be to look at how their state laws could be brought into greater harmony with the structure of the federal laws for those that remain in their state jurisdictions.
Senator MURRAY—I suspect one of the prime issues for employees—although employers are most commonly surveyed—is their level of understanding of the unfair dismissal laws and their perceptions being so far divorced from reality, which I frankly think can lead to them being conned as to the need to settle when they do not need to settle.

The law gives them much more protection than they think sometimes.
There was a survey in the Yellow Pages business index in July 2002, and I will use the Northern Territory as my example because, as you know, it has always been under federal law; there can be no misconception.
Of the businesses surveyed in the Northern Territory—I will round the figures out—10 per cent said that they were mainly covered by Commonwealth law, 15 per cent said that they were mainly covered by state law, 48 per cent thought that they were equally covered by state and Commonwealth law and 26 per cent did not know.

I am not surprised by that, but the fact is that they have no idea.
Reading that a different way, it would seem to me that unfair dismissals do not affect that many of them because, if they did, businesses would probably know where the laws fell.

One of the advantages which might be seen in getting greater coverage is getting greater understanding on the part of small business.
If that survey is accurate, the Northern Territory experience seems to indicate that whatever you do small business is not going to get their heads around it without a major and very expensive information campaign.

Mr P. Anderson—There is no doubt that there are a large number of businesses which do not know whether their businesses operate under federal or state unfair dismissal law.

Senator MURRAY—Even when they have never operated under it?
EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION Monday, 24 February 2003 SENATE—Legislation EWRE 15 Mr P. Anderson—Yes.

In some cases though, even in the territories, you have some state laws—discrimination laws and workers compensation laws—that intrude on dismissal issues.
Some businesses that have had a discrimination complaint in relation to a termination of employment under a state law could see that as a claim of unfair dismissal—even though it is a claim under a state law and the unfair dismissal law is purely a federal law.
It is not a good thing, that businesses do not know in which jurisdiction they may be subject to unfair dismissal laws, but, as with a lot of our industrial system, we have an extremely large array of workplace and employment regulations in Australia.

If we asked employees whether they were subject to state or federal unfair dismissal laws, I reckon the figures we would come up with would be just as troubling—and perhaps even more so.
In the states where both jurisdictions operate side by side, lawyers and bush lawyers have equal difficulty in some cases trying to work out whether state or federal laws apply, because of the range of constitutional tests.

What is the bottom line?

I think there is value in better information, education and training on unfair dismissal matters, and I think the Senate committee’s report on employment is very useful in that regard.
But I think you need to go a step further than that in respect of unfair dismissal matters and look at the regulatory content of the system, because the more complicated the system is the more confusion you are going to have within an employer community.

Senator MURRAY—I have figures from 31 December 1996 to 30 June 2002 on how applications under the federal law have been dealt with.
Of those applications—and again I will round the figures—18 per cent were withdrawn, settled or otherwise discontinued prior to conciliation.

In other words, nearly one-fifth were lodged and then withdrawn.

Fifty-five per cent were settled by conciliation.

The 21 per cent unable to be settled by conciliation were dealt with in various ways.

One of the interesting things that has emerged was the issue of putting a certificate down—as to whether there were any reasonable prospects of success.
Just as a side issue, in the eight months after the introduction of the new law there were only six certificates issued where there was no reasonable prospect of success.

That means to me that the vast majority of the applications getting through had some merit; they may not have had full merit but they had at least enough merit to get over the threshold.

A lot of assertions have been made that people are settling before the application is made.
I return to my figure that 55 per cent are settled by conciliation and 18 per cent are withdrawn, settled or otherwise discontinued prior to that.

People are saying that we only see in these figures the narrow end because people are settling long before it gets to application.

But that is the normal course of events in a business, isn’t it?
If you have a quarrel with a supplier, an employee or a customer—where the customer brings back something that he says is a dud and you say is not—you will settle in some way.

How big is that issue of unrecorded settlements?

Mr P. Anderson—On the figures you have—and I do not have better ones—there are 18 per cent settling before conferences.
That does not mean that they are being settled in circumstances where either the employer is acknowledging some wrongdoing on their part or the employee is withdrawing, acknowledging that they have no case.

You are still having commercial decisions made—even at that point—about settling matters.

In fact, at that point, you would be having a certain percentage of that 18 per cent employers saying, ‘Well, I’m going to be facing a process of litigation as a result of this conference.
I don’t have a great deal of confidence in the process; therefore, I will instruct my industrial manager or my lawyers to seek to settle.’ One of the problems that we have alluded to in our submission is that there is a lot of variety when these matters get to the commission as to the views of EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION EWRE 16 SENATE—Legislation Monday, 24 February 2003 commissioners on particular dismissal circumstances.

It is a bit of a lottery.


As that trend increases and as that belief permeates through the employer community, I think you will get more employers settling before conferences because they cannot be sure of their own grounds—depending on who they may get in these conferences.

So, yes, I think there is something good about settlement before conferences.

I do not think that particularly means that the system is still in sync, as it should be.
As to your point about the ‘reasonable prospects of success’ test, I would not quite agree with the proposition that only that small number of certificates suggests that the matters going on have intrinsic merit.

Senator MURRAY—Let me explain what I meant quickly, so that it will help you with your answer.

There has been a reduction of 12 per cent in the numbers on an annualised basis since those laws were passed.
I would think that there is a natural weeding out process going forward, because the advisers are saying, ‘Look, you’re not going to succeed.’ So it would seem to me that that is a signal that the clean-out has already occurred, because relatively few certificates have been required since.

I have no evidence, but that is a judgment I make.


Mr P. Anderson—The feedback we are getting from the employer representatives who are involved in the jurisdiction is that the commission is applying that test in a very low-threshold way.

Dismissing matters at that stage because there is no reasonable prospect of success is not a high threshold for the commission to refer a matter on at.
We have certainly had feedback from employer representatives who have the view that there needs to be an extraordinarily deficient case, something which is just entirely beyond argument, for the commission to not issue such a certificate.

It is difficult to structure that threshold test in a way that you do not do injustice to genuine claims or to people’s rights to natural justice; I acknowledge that.
But the feedback we are getting is that there are still some very marginally arguable matters still proceeding through because of the way the test is being applied.

Senator GEORGE CAMPBELL—Mr Anderson, the thing that troubles me about this whole area is that a lot of information relating to unfair dismissal is still very much anecdotal.

I suppose the other component is the hysterical.

Somewhere in between is the truth of the matter in practice.
You say that unfair dismissal is still a problem for small business.

I acknowledge that for some small business it is a problem, but for a lot of small businesses so is running their business.

One of the things that came out of the Small business employment report was that there is a whole raft of issues that small business has to confront on a daily basis, and unfair dismissal was not sitting out there as a beacon for every small business in the country.
They were not walking in at 7 o’clock or 8 o’clock in the morning saying, ‘Oh my God, I’ve got to face up to unfair dismissals again today.’ The evidence we did take on unfair dismissal essentially came from a few companies who had had a particular problem; in the main, those companies did not understand which jurisdiction they should have been operating within.

That raises a question for me in looking at these proposals.
Setting aside the merits of technically whether it can be done or not, isn’t it of concern that again we are talking about putting a third tier into the mix of what employers have to confront on a daily basis?
You could be creating a set of circumstances where you could have workplaces with employees on federal awards who would be subject to federal jurisdiction; you could have companies that are incorporated who are on state awards but subject to federal jurisdiction in respect of unfair dismissals but not in respect of their wages and conditions; and you could have a third group of employees who are in unincorporated companies, who are subject to state conditions of employment, for both awards and unfair dismissal.
Maybe there is a fourth one—I do not know—but those three stand out.

Isn’t it of some concern that, in the process of trying to EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION Monday, 24 February 2003 SENATE—Legislation EWRE 17 simplify the process, we may well be building in another level of complexity, saying to small business, ‘You have to cope with it’?

You are right: a lot of small businesses do not understand the employment relationship they have.
They do not understand where they fit in the slot, so to speak.

I would have thought that trying to reduce that rather than make it complex would have been one of the targets of this approach.

But it does not seem to me that this bill gets there.
It is taking out one element of the employment relationship and trying to deal with that in the context of the federal arena rather than trying to deal with the issue of the federal-state jurisdictions—a unitarian system, if you want to put it like that—in terms of a process of negotiation with the states.

I understand that the states were not even consulted in respect of this legislation.

It was just put on the table with a ‘Take it or leave it,’ without any consultation with the state ministers.
I think in your document Modern workplace: modern future—a blueprint for the Australian workplace relations system 2002-2010 you suggested a nine- or 10-step process about how that consultation might occur and how we might get to an end result in a unified system.

Isn’t that a concern to you?

In the small business employment inquiry, we talked to a number of small businesses around the country in roundtables.
When we asked them if they would they rather have one system or have the choice of a state or federal system, in the vast majority of cases they all opted for having the option of forum shopping rather than being linked into one system.

Maybe that was a matter of them not understanding what was being put to them or maybe they understood very well what was being put to them—I do not know, because we never had the opportunity to actually test that.
To what extent, through your small business council at ACCI, have you consulted your representatives from the small business arena about this question?

Do they want to continue to have the capacity to forum shop or be locked into one system where they are capable of processing these issues?

I am sorry, there are a lot of questions bound up in one question.

Mr P. Anderson—There are a lot of issues there.


Small businesses are certainly more concerned with the regulatory content of the system than the source of the laws.

There is no question of that.

When you ask small businesses about unfair dismissal laws, or if small businesses say that unfair dismissal laws are complicated, their primary concern is not whether the unfair dismissal laws are state or federal laws but whether the laws compel them to dismiss people in a certain way.
If a small business dismisses a person in a certain way, they do not know whether it will be ultimately seen as fair or unfair or whether they will end up in the courts; and, if they do end up in the courts, they do not know what possible consequences could flow from that.

That is the primary issue of concern.


If the alternative to the approach in this bill of dealing with unfair dismissal laws in a more unified way is to say, ‘Let’s do it more broadly as part of a general consideration of a move towards a national unitary industrial relations system in Australia,’ then that is a much larger question.

From our point of view as ACCI, and as we say in our blueprint, we certainly think that that is an issue worthy of very serious examination in Australia.
But, even from our point of view, we neither give an unqualified yes nor hand a blank cheque to a government for that.

Senator GEORGE CAMPBELL—If you do not do it that way, are you not potentially building more complexities into the process?
Mr P. Anderson—I do not think you do in the context of the unfair dismissal laws because, whilst what you say about possibly having people under state awards or agreements subject to a federal unfair dismissal law as a consequence of this bill is correct, the point is that the employer and employee will only have to ask what should be a fairly simple question EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION EWRE 18 SENATE—Legislation Monday, 24 February 2003 as to where their unfair dismissal coverage lies—and that question is: are they employed by a corporation or a company?
That is a fairly simple question.

In the employer community, it is probably much easier to pose and have answered that question than to expect an employer in High Street to have a grasp as to whether it is the state or federal unfair dismissal laws that apply.

Senator GEORGE CAMPBELL—Suppose I go beyond that and ask: what about working environments—not just the employer’s environment, but working environments?

Take the construction industry.


On a construction site you can have a mix of all three types of employment going on at the one time.

What complexities does that build into the process?

Mr P. Anderson—I do not think the bill adds to it in that regard, because at the moment you can have people in the same general work environment working under federal and state award systems and state and federal agreements who are subject to different unfair dismissal jurisdictions.
There is a simplicity that the bill would produce simply because determining whether you are employed by a corporation or whether you are a corporation—although, if an employer does not know that, they should not be in business—is a more straightforward question.

It is not an entirely straightforward question, because it has to be a constitutional corporation, which is a slightly different question, but it is a much more straightforward question.
It does mean that some people under state instruments of regulation, in terms of wages and conditions, would be under a federal unfair dismissal law, but I do not think that is a net complexity to the system, because of the simplicity in the question that would have to be asked.
As to the issue of forum shopping, from an employer’s point of view, I do not think the issue of choice really comes into it in this jurisdiction, because the unfair dismissal laws are laws which create a cause for employers to be sued, for complaints to be made and for litigation to commence.

It is the employee who is exercising the choice.

The employer can only try and best manage the claims once they are made.
To the extent that there is forum shopping in the system—and there is at the moment, where you can chose whether you want to move into state or federal systems if you are a certain category of employee—the bill is a net advantage.

It lessens forum shopping because it says in its provisions that, if you are employed by a constitutional corporation, you are governed by federal laws and you do not have the right to go back into the state systems.
Senator GEORGE CAMPBELL—What about the discontinuation of two classes of employees?

A fundamental argument that has now been in this area for all six or seven bills is that you still continue to set out two classes of employees dependent on the nature of the company they are employed with and what their rates are in terms of their termination of employment.

The bill does not address that issue.

Mr P. Anderson—I think our unfair dismissal laws generally provide differential rights.
In Queensland there is a 12-month exemption for certain employees to be able to make claims.

In other states there is a differential provision.

There are different classes of employees for unfair dismissal laws, even amongst state systems, and when you look at the federal system you see there are further differences.

I think that, whilst we have multiple industrial systems, we are going to have these differential classes.
It is not an easy situation to resolve, even with a single unfair dismissal law, because it is sometimes a very subjective issue as to whether a person is unfairly dismissed.

Different commissioners, even in the one industrial system, have different views.
What might be ultimately regarded as a justified dismissal for swearing in the workplace or abusing a customer, one commissioner might regard as not meeting the standards of fairness and another EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION Monday, 24 February 2003 SENATE—Legislation EWRE 19 member of the commission may differ.

So there are inevitably going to be differential outcomes depending on how applications are lodged, whether you have multiple or single systems.
As regulators, I suppose the task of the parliament is to try to make the system as straightforward as possible so that those difficulties are minimised.

That is one of the reasons that we support the proposals in the bill to have a more direct test as to when there is an unfair dismissal in small business.

Senator MURRAY—As I said before, Mr Anderson, I understand that the state governments were not consulted about the drafting of this legislation.

Was ACCI consulted about it?


Mr P. Anderson—Not on the draft of the legislation.

As we are a member of the Committee on Industrial Legislation, COIL, we were consulted through that process.

But we were not consulted outside of that process.

Senator SANTORO—It seems to me, from listening to my colleagues and to other argument that is out there in the general community, that one of the underlying reasons for opposition to this bill by certain sections of the community is the lack of empirical evidence.
I recently participated in a debate in the parliament where the argument was put—including by my colleague on my right—that there is not sufficient evidence out there to suggest that small business would respond favourably to the passing of unfair dismissal provisions such as those contained in this bill.
Subsequent to that, the argument was put that there had been a lot of research done—Yellow Pages research, employer group research and academic research by various university people—but, again, in my particular experience, that failed to sway the Senate to accept that there was sufficient, persuasive empirical evidence.
Yet it seems to me that, if the four or five senators sitting here went to a nearby industrial estate in Melbourne and we asked employers who employed fewer than 20 people what were the two or three biggest disincentives to them employing, it is a fair bet that a good number of them—I will not put a figure on it—would say workers compensation issues and unfair dismissal issues.

But, again, that probably would be regarded as anecdotal.
How is the employer movement going to resolve this issue of what employers really see as the biggest impediment to employment?

It is a real issue.

In looking at the debates that have gone on in the Senate over recent times, one sees that it is an issue that is constantly raised.
There seems to be conflicting evidence, even though out there in the marketplace my experience tells me that, unprompted, small business employers more often than not will mention unfair dismissal law as a disincentive to their willingness to employ.

Mr P. Anderson—We would certainly agree that that is one of the higher echelon issues that small business raises when small business is asked to comment on the regulatory framework.

Not all businesses will respond in exactly the same way.
If there are 7,500 federal unfair dismissal claims per year, then obviously you have only 7,500 directly touched by the federal unfair dismissal law.

But what you do not get in those figures is those employers who are unsure about making decisions about terminating staff or disciplining staff because of the worry and concern that termination laws may provide some counterproductive costs for them.
You also have that cohort of businesses who may be reluctant to put on staff, or who may be reluctant to put on permanent staff, because of the operation of unfair dismissal laws.

How do we deal with that as an employer community?

We attempt to bring forward the best material that we can.

Some of it is anecdotal—and that, by definition, is going to be the case in this area, because you do not have the whole profile of employers all affected by an unfair dismissal claim in the one business cycle.
We have over the last couple of years sought to bring forward more than just some survey material.

Our surveys are consistent with the EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION EWRE 20 SENATE—Legislation Monday, 24 February 2003 type of results that you have shown: in the top four, five or six issues—depending on just when you survey and what profile of employers you survey—employment regulation and unfair dismissal regulation are matters of major concern.
But we have also sought to bring forward examples of how the system has dealt with unfair dismissal claims.

We have sought to do that not just by reference to ultimately arbitrated outcomes but also by some of the outcomes that occur in the unreported area—which is the conference area, where we do not have material from the industrial registries about exactly under what circumstances a particular claim might or might not have been settled.
We do rely on the participants in that process to bring forward some material.

We have sought to compile some of that material and provide it to the parliament, which is what we did in August of last year.

We have also sought to encourage employers to directly come along and talk about some of their experiences.

Obviously, many employers do now wish to do that.

They have had enough of unfair dismissal laws without coming along and talking publicly about them.

But there has been some direct evidence.


I do not think it is all anecdotal.

There has been some direct evidence given to the parliamentary committees over the last four or five years from actual business people who have put forward their unhappy experiences in the jurisdiction.
Senator SANTORO—For the benefit of fellow committee members, I remind the committee that in Queensland, which is the state where I have the most experience in relation to the application of unfair dismissal laws, when the Labor government took over from a coalition government—despite its trenchant opposition to what the coalition put in place—it did not wind back the unfair dismissal laws to the point at which the coalition took government.
In other words, it only wound back the coalition legislation to a certain extent.

I see that as an implicit admission that the coalition’s unfair dismissal laws did have some merit in terms of the employment creation argument.

Why do you believe that small business would prefer a six-month rather than a three-month probationary period?

What do you see, from an employer perspective, as being the specific advantages to small business in that as opposed to a three-month probationary period?
Mr P. Anderson—Three months is only 12 weeks.

It is a relatively short period of time to be able to make what is an important judgment, and that is a judgment about whether or not in the course of a person’s employment they are able to fit into the workplace, they are able to well and truly undertake all the tasks that are part of the ordinary course of employment and the business is able to sustain that job that has been brought into the workplace.

Twelve weeks is a relatively short period of time.


It is not really a full business cycle.

Over the course of 12 weeks you may not as an employee even have the full range of experience of what you have to perform if you are, for example, a receiving clerk.

I would suggest some of your core functions would arise over a longer period than 12 weeks.

You also have to bear in mind, in looking at the qualifying period issue, that these laws are not just laws about unfair dismissals.
If we were just talking about the only claims coming forward being the ones where there is unfairness and where there needs to be regulatory intervention, we would not have the same argument for extending the qualifying period.

This is a jurisdiction where the fair and the unfair claims are brought before the commissions and where employers have to defend the fair and the unfair dismissals.

That means that a sizeable group of claims are litigated.
We heard from JobWatch before, where a gentlemen indicated that he would take an application where there was a probationary period just to test out and see whether or not the probationary period was understood.

An entirely EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION Monday, 24 February 2003 SENATE—Legislation EWRE 21 valid probationary period may have been established, but employers still have to defend themselves in respect of that claim.

These are matters of balance.


A 12-week qualifying period certainly is on the shy side if you want to have the laws in a proper balance.

It is not just a law that is dealing with the right to bring forward unfair claims; it is a law which brings forward claims where people believe they have been unfairly treated—but not necessarily so.

Senator MARSHALL—Mr Anderson, I would like you to explain the fairness argument to me.
Given the devastating effects of termination of employment on the individual who is being terminated, clearly in terms of the balance of inconvenience, it certainly weighs very heavily against that individual.

How do you justify the fairness argument about one group of employees having rights to natural justice and procedural fairness—challenging unfair, harsh, unjust terminations through a process—and another group of employees not having those rights, simply on the basis of the size of the employer?
I know you are an advocate for employers, but could you try to explain to me some logic for that application of distinction on size?

Mr P. Anderson—I think the distinction on size comes down to the fact that, when you look at this jurisdiction, it is about employees’ rights as against employers’ businesses.

You have to qualify rights by reference to the real environment in which they are sought to be exercised.

Those rights are exercised against a particular business.
Smaller businesses are in a more vulnerable position when it comes to both pre-termination issues and post-termination issues.

Pre termination, smaller businesses are less likely to have the internal resources to be able to go through the formal processes that our unfair dismissal cases indicate are necessary to establish a fair dismissal according to law, because workplace relationships are much more informal in small business.
The business proprietors themselves individually have to not only work in the business but also deal at large with all of the regulatory issues that arise.

So, whilst there is a differential in terms of the rights between larger businesses and smaller businesses when you talk about cut-offs, that is because there are different business profiles in which those rights are sought to be exercised.

Post termination, smaller businesses again have fewer resources to defend matters.
If you are having to pull perhaps your one supervisor out of a shop to go down to the unfair dismissal jurisdiction to defend the claim and explain inadequate performance and the like, that has massive implications for the operation of your business over that period of time, whereas one manager coming out of a larger business may have much less impact on the business.
The other impact on small business is obviously the fact that a compensation order can have a much more dramatic effect on a small business than on a large or publicly traded business where large compensation orders will have an impact, but a much lesser impact than they will on the cash flows of small businesses—many of which are operating on an overdraft and would have to increase the size of the overdraft to pay the compensation amounts or additional settlement amounts.
I accept the proposition that there are differential rights, but in our industrial relations system we do have differential rights for employees in a number of areas.

There are qualifying periods for a range of entitlements— Senator MARSHALL—Yes, and I heard your answer to Senator Campbell.

Mr P. Anderson—It is not only in unfair dismissal.

You have to work for 12 months before you qualify for maternity leave, for example.
We do have differential provisions in the industrial relations system which try to balance interests, and they do mean differential rights.

EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION EWRE 22 SENATE—Legislation Monday, 24 February 2003 CHAIR—I would like to test some of the things that were said by Mr Redford from JobWatch previously.

I am not whether you heard all of his evidence.


In relation to the way in which the current unfair dismissal laws are set up, he did not concede any disadvantage to small business.
He just said, ‘You’ve got to pay taxes; you’ve got other things to manage in business, and this is just one of the others.’ I would like you to comment on the difference for small business between claims that might be meritorious and those that are perhaps unmeritorious and the effects on small business of those frivolous or vexatious sorts of claims.

Mr P. Anderson—As I said in answer to Senator Marshall’s question, the small business impact is much more severe.
When a small business receives an unfair dismissal claim, that business is being sued.

That business is having to account to authorities for the decisions that have been made about the termination of that staff member.
As well as the inconvenience the business is put to—inconvenience not in a casual sense but the impost and impact on the business—in defending unfair dismissal matters, the business owner has the dilemma of trying to gauge whether to settle, even if they think it is unmeritorious, because of the inevitable costs that will accrue; the risks in litigation of different judgments being made by different members of the tribunal, because in conference individual commissioners may advise a small business that their case looks pretty good but that, if the matter goes on, other members of the tribunal could have different views; and, as I said to Senator Marshall, the pre-dismissal dilemma that small businesses have because of the lack of specific human resource specialists in their business.
So there are unquestionably differences.

We have to recognise that we do not make laws in the abstract; we make laws which impact on businesses as we find them.

We find businesses in different circumstances, and small businesses are impacted by these laws differently.

CHAIR—This is the fourth time we have had such an inquiry and, although what we are considering today is different in a number of ways, some core matters are still the same.
The thing that has bedevilled us right through each inquiry is pinning down the actual cost of these arrangements that we have and whether it actually does deter employers from putting people on.

I put the Melbourne Institute of Applied Economic and Social Research study to Mr Redford, and I would like you to perhaps comment on it as well.
The Minister for Employment and Workplace Relations, in his second reading speech on the bill, said that the study provides: … evidence of the confusion caused by overlapping federal and state unfair dismissal laws and also of the damage these laws can do.

The figures from the Melbourne Institute put a cost of $1.3 billion a year on this, and the loss of 77,000 jobs.

Mr Redford’s reaction was that you could not trust the questions that were asked and that it was probably push polling.
I know that happens in politics sometimes, but my experience as an academic—and having done such research and design of questions—is that they are usually very rigorously done.

I would assume that a professor from the Melbourne Institute of Applied Economic and Social Research would also undertake rigorous question design, and he does come up with these figures.

I would just like you to comment on what you feel the validity of those figures is and what this contributes to the debate.
Mr P. Anderson—We think the Melbourne Institute work certainly does contribute to the debate.

We were very pleased that the report was produced.

One can always quibble at the edges about questions, methodology and assumptions that build into estimates, but it is independent research.

It is the best independent research that has been conducted on the issues.

It is research outside the vested interests of unions, employer organisations, lawyers and those associated with the jurisdiction.
As we have read through the work, it does seem EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION Monday, 24 February 2003 SENATE—Legislation EWRE 23 that the academics involved went to quite some lengths to try to come up with neutral questions and a methodology that was robust.
In this area you are always going to have to make certain assumptions about cost impacts, but I do not think we should be preoccupied as to whether the methodology is exactly right, 10 per cent out, 10 per cent too far one way or the other, or 20 per cent too far one way or the other.

It is within the ballpark, and I think it gives some frame of reference for the committee to look at in terms of an independent academic analysis of the issue.
CHAIR—In your 2002 paper Modern workplace: modern future, you advocate a nine-step, orderly process for a more unitary industrial relations system.

In one of his opening questions, Senator Murray indicated that people in the Northern Territory were not too sure whether they were under state or federal law, even though they were in a territory, indicating the confusion occasioned by not having a unitary system.
I do not necessarily want you to go through the nine points, but could you just provide the general thrust of where the ACCI thinks we should be going in the evolution of the IR system to sort out some of this confusion between jurisdictions?

Mr P. Anderson—We have suggested that this issue would involve a very large structural change in the Australian industrial system.
It ought to be examined outside the political fray in the initial period because there are a number of different ways in which you can move towards a single industrial system in Australia.

If it is looked at objectively, that examination ought to cross industrial boundaries and also political boundaries.
There are some good arguments on both sides, but I think we have put forward in the blueprint a series of steps that should be taken to deal with the issue so that it can be given the examination it warrants, because it is a very substantial issue that we should grapple with in this country.
We have multiple industrial systems; they do not interact coherently; and, even if one were to retain multiple systems, one would not draw lines between them in the way we currently do if one wanted to structure a sensible interaction between state and federal responsibilities on employment matters.

Those issues ought to be examined over a period of time and in a way that minimises the immediate political positioning or the immediate corners that a political debate pushes people into.
Whilst it is proper to move on some single issues, like the unfair dismissal area, the broader questions warrant examination, and through our blueprint and our public debate we will certainly be encouraging that.

Senator GEORGE CAMPBELL—I want to return to the survey.

It has been quoted—I avoided quoting it for a number of reasons—as setting some benchmarks, and I think there needs to be some clarification.

As I understand it, the survey done by Professor Harding sampled 42 businesses.
They were businesses that had claimed that unfair dismissal laws had some impact on their decisions to cut staff.

That was used to create the figure of $1.3 billion and the figure of 77,000 jobs a year.

The other figures that have been out there—which I think are probably more accurate—are from the Yellow Pages and the AWIR surveys, which suggest that the number of businesses that have been affected is between two and five per cent.
Mr P. Anderson—I think the differences go to how one regards a business having been affected by an unfair dismissal matter.

If one were to take it across the economy, you might have 8,000 federal unfair dismissal claims in a year.

Even if you add the state claims, you have a relatively narrow profile of employers who directly deal with claims.
I think what the academics have done is to go out and survey employers who have been affected by the claims EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION EWRE 24 SENATE—Legislation Monday, 24 February 2003 and try to identify what the particular problems are with the operation of the unfair dismissal laws.

I think the difference is the different methodologies.

Senator GEORGE CAMPBELL—I can understand that.

But my concern is how to extrapolate that into $1.3 billion a year and 77,000 jobs.
I think it is stretching the imagination somewhat, given that there are 1.2 million small businesses and only 42 were used in a sample.

Mr P. Anderson—When you look at the 1.3 million small businesses, you see that, of those, only a certain percentage are actually employers.

Senator GEORGE CAMPBELL—Sixty-five per cent of them do not employ anybody?

Mr P. Anderson—That is right.

That reduces that number.


I accept that there are always going to be arguments about methodology, but there is a thread of consistency in what the professor does say about the unfair dismissal laws.

Leaving aside the actual figures that he uses or the actual number of jobs that he ultimately concludes, there is a thread of consistency between the business surveys and this work.
Senator GEORGE CAMPBELL—I do not mind that consistency being established; it is the extension of that in putting on it what are then quoted as definitive figures that I object to.

Mr P. Anderson—I think these are the best possible figures that the academic work has been able to come up with.

It is the only such detailed academic work that we have had on this area so far.

On face value, we are prepared to regard them as being within the ballpark.
Proceedings suspended from 11.32 a.m. to 11.51 a.m. EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION Monday, 24 February 2003 SENATE—Legislation EWRE 25 MARASCO, Mr Renato, Senior Adviser, Workplace Services, Australian Industry Group SMITH, Mr Stephen Thomas, Director, National Industrial Relations, Australian Industry Group CHAIR—I welcome representatives from the Australian Industry Group.

The committee has before it submission No.

13.

Are there any changes you wish to make?

Mr Smith—No.
Mr Smith—No.

CHAIR—The committee prefers that all evidence be given in public, but if at any time you want to give any evidence, part of evidence, or answers to any questions in camera, you may make the request and the committee will consider the request, but such evidence may subsequently be made public by an order of the Senate.

I now invite you to make a brief opening statement.
Mr Smith—The Australian Industry Group welcomes the referral of this bill to the Senate committee and welcomes the opportunity to make submissions on it.

Our association has long held a position of support for a unitary industrial relations system in Australia.

For reasons of simplicity, fairness and consistency, we believe that a unitary industrial relations system is inherently logical.

In contrast, we believe our current industrial relations system defies logic.
There is the federal system, five state systems and the possibility of a sixth system in Victoria shortly.

There are some 2,000 state awards and some 2,200 federal awards, and there are significant inconsistencies between state and federal industrial relations laws, for no valid reason.

Today, Australian companies are exposed to the full brunt of world competitive pressures.

To survive and compete in that environment, firms have had to restructure.
We believe that Australia’s industrial relations system similarly needs to be restructured to ensure that it retains its relevance.

The implementation of a unitary industrial relations system is an important goal.

It is essential that we begin taking steps towards the eventual achievement of such a goal.

The legislative proposals in schedule 1 of the bill represent an appropriate step down the path towards the eventual implementation of a unitary industrial relations system.
Schedules 2 and 3 of the bill also have great merit.

Schedule 2 of the bill simplifies the unfair dismissal laws applicable to small businesses and introduces some special arrangements to reduce the burden of those laws on such businesses.

Our small business members consistently express the view that the unfair dismissal laws operate as a disincentive for them to employ new staff.

We believe that it is important that the legislation be amended to grant them some relief.
In our submission to the Senate committee last year regarding the fair dismissal bill, which sought to totally exempt small business, AIG proposed a compromise to the political parties.

Part of our compromise was to extend the qualifying period of employment from three months to 12 months for small businesses.

We continue to support that compromise proposal, but if a 12-month qualifying period is not achievable then we support the six months as proposed in the bill.
Such a qualifying period would reduce the disincentive for small businesses to employ new staff while at the same time preserving the rights of longer serving employees.
The other element of the compromise we proposed last year was reducing some of the major constraints of procedural fairness on small businesses by simply requiring that such businesses, firstly, have a valid reason for terminating the employment of an employee; EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION EWRE 26 SENATE—Legislation Monday, 24 February 2003 secondly, notify the employee of the reason; and, thirdly, give the employee an opportunity to respond.
That approach meets the standard of procedural fairness prescribed in the relevant ILO convention.

Our act currently incorporates a higher standard—for example, by requiring that warnings be given—and the application of that higher standard to small businesses is not in the national interest.

We believe that the bill strikes an appropriate balance between maximising employment and protecting Australian workers.
In summary, we believe that the three schedules of the bill have great merit and we urge all senators to support the passage of the bill through parliament without delay, with the few amendments which are set out in our written submission.

Senator MURRAY—I begin by saying that it is usual that the AIG and the ACTU both give us high-quality submissions.

You have done it again, so thank you very much.

It is very helpful to consideration of these matters.
The extended coverage is likely to pick up employers and employees not presently covered by the federal or state workplace or industrial relations law.

Does it concern you at all that people will move out of the common law system and into the regulated system?

Mr Smith—The proposal to extend the federal unfair dismissal laws simply extends a jurisdiction that we have some concerns about—as we have proposed, in the area of small businesses.
But, essentially, those unfair dismissal laws are tested, they apply very broadly— for example, here in Victoria—and we do not have concerns about the extension of that system to other groups of employees in other states.

We make this point: if those laws are so unfair for employees, why is it that here in Victoria, where they apply very broadly, we see no agitation for any changes to the system?
Even the task force that considered the nature of the industrial relations system here in Victoria concluded that those unfair dismissal laws should not be changed.

Senator MURRAY—In Queensland, for the financial year 2001-02, there were 440 unfair dismissal applications under federal rule—this is for all business—and there were 1,728 under state law, totalling 2,168, which puts Queensland at about the 20 per cent level for federal jurisdiction.
The government’s indicative figures are that they will virtually double their coverage, so I assume it will end up pretty well half-and-half state and federal on that basis.

They will jump up from 440 to 880 to 1,000, so it is about half.

Do you think this is an area where, if the bill passes with those provisions, state government should consider referring that area of their industrial jurisdiction over, so that you get not only the coverage that the Commonwealth is asking for but also complete coverage?
Mr Smith—Certainly we think that is very logical.

If it is not immediate, then we would think that if the bill passes it is likely that that will happen over a period of time anyway.

The state system would remain in place and there would be a relatively small number of people covered under it, so it would be sensible for the state government to refer those powers to the federal government.

It would be far more sensible for that to be done up front when this bill is passed.
Could I just point out that those figures may be a little misleading.

Our Queensland branch informs me that there are a significant number of federal award covered employees in Queensland who pursue their applications for unfair dismissal through the state system.

Up there, the commission has held that the state jurisdiction can deal with federal award covered employees—as, for example, the WA state commission has held.

That creates an even more unworkable situation for employers.
Not only are they faced with different jurisdictions applying to different categories of employees based upon whether they are covered under a EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION Monday, 24 February 2003 SENATE—Legislation EWRE 27 federal or state award; there is also an ability to forum shop by employees within the jurisdictions.

It just does not make sense.

Senator MURRAY—Using that Queensland example, are you suggesting that the shift over may be even larger than the estimated figures envisage?
Mr Smith—I think that would certainly be the case.

As I have said, I have obtained very recent information from our own industrial staff up there.

They say that more and more of the federal award covered employees in Queensland are going to the state commission.

Up there, the two commissions operate in the same building.

It may be quite confusing for everyone as to what jurisdiction should apply.
Senator MURRAY—I have not yet read the New South Wales government submission, which I understand has come in, but I have read the Tasmanian and Queensland government submissions.

They oppose the extent of coverage, and there is an implied, if not actual, threat that they might want to test it constitutionally at the High Court.

Would your organisation support that testing in order to establish the limits to which extended coverage can go or would you rather that did not happen?
Mr Smith—We would rather it did not happen.

This bill is a very sensible proposal, we believe.

It would improve the situation significantly, not only for employers but also for employees.

It is just a very sensible thing.

Of course, it is the right of any party to seek to challenge a new law, but, given the merit in the proposal, we would rather it not be tested.

Senator MURRAY—That is all I have.

CHAIR—Thank you.

Senator Campbell.


Senator GEORGE CAMPBELL—Do you have any concerns about the potential for companies to restructure the nature of their operations in order to put themselves within the framework of this legislation—in other words, to make sure they qualify as a small business?

What provisions ought to be there to ensure that that does not occur?

Mr Smith—I do not think the evidence supports that that is likely to happen.
When you consider the exemption or the cut-off that exists within the redundancy provisions in awards, there has been a significant test case take place in Queensland to consider whether or not that exemption should be removed, and there is a test case, as you would be aware, going on federally.
Our assessment of the evidence in the Queensland test case is that there is no evidence that that has been the case—that people have sought to restructure their operations to ensure that they have less than 15 employees to avoid paying redundancy pay.

It is interesting that the Queensland government is putting a very strong submission in that case to retain that exemption for small business under the redundancy provisions.
We believe there is similar merit in having some differentiation here in the area of unfair dismissal laws.

Senator GEORGE CAMPBELL—You said that there is no evidence that that would occur.

There has been a lot of evidence, for example, on companies restructuring their internal relationships to avoid redundancy payments, and there have been a number of high profile cases of that nature.
In the fair dismissal hearings that we had in Victoria there was some evidence presented that ACCI had restructured the nature of its membership so that some members could avoid the coverage of section 1A to those particular employees.

There are examples out there where companies have done it in order to avoid obligations under the act.

Why wouldn’t companies do it under these circumstances?
Mr Smith—This proposal is not unlike provisions that exist, as I have said, within awards, within the Corporations Law and in other areas.

We have seen no evidence to suggest that it is EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION EWRE 28 SENATE—Legislation Monday, 24 February 2003 likely to occur.

We can only draw on our own experiences and the evidence that we have seen.

We have seen no evidence, as I have said, to support that.
Senator GEORGE CAMPBELL—In relation to the Queensland example that you gave of people using Queensland jurisdiction for people who are under federal awards, I do not know if it can be done vice versa in the Queensland system.

Is that a matter of convenience?

What are the fundamental differences between the provisions of the two systems?
Mr Smith—I am not knowledgeable enough to give the specific differences between the two off the top of my head, but there would be differences— Senator GEORGE CAMPBELL—I thought you were from Queensland.

Mr Smith—I am, but it has been 10 years since I was employed up there, and the act has changed significantly.

It does highlight this, though.

Let me draw a parallel with New South Wales, which I am more familiar with off the top of my head.
In New South Wales, there is a different arrangement for access to the unfair dismissal laws for casuals—for example, a six- month rather than a 12-month period.

That sort of difference does promote forum shopping— quite unfairly, we believe.

It is not so much a matter of convenience.


People could, through their lawyers or advocates, just look at the different laws and say, ‘I would rather pursue my matter through this law than that law.’ That puts the employer in the hopeless position that they need to understand not only the requirements of one relatively onerous set of laws, but two sets, not knowing which avenue the employee is going to pursue their claim through.
Senator GEORGE CAMPBELL—I am particularly concerned to explore the Queensland example, because that is the example you used, and what the differences are that might encourage people to take their claims to the state jurisdiction rather than the federal jurisdiction.

Are the differences so insignificant that it does not matter?

Maybe the two commissions are exchanging workloads between them.

I do not know.

I am asking you.

That is the example you used.


I am asking you to clarify why they are doing that.

Mr Smith—I could take that on notice.

Senator GEORGE CAMPBELL—I would appreciate it if you would.

Mr Smith—I really do not know why, but the point that we are trying to make is that we think that is quite unfair on employers—to not know what sets of requirements they need to deal with.
There is a separate piece of legislation there; there is a separate commission; the requirements may well be quite different.

I can take that on notice and provide a response very quickly.

The same situation applies in Western Australia, where you have the commission finding that employees covered by the federal award can access the state system.

There would be no option the other way round.

Clearly an employee covered by the state award would have no way of pursuing a claim under the federal system.
Senator GEORGE CAMPBELL—I appreciate you taking that on board, because it is important if we want to understand why cases are being taken into the state jurisdiction in that particular state.

Mr Smith, in your submission you say that the AIG supports a unitary system, and I think that is understandable from the point of view of employers.
To what extent do you think the approach that has been used in promoting this bill will encourage a movement towards a unitary system or—given that the states are saying that they were not consulted in respect of this bill, as they would normally have been on other federal-state relationship issues—to what extent is it likely to discourage a move towards a unitary system?

I think New South Wales, Tasmania and Queensland are opposed to this particular bill.
EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION Monday, 24 February 2003 SENATE—Legislation EWRE 29 Mr Smith—I do not have any direct knowledge of the consultation process between governments, but the reason why we support this bill— Senator GEORGE CAMPBELL—Was the AIG consulted on this, by the way, prior to the bill being implemented?

Mr Smith—Not on the specific terms of the bill.


We did consult with all political parties about our compromise proposal, which has largely been adopted in schedule 2—that is largely our proposal—but not on the specific terms of the bill.

I have lost my train of thought.

Senator GEORGE CAMPBELL—I asked you whether you thought this would encourage the move towards a unitary system or discourage it, given the circumstances under which the legislation has been introduced.
Mr Smith—Even though I have no direct knowledge about the consultation process between governments, we believe this bill is so logical that it would be very undesirable for it not to pass.

Whether the consultation process was exactly as it should have been we cannot say, but there is a process of consultation through this committee, for example.

If this bill is passed we believe it will be a very tangible beneficial step towards the achievement of a unitary system.
We believe that not only will a significant group of employees move within the federal laws but also there will be a significant incentive for the states to hand over the rest of their unfair dismissal jurisdiction to the federal system.

Senator GEORGE CAMPBELL—You are assuming that there would be a significant incentive.

That is not what the submissions are saying.

Mr Smith—We are assuming that.


Assuming that we are right—and we believe we are right—that would mean that one significant plank of the industrial relations laws would be entirely federal, and that would be a far cry from where we are at the moment.
Senator GEORGE CAMPBELL—What about the set of circumstances I put to ACCI— that the introduction of this bill could lead to more complexity in the workplace, given that you will be, as you are now, managing work sites with a multiplicity of contract employers engaged, some operating in the state jurisdiction with awards in the state jurisdiction, some operating in the federal jurisdiction, some incorporated and some not?
Will this bill have the potential to add more complexity to the industrial relations environment on those sites, or not?

the contrary.

Companies are either constitutional corporations or they are not.

If they are a constitutional corporation, this bill achieves a unitary set of unfair dismissal laws for those organisations.

If they are not, in the main they are small organisations that operate only in one state, so in a sense those companies get a unitary unfair dismissal system as well.
Even though we will still have two systems, at the company level we will achieve a very significant step forward from where we are at the moment.

Mr Smith—Not at all—quite Senator GEORGE CAMPBELL—The systems will be different.

Mr Smith—The systems are different, and we would prefer that the states hand over their powers, when this bill is passed, to cover all employees.
If that does not happen, there will be different systems, but, as we said in our written submission, there would then be a significant incentive over time for the states to adopt what we would see as a very commonsense approach of delivering a unitary unfair dismissal system within their jurisdictions.
Senator GEORGE CAMPBELL—And you do not think that businesses that currently have state award coverage—state jurisdiction on unfair dismissals—will not be confused even EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION EWRE 30 SENATE—Legislation Monday, 24 February 2003 further by the fact that their unfair dismissals are going to be dealt with in the federal system while their awards, wages and working conditions are all dealt with in the state jurisdiction?
Mr Smith—There will be an education process that would need to occur.

Senator GEORGE CAMPBELL—It has not worked very well to date.

Mr Smith—I think we all agree there, Senator.

There is a lot of confusion about the unfair dismissal laws and which ones apply.

At least when this bill is passed, any organisation that is a constitutional corporation will have for the future—unless there are any further legislative changes in the other direction—one set of unfair dismissal laws.
We would embark upon a major exercise to inform our members about the issues.

Hopefully, the problem is a one-off one until they understand the nature of those laws compared to the ones they were previously under.

Senator GEORGE CAMPBELL—Your organisation has about 7,500 members nationally.

Is that right?

Mr Smith—Off the top of my head, I could not give you the exact figure.
Senator GEORGE CAMPBELL—Under the current definition of 20 or fewer employees, what percentage of your membership of around 7,500—it could be a bit more or a bit less these days—fall into the category of small businesses?

Mr Smith—The significant majority would fall under that definition.

CHAIR—As there are no further questions, I thank you for appearing today.
Proceedings suspended from 12.17 p.m. to 1.32 p.m. EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION Monday, 24 February 2003 SENATE—Legislation EWRE 31 RUBINSTEIN, Ms Linda Esther, Senior Industrial Officer, Australian Council of Trade Unions LENNON, Mr Mark Roy Robert, Assistant Secretary, Labor Council of New South Wales CHAIR—I welcome the witnesses to the table.

The committee has before it submissions Nos 5 and 23.

Are there any changes you wish to make?

Ms Rubinstein—No.

Mr Lennon—No.


CHAIR—The committee prefers all evidence to be given in public but, if at any time you wish to give any evidence, part of your evidence or answers to specific questions in camera, you may request to do so.

The committee will consider the request, but such evidence may subsequently be made public by order of the Senate.

I now invite you each to make a brief opening statement.
Ms Rubinstein—The ACTU welcomes the opportunity to give evidence to the committee in relation to the termination of employment bill.
The ACTU is opposed to all of the key provisions of the bill, which we see not as being directed to the greater efficiency or effectiveness of the legislation but rather as having the goals of restricting access to the federal unfair dismissal jurisdiction while wiping out access in the state jurisdictions and reducing the remedies that are available for those applicants who have been found to have been unfairly dismissed.

I will deal briefly with the three schedules of the act.
The first schedule deals with extending the reach of the federal legislation, or covering the field.

It cannot be said that the Commonwealth is committed to a unitary industrial relations system.

The Commonwealth is primarily committed to reducing the terms and conditions of employment and the protections available to employees.

In that regard, particularly with Labor governments in every state, it sees the possibility of being able to do that by extending the reach of the federal legislation.
Interestingly, when the coalition government came to office in 1996, it found that the unfair dismissal provisions allowed applications to be made by any employee.

They were not required to be employed by a constitutional corporation or to be employed under a federal award.

Those restrictions were inserted by the 1996 amendments to the act.
The only explanations that can be found for that are that, firstly, the coalition did not want to use—presumably for ideological reasons—the external affairs power to ensure the reach of Commonwealth legislation and, secondly, I think at that time there was only one state Labor government, so it was felt that the reduction of employment conditions could be safely left to the states.

The ACTU submits that the bill will create greater constitutional complexity and more reliance on litigation.
The question as to whether the extension of federal power is constitutional is not one that can be answered.

Anybody who answers questions about constitutionality that have not been tested is rather brave.

It is in fact impossible to know.


I think it is assumed—and it has been assumed by the High Court itself in the case of Victoria and the Commonwealth—that Commonwealth legislative power does allow for legislation concerning the terms and conditions of employment of employees of constitutional corporations.

However, that particular point has not been tested and, certainly, its extension to a particular condition like unfair dismissal has not been tested.
While there may be different views about the likelihood of the success of a constitutional challenge, there is one matter about which there can be no doubt: there will be a constitutional challenge.

That is clear from EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION EWRE 32 SENATE—Legislation Monday, 24 February 2003 the strong opposition to this bill that has been expressed by the governments of Western Australia, Queensland and New South Wales.
I am not sure whether others have also put in submissions, but those are the states that I am aware of—although I believe that South Australia either has put in or will be putting in a submission.

The outcome of this bill will be that employers and employees will be forced out of the flexible stakeholder responsive state systems into a more procedurally complex federal tribunal.

That has been made clear by the submissions to the committee.
Mr Lennon will talk about New South Wales, but I will mention the submission of the Western Australian government.

I think Western Australia has the most flexible system.

The commission deals with unfair dismissal disputes as part of its normal industrial relations powers, although there are some special provisions that apply to unfair dismissal.

According to the Western Australian government, the system is certainly well understood and well accepted there.
This bill is not supported by any state government and, in light of the submissions that have been made in opposition, the bill could not be said to do anything other than worsen Commonwealth-state relations, particularly if it is the case, as is submitted by Western Australia, that no consultation took place and it is seen by the states as a breach of the understandings that were reached in relation to the Corporations Law, where it was understood that the corporations power would not be used to extend the Commonwealth’s reach into industrial relations.
The second schedule of the bill deals with small business.

It does not deal with the small business exemption, which has come before the parliament a number of times, but rather with some particular restrictions to apply to employees of small business.

The first point I would make is that there is going to be litigation and difficulty about even the definition of small business, just as there will be about the issue of what is a constitutional corporation.
Small business is defined in the bill as a business that employs fewer than 20 people, but excluded from that number are casual employees who have not been employed on a regular and systematic basis for at least 12 months.
There are businesses that have a relatively small core of full-time employees and a very large number of casuals, so you can see a situation where you could be going through each casual’s employment arrangements in order to determine whether the threshold of 20 employees has been breached or not.

You would be looking at the contracts and arrangements not of applicants—that would come later—but of all those other employees.

Clearly, that is very complex and destructive.


There is no link between a small business exemption and special treatment in unfair dismissal and employment.

That has been well established.


The Queensland government, in a document referred to in the ACTU’s submission, has found that, during the period when a small business exemption applied in Queensland, employment in large business outstripped employment growth in small business, and the opposite was the case prior to that small business exemption being in place.

The Melbourne Institute report on unfair dismissal in small and medium sized business has been dealt with at some length in my submission.
I will not take you to that in detail; I will leave it to questions.

However, suffice it to say that that report is nothing other than the report of a very suggestive set of questions asked of employers from which entirely unwarranted conclusions and extrapolations have been made.

I have some brief comments on the particular legislative proposals in relation to small business.

The proposal for extended probation is unnecessary.
It needs to be understood that there is no three-month cap on probation currently; it can be longer, if it is reasonable.

I think Professor Andrew Stewart made the point in his submission, with which we would concur, EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION Monday, 24 February 2003 SENATE—Legislation EWRE 33 that it ought to be easier in small businesses to figure out whether an employee is suitable than it is in larger businesses—for obvious reasons.
Therefore, the case for a longer probation period for small business is very far from being warranted.

Deleting the consideration of whether employees receive a warning is simply sending the message to employers that you do not need to warn employees who are not doing the job properly.

Yet fairness says that, if someone is not doing the job adequately, they ought to be told.

They might not know: it might be that it is what they did in their previous job and it was perfectly acceptable.
They ought to be told and they ought to be given an opportunity to improve their performance.

The commission needs to retain its discretion to consider all relevant matters related to an unfair dismissal.

There is also no justification for halving the maximum compensation available to employees of small business, particularly bearing in mind the fact that the six-month compensation cap means that no account can be taken of the degree of employer culpability in relation to the fairness of the dismissal.
Finally, the third schedule comprises a number of proposals to restrict access and remedies for all employees, irrespective of the size of the business.
The effect of the proposed exclusion from the jurisdiction of employees dismissed for redundancy simply says to employers, ‘We’ll say it’s about redundancy and then the employee has to show some unspecified special circumstances.’ You need to have unfair dismissal provisions applying to redundancy, because redundancy is often used as a means of getting rid of employees for reasons other than there being no need for the job that they are doing.
Generally, there is a need when there are redundancies to select which employees are going to be made redundant, and that process should be fair.

That is really all that is provided for now, and that ought to be the case.

Similarly, reducing the employee’s compensation if the employee’s misconduct contributed to the dismissal happens now.

In fact, maximum compensation is not generally awarded.

It is generally less than that.


I think one submission to the committee from an employer group said that employees generally receive about one month’s compensation, whether it is a state or federal jurisdiction.

The commission now reduces compensation by taking into account employee misconduct.

Of course, what they cannot do because of the cap is take into account the degree of employer misconduct.

That, I think, highlights the lack of balance in the bill.
That concludes the remarks that the ACTU wishes to make at this point.

Thank you.

Mr Lennon—I thank the committee for the opportunity for the Labor Council to make a few remarks.

I support the general submissions of my colleague, Ms Rubinstein, but I want to focus my remarks on what we see as the reduction of access to the New South Wales system should this legislation proceed.
The first thing to note is that, as Ms Rubinstein said, there has been a distinct lack of consultation with the state governments over this legislation.

That in itself is disturbing.

Aside from that, in any of the material I have seen regarding the legislation, there seems to have been no clear or obvious reason given as to what problems there are with the New South Wales system, particularly when it comes to unfair dismissals.
I suppose it is fair to say that in New South Wales all the industrial parties take pride in our industrial relations system.

We work in a fairly cooperative manner in New South Wales under the auspices of the Industrial Relations Act 1996.

Yes, some issues have been raised, in particular in relation to unfair dismissals.

I will come to those and some of the discussions we have had in recent times with regard to the unfair dismissal provisions.
In the main, we have not seen any problems—particularly reasons by employers—that would warrant the effective transfer of the unfair dismissal regime in New South Wales to the federal jurisdiction.

Certainly in the present environment in New South Wales, where we are facing a state EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION EWRE 34 SENATE—Legislation Monday, 24 February 2003 election in four weeks, it is not an issue that has raised its head.

It is not a key issue in the state election.


It is not one up there registering with the voters.

So in that context, it is certainly not seen as a problem.

I note from the submissions to this committee that there are three peak employer bodies that are registered under the New South Wales legislation: AIG, Australian Business, and Employers First.

Two of those three have not put forward a submission with regard to this legislation.
Aside from the fact that we believe that the New South Wales system is fairly simple and straightforward, the proposals as presently put forward would only make the system of unfair dismissals in New South Wales far more complex.

At the moment an employer may be covered by an award under section 10 of the legislation in New South Wales or an enterprise agreement under section 29 and any unfair dismissal case would be brought under section 84.
So the legislation is pretty straightforward and pretty clear as to which sections of the act to go to.

We would move to a regime, if this legislation were to proceed, where you may be under an award under section 10, or an enterprise agreement under section 29, and then an unfair dismissal would be under some federal provision such as section 170CE(5B)(a).

It seems to me that that is not making the system very simple at all.
One of the other problems is that unincorporated associations—and the whole definition of ‘corporation’ is an issue in itself— will be left in the New South Wales jurisdiction.

That could lead to an enormous number of problems.

One example that comes to mind is an organisation such as the NRMA, which in its old guise was an unincorporated association, but underneath had a number of corporations.
So the NRMA would be covered by the state jurisdiction when it came to unfair dismissals and yet all of its subsidiary companies would be under the federal jurisdiction.

Such issues have not been properly considered.

The other issue is that there is a separate power in the New South Wales legislation to order reinstatement or re-employment.

That is in section 137, which is used in the context of resolving industrial disputes.
That would make the system more complex because the unfair dismissal regime—I think it is under sections 83 to 89—would in effect be under the federal jurisdiction, yet you would still have this residual right for the commission to make orders for reinstatement or re-employment under section 137.

Our other concern, which my colleague has discussed, is for the loss of rights for small business employees.

Under the New South Wales jurisdiction an application can be made if there is threatened dismissal.
There is clearly a wider discretion as to what the New South Wales commissioners and members can take into account when considering the question of an unfair dismissal.

There is the question of costs.

At the moment, costs in New South Wales can only be awarded in an unfair dismissal case under section 181—in essence, if the claim is considered to be frivolous or vexatious.
And there is the whole question of being able to go to the one jurisdiction regardless of what the nature of your unfair dismissal claim is.

Another key area is that we want to ensure that there is a proper service to union members when they are seeking to pursue an unfair dismissal claim.

In recent years in New South Wales the commission has restructured to put in place a panel system to ensure that the whole of the state is covered.
Roughly about 25 per cent of these matters are now heard outside Sydney, in places as far and wide as Broken Hill, down to the south coast and up to Lismore—places such as that.

If this new regime were to be put in place and most of these unfair dismissals were to fall under the federal jurisdiction, how that would be handled and how that sort of level of service—both to employer and employee and union members— would continue would be in our opinion a major concern.
EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION Monday, 24 February 2003 SENATE—Legislation EWRE 35 The other issue I want to raise is that no system is perfect.

In New South Wales, we have recently gone through a bit of a review of the process.

One of the issues that the union movement is continuing to pursue in New South Wales is to ensure that the primary remedy is and remains reinstatement in New South Wales.

We had lengthy discussions with the government and employers about this late last year.
We are still pursuing those.

The key there is that a lot of that is just questions of process and how quickly unfair dismissals can be brought before the commission to ensure that, once the matter is heard, there has not been a time lapse too long to make reinstatement practicable.

There have been some issues raised and we did have some legislative changes in New South Wales with regard to industrial relations.
But it was done, as I said in my opening remarks, in a cooperative manner, with all the parties around the table together, with government, looking at the various positions of the relevant parties and coming up at this stage with at least some amendments that I think all the parties concurred with.

They were not opposed by anyone as they went through the parliament.

Hopefully, we will continue to work in that manner to refine the system, which we believe is one of the best in Australia.
In relation to the other matters, including the question of economic impact of unfair dismissal laws and the question of changes to the laws which impact on the rights of certain classes of employees, I concur with the remarks of my colleague.

Also, we have addressed those in our submission.

CHAIR—Thank you very much.

Senator MURRAY—Mr Lennon, I forgot to bring my comparative schedule of state and federal unfair dismissal laws.
Can you remind me for New South Wales what qualifying or probationary period there is, if any?

Mr Lennon—Three months.

Senator MURRAY—That is the same as the current federal system?

Mr Lennon—That is right.

Senator MURRAY—Do you therefore disagree with the Queensland Labor government’s setting of six months, which the new bill tries to harmonise with?

Mr Lennon—We have had some discussion in the context of our review process over the probationary period.

We prefer to stay with three months.


Senator MURRAY—Can you indicate why that is better?

Mr Lennon—We think that is an appropriate period.

Three months is sufficient to determine whether or not an employee is suitable.

Senator MURRAY—Were you ever advised what the Queensland Labor government’s reason for going to six months was?

Mr Lennon—No.
Mr Lennon—No.

Senator MURRAY—Ms Rubinstein, on the issue of reinstatement, in your submission you say that you believe reinstatement should be a far more common remedy than at present.

The figures I have indicate that from 31 December 1996 to 30 June 2002 only 0.4 per cent of all unfair dismissal applicants under the federal regime were reinstated.
If you actually break it down a little more and take out unfair dismissal applications withdrawn, settled or otherwise discontinued, dismissed at the preliminary stage or settled by conciliation, and you just leave in the 21 per cent unable to be settled by conciliation and therefore determined, it only lifts to two per cent—two per cent of those.

Why is reinstatement so seldom used as a remedy?


EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION EWRE 36 SENATE—Legislation Monday, 24 February 2003 Ms Rubinstein—First of all, I think with those figures—as I recall, without shuffling through and trying to find it—less than half of all of the applications the merits of which are determined by the commission are resolved in the employee’s favour.

You have to take out from that all the ones in which the dismissal is upheld.
I think that in cases where the employee does not want reinstatement or in cases where the employer does not want reinstatement the commission is likely to say reinstatement is not practicable because of the attitudes of one or both of the parties and award compensation.

What needs to be understood is that it is not necessarily the employee who does not want reinstatement.
Very often it is the employer, because having the employee come back in those circumstances is clearly indicating to other employees that the wrong thing was done.

Employers will often put in very strong submissions along the lines of the reinstatement being impracticable.

Senator MURRAY—As you know, the bill tries to drop the amount to be paid to employees.

It seeks to halve the compensation.


Do you think employers should be offered a choice: either they reinstate or the compensation will be increased, not halved?

Ms Rubinstein—I think that is an option.

It is like everything else: it all depends on how elastic the compensation is going to be.

If you say to the employer, ‘You have the choice between reinstating or paying $500,’ they will pay the $500.
If you were to say, ‘It is a choice between reinstatement and $1 million,’ they will come to a different conclusion.

I think that is exactly the point: that is how they are going to work it out.

The humiliation to the employer of having the employee back is obviously a very strong factor.

But their ability to pay and the amount that is likely to be paid is going to be a factor in that as well.
Certainly I think that halving it will make employers less likely to accept reinstatement, because it will be much cheaper to make the thing go away, although in practice maximum compensation is rarely awarded.

Senator MURRAY—The AIG submission at pages 14 and 15 gives just two examples of the difficulties employers face with having six industrial relations jurisdictions.
Example 1 is for a large member; the key difference seems to be between administrative employees and manufacturing and maintenance employees.

Example 2 takes a small metal industry business in New South Wales with five fitters and one clerk; the fitters fall under federal unfair dismissal laws and the clerk presently falls under New South Wales unfair dismissal laws.

Surely you accept that that circumstance is impossible?
Ms Rubinstein—Mr Lennon might want to say some more, but let me say a couple of things.

First of all, their wages fall under two systems.

All of their employment conditions fall under two systems.

Their long service leave falls under two systems.

This is only going to resolve something very small that may in fact never happen.

The second point is that it can be dealt with through harmonisation, as it is in some states— but, I understand, not in New South Wales.
In Queensland, for example, I understand they have a single registry.

It is like a one-stop shop.

People come along and do not have to know which jurisdiction.

You are told and you are pointed in the right direction.

That is obviously a way to go.

Thirdly, in a lot of state jurisdictions—again, not New South Wales so Mr Lennon can speak to that—people under federal awards can make applications under state law anyway—for example, in Western Australia.
The response to that would be that: ‘Who settles everything else for that clerk?’ Mr Lennon—If they are a member of their relevant employer organisation—and we in New South Wales always encourage collective organisation—they certainly have the expertise EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION Monday, 24 February 2003 SENATE—Legislation EWRE 37 to help them with that.

We would not argue that anyone in those circumstances should be moving from the state jurisdiction to the federal jurisdiction.
I would say the one individual there is better off than the other four or five.

I agree with my colleague that maybe the best way is to look at some better ways of harmonisation—a registry and things—for that matter to see if you can at least eliminate any problems with process or minimise the problems with process.
Senator GEORGE CAMPBELL—I was tempted to come in on that example of the New South Wales award for clerks and relate the history but I will tell you the story another time, Senator Murray, as to why that situation prevails.

Ms Rubinstein was the ACTU consulted in respect of this proposed legislation, at any part of the process?
Ms Rubinstein—The ACTU is represented on COIL, the Committee on Industrial Legislation, which is a subcommittee of what was the NLCC and I think is now the WRCC, or something like that.

I do not think it would be seen too badly if I were to say that the consultation is somewhat perfunctory but we get an opportunity to look at draft legislation generally a few hours before it is introduced into the parliament.

Senator GEORGE CAMPBELL—Was that the case with respect to this legislation?

Ms Rubinstein—Yes.
Ms Rubinstein—Yes.

I cannot tell you exactly when.

Mr Smythe, who I see is here, and the department people would be able to tell you exactly when—whether it was the night before or a couple of days before.

We have been consulted in that manner about this bill and every other bill that has been introduced.

Senator GEORGE CAMPBELL—So you did not really have an opportunity to put a considered viewpoint as to the general direction of the legislation, as opposed to the specifics of it?

Ms Rubinstein—No.
Ms Rubinstein—No.

Senator GEORGE CAMPBELL—We heard this morning from witnesses from the AIG who presented some evidence that in Queensland a lot of unfair dismissal cases in companies that are under federal awards found their way into the state jurisdiction.

When I asked Mr Smith he was not able to explain why that was the case.
Are you aware of what happens in the Queensland jurisdiction and why cases that involve employees or companies that are under federal awards would find their way into the state jurisdiction rather than being dealt with in the federal jurisdiction?

Ms Rubinstein—I think in Queensland they have jurisdiction to deal with those cases in the state area, don’t they?

I imagine that applicants look to the Queensland body.
If they had any knowledge they would know that the constitutional difficulties do not exist in Queensland.

For example, the distinction between the unfair dismissals and the unlawful dismissals, and the necessity to elect whether to run the case through the commission or the court and so on, are not problems in state jurisdictions.

Or it might well be that people just go there.

As I said, they have a single registry so I would suggest that they are being directed there.
You might well ask why, but it may be that it is understood that it is a simpler, less costly, jurisdiction for all parties.

Senator GEORGE CAMPBELL—Would the state commissioner be sitting with a federal hat on when he is dealing with these issues?

Ms Rubinstein—I think all of the state commissioners have concurrent federal appointments, but if they were dealing with it under state law then they would be sitting as the state jurisdiction.
But the same people could hear the case under federal law with their federal EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION EWRE 38 SENATE—Legislation Monday, 24 February 2003 hats on, although their primary appointment is to the state commission; they are state government appointments.

Senator GEORGE CAMPBELL—I wonder how recorded administratively.

Would that been seen as a case being dealt with under the federal jurisdiction or the state jurisdiction?

I don’t suppose you can answer that question.


The issue raised about re-employment is probably better raised with you, Mr Lennon, given the specific provisions in the New South Wales state act.

Why is re-employment not used more often as a remedy in this field?

Isn’t one of the problems the period of time necessary to deal with some of these cases so that at the end of the day it becomes a remedy that is not available?

is probably that Mr Lennon—That is right.


I was seeking to address that in my comments.

That was the crux of the discussions that we had with the government and employers late last year about reforms to the unfair dismissal provisions—that is, how we can speed up the process to some degree to ensure that time has not gone on too far, making reinstatement or re-employment impracticable.
We were looking at measures such as allocating to the relevant commissioner an unfair dismissal application as soon as it had been received and speeding up the conciliation process.

It is an issue, and it is still under discussion with the government— hopefully a Labor government post March 22.

Senator GEORGE CAMPBELL—I will not comment on that.
With respect to the definition of ‘small business’ in the exclusions and the ‘fewer than 20 employees’, what grave concern do you have about the potential in that proposal for companies to restructure their operations to ensure that they always fall underneath the bar in terms of the definition—in other words, that they would always fall into the bracket of being defined as a small business?

Mr Lennon—That is a concern.


We actually saw that happen as a practice a few years ago with regard to workers compensation where companies tried to split the organisation up into a clerical company, a metalwork section and a warehousing company allegedly to take advantage of lower premiums for the classifications of employees.

That is a concern, and it would not surprise me if that were a tactic that was employed.
Ms Rubinstein—It is sometimes said that employers are more likely to employ casual employees because they do not want to have to deal with unfair dismissal and with casuals, at least, there is a 12-month period before they do.

But it could also be said that this bill would encourage the employment of casual employees, because casuals with less than 12-months service are not counted.
So if an employer is deciding whether or not to grow the business— and that is really the point, they get to 19 or 20 employees and decide to take on a couple more and all of these other things start applying—it might well be that they decide either not to take them on at all or, alternatively, to take them on as casuals.

I think the effect of the bill, with respect to those issue, would be worse than the current situation.
There would be greater incentives not to take on additional employees and to employ casuals than is currently the case.

Senator GEORGE CAMPBELL—Is the definition of ‘redundant’ the same as in the TCR provisions of the act?

Ms Rubinstein—No, it is not actually defined.

For the purposes of unfair dismissal, it is called ‘operational requirements’, because they are the words of the ILO.
It talks about people being dismissed for a valid reason connected to their performance or to the operational requirements of the employer’s business.

Putting it in our language: if an employee is not operationally required, it means their job is not required which means that they are redundant.

That is how you get to that.

EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION Monday, 24 February 2003 SENATE—Legislation EWRE 39 Senator GEORGE CAMPBELL—But there is no attempt to put a time frame on that, is there?
Ms Rubinstein—No, it just talks about operational requirements—that is it; no definition.

It is defined in terms of the ILO.

There is ILO jurisprudence on some of this.

Senator GEORGE CAMPBELL—So, presumably, they could be made redundant on Friday and a new employee could start on Monday.

Ms Rubinstein—They could be.

You would then challenge whether it was in fact a redundancy—and maybe that could be.
The employer would just say, ‘My view of the business changed from Friday to Monday.’ Senator GEORGE CAMPBELL—So that in itself can open up new fields of litigation?

Ms Rubinstein—Absolutely.

Mr Lennon—It would be a position change—same job, different position.

In other words, the old position has allegedly been made redundant but someone else starts on the Monday doing the same job but there is a different name for it.
Senator GEORGE CAMPBELL—Can you see any circumstances where this is going to make the area of industrial relations more complex?

I have raised this with a couple of the employer groups this morning.

I am talking about work sites as opposed to individual companies.

It seems to me that we are adding another ingredient into the potential mix of employer-employee relations on particular work sites.
In this instance, I suppose employees who are under state awards employed by a constitutional corporation will have different terms of employment again.

Their terms of employment might be regulated by the state systems but their capacity to be dismissed would be regulated in the federal arena.

What is the potential in some of those sites for this to actually generate more industrial disputation?
What is your experience in the building industry or areas like that where you have a multiplicity of different employment arrangements occurring?

Mr Lennon—As I said in my opening remarks, it can only add to the complexity of the system.

I go back to the example quoted by Senator Murray from the AIG submission about the five metalworkers and the one clerk.
As you have just pointed out, in that situation you are going to have five metalworkers under federal jurisdiction and you are going to have the clerical employee under two different jurisdictions: one for the unfair dismissal regime; one for their other conditions of employment.

In New South Wales our state act allows for Commonwealth awards.

The award covers the field, then, when it comes to conditions of employment.

We have the provisions for the question of unfair dismissal there as well.
Our argument is that it is a pretty simple and straightforward system for an employer.

They want to know what their obligations are.

They can look at the relevant Commonwealth award.

They know what their obligations are with regard to unfair dismissal.

They can go to section 84.

This will add enormously to the complexity, given the fact that it can only cover constitutional corporations and still leaves that question of unincorporated associations unanswered.
I can see that it will add to the enormous confusion that there already is about federal legislation.

It can only serve to add to that confusion, only to the detriment of the New South Wales system, which is a fairly simple system.
EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION EWRE 40 SENATE—Legislation Monday, 24 February 2003 Senator GEORGE CAMPBELL—One final question: is the ACTU opposed to a unitarian system per se or are you prepared to sit down and talk with the states and with the Commonwealth about a rationalisation of the IR systems in this country?

Ms Rubinstein—I suspect our position is similar to that of the government, in a funny way.

We all support a unitary system as long as what we think ought to be in it is in it.
That is really what it is about.

If what was on offer was unitary system that took the best of all of the various jurisdictions then that would be very difficult to oppose.

As I think we have demonstrated, the government is only interested in a unitary system if it can mine the very bottom of employment conditions.

It is really not the issue.

The issue that divides unions and employers and governments is really the question of what is in the industrial relations system.
What level of protection does it offer?

How does it operate?

Whose interest does it operate in?

Those are the issues, rather than a unitary system per se.

Having said that, if you could get a suitable, appropriate, fair system that operated consistently in all the states and territories, there would be some advantages in that.

Senator GEORGE CAMPBELL—Has there been discussions of that nature at COIL?

Ms Rubinstein—Not really at COIL.


Some two or three years ago the Business Council launched a discussion on a unitary system and held a seminar at which I spoke and the then minister spoke and Senator Murray spoke.

The then minister also released some papers called Breaking the Gridlock—something to do with the gridlock, anyway.
There was a bit of a discussion but in the end it did not get anywhere and it was never going to get anywhere because what it was really about was not the unitary system, but what was in it and why did people want it?

They never wanted it just for its own sake because the fact of the matter is the different state systems are not like the narrow gauge railway or something—they are not really dysfunctional; they are not a barrier to doing things.

They are simply not that much of a problem.


What people perceive as the problem with the industrial relations system from wherever they sit is what is wrong with it from their different points of view.

That is the issue on which agreement is difficult to reach.

Senator MARSHALL—Ms Rubinstein, you finish your submission with a number of suggestions on how to streamline the process and reduce costs in the unfair dismissal system.
Has the government explained to you why they have not picked up any of those issues?

Ms Rubinstein—That is kind, but they are not actually our suggestions.

I think they were in a bill that was moved by the Labor Party, either by Mr Crean or by Mr McClelland.

The government, as I understand it, has rejected those.

In fact, I think they were all moved as amendments in the Senate to the government’s fair dismissal bill.
I think the government senators voted against each one of them, and reasons were probably explained there.

I would suspect that the government thinks that some of them probably do not disadvantage employees at all, while others may only do it a little bit.

But really those proposals are all directed at the efficiency of the system rather than it simply restricting the rights of employees, which is where the government’s interest primarily lies.
Senator MARSHALL—Do you believe that there could be real efficiencies that will lead to lower costs if these issues were adopted?

Ms Rubinstein—There probably are.

Harmonisation is an obvious example of that.

I suspect that costs are much lower in the state systems because of the absence of the constitutional problems associated with how things are dealt with.

But it should be possible.

I think another way to save costs is to provide employers with information.
It is absolutely extraordinary that one in four employers believes that you cannot sack an employee who has EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION Monday, 24 February 2003 SENATE—Legislation EWRE 41 been stealing from you.

Half of all employers—or small businesses, anyway—say they believe that employers never win unfair dismissal cases, when the truth is that they win most of those that are actually arbitrated.
So I think some sort of information, rather than the disinformation campaign that is run, would be very useful.

It needs to be recalled that unfair dismissal jurisdictions—say in New South Wales and Western Australia, at least—have been there since the beginning of time.

But this only became an issue in 1994 or 1995, when John Laws discovered that the Labor government had legislated federally for unfair dismissal.
Suddenly there was a hysterical campaign in New South Wales, even though most New South Wales employees came under the state jurisdiction and had done since before John Laws was born.

So there has been a very steady campaign of disinformation ever since 1994.

There needs to be a positive information campaign that tells employers and employees what their obligations are, and suggests ways in which they can resolve differences between them without recourse to these sorts of measures.
I think that is contained somewhat in the Labor Party bill we referred to in our conclusion.

Senator MARSHALL—Thank you.

CHAIR—Thank you very much.
EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION EWRE 42 SENATE—Legislation Monday, 24 February 2003 [2.21 p.m.] ANDERSON, Mr Alex, Assistant Secretary, Strategic Policy Branch, Workplace Relations Policy and Legal Group, Department of Employment and Workplace Relations HOY, Mr Rex Jeffery, Group Manager, Workplace Relations Policy and Legal Group, Department of Employment and Workplace Relations SMYTHE, Mr James Edward, Chief Counsel, Workplace Relations Policy and Legal Group, Department of Employment and Workplace Relations CHAIR—I welcome officers from the Department of Employment and Workplace Relations.
The committee has before it submission No.

14.

Are there any changes you wish to make?

Mr Smythe—No.

CHAIR—The committee prefers all evidence to be given in public.

If you wish to put any evidence in camera, you can make that to the committee.

I now invite you to make a brief opening statement.

Mr Smythe—This bill will extend the federal unfair dismissal system through the use of the corporations power.
The department estimates that the extended system will apply to 85 per cent of employees, or close to seven million workers.

The unfair dismissal provisions of the act already rely in part on the corporations power.

The bill will reduce the overlap that currently exists between state and federal laws for the majority of Australian businesses.

The bill also proposes a number of amendments to the operation of the unfair dismissal provisions.
A number of these proposals are designed specifically to assist small business.

The corporations power proposals in schedule 1 of the bill follow a long period of public debate on the use of the corporations power to create a simplified national workplace relations system.

The department’s submission notes that there is significant support for a simpler national workplace relations system, including by business and industry groups, union officials, politicians and academics.
The government considers that one major area of Australian industrial law in urgent need of simplification is the law regulating termination of employment.

The bill proposes that all incorporated businesses be subject to a single unfair dismissal scheme regardless of award or agreement coverage.
The government considers that this expanded Commonwealth scheme would provide benefits for the majority of Australian employees and employers in terms of certainty of coverage and clarity and enforceability of the laws.

The government also considers that the reduction in jurisdictional uncertainty and confusion flowing from the broader application of federal laws would encourage higher employment and increased investment.
Minister Abbott has recently written to state and territory workplace relations ministers canvassing these issues and seeking their views on the expanded Commonwealth system.

The minister recognises that, under an expanded Commonwealth unfair dismissal scheme, states may conclude that it is not cost effective nor efficient to maintain separate unfair dismissal systems for the relatively low numbers of employees that would remain subject to state law.
The minister has sought the views of the states on whether it may be appropriate to consider a referral of state legislative power regarding unfair dismissal to allow all employees and employers to be covered by one consistent statutory scheme.

EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION Monday, 24 February 2003 SENATE—Legislation EWRE 43 CHAIR—Would any other officers at the table like to make an opening statement?

Mr Hoy—No.

CHAIR—We will now go to questions.


Senator MURRAY—Mr Smythe, firstly, my thanks to you for supplying the committee, at my request, with some additional data, which will be useful.

Could you, on notice, supplement that.

Your account of the number of small businesses only refers to non-farm small businesses, but my understanding is that farm small businesses are also affected by unfair dismissal laws.

We need to know that and the number of employees related to it.
Mr A. Anderson—I am not sure what data may be available about farm employees.

That may be an artefact of what is available through the ABS, but we can provide on notice an explanation of either the data that its available or the nature of the limitations on data availability.

Senator MURRAY—Or your best estimate because, as you know, the NFF, in particular, has been very strong about unfair dismissal, so it must affect them.

My second request refers to page 7.


Are you able to confirm that, under item 4 in the table concerned, the reference to the number of ‘federal’ termination of employment applications lodged, should be ‘state’?

Mr A. Anderson—Correct, Senator.

Senator MURRAY—One of the issues raised with our first witness was the importance of the threshold qualifying period.

The bill suggests that the Commonwealth raise the threshold qualifying period from three months to six months.
We have just heard from New South Wales that under New South Wales state law it is three months, and we know in Queensland that it is six months.

Can you recall what it is in the other state jurisdictions?

Mr Smythe—I think I have a document which tells me that.

I should also just mention that the proposal in the bill to raise the threshold to six months is only in respect of small businesses; it is not across the board.

I am sorry, I will have to take that on notice.


I thought I had it in a table that was prepared, but I do not.

Senator MURRAY—I have it somewhere, but I have left it behind.

The reason I am going after that is this: it seems to me this is a two-step process.

If first the Commonwealth expands the coverage, the next step would either be to get the states to refer their unfair dismissals powers across or to harmonise their remaining jurisdiction, and one of the issues has to be the qualifying period.
Would it be sensible, instead of your proposition, for the Senate to consider perhaps that it would set what the qualifying period is for businesses that fall under Commonwealth jurisdiction but, in respect to those states where the qualifying period is different, to agree that it will be that period for that state or businesses in that state?
For instance, it would remain three months for the Commonwealth and remain three months in New South Wales, but in Queensland, both federal and state, it would be six months.

That would result in a common approach and, since Queensland Labor introduced it there, I assume that they would not object that much.

I am not putting a Democrat position; I am putting a question to you as to whether you are able to vary it or must it be common everywhere.
Mr Smythe—If you are asking me whether technically it is capable of being varied, of course it is.

In terms of whether, as a matter of policy, it would be a good idea to vary it, I suspect that the government would not favour such an approach.

I think the government believes that one of the advantages of the approach it is taking is to have one simple consistent set of rules across the board for all employees of corporations.
If the proposal you suggest were adopted, it would perpetrate a multiplicity of provisions.

EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION EWRE 44 SENATE—Legislation Monday, 24 February 2003 Senator MURRAY—There is the issue of reinstatement.

It appears to me—and I had a brief discussion with the ACTU—that the act has no incentives to reinstatement and the level of reinstatement has been very low statistically over the last seven years.
Do you think it would be appropriate to introduce the concept of an incentive for reinstatement?

Let me give you an example—and once again, I am not putting a policy position; I am just making an inquiry—if the employee did not want reinstatement, they would only get paid out three months pay; if the employer did not want reinstatement, they would have to pay out nine months pay; and if the IRC believed reinstatement was not appropriate, it would be six months, as at present.
That would make it costly for the employer, if they did not want reinstatement; it would make it costly for the employee, if they did not want reinstatement; but you would still have the IRC with the determining middle position.

I do not know if that incentive would work, but is there a need for incentives to get reinstatement back or is reinstatement just a lost cause?
Mr Smythe—It is an interesting concept but not something that I had thought about before hearing you mention it in your discussion with the ACTU.

It is not quite correct to say that the act does not provide an incentive for reinstatement.

With the way the act is presently constructed, reinstatement is the first port of call, and the commission is only required to order damages in lieu of reinstatement if it determines that reinstatement is not an appropriate remedy.
The act is already skewed a little towards reinstatement, and the bill proposes to further emphasise that bias.

The government’s policy position is that reinstatement should be the primary remedy, so the bill proposes to further emphasise the act’s bias towards reinstatement.

Senator MURRAY—Can you tell me why reinstatement is so unpopular?
The figures I received from you indicate that reinstatement is 0.4 per cent of all unfair dismissal applications under federal jurisdiction and it works at about two per cent of those federal cases which proceed to arbitration.

Mr Smythe—The vast majority of unfair dismissal applications never proceed to arbitration, so there is no scope for formal reinstatement in that regard.
The extent to which cases might be settled and part of that settlement might be reinstatement is completely unknown, although I suspect it is rather uncommon.

Senator MURRAY—On these figures, it would be two per cent.

If you accept Ms Rubinstein’s approach that half the cases are found in favour of the employers, you might double it, but it is still only four per cent.

It is a very seldom used remedy.

Do you think it is a lost cause?

Mr Smythe—I do not know.


Senator MURRAY—The last question I have—and this is a chance for a go around later—is that my bush lawyer’s instinct tells me that, if this law for coverage were passed and went to the High Court, a challenge would fail because I think it is within the powers of the Commonwealth to do what it is doing.

But you are a real lawyer, so tell me what advice you have as to the chances of a challenge succeeding at law.
Mr Smythe—We have had advice from the highest level of the Australian Government Solicitor’s office that this bill is constitutionally valid.

Senator MURRAY—Do you think that, if the governments of the states know that, they are likely to be more amenable to referring the remainder of the unfair dismissal powers to the Commonwealth, or do you not know from your consultations whether that is a possibility?
EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION Monday, 24 February 2003 SENATE—Legislation EWRE 45 Mr Smythe—I imagine there would be quite a number of variables which might influence the way state governments might think about it.

However, I am aware that a number of people have suggested that there are constitutional doubts.
But, as I have said, the advice we have received is that the proposal is constitutionally valid, and most of the more eminent academics who have proffered a view on this also seem to think that it is more likely than not that our proposal is valid.

So the department and the government are confident that the bill is constitutionally valid.

I could not hazard a guess as to what the state governments would make of that.
Senator SANTORO—The ACTU’s submission refers to a submission by the Queensland government to the federal government in which that state government suggests that between March 1995 and March 1997, when the coalition’s unfair dismissal laws were not in place, employment growth in small businesses exceeded that that occurred in larger businesses and that when the coalition unfair dismissal laws fell into place, between March 1997 and March 1999, the reverse trend occurred—that there was greater job creation within larger businesses than in smaller businesses.
Are you familiar with that submission and that particular argument?

Does the department have a perspective on that submission in terms of its accuracy and in terms of any analysis that you might have done?

Mr Smythe—I am only vaguely familiar with that submission.

Senator SANTORO—I would be interested to receive any response that the department might have made to the Queensland government at the time.

Mr Smythe—We will take that on notice, if we may.


Senator SANTORO—Perhaps you might be able to confirm, through some analysis, that in terms of ABS figures or any other figures that may be available that that was what occurred in the workplace.
Senator GEORGE CAMPBELL—Mr Smythe, you may or may not be able to answer this question: to what extent was there consideration given to talking to the state governments about this whole issue of the transfer of powers to widen the scope of powers of the federal government to deal with this specific area?

Why didn’t those consultations take place through the normal state-federal relations?

Mr Smythe—I cannot answer that question.

That is a matter for the minister.


I do not know what motivated his decisions in that regard.

Senator GEORGE CAMPBELL—Other than the consultation which you referred to earlier on—I understand the letter was sent last week or a couple of weeks ago—was there any attempt by the minister to consult with the state counterparts?

Mr Smythe—I do not know.

Mr Hoy—Are you talking about this proposal specifically or more generally?
Minister Reith and Minister Abbott both consulted with their state colleagues generally on the unitary system.

Senator GEORGE CAMPBELL—I am talking specifically about these proposed changes.

It would be a pretty radical step to take, I suppose.

It may well be constitutional but it is still radical in terms of the step having been taken to deal with a specific issue.

It seems a bit surprising why there would not have been some consultations.

Are you able to enlighten me, Mr Hoy?

Mr Hoy—No.


The comment I made went to the broader issue about consultation on the benefits of a unitary system, which have been going on for some years.

EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION EWRE 46 SENATE—Legislation Monday, 24 February 2003 Senator GEORGE CAMPBELL—And that goes back to my time on COIL with Hancock, who brought the report down.

So it has been around for a while.


Mr Hoy—But this subject matter was one of the areas that was covered in the broad consultations.

But in terms of your specific question I cannot add to what Mr Smythe said.

Senator GEORGE CAMPBELL—Mr Smythe, you have just said that 85 per cent of the work force essentially will be covered—and you said seven million-odd workers—once this legislation goes through the parliament.

What happens to the other 15 per cent?

Mr Smythe—They remain where they are.


Senator GEORGE CAMPBELL—What if they are nowhere?

What percentage of those would be covered under state systems and what percentage would effectively have no coverage?

Would they all be picked up under the state system in one form or another?

Mr A. Anderson—The remaining 15 per cent would potentially be covered by state systems.

Senator GEORGE CAMPBELL—Potentially?


Mr A. Anderson—The aspiration of the Commonwealth is that they should be covered by the Commonwealth system.

There are two potential approaches, to pick up on an angle that Senator Murray was addressing previously.

One approach would be for the states to effect a referral of power in respect of remaining employees within a given state so that they could be covered by the Commonwealth parliament.
Technically, an alternative possibility is for a state legislature to exactly replicate the Commonwealth provisions.

That has the disadvantage of there formally being a different tribunal—a different system of dispute resolution—applying the law but at least it would give the benefit of the consistency of law so that there could be straightforward information for employers and employees.
But the downside with that second approach is that at any point where a state parliament elected to make some small difference in its approach from that used by the Commonwealth then the complexity and uncertainty would again be a live issue.

Senator GEORGE CAMPBELL—So, at the end of the day, what we could see out of this process is a shift in the number of people on the federal scale—as opposed to those people on the state scale—but with the same complexity still existing.
Mr A. Anderson—This is a substantial step: producing a uniform system for a preponderance of employers and employees.

It can also be seen as a step towards 100 per cent uniformity.

Senator GEORGE CAMPBELL—Yes, but all the same issues may well still exist, even after that point has been reached down the track, if those 15 per cent are not picked up or brought in under the federal umbrella in one form or another.
Mr A. Anderson—So there would be a substantially smaller group of employers and employees that would be subject to the present disadvantage.

Senator GEORGE CAMPBELL—Whether it is big or small, the disadvantage would still exist.

Mr A. Anderson—That is correct.

Senator GEORGE CAMPBELL—Why is there the concern in this legislation to provide special exemptions for small business?
The references committee of this committee recently laid down a report on small business which identified that one of the major problems with our small businesses is the high incidence of poor management skills: the lack of confidence that EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION Monday, 24 February 2003 SENATE—Legislation EWRE 47 is shown by many small business people in recruiting and employing suitable staff, and their inability to manage them effectively and productively.
Yet I suppose the Commonwealth, in the process of this legislation, wants to reward that incompetence.

A lot of it is not incompetence; it is purely ignorance in terms of what exists out there, and some bodies have been trying to address it.

But it could also be argued that we are rewarding incompetence by making special provisions for those businesses that are not capable of managing their own employees.
Mr Smythe—The government does not see it in terms of incompetence; the government sees that small business, by definition, is not in the same position with respect to the training and assessment of staff as larger business.

Therefore, special provision needs to be made for it.

Senator GEORGE CAMPBELL—But in some states the small business community has that same competence available to them, through business enterprise centres, that large businesses have with expert HR assistance, et cetera.
Mr Smythe—That may be the case, but the government believes that on the ground a small business, by definition, simply will not have the advantages of scale, if you like, that are available to larger businesses.

Therefore, the Commonwealth government believes that special provision should be made so that small business can prosper and create employment.

Senator GEORGE CAMPBELL—In some respects that then builds in discrimination against larger firms for having the competence.
Mr Smythe—It is not unusual in legislation for large and small business to be dealt with differentially.

Discrimination is a loaded term.

To deal with small business differentially is simply a recognition of the difficulties that smaller organisations have.

Mr A. Anderson—That was covered in our submission, in paragraph 2.18, where it talked about differences between various pieces of legislation, including the Income Tax Assessment Act.
Paragraph 2.18 of our submission talked about the different standards which apply to business and pointed out that it is not novel to have different standards.

Senator GEORGE CAMPBELL—Mr Hoy, at paragraph 1.10 of your submission you argue: … the federal unfair dismissal laws are fairer and better balanced … than the State laws.

How do you justify that view?

I assumed that you would have a bias; is there something else behind that statement or is it simply your bias?
Mr Smythe—The federal government believes that getting unfair dismissal laws right involves striking the right balance between equity for employees and a fair go for employers—not imposing so much regulation on employers that that becomes a disincentive to employment and growth—and it believes that the federal laws strike that balance better than any other regime.
Senator GEORGE CAMPBELL—Can you point to any specific areas to justify that argument—for example, the differences between your regime and that of New South Wales?

What is it about the New South Wales regime that is inferior to your proposals which would give credence to that argument?

Mr Smythe—Some of the provisions which require the commission to take into account the size of a business when determining the level of compensation.
That is one of the areas in which the balance is better struck by the federal laws.

EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION EWRE 48 SENATE—Legislation Monday, 24 February 2003 Senator GEORGE CAMPBELL—You argue that that is the case, but is there any empirical evidence to support that?

Mr Smythe—It is very difficult to get empirical evidence about any of these things.

Senator GEORGE CAMPBELL—And that is exactly the case with respect to employment growth—isn’t that right?
The assumptions about employment growth in the small business area really are assumptions.

Mr Smythe—No, they are estimates largely based on surveys of perception, because gathering empirical evidence is very difficult, if not impossible.
Senator GEORGE CAMPBELL—But it is fair enough to say to you that most of the small businesses we talked to in roundtable hearings for our recent report on small business said the thing that generates employment growth is demand for goods and services, not whether or not they understand how to employ people or whether they are concerned about unfair dismissals.

At the end of the day, if there is a demand for their goods and services they will employ people.
Mr Smythe—I agree that a significant number of small businesses do make that point, but the government believes that a sufficient percentage of small businesses are concerned by unfair dismissal laws to warrant the making of legislation like this.

CHAIR—Senator Campbell made much of the fact that you are differentiating between small and big business.

We are in the area of human resources for businesses.
I assume one of the reasons you differentiate is that bigger businesses tend to have human resource departments and small businesses do not.

Is this really one of the main justifications for special provisions, given that small businesses are by their nature small and would therefore have difficulty because they do not have special expertise in some of these areas?

Mr Smythe—That is correct.


One of the provisions in the act at present requires the commission to take into account whether or not a business has specialised human resource management capacity in determining unfair dismissal cases.

So that very issue is already recognised in the act and is indeed a reason why small business should be treated differently.

CHAIR—This is the fourth time we have brought this type of legislation back.
This time it is in a slightly different form, but we are still getting at some of the core issues relating to employment and the effects of federal and state laws on employment, and we have had difficulty over the years in trying to measure that in a quantitative way.

There are claims that unfair dismissal laws affect the motivation of employers to employ, but there have been questions about to what extent that actually happens.
I just want to draw your attention to the minister’s second reading speech, in which he cited a Melbourne Institute of Applied Economics and Social Research study.

They sampled and came up with an estimate of a cost of $1.3 billion per year and 77,000 jobs.

In response to questioning this morning, Senator Campbell indicated that was a small sample.

According to the minister’s speech though, it was 2,000 small to medium-sized businesses—that is coming up with 77,000.
Going back a few years, the ACCI did a study and I think it came up with the figure of 55,000.
If we have empirically based studies like this coming up with these sorts of figures, surely we now have a ballpark estimate that really tells us that, the way these laws were originally set up in 1994—our government has had some difficulty in modifying them—in their current form, which we a now trying to change and because of what is happening at the state and federal level, we have a system of unfair dismissal that is actually costing jobs and production in this country.
Would that be a fair assessment, based on those studies?

EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION Monday, 24 February 2003 SENATE—Legislation EWRE 49 Mr Smythe—I agree, and I think this submission refers to previous submissions we have made, which set out quite a long list of studies of employer attitudes to the unfair dismissal laws.
People can quibble at the margins about various aspects of those surveys, but there is a consistent theme in those surveys over quite a number of years now and they all say that the perception of employers is that these unfair dismissal laws are a problem, affect employing intentions and cost money and jobs.

It may be that there are minor flaws at the margins in any given survey, but all the surveys consistently deliver the same message that you have articulated.
CHAIR—In the current proposals a number of modifications are suggested for the existing laws.

In your submission at 1.10, you say that, if these measures go through, they are less destructive of employment growth.

Could you expand on why that is the case?

Mr Smythe—As I said earlier, this goes again to the balance between justice for the employee and a fair go for the employer.

The measures that we introduce ensure that that balance is better struck.
CHAIR—There are a number of provisions I thought you might like to comment on, relating to qualifying periods, the on-paper claims, compensation, penalty provisions and lawyers putting up unmeritorious claims.

I thought you might wish to comment on some of those provisions of the bill in regard to being less destructive of employment.

Mr Smythe—Let me just take one of them to start with—the ‘on the papers’ provision.
Firstly, I should stress that the ‘on the papers’ proposal is only in respect of applications which should fail because of jurisdictional problems or because they are frivolous, vexatious or lacking in substance.

In other words, it isn’t a dismissal on the papers for any unfair dismissal case; it is just in those special cases.
There is no reason why a small business employer should have to go through the cost and inconvenience of turning up to possibly one, two or three conciliation hearings in the commission to discuss and conciliate over an application which should never have been made in the first place.

That is a proposal which lightens the administrative burden on small business.
The government takes the view—quite rightly, I believe—that small businesses are particularly affected by the need to have to turn up at a tribunal and perhaps spend half a day away from the shop floor to be involved in proceedings when the application is either vexatious or in the wrong jurisdiction.

It is quite an imposition on a small business to have to be there for that, and that sort of provision lightens the burden.
CHAIR—Senator Murray was pointing out earlier today that a survey done of Northern Territory businesses showed that they were not too sure which jurisdiction they were actually in.

Some businesses thought they were in various state jurisdictions, even though they are in a territory.

What is the government doing in terms of educating small business about the way this whole system works and their responsibilities in dealing with unfair dismissal issues?
Mr Smythe—The department has been involved in an ongoing regime of education.

My colleague Mr Anderson may be able to clarify that a little further.

Mr A. Anderson—Education on the existing unfair dismissal laws is a shared Commonwealth and state responsibility for those areas where the state laws do apply.

For its part, the department provides information to employers and employees about unfair dismissal principles and the particular federal laws through a range of means.
A principal one of those is the information available on the Internet through the WageNet site.

The phone information service, WageLine, which the department operates provides information about unfair dismissal.
EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION EWRE 50 SENATE—Legislation Monday, 24 February 2003 The department runs a series of seminars, principally targeted at businesses, which takes a broader approach of looking at obligations on the formation of an employment relationship and at issues relevant to possible termination of employment—taking the positive approach that good practices in engaging and managing staff will avoid possible termination practices.
Those seminars are also periodically offered for employees, such as New Apprentices, or to students as future employees.

The Industrial Relations Commission, through its registry, also provides information for potential enquirers, such as employees, who may wish to utilise the unfair dismissal remedies and for employers who have queries about the impact of an application that they have received.

The registry provides phone information, publications and also provides over-the- counter advice.
Senator SANTORO—With respect to the seminars you referred to, I can confirm that, two weeks ago, I cleared from my post office box a very attractive pamphlet advertising a series of seminars in Queensland.

So I can give you first-hand feedback that that particular piece of attractive junk mail was received in my letterbox and I did not discard it.
Senator MURRAY—Returning to the data that you gave us, at page 7, item 4, under the number of state termination employment applications lodged, you have New South Wales with an asterisk and say that the figures for New South Wales are for the number of cases resolved, not the number of cases lodged.

Is it possible for you to give us an estimate so that we can compare like with like with respect to applications lodged?

My instinct is that there must be many more than resolved.
Mr Smythe—We will do what we can.

Senator MURRAY—If you could, we would then at least be trying to compare like with like.

Mr A. Anderson—We are dependent on the good officers of the registry at the state commission for the collection of that information.

It may be that a small number of cases are carried forward.

But, if the number of applications is consistent with the number of resolutions, the number resolved would be fairly close to the number lodged in a given period.
We will see whether we can provide any further comment on that.

Senator GEORGE CAMPBELL—Mr Smythe, in the Queensland government’s submission they argue that this bill may well result in more complexity for employers as a result of them having to defend an unfair dismissal case both before the AIRC and the Queensland Industrial Relations Commission, one on the basis of the unfair dismissal component and the other in relation to the wages component.

What is your response to that?


Mr Smythe—I am not sure that I understand the point that the Queensland government are making.

The intention of the bill, as you would be aware, is to try to ensure that you cannot bring any sort of case relating to unfair dismissal in a state jurisdiction if you have a remedy in the federal jurisdiction.

I accept that they may be saying that there is some loophole—and I am happy to have a look at that—but I am not aware of how that loophole might work.
Senator GEORGE CAMPBELL—They are also claiming that, in some cases, this legislation may prevent the state tribunal from settling industrial disputes or that, at the very least, the disputes could be protracted as a result of legal disputes arising.

Have you given any thought to that?

Do you have a response to that?

Mr Smythe—It is not something that I have turned my mind to.
As I said, the intention was that, if an individual employee has a remedy under the proposed federal jurisdiction, there should be no remedy under the state jurisdiction.

How that might flow into other areas EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION Monday, 24 February 2003 SENATE—Legislation EWRE 51 of the industrial relations regime in the state I have not considered.

Perhaps I can take that question on notice.


Senator GEORGE CAMPBELL—Could you take both those questions on notice and give us a response to them?

Mr Smythe—Sure.

Mr A. Anderson—I take the opportunity to address some questions put to us and perhaps draw some connections.
Senator Santoro raised the issue of the Queensland government submission in reference to past jobs growth in various sizes of enterprises under differing legal systems, and Senator Campbell raised the issue of whether the prime determinant of employment levels in small business is demand for the products of the business.

The government considers the Harding report on the significance of unfair dismissal to employers very cogent evidence of the importance of this bill.
This is not to deny the importance of demand for the outputs of a particular business to the prospects of that business.

Actual employment practices of small and larger businesses are influenced by a broad range of factors.

Even in terms of the regulatory environment, there are many factors that could influence employment decisions.
But we take the position that decisions about employment will be particularly influenced by employment regulation and that the perceptions of the employer—the decision maker on whether to engage employees or dismiss employees—of the impact of unfair dismissal laws is a key determinant of what a small business will do.
Even where a business has opportunities for growth, a proprietor may consider alternatives— to employ people, to bring relatives into the business or to subcontract—so employment decisions, even in response to a growth opportunity, will not necessarily take the form of employment.

I want to address some comments in some other submissions which I have had the opportunity to examine since the committee released them.

A number of submissions have criticised the Harding report.
They have accused it of using leading questions and therefore attempted to discount the findings of the survey, but Mr Harding addressed in the survey itself the difference between leading questions and closed ended questions.

The government has for some time been advocating the conviction that unfair dismissal laws are a key determinant of small business hiring intentions.
Those opposed to that change have said, ‘Where is the evidence?’ We in the department set out to examine what was the best way to find evidence about the impact of unfair dismissal laws.

The Australian Bureau of Statistics said that it would not be feasible to find retrospective empirical evidence of what had influenced particular employment events and that the best thing to look for was employer intention.
The Harding report set out to find information about the effect of unfair dismissal by asking questions about unfair dismissal.

It had to use closed ended questions.

In a survey that invites the employers to identify what factors are relevant, some employers may not identify unfair dismissal.

That may establish that it was not their most important factor but it does not necessarily establish how important unfair dismissal was for those employers that do identify unfair dismissal as a factor.
So the approach the Harding survey took was to ask follow-up questions of those employers that did identify that unfair dismissal had been relevant in past job reductions or would be relevant in future hiring decisions.

That was the basis for the estimate of the economy wide impact of unfair dismissal laws.

The government stands by the significance of that survey.

CHAIR—Thank you for clarifying that.


Mr Hoy—Much was made, certainly by the ACTU, of how harmonisation might be one way to achieve some of the elements of a unitary system.

I point out to the committee that EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION EWRE 52 SENATE—Legislation Monday, 24 February 2003 governments of both political persuasions have been pursuing this as a policy objective for six or seven years with varying degrees of success.
As Senator Murray has pointed out, there are still differences across the states, certainly in the area of unfair dismissal.

It is also significant, in relation to comments about New South Wales, that despite a number of overtures by the federal government New South Wales has consistently refused to attempt to harmonise any of the various systems.
Senator GEORGE CAMPBELL—In response to Mr Anderson’s comments, I understand from the information I have available to me that the claim by Mr Harding of $1.3 billion and 77,000 jobs a year was based on a sample of just 42 businesses that had claimed that unfair dismissal laws had some impact on their decisions to cut staff.
I do not know the number of businesses he may have surveyed, but the claim is that there were just 42 who had made that claim and that information was then taken and extrapolated to give a figure of $1.3 billion and 77,000 jobs a year.

Maybe you would like to go back and have a look at the research and clarify for me if that is the factual situation or not, how many were actually surveyed which led to that claim being made.
I also understand that he found that 62 per cent of the small businesses surveyed were not aware of the most recent changes to the federal unfair dismissal laws.

That raises the question: how can businesses determine the impact of the laws if they are not even aware of them?
That is a either problem of small business operating in a vacuum or in isolation, which may well be the case—and we experienced some of that in a recent survey we had done—or your capacity to reach them with your information services is not getting to the people on the ground who need to get it.

Mr A. Anderson—On the survey numbers, 42 employers giving a positive response on the impact of unfair dismissal out of 2,000 employers within the scope of the Yellow Pages survey is a significant response.
That was the basis of it, yes.

Senator GEORGE CAMPBELL—My argument is not on the number surveyed or, in fact, that some of the trends may not be correct.

But I think to use that to extrapolate to give precise figures of the number of jobs and costs to the economy is really stretching the string a bit long.

You would have assumed that that response would have come across in the recent hearings we had all around the country when we had roundtable meetings with a lot of small businesses.
However, that certainly did not come across in those hearings associated with the small business employment inquiry.

CHAIR—That concludes the Senate inquiry into the Workplace Relations Amendment (Termination of Employment) Bill 2002.

I thank the officers from the department and I thank the staff.

Committee adjourned at 3.07 p.m. EMPLOYMENT, WORKPLACE RELATIONS & EDUCATION