Small businesses are calling for reform in the wake of new research showing less than 1 per cent of unfair dismissal claims were backed by the industrial umpire.
The Australasian Convenience and Petroleum Marketers Association claims small businesses are incurring significant financial and time penalties contesting unfair dismissal claims at the Fair Work Commission that rarely succeed.
During the first three months of this year the commission received 3583 applications for unfair dismissal with less than 1 per cent resulting in findings of unfairness by the commission.
The Small Business Unfair Dismissal Code applies to businesses with fewer than 15 employees and gives special treatment to small businesses including an inability for employees to claim unfair dismissal in their first 12 months in a job or to dismiss an employee summarily for misconduct.
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Of the applications studied 3180 were settled during mediation or conciliation, 6 were withdrawn, and 172 were finalised by a decision of the commission with the remaining 225 presumably still in the system, and yet to be finalised.
ACAPMA chief executive Mark McKenzie said while the results of mediation or conciliation were confidential it is clear the code needs to be reformed.
"From ACAPMA’s experience, the vast majority of the matters subject to mediation and conciliation result in either the employee withdrawing the application after mediation, or the employer deciding to make a modest ‘go away’ payment – rather than go through the stress and expense of fighting the claim in the commission”, Mr McKenzie said.
Of the 172 cases brought before the commission 32 cases (or 19 per cent) were resolved in favour of the employee.
This was similar to previous years with 15 per cent resolved in favour of employees in 2018 and 17 per cent in 2017.
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Of the cases 79 were dismissed by the commission as 'without merit' while 32 were dismissed for being legally invalid due to the claims being lodged ‘out of time’, the case being a genuine redundancy, or the case being ineligible on other technical grounds.
Mr McKenzie said given the significant financial and time penalties associated with preparing a defence against an adverse dismissal claim, the high number of cases that were dismissed by the commission suggests that the current operation of the code is imposing unnecessary costs on small business owners.
"That is to say nothing of the stress involved in defending these actions and the fact that they often result in the business owner losing sight of their small business and suffering other financial consequences," Mr McKenzie said.
A spokesperson for the commission declined to comment on the calls for reform.
"Many matters are resolved by agreement between the employee and the employer at conciliation, others are resolved by the applicant withdrawing their application, and applications may be formally dismissed for example where it is found to be outside the commission’s jurisdiction," the spokesperson said.
Anthony Massaro from law firm Russell Kennedy said it is likely a "significant proportion" of the 3180 settled claims would, or might, have been successful at arbitration.
"If an employer knows that there were problems with the dismissal, and the employee is not asking for a significant amount of money, then in most cases the matter settles," he said.
"Obviously, there are frustrating situations where a seemingly merit-free claim can proceed because there is minimal prospect of an adverse costs order at the end of it. At the same time, any alteration to the system needs to take into account that the entire purpose of the system is to ensure that certain employees have a channel to contest unfair decisions. If the system is too discouraging, it fails."
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