How will the fair dismissal code work?

Labor has signalled that IR changes will be made sooner rather than later. Details are scarce, but there are parameters. Here’s an informed run-down. By PETER VITALE.

By Peter Vitale

As happens after a change of government, the navel gazing about exactly what the new lot will do has begun.

Last week I outlined the possible timing of Labor’s proposed “forward with fairness” reforms to workplace relations law. Within days of the election result, we already have some pronouncements that indicate that the Rudd government will push hard to implement the paring back of WorkChoices sooner rather than later.

The Deputy Prime Minister and Industrial Relations Minister elect, Julia Gillard, has indicated that the new government will commence drafting the initial “transitional” phase of its legislative program for presentation to Parliament early in 2008. 

More detail is beginning to emerge about how they will approach the task.

Gillard has made clear that the Senate will be asked to vote on laws to prevent employers making new AWAs and in relation to Labor’s version of minimum standards of employment, even though the conservative parties retain control of the upper house until 1 July 2008.

That legislation will also contain provision to enable employers to enter “individual transitional employment agreements” (ITEAs), provided they already have AWAs in place.

ITEAs will not be allowed to run beyond 31 December 2009. They will be subjected to an assessment, akin to the Fairness Test, to ensure that minimum standards are not avoided. It is likely that the new test will be more stringent than the current arrangements.

So far there are no further details on the proposal to implement more flexible individual agreements for employees who earn more than $100,000 a year.

The timing of changes to unfair dismissal laws remains open, but one of its policy planks, the introduction of a “fair dismissal code”, may well prove more difficult to implement than expected.

Labor has indicated that the code will be developed after consultation with small business. In the event that a business with less than 15 employees can demonstrate that it has genuinely complied with the code, the dismissal will be deemed to be “fair”.

Unfair dismissal laws have, at least in recent history, been fairly consistent on a range of matters – requiring that the employers have a valid reason for termination, requiring that the employee has an opportunity to respond to allegations of poor performance or conduct, and to rectify any faults.

The question of whether the application of those laws is considered more or less favourable to employees has tended to rotate around the stringency with which these standards are applied.

What is as yet unknown about the fair dismissal code may give SMEs more heartburn than heart. Take a few examples:

• It’s not clear whether the onus will be entirely on the employer to show compliance with the code, or whether employees will have to demonstrate some sort of arguable case before an employer is required to argue the issue.
• How compliant will an employer have to be to show “genuine” compliance with the code? Does this mean that it will be enough for employers to genuinely believe that they are doing the right thing; will they have to show objective compliance with most of the requirements of the code, or will they be obliged to demonstrate strict compliance to the letter of the code?
• How will the code compare to the rules applying to businesses that aren’t covered by it? Substantial differences may lead to jurisdictional arguments about which rules properly apply to which employers.
• Will decisions about the code by industrial tribunals be published, so that employers can gain a better understanding of how it is intended to operate.
• Will the parties have an opportunity to appeal if they don’t agree with the decision of the tribunal?

At this point you may be forgiven for thinking the fair dismissal code is going to be just another lawyers’ picnic.

And there’s the rub. The Labor policy promises to keep lawyers out of the system to help minimise complexity and keep costs down. It’s a noble objective, but self interest aside, the writer won’t be the only person keen to understand how this will be the first piece of industrial legislation to achieve it.

The lesson for employers?

Keep your eye out. You may have a whole new set of termination rules to learn early in 2008.

Peter Vitale is the principal of CCI Victoria Legal .