Changes to small claims in IR bill could reduce legal costs for SMEs

The Coalition tabled its industrial relations omnibus bill last week, and amid the debate over casual employment and enterprise agreements, changes to small claims, which could reduce legal costs for SMEs, have been overlooked.

The bill proposes to increase the cap on employment-related small claims from $20,000 to $50,000, and give more power to the Fair Work Commission to either dismiss frivolous and vexatious claims or settle them at the conciliation or arbitration stage of a dispute.

The bill states that courts must consider whether a small claim should be referred to the Fair Work Commission for conciliation as soon as proceedings commence.

Australian small business and family enterprise ombudsman Kate Carnell supports the bill because it could reduce the cost of legal representation for small businesses facing small claims related to unpaid wages and employment entitlements.

“We think wherever it’s possible to keep cases out of the court system, that it’s a really good thing,” Carnell tells SmartCompany.

Carnell says it is also important the Fair Work Commission has the capacity to set aside vexatious claims, which are cases that are brought without reasonable grounds and are initiated to annoy or cause harm to a party.

“The Fair Work Commission needs to have the capacity to say ‘no, we are not hearing it’,” Carnell says.

“They’ve claimed that it’s difficult for them to do that, so really vexatious claims end up going through the mediation process, which isn’t reasonable for the small businesses involved.”

According to Carnell, while there is not a lot of detail in the bill about how the Fair Work Commission would carry out these functions, it appears to be a step in the right direction for small claims between employees or contractors and employers.

“Often we see employees being represented by the union and the small businesses having to pay lawyers,” Carnell says.

“So, having a conciliation or arbitration capacity that doesn’t require lawyers, we believe is a step in the right direction.”