Employers more likely to lose unfair dismissal case under Fair Work, research shows

Employers are urged to observe the correct processes when firing staff, as decade-long research into unfair dismissals finds that claimant success rates have soared under Labor’s Fair Work Act.

Academics studying unfair dismissal cases from 2000 to late 2010 arbitrated by Fair Work Australia and its predecessor bodies have found that claimant success rates have lifted from 33% under Work Choices to 51% under the current Fair Work Act.

They say that claims under Fair Work against businesses with more than 100 employees have a 41% success rate, versus the 33% rate under WorkChoices.

The researchers, Benoit Freyens, assistant economics professor at the University of Canberra, and Paul Oslington, economics professor at the Australian Catholic University, say the new industrial relations laws might catch out small businesses, which had previously been immune to unfair dismissal claims if they employed fewer than 100 people.

The academics’ report, which is now in draft stage and published in the Australian Financial Review, also finds that:

• Claims lodged under Fair Work have jumped to 17,000 per year, from 6000 under Work Choices – in line with the increase in the number of employees able to make unfair dismissal claims.
• Payouts are steady, averaging about 12 weeks’ pay, and
• The actual costs imposed on business by unfair-dismissal regulation are small, as are the impacts on aggregate employment.

Freyens says companies need to be vigilant in conforming to process while firing somebody.

Even when companies believe they have a sufficient reason to fire somebody, such as theft, they need to follow the correct process – such as providing warnings and collecting documentary evidence.

“The absence of HR services is one issue, it’s very easy to sue an employer on the basis of fair process,” Freyens told SmartCompany.