Rise in unfair dismissal claims under Fair Work Act

New research cited by The Australian Financial Review shows that unfair dismissal claims under Labor’s Fair Work Act have risen to about 17,000 per year, with the success rate for employees sitting at around 51 per cent.

The research by Professor Oslington of the Australian Catholic University, and Benoit Freyens, an assistant professor of economics at the University of Canberra, compares unfair dismissal data under the last three major versions of workplace law. It shows that the number of claims has noticeably risen under Labor’s Fair Work Act, mostly because the former Work Choices laws covered around fifty per cent of the workforce, while Labor’s new laws cover around 80 per cent. While previous laws exempted employers with fewer than 100 employees from claims, Labor has since removed this prohibition, and lawyers have been quick to take advantage.

In particular, it seems that claims on the grounds of adverse action are on the rise. These have gone up from around 1200 in 2009-10, to almost 1900 last financial year. By this year they will likely reach 2200. This represents a growing area of concern for employers, with new prohibitions against an employer taking “adverse action” against an employee on a range of anti-discrimination grounds.

Under the Act, “adverse action” includes dismissing or refusing to employ someone, as well as discriminating against them or demoting them. Employers can be found to be taking adverse actions when they act against the workplace rights of the employee – for example, to complain or inquire about their work situation – or punish them in any way for engaging in lawful industrial activity, for example, participating in a union.

These types of claims may be particularly worrying to employers. They allow uncapped compensation, have longer cut-off dates for lodging claims, and do not exclude employees who earn more than $118,000. However, the researchers have noted that figures for claimant success rates and payouts in these adverse action claims under the new legislation have not been released.

The research also supports the view that the actual costs imposed on employers by the legislation, and the impacts on aggregate employment, are small. Indeed, it is suggested that the lower risk of dismissal might actually lead to a rise in productivity, with workers having a greater stake in the firm, and better training. 

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