Employment laws drag business down
Fears for small business after new employment laws
By Grace Collier
For a government to impose additional costs on business during good times is courageous. In tough times it is simply foolish.
Our surplus has been spent, unemployment is rising, we teeter on the cusp of recession and yet the Rudd Government is about to make life even harder for the vast bulk of our business community.
Since March 2006 the Howard government’s reforms have treated businesses employing less than 100 staff like responsible entities.
For the first time in ages, businesspeople were able to dismiss employees who they could no longer employ without fear of being sued and consequently having to pay huge amounts of go-away money just to avoid a ghastly legal process.
Due in June, Rudd’s new laws will condemn these businesses to a dreadful legal treadmill where the only way to get off is to cough up and cough up big.
The legislation will hinder business growth and affect survival; it’s an added stress and cost that they don’t need and it comes at the worst possible time.
When it comes to sacking people for poor performance or misconduct there are two facts; firstly, no one who is sacked ever believes they deserved it. No matter what they did, they always deem it to be unfair.
It is part of the human condition that we construct lies to self and others in order to be the innocent victim of an injustice rather than an appropriately punished perpetrator.
The actuality is in the vast majority of cases employees who are sacked are sacked well after they should have been; they have usually been making life for everyone in their workplace hell, co-workers are fed up with them and in a temporary moment of courage or desperation the manager eventually takes the action they should have taken much earlier by saying goodbye.
Having said that, I concede sometimes employees might be sacked unfairly. I have yet to see it for myself, but I am told it happens. The point is, thanks to Rudd, business will now bear a huge cost for all those employees who deserve to be removed from the workplace, instead of the tiny proportion that might not.
Secondly, nobody likes or enjoys sacking an employee; employers avoid it like the plague. Like most people, they are terrified of conflict. Let us not forget that small business owners work closely among their employees, developing strong working relationships and where workforce relationships are tight, bosses, and how they treat team members, are in turn watched closely by staff.
So in plain terms, what does the new legislation mean for bosses, workers and the economy?
After June this year, employers with fewer than 100 staff will have to pay to seek advice from expert consultants or lawyers prior to dismissing staff, costing the average small business up to $10,000 or more for every person they wish to dismiss.
After the dismissal, businesses will have to pay these consultants again for representation at a court-style dispute resolution session in the offices of Fair Work Australia. For your reference, dispute resolution is simply code for "How much will you pay your ex employee to go away?"
These resolutions will not be achieved on the basis of justice, truth and fairness, but on the threat of mushrooming costs and unpredictable risks to the employer, costs and risks that will be exaggerated by the Fair Work Australia officials to terrify the employer into paying up.
Based on more than 15 years’ experience in unfair dismissal processes, I found most workers and bosses who expect to have their story heard and justice dispensed are left shocked and disillusioned. Both employer and employee receive a short time to outline their case and the mediator hearing the matter usually makes it clear that they are not interested in the pedestrian details of their mundane story.
The better part of the dispute resolution session is always devoted to haggling over money. Because no evidence can be presented, the mediator has no way of telling who is lying, so the focus is to find the means to settle the dispute. This is done with a transfer of dollars from the employer’s bank account to the ex-employee’s.
Weeks’ pay is the standard term used for settlement currency, instead of dollars, possibly because it seems smaller and non-specific. Twelve weeks’ pay sounds relatively insignificant until you convert it into dollars.
Knowing that unsettled cases proceed to a formal court hearing, at a cost of $25,000 to $50,000, and with active encouragement, misinformation, strong pressure and even bullying by the mediator in more than 80 per cent of cases the employer buckles by agreeing to a go-away fee.
The matter is deemed settled, cash is transferred and a certificate is issued.
For the employee, the odds of success are better than at any casino; they present to the session with a $50 fee, and after an hour usually walk away with over $10,000 in cash.
Under Labor’s old laws, workers made 12,194 unfair dismissal applications for the period July 2005 to June 2006; 10,012 were settled at dispute resolution.
Using a conservative estimate of 13 weeks pay per case, multiplied by the minimum wage, small businesses paid at least $109 million that year in go-away money.
In the year following the introduction of Work Choices, small business became exempt, and as a result only 7257 applications were made. Using the same formula for the 6068 settled cases, $69 million was paid.
Under Rudd’s new laws, I predict we will see the small and medium business sector slugged with a go-away money bill of well over $120 million a year. In 2009, this is a cost businesses can ill afford.
Rest assured, it is a cost that will be passed on to all Australians. Now that’s unfair.
Grace Collier worked as a union official for blue and white-collar unions and is now an industrial relations consultant and employer in big business.