A costly solution for small business

The year was 1995. A small group of mainly twentysomething recent Liberal Party recruits had gathered at Sydney's North Ryde RSL Club for the inaugural meeting of their new branch. Presiding over the meeting was local MP and then shadow industrial relations minister John Howard.

Branch formalities had ended and Howard invited questions from the floor. One recently graduated solicitor present posed this question.

"Mr Howard, you've often said that the Liberal Party is a mixture of liberals and conservatives. Would it be correct to say that the policies of the party tend to be more conservative than equivalent policies of the ALP?"

This was no trick question. As one of the more experienced Liberal MPs, Howard was well positioned to answer it. From memory, his answer went something like this.

"Not always. In some areas, the ALP is more conservative in that their positions are historically well-entrenched. In my portfolio of industrial relations, our policies like deregulating the labour market and curbing union dominance would be considered revolutionary."

This certainly was the case back then. In a December 2005 address to the Australian Liberal Students Federation, self-confessed "industrial ayatollah" Des Moore from the Institute for Private Enterprise referred to the 1993 establishment of the Industrial Relations Court of Australia "to implement the first national unfair dismissal legislation … After three months, a cap had to be put on IRC compensation because the judges were prone to making million-dollar awards …"

No doubt there is a strong element of free market revolutionary mythology in these claims. However, certainly many participants in the system saw it as a cash cow. One solicitor boasted to me at that time of filing unfair dismissal claims almost as a matter of course each time one of his workers-compensation clients was dismissed. After all, he said, most employers were happy to pay something just to make the matter go away.

In due course, a host of limitations was placed on unfair dismissal claims. These included caps on compensation, specific criteria to determine how a dismissal would be deemed unfair and exemptions for certain kinds of dismissals and businesses. Generally, each party had to pay their own legal fees. For workers without union representation (i.e. the majority) and paying by the hour for a private solicitor, taking a matter to arbitration had little attraction.