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Unfair dismissal: the figures donít add up

By Andrew Murray - posted Thursday, 9 June 2005

The Federal Government intends to stop small and medium business employees from being able to contest an unfair dismissal under federal law. It has lifted its proposed exemption from unfair dismissal laws from employers with less than 20 employees to employers with less than 100 employees.

In one sense the greater discrimination does not matter. Either you accept the idea that some employees should have less rights than others or you don’t. Whatever the line, it is arbitrary. In both cases its justification is as a job-creating exercise. The theory is that the public good of job creation justifies the private harm of reducing employee protections.

The advocacy is accompanied by a propaganda mudslide of horror stories, urban myths and deceptions. Experiences under lax state laws are seamlessly transferred to become experiences under rigorous federal laws. Historical experiences pre-dating significant improvements in the law are regaled as current practice. Sensible acceptance of liability and a negotiated outcome are characterised as extortionate go-away money. Employers gaily tell the gullible that you cannot even fire workers for stealing.


The Coalition variously claims that exempting small business from federal unfair dismissal laws would create between 50,000 and 77,000 jobs. Could this really be true, or is it a load of old Goebbels? Endless repetition does not make something true, so what evidence might we rely on?

The February 2005 OECD Economic Survey said, “OECD studies consistently rank Australia as one of the countries with the least restrictive employment protection legislation”. In other words, Australia’s IR system is already employment friendly. That is a lot different from what the Coalition has been saying.

In the 2001 Hamzy (Hamzy v Tricon International Restraunts trading as KFC) case the expert witness for the Federal Government, Professor Mark Wooden, agreed with the statement “the existence or non-existence of unfair dismissal legislation has very little to do with the growth of employment and that it is dictated by economic factors”.

Recently, ten months after I first asked the question, the Federal Government finally gave us some statistics. In 1996 termination of employment applications were 14,533 federal and 6,478 state, totalling 21,011. In 2003, after two bouts of Coalition-Democrat federal reforms, effective from 1997 and 2003, termination of employment applications were 6,954 federal and 8,299 state, totalling 15,253. That’s right - in round figures just 15,000 out of 10 million employees.

So in less than a decade federal unfair dismissals have halved while state unfair dismissals have increased by a quarter under their less rigorous laws. Full and part-time employment has grown by about 1.5 million since 1996. Once again, this is a lot different from what the Coalition has been saying.

On the Coalition theory, the fall in unfair dismissal applications should have increased employment in workplaces covered by federal law, and the rise in unfair dismissal applications should have decreased employment in workplaces covered by state law. Of course it did no such thing.


A third of those federal unfair dismissal applications were small business employees. The Coalition says that preventing a little over 2,000 small business employees from contesting unfair dismissal will create up to 77,000 jobs. Their 50,000 estimate was based on a throw-away line by a commentator and the 77,000 on a survey.

The majority of small business employees fall under state not federal law. There are real problems with state unfair dismissal regimes. A number of these are amenable to rorts, and need tightening up along federal lines. Victoria is under federal law already. Getting rid of five state unfair dismissal regimes and transferring them across to the federal jurisdiction would probably also halve the number of state applications.

Such reforms would mean a likely reduction to around 12,000 unfair dismissal applications nationally a year, of which between 3,000 and 4,000 would be small business employees, out of 10 million employees. On these figures it hardly seems fair or necessary to take away the unfair dismissal protection of small and medium business employees. There is a case for more reform but not one for eliminating rights.

If the case for ending essential employment rights rests on large-scale job creation you will search in vain for convincing empirical data.

Without such evidence the case for exemption is still mostly Goebbels.

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About the Author

Senator Andrew Murray is Taxation and Workplace Relations Spokesperson for the Australian Democrats and a Senator for Western Australia.

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