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Practical and Principle-Based Arguments for a Revised Remedy Regime for Unfair Dismissal in Australia

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“TO THE ADVANTAGE OF ALL CONCERNED”: PRACTICAL AND PRINCIPLE-BASED ARGUMENTS FOR A REVISED REMEDY REGIME FOR UNFAIR DISMISSAL IN AUSTRALIA by DAVID WOOLIAS A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF LAWS in THE FACULTY OF GRADUATE STUDIES (Law) THE UNIVERSITY OF BRITISH COLUMBIA (Vancouver) April 2012 © David Woolias, 2012 ABSTRACT Among the extensive literature on the merits of unfair dismissal laws, comparatively little attention has been paid to the key issue of which remedies, and in what form, can best give effect to those laws. In order to address this gap in the literature, this thesis examines remedies for unfair dismissal through an empirical study of all unfair dismissal decisions handed down in Australia during the 2010-2011 financial year by the Australian federal employment tribunal. This thesis also contains a detailed analysis of the theoretical underpinnings of the current remedy regime for unfair dismissal in Australia – which comprises reinstatement and monetary compensation subject to a statutory cap – to assess the merits of those remedies from the perspective of principle. The results of the analysis reveal some troubling issues of both practice and principle. First, there is a significant divergence between the law as it appears on the statute books in relation to remedies for unfair dismissal (which emphasises reinstatement and making whole the loss suffered by the unfairly dismissed employee) and the law as it actually operates in practice (in which reinstatement is awarded infrequently and the quantum of compensation ordered in lieu of reinstatement is generally small). Second, this problem is particularly acute for self-represented applicants. An economic decision-making model is used to show that, in particular, it is likely that this problem causes self-represented applicants to reject settlement offers which they should rationally accept. Third, neither compensation nor reinstatement is capable of fully realising the purposes that the remedy regime is designed to achieve. In particular, the availability of the remedy of reinstatement against the will of an employer is unsupportable in principle and fails to afford employers a “fair go all round”. The thesis concludes by proposing that the remedy regime for unfair dismissal in Australia be modified to provide only the remedy of compensation, subject to a significantly larger statutory cap than that which presently applies. It is likely that similar modifications would benefit other jurisdictions around the world, such as Canada and the United Kingdom, which have similar statutory unfair dismissal laws to Australia. ii TABLE OF CONTENTS ABSTRACT ............................................................................................................... ii TABLE OF CONTENTS ........................................................................................... iii LIST OF TABLES ..................................................................................................... vi ACKNOWLEDGEMENTS ....................................................................................... vii 1.0 INTRODUCTION ............................................................................................ 1 1.1 Background .......................................................................................... 1 1.2 The purpose of this thesis .................................................................... 8 1.3 Remedies for unfair dismissal: the scholarship to date ...................... 10 (a) Descriptions / comparisons of remedy regimes operating in different jurisdictions ................................................................ 11 (b) Empirical studies of attitudes towards, or outcomes of, particular remedy regimes ....................................................................... 14 (c) Analyses of the merits of possible remedy regimes ................. 22 (d) The contribution of this thesis to the literature ......................... 27 1.4 Outline of methodology and conclusions of this thesis ....................... 29 1.5 Scope of this thesis ............................................................................ 31 1.6 Structure of this thesis ........................................................................ 34 1.7 A counter-intuitive proposal ................................................................ 36 2.0 HISTORY OF UNFAIR DISMISSAL LAWS IN AUSTRALIA ....................... 40 2.1 Introduction ........................................................................................ 40 2.2 The current situation........................................................................... 40 (a) The Constitutional backdrop to unfair dismissal laws in Australia ................................................................................................ 40 (b) The federal unfair dismissal laws ............................................. 42 2.3 The development of federal regulation of unfair dismissal ................. 46 (a) First steps: The Industrial Relations Reform Act 1993 (Cth) .... 46 iii (b) Reinstatement becomes the primary remedy: The Workplace Relations Act 1996 (Cth) ......................................................... 51 (c) A dramatic shift in coverage: “Work Choices” 2005 ................. 53 (d) Summary of key points ............................................................ 55 3.0 AUSTRALIAN UNFAIR DISMISSAL LAWS IN PRACTICE – AN EMPIRICAL ANALYSIS ............................................................................... 56 3.1 Introduction and overview .................................................................. 56 3.2 Methodology for the empirical analysis .............................................. 57 (a) Identifying the relevant decisions ............................................. 57 (b) Recording relevant metrics ...................................................... 59 (c) Consolidating the data ............................................................. 62 3.3 Findings .............................................................................................. 64 (a) Outcomes of applications ........................................................ 65 (b) Remedies ordered when dismissed employees are successful at hearing ................................................................................ 69 (c) The length of hearings and the representation of the parties .. 75 (d) The special case of the self-represented applicant .................. 80 4.0 MODELLING THE DECISION TO SETTLE – THE CASE OF THE SELF- REPRESENTED APPLICANT ...................................................................... 85 4.1 The decision to settle from the perspective of the dismissed employee ........................................................................................................... 85 (a) Determining the values of each variable in the model ............. 87 (b) Valuing reinstatement .............................................................. 89 4.2 The decision to settle from the perspective of the employer .............. 95 (a) Determining the values of each variable in the model ............. 96 4.3 The settlement decision – bringing the two halves of the analysis together ............................................................................................ 100 4.4 Explanations for the behaviour of self-represented litigants ............. 101 5.0 AUSTRALIAN UNFAIR DISMISSAL LAWS IN THEORY – EVALUATING THE THEORETICAL UNDERPINNINGS OF THE CURRENT REMEDY REGIME ...................................................................................................... 107 iv 5.1 Introduction and overview ................................................................ 107 5.2 The purpose of providing remedies for unfair dismissal ................... 109 5.3 A theoretical analysis of compensation as a remedy for unfair dismissal .......................................................................................... 113 (a) Is compensation capable of making whole the losses suffered by the unfairly dismissed employee? ..................................... 113 (b) Is compensation a remedy that is fair to both employers and employees alike? ................................................................... 117 5.4 A theoretical analysis of reinstatement as a remedy for unfair dismissal ......................................................................................................... 119 (a) Is reinstatement capable of making whole the losses suffered by the unfairly dismissed employee? .......................................... 119 (b) Is reinstatement a remedy that is fair to both employers and employees alike? ................................................................... 120 6.0 OPTIONS FOR IMPROVING THE CURRENT REMEDY REGIME ............ 135 6.1 Introduction ...................................................................................... 135 6.2 The six problems with the current remedy regime identified in this thesis ................................................................................................ 136 6.3 Options for improving the remedy regime for unfair dismissal in Australia ........................................................................................... 138 (a) Options for modifying the remedy of reinstatement ............... 139 (b) Options for modifying the remedy of compensation ............... 149 6.4 Summary of recommendations .......................................................
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