Commonwealth Numbered Regulations - Explanatory Statements

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WORKPLACE RELATIONS AMENDMENT REGULATIONS 1998 (NO. 2) 1998 NO. 338

Statutory Rules 1998 No. 338

(Issued by the authority of the Minister for Employment, Workplace Relations and Small Business)

Workplace Relations Act 1996

Workplace Relations Amendment Regulations 1998 (No. 2)

Authority

Section 359 of the Workplace Relations Act 1996 (the Act) provides that the Governor-General may make regulations, not inconsistent with this Act, prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed, for carrying out or giving effect to the Act,

Subsection 170CC(1) of the Workplace Relations Act 1996 (the Act) provides that the Governor-General may make regulations to exclude certain classes of employees from specified provisions of Division 3 of Part VIA of the Act.

Paragraph 170CC(1)(b) of the Act provides that one of the classes of employee which can be excluded by regulations are 'employees serving a period of probation or qualifying period'.

Subparagraph 170CC(1)(e)(ii) of the Act provides that regulations may be made which exclude 'employees in relation to whom the operation of the provisions causes or would cause substantial problems because of... the size ... of the undertakings in which they are employed'.

Purpose

The purpose of the Workplace Relations Amendment Regulations is to insert new regulations 30BAA and 30BAB into the Principal Regulations to exclude employees in the first six months of employment with a particular employer, or who are employed by undertakings with 15 or fewer employees, from eligibility to apply for a remedy in respect of unfair dismissal. These employees continue to have a remedy in respect of unlawful dismissal.

Context

More Jobs, Better Pay, the Coalition's workplace relations election policy, contains commitments to implement these two exclusions. The six month qualifying period is the Government's response to the deterrent effect on employer hiring intentions of unfair dismissal claims by employees with less than six months service.

The small business exclusion is the Government's response to the special problems which unfair dismissal provisions cause for small businesses. It is an unavoidable fact that the defence of an unfair dismissal claim, however groundless, is especially burdensome for small business. The small business exclusion is intended to remove this disincentive.

Background

On 30 April 1997, a regulation was made (in Statutory Rules 1997 No. 101) to exempt new employees of businesses with 15 or fewer employees, with less than 12 months' continuous service, from the federal unfair dismissal provisions. The relevant regulation was disallowed by the Senate on 26 June 1997.

Accordingly, on 26 June 1997, the Government introduced the Workplace Relations Amendment Bill 1997, which proposed an exemption for new employees employed in an undertaking with not more than 15 employees. The Bill was twice introduced in and passed by the House of Representatives, and twice rejected by the Senate despite strong evidence that such a measure would result in jobs growth. The evidence includes the Morgan and Banks' 1996 survey, the April 1997 Recruitment Solutions survey, and the May 1997 New South Wales Chamber of Commerce and St George Bank survey, the Yellow Pages Small Business Index Survey conducted in October and November 1997, and further surveys conducted in March 1998 and July 1998 by Australian Business Limited, the South Australian Employers' Chamber of Commerce and Industry and the Queensland Chamber of Commerce and Industry.

The Workplace Relations Amendment (Unfair Dismissals) Bill 1998 was introduced into Parliament on 12 November 1998. The amendments proposed will allow an employee (other than an apprentice or a trainee) engaged after the commencement of those subsections to apply for an unfair dismissal remedy only where the employee has completed at least six months' continuous service with the employer and was employed by an employer with more than 15 employees. The Bill was passed by the House of Representatives on 2 December 1998, but has been referred to the Employment, Workplace Relations, Small Business and Education Legislation Committee by the Senate.

Although the 1998 Bill is before the Parliament, there is no legal impediment to the making of a regulation addressing the same issue concurrently.

Application

Item 1 of Schedule 1 creates new regulations 30BAA and 30BAB, which will exclude, respectively, employees with less than six months service and employees employed by undertakings with 15 or fewer employees from accessing an unfair dismissal remedy under section 170CE(1) of the Act.

Details of the Regulations are in the attachment.

Regulations 1, 2 and 3 and Schedule 1 commence on gazettal.

ATTACHMENT

WORKPLACE RELATIONS AMENDMENT REGULATIONS 1998 (No. 2)

Regulation 1

Regulation 1 sets out the name of the regulations.

Regulation 2

Regulation 2 provides for the commencement of regulations 1, 2 and 3 and Schedule 1 on gazettal.

Regulation 3

Regulation 3 is a formal provision, providing that the Workplace Relations Regulations are amended as set out by these Regulations.

Schedule 1 - Amendments to Workplace Relations Regulations

Item 1

Item 1 of Schedule 1 creates new regulations 30BAA and 30BAB which operate to exclude employees with less than six months' continuous employment and small business employees respectively, from the operation of s. 170CE(1)(a) and s. 170CE(1)(c) to the extent that it refers to s. 170CE(1)(a). The effect of the regulations is to bar the classes of employees specified from applying for an unfair dismissal remedy under the Act.

For the exclusion in regulation 30BAA to apply, an employee must not have completed six months' continuous service at the time that either notice of termination was given or the employee's employment was terminated, whichever first occurred. Subregulation 30BAA(3) lists the events that are to be disregarded in ascertaining continuous service for the purposes of this regulation.

The exclusion in regulation 30BAB applies to employees of undertakings with no more than 15 employees at the time that notice of termination or termination of employment occurred. Subregulation 30BAB(3) specifies which employees are to be excluded for the purposes of determining the number of employees in an undertaking.

Both regulations 30BAA and 30BAB apply only to employees employed after the commencement of the Regulations. Both regulations expressly do not apply to apprentices or trainees under a registered training agreement.

The small business exclusion is the Government's response to the special problems which unfair dismissal provisions cause for small business. Relevant special circumstances of small businesses may include the following:

*       smaller amounts of capital reserves, earnings and profits;

*       greater direct exposure of the proprietor, and greater personal commitment of assets to the business;

*       greater vulnerability to serious disruption from financial, personal and time pressures; and

*       lack of time and resources for dealing with specialist issues such as human resource management.

The substantial problems caused by the operation of unfair dismissal provisions for businesses with 15 or less employees, because of their size, include the following:

*       businesses of this size are less able to absorb the costs of responding to an application, preparing for a hearing, attending a hearing and complying with outcomes - these costs include:

-       information and evidence gathering costs;

-       costs for legal or other professional advice;

-       opportunity cost of lost time in seeking advice, attending settlement discussions and attending hearings;

-       disruption to working relationships; and

-       orders for compensation;

*       businesses of this size typically do not have specialist expertise and resources to put into recruitment and termination procedures;

*       attendance of the employer as a party, or witnesses from the business, at a hearing can bring a business of this size to a standstill or effectively compromise its efficient operation.

These substantial problems have deterred small businesses from hiring new employees, because of concerns that they may be subject to an unfair dismissal claim, and that the claim would be disproportionately burdensome, even if their actions were ultimately vindicated. The small business exclusion is intended to remove this disincentive.