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The impact of the Workchoices unfair dismissal exemption for small businesses on job creation: a study in the Richmond-Tweed region of new South Wales.


In the Australian federal parliament, the Liberal-National Coalition government had long sought changes to industrial relations laws that had been introduced by the Labor Party when they were previously in government in the 1990s. One policy plank was exemption from "unfair dismissal laws" for small business, justified on the basis that these laws discouraged job creation within the small business sector. When the Coalition finally achieved control of the Senate, a raft of sweeping amendments, known as WorkChoices and set out in the Workplace Relations Amendment (WorkChoices) Bill 2005, was passed into legislation amid objections from a range of interested parties (Way, 2005).

Part of those objections was based on the reliability of evidence used to justify exemption of small-medium firms, those with 100 or less employees, from unfair dismissal legislation. The government had argued that the unfair dismissal laws inhibited job creation and that exemption would result in new jobs. Studies in this area of industrial relations however, presented an opposing view suggesting the need for an exemption to unfair dismissal legislation was not substantiated by the evidence (Robbins and Voll, 2005; Robbins and Voll, 2004; Barrett, 2003a, 2003b) (Robbins and Voll, 2005).

This paper reviews part of the existing literature regarding the case for an unfair dismissal exemption. It also presents the findings from an in-depth study which investigated the impact of the pre-WorkChoices unfair dismissal laws and the unfair dismissal exemption, on job creation in businesses with 100 or less employees in the Richmond-Tweed region in north-eastern New South Wales.

In terms of structure, the paper commences with a brief account of the previous legislation and how it has changed under WorkChoices. Then, a summary of the arguments supporting/opposing an unfair dismissal exemption, as discussed in the literature, is presented. Thirdly, the qualitative methodology used in the research is described. Finally, the results of the study are discussed, and concluding comments made.

A Brief History of Unfair Dismissal Laws

Unfair dismissal legislation was first introduced into the federal industrial relations system in the Industrial Relations Act of 1993. Under this Act there were two main cases a dismissed employee could put to make a legitimate claim under the unfair dismissal laws. These were that:

* the dismissal was harsh, unjust or unreasonable (even if there had been a valid reason for the person's dismissal), or

* the protocol used for dismissal of the employee was unfair (Voll, 2005).

With the election of a Liberal-National Coalition government in 1996, IRA 1993 was repealed and a new the Workplace Relations Act of 1996 (WRA 1996) was passed by the Senate with a range of changes to unfair dismissal legislation justified on the notion of 'a fair go all round'.

Amendments included:

* hearings to be heard in the Australian Industrial Relations Commission (AIRC) instead of the Federal Court, making proceedings less formal, expensive and time-consuming;

* deterrents to speculative or unmeritorious unfair dismissal claims;

* costs awarded against an employee found to have made a frivolous or vexatious claim;

* employees to pay a $50 application fee;

* the viability of the employer to be taken into account in deciding whether to award damages in lieu of reinstatement; and

* greater restrictions placed on probationary, casual and specified term contract employees applying for unfair dismissal relief. (Murray 2004)

From the inception of the WRA 1996, the Coalition had been lobbying for an exemption for small business (20 or less employees) from the unfair dismissal laws, arguing that the legislation negatively affected these businesses and inhibited small business employment growth (Robbins and Voll, 2004).

In August 2001, the Government was successful in amending the unfair dismissal legislation and made changes to regulation that required the AIRC to take into account the size of the business in being able to carry out "... proper dismissal processes and procedures" (Barrett, 2003a, p87). The changes also included a qualifying period of employment before employees could make a case for unfair dismissal, the justification being that small employers needed time to evaluate their recruitment because they do not have the resources to carry out immediate and flawless selection (Wooden 2005). The qualifying period was taken as three months or, as negotiated prior to employment, or again, as deemed reasonable by the AIRC. In effect, employees were put on probation, during which time employees were not protected from unfair dismissal (Barrett, 2003a).

The prospects for implementation of the Coalition's complete agenda regarding unfair dismissal legislation were realized when the Coalition won a majority in both Houses of Parliament in the 2004 federal election, ensuring a simpler path through the legislative processes. An amendment to WorkChoices legislation the following year (WRA 2005) included an exemption for small businesses (defined as one hundred or less employees) from the federal unfair dismissal laws and an extension of the three month probationary period for "big" business to six months. Employees who are dismissed for operational reasons or hired seasonally are also unable to claim unfair dismissal under the new laws and it became unlawful to request the inclusion of an unfair dismissal remedy contract in a federal workplace agreement (WRA 2005).

The focus of this research is limited to the first of these changes, namely the exemption of small businesses from unfair dismissal claims. In this study the largest enterprise has thirty employees. [Note that the usual definition of a "small business" is somewhat different. For example, the Australian Bureau of Statistics defines a small business as twenty or less in services and 100 or less in manufacturing].

This study follows other recent research into the effects of the unfair dismissal laws on small and medium sized businesses, where different sizes of enterprise were surveyed, ranging from less than twenty employees to less than 200.

As noted above, the Coalition Government's perception was that managing the unfair dismissal provisions of IRA 1993 was beyond the scope of many small enterprises. In broad terms, the major themes underpinning these notions were that unfair dismissal laws impinge on small businesses because:

* Small businesses do not always have correct human resource management (HRM) policies and practices and that this leads to problems with the laws;

* In order to avoid legal implications, small businesses will only employ close friends and family (so-called safe employees) or not employ at all; and

* Employees are encouraged to make claims against employers because of the likely success and the cost to small business (Bryson 2006).

One of the implications is that job growth in small-medium enterprises could be retarded. There is also the possibility of dysfunctional hiring outcomes, and biased legal processes adding to costs and inefficiencies in small-medium enterprises. Each of these implications is discussed below.

Effects on job growth

The first argument supporting an unfair dismissal exemption is that small business job creation was inhibited by the unfair dismissal laws. The Australian Chamber of Commerce and Industry (ACCI 2005b) claimed the laws created fear among small businesses and negatively impacted on their decisions to employ. An exemption was deemed a necessary remedy. One study supporting this view was that of Harding (2002), who surveyed 1802 businesses with less than 200 employees, and found that 77,000 jobs had been lost in part because of the unfair dismissal laws (Harding, 2002, p22). This figure was quoted by the Coalition government as the potential job creation figure that could be achieved if small and medium businesses were exempt from the unfair dismissal laws (Freyens and Oslington, 2005b). This figure was questioned however because of the modeling employed in the calculation. (Robbins and Voll, 2005).

In contrast, Freyens and Oslington's (2005a) quantitative study of 1438 small to medium sized businesses, found that the potential job creation in these sectors, if exempt from unfair dismissal laws, would more likely be in the region of 6,000 extra jobs. That study also found that small firms were no more burdened by the laws than big business (Freyens and Oslington, 2005a and 2005b).

Chalk's (2004) quantitative study of Motor Trader's Association members, estimated that 2654 jobs could be created within the MTA membership with an exemption for small businesses. Yet the study also suggested that job creation in small business was not really inhibited by the unfair dismissal laws, and that "small business generally will hire staff on a needs basis if the work is available, regardless of any preconception about unfair dismissal laws" (p47). A similar quantitative study by Robbins and Voll (2004) of 594 small businesses in the Albury-Wodonga region found the unfair dismissal laws to be a minor issue influencing the hiring decisions of small businesses. Again, Barrett's (2003a) investigation found that there was little evidence of effects of unfair dismissal laws inhibiting jobs growth in small businesses.

Dysfunctional Hiring Outcomes

Harding's (2002) study found that 47.9% of respondent businesses believed the unfair dismissal laws had this effect, resulting in firms using employment strategies designed to avoid the unfair dismissal laws. Harding also found that the laws contributed to discrimination between certain types of job applicants, including the long term unemployed, because of a perceived possibility of hiring someone who may later turn out to be unsatisfactory and difficult to dismiss.

A parallel argument for the exemption is that the combination of inadequate HRM and fear of the litigation may lead to dysfunctional employment outcomes, such as inappropriate hiring employees of relatives or friends. Worse, employers may not hire at all perhaps, substituting their own labour in the form of overtime (Wooden, 2005, ACCI, 2005b). The result is that "UFD (unfair dismissal) laws reduce the efficiency with which the labour market matches job seekers with jobs" (Harding (2002, p25).

A related notion is that the HRM capacity of small business to respond to unfair dismissal is inadequate. Often, small business cannot afford the time or money to implement reliable recruitment, selection and dismissal procedures which would go some way to protecting them from unfair dismissal claims (Wooden 2005, ACCI 2005a, Chalk, 2004, Barrett 2003b, Harding 2002).

Barrett's (2003b) study into small business jobs in the La Trobe Valley, consistent with the broader literature on small business development, confirms the proposition that small businesses lack resources for specialised HRM procedures. The counter argument is also put by Barrett who asserts that support and training for small business in the HR field should be more accessible, so that HRM incompetence is remedied rather than ignored. Barrett suggests that an exemption for small business from unfair dismissal does not cure the "... larger problem with the quality of management skills" (Barrett, 2003b, p.12). The Australian Council of Trade Unions (ACTU 2005) supports this view and argues that improvements to management skills in dealing with employees, as a result of the need to abide by the unfair dismissal laws, would benefit both the employer and employee. [Note: This is not dissimilar to the argument put by the Howard government with respect to the Goods and Services Tax (GST), when the claim was that, although complicated paperwork would be required, small business would improve their paperwork skills].

In summary then, there seems to be agreement that smaller businesses lack suitable HRM skills and resources. One approach is to avoid the issue by exempting small businesses from the application of unfair dismissal laws (and alienating peoples' rights to not be unfairly dismissed). The other is to use the law to force small business to improve their HRM performance. The Coalition government's chosen strategy was to justify an unfair dismissal exemption because of inadequate HRM skills in small businesses. (Howard, 2005).

Biased Legal Processes

The third proposition, as suggested by the ACCI (2005a), is that the unfair dismissal legislation was skewed towards employees and had a larger impact on small business, and hence the need for protection of this sector. The ACCI notes that, due to the ease with which an unfair dismissal claim can be lodged, as well as the creation of an industry of specialised groups of professionals to deal with cases, employees are encouraged to malicious and inappropriate litigation. There is also the claim that court rulings have changed shape since the early forms of employment protection in the 1970s.

Initially, the objective of employee claims was the intent of returning to the job. However the recent emphasis had shifted to monetary settlements at considerable expense to employers. The ACCI also argue that the AIRC were too harsh on employers, as they were judged on their disciplinary procedures, and not on why the person was dismissed in the first place (ACCI, 2005a). A further adverse effect of unfair dismissal cases was, according the ACCI, that having experienced an unfair dismissal case, "... many small business employers became more risk averse to hiring people" (ACCI, 2005a, p10).

Findings from studies by Robbins and Voll (2004), Voll (2005) and Freyens and Oslington (2005a) contrast with the ACCI's claims. Firstly, the study by Freyens and Oslington (2005 a, p23) found that, "... there is not much evidence of variation by firm size, suggesting that unfair dismissal provisions do not impose a higher burden on small business" when examining the costs imposed.

Second, the findings of Robbins and Voll (2004) indicated that

* only a small number of small business employers had experienced an unfair dismissal claim, and

* the majority of those were satisfied with the outcomes of the case.

Their research also indicated that those who had experienced a claim found the process to be mostly uncomplicated and the costs to employers not unreasonable. In an analysis of six case studies of the unfair dismissal process, Voll's (2005) findings were consistent with Robbins and Voll (2004). Within the sample, employers generally did not need representation and Voll (2005) concluded that the expense involved in an unfair dismissal case, even if the employee was unfairly terminated, was small.

Also supporting this argument, Barrett (2003a) states that small firms were defendants in only 22% of federal unfair dismissal claims from 1996 to 2001, which is a small number of cases compared to a total small business sector employment share of over 50% of the workforce (Australian Bureau of Statistics 2001). Barrett (2003a) also asserted that it seemed unnecessary to exempt small businesses from these laws as amendments were made to the unfair dismissal legislation in 2001, as previously mentioned, to further protect small business from and in unfair dismissal litigation.

Robbins and Voll's (2004) study also showed that while few respondents had experienced an unfair dismissal claim, half of the respondent small businesses thought the laws were unfair on their sector. From these findings, Robbins and Voll indicated the likelihood that employer perceptions of the unfair dismissal legislation were not formed as a result of actual experience with the laws but from "... government publicity regarding unfair dismissal law ..." (Robbins and Voll, 2004, p8).

In conclusion, the debate continues as to the experience of small businesses in the unfair dismissal claims process. One side of the argument is that employers of small businesses were negatively affected by the unfair dismissal process, as claimed by the employer organisation ACCI (2005a), while the studies of small businesses themselves by Robbins and Voll (2004) and Voll (2005) found the process was not hugely detrimental to small businesses.

Table 1 summarises these arguments as taken from the literature that treat the effects of the unfair dismissal laws.

Some Research Questions and a Methodology

To sum up then, various groups had supported an exemption from the unfair dismissal laws for small business because of the possibility that such laws inhibited jobs growth in the small business sector. Given that small businesses were given an exemption under the WorkChoices legislation, effective March 2006, jobs growth should increase after that date.

This research is about that very issue; has job growth increased in the small business sector? There are definitional problems with this question of course. That is, what exactly is a small business? WorkChoices targets firms of less than 100 employees. Wooden (2005a) suggests that job creation rates resulting from the exemption will decrease as firm size increases.

There are additional issues that complicate the question. For example, Barrett (2003b) suggested that the job creation outcomes may differ across Australia because of varied regional characteristics. Then again, not all small businesses in Australia are exempt from the unfair dismissal laws--those operating under state industrial awards for example.

Another concern is that it may be too early to tell yet as to whether jobs have or will be created. Certainly unemployment rates are at low rates, and the Coalition government claimed part of this belongs to the WorkChoices legislation. Unemployment rates have fallen, but this is part of a long-term slow trend since 1996, a trend interrupted only by the spike in 2001 around the time of the introduction of the GST (Goods and Services Tax).

Then Federal Treasurer. Peter Costello also suggested that the national unemployment level has reached full employment, which in economic terms means that all unemployment is of a structural form (Irvine 2007). Given the unfair dismissal was seen as a structural impediment, job creation in small firms should contribute to a deviation from trend, if it occurs in any numbers. The problem is that isolating the effects by quantitative methods can be problematic because of potential interference by other variables.

In order to overcome some of these problems, a qualitative methodology consisting of open-ended, structured interviews was employed in this study. This allowed the research to examine, in detail, whether there was any change in respondent businesses on job creation decisions after the unfair dismissal exemption, regardless of how small. A qualitative methodology also enabled the close investigation of the link between job creation and unfair dismissal laws from different angles and to conclude with some confidence whether previous unfair dismissal laws inhibited job creation, and to evaluate the real value of an exemption, from the perspective of the respondent businesses at least. (Barrett (2003a, p92).

The main research question was:

"What will be the effects on job creation, of the unfair dismissal exemption for businesses with 100 or less employees, in the Richmond-Tweed region?"

So, the research has a regional dimension and nine business owner/managers service industry businesses were purposively chosen from three main towns within the Richmond-Tweed (Lismore, Byron Bay and Ballina) for the study. Interviews were conducted between July and September 2006 at each respondent's workplace or a mutually agreed venue, and interviews lasted between forty and eighty minutes. Table 2 shows some characteristics of the businesses involved in the study.

Note that all firms were small; the biggest had a staff of thirty. One firm had zero employees. Thirty-eight questions were used to interrogate the respondents via four broad categories of question, as follows:

1. What are the owner/manager's perceptions of and experiences with the unfair dismissal laws as they existed before WorkChoices?

2. What are the human resources practices of businesses with 100 or less employees (in the Richmond-Tweed region)?

3. How were human resource management decisions influenced by the previous unfair dismissal laws? 4. How will the WorkChoices legislation, in particular the unfair dismissal exemption affect the human resource management practices and decisions made by employers?

Within each category, specific interview questions were used and evaluated using cross-case analysis and a set of findings for each research question resulted (Patton, 2002, p440). The findings are presented firstly as summary statements that reflect the majority view where there was one, and then as substantial minority positions.

Owner/Manager Perceptions about the Laws

The level of knowledge of the interviewees about WorkChoices and how these laws applied to their business was limited. Four respondents judged themselves to be reasonably familiar with the new law, while five respondents, although they had a fair understanding of the law, believed they did not understand it as well as they should. Further interrogation revealed that respondents did indeed have a limited detailed knowledge of the law, although they felt they had a level of knowledge almost appropriate to their needs.

Respondents used varied sources to gain information about the new law and the majority were proactive in researching and determining what changes, if any, might be needed to establish compliance and to take advantage of opportunities that might arise.

Overall, the conclusion can be reached that the respondents were aware that important changes had been made to industrial legislation, but were also aware of the need to develop a more precise knowledge of how the changes were likely to affect their businesses.

Human Resource Practice

Given the respondents were small firms, the literature had predicted that human resource practice would often be ad hoc and relatively informal and unstructured. This proved in general terms to be the case. While respondents usually had some form of written or verbal human resources policies, the practices of the respondents were likely to be skewed to some degree towards subjective rather than objective decision-making about who to hire.

When recruiting, respondents were often predisposed to hiring someone known previously or someone they inherently trusted, rather than hiring someone unknown. Seven respondents showed a clear preference for this approach, the reason being that they felt more confident about the hiring decision. Part of the reason is that employees in a small business need to 'get along' with each, due to their close proximity in the work space, so judgements of a personal nature are made. Hiring someone previously known also reduces search costs "because it saves time in the hiring process ... if someone they know can vouch for the applicant." This was not the exclusive practice for obvious reasons that are associated with the available talent pool.

A related reason for hiring someone previously known had to do with the problem of employee dismissal. There were two clear dimensions to the reasoning in this respect, namely, the cost (including personal--"it's an unpleasant exercise") and potential legal problems associated with dismissal, as well as the costs of training new employees. This finding lends support to Harding's (2002) and Wooden's (2005) views that hiring practices were responding to the unfair dismissal laws.

Clearly though, as with all economic organisations, employee turnover costs is a multi-dimensional issue, involving retraining, searching, psychological and legal costs, and there are a variety of sensible reasons as to why businesses try not to make mistakes in the recruitment.

Clear, developed and precise recruitment policies and practices would of course, reduce the capacity for bad recruitment decisions and in this respect, Barrett (2003b) recommended training to enhance small firm's HR practices overall, rather than an exemption to unfair dismissal. On this count, the opposite effect is apparent as a majority of respondents see no need to change their HR practices, exemption or otherwise. Two respondents did suggest they will "open up" their hiring decisions.

The majority of respondents had hired family and friends at some stage. The reasons respondents hired family and friends included that they "felt an obligation to employ" these people, it was "a family-oriented business", and that the family member hired was qualified for the position. Respondents made no mention of the unfair dismissal laws in this context, and the notion that small business relies on family and friends to avoid the unfair dismissal laws was not supported

Respondents also used a variety of additional methods to source staff including newspaper ads, word of mouth and employment agencies. So while most respondents hired family and friends as well as people known to them, the majority also used other, more impersonal methods of sourcing staff. This suggests that the business decisions of respondents were not overly constrained by the unfair dismissal laws and nor were they prevented from hiring according to need.

Impact of Unfair Dismissal Laws on Small Business HR

The majority of respondents demonstrated awareness of the requirements involved in the dismissal process under the unfair dismissal laws and they were also aware of the need to justify dismissals. Five of the nine respondents had negative perceptions of the previous unfair dismissal laws. This finding is somewhat consistent with the Robbins and Voll's (2004) finding when half of their respondents believed the unfair dismissal laws were unfair. Closer interrogation of the respondents also found that perceptions of the unfair dismissal laws were more likely a result of political propaganda than actual experience. No respondent businesses had been involved in an unfair dismissal case and only five respondents had personal knowledge of anyone involved in a case. [Note: This suggests a low incidence of the event in a regional town context].

Seven respondents believed small businesses would be better off under the unfair dismissal exemption. A minority mentioned the difficulties faced by small business employers under the unfair dismissal legislation around the possibility of having to financially support staff during downturns in business and fearing they would being unable to dismiss them easily. Respondents mentioned that the unfair dismissal exemption would allow for greater control over staffing decisions and give small business employers the flexibility to make productivity decisions quickly. However, five respondents identified alternatives to the exemption that would suit employers, including an overhaul of the unfair dismissal legislation to make the dismissal and claims process less arduous for the employer.

Despite the limited knowledge of the unfair dismissal laws and limited experience of real disputes, five of the respondents accepted that unfair dismissal laws had influenced their HR decisions including hiring and dismissal, with three stating that the influence was significant.

When business decisions were influenced, it was to do with perceiving the laws to be cumbersome, and the fear of litigation. To avoid the laws, partly at least, two respondents primarily hired casual employees who were never subject to these laws.

One respondent was reluctant to trial some types of potential employees because of the risk of not being able to dismiss the person if found to be unsatisfactory. Other respondents mentioned that the laws added "pressure" to the selection process for the same reasons. In one sense, the effects of the unfair dismissal laws seem to have been positive in a business management sense; respondents noted that they "took extra care" when choosing new employees, and hired only when there was a real need.

However, while respondents in the study were influenced by the unfair dismissal laws, none claimed to have been influenced to the point that they were stopped from hiring when the business required it. This corresponds with propositions put by Chalk (2004) and Robbins and Voll (2004) that the unfair dismissal laws did not rate highly on a list of factors considered in the hiring decision. So the notion that the unfair dismissal laws inhibited job creation in the respondent's businesses in any significant way seems unlikely. Again, this corresponds with the findings of Oslington and Freyens (2005a), Barrett (2003a) and Robbins and Voll (2004) who found little evidence to suggest that unfair dismissal laws had great effect on job creation in these sectors.

When asked if the unfair dismissal laws had influenced the decision to dismiss or not dismiss any unsatisfactory workers, six respondents felt the laws had no influence in their dismissal decisions but three believed the laws had some influence. These respondents found that the dismissal process was longer and more difficult however, but it did not change the final decision to dismiss. In this limited context, this finding does not back up Harding (2002) and Chalk (2004) who found that some businesses retained unsatisfactory workers due to the unfair dismissal laws.

Effects of the Exemption on New Job Creation

Overall, the unfair dismissal exemption is not expected to add new jobs to the businesses of the respondents to this study. Seven respondents were expecting to increase staff levels in the next twelve months, only three respondents regarded the exemption as having any influence. Such influence would be in the form of who was hired and on what basis, rather than whether employees were hired at all. Other respondents mentioned being "less worried" about accidentally hiring the wrong person because they could now dismiss more easily. One respondent was intent on hiring a full time employee where previously only casuals, not subject to the laws, were hired [Note: So, in a real sense, jobs (part-time) could be lost].

Four respondents believed the exemption would not influence their decision to increase staff levels at all. Again, such results correspond with Robbins and Voll (2004), Robbins and Voll (2005) and Barrett (2003a) in that there was little evidence that jobs would be created as a direct result of the unfair dismissal exemption.


Respondents were also asked about how they believed the exemption would affect other small business in the region. Four respondents believed that the unfair dismissal exemption would have no great effect on the growth or success of small and medium businesses in the region while four respondents believed there would be a positive effect, and for a number of related reasons. There was the increased freedom to manage staff in their business as a result of the unfair dismissal exemption. Businesses would now be able to employ suitable workers and 'not get stuck' with unsatisfactory employees. More jobs would be created within smaller businesses due to the reduced risk in dismissing.

When asked to comment on whether some employers would be likely to unfairly exploit this extra power over employees because of the exemption, the majority response was no, because it would be detrimental to the business to but that "... it was possible some employers may do so." The respondents in this study were of the belief that employees were an asset to the business so it would be unwise to treat staff unfairly.

Another important reasons for not exploiting the exemption included community perceptions. The reputation of the business is critically important to success in the types of small communities in which these businesses reside. The consensus was that it would be unwise to take advantage of some of the practices the exemption makes possible, such as hiring and firing according to short-term workloads of the business.

Frequent hiring and dismissing was expensive and costly to productivity, and with the already difficult task of finding suitable employees in regional towns in the Richmond-Tweed, the task would be made much harder with a reputation for mistreating staff. So, while there was common agreement amongst respondents that it was possible employees could be disadvantaged by the exemption, other factors in business success would militate against it.


An exemption from unfair dismissal laws was contained in WorkChoices legislation for small businesses, on the political justification that it unleashed powerful job creation forces in the sector. The case for the exemption was based on a variety of research, some quantitative, that found that unfair dismissal laws had significant negative effects on small firm job creation. Other studies disagree; if there were any effects inhibiting job creation, they were minimal at best. This research was an attempt to add information to that debate.

The approach taken was somewhat innovative in that a qualitative methodology was used to explore effects in greater depth, and to see then how the results correspond with the previous and largely quantitative approach.

Overall, the study found that the unfair dismissal laws had minimal influence on job creation in the respondent businesses. Further, there was no evidence to suggest that the short term job creation plans of respondent businesses were affected by the exemption. Moreover, respondents showed little intention to implement new practices to take full advantage of the added power over employees, and this seemed to reflect the importance with which staff was perceived, and the need to treat them fairly. And in more broad terms, the exemption seems to have had had no significant impact on the human resource practices and decisions of the small businesses in this study.

These findings relate to a small group of businesses in the services sector in three of the main towns of the Richmond-Tweed and can hardly be generalised to the population as a whole. But the findings do provide new detail, and they also correspond with the findings of a range of studies that brought into question the veracity of the arguments to support an unfair dismissal exemption for small firms. It seems that small firms weren't sure they wanted or needed an exemption of the form delivered, but definitely, people's rights as employees have been reduced.

The election of a Rudd Labor Government in December 2007 will bring changes to industrial relations laws including a reinstatement of unfair dismissal provisions for small businesses, although an exemption regarding employees with less than twelve months service is proposed (Gillard 2007). It would be useful to revisit this research to see if policy change has had any new impact on the employment experiences of the nine workplaces introduced in this paper.


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Ashlee Bryson and Dennis Howard

Southern Cross University
Table 1: Findings supporting and opposed to an unfair
dismissal exemption

     Arguments supporting an              Arguments opposed to an
            exemption                            exemption

Small business jobs growth was      Studies show the effects of unfair
hindered by previous laws and if    dismissal laws on small business
exempt, more jobs will be created   are not hugely expensive for these
(Australian Chamber of              businesses and job creation in this
Commerce and Industry (ACCI),       sector is not significantly
2005a and 2005(b); Harding, 2002;   affected (Freyens and Oslington,
Howard, 2005; Wooden, 2005).        2005a, 2005(b); Robbins and Voll,
                                    2004; Voll, 2005).

Many small businesses do not        Unfair dismissal laws are in place
have the resources to implement     for the good reason of
proper Human Resource               encouraging firms to refine their
Management (HRM) practices to       HRM skills to minimise unfair
help protect them from unfair       dismissals (Australian Council of
dismissal claims (Barrett, 2003     Trade Unions (ACTU), 2005;
(b); Harding, 2002; Wooden, 2005).  Barrett, 2003(b)).

Many small businesses are non-      The larger a business grows, the
employers or only more              able they are to implement
employees' due of                   reliable recruitment, selection and
these laws, thereby excluding       disciplinary procedures, so should
many prospective employees          not need protection from unfair
(Harding, 2002; Wooden, 2005).      dismissal (Wooden, 2005).

Unfair dismissal claims are easy    Actual costs to small business of
and cheap for employees to make,    unfair dismissal cases are minimal
and rulings are swayed in favour    and the majority of small business
of employees (ACCI, 2005a and       employers who have experienced
2005(b)).                           the unfair dismissal legislative
                                    process are generally satisfied
                                    with the outcomes (Robbins and
                                    Voll, 2004; Voll, 2005).

Table 2:  Characteristics of firms in the study

Code     Business Type       Age of     Employee *  Business
                            Business     Numbers    District

 1    Hospitality/Retail      21          15        Lismore
 2    Retail/Business        14.5         19        Lismore
 3    Recreational and        22          21        Ballina
        Cultural Services
 4    Retail/Wholesale        2.5          0        Lismore
 5    Business and            1.3          7        Byron
        Property Services
 6    Distribution            25          30        Byron
 7    Retail                  1.5          3        Byron and
 8    Property and            25           7        Ballina
        Business Services
 9    Retail                   3           9        Ballina

* excludes owner
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Author:Bryson, Ashlee; Howard, Dennis
Publication:International Journal of Employment Studies
Date:Oct 1, 2008
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