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Abstract

Debate over regulation of dismissals has been intense in recent years, and renewed in the lead-up to the 2012 review of the operation of the Fair Work Act. This paper reviews the economically relevant aspects of the legislative changes from the Workplace Relations Act which operated from 1993-2006, WorkChoices from 2006-2009 and the Fair Work Act from 2009 and compares the lodgment patterns and outcomes based on the data provided by Fair Work Australia on the operation of the unfair dismissal system, as required under the Fair Work Act. Our findings reinforce earlier work that showed costs imposed on business and employment are modest, but further work is required on productivity effects of dismissal regulation.

JEL Classification: J63, J68, K31

1. Introduction

The regulation of dismissals has been one of the most controversial public policy issues in Australia in recent years. However, little hard evidence is available to adjudicate claims about the employment and other effects of unfair dismissal regulation. Interest of economists in the issue has waned since a few studies were undertaken of the impact of the dismissal provisions of the WorkChoices legislation which operated from 2007-2009.1 There have been no studies by economists of the impact of the Fair Work Act dismissal provisions which replaced WorkChoices in 2009, though there are lively legal and human resources literatures on the changes to dismissal rules. One of the frustrations in this area is how little interaction there is between researchers from different disciplines interested in dismissal regulation. Research on the topic seems now to have been reignited by the release of data about dismissal claims in the annual reports of Fair Work Australia, the body which administers the legislation, and the review scheduled for 2012 of the operation of the Fair Work Act (see Sloan, 2010; Fair Work Australia, 2012).

The purpose of this paper, building on our previous work (Freyens and Oslington, 2007) is to compare the impacts of the different regulatory regimes on the number of cases lodged, probabilities of success, and awards to dismissed employees as far as is possible with data provided by Fair Work Australia and its predecessor bodies.

The paper continues with a brief review of the economics of dismissal regulation in section 2, an...

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