Rethinking Job Security

A Comparative Analysis of Unfair Dismissal Law in the UK, Australia and the USA

Joanna Howe

• Publisher: Routledge
• Year: 2016
• Print ISBN: 9781472450579
• eBook ISBN: 9781317064022
• Edition: 1
• Topic: Law
• Subtopic: Law Theory & Practice
• Index: Law

This book critically examines the proper role of the law in protecting job security in the contemporary workplace. It provides a historical, theoretical, practical and comparative perspective on this under-researched, but fundamentally important, legal mechanism at a time when the pressure to deregulate and dilute worker-protective laws has taken on increased importance. The volume critically analyses both statute and case law from three advanced industrialised liberal democracies with a common law foundation, the UK, Australia and the USA, to understand the extent to which job security is realised. By applying a common approach and a conceptual framework that emphasises the complex relationships between law, the economy and society to analyse a series of national studies, the book is also designed to draw upon the insights of comparative analysis to deepen our understanding of the limits and possibilities of legal regulation of job security. The national case studies are supplemented by research that focuses on how supra-national organisations have sought both to develop and disseminate new legal norms around the practices and processes of dismissal. This study critically analyses and assesses the adequacy of the international regulatory framework for protecting the rights of employees in the dismissal process.

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Introduction

Introduction

Whether legislation should protect employees from arbitrary dismissal remains an open question. There is no universal agreement on the meaning of job security, its importance and how best to achieve it. This book examines the proper role of statute law in protecting job security in the contemporary workplace. It provides a historical, theoretical, practical and comparative perspective on this fundamentally important legal mechanism at a time when the pressure to deregulate and dilute worker-protective laws has increased.

The book begins by considering the two divergent paths to regulating job security undertaken by the three countries under review in this book. In the United Kingdom and Australia, where unfair dismissal laws exist, they are under considerable pressure. The contrasting United States approach of employment at will is controversial and continues to inspire rigorous debate.

The central inquiry of this book is whether, in substance, there is a significant difference in the job security protection afforded by the United Kingdom and Australia’s approach on the one hand, and the United States on the other. Although conventional wisdom answers this question affirmatively, is this the whole story? To what extent do the United Kingdom and Australia’s unfair dismissal laws provide adequate job security protection? How different is this to the protection afforded under the United States model of employment at will? Undoubtedly, when unfair dismissal law was first introduced, it was a pathbreaking innovation and distinctive in procedure and substance to the employment-at-will model. Its evolution, however, tells a different story – and it is to these divergent trajectories we now turn.

A pathbreaking innovation: the inception of unfair dismissal law

Albeit at different times, a statutory unfair dismissal system in the United Kingdom¹ and Australia² was ushered in as part of a promise of a new beginning for domestic labour law. The traditions of collective laissez-faire and conciliation and arbitration were being replaced, and with them disappeared the old order of protecting workers from unfair dismissal through union strength. Overturning these traditions was no mean feat. The central debate was not over unfair dismissal rights but the entire kaleidoscope of industrial relations. The United Kingdom’s Industrial Relations Act of 1971 was a fruit of fierce debate in the preceding decade over the future of the United Kingdom’s labour law and an attempt by the Conservative government to replace strife with orderly industrial relations. For Australia, the aim behind the Industrial Relations Act 1993 was not order but modernisation: to rejig industrial relations so that enterprise bargaining and not the traditional processes of conciliation and arbitration became the central determinant of wages and conditions. As part of both countries’ departure from their traditional paths, a statutory unfair dismissal system was canvassed and ultimately introduced as an enhancement of legal protection to working people so as to guarantee a greater degree of job security that was not contingent upon their ability to garner union support for their dismissal claim against their employer. With the shift to a more juridified concept of industrial relations, workers in the United Kingdom and Australia were empowered to challenge an employer’s decision to dismiss before an independent tribunal. The notion of job security conceived by each system tended to focus upon providing compensation for unfair dismissal: in both the United Kingdom and Australia it was the exception rather than the rule that unfairly dismissed workers would get their jobs back. Providing a ‘cost’ to employers for unfair dismissal was intended to bring about the cultural reform of workplaces so that dismissals occurred according to the correct procedure and resulted in fairer outcomes. The idea was to provide an incentive for employers to only dismiss a worker for good reason and according to the dictates of natural justice.

Yet, despite these aspirations, the reality of the unfair dismissal systems of the United Kingdom and Australia was that they afforded only limited protection for the job security of working people. In both countries, from the outset, constraints were placed upon who was eligible to bring an unfair dismissal application. Casual employees, those on fixed-term contracts, and those who were still part of a statutorily mandated qualifying period were unable to challenge an employer’s dismissal decision. From the beginning, both countries placed limits on the amount of compensation that could be awarded and, whilst the statutory preference was for reinstatement, tribunals were given significant discretion to award compensation if, in their view, the employment relationship had been sufficiently severed. Despite these constraints of jurisdiction and upon the remedy, working people in both the United Kingdom and Australia began to use their new unfair dismissal rights, so much so that in both countries concern was quickly raised about the caseloads of tribunals and the onus upon business of challenging unfair dismissal claims. Common to the trajectory of both the United Kingdom and Australia’s unfair dismissal systems was the emergence of a movement towards limiting access to unfair dismissal protection by reforming the jurisdiction according to the needs of business. This reoriented the focus of both unfair dismissal systems from their original anchorage in a primary concern for protecting job security to a new preoccupation with protecting business efficiency and reducing regulatory burdens.

Despite the challenge to the legitimacy of unfair dismissal law in both the United Kingdom and Australia, statutory protection for workers from unfair dismissal still exists to some extent. No political party or major interest group has seriously proposed eliminating unfair dismissal protection altogether. Instead, the statutory unfair dismissal systems of the United Kingdom and Australia have been unravelled more covertly via an argument to reduce the burden of the unfair dismissal system upon business and to ensure that the presence of statutory protection does not act as a disincentive to job creation. This has led to the peeling back of the statutory superstructure governing unfair dismissal law. Whilst neither system has achieved complete deregulation of its unfair dismissal law, recent reform of the unfair dismissal systems in both the United Kingdom and Australia has centred on enabling efficient dispute resolution. The objective of policymakers is to resolve disputes within the workplace and without recourse to tribunals. In the United Kingdom, reforms have been canvassed which replace unfair dismissal law altogether with a system of no-fault dismissal, and there are new provisions that encourage employees to opt out of job security protection. In Australia the case against unfair dismissal law has been made particularly with small business in mind, and various reforms have exempted small business employees from unfair dismissal law, albeit to different degrees.

This story of a general pattern of parallel, diachronic developments between the unfair dismissal systems of the United Kingdom and Australia should not be overstated. Real differences occurred in the emergence of unfair dismissal law in each jurisdiction because of their divergent labour law traditions, with the United Kingdom’s traditional labour law culture one of collective laissez-faire, and Australia’s culture one of conciliation and arbitration. In spite of these divergent traditions, the United Kingdom and Australia’s unfair dismissal laws were introduced in a broadly similar substantive manner, although some divergences remained. For example, although in both the United Kingdom and Australia a new specialist labour court was created and charged with resolving unfair dismissal disputes, in the latter jurisdiction the traditional processes of conciliation and arbitration, whilst out of favour with the direction of Australian labour law more generally, became embedded as the adjudicative process for resolving unfair dismissal claims. In Australia the decision after 1996 to rely on the federal industrial tribunal traditionally charged with resolving collective disputes as the arbiter of individual disputes produced a different unfair dismissal system to the United Kingdom’s. The timing of legal change in both countries was also divergent. In the United Kingdom unfair dismissal protection was introduced over two decades earlier than in Australia. Constitutional shackles in the latter jurisdiction played a key role in this delay. These variations and the differences in the design of the unfair dismissal systems adopted in the United Kingdom and Australia in part reflect the different labour law traditions in each country.

Most important of all, however, is to observe from the outset the significance of this introduction of unfair dismissal law in the United Kingdom and in Australia. Hepple and Veneziani, in their study of the transformation of European labour laws, characterise the establishment of individual rights against unfair dismissal as a ‘path departure’, which they define as ‘when a juncture is reached at which substantively different laws and policies begin to be followed’.³ The establishment of a statutory unfair dismissal system in the United Kingdom and Australia represents a break with the past tradition of resolving unfair dismissal disputes largely through industrial tactics.

An alternative path: the inception and maintenance of employment at will

Unlike almost every other industrialised country and many developing countries, including Australia and the United Kingdom, the United States has never provided employees with a general statutory law protecting against unfair dismissal. Although International Labour Organization (ILO) Recommendation No 119 (1963) and ILO Convention No 158 (1982) developed international norms around the protection of job security, in particular the requirement of a valid reason for dismissal,⁴ the United States remained defiant. Instead, the United States adopted the employment-at-will doctrine, allowing for dismissal without good reason or even for no reason at all. The courts apply this default rule when parties in an employment relationship have failed to specify the duration of that relationship.⁵

Just as unfair dismissal law in the United Kingdom and Australia has been diluted over time, the employment-at-will rule has been gradually eroded. Exceptions have emerged which have increased the level of job security protection afforded to American employees. For example, Montana’s adoption of a Wrongful Discharge from Employment Act extends unfair dismissal protection to nonunionised workers; collective agreements also typically provide that an employee may only be dismissed for ‘just cause’, a matter on which an independent arbitrator can be asked to rule; there exists statutory protection against dismissal for certain reasons, notably those which are based on discriminatory factors such as gender, race or age or which relate to the exercise of collective bargaining rights; and a number of common law exceptions have emerged over time which have eroded the edifice of the at-will rule.

Despite these modifications, the United States employment-at-will approach seems harsh when viewed in light of the contrasting statutory unfair dismissal schemes existing in Australia and the United Kingdom. The United States is also an outlier amongst developed countries more generally. Why United States labour law has taken a vastly different trajectory in regulating job security can only be understood in light of the historical origins of employment at will and the reasons for its introduction – a subject to which I will return later in this book. First, however, I will describe my approach in this comparative study.

The aims, methods and scope of this book

Controversies around legal regulation of job security abound. There is a well-trodden debate between theorists advocating recognition of employees’ investment in their jobs by relying on notions of a right to work, job property, employee dignity, industrial justice or citizenship, and at the other extreme theorists justifying the at-will rule on the basis that it permits greater labour market flexibility, resulting in a more efficient, productive economy. Remarkably, there has been little scholarly attention to the ways in which these controversies converge around the different procedural and substantive protection afforded by the employment-at-will approach and the unfair dismissal systems. As such, a central contribution of this book is its in-depth descriptive work on the laws regulating job security in three countries. Although many scholars have observed and critiqued the difference between these countries’ approaches, this has tended to stop at a comparison of countries’ normative laws as they appear on the books, and not according to how they operate in practice.

I advance the three descriptive country studies using a method of legislative history advocated by Paul Davies and Mark Freedland in their seminal work on the United Kingdom’s labour law and public policy.⁶ I rely upon policy documents and parliamentary debates as the main source of primary evidence. In relying predominantly on primary sources, my aim is to avoid the errors of law that can be contained in secondary materials, which Watson observes is one of the perils...

Table of contents

• Cover
• Title
• Copyright
• Contents
• Foreword
• Acknowledgements
• Table of cases
• Table of legislations
• International conventions
• 1 Introduction
• 2 United Kingdom – Part I: the journey to unfair dismissal law
• 3 United Kingdom – Part II: the evolution and erosion of unfair dismissal law
• 4 Australia – Part I: the journey to unfair dismissal law
• 5 Australia – Part II: the evolution and erosion of unfair dismissal law
• 6 United States of America – Part I: the origins of employment at will
• 7 United States of America – Part II: the evolution and erosion of employment at will
• 8 Conclusion: future prospects for job security
• Bibliography
• Index