If an ex-employee of your business has lodged an unfair dismissal application, you will find yourself being invited to participate in a Fair Work Commission (FWC) conciliation – an informal process via telephone where you are encouraged to reach a settlement via a facilitated negotiation.
This article provides information about FWC conciliations in unfair dismissal cases and sets out key considerations for employers when participating in conciliations.
At what stage does conciliation occur?
The initial stages of an unfair dismissal application in the FWC are:
- the applicant lodges an unfair dismissal application (Form 2);
- upon receiving the application, the FWC will send a notice to both parties allocating a time for a conciliation; and
- the employer lodges a response (Form 3).
Conciliation in unfair dismissal matters is voluntary, but the vast majority of parties agree to participate in conciliation. It offers the best opportunity to resolve a matter without the time and expense of proceeding to a hearing which will involve giving evidence and making submissions to a FWC member.
Of course, conciliation is not the only way that parties can negotiate and other avenues of alternative dispute resolution remain open – including corresponding directly with the applicant.
If there are jurisdictional issues in relation to the applicant’s eligibility to lodge an application (e.g. the employer maintains the applicant was not an employee or was not dismissed), the employer may decline to participate in conciliation and have the jurisdictional objection determined first before the conciliation.
What happens during conciliation?
Conciliators are impartial officers of the FWC whose job is to assist the parties to reach a resolution without pointing the blame or making recommendations.
Both parties can have legal representation at the conciliation, without seeking permission to appear. However, legal representation is not necessary, and parties may elect to self-represent.
Conciliations are always via telephone and usually run for about 90 minutes (perhaps less if there is a disinterest in reaching a settlement by either party).
The general course of events is:
- The conciliator will explain their role, which is to assist the parties to reach a resolution, and that the conciliation is strictly confidential.
- The parties will each have the opportunity to make an opening statement, with the applicant going first. The better opening statements will set out the parties’ positions and identify the key issues without repeating too much detail from the application/response form.
- The conciliator may then ask questions of each party and summarise the key issues in dispute. However, they will probably emphasise that the parties are unlikely to reach agreement on the facts and should focus on resolution.
- The conciliator will then break the parties into “private conference” to facilitate a negotiation, typically starting with the applicant to prompt an opening offer, and then shuttling back and forth between the parties with any counter-offers.
- If the parties are close to settlement but have reached an impasse, the conciliator may offer a “conciliator’s bid” as a middle ground – leaving it open for either party to agree to that bid. If one of the parties is still considering an offer at the conclusion of the conciliation, the conciliator may leave the conciliation “open” for a number of days, to give the party time to respond to the offer in writing.
- At the conclusion of the process the conciliator will typically bring the parties back together and discuss:
- the terms of settlement if the matter has settled; or
- the next steps in the process if that matter hasn’t settled.
What settlements typically look like
The key component is almost always compensation, which is typically calculated by a number of weeks’ worth of salary. Prior to the conciliation you should calculate a week’s worth of the applicant’s salary, before tax and excluding superannuation.
Superannuation is not payable on compensation payments (because it is not ordinary time earnings) and it is usually taxed as an employment termination payment. To make sure everyone is on the same page you should make this clear during the negotiation if it is not clarified by the conciliator.
Applicants often ask for the following non-financial components of the settlement, which are typically agreed to by employers if there is an appetite for settlement:
- Characterisation of the termination as a resignation (noting this does not require any formal step to be taken by the employer, it is just recorded in a settlement agreement).
- A statement of service be provided to the employee (typically just identifying the employee’s role, their period of employment and their key duties).
- A point of contact at the employer who will confirm the matters in the statement of service (this is less commonly requested, and is distinct from a positive reference, which is rarely agreed upon).
Additionally, the FWC regards the following matters as “standard terms” of a settlement and will usually suggest them:
- Mutual releases – both parties agree not to sue each other for any matter relating to the employment.
- Mutual non-disparagement – the employer agrees not to disparage the applicant, and vice versa).
- Mutual confidentiality about the negotiation and terms of the settlement.
If the matter settles, the terms will be recorded in a formal agreement for the parties to sign. The conciliator will offer to use the FWC’s standard terms. You should review the standard terms carefully to make sure they capture everything in the settlement and that you are comfortable with them.
There are some matters an employment lawyer may recommend that aren’t included in the FWC’s standard terms, for example ensuring the releases in your favour extend to any related entities of the employer.
The conciliator will offer unrepresented parties a 3-day cooling off period if the matter settles, during which the party may opt-out of the agreed settlement.
Considering whether to settle
About 4 out of 5 matters settle at conciliation. Significant time, effort and legal cost (if the employer is legally represented) is required to defend an unfair dismissal claim. Unfair dismissal cases are public and can be unpredictable – they are decided entirely at the discretion of the FWC member and can come down to the performance of witnesses under cross-examination.
In preparing to actively participate in conciliation you should consider, in conjunction with your employment lawyer, the:
- amount you are willing to offer to resolve the dispute;
- genuineness of the claim;
- legal costs that may be incurred if the matter continues;
- potential risk of the FWC ordering the employee be reinstated (which is the primary remedy in an unfair dismissal claim unless the employer can demonstrate reinstatement would be impractical);
- amount of likely compensation; and
- impact the dispute may have on your business image internally (particularly if multiple witnesses are required to give evidence) and externally.
After considering these factors you may decide that it is in your business’s best interests to resolve the dispute at conciliation, provided the outcome is commercially rational.
Alternatively, you might decide that, despite the time and cost, resolving the matter is not the best decision – perhaps it is against the principles of the business.
What happens if the matter does not settle?
If the matter does not settle at conciliation, the matter will be listed for a hearing.
The FWC operates very quickly compared with the Courts and other tribunals – the parties will typically be required to put on their evidence and submissions within weeks of an unsuccessful conciliation, with the matter listed for hearing within a couple of months.
It is common for parties to continue to negotiate after the conciliation, and as we have mentioned, there is nothing preventing you from reaching a settlement outside the FWC processes.
The Employment, Industrial Relations and Safety Team at Batch Mewing regularly appear at conciliations for employers and help negotiate good outcomes to resolve disputes.
If you require any assistance at any stage of an unfair dismissal claim, get in touch here.