Unfair dismissal laws came into action in the 1970s as state governments created them in this period where they were perceived to be experimental and risky. The creation of these laws were with good intent that were to give courts the power to examine key reasons behind dismissal of employees thereby giving chance to an unfairly dismissed employee to go back to their job.  The Australian government decided to have a national unfair dismissal law and was enacted in 1993. The question of exemption of medium and small businesses from the unfair dismissal laws has since been raised and has been the content of several heavy debates. In fact the Australian coalition government has had its agenda featuring this issue since 1996 where the senate has set up several reforms on the same.

Much legislation in Australia and the world in general have been influenced by the International labour organization convention number 158 on termination of employment at the initiative of the employer and its recommendations. The freedom of parties involved is restricted in order to regulate terms of employment (Sasha Keats and Arcus Legal 2004 p.1). The employees are hence better placed than they were during the existence of common law. The above convention has resulted in legislations in many countries such as New Zealand the Employment Relation Act of 2000, Britain the Employment Rights Act of 1996 and Canada the Canadian Labour Code RSC of 1985 (Robbins, W. & Voll, G. 2005). In Australia, it was not realized until recently as the Federal Parliament had constitutional limitations towards legislations that deal with employment. The federal parliament and other relevant parties claimed that the Australian Industrial relations Commission was not capable to order remedies for unfair dismissal of employees as it lacked the jurisdiction to make such an order. This later changed as corporations powers bared by the constitution and foreign affairs formed a basis for legislations regarding employee dismissal. Dismissal of employees without concrete reasons that were connected with employee’s conduct or capacity was then made unlawful through Federal provisions it the year 1993. The reason was deemed invalid if employee’s dismissal was unjust or harsh in any way. The employing authority was held responsible for establishment of a valid reason for termination. Then the employee is to show if the termination of their duties was unjust or harsh in any way. A person could not be terminated from place of work without being given the opportunity to defend the allegations that led to his or her dismissal unless the employing authority could not reasonably be supposed to give the employee that opportunity. The work place act of 1996 required that employees be warned of unsatisfactory performance before dismissal and given a chance to respond (De Ruyter, A & Waring, P, 2004 p.20).

Unfair dismissal laws have been associated with several problems since its inception. It is believed that since its creation, the layers and consultants in the industry have become business driven instead of justice driven impacting heavily on small businesses with less profits (Australian Chamber of Commerce and Industry 2005 p. 5). Compensations were ordered in courts where unfair dismissal cases were won. In a reasonable case, one is expected to ask for his job back through re-employment rather than a paycheck for compensation. Large numbers of employees are asking high paychecks in form of compensation instead of their jobs. Money has therefore become objective. The expenses associated with the legal processes of defending claims in courts have risen sharply too. Instead of judgment on reasons for dismissal, tribunals set up to look into unfair dismissal cases judge unfairness on warning procedures. All the above hit hard on small businesses which are not well established and luck the financial capabilities of other large businesses (Freyens, B. & Oslington, P. 2005).  

The government has been keen to have small businesses exempted from unfair dismissal laws and has seen it develop legislations which have been scrutinized by the Employment Workforce Relations and Education legislation committee on several occasions. The government on its part presented several arguments in its attempts to have legislations that small businesses are exempted from federal unfair dismissal laws. The government argues that unfair dismissal laws greatly affects job creation and hiring intentions in the small business sector. Job creation is a fundamental objective of any government and the government will fight to discourage anything that would deter job creation (SEWRERC 2005 p. 16). If a small business is subjected to the unfair dismissal laws, the employer will be reluctant to hire more employees as they would become liabilities incase they are dismissed from their jobs without proper reasons. The government argues that the surveys done on business hiring intentions and unfair dismissal laws indicate a strong correlation. This indicates that unfair dismissal laws impacts directly on job creation as it affects hiring intentions. An exemption of small business sector from unfair dismissal will therefore reduce or even remove completely the perceived barriers that affect hiring intentions and therefore growth of employment can be realized in the small business sector (SEWRERC 2005 p. 16).

Unfair dismissal cases involve all kinds of dismissals whether fair or unfair rather that involving in only unfair dismissal. They normally involve several rights of the dismissed employee, rights of the employer and other employees as well. The main objectives of businesses are to make maximum profits and therefore need productive and innovative employees and hence some employees are actually dismissed fairly by lacking this attributes. As an employer dismisses an employee, that position left vacant should be filled thereby indicating a recruitment process, training process and thereby losing cost are incurred and there is loss of productivity. Employers have to undergo the risks and expenses that are involved in employment of their staff. The costs incurred by businesses when recruitment decisions fail to work are enormous. Employers therefore have to incur loses in terms of recruitment costs, turnover costs and lost productivity. Unfair dismissal claims by dismissed employees further exposes employees to this exorbitant costs which severely hit medium and small businesses. These small businesses are therefore forced to limit employment in an attempt to limit this risk (Harding, D. 2005 p.14).

Many unfair dismissal cases involve small businesses. Many small business families are also low income households having small income that is sometimes below the poverty line (Australian Chamber of Commerce and Industry 2005 p. 5). As these small businesses take the risk of employing people, they are forced to pay large sums of money to employees and solicitors in claims settlement impacting greatly on these businesses. When such employers go through the unfair dismissal cases and forced to pay large claims to dismissed employees, they become more cautious and more risk reluctant to hiring employees. As more and more employers become cautious and reluctant to take the risk of hiring new employees, the rate of employment stagnates instead of taking an upward trend. Small business employers suffer a lot in trying to cover unfair dismissal claims by dismissed employees and this ought to be considered in exempting small businesses from unfair dismissal laws (Pocock et al 2008 p.478).

As much we may advocate for the exemption of small businesses from unfair dismissal laws, this laws play a great part in bringing justice to unfairly dismissed employees. Some employees are harshly dismissed from their jobs without any notice or warning and hence they have a right to be defended by law. However, Small businesses are much hit by unfair dismissal claims than large businesses and efforts should be made to exempt them from this unfair dismissal laws.

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