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Businesses are being forced to settle claims

Unfair dismissal claims are becoming unmanageable for small businesses. The number of businesses being sued for unfair dismissal each year has risen dramatically under the Fair Work Act 2009. As many as 1 in 5 small businesses now face an unfair dismissal claim each year.

Claims for discrimination are also on the rise, with an approximate 50% increase in the wake of the David Jones scandal. Employees seem to have been inspired by the sums involved in that dispute and assume that, whilst they might not get the sums of money Ms Fraser Kirk was asking for, they should get something.

They could well be right. With the average cost of defending a claim being upwards of $50,000, employers that are sued are left with an unpalatable decision.

They can fight the claim, but will then be left with large legal bills, which are often disproportionate to the amount of money in dispute and leave an unexpected hole in an annual budget in already testing times. Alternatively, the employee can be paid a sum of money on a "commercial basis" to settle the dispute. The problem with this is that settlements create claims cultures. What often results is a workplace in which staff sue on their way out of the door because they know that it will result in a settlement, even when the underlying claim has little merit.

The legitimacy of a system in which businesses cannot properly defend themselves is questionable and this is a problem that has been highlighted by Senator Eric Abetz, the opposition spokesperson on workplace issues, who has described it as the return of "go-away" money.

Unfortunately for business, these laws are here to stay, meaning that attention needs to be focussed on minimising the risk of claims and ensuring that adequate protection is in place in the event that one does arise.