Depending on who you listen to, the Australian economy at the moment is spiralling out control or being remarkably resilient in the face of global economic jitters. One certainty – Australian employers are twitchy and the news media has played up the dramas which has fuelled the unease.

Latest Australian Bureau of Statistics figures reveal more than 53,000 full time jobs were lost in February,the biggest drop in full-time positions since mid-1991, pushing the unemployment rate to 5.2 per cent. However the ABS data also showed total employment rose by 1800 to 10.810 million seasonally adjusted, with part-time employment up 55,600 to 3.146 million.

These figures suggest either many employers are dealing with economic fears by replacing full time employees with part time staff, or households are adjusting to redundancy by one partner taking part time work when the other is made redundant from a full time position. At present the workplace is too murky for a clear picture.

As an employment lawyer I have been urging employers not to succumb to a media- driven “the sky is falling” panic fuelled by fears of a global recession. Almost every day now we see media reports quoting this business or that employer saying they are shedding staff “due to the economic situation”.

In some cases the redundancies are genuine and businesses fail because the demand for their products has evaporated. But sometimes, “the economic situation” is a cunning shorthand for firms dumping some unwanted staff members, cruelly regarded as “dead wood”, using the spectre of a recession to avoid legal repercussions from such dismissals.

As an employment lawyer I tell business clients that dismissing staff should be a last resort option, if a business has no alternative means of survival. Any businesses contemplating staff cuts need to consider whether redundancies are based on reality or a “fear of the fear” of recession. Already there have been examples of employers using the excuse of recession fears to dismiss staff, and replace them with others. Employers need to realise that if this happens, those laid off might seek redress through the unfair dismissal laws if they feel they have been dismissed for the wrong reasons. Dismissed staff will also certainly demand their legal entitlements for holiday pay, sick pay and any other monies due to them. This could place further financial pressure on a business, especially if the employer has been a bit lax about putting money aside for such things.

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The employment law landscape is volatile right now because many of the Howard government Workchoice laws have not yet been repealed. This is probably the single biggest misunderstanding among Australian employers – an assumption that all of the Howard workplace laws were swept away and replaced with Rudd Government laws.

There’s an assumption that employers with fewer than 100 staff can sack people without risk of any comeback. This is not so. Sacked employees are turning to the Anti Discrimination Commission and also seeking common law remedies through the courts for breach of contract.

I know of several such cases underway now with more likely to follow.

A recent Gold Coast example involved a man made redundant from his job in the manufacturing industry after eight years. Ostensibly he was made redundant “for operational reasons”, because of the economic crisis.

The term “operational reasons” is an interesting phrase, theoretically there to give an employer a legal “out” to avoid paying redundancy.The redundant worker returned to his former workplace a week later, to retrieve some personal property, only to find a friend of his boss at his old desk, doing his job.

The boss’ mate had lost his job, so the boss “found” a position for him. The man made redundant had been a good worker but he had over the years also argued for younger employees’ rights. Making such a man redundant, then giving his job to someone else, only adds fuel to the legal action.

If the employer thought he was being clever, he’s now going to have to deal with an unfair dismissal case. The employer is being sued for unlawful dismissal.

Cases like this can either settle at a conciliation conference or if the matter goes to court it can take 12 months, with appropriate costs and legal fees.

I sympathise with the pressure employers are feeling but it’s crucial they seek professional advice before implementing cost- cutting moves that might cost them more than they save.

Any review of a business plan which includes dismissing staff needs to be carefully thought through. Employees will not just go quietly if they feel they have done nothing wrong and are being deprived of their employment rights.

My general advice to employers at a time like this is to be fair with how you manage staff in any restructuring, and have procedures in place to document any disciplinary or dismissal actions. This proof may assist you later if former staff take legal action over their dismissal.

Another issue related to the recession-fuelled redundancies is an employer’s responsibility for the mental wellbeing of staff.

We are hearing more about mental illnesses such as depression and anxiety in workplaces due to redundancy fears. The news media has reported that Counselling services have reported a rise in workers dealing with pressure and uncertainty.

Employers need to be aware of this and deal with it now, because they could face legal action with workers claiming psychological damage.

An employer's duty of care under occupational health and safety laws includes employees’ mental safety and welfare.

Redundancy fears, especially if unfounded, could cost an employer more than any perceived short term gains by downsizing staff. Employers have a duty to take all possible steps to prevent the development or aggravation of mental illness due to work-related pressures.

This raises the other side of the redundancy fear spectre. The workers who keep their jobs could become very unsettled and distrustful of their employer with consequent impact on productivity and profit.

It’s a reality that some employers can get bad “names” among the workforce. In my experience bosses of small to medium-sized businesses are the ones most likely to try and skirt the law. Big employers have proper HR departments and conform with the workplace laws.

Employers in small businesses must appreciate the Howard workplace laws may have favoured the employer, but there are plenty of ways to get around those laws that still remain.

It’s important at a time like this for employers to try and take a calm and rational look at their operations, and not be spooked into knee-jerk actions. A firm that downsizes too quickly might not have the ability to easily replace resources when the economic situation improves.

Trained and skilled staff cannot just be replaced on a whim. New people may not have the same skills or experience of those put out of work, so productivity and profit could suffer.

The new workplace laws are still being debated in the Senate which means any meaningful changes could still be six months away

If an employer wants to lay off some people, there are set processes to be worked through. Just dismissing people could lead to unexpected costs that could be enough to send a business under.

Brett Wilson is a Gold Coast- based employment law expert with Aitken Wilson Lawyers.