Submission 167 Australian Council of Trade Unions Workplace Relations Framework Public inquiry

Modern awards and incentives to bargain

The high level of reliance on modern awards has not discouraged collective bargaining. As noted above, 41.1% of employees are covered by a collective agreement.

Moreover, research commissioned by the FW Commission for the 2013-14 Annual Wage Review reveals that there is no positive or negative relationship between minimum wage increases and the incentive to bargain. Instead the evidence points to a complex mix of factors that may contribute to employee and employer decision making about whether or not to bargain.

AWR increases were assessed as a third order factor in generating incentives or disincentives to bargain.²⁴¹

For employers, the ‘first order’ incentives to bargain all dealt with the preservation of commercial viability for the business including: local labour market and product market concerns; workplace level restructuring; performance management; and policy directives (either macro or micro) which employers identified as having more immediate impacts for pricing or cost structures.²⁴²

For employees, the ‘first order’ incentives to bargain emerged from a mix of personal and work factors and included: workplace level restructure; perceptions of value to their employer; a desire to achieve a better fit between work and home life; and perceptions about ‘receptiveness’ to bargaining at the workplace level (ie workplace culture).²⁴³

Scope to consolidate and/or simply modern awards

The creation of modern awards involved consolidation and simplification of award entitlements on a massive scale. In the process, terms and conditions of employment that had been well-entrenched in particular states, sectors or parts of the economy were eliminated. Examples include additional public holidays, jury service make up pay, and more beneficial leave entitlements. In addition, detailed provisions were redrafted in order to clarify and/or simply the safety net. In some cases, critical information regarding the operation of specific entitlements was removed, creating a degree of uncertainty or ambiguity in relation to the safety net. It ought not be forgotten that Award Modernisation in itself came on the back of over two decades of award restructuring, simplification and review within the federal system under which award classifications and wage relativities were aligned, awards were reduced in size and complexity and (from 1986) awards were transitioned from paid rates instruments to a safety net. Some of these processes were initiated by the parties through the C&A Commission and AIRC²⁴⁴ and some were of legislative origin²⁴⁵.

From our perspective, further simplification or consolidation of modern award entitlements would greatly disadvantage employees, make it more difficult to accommodate circumstances that are unique to particular industries/occupations, reduce the flexibility of the existing framework and cause confusion in relation to the operation of minimum wages and conditions of employment.

There is scope, however, to make minor variations to clarify and/or improve the operation of award provisions. It is also necessary that the FW Act provide a satisfactory mechanism for varying and updating the content of modern awards to reflect changes in ‘community standards and expectations.’²⁴⁶ The four yearly review process is considered further below.

4 Yearly Review Process

Prior to the FW Act variations could be made on application by one of the parties to an award or at the initiative of the AIRC. There was no requirement for the AIRC to conduct regular award reviews. The legislation provided sufficient scope to modify and update the safety net without causing unnecessary disputation or uncertainty in relation to award entitlements.

When the FW Act was implemented, it was envisaged that modern awards would provide “certainty, flexibility and stability for employers and their employees”.²⁴⁷

Unfortunately the legislative requirement to review modern awards every four years has resulted in award entitlements being contested simply because the review process provides a trigger for doing so. Employer organisations and unions are effectively bound by their charters to use the review mechanism as an opportunity to improve their position. As a result, elements of the safety net that were well-entrenched and relatively uncontroversial prior to the creation of modern awards (such as penalty rates) have become a battleground for industrial parties.

In the 2012 Award Review variation ‘applications’ were made in relation to 85 out of 122 modern awards. ²⁴⁸ The vast majority of these applications were dismissed on the basis that there was insufficient evidence. The decision issued by the Full Bench at the commencement of the four yearly review in March 2014 indicates the extent to which unsubstantiated award variations have become an issue. It states:

The need for a ‘stable’ modern award system suggests that a party seeking to vary a modern award in the context of the Review must advance a merit argument in support of the proposed variation… Where a significant change is proposed it must be supported by a submission which addresses the relevant legislative provisions and be accompanied by probative evidence properly directed to demonstrating the facts supporting the proposed variation.²⁴⁹
The number of applications generated by the review process has created an enormous workload for the FWC, unions and employers. Legislative changes are required in order to prevent variation applications being made without proper legislative grounds, which unnecessarily take up FWA’s time and that of intervening organisations.²⁵⁰

In 2012, the ACTU proposed that FWC should be able to strike out applications that are clearly speculative and without foundation on conventional grounds adopted by the courts.²⁵¹ Our experience during the 2012 and 2014 Award reviews are such that we now believe that it is necessary to abolish the four yearly review process altogether and replace it with a mechanism that enables parties to apply for an award variation where necessary to achieve the MAO. This would essentially restore the position whereby safety net changes were a product of either a genuine contest on the merits within a concrete factual setting or of the FW Commission responding to demonstrable changes in community expectations and economic conditions (for example through the development of test case standards).

The FW Act currently enables the FW Commission to make, vary or revoke a modern award between the four yearly reviews on its own initiative or on application under section 158 where certain requirements are met. These provisions should be modified to provide an alternative to the current review process.

10	The Safety Net: (2B) Penalty Rates