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

The radical era

Appendix 6 sets out the various legislative ‘tests’ that have applied to collective agreements, both at a State and Federal level.

It shows that, except for the period from March 2006 to March 2008, the legislative tests are generally comparable.

Prior to 27 March 2006, all jurisdictions (both state and federal) had a statutory tribunal empowered to both assess and approve enterprise agreements and it was the role of these tribunals to test whether the application of the enterprise agreement would leave the employee(s) disadvantaged when compared with the relevant safety net of entitlements.

There was no precedent at all for the radical shift that occurred with the introduction of WorkChoices. From 27 March 2006, there was no tribunal or other body empowered to assess and approve enterprise agreements. The agreements were lodged with the Office of Employment Advocate (OEA) who were empowered only to review the agreement for the purpose of identifying and removing prohibited content. There was neither an assessment, nor an approval process.

Accordingly, the safety net was seriously undermined.

Arising from the backlash and concern about the inferior agreements that were being made during this time, the Government at the time passed the Workplace Relations Amendment (A Stronger Safety Net) Act 2007 which introduced the ‘fairness test’.

The fairness test only required that an employee be “fairly compensated” for the modification or removal of a limited range of protected award conditions³⁶⁰.

It was the role of the Workplace Authority to ‘approve’ enterprise agreements and there were a number of complaints from employers at the time about the inefficiency of the process as it was time consuming, lengthy and the staff lacked the requisite skills and knowledge to understand industrial instruments. Unions were concerned that agreements were being approved in circumstances where employees were not fairly compensated for the removal of protected conditions. In part this concern arose because it was permitted for employers to rely on non-monetary benefits to satisfy the fairness test, however largely it was due to the ambiguity caused by the subjectivity of this assessment that was the trigger for disputation. The fact that the legislative amendment that introduced the fairness test ran to 35 pages³⁶¹ didn’t help matters either.

Non-monetary compensation

Non-monetary compensation should not be permitted as trade-offs for safety net conditions. Non-monetary compensation in exchange for penalty rates and overtime does not assist workers to meet their financial obligations, such as a mortgage, rent or bills. Such a framework is rife for exploitation by employers to the detriment of their workers.

This power dynamic in employment relationships can manifest in an employee feeling compelled to ‘agree’ to an arrangement that they may not necessarily have wanted or which may not benefit them. The industrial relations system seeks to equalise the relationship and in many instances is able to do so to the extent that employees are placed in a fairer position. Allowing employers and employees to trade-off safety net monetary benefits for non-monetary benefits in a collective agreement, undoes the benefits the system has worked to create in terms of equality.

It is also the case that non-monetary benefits are typically poorly described and non-prescriptive such that a great deal of ambiguity and differing opinion about what the precise benefit is that is being traded. This is fertile grounds for bargaining disputation but also it makes it difficult for employees at a workplace to genuinely understand what it is they are agreeing to and hence, complications arise for the parties in demonstrating that the agreement has been genuinely agreed to. It also permits an employer to assess the precise value of the non-monetary compensation and as such, it would allow them to ‘act as judge in her or his own cause’.

In any event, such a concept is totally unworkable under a collective bargaining system as the ‘value’ of non-monetary compensation will differ (often greatly) from worker to worker. Further, the value of the non-monetary benefit has potential to change, meaning that workers terms and conditions are eroded over the life of an agreement. It would be interesting to test how it is that the proponents of non-monetary benefits could demonstrate the BOOT becoming easier to understand and more certain if non-monetary benefits were permitted to play a role.

In any event, the small class of non-monetary benefits that are capable of tangible valuation, such as car-parking or a child care place, could have implications for families’ tax benefits and could potentially reduce the social benefits to which they would otherwise be entitled to (such as family tax benefits or low income offsets).

Working families need certainty about their income so that they can manage the often tightly constrained household budgets. The unpredictability of a test involving non-monetary benefits leaves workers unable to evaluate whether the agreement offered to them is either fair or will enable them to meet their financial commitments.

Finally, there are no safeguards to protect workers from being ripped off by employers who may place a premium value on a goods or service or impose an administrative fee or the like. This comes back to precisely the sort of exploitation that industrial tribunals have always been concerned about and which legislatures have sought to protect against. All relevant industrial statutes have provisions that mandate wages to be paid in money³⁶². This concept arose out of the contractual principles of the employment relationship, whereby there is an agreement between an employer and employee for pay (money) in exchange for work. This exchange constitutes ‘valuable consideration’ and hence the employment contract is validly made. Similar legislative protections are in place with respect to permitted deductions from wages in order to prevent employers making unreasonable and arbitrary deductions without the agreement of the worker³⁶³. Allowing non-monetary compensation to trade off other benefits undermines these fundamental existing protections.