The objectives of the industrial relations system:
At the most fundamental level, the objectives of our industrial regulation system are based on a broad and enduring social consensus: Workers rights must be protected and there must be a policy intervention to alter the market distribution of incomes in their favour. The outputs of this consensus have positive social effects both within the workplace and beyond it.
The capacity of the system to meet those objectives has deteriorated over time due to deliberate concessions to the interests of business and also because of insufficient responses by regulators to changes in the nature and organisation of work and the behaviour and organisation of capital.
Australia in context:
Our system has, appropriately, been shaped by the principles embodied in international conventions. However, there is more to be done by Australia bring its laws into conformity with the principles it purports to concur with and there are further international obligations that it is appropriate for Australia to assume. There are some valuable examples from overseas jurisdictions that apply those principles in collective bargaining frameworks more suited to the modern organisation of work.
Free trade agreements can have the effect of undercutting domestic employment norms and standards with little capacity to challenge them in readily accessible Courts and Tribunals. The labour movement has developed a policy response to this problem which we endorse and commend to the PC.
Competition policy:
Labour markets are not product markets and labour is not a commodity: labour is inseparable from the human actors who provide it. Those that suggest that worker collectivism needs to be limited on competition policy grounds fail to appreciate that capital itself is in inherently collective in nature. This misapprehension (or world view) may also be at least partly responsible for the failure of the industrial relations system to provide an adequate framework for multiple employer bargaining and its related failure to permit bargaining outcomes with the locus of economic control to flow through to reliant parties in the labour supply chain.
The evolving labour market:
The transformation of the labour market through from the accord era onward and the economic shocks that followed thereafter, including the GFC, have shown that the industrial relations system is inherently flexible and compatible with employer’s desires for the efficient allocation of resources. This flexibility has however come at cost for large sections of the workforce.
The transformations seen in the labour market over that period have many disturbing aspects including insecure work, rising inequality, hours and skills mismatches, a growing gender pay gap, a growing reliance on temporary foreign workers and the consequences of life cycle transformations. Many of these issues are not capable of being addressed by the industrial relations system alone, particularly for so long as that system remains obsessed with relations at the workplace between a single employer and its employees.
Economic impacts of the system:
Labour markets can never approximate idealised markets. Real world labour markets are at best characterised as dynamic monopsonies in which many of the ‘frictions’ which prevent adjustment are not perverse incentives or dysfunctional institutions but important parts of the social fabric and inseparable from the market itself.
It is not possible to say that changes in the industrial relations framework over recent decades have been the cause of the upswing, downswing and recovery in productivity growth seen over that period. It may be the case that industrial relations policies affect the productivity of individual workplaces, but their effect on net economic performance is minimal. The most important economic solutions lie elsewhere.
Although further changes in the industrial relations framework might bring minor improvements in workplace productivity, these kind of incremental advances in international competitiveness are dwarfed by other factors such as currency fluctuations, taxation policy and the head-office investment strategies of global producers.
All regulatory frameworks impose some compliance costs which are necessary and unavoidable. The most significant drivers of compliance costs in recent years have been transitional in nature. Aside from these, the key routine costs for unions are associated with protected action ballots, right of entry permit renewal and the reporting requirements under the RO Act. The latter is a burden which unions are content to bear given the clear and balanced objectives of transparency and democracy. We believe the system of right of entry requires some improvements.
The costs of participating in FW Commission are largely impacted by the choice to engage external legal representation.
The regulatory history of recent decades of a combination of concessions to capital and a failure to keep pace with changes on the labour market have resulted in regulatory gaps and incentives for exploitation.
Some steps have been taken to recognise that individual workers who are independent contractors are workers nonetheless who should benefit from the types of rights and protections offered to workers who are employees, however these steps are insufficient. A clearer discriminator between contractors and employees than that which the common law has developed is required. The desirable reform is one which permits single worker contractors who do not subcontract their work to gain proper worker protections and rights, including the right to bargain alongside other workers collectively with those who engage them. At the very least, the current sham contracting provisions require substantial amendment to sheet home responsibility to employers more effectively, and complementary tax law changes to ensure that if two workers are doing the same job under the same conditions, they should be paying the same tax.
The limited regulatory oversight which accompanied the growth in casual employment seen in previous decades has been characterised by a lack of a unified position as between the common law, industrial tribunals and the legislature over what casual work is or what it should be. The practical result has been that, in large measure, employers decide where the boundaries are merely by choosing to describe a worker as casual. Through the present review of modern awards, unions in many sectors are attempting to give workers more choice about their form of engagement, however there are more comprehensive policy changes that have been suggested to overcome the difficulties faced by large numbers of the casual workforce that warrant further consideration. These include a legislative definition of a casual worker which draws on common law principles, pre-requisites to engaging casual workers and the extension of minimum standards to casual workers.
Labour hire exists purely as an avoidance strategy and its continued operation in the present regulatory settings is untenable unless one accepts that the workers who are engaged by labour hire agencies are second class citizens. A first order issue is ensuring that labour hire workers engaged in a workplace – however temporarily – have the same level of industrial citizenship as the employees they work with.
The key requirement for a worker to be sponsored by a specific business as a condition for that worker to continue to hold their visa (and consequential lawful right to remain in Australia), can and does create circumstances where the employee does not act to protect their interests and are exploited by some employers. This is bad for those workers and for the labour market more generally. Jobs and training opportunities should be maximised for Australian citizens and permanent residents and the labour market testing regime around temporary workers should accordingly be rigorous. As a nation we should be skilling up our workforce rather than searching for reasons not to. Where genuine temporary shortages occur that cannot be filled locally, temporary workers must be employed according to Australian pay and conditions, be safe in their workplace, and have access to government services on an equal basis with all Australians.
The claims of burdensome transfer of business effects in voluntary transfers between related entities are highly exaggerated, and fail to appreciate that applications for exemptions in relation to the transfer of instruments can be made in relation to transfers that are likely – that is the orders can be made pre-emptively to provide certainty. It is hard to conceive of any situation where an order would be refused where it was sought by consent, particularly given the nature of the matters that the FW Commission is required to consider in deciding whether to grant it. Rather, we see the main difficulty in relation to transfer of business being the treatment of accruing entitlements, where there is potential for some unintended effects that disadvantage workers.
We are concerned by the current capacity in the FW Act for an employer to make an agreement with a start-up or temporary workforce, for the purpose of locking down conditions in a workplace. In circumstances where the number or identity of the workforce changes significantly within 1 year after a non greenfield agreement is approved, the workers upon demonstrating majority support should be able to bring forward the nominal expiry date of the existing agreement.
The Safety Net:
The minimum wage fixation decisions of FWA and the FW Commission under the present framework have been modest and predictable and there is no basis upon which to assert that they have resulted in any negative employment effects.
Whilst we regard the institutional and procedural framework for setting the minimum wage as appropriate, we are of the view that it could be made more effective by a clearer articulation of its re-distributional purposes to more squarely concentrate on reducing inequality and the incidence of low pay. This is first order issue relative to a theoretical consideration of an in-work benefit that is exceedingly unlikely to be funded.
There must be continue to be a mechanism to assess the adequacy and relevance of the discounted wage arrangements for apprentices, trainees and juniors taking into account factors such as changing community standards, changes in the labour market, industry characteristics, evidence of the productivity and experience of these workers, and the needs of the low paid.
Modern awards contain matters that must be regulated in order to ensure that employees have access to fair wages and conditions. Estimates of the proportion of employees reliant on award conditions is variable but at least 18% rely on awards for their rate of pay and up to 35% may rely on them for other conditions of employment.
The exploitative practices adopted by employers following the enactment of WorkChoices, which enabled award conditions to be removed,clearly demonstrates that the risk to employees of eliminating or reducing award regulation is not simply theoretical.
The award system has been thoroughly reviewed on numerous occasions over more than two decades, in processes initiated by both the C&A Commission/AIRC and the legislature. It has retained industry differences for good reason. There is no case for another round of consolidation or review, and the entrenched legislative review process has been burdensome and has achieved nothing that could not have been achieved without it. The compulsory four yearly review process should be abolished in favour a mechanism that enables parties to apply for an award variation where necessary on the basis of a genuine contest on the merits within a concrete factual setting.
It is undesirable and inefficient to have both the PC and the FW Commission conducting parallel inquiries into penalty rates. This is particularly the case to the extent that the Minister has ruled out any legislative change concerning penalty rates.
The PC should not assume that industrial relations system is naïve to arguments concerning the “24/7 economy” – the FW Commission and its predecessors have been dealing with versions of the argument for over 60 years. Employees should be appropriately compensated for working long hours at inconvenient and unsociable hours.
Some of the most vulnerable employees rely on penalty rates to make ends meet. These employees include the low paid, women, and those in regional/rural areas. Close to 40% of the Award dependent workforce is employed in two industries – Accommodation and Food Services and Retail Trade. These are the industries where the loudest critics of penalty rates reside. A fact that rarely features in the debate is that even mid-senior levels of workers in those awards - such as Retail staff with some management responsibility, Cooks, Bar Staff, Front of House Staff and Waiters in Fine Dining Restaurants – have rates of pay that mean they would still receive less than Full Time Average Weekly Total Earnings even if they worked a full time week at double time for every hour worked.
There is nothing extraordinary about our industrial relations system providing for penalty rates. They should remain part of the safety net maintained by the FW Commission and bargaining parties should continue be free to modify them on a “better off overall” basis through collective agreement making.
The content of the National Employment Standards is largely based on safety net standards developed by the AIRC through the Award system. In broad terms that content is uncontroversial and unobjectionable, however there are some particular features of the National Employment Standards that warrant further development. In particular:
the rights to request a change in work arrangements or an extension of parental leave need to oblige employers to reasonably accommodate such requests and be underscored by an effective right of review;
the minimum redundancy standards now included in the NES have seen little change, notwithstanding that much has changed in terms of the economic position of Australia and the make-up and structure of the modern workforce. Modern working arrangements are such that the dated exclusions from redundancy pay concerning:
casual work (even where it is regular);
work on successive fixed term contracts;
“ordinary and customary turnover of labour”; and
obtaining “suitable” alternative employment that does not recognise prior service.
are having harsh and unintended effects on some workers. This requires rectification.
Subject to our observation below, we are of the view that a national long service leave standard should be developed. The preferred model would ideally be based on the standards contained in the legislation covering general employment in South Australia and the Northern Territory but incorporate selected features from elsewhere. The standard should operate nationally and only exclude workers covered by existing industry portable long service leave entitlements.
There is much to recommend a national portable long service leave scheme, however devising such a scheme would involve interaction with superannuation and financial services sectors and potentially others. The issues of both the NES LSL standard and the question of the desirability of a portable national scheme should be the subject of a specific separate inquiry inviting contributions from all interested stakeholders.
The provision of accessible and effective dispute settlement procedures is integral to guaranteeing the safety net. However, the lack of access to an arbitrated, binding decision to settle disputes under the under the current provisions of the FW Act and the modern award framework undermines the capacity to achieve this.
The FW Act should empower the FW Commission to arbitrate disputes about any matters arising under awards or the NES, as a last resort. If necessary, such orders can lay down rules for the future conduct of the parties (for a nominated time, or indefinitely) in order to avoid further disputation.
Modern awards provide significant flexibility to employers to structure their business. They do not regulate trading hours or impose restrictive work practices: they provide a safety net for workers that is adapted to industry needs. Further workplace flexibility is achieved through collective bargaining on a better off overall basis. Calls by industry for further flexibility in the safety net are ambit claims of dubious merit.
Collective agreements are a well-established path for workers who seek better conditions and for employers who seek greater flexibility and who are content with the notion that their workers are worth more than the bare minimum.
There is no evidence that the requirement for agreements to meet the better off overall test is an impediment on agreement making. The fact that the better off overall test does not permit safety net conditions to be traded for non-monetary compensation does not mean that in inhibits flexibility in the workplace.
Permitting the better off overall test to take account of non-monetary compensation would lead to uncertainty, exploitation and would undermine the safety net.
Collective Bargaining:
If proper effect is to be given the beneficial objects and purposes of our industrial relations system, there is simply no role for the State to use laws as a device impose a limitation or ideological judgement on the merits of that which workers might seek to pursue to protect and advance their interests through collective bargaining. Any legitimate limitations must come from elsewhere, such as income tax laws or laws prohibiting discrimination.
A less restricted scope to bargaining content would make the system less complex and would continue the path of reform toward more meaningful multi employer bargaining, including supply chain bargaining which at least indirectly covered labour hire workers who are economically dependent servants and agents of an entity with which they have no “employment relationship” for any “matter” to “pertain to”.
The operation of the GFB provisions of the FW Act has been positive but not uniformly so, particularly in the area of first agreement negotiations involving workers with limited bargaining power. To combat this, the underlying principle that should permeate the GFB framework is that the parties to collective bargaining must come to the table with the intention of attaining a mutually satisfactory enterprise agreement.
There are some concerns that the good faith bargaining obligation concerning “disclosure of relevant information” save where it is “confidential or commercially sensitive”, is not working effectively. If one accepts that workers have a material interest in such matters that would affect their decision making in negotiating their conditions, it can hardly be considered “good faith bargaining” to condone non-disclosure of those matters. There is force in the suggestion that workers’ and their representatives would be more appropriately informed by a materiality test adapted to their circumstances that was not so easily avoided.
The degree of prescription and regulation concerning the availability of protected industrial action is excessive and has drawn criticism on the basis of its inconsistency with our international obligations. The moves to further restrict the right to strike should be seen in the context of just how limited the right already is in Australia. The right to strike is one of the essential means available to workers and their organisations for the promotion and protection of their social and economic interests. The erosion of that right runs directly contrary to the purposes of the industrial relations system. Strike ballots, if they are to remain, should serve no purpose other than a democratic one.
The framework of dispute resolution in the context of a system of collective bargaining must primarily be guided by pragmatism and common sense, albeit within the confines of what our international obligations permit. The arbitration pendulum has, at a practical level, swung too far in the direction of non-intervention since the introduction of enterprise bargaining in the early 1990’s. This is manifested in two features of the legal architecture of the FW Act:
‘Interest’ arbitration of collective bargaining disputes is practically unattainable, unless one party (as in the case of Qantas in 2011) is able to inflict massive damage on the economy, or a significant part of it; and
The question of whether the FW Commission is able to arbitrate on a dispute arising from the operation of an enterprise agreement is a largely matter for bargaining itself, leading in practice, to many major corporations imposing an effective veto on access to arbitration during the term of agreements.
Whilst there should not be ready recourse to the compulsory arbitration of collective bargaining disputes, a recalibration of the tests contained in the FW Act is required to provide more flexibility to the FW Commission to interpose itself in the bargaining environment in appropriate situations, having regard to:
The maturity of the bargaining relationship and, in particular, whether the bargaining involves an actual or virtual first agreement.
The extent to which the parties have adhered to their good faith obligations;
The damage that a continuing industrial dispute is causing to the relationships at the workplace.
Whether there is any reasonable expectation that the dispute will be solved by further negotiation.
We support the expansion of the Good Faith Bargaining requirements to Greenfield Agreements, and the availability of assistance from the FW Commission to resolve greenfield bargaining disputes. That assistance however should be merits based in the same manner consistent with that we have proposed for agreement making generally. That is, arbitration is a last resort in a continuum of assistance. In arbitrating the merits of greenfield arrangements, the FW Commission should have regard to the conditions applicable on projects of similar scale or nature and the agreements should be of limited duration so that conditions adapted to the operation in practice can be negotiated in the usual way.
There are a number of barriers to fair and efficient agreement making in the public sector. These include the separation between the decision making entity and the bargaining entity, the difficulty of obtaining meaningful assistance or determination from the FW Commission and the strategies employed by the public sector to exploit the limitations in the system to achieve delay. Reform of the nature identified for private sector bargaining will assist, although consideration could also be given to public sector specific provisions which have been utilised in the past and are supported by international instruments.
The lack of any accepted measure of public sector productivity is a complication to achieving bargaining outcomes, however the larger challenge is the view taken by the public sector that productivity in bargaining is achieved only by cutting pay and conditions.
The regulation by the FW Act of State public sectors is entirely unsatisfactory owing to difficulties in characterising employers as either “constitutional corporations” or caught by a referral of power. The distinction is significant because it impacts on the matters which may be included in a collective agreement, the action that might be taken in support of reaching such an agreement and the enforceability of that agreement. There also concerns about the applicability of minimum standards to some public sector workers. The Victorian Government can act to ameliorate some of these difficulties, and should do so.
Legislation in NSW which applies to its public sector workers prohibits unions from achieving pay increases above those set by Government policy, prescribes the manner in which all Awards are to be determined by reference to Government policy and to limits the matters upon which Awards can bestow enforceable entitlements upon employees. This is not acceptable and must be repealed.
Collective agreements that are made under the FW Act do not permit the bargaining parties to have recourse to their bargaining rights in order to advance new claims, until the nominal expiry date of the existing agreement has passed. In other respects, agreements do enable workplaces to continue to evolve during their nominal term. The question of how much change is to be permitted and what checks and balances exist on the change process are of considerable importance in ensuring the “bargain” remains a fair one.
Whilst the model provisions for consultation and change are a starting point, more needs to be done to better involve employees in the change processes at their workplaces.
A compulsory arbitration clause in collective agreements is an essential part of a properly functioning collective bargaining system. Arbitration as a final step process allows for employee grievances over the application of the agreement to be dealt with relatively quickly, cheaply and by persons who have an understanding of industrial issues. The refusal of certain employers to accept arbitration as a mandatory clause in enterprise agreements amounts to workers having to accept the proposition of ‘do as we say, not what you think the agreement means’.
Individual Arrangements:
The common law contract of employment does not provide a meaningful safety net for employees. In modern Australia, the common law does not see itself as fulfilling that role – it relies on the legislature.
The industrial relations system has adopted “cut off points” for the application of its safety net based on using incomes and occupations as a proxy to make assumptions about workers’ bargaining power and the consequent need for protection. Individual statutory arrangements pay no regard to those cut off points, and have been crafted to result in the removal of rights and protections that would otherwise be in place. In that respect, they leave workers worse off than would be the case under common law contracts.
Individual statutory arrangements are at odds with the fact that the industrial relations system is based on an acceptance that a labour market underpinned by freedom of contract produces unacceptable outcomes for workers.
In the absence of an iron clad and enforceable guarantee that the safety net in all respects remains in place and is improved upon, there is no incentive for employees to freely and genuinely agree to an individual statutory arrangement. If experience is anything to go by, these guarantees would make such arrangements highly unattractive to the types of employers who historically have shown the greatest enthusiasm for them.
Employment Protections:
Decisions as important as that to terminate someone’s employment should be subject to valid reasons and reasonable standards. If the decision to terminate does not objectively meet these criteria, then the employee should have an accessible and effective remedy. The FW Act substantially achieves this, but it is far from optimal:
There needs to be an avenue for employees to argue that they have been unfairly selected for a redundancy;
Administrative processes are inflexible and in the rare cases where matters proceed to arbitration there are often delays, particularly for workers in regional Australia.
There restrictions on access to the system based on qualifying periods of employment and the nature of the employment or size of the employer are in some respects arbitrary or unfair.
Caps on the compensation payable to employees are unwarranted and it cannot be assumed that payments would blow out if the cap were lifted, due to other checks and balances in the system.
Efficiencies and reduced costs and complexities in the small number of UD matters that proceed to final determination could be realised if the FW Commission were able, with the consent of both parties or by its own motion, to conclude matters by way of a less formal “arbitration conference”.
The increasing legalism of the UD system has the effect of increasing the costs upon represented applicants (or their organisations) and also results in a serious imbalance in situations where only one party is represented. The FW Commission should strictly enforce the presumption against legal representation in matters before the FW Commission generally, but in UD proceedings in particular.
The purpose of the General Protections of the FW Act is to protect persons with certain attributes, or engaged in certain conduct covered by the FW Act, from ‘adverse action’ engaged in or initiated by another person. The intended effect of the general protections is beneficial and protective. They are designed to further and promote certain internationally recognised norms including, inter alia, the protection of persons engaged in lawful industrial activity.
The current state of the law based on recent general protections cases however is such that the protections have been effectively read-down by the Courts and are at risk of being undermined in a critical area. Legislative amendment may be the only means of reinstating the essentially beneficial and protective operation of the general protections provisions of the FW Act. Such an amendment might positively describe the relevant test of characterisation as an objective test, or may alternately preclude a purely subjective approach to ascertaining the reasons for adverse action.
The Unlawful Termination provisions contain a deficiency which insufficiently protects the rights and interests of workers in receipt of workers’ compensation. This deficiency was given effect to by a regulation which effectively overruled a the view of the Courts that reasoned that international law roots of the protection were consistent with the protection of injured workers irrespective of the cause. This anomaly should be rectified.
It is premature to conduct a thorough review of the FW Commission’s anti-bullying jurisdiction. Preliminary indications are that the FW Commission is focussing on achieving conciliated outcomes rather than dispensing orders that require workplace bullying to stop. There is also some suggestion of some delay and a need for better resourcing.
Accessing Workplaces:
Unions have an institutional compliance function in the industrial relations system. The restriction on right of entry for compliance purposes affecting non-members erodes their capacity to carry out that function. There is an economic efficiency in having unions identify and rectify these matters without the necessity for court proceedings or the intervention of public authorities such as the Fair Work Ombudsman.
Because the FW Act confines entry to investigate a suspected contravention only for a member who performs work on that premises, it is not possible to exercise those investigative rights for members who have left their employment (either by choice or otherwise). This should be remedied.
There is no warrant for prohibiting bargaining parties from agreeing upon the terms of access and representation clauses in a collective agreement. Obstacles to such consensual arrangements should be removed.
The current requirement to give notice of entry for the purpose of discussions during employees’ meal or other breaks should be removed as should the notice requirement for suspected contraventions, the latter of which is inappropriate in the context of investigations and significantly undermines the proper enforcement of employee entitlements. The limitation on the inspection of records relating to currently employed members should likewise be rescinded.
One recurring complaint from employers about the current entry regime is that it has resulted in a major increase in the frequency of union workplace visits. Whether or not this is the case, what is clear is that in some cases the approach of the employers themselves has contributed to an increase in the number of entry notices, if not entries, to Australian workplaces. Employers have actively resisted a coordinated and efficient approach to workplace access which would limit the frequency of these visits.
On the other side of the ledger, a significant amount of interaction in the workplace between employers and trade union employee representatives occurs by mutual agreement and without incident or disruption. Where entry and representation arrangements can be agreed by the industrial parties the law should facilitate and not impede those arrangements.
The ‘one size fits all’ approach to workplace access disputes is unnecessarily restrictive and inconsistent with achieving reasonable and flexible arrangements that suits the needs of Australian workplaces. The FW Commission should be empowered to make orders varying the circumstances under which access can occur, particularly where doing so would have the effect of settling a live industrial dispute.
Institutions:
The FWO’s compliance and enforcement policy indicates it applies a sensible triage and management process to the inquiries it receives, save perhaps in relation superannuation matters which it perplexingly refers to the ATO notwithstanding that agency’s poor track record of action on such matters.
The FWO’s development of a mediation service may be a symptom of the gaps in the functions of the FW Commission or a poor awareness about its existing functions and the lack of accessibility to the Court system.
A glaring issue of inefficiency and waste is the fact that there are two separate and separately funded, statutory agencies enforcing one set of industrial laws – the FWO and the FWBC. The decision by the FWBC not to secure and enforce employee entitlements but to abdicate that responsibility to the FWO makes the case for disbanding the FWBC and allowing the FWO to function as the sole federal labour inspectorate all the more compelling.
The FW Commission is functioning highly effectively subject to three concerns: the Award review process (see Chapter 9), the processing of Right of Entry matters (see Chapter 6) and the inflexibility and delay in the processing of unfair dismissal matters (see Chapter 18).
As alluded to in Chapters 11-16 & 18 & 21 in particular, there is room for the FW Commission’s jurisdiction to be modified and broadened in order for the industrial relations system to provide more effective pathways to resolving rights and interest based disputes. Further, as raised in Chapter 8, reforms to the minimum wage setting framework should be pursued to more closely align that function with the distributional purpose of the industrial relations system.
There are numerous statutory provisions which give special rights to a Minister or a regulatory authority to participate in industrial contests to the exclusion of the discretionary considerations that might otherwise be applicable. These provisions, detailed in Chapter 22, involve unwarranted state interference in industrial relationships, and should be repealed.
The institutional role of unions in the industrial relations system is multifaceted and is critical. Unions are fundamental to the two vehicles by that the system relies on to give effect to its central purposes: the setting of minimum standards and collectivism.
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First Principles: The Purpose of Industrial Relations Regulation.
