The result of the Federal government’s post-implementation review of the Fair Work Act 2009 was released last Thursday to a barrage of criticisms from employer groups. Despite these public remonstrations, among the 53 recommendations there are several proposals for reform that should give succour to employers.
Under the terms of reference announced late last year by the Minister for Workplace Relations Bill Shorten, the review was required to make an evidence-based assessment of whether or not the Fair Work Act has been operating in a manner consistent with the objects of the Act. The legislation is required to balance fairness and equity for employees with economic considerations, such as flexibility and productivity for business.
The 294-page report from the panel of eminent specialists — labour law academic Ron McCallum, former Federal Court judge Michael Moore and economist and Reserve Bank Board member, John Edwards — concluded that the Fair Work Act is broadly operating as intended and in conformity with its objects.
As shown by the success of the campaign against WorkChoices, the notion of a labour law regime that protects employees from the vicissitudes of the market is deeply entrenched in the Australian psyche. As such, recent demands by employers for a return to WorkChoices-era industrial regulation have been couched in the language of "promoting productivity" and "allowing flexibility".
However, we should be careful to not dismiss the notion of labour productivity too quickly. Productivity growth — that is, producing more goods or services with the same capital and labour inputs — is vital for an economy that aims to lift the living standards of its citizens through higher wages.
The panel’s report begins with a thorough analysis of Australia’s economic performance over the past decade. Although the report concludes that productivity growth has been disappointing under the Fair Work Act, this was also the case under WorkChoices. More importantly there is only very superficial evidence that links industrial regulation with labour productivity. Australia’s stellar productivity performance during the 1990s may have had much more to do with factors such as the adoption of new technologies than with its labour laws.
Further, the report makes the very important point that equity and productivity are not counterpoised. In fact, the best way to ensure productive workplaces is to look after employees’ interests by guaranteeing fairness and justice in the workplace. It is axiomatic that happy workers are productive workers.
Industrial regulation cannot be blamed for Australia’s productivity slowdown in recent times, the report found. But labour laws can play an important role in not acting as an impediment to flexibility and productivity.
With this in mind, the recommended reforms broadly fall into four categories — rethinking the institutional framework, amendments to the enterprise bargaining regime, increasing access and transparency of Individual Flexibility Arrangements (IFAs) and certain restrictions on accessing remedies for unfair employment practices.
One of the less controversial recommendations made in the report is for the name of the Orwellian "Fair Work Australia" to be changed, and preferably, for it to contain the word "commission." The report also recommends that the renamed Fair Work Australia be given a role in identifying and promoting best-practice productivity enhancing measures.
Several of the reforms suggested by the panel go toward fine-tuning the enterprise bargaining regime. Going into the review, the two major demands made by employer groups were for restrictions to be placed on the types of content that employees could bargain for during enterprise bargaining and for employers to be able to make "greenfields agreements", which apply to new enterprises, without negotiating with a union. The high-profile Qantas dispute arose last year because the Transport Workers’ Union sought to negotiate a term in an enterprise agreement that would restrict the use of outsourcing and the engagement of contractors.
While the report does not accept that parties should have further restrictions placed on the types of matters that they can include in enterprise agreements (parties are already subject to the restriction that agreements can only contain matters which pertain to the relationship between an employer and employees/unions), the report recommends some changes to the Greenfields agreement-making process which addresses employer concerns. These include the making of Greenfields agreements subject to good faith bargaining obligations and for Fair Work Australia to be empowered to conduct a limited form of arbitration when parties have reached an impasse.
There are some significant changes proposed to the operation of IFAs. Under the current regime, employers can negotiate an IFA with an individual employee, once the employee has started work, if it offers terms that are on balance better than those in the award or agreement. Unions complain that IFAs are a backdoor mechanism that allow individual statutory agreements (like WorkChoices AWAs) and so usually seek to have the scope of IFAs limited in enterprise agreements. Employers grumble about the difficulty of accessing IFAs and particularly dislike the fact that IFAs cannot be offered as a condition of employment — either party can terminate an IFA with the provision of 28 days’ notice.
There are four main changes proposed to the IFA process. The review recommends that employers be expressly permitted to offer non-monetary benefits to compensate employees for derogating from a benefit in an award or agreement and for the period of notice necessary to terminate an IFA be increased to 90 days. Unions would also no longer be able to restrict the scope of an IFA-permitting term in an agreement. Finally, the report suggests for employers to be provided with a defence of "reasonable belief" if they are accused to contravening the statutory requirements of making an IFA.
Finally, there are several changes proposed to that classic employer bugbear, the unfair dismissal and general protections jurisdictions. These include harmonising the time period in which a dismissed employee has to bring a claim (changed to 21 days for both jurisdictions) and for the discretionary powers of Fair Work Australia to dismiss unmeritorious claims and make costs orders to be expanded.
Very few of the union movement’s suggestions for amendments were supported by the report. But unions will at least be happy that the report determined that significant changes to the Fair Work Act were unnecessary.
The Labor government is expected to release its response to the recommendations in the report in the coming weeks after it has had an opportunity to undertake further consultation with stakeholders. Although both employer and employee parties will be privately happy about the outcome of the review, expect to see the parties continue to jockey for position in an attempt to influence the government.
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