What's next for the FWC and FWO?

Analysis

What's next for the FWC and FWO?

The Fair Work Commission is still tackling the fallout from the controversial Workpac V Skene decision, a recent IR conference was told, and new 'vulnerable worker' legislation is posing challenges for the Fair Work Ombudsman.

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Dealing with the fallout from the Workpac v Skene case, looking for explanations of the continued low level of wages growth, and trying to speed up the process for approving enterprise agreements – these are the main issues occupying the Fair Work Commission at present.

Meanwhile, the recent “vulnerable worker” legislation passed by the federal government is presenting challenges for the Fair Work Ombudsman.

Representatives from both organisations provided some insights into these issues at the 2019 Conference of the Industrial Relations Society of New South Wales, held at Terrigal (NSW) on 24/25 May 2019.

Fair Work Commission

Workpac v Skene

Vice President Adam Hatcher discussed the controversial Workpac v Skene decision(see previous article), in which a casual labour hire worker was found to be actually an employee, and therefore entitled to annual leave as provided by the National Employment Standards. This has proved to be a highly controversial decision, with employer representatives lobbying for change.

Hatcher said that the decision used the common law approach to defining a casual employee. This assesses the employment relationship according to a range of criteria, to determine on an overall basis whether someone is an employee or a contractor. However, awards typically state that a casual is someone “who is engaged and paid as such”. In other words, if you are called a casual, you are a casual. “Casual conversion” clauses are now very widespread in awards, and they are based on the award definition of “casual”.

Hatcher suggested two possible ways to overcome the disconnect between legislation and awards:
  • Amend the Fair Work Act to include a definition of “casual employee” – there currently isn’t one; or
  • The Fair Work Commission needs to vary awards to make them consistent with the Act

Low wages growth

Hatcher said that the ongoing low rate of wages growth (currently 2.3% per year) is in spite of the labour market otherwise performing very well, actually better than GDP results indicate. The employment participation rate of 77.5% is the highest ever (and well above the OECD average), the size of the workforce has increased and working hours per employee are also increasing.

A similar trend is also occurring in many other countries. Analysts are yet to provide a plausible explanation, but it is evident from all the data that the cause is not productivity-related.

Enterprise agreement delays

Complaints that the Fair Work Commission is slow to approve enterprise agreements are common.

Hatcher offered the following reasons:
  • The BOOT (Better Off Overall Test) is very complex to conduct. Every current employee and foreseeable future ones (based on what the agreement allows) must be better off.
  • The Act’s provisions are very technical, or difficult to quantify, in relation to requirements such as determining whether employees “genuinely agreed” and how the employer explained the terms of the agreement to employees.
  • “Confidential commercial information” is another problem area. If an employer cannot comply with the Act’s disclosure provisions for commercial confidentiality reasons, the agreement has to wait until they are able to do so. One large employer planned to introduce large fully-automated warehouses. Unions claimed they weren’t told about it and the employer claimed disclosing its plans would harm its competitive position with other retailers. Eventually, the agreement was approved because the changes were not scheduled to happen during the term of the agreement, so unions would have a later opportunity to negotiate over the plans.
  • Some information provided is just plain wrong, but time is wasted checking it. One employer claimed on its website to have more than100 employees, but submitted an agreement covering only two. When questioned, it said it did only have two employees, but falsely advertised a higher number purely to impress potential clients.
  • “Productivity” is another contentious issue. Hatcher said that employers prefer to regard it as a managerial prerogative and not negotiate over it. An enterprise agreement covers pay and conditions only. But in any case, by far the main cause of productivity increases is capital investment (eg in new technology).

Fair Work Ombudsman

Vulnerable workers

The Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 has resulted in the Fair Work Ombudsman giving priority to monitoring compliance and enforcement in relation to franchise operations, according to Cletus Brown, the FWO’s director of knowledge.

Brown said that the FWO focuses on self-resolution, early intervention strategies and mediation, which covers about 90% of its matters. However, it also currently has 70 matters before court.

It also targets specific industries. Those identified by the “vulnerable workers” legislation above include the industries of cleaning, fast food/restaurants/cafes, and horticulture.

A difficult issue under the legislation is trying to determine what are “reasonable steps” that an employer took, or could have taken. It will depend on context – the size and resources of the business, its ability to control its resources and its compliance procedures.

Common obstacles encountered include the response “it’s not my problem” (once the contract is signed) and persuading franchisors to consider performance and quality when issuing the contract, not just price. Brown suggested personalising the issue, and asking: “If it was your child being underpaid, what would you like the franchisee to have done”?

Brown commented that the record-keeping provisions of the legislation are yet to be tested in court.

Other problems are employers who declare themselves bankrupt, but may then start other businesses and repeat the conduct. It is not unlawful to declare oneself bankrupt, but it prevents recovery of money for employees. The FWO is building a database of “rogue” and “repeat offender” business operators, which may enable earlier interventions. It also liaises with the Tax Office, the Australian Securities and Investments Commission and immigration authorities.

Modern awards review

The FWO can provide legal advice on the meaning of award clauses. A standard question to ask is “what did you mean to say when drafting the clause in the first place”?

NSW Industrial Relations Commission

Commissioner Damon Sloan provided an update of the NSW Commission’s operations. He claimed that it is catching up on its backlog of matters with a “116% clearance rate” in 2018, but said that the lack of online filing of documents remains a drawback.

A problem with work value cases is that employees cannot receive more than the government-mandated 2.5% pay increase unless the employer can demonstrate that other cost savings will fully offset the cost of the proposed increase – which is usually very difficult.

Further information about the conference is available from the NSW Industrial Relations Society 
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