Fair Work Act: a bridge over troubled IR waters?

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Fair Work Act: a bridge over troubled IR waters?

The changes in the Fair Work Act are not fundamental, they amount to a fairly limited re-regulation of the system and will probably be a bridge between the traditional system and some form of new industrial relations era in the future. That said, once the Act commences, it is unlikely to be substantially amended for many years to come — for political reasons.

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The changes in the Fair Work Act are not fundamental, they amount to a fairly limited re-regulation of the system and will probably be a bridge between the traditional system and some form of new industrial relations era in the future. That said, once the Act commences, it is unlikely to be substantially amended for many years to come — for political reasons.
 
A keynote presenter at the 2009 Informa Australia Limited Workplace Relations Summit, held in Sydney on 30–31 March 2009, was asked to comment on whether the Fair Work legislation was likely to achieve its objectives.
 
Jack de Flamingh, partner of Corrs Chambers Westgarth, noted that the government’s Forward with Fairness policy had intended to achieve three objectives:
  1. maintain global competitiveness
  2. provide fairness at work for employees
  3. meet the flexibility and productivity needs of business.
The extent of consultation with stakeholders was considerably greater than the previous WorkChoices changes had provided.
 
Global competitiveness?
 
The World Economic Forum’s Global Competitiveness Index ranks Australia 19th for global competitiveness and 13th for labour market efficiency. It ranks 'restrictive labour relations' as the
'third most problematic factor for doing business in Australia' (behind tax issues).
 
Many 'traditional' features of Australian industrial relations system remain in the Fair Work Act awards, an arbitral body (now Fair Work Australia), rules for employee and employer organisations, industrial action, freedom of association and right of entry.
 
De Flamingh suggested that there is a perception that workplace relations reform has not kept pace with economic reforms in Australia such as removal of tariffs, deregulation and globalisation. Changes at workplaces themselves have also been considerable, including greater international financial integration, more incentive plans, more franchises and joint ventures.
 
Political pressures
 
It is widely believed that concerns about WorkChoices was possibly the most important reason for the defeat of the previous Howard Coalition Government. The significance of this becomes clearer when one recalls that when there was a major and very emotive dispute over waterfront industrial relations 'reforms' in 1998, it appeared to have little impact on the result of the 1998 election. Thus there was strong political pressure on the current Federal Government to implement its Fair Work legislation.
 
However, taking all the above issues into account, the Fair Work Act amounts to a limited re-regulation of the traditional system, in order to achieve the three objectives listed above.
 
De Flamingh mentioned in passing that there is no reliable evidence that 'unfair dismissal' legislation results in loss of jobs, although there is some OECD research that suggests it does not do so. He made the prediction that claims of unfair dismissal will approximately double under the Fair Work Act.
 
Will it be more efficient?
 
The government claims that the new Act will improve efficiency, particularly via the operation of Fair Work Australia (FWA). What FWA will actually decide to do in practice won’t become clear until after it becomes operational; however, there is a promise of efficiency improvements in the following changes:
  • reduced roles for lawyers and FWA’s ability to handle some matters 'on the papers'
  • more flexible processes that should improve the flow of cases — based on experience with a similar model used in the United Kingdom
  • restricting the responsibility for decision making to FWA Members — should improve the consistency of decisions and reduce the number of appeals
  • agreements will be approved faster, which is a major drawback under WorkChoices because the Workplace Authority has been completely swamped. However, the faster approvals will be as much due to the fact that AWAs have been abolished and much fewer individual agreements will be submitted, so the workload will decrease anyway
  • the better-off-overall test for approving agreements will be easier to process than the current no-disadvantage test, although it is only slightly different
  • fewer awards under the Modern Awards system may achieve some efficiency improvements.
 
But, on the other hand:
  • FWA is not really a 'one-stop shop'. It is basically three organisations that have a common entry point.
  • All Commissioners currently in the AIRC will be transferred to FWA, which suggests that the chances of a 'cultural shift' are rather low, and many traditional practices will continue.
  • An original part of the 'sales pitch' for FWA was that its staff would come to workplaces to deal with matters. However, there is evidence that the government is backing away from this promise, and it appears unlikely to occur often.
  • On the other hand, more inspectors will be appointed.
  • Overseas experience of good faith bargaining suggests that it adds to the timeframe for making agreements and can result in lengthy litigation and disputes, particularly over the 'duty' to disclose information. There are also claims that both sides will be able to manipulate the process as a tactical ploy. However, the government claims that the good faith bargaining requirements in Queensland and Western Australian legislation have not placed increased obligations on employers.
  • The scope of the 'matters pertaining' to agreements definition has been extended, to cover matters between the employer and union, as well as between employer and employee. This may provided increased scope for union involvement.
  • Employers have claimed that the 'transmission of business' requirements may increase offshoring and act as a disincentive to acquire failing businesses.
  • While modern awards may provide greater consistency, for example, with penalty rates, there are some concerns about the groupings proposed in some industries, eg restaurant staff and call centres, with the claim that some staff will be forced into awards and employment costs may increase substantially.
 
Easier to understand and use … except for the Transition Bill
 
A major improvement is that the Fair Work Act has been completely rewritten, and is thus far more user friendly for practitioners. It is much shorter and better organised than the current Workplace Relations Act. However, several presenters at the Summit added that the progress made here has been spoilt by the Transition Bill introduced in March 2009 to cover the period from 1 July 2009 to 1 January 2010 (because the new Act has both these commencement dates for different provisions). They described the Transition Bill as unwieldy and a 'nightmare'.
 
Focus on positives
 
Ross Clarke, national director of Workplace Relations of the Australian Hotels Association (AHA), commented that the political nature of workplace relations reforms meant that some people spent too much time looking for worst-case scenarios, eg of union or management behaviour. This has been very evident since WorkChoices commenced. From now on, 'bad behaviour', particularly by unions, will harm their position, so they are more likely to 'behave' now. Also, any resort to a 'payback' mentality could simply replicate the situation under WorkChoices, but in reverse.
 
Clarke suggested the following positive steps can be taken under the Fair Work Act:
  • Interpret the law from the perspective of collaboration rather than conflict. Labour/skills shortages will still exist in some areas, and the ageing workforce will ensure they remain an issue and will probably get worse. So there is a balance required between protecting individual interests and harnessing the potential to the benefit of all.
  • Good faith bargaining may focus too much on procedure instead of productivity (as noted above). It may also encourage 'set-ups' that force arbitration, which is what one party really wanted. On the other hand, it may make the parties become better prepared and proactive, and employers will have greater opportunity to influence and dictate the procedures and rules.
  • When preparing for bargaining, use employee surveys and feedback systems to ensure you gain a genuine range of employee views.
  • The aim should always be to increase the size of the overall 'cake', rather than carve up the existing one. The latter means that one side is forced to concede and ends up worse off.
  • FWA needs to go beyond its umpire and rule-maker roles. It needs to be a coach and commentator as well, helping to develop the skills and education of the parties in the system, particularly small business. However, Clarke suggested that the progress towards modern awards so far indicates that this is unlikely to happen, despite clear requests from the Minister. If a legalistic mindset dominates, the parties are likely to copy that example. While the legislation uses the word 'facilitate' a lot, in the industrial relations context it still has an element of force behind it.
  • Employer communications and employee engagement will become more important. For example, good faith bargaining will require employers to publicly explain why they took hard decisions. Employers should evaluate their communication processes, both internal and external.
 
AHA Memorandum of Understanding
 
An example of what can be done is the Memorandum of Understanding signed in 2007 between the AHA and Workplace Ombudsman. AHA audited its member businesses first, assisting them by providing compliance tools, after which the Ombudsman commenced compliance audits.
 
Summary
 
Consensus seemed to be that the Fair Work Act generally achieved its objectives, but it is not a major step forward. At best, it is a bridge towards the next generation of reform and, at least, it is not a gangplank.
 
Further information
 
Further information about the Workplace Relations Summit is available from Informa.
 
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