'Repair' workplace relations system, says PC report


'Repair' workplace relations system, says PC report

Changes to unfair dismissal, a new “enterprise contract”, a shake-up of the Fair Work Commission and reduced penalty rates are among a swag of recommendations in the Productivity Commission’s draft report on Australia’s workplace relations system.

Changes to unfair dismissal, a new form of agreement – an “enterprise contract”, a shake-up of the Fair Work Commission and reduced penalty rates for hospitality and retail workers are some of the main recommendations of the Productivity Commission’s draft report on Australia’s workplace relations system.

The recommendations are summarised in this article.

New 'enterprise contract'

The PC considers there is scope for a new form of agreement, to be called an ‘enterprise contract’, which would fill the gap between enterprise agreements and individual arrangements. This would be suitable for small businesses in particular as it would offer many of the advantages of enterprise agreements, without the complexities. 

The PC is positioning the proposed new agreement as a “collective individual flexibility arrangement, but with some further flexibility”. Its main advantage would be to allow employers to vary an award for entire classes of employees,  or for a group of particular employees, without having to negotiate with each party individually or to form an enterprise agreement. A template would be provided on the FWC website. Employees would retain the right to revert to the award.

Enterprise agreements

The nominal expiry dates of enterprise agreements should be extended to five years, or to match the life of a greenfields agreement. 

The PC does not support the introduction of mandatory productivity improvement clauses in enterprise agreements, instead recommending these should be voluntary.

Labour flexibility 

The PC unequivocally recommends that enterprise agreements not be allowed to contain terms that restrict the engagement of independent contractors, labour hire and casual workers, or regulate the terms of their engagement. 

Better off overall test

Along with a comment that enterprise bargaining can be “ill-suited” to smaller enterprises, the PC recommends replacing the ‘better off overall test’ used to assess whether an enterprise agreement leaves employees better off compared with the award, with a no-disadvantage test, supported by guidelines about the use of the test.

The same test would be applied to individual flexibility arrangements. Increased uptake of individual flexibility arrangements could be encouraged by providing information on their use, extending the termination period and by moving to a no-disadvantage test (see below). 

Greenfields agreements

Greenfields agreements should only provide a limited menu of bargaining options so as to improve timeliness. Bargaining representatives for greenfields agreements should be subject to good faith requirements. The PC recommends the following process for breaking the stalemate in greenfields agreements:

“if an employer and union have not reached a negotiated outcome for a greenfields agreement after three months, … the employer may: 
  • continue negotiating with the union 
  • request that the Fair Work Commission undertake ‘last offer’ arbitration of an outcome by choosing between the last offers made by the employer and the union 
  • submit the employer’s proposed greenfields arrangement for approval with a 12 month nominal expiry date. 

Regardless of the agreement-making process chosen by the employer, the ensuing greenfields arrangement must pass the proposed no-disadvantage test.”

The Fair Work Commission

According to PC chair Peter Harris, the “commission needs to become a different kind of body”. One of the PC’s major recommendations is to split the Fair Work Commission into two divisions: a minimum standards division, responsible for minimum wages and modern awards, and a tribunal division responsible for all remaining functions.

Appointments as members of the different divisions would be based on different criteria. An independent expert panel should be appointed to make a shortlist of suitable candidates, assessed against these criteria. The Minister for Employment would select members from the shortlist.

All appointments to the role of commissioner and above should be only for five years, although reappointment would be possible after a merit-based performance review. Non-judicial members of the commission would also be subject to performance review based on the length of their current appointment.

In another recommendation going to the heart of the FWC’s performance, the PC recommends an independent performance review of the Fair Work Commission’s conciliation processes, and the outcomes that result from these processes.  

Weekend penalty rates 

The PC’s recommendation in this contentious area is set out in full below:
“Sunday penalty rates that are not part of overtime or shift work should be set at Saturday rates for the hospitality, entertainment, retail, restaurants and cafe industries. 

"Weekend penalty rates should be set to achieve greater consistency between the hospitality, entertainment, retail, restaurants and cafe industries, but without the expectation of a single rate across all of them. 

"Unless there is a clear rationale for departing from this principle, weekend penalty rates for casuals in these industries should be set so that they provide neutral incentives to employ casuals over permanent employees.” 
These new penalty rates should be introduced with one year’s advance notice as part of the current award review process.

The PC is also seeking views on whether there is scope to include preferred hours clauses in awards beyond the current narrow arrangements, including the scope for an arrangement where an employer would be obliged to pay penalty rates when it requested an employee to work at an employee’s non-preferred time in the employment contract. 

The PC report also makes recommendations about industrial disputes and right of entry. It recommends that employers be able to deduct the wages of employees who take brief stop work action, to the nearest 15 minutes. It sees merit in deducting a minimum of 25 per cent of normal wages for the duration of any stoppage but will take submissions on this issue.

It also recommends the government increase the penalties for illegal strike action.

Public holidays

The PC took the view that more flexibility should be allowed in modern awards to allow for public holidays to be substituted for an alternative day. It also recommends the NES should be amended so that employers are not required to pay for leave or any additional penalty rates for any newly designated state and territory public holidays. 

Leave entitlements

The PC has also floated the idea of state and territory governments, periodically, jointly examining the possibility of extending the existing 20 days of paid annual leave in the NES, with a cash out option for any additional leave where that suits the employer and employee. Any such further leave would only be achieved “through a negotiated tradeoff between wage increases and extra paid leave”.  

It is also seeking information on the practicality of allowing casual workers to exchange part of their loading for additional entitlements such as personal or carer’s leave.

Unfair dismissal

The PC makes draft recommendations around compensation for unfair dismissal, including enabling employees only to be compensated when they have been dismissed without reasonable evidence of persistent underperformance or serious misconduct. 

It also recommends removing reinstatement or compensation as remedies for procedural errors by an employer in relation to unfair dismissal. Instead the FWC could recommend counselling and education of the employer, or financial penalties. 
The emphasis on reinstatement as the primary goal of the unfair dismissal provisions in the Fair Work Act should be removed. The PC comments that good legislation should not have as a primary goal an outcome that is rarely achieved.

The PC recommends restricting access to the FWC, focusing on the merit of a claim before it is automatically heard by the commission. Possible higher lodgement fees are another mechanism, although the commission is seeking  more views on this proposal.
The PC also recommends the Small Business Fair Dismissal Code should be removed, as it considers it is redundant if its other suggested reforms are implemented.

General Protections (adverse action)

Complaints concerning the General Protections (adverse action) provisions in the Fair Work Act could be excluded if found to be frivolous or vexatious and a cap on compensation for adverse action should be introduced.

The PC also made recommendations that lengthy and expensive processes of discovery of documents (essentially fishing expeditions) should be reformed to be “proportional” to the actual matter at hand. The definition of a workplace right should be more clearly defined and there should be a requirement in the Fair Work Act that complaints must be made in good faith.

The PC decided not to make recommendations about the anti-bullying jurisdiction as it considers not enough time has elapsed since its introduction in 2014.

Minimum wages 

The newly-constituted minimum standards division of the Fair Work Commission would be given the same power to adjust minimum wages in an assessment of modern awards as the minimum wage panel currently has in annual wage reviews.  

The FWC should be given the power to temporarily vary awards in exceptional circumstances after an annual wage review has been completed.  

Trainees and apprentices

The Australian government conduct a comprehensive review into Australia’s apprenticeship and traineeship arrangements, assessing the role of the current system within the broader set of arrangements for skill formation. It should also consider apprentice and trainee award provisions, including junior and adult training wages and the adoption of competency-based pay progression, as well as supply and demand for apprenticeships and traineeships.

The PC is also seeking information on whether the structure of junior pay rates should be based on a model other than age, such as experience or competency, or some combination of these criteria. 

Modern awards

Four yearly reviews of modern awards would become a thing of the past, under the PC’s recommendations. Instead, the minimum standards division of the FWC would be required to review and vary awards as necessary to meet the modern awards objective. 

Migrant workers 

The Fair Work Ombudsman should be given additional resources to investigate employers suspected of underpaying migrant workers (including those in breach of the Migration Act 1958 (Cth)). The Migration Act should be amended so that employers can be fined by at least the value of any unpaid wages and conditions to migrants working in breach of the Migration Act, in addition to the existing penalties under the Act. 

Transfer of business 

The Australian government should amend the Fair Work Act so that an employee’s terms and conditions of employment would not transfer to their new employment when the change was at his or her own instigation. 

More information

This Productivity Commission draft report can be viewed on its website.  Written submissions are to be made by Friday 18 September 2015. 

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