CHAPTER 2
Issues
Amendments arising from the Fair Work Act Review Panel
2.1
The bill contains a number of amendments to the Fair Work Act 2009 that
reflect, in part, the findings of the Fair Work Act (FWA) Review Panel.[1]
The Department of Education, Employment and Workplace Relations (DEEWR) explained
the findings of the Review Panel:
In [its] report, the Panel found that the [Fair Work] Act was
operating as intended, consistent with the objects of the legislation. The
Panel also found that important economic outcomes such as wages growth, industrial
disputation, the responsiveness of wages to supply and demand, the rate of employment
growth and the flexibility of work patterns have been favourable to Australia’s
continuing prosperity under the...Act. The Panel did not recommend wholesale
changes, but instead made 53 mainly technical recommendations to further
promote productivity, improve equity or correct anomalies with the...Act.[2]
2.2
Many submitters to this inquiry offered general support for the bill.
For example, the Australian Council of Trade Unions (ACTU) provided the
following statement of support:
The Bill represents a balanced package of largely technical
and administrative amendments which we support. We would urge the prompt
enactment of the Bill, noting its widespread support and the thorough
consultation process that preceded it. Accordingly, the ACTU suggests that its
passage be recommended to the Senate.[3]
2.3
However, a significant proportion of submitters, while overall in
support of the bill, called for amendments.[4]
While a number of specific amendments are argued for, many objections are couched
in terms of what they see as the Government's failure to adopt the
recommendations of the FWA Review Panel as a package. The Chamber of Commerce
and Industry of Western Australia (CCI) was typical of a number of submitters
in arguing that:
...it is disappointing that the Bill only seeks to introduce
approximately 18 of the 53 recommendations which were made...the Bill fails to
implement many reasonable recommendations made by the Expert Panel.[5]
2.4
The bill is clearly described by its Explanatory Memorandum (EM) as the
first tranche of amendments to the Fair Work Act. It is therefore intended that
other recommendations may be implemented in the future. To this end, DEEWR further
explained that:
As a result of [stakeholder] consultations it was clear there
is broad support for around one third of the recommendations. These
recommendations are reflected in the Bill. The Minister has committed to
continue to work with stakeholders on the remaining recommendations with a view
to introducing further legislation in the new year. In doing so, the Minister
has publicly stated that he has neither ruled in nor out any of the Panel’s remaining
recommendations.[6]
2.5
Issues identified and discussed in this chapter are those which are relevant
to provisions in this bill, and emphasis is given to key issues identified by
submitters. Discussion of suggested amendments which may be picked up in a
future bill will be discussed if and when such a bill comes before the
committee.
Standing to apply to vary awards
2.6
The bill proposes to give registered organisations standing to apply to
vary awards. This provision attracted broad support, including from the ACTU, the
Housing Industry Association (HIA), the Maritime Union of Australia (MUA), THE
Australian Chamber of Commerce and Industry (ACCI) and Ai Group.[7]
The Chamber of Commerce and Industry of Western Australia also offered support,
but argued that unregistered organisations should also have standing.[8]
Union officials only to act as
bargaining representatives for workers the union is eligible to represent.
2.7
The bill would provide that an official of an employee organisation
cannot be a bargaining representative for an employee unless that organisation is
itself entitled to represent the industrial interests of the employee in
relation to work that will be performed under the proposed enterprise
agreement. This amendment responds to Review Panel recommendation 21.
2.8
The proposal had widespread support, including but not limited to the
ACTU, HIA, Chamber of Commerce WA, and Australian Mineral and Metals Association
(AMMA).[9]
2.9
The MUA was opposed to the amendment, taking the view that:
...the philosophy underpinning the bargaining representative regime
is that an employee should be able to be represented by a person or
organisation of their own free choice. Given the fundamental importance of
freedom of association as enshrined in the ILO Convention Concerning Freedom of
Association and Protection of the Right to Organise, we feel it inappropriate
to restrict an employee’s free choice of bargaining representative in the manner
proposed by [the bill].[10]
Agreement clauses that permit
“opting out” to be unlawful terms.
2.10
The bill would clarify, consistent with recent decisions of the full
bench of Fair Work Australia, that terms which enable employees to 'opt out' of
an enterprise agreement are prohibited.[11]
2.11
A group of submitters, including the HIA, ACCI and Ai Group were opposed
to the amendment.[12]
The HIA submitted that, while it recognised that opt out clauses had the
potential to undermine bargaining certainty, its overall position was that
parties should be free to include them if desired. Similarly, the Business
Council of Australia (BCA) submitted that:
The proposal to prevent opt-out clauses in enterprise
agreements is disappointing. Such clauses provide for the situation where
individual employees for a range of reasons may wish to have an alternative
employment arrangement with their employer. It is of particular concern that
this amendment is retrospective and will remove the opportunity to use opt-out
clauses in current agreements in the future.[13]
2.12
On the other hand, the Australian Manufacturing Workers Union (AMWU)
supported the amendment, arguing that:
[P]ermitting opt-out clauses can lead to manipulation of
bargaining and agreement-making to undermine good faith bargaining entirely.
When the good faith bargaining framework provided by the Act is premised on a majority
vote for an agreement following good faith negotiations with the group of employees
to be covered by that agreement, the facility of “opting out” of an agreement renders
the framework meaningless. Those who can “opt out” can negotiate and bargain
for a new agreement, including potentially taking protected industrial action.
Those who do not “opt out” are at risk from manipulation of the real group of
employees ultimately to be covered by the agreement.[14]
Prohibition on single employee
enterprise agreements
2.13
The bill proposes to prohibit single employee enterprise agreements. This
measure was opposed by a number of submitters, including the HIA, ACCI, and Ai
Group.[15]
Master Builders Australia also opposed this prohibition, preferring a 'better
off overall test' as the test for allowing EAs, regardless of employee numbers.[16]
2.14
Master Electricians considered that the amendment was unfair on small businesses,
many of which have fewer than three staff, and proposed instead to limit the operation
of the provision to proprietary limited companies with more than 1 employee,
and specifically exclude partnerships and sole traders.[17]
2.15
However, the ACTU supported the provision, submitting that:
The practical reality is that such agreements serve to
artificially “lock down” the terms and conditions in an enterprise before a sufficient
workforce has been engaged to genuinely participate in good faith bargaining. Single
employee agreements would therefore be attractive to newer businesses seeking
to satisfy the limited “market rate” conditions associated with sponsoring
guest workers. This amendment resolves the legal dispute in a manner which is
consistent with the underlying policy of genuine good faith collective
bargaining.[18]
2.16
The AMWU felt similarly, explaining that:
As we further submitted to the Panel, to provide that a
collective enterprise agreement can be made with a single employee flies in the
face of a structure of bargaining and agreement making in an Act premised upon
collective bargaining, that is, employees negotiating collectively with their
employer. The extensive public discussion, and phasing out of Australian
Workplace Agreements through the use of Individual Transitional Enterprise Agreements
prior to the commencement of the Act, together with the explicit provisions of the
Explanatory Memorandum make it abundantly clear that an individual agreement is
not a collective agreement, and collective agreement making provisions in the
Act should not be able to be manipulated in this way.[19]
Aligning the period for lodgement
of unfair dismissal applications with the limitation period for unfair
dismissal-related general protections claims
2.17
The bill would extend the period for lodgement of unfair dismissal
claims and reduce the limitation period for unfair dismissal-related general
protection claims. These measures would increase the allowable period in which
to lodge a claim for unfair dismissal from 14 to 21 days, and reduce from 60 to
21 days the allowable period in which to lodge a dismissal-related general
protection claim. The Department set out the background of the amendments this
way:
Aligning the timeframes for applications at 21 days reflects [Review]Panel
recommendations 40 and 49, which were made in response to concerns raised by
both employers and unions. Employers raised concerns that many general
protections dismissal claims were in fact more properly characterised as out of
time unfair dismissal claims and that different timeframes allow employees to
withdraw an unfair dismissal claim after an unfavourable conciliation and lodge
a general protections dismissal claim instead. These practices undermine the
intent of the provisions and downplay the seriousness of general protections
claims. Unions argued that the current 14 day time frame for unfair dismissal
applications did not allow for sufficient time for dismissed employees to seek
advice.[20]
2.18
In respect of the proposed increase in the time allowed to lodge an
unfair dismissal claim, submitters' opinions were divided. The committee notes
support for the measure from AMWU, the National Tertiary Education Union (NTEU),
the MUA and the ACTU. For example, the ACTU submitted that:
We believe that 21 days is an appropriate period to enable
employees to seek advice on potential unfair dismissal applications. We accept
that an alignment of the time limits for termination of employment matters in
the context of the package of amendments as a whole.[21]
2.19
During the public hearing in Canberra, Mr Tim Lyons, Assistant Secretary
of the ACTU, explained that 21 days provided people with sufficient time to
seek appropriate advice before making the decision lodge an unfair dismissal
claim:
We support the increase in the lodgement time for unfair
dismissals because this is a really practical thing. I used to do a lot of
unfair dismissals as an organiser, and giving people three weeks to seek proper
advice and have a discussion with the employer before they decide whether or
not to lodge a claim gives people more time to deal with the matters, get the
proper advice and ensure that, if a claim is made, it is a claim that has merit
and a claim that has been properly considered.[22]
2.20
Other submitters supported, or did not object to, the increase to 21
days, but argued the lodgement period should be longer. For example, the
Employment Law Council of Western Australia considered that the increase was
positive but should extend to 90 days and the Redfern Legal Centre considered
the deadline should be 60 days.[23]
The Kingsford Legal Centre agreed, arguing that, even at 21 days, people are
likely to file claims with little or no prospects of success because they have
not had adequate time to seek legal advice. This would result in a higher
workload and costs for FWA and employers.[24]
2.21
On the other hand, the increase was opposed by organisations such as the
Australian Federation of Employers and Industries and the AMMA.[25]
Submitters such as HIA supported alignment of the claim period with the general
protections claim period (discussed in the following paragraphs), but
considered that both should be reduced to 14 days.[26]
2.22
Having regard to the proposal in the bill to decrease from 60 to 21 days
the allowable claim period for dismissal-related general protection claims,
submitters were again divided. Support for this measure was received from a
number of submitters, including ACCI and Ai Group.[27]
2.23
Other submitters considered that the time limit should be maintained at
its current level [28]
or increased. Submitters arguing for the latter camp included the Employment Law
Centre of Western Australia and the MUA. The MUA sumbitted that:
Unlike an unfair dismissal application, where failed
conciliation may ultimately result in arbitration before the Tribunal, failed
conciliation of a general protections dispute is a precursor to court action. The
considerations informing the decision to bring a general protections dispute
application are therefore more complex, involving considerations of greater
costs, lengthier and more formal proceedings and additional commitment and
concomitant stress.[29]
2.24
Similarly, the NTEU called for the limit to be set at 28 days, to
reflect the extra time needed to prepare for a General Protection claim, as
opposed to the time required to lodge an application. The same position was
taken by Kingsford Legal Centre, although they sought a 90 day limit, or at
least the retention of the existing 60 days.[30]
2.25
JobWatch argued against alignment of the time periods on the basis that
telephone conciliation of unfair dismissal claims often resolved matters.
However, if it did not, employees could discontinue the unfair dismissal claim
and file a general protection application where that was a more appropriate
course of action. This would not be possible if both unfair dismissal and
general protection claims were subject to 21 day time limits.[31]
2.26
The committee notes DEEWR's submission that aligning the timeframes will
ensure that:
- dismissed employees make the right claim in the right
jurisdiction;
-
employees have an appropriate timeframe to seek advice about a
dismissal so they can make this choice in an informed way; and
- employers will respond to one claim in respect of a dismissal,
not an unfair dismissal claim and later a general protections claim.[32]
2.27
DEEWR also submitted that the 21 day time limit was arrived at as a
compromise between the various groups who took part in the consultation
process, and that it is an equitable approach which provides adequate time for
employees to seek advice while also providing certainty to employees.[33]
Broadening FWA power to issue costs
orders
2.28
The bill would give FWA the power to order costs where a party has
unreasonably failed to discontinue, unreasonably failed to agree to settlement
or has unreasonably caused the other party to incur costs.
2.29
This amendment received qualified support from the ACTU, ACCI, and the HIA
(ACCI and HIA supported the measure provided it extended to union officials). [34]
2.30
However, a number of other submitters did not support the amendment. The
Employment Law Centre of Western Australia and JobWatch were among them, the
latter arguing that FWA can already refuse to grant a lawyer permission to
appear, and there are existing procedures for security of costs in unfair
dismissal applications. JobWatch considered that existing measures are adequate
to achieve the policy outcomes sought by the amendment. [35]
Departmental Response
2.31
The Department submitted that the amendment responded to Panel
recommendation 45 and reflected the Panel’s concern that unscrupulous lawyers
or agents were encouraging dismissed employees to pursue unfair dismissal
claims without merit on a no-win no-fee basis. The amendment would facilitate costs
orders to be made against a person or their legal representative when they have
unreasonably pursued or defended a claim but, according to the Department,
would not stop a party from robustly pursuing a genuine claim.[36]
FWA power to dismiss unfair
dismissal applications
2.32
The bill would also give Fair Work Australia the power to dismiss unfair
dismissal applications where the applicant unreasonably fails to attend or
comply with orders/directions or discontinue a matter after a settlement
agreement has been concluded. The amendment responds to a recommendation of the
Expert Panel, and was broadly supported.[37]
Power to appoint two full-time Vice
Presidents.
2.33
The Act currently provides for the appointment of a President, Deputy
Presidents and Commissioners to FWA.[38]
Currently FWA has two Members who were originally appointed as Vice Presidents
and a number of Members who were originally appointed as Senior Deputy Presidents,
under the previous legislative scheme.[39]
The committee was informed that during consultations Justice Iain Ross,
President of FWA, proposed that two Vice President positions be created in order
to attract senior legal specialists with high level expertise and to assist him
in the administration and management of the tribunal, a proposal subsequently
included in the bill.[40]
2.34
Submitter opinion on the amendment varied widely. For example, the Business
Council of Australia, Chamber of Commerce and Industry of WA, AMMA and ACCI
were opposed, taking the view that a need for the new positions had not been
established.[41]
On the other hand, Ai Group was not opposed, provided the appointments were made
on merit.[42]
2.35
The Law Council of Australia raised a matter of judicial independence,
arguing that unless the existing Deputy Presidents were appointed to the new
Vice President positions, the effect of new vice presidents being appointed
would be to 'reduce the status' of the current Deputy Presidents and that:
Henceforth responsibilities that would have been capable of
being delegated or given to them by nature of their senior status would instead
be given to the new statutory Vice Presidents. This would have the tendency to
reduce the independence of the Tribunal in that it will reduce the role and
privileges associated with particular individuals.[43]
2.36
The Law Council further argued that:
As a general principle, once a person has been appointed to
sit on a Court or independent Tribunal with designated powers and privileges,
any change that would have the effect of removing or reducing that particular
person’s powers or privileges while not affecting the powers and privileges of
other Members of that Tribunal, has a tendency to undermine the independence of
the Court or Tribunal. That is so because such action can be portrayed as being
done because the individual Member is not in favour with the Parliament or the
Executive.[44]
2.37
During the public hearing Mr John Kovacic, Deputy Secretary, DEEWR,
emphasised that the positions had been created on the basis of a recommendation
made by the President of Fair Work Australia, and that 'the positions will be
publically advertised and will be subject to a merit based selection process
consistent with government policy'.[45]
President's power to decide a
matter personally
2.38
The bill provides that the President of FWA would have the power to
decide a matter personally, even after it has been allocated to a single member
of the full bench for decision. The most substantive submission in respect of
this proposal came from the Law Council of Australia, which criticised the move
in the following terms:
Proposed s 615C provides that after the President has
allocated a matter to a single Member or a Full Bench the President can decide
“to perform the function or exercise a power” himself or herself. Upon that
occurring, the earlier direction that the single Member or Full Bench determine
the matter is revoked. There are no preconditions to that decision and it can
occur at any time, even during a proceeding. The President does not need to
have considered submissions, nor be satisfied that it is in the public interest
to do so. The [Law Council's Industrial Law] Committee considers it
inappropriate that the Fair Work Act should include a provision that empowers
the President to take over a matter allocated to a Full Bench and deal with it.
Should such a power be exercised it would have the potential to reduce the
standing of the Tribunal, given the potential for such an action to be
characterised or perceived as an attack on the independence and/or competence
of the Full Bench. That it might occur as a consequence of, or following
submissions made by, a party would tend to emphasise the potential for the
action to be portrayed as one intended to achieve a result or procedure
different from that which the Full Bench might have expected to determine or
adopt.[46]
2.39
However, the Department submitted that the provision was advantageous as
it would allow matters before the FWC to be escalated in significant cases and
potentially save the parties time and further expense on later appeals. The
committee notes the Department's contention that the inclusion of such a
measure received broad support from stakeholders during the consultation phase.[47]
Fair Work Australia to be renamed
the “Fair Work Commission”.
2.40
The bill would rename FWA as the Fair Work Commission. This proposal
elicited relatively little comment from submitters. A number of submitters saw
merit in resurrecting the title 'Australian Industrial Relations Commission', on
the basis that the name is well known and accepted in the community.[48]
Amendments arising from the Productivity Commission's report into default
superannuation funds
2.41
The bill contains amendments that arise from the Productivity
Commission's report on default superannuation funds. Many submissions provided
general support for the contention that default superannuation schemes are
required. The Australian Institute of Superannuation Trustees advised that:
Default superannuation arrangements have existed in the
industrial relations system since prior to the advent of the Superannuation
Guarantee. They have operated to ensure universality, fairness and balance, in
a way that is supported by the representatives of employers and employees, and
by the industrial tribunal itself.[49]
2.42
However, these reforms also attracted a significant amount of criticism.
The submission from Russell Investments summed up the tone of many:
The Bill partly adopts the recommendations of the
Productivity Commission. Importantly, key recommendations from the Productivity
Commission are not included in the Bill. We are concerned that the apparently
hurried nature of this response and the failure to adopt the Productivity
Commission recommendations as a coherent package will lead to the potential for
significant adverse outcomes for ordinary superannuation fund members.[50]
Exclusion of Corporate and Tailored
MySuper products from nomination as default funds
2.43
The bill would amend the Act to provide that a superannuation fund is
eligible to be included on the Default Superannuation List in a modern award if
it is a 'generic MySuper product'. Corporate MySuper products are expressly
excluded from eligibility. This would remove the ability of employers to
contribute to a corporate fund as the default fund (even though it is a MySuper
product) in respect of employees covered by a modern award.[51]
This was the cause of considerable criticism from a number of submitters.[52]
2.44
Those who opposed the change argued that the retention of corporate
funds as default funds in awards has been the result of careful bargaining and
negotiation, and that removal of these funds from eligibility to be a default
fund, and the consequent inability of employers to contribute for
Superannuation Guarantee purposes, would disrupt agreed arrangements and
operate to the detriment of employees.
2.45
It was argued that in many cases the types of funds which stand to
become ineligible offer terms and conditions which are substantially more
favourable for members than some or all of the funds typically listed in Modern
Awards. It was submitted that the proposed legislative changes would mean
members of many of these funds are likely to be significantly disadvantaged,
for example through higher fees and/or inferior insurance arrangements.[53]
A few examples follow.
2.46
Corporate Super Association did not support the exclusion of corporate MySuper
products, describing the proposed amendment as:
...unjust, unexplained and is not based on any reasonable
policy grounds....to exclude a fund that has qualified for MySuper status simply
because it is not a public offer fund is not justifiable. It results in the
exclusion of funds that have a long-standing recognition in awards and which
provide generous and reliable benefits that have been agreed with large groups
of employees subject to awards'.[54]
2.47
Corporate Super Specialist Alliance specifically criticised the
rationale provided by the Productivity Commission, arguing that:
The suggestion in the Productivity Commission Report that
employers choose default funds for ease of administration, and not in the best
interest of its employees, is without substantiation and is intuitively
incorrect. Employers are usually members of the default fund also, so why would
they not select the fund most suitable to members?[55]
2.48
Opponents of the change commonly argued that certain corporate
superannuation arrangements should be able to be used as a default fund by a specific
employer even though not listed in a relevant award. Such funds should include
standalone corporate funds offering MySuper or tailored MySuper arrangement and
other funds offering a MySuper facility.[56]
2.49
Opponents also addressed the 'grandfathering' provision currently in the
Modern Awards. This provision enabled employers to retain their existing
default super fund if it was the default at 12 September 2008. Some submitters
argued that if the proposed amendments were passed, then the grandfathering provisions
should be retained to bring about certainty.[57]
2.50
Ai Group, while expressing support for the bill's other provisions in
respect of superannuation, was critical of the removal of 'grandfathering'
provisions which would preclude employers to from continuing to contribute to corporate
MySuper products.[58]
AiGroup called for the bill to be amended to include a grandfathering
arrangement in each modern award for corporate funds with MySuper products.[59]
2.51
During the public hearing in Canberra, Mr Dick Grozier, Director, ACCI,
suggested that alternatively the proposed bill could be amended to provide that
modern awards would permit contributions into tailored or corporate MySuper
products.[60]
Consultation
2.52
Some submitters also expressed concern that they were not 'warned' of
the impending change to the superannuation arrangements. A number of submitters
argued that the amendment flew in the face of legislation tabled as late as
September 2012 (the Superannuation Legislation Amendment (Further MySuper and
Transparency Measures) Bill 2012), the Explanatory Memorandum for which
provided in part:
A term of a modern award will still have effect if it
requires or permits superannuation contributions to a class of fund but does
not specify a particular fund. For example, most modern awards include a
grandfather clause that permits an employer to make contributions to a fund
that the employer was contributing to before 12 September 2008, provided the fund
is an eligible choice fund.[61]
2.53
These submitters considered that the reassurance they had taken from the
MySuper Core Provisions Bill Explanatory Memorandum had been misleading. In
addition, some submitters argued that the money they had spent on attaining
MySuper status would now be wasted.[62]
2.54
However, the Department told the committee that in addition to
consultations it had conducted, the Fair Work Review Panel had also engaged in
lengthy consultations as part of its review process.[63]
Time and cost implications
2.55
Other concerns were associated with the time and cost of implementing
the proposed changes. The Corporate Super Specialist Alliance submitted that the
Productivity Commission Report significantly underestimated the time and effort
required by an employer in switching funds, based on the need to go through a
selection process, the cost of professional assistance and the time needed to
undertake a communication programme to employees.[64]
2.56
The amendment would bring about the need to make specific purpose
agreements to deal with super. Some submitters argued that this would be both expensive
and disruptive. Associated with this is an argument that it would bring
multiple laters of bureaucracy into play – an application to APRA to become a
MySuper fund, approval by the Default Selection Panel, and then vetting by FWA.[65]
2.57
It was also submitted that, even once switching of funds has been
achieved, many large employers have different groups of employees covered by a
number of different awards. That potentially increases cost and complexity for
that employer as they have to direct default contributions to a number of
different funds.[66]
2.58
Instead, some submitters called for any MySuper fund to be eligible to
be a default fund.[67]
As an alternative, there was a consistent call for the retention of
'grandfathering' provisions.[68]
Support for superannuation reforms
2.59
However, criticism of the move was not unanimous. Mr Tim Lyons,
Assistant Secretary, ACTU, reminded the committee that proposed changes gave
effect to 'what the Productivity Commission wanted, which is for somebody who
is not the employer to look at the question of what an appropriate default
super product is and to make that decision for disengaged workers'.[69]
2.60
Dr Alison Morehead, Group Manager, DEEWR, advised the committee that any
workplace that has an enterprise agreement may choose to list superannuation
funds in that agreement:
If the parties to the agreement have chosen to list
superannuation funds in them, they do not need to go through the process that
default funds in awards will go through under the bill. Anyone who has MySuper
product that is in an enterprise agreement is able to continue doing that and
is not part of the process. The process that is suggested is about awards and
about employees who rely on the default funds which are listed in awards.[70]
2.61
In its submission, the ACTU argued that:
This approach recognises that because of the highly imperfect
nature of the ‘market’ for default funds, and because the new MySuper
regulations will allow product tailoring and differential pricing,
MySuper-compliance is a necessary but insufficient condition for a fund that
wishes to be named as a default in an award. It is therefore appropriate to
develop a selection process that builds on MySuper-compliance by combining input
from those with expertise in superannuation or related fields with input from
industrial stakeholders. This provision secures that objective.[71]
2.62
The ACTU went on to argue that the transition arrangements contained in
the bill were appropriate to the circumstances:
This provision recognises that there may be circumstances
where it is in the interests of members for a newly excluded fund to be allowed
to continue to receive default contributions for a transitional period. For some
employers it may take time to identify a new fund appropriate to their
circumstances and to put new administrative arrangements in place. It is therefore
appropriate for the Commission to have discretion in this area.[72]
2.63
The Australian Institute of Superannuation Trustees (AIST) also
expressed strong approval for the measures, submitting that:
AIST fully supports the Bill in relation to the selection of
super funds in awards. AIST has made submissions to the issues paper issued by
the Productivity Commission in April 2012, its report in August 2012, and was
involved in meetings with the Productivity Commission and the public hearings. Throughout
this process, and the subsequent response of the Government, AIST has seen a progressive
strengthening of consumer protections, and increased transparency,
contestability, accountability and practicality in the emerging proposals.[73]
2.64
The AIST also considered the transitional arrangements to be
satisfactory:
The transitional authorisation provided to the regulator...ensures
that employers can be given a reasonable amount of time to transition across to
new default arrangements, should this be necessitated by changes to a default
fund term in an award.[74]
2.65
Industry Super Network (ISN) were also in support, submitting that:
ISN welcomes the Bill which increases transparency in the
process by which default superannuation funds are named in modern awards and
ensures the process has as its overarching consideration the best interests of
employees. The Bill implements the key recommendations of the final report of
the Productivity Commission and successfully incorporates those key
recommendations into a functional system that recognises that Superannuation
Guarantee payments are a form of deferred wages.[75]
Power to appoint Expert Panel
Members to conduct four yearly reviews
2.66
The bill proposes to provide members of the new Fair Work Commission
with the power to appoint three expert panel members to sit with the FWC
members during the four yearly reviews of default fund terms in modern awards.
2.67
The measure was criticised by some. For example, HIA was concerned that these
new provisions introduce another layer of governmental intervention allowing
the “conflicted” parties of FWC to continue to select default superannuation
funds. Whilst HIA does not have a preference over industry or retail funds it
expressed concern that
[T]he proposed provisions favour industry funds and would
enable the removal of a default fund as part of the 4 yearly review. Such a
function is anti-competitive and will reduce flexibility.[76]
2.68
In contrast, the ACTU, the MUA, and the Ai Group, among others, support
this measure.[77]
The AIST also expressed strong support, arguing that the proposal:
It is most efficient for all stakeholders, including
employers, and society generally for the existing industrial regulator, Fair
Work Australia (“FWA”), to be directly responsible for the selection of default
funds...An expert panel within FWA provides appropriate alignment between expert superannuation
knowledge and the overall regulation of workplace relations.[78]
2.69
The Financial Services Council expressed concerns that four-yearly
reviews may lead to a short-term focus, to the detriment of members' long term
interests.[79]
2.70
However, AIST supported the requirement for default funds to be reviewed
4-yearly:
AIST supports efforts to ensure that the relevance and
appropriateness of default funds is reviewed frequently, and we believe that
the creation of default superannuation fund lists as proposed in [the bill] is
suitable for this. We also believe that this process achieves the Productivity
Commission’s principles... of best interests, contestability and competition, transparency,
procedural fairness, minimum regulatory burden, market stability, consistency
with other policies and regular assessment.[80]
2.71
During the public hearing in Canberra, Mr Kovacic, Deputy Secretary, DEEWR,
explained to the committee the rationale behind four yearly reviews:
The Productivity Commission recommended a major review every
eight years with an interim review at a four yearly term. The government's view
was that that was probably too long a period of time. Conversely, having an
ongoing opportunity to vary modern awards would go contrary to the concept of a
stable and secure safety net, so it probably goes to the other end of the
spectrum. In the government's view, the four-yearly time frame is an
appropriate time frame which will ensure that those sorts of developments in
the marketplace in terms of products and whatever will certainly be adequate to
provide the opportunity to be reflected in modern awards.[81]
Conclusion
2.72
The evidence before this committee indicates broad overall support for
the bill. It is clear to the committee that this first stage of amendments to
the Act are the product of lengthy consultations and reflect an appropriate
balance of the needs of both employer and employee groups.
2.73
Consistent with its undertaking when the Act came into force, the
government conducted a review of the Act within two years of its
implementation. The Review Panel consulted widely and received more than 250
submissions. The Review Panel concluded that the Act was working well and the
economic outcomes achieved under the Act were consistent with Australia's
productivity and prosperity.
2.74
The amendments contained in this bill reflect the government's
implementation of around a third of the recommendations made by the Review
Panel – those amendments that attracted broad support from the majority of
employer and employee groups.
2.75
Nevertheless, submitters and witnesses hold divergent views on some
amendments to the bill arising from the Review Panel. Some submitters have
welcomed the bill because of its timely and necessary reforms, where others
have expressed concerns about the amendments.
2.76
The committee is mindful of the detailed and lengthy consultations that
both the Review Panel and DEEWR have conducted, and that this bill represents
the first of a number of bills in the Fair Work reform package. Added to this, the
committee notes the overall support for passing of the bill – even among those
submitters who have expressed criticisms about particular provisions.
2.77
In relation to the amendments pertaining to superannuation, it is important
to remember that the amendments only operate in cases where a person has not
otherwise indicated their choice of super fund. Furthermore, enterprise
agreements may continue to specify corporate MySuper funds as the default fund.
2.78
It is also of fundamental importance that member funds be protected
through a thorough and independent assessment of default funds specified in
awards, which is precisely what the FWA review process is designed to achieve.
Recommendation 1
2.79
The committee recommends that the Senate pass the bill.
Senator Gavin Marshall
Chair
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