Index

Bills Digest no. 66 2005–06

Workplace Relations Amendment (Work Choices) Bill 2005

WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

CONTENTS

Glossary

Purpose

Structure of the Bill

Scope and structure of the Bills Digest

Key features of the proposed new law

Key issues in the Bill

Key publications accompanying this Bills Digest

History of this Bill

Discussion of the Bill

Schedule 1 of the Bill

Part I: Preliminary

Background
Main provisions
Comment

Part IA: Australian Fair Pay Commission

Main provisions
Comment

Part II: Australian Industrial Relations Commission

Main provisions
Comment

Part IVA: The Employment Advocate

Part V: Workplace inspectors

Part VA: The Australian Fair Pay and Conditions Standard

Background to Part VA
Main provisions

Part VB: Workplace agreements

Background
Main provisions
Comment

Part VC: Industrial action

Background
Main provisions
Industrial action, freedom of association and international obligations

Part VI: Awards

Main provisions
Comment

Part VIA: Minimum entitlements

Division 1—Entitlement to meal breaks
Division 2—Equal remuneration for work of equal value
Division 3—Termination of employment—unfair dismissal
Division 5—Parental leave

Part VIIA: Transmission of business rules

Background
What the Bill does

Part VIIA: Dispute resolution processes

Model dispute resolution process
AIRC-conducted alternative dispute resolution
Focus on private dispute resolution
AIRC-conducted ADR and proposed collective agreements
AIRC-conducted ADR and workplace agreements
ADR conducted by another provider

Part VIII: Compliance

Main provisions

Part IX: Union right of entry

Background
Main provisions
Comment

Part XA: Freedom of association

Background
Main provisions

Part XI: Offences

Part XIII: Miscellaneous

Costs orders
Variation of workplace agreements

Part XIV: Jurisdiction of the Federal Court and Federal Magistrates Court

Part XV: Matters referred by Victoria

Referral of constitutional power
Main provisions

Transitional provisions contained in Schedule 1 of the Bill

Amendments to Schedule 1B of the WR Act 1996
New Schedule 13: Transitional arrangements for parties bound by federal awards
New Schedule 14: Transitional arrangements for existing pre-reform Federal agreements etc.
New Schedule 15: State employment agreements and state awards
New Schedule 16: Transmission of business rules (transitional instruments)
Schedule 2 of the Bill—Transitional arrangements for State organisations
Schedule 3 of the Bill—School-based apprentices
Schedule 4 of the Bill—Transitional and other provisions
Schedule 5 of the Bill—Renumbering the Workplace Relations Act

Concluding comments

Constitutional issues

Corporations power

Will choosing the corporations power simplify the WR system?
Vertical coverage of the WR system—‘covering the field’

Federal balance

Express limitations contained in the Constitution

Circumvention of express limitations in the Constitution
Expropriation on just terms

Implied limitations under the Constitution

The implied freedom of political communication

The implied freedom of association

Henry VIII clauses and the Commonwealth’s law-making powers

Can the use of Henry VIII clause undermine parliamentary supremacy
Can broad executive law-making powers undermine the rule of law?

Australia’s international obligations

Compliance with the Australia-United States Free Trade Agreement
Compliance with ILO Conventions

The proposed workplace reforms—potential economic aspects of the changes

The proposed workplace reforms—important social dimensions of the changes

Some consider the IR reforms will have social benefits Some consider the IR reforms will have adverse social impacts
Social impact on specific groups
Academic opinion on social impacts of the proposed IR reforms

Appendix A—Summary of impact of WorkChoices changes on employers

AA: Incorporated employers
AB: Unincorporated employers

Appendix C—Table of contents for the Bill

Appendix D—Table Of Contents for the Explanatory Memorandum

Appendix E—Metal, Engineering etc Award 1998

Endnotes

Glossary

Workplace Relations Amendment (Work Choices) Bill 2005

Date Introduced:  3 November 2005

House:  House of Representatives

Portfolio:  Employment and Workplace Relations

Commencement:  Sections 1 to 3 of the Workplace Relations Amendment (Work Choices) Bill 2005 will commence with Royal Assent. Schedules 1 to 3 and 5 will commence either on proclamation or on the day after a period of 6 months after the Bill receives royal assent, whichever comes first. Part 1 of Schedule 4 will commence with royal assent and Part 2 of Schedule 4 at the same time as Schedule 1.

Purpose

The Workplace Relations Amendment (Work Choices) Bill 2005 (‘the Bill’) proposes to make significant changes to the existing Workplace Relations Act 1996 (‘WR Act 1996) to implement the Government’s WorkChoices policy.

Structure of the Bill

The Bill is an amendment Bill to the current WR Act 1996. The Bill is made up of five Schedules. The amendments to the WR Act are contained in Schedule 1. The reader should note that the Bill will also amend current Schedules 1B and 13–15 of the WR Act 1996, which explains why amendments to these Schedules are located within Schedule 1.

For the convenience of the reader, tables of content of the Bill and the Explanatory Memorandum, complete with corresponding page numbers, have been added to this Bills Digest as Appendices C and D.

Scope and structure of the Bills Digest

Readers should note that due to the size of the Bill and the short time between its introduction and its debate in Parliament, the digest focuses on key issues only.  It does not attempt to provide a comprehensive list of all possible issues in the Bill that Parliament might consider.

This digest will, first, provide an overview of the key features of the proposed new workplace relations (WR) system, followed by, second, an outline of the potential issues which arise from the changes. Third, readers are referred to several key publications of the Parliamentary Library. Fourth, a brief overview of the historical development of this reform proposal is provided. Fifth, the digest will discuss the main provisions of the Bill. As far as possible, the digest tries to follow the order of parts as they will be located in the amended WR Act 1996 after the passing of this Bill. Finally, the digest provides some concluding comments, discussing constitutional and other issues raised by the Bill, and several appendices, which contain further information for the reader.

Renumbering

Amendments

Key features of the proposed new law

The CCH Special Email Alert Dispatch, issued 3 November 2005, remarks that ‘The federal government’s Work Choices legislation fundamentally changes Australia’s workplace relations system’. The key features of the workplace relations system can be briefly summarised as follows:

• the changes are based on a bundle of constitutional powers of the Commonwealth, with the corporations power at the heart of the reform of the WR system
• the Commonwealth aims at overriding existing industrial relations (IR) state laws to create a unitary WR system
• the proposed new WR system is designed to encourage the negotiation of workplace agreements directly between employers and employees, including without the intervention of third parties
• the existing ‘no-disadvantage test’ will be abolished and substituted with five minimum requirements which must govern future workplace agreements
• workplace agreements generally will become operative upon lodgment with the Office of the Employment Advocate (the OEA)
• all workplace agreements must at least meet the legislated pay and conditions standard, and must contain dispute-settling procedures
• certain matters will be prohibited and cannot be included in workplace agreements
• minimum wages in Australia will be reviewed and set by the Australian Fair Pay Commission (AFPC)
• the Australian Industrial Relations Commission’s (AIRC) dispute resolution powers will be limited significantly. However, the AIRC will still have the power to arbitrate certain workplace arrangements in limited circumstances
• under the new system, existing award conditions will be preserved, unless they are specifically bargained away. Collective agreements or Australian Workplace Agreements (AWAs) will need to set out how they amend or remove many of these award conditions
• award rationalisation and simplification will be achieved by removing certain allowable award matters
• unfair dismissal laws will remain largely unchanged, but their application will be limited to businesses with more than 100 employees
• employees in businesses to which the unfair dismissal laws apply will not be able to bring unfair dismissal claims if they are dismissed within less than six months’ service for the business, and
• employees who have been made redundant will have no redress under the unfair dismissal laws, but will be able to bring claims for unlawful termination.⁽⁵⁾

Key issues in the Bill

During the preparation of this Bills Digest, the following issues were identified as the key issues in the proposed new WR system.

Key publications accompanying this Bills Digest

The Parliamentary Library has produced a range of publications to accompany the introduction of the proposed new WR system. Readers are encouraged to consult these documents for further information in relation to the proposed changes:

• Workplace relations reforms: a chronology of business, community and Government responses (includes a chronology and links to documents from 28 September 2004 onwards)
• WorkChoices: A New Workplace Industrial Relations System—A Summary (Parliament House users only; last updated 25 October 2005)
• Federal workplace relations plans and the States in 2005 (Parliament House users only; last updated 18 October 2005)
• Workplace Relations Legislation: Bills Passed, Rejected or Lapsed, 38th–40th Parliaments (1996–2004) (E-brief, 8 July 2005)
• P. Prince and T. John, ‘The Constitution and industrial relations: is a unitary system achievable?’, Research Brief, no. 8, Parliamentary Library, Canberra, 2005–06.

Further material, including key government documents, articles canvassing the issue, and information on the parliamentary progress of the Bill, can be accessed via the Parliamentary Library’s Internet guide to the Workplace Relations Amendment (Work Choices) Bill 2005, http://www.aph.gov.au/library/intguide/law/workchoicesbill.htm.

History of this Bill

For a detailed overview of developments in relation to workplace relations laws and their proposed reforms in Australia since 1996, readers are referred to the Parliamentary Library’s e-brief Workplace Relations Legislation: Bills Passed, Rejected or Lapsed, 38th–40th Parliaments (1996–2004).

This Bill was developed following representations by employer groups after the Coalition parties won control of both houses of parliament at the federal election of 9 October 2004. Employer groups, especially the Australian Chamber of Commerce and Industry (ACCI), made representations to the Government for a fundamental rewriting of federal labour law, starting with measures which the Senate had previously amended or failed to pass. These representations to the newly re-elected government were reported by the media at the time. For example, The Australian commented on 12 October 2004 that:

Coalition workplace reforms blocked in the Senate include compulsory union secret ballots before strikes; a permanent commission to police corruption in the building industry; the spread of non-union individual contracts; and small business exemption from unfair dismissals.

The Australian Chamber of Commerce and Industry urged the Coalition to pursue a much more ambitious agenda, taking full advantage of its likely control of Senate numbers for the first time in a generation. ACCI chief executive Peter Hendy said business wanted a long list of legislation that had been blocked by the Senate to be reintroduced so it could be passed after next July, when new senators took their places.

Mr Hendy said the first issue for the Government should be to establish “a national system of industrial relations in this country”. The ACCI’s position, if adopted, would pit the Coalition against Labor state governments in a hostile takeover, seizing control of their state-based systems that still gave unions significant influence over wages and conditions. “You don’t need a review to do this,” Mr Hendy said. “The only review the Government would need is how to put it in place.”⁽⁶⁾

By early 2005, the form of the Bill was becoming apparent and the Minister for Employment and Workplace Relations, the Hon. Kevin Andrews, provided an outline in February 2005.⁽⁷⁾ However, a more important address on the framework of the new legislation was made by the Prime Minister, the Hon. John Howard, to the parliament on 26 May 2005. In this address, the Prime Minister revealed, for example, that a new Fair Pay Commission would replace the Australian Industrial Relations Commission.⁽⁸⁾ Then, a much larger document, the WorkChoices booklet, foreshadowed the possible structure of the Bill, and for example, itemised transitional arrangements for corporations under state jurisdictions to move to the federal system, and revealed much more.⁽⁹⁾

Despite the fact that the government’s commitment to independent contractors legislation was manifest in its 2004 election policy,⁽¹⁰⁾ key measures in the Bill, including, for example:

• the exclusion from unfair dismissal laws of firms with 100 employees or fewer
• the use of the Constitution’s corporations power to remove large sectors from the state jurisdictions, and
• the replacement of the ‘no-disadvantage test’ with five minima

are, if at all, difficult to be found in the Coalition’s 2004 workplace relations policy.⁽¹¹⁾

Discussion of the Bill

Schedule 1 of the Bill

Part I: Preliminary

Background

Proposed new Part I will set the foundation for the operation of the WR system, proposing its constitutional underpinnings. Specifically, this Part will prescribe, first, the possible ‘horizontal’ coverage of the WR system, that is, who is intended to be covered by the proposed new law and what kind of activities of those who will be covered may be regulated. Second, this Part prescribes what may be called the expected ‘vertical’ coverage of the proposed WR system, that is, how far the changes can reach into the states’ ability to regulate industrial relations.

Main provisions

Item 1 of the Bill will repeal the current principal-objects provision in the WR Act, substituting it with proposed new section 3. This proposed new section will specify the principal objects which the amended WR Act 1996 will have. The principal objects will be modified to reflect the overall changes to the proposed new WR system. The proposed new objects include, for example, the:

• provision of an economically sustainable safety net comprised of minimum wages and conditions (proposed new subsection 3(c))
• provision of a foundation of key minimum standards (proposed new subsection 3(d))
• support of harmonious and productive workplace relations (proposed new subsection 3(h)), and
• balancing of the right to take industrial action with the need to protect the public (proposed new subsection 3(i)).

Item 2 will repeal the current definition section, replacing it with proposed new section 4. This proposed new provision will define essential terms of the proposed new WR system.

Horizontal coverage of the Bill—employers, employees and their relations

Central to the working of the proposed new WR system are proposed new sections 4AA and 4AB. These two proposed provisions will define the terms ‘employee’ and ‘employer’. Of particular importance for the operation of the proposed new law will be the employer—the Commonwealth will use the definition of employers as the anchor point for its constitutional powers, especially its corporations power, in order to regulate employment in Australia.

The definition of the term ‘employer’

The basic definition of the term ‘employer’ is contained in proposed new subsection 4AB(1). The proposed new definition is descriptive, and relates to individuals and entities over which the Commonwealth can assert regulatory powers by virtue of the powers granted to it under the Constitution. These individuals and entities include:

The table above also includes the constitutional powers upon which the Commonwealth bases its regulatory powers over individuals and entities.⁽¹²⁾ Whilst many of the provisions of the current WR Act 1996 were based upon the external affairs powers given to the Commonwealth,⁽¹³⁾ this power is not mentioned in this list. However, it is nevertheless conceivable that it could play a role: first, in relation to provisions which aim at giving effect to international instruments, and, second, for some measures which may not be supported by the corporations power, but could be implemented by relying on the external affairs power.⁽¹⁴⁾

Proposed new subsection 4AB(2) contains an exception to the basic definition above, that is, where a contrary intention is expressed, the meaning of the term ‘employer’ does not take the above meaning, but its ordinary meaning. It appears that the proposed new law relies on the term’s ordinary meaning where a specific measure can be constitutionally supported without especially relying upon the corporations power.⁽¹⁵⁾ The exception will apply to references which will be specified in proposed new Clause 3 of Schedule 1.⁽¹⁶⁾ It should be noted that this list of references is not conclusive but can be amended by way of regulations.

The definition of the term ‘employee’

Unless the proposed new law expressly provides otherwise, the term ‘employee’ is given the meaning prescribed in proposed new subsection 4AA(1). In essence, this subsection prescribes that employees are individuals who are employed by an employer as defined in proposed new section 4AB referred to above. By creating this link between the employee and the employer, it is envisaged that this relationship can be regulated by the Commonwealth because it is supported by a head of power referred to above.

The term employee as defined in proposed new section 4AA(1) is also subject to the exception that in certain circumstances the ordinary meaning of the term is applicable (proposed new subsections 4AA(2)).

The definition of the term ‘employment’

Under proposed new subsection 4AC(1), the term ‘employment’ will be defined as the relationship between the ‘employer’ and ‘employee’ as defined by proposed new sections 4AA and 4AB. Like before, where reliance on the corporations power is not needed, the provision stipulates that the word employment is to be understood in its ordinary meaning.

Vertical coverage of the Bill—Federal-State relations

Item 9 will add proposed new sections 7C–E, which will determine the vertical coverage of the proposed WR system. Plainly, these provisions aim at ‘covering the field’ in relation to industrial relations. Where the Commonwealth successfully covers the field, the States are precluded from legislating in this area and their existing laws which regulated this area become inoperable. Proposed new section 7C will override:

• ‘State and Territory industrial laws’ (proposed new subsection 7C(1)(a)). This term is defined in proposed new section 4(1). Consequently, the state and territory industrial laws which could be overridden will include:
  • all individual state industrial laws (with the exception of Victoria’s, since Victoria has already referred its industrial relations power to the Commonwealth, see below: Part XV)
  • state and territory legislation which applies to employment generally. To assist in identifying such laws, the definition lists five main purposes which are indicia for such a law
  • all legislative instruments made under state and territory industrial laws or which apply to industrial relations generally, and
  • any further state and territory laws the Commonwealth executive has prescribed by regulation as falling within this definition.
• state and territory laws which apply to employment generally, dealing with leave other than long service leave (proposed new paragraph 7C(1)(b))
• state and territory laws establishing state or territory courts or tribunals which can make equal remuneration orders (proposed new paragraph 7C(1)(c))
• state and territory laws which deal with unfair contracts (proposed new paragraph 7C(1)(d)), and
• state and territory laws which regulate union right of entry, except for laws connected with occupational health and safety (proposed new paragraph 7C(1)(e)).

However, some areas in which states still retain some powers to legislate will be expressly excluded from these broad overriding provisions. These areas will be:

• laws which relate to the prevention of discrimination or the promotion of equal employment opportunity (EEO), but only under the proviso that they are not laws amounting to an overridden state and territory industrial law or are contained therein (proposed new paragraph 7C(2)(a))
• laws which are prescribed to be excluded from the operation of subsection 7C(1) by regulation (proposed new paragraph 7C(2)(b))
• laws which deal with so-called ‘non-excluded matters’ (proposed new paragraph 7C(2)(c)).
• Proposed new subsection 7C(3) contains a list of those matters which the proposed new law will regard as ‘non-excluded matter’.

Extraterritorial coverage of the proposed WR system

The proposed new laws will also have a certain extraterritorial application. Item 6 will repeal current section 7 of the WR Act and substitute it with proposed new sections 7 and 7AA.  Proposed new section 7 will provide that the Regulations can have the effect of changing the application of the proposed new law with respect to Christmas Island and the Cocos (Keeling) Islands. Proposed new section 7AA will extend the application of certain Divisions and Parts of the proposed new law to ‘persons, acts, omissions, matters and things’ outside Australia. Item 8 will add proposed new subsection 7B(2), which will extend the geographical application of the Commonwealth’s Criminal Code to the same extent to which Australia asserts the extraterritorial application of the proposed new WR system.

Comment

The horizontal and vertical coverage of the proposed WR system could potentially raise a number of constitutional questions. According to the states and leading employment and constitutional scholars, some of these issues might soon be pursued in the High Court.⁽¹⁷⁾ A brief discussion of potential issues which may arise as a result of the intended coverage of the Bill is contained in this Bills Digest as part of the Concluding Comments.⁽¹⁸⁾

Part IA: Australian Fair Pay Commission

Item 10 will insert proposed new Part IA into the WR Act 1996, setting out the framework for the AFPC. Shifting the responsibility to set minimum wages from the AIRC to the AFPC is an essential cornerstone of the Government’s proposed changes to the WR system.

Main provisions

The Bill establishes the AFPC by virtue of proposed new section 7G. The AFPC’s primary function will be to set wages under proposed new section 7H. In particular the AFPC will:

• set and adjust the federal minimum wage (FMW)
• set and adjust minimum award classification rates of pay
• set and adjust the FMW for juniors, trainees (including school-based apprentices) and employees with disabilities
• set and adjust minimum wages for piece workers, and
• set and adjust casual loadings.

In setting wages, the AFPC’s primary objective will be to promote the economic prosperity of the people of Australia (proposed new section 7J). In achieving this function, it must have regard to:

• the capacity of the unemployed and low paid to obtain and remain in employment
• employment and competitiveness across the economy
• providing a safety net for the low paid, and
• providing minimum wages for junior, trainee and disabled employees to ensure those employees are competitive in the labour market (proposed new section 7J).

This is in contrast to the current requirements for the AIRC which, when determining the level of minimum wages in Australia, is required to have regard to the need to provide fair minimum wages.⁽¹⁹⁾

The AFPC will be made up of five members: a Chair who can be appointed for a period of up to five years on a full or part-time basis (proposed new subsection 7G(2)), and four Commissioners, who can be appointed for a period of up to four years on a part-time basis (proposed new subsections 7P(2) and 7Y(2)). The lack of tenure and the possibility of reappointment may raise the issue of independence of the AFPC.⁽²⁰⁾ However, this must be viewed in light of the period for which the members are appointed. Considering that the appointments are for a period which exceeds the lifespan of a parliamentary period, the independence of the AFPC may not be such a significant issue.⁽²¹⁾

The Chair will be required to have a high level of skill in business or economics (proposed new subsection 7P(3)), while the Commissioners must have experience in one or more of the following: business, community organisations, workplace relations or economics (proposed new subsection 7Y(3)).

Despite the legislation not having passed through parliament, the government has already announced that Professor Ian Harper will hold the position of Chair of the AFPC.⁽²²⁾

Currently, wages are reviewed on an annual basis by the AIRC on the basis of cases brought before it. However, it must be noted that there is currently no legal obligation upon the AIRC to review minimum wages annually. Further, there is no guarantee that the AIRC makes an award increase. Under this Bill, the AFPC will determine the timing and frequency of wage reviews, as well as the scope and manner in which wage reviews are conducted and the date when wage-setting decisions are to come into effect (proposed new section 7K). Therefore, under the proposed new arrangements, wages will not necessarily be reviewed on an annual basis. The government has indicated that the first decision of the AFPC will be in Spring 2006.⁽²³⁾

Under the current system, the AIRC determines the minimum wage following representations by interested parties, including unions. In relation to the proposed system, the Bill states that the AFPC will determine wage rates through consultation and research and by monitoring the impact of wage-setting decisions (proposed new section 7K). Unions will no longer have an automatic right to be heard, yet they may still be consulted by the AFPC. It should be noted, however, that proposed new subsections 7K(1) and (2) will be subject to changes made by regulations. Such regulations could, for example, prescribe the way the AFPC has to consult and, more importantly, with whom.⁽²⁴⁾ So far, there is no indication when such regulations may be available, but it has been suggested that they will not be available until well into 2006.⁽²⁵⁾ The wage-setting decisions by the AFPC must follow prescribed formal requirements (proposed new subsection 7K(4)). However, the Bill expressly stipulates that any decision will not be a legislative instrument for the purposes of the Legislative Instruments Act 2003 and, as a result, the decision cannot be reviewed and voted upon by parliament.

Under proposed new subsection 7N(1), the AFPC may determine its own operating procedures for the purposes of performing its functions set out above, but regulations may also prescribe the procedures to be used by the AFPC.

The AFPC will be required to report annually to parliament on its operations (proposed new section 7O).

Item 10, proposed new Division 3, establishes the AFPC secretariat, which is to assist the AFPC in the performance of its functions.

Comment

Constitutionality of the AFPC

The question whether the creation of the AFPC, its functions and operation, can survive a constitutional challenge could be one of the potentially crucial issues. The question addressed to the High Court could be whether setting up and regulating the AFPC amounts to a law ‘with respect to’ constitutional corporations. Arguably, to find so would require a significant expansion of the incidental scope of the corporations power.⁽²⁶⁾

If the establishment of the AFPC is found not to be supported by the corporations power, the Commonwealth may be required to rely on other heads of power, for example, the external affairs power granted under section 51(xxix). Under this head of power, the AFPC seems to be sustainable, considering that in 1973, Australia ratified the International Labour Organisation’s C131 Minimum Wage Fixing Convention of 1970.⁽²⁷⁾ Article 1 of this convention requires signatories to establish a system of minimum wages which covers all groups of wage earners whose terms of employment are such that coverage would be appropriate.

The level of minimum wages in Australia

The government has guaranteed that minimum and award classifications wages will not fall below the level set by the AIRC’s 2005 Safety Net Review case.⁽²⁸⁾ It also states that decisions of the AFPC will be independent of government.⁽²⁹⁾

However, despite these guarantees, strong concerns have been expressed that under the new pay-setting arrangements, there will be a reduction in the real value of the minimum wages. The Australian Council of Trade Unions (ACTU) has been vehemently opposed to the IR reforms. In relation to minimum wages, the ACTU recently released a fact sheet setting out its concerns about the effect the new law will have on minimum wages and living standards for lower paid workers in Australia. Arguing that the Federal Government’s refusal refuses to give a wages guarantee, the fact sheet states that:

• The Federal Government has refused to guarantee that the FPC will increase minimum and award wages to keep up with the cost of living
• If minimum rates are not regularly increased then the living standards of award wage workers and their families will go backwards
• We have seen this in the US where the minimum wage is just $5.15 an hour and has not increased for 8 years
• Low minimum wages is a significant contributor to inequality and division within society
• ACTU wrote to the PM John Howard on April 11 asking him to guarantee that the real value of minimum and award wages will be maintained and will not be allowed to go backwards.
• In the letter the ACTU sought ‘confirmation that the Government will guarantee the maintenance of the real value of minimum wages in any reforms the government may implement’ – no response has been received
• On June 24, the office of the Workplace Relations Minister Kevin Andrews’ confirmed that the government’s proposed new Fair Pay Commission would not consider any increase in minimum wages for the 1.6 million Australians and their families who rely on them until at least spring 2006, and that it was likely there would be no increase at all until well into 2007. (Herald Sun, Friday June 24, 2005).⁽³⁰⁾

The National Assembly of the Uniting Church has expressed fears about the proposed AFPC and the impact that the IR reforms will have on minimum wages and workers generally. In a media release, the National Assembly stated that:

It is our fundamental concern that this new system is creating an uneven playing field for those who have to bargain from a position of weakness. The Fair Pay Commission’s mandate is geared towards keeping wages low rather than assessing the minimum wage according to what workers need to live a decent life …

We are concerned individuals will be considered commodities in the service of greater profits and left open to exploitation. There is more to being human than simply being a piece in the economic jigsaw puzzle.⁽³¹⁾

In a speech to the National Press Club on 9 September 2005, Cardinal George Pell of the Catholic Church articulated his opposition to seeing any drop in the level of minimum wages, stating the following:

I would like to see and I will back systems which increase employment and the market has done that in a way which I didn’t quite anticipate. I realise there is some tension which is often unnoted [sic] between the number of unemployed and the minimum wage of people who are employed but especially today when the ladder is being extended fantastically and some of our top executives are getting enormous salaries, I’m very reluctant and I won’t consent to a reduction in the minimum wages. I can’t see how that is a good thing, although I am keen to free up employment.⁽³²⁾

The Federal Government argues that the current minimum wages arrangements are ineffective and detrimental to the Australian economy, stating in the Regulation Impact Statement that:

Establishing genuine minimum wages and conditions will assist in achieving increased labour market participation. At present, low skilled workers or the unemployed may be priced out of the labour market. Australia has the highest ratio between the minimum wage and median wage in the OECD—currently 58.8 per cent … Furthermore, Australia has thousands of minimum wages through the award system. Wage increases achieved through safety net adjustments, unlike those achieved through agreement-making, are not based on productivity improvements. Moreover, large award wage increases can adversely impact upon employment opportunities for unemployed people and the low paid, pricing them out of the labour market.

In 2004, the Government undertook a longitudinal study to examine long term outcomes for clients of its employment assistance programs. The study particularly examined how disadvantaged people fare in the labour market up to two years after assistance has ceased. This study confirmed a key finding of a body of related studies in that a substantial number of low paid workers do move to higher paying jobs over time – ‘in the case of more disadvantaged job seekers, taking even low paid, casual jobs will increase their chances of finding better paid more permanent employment’[…]

By introducing a genuine safety net, based on minimum standards set by the AFPC and through legislation, more jobs will be available, allowing new entrants and returning and low skilled workers enhanced access to the labour market. This will in turn provide a stepping stone for low paid workers to move into higher paying jobs over time.⁽³³⁾

This extract illustrates the Government’s policy rationale in relation to those aspects of the IR legislation which impact upon wages—in effect a more flexible wage-setting system, where minimum wages can be set below those currently determined by the AIRC, will lead to more people entering the workforce. Based on this observation, it would appear that these new arrangements could therefore see a reduction in the real value of minimum wages.

Minimum wages—current procedures, proposed changes and possible impact on wages

Some commentators are quite critical of the current operations of the AIRC, pointing out significant flaws in the way the AIRC conducts wage determinations.⁽³⁴⁾ It has been suggested that the AIRC does not have adequate information about low paid workers, that it does not gather information in an effective way so as to inform itself, and that it increases the minimum wage without proper reasoning. For reasons such as these, it has been argued that the new AFPC may in fact be able to remove some of the flaws in the current system.⁽³⁵⁾

One of the key criticisms in the past has been the adversarial process upon which the AIRC was based. The Regulation Impact Statement notes that this system is based on ‘arbitrary and artificial claims between the employer organisations and unions’, suggesting ‘a long overdue shift from the historically adversarial process for wage setting in Australia.’⁽³⁶⁾ The abolition of the adversarial process will mean:

• first—that AFPC hearings cannot be initiated by organisations representing the low paid by bringing claims. Instead, the AFPC will initiate any wage case hearing on its ‘own’ motion which is clearly reflected in the proposed new law. When compared to the current system, it appears that the proposed new system could allow more interest groups, including churches or welfare groups, to exert pressure on the AFPC to review the minimum wages. However, how susceptible the AFPC will be to such pressure remains to be seen once the new regime is in place, and
• second—the proceedings will be more consultative, with the AFPC inviting parties to make submissions. Both consultative and adversarial procedures, if conducted properly, can produce excellent results. Adversarial procedures have the advantage that the parties are able to test the veracity of the evidence before the decision maker. However, they are also based on the parties being responsible for conducting the case and it has been argued that parties aggressively contest every conceivable point rather than focussing on the key issues.⁽³⁷⁾ In contrast, the consultative procedure may have the advantage that the AFPC can consult a broader range of sources to inform itself. However, much will depend upon the composition of the AFPC, the procedures adopted by it as well as the regulatory framework the Government may decide to impose upon this body by virtue of the regulations.

It has been noted that, unlike the AIRC, the AFPC will be required to set wages on the basis of economical considerations rather than notions of fairness. Robyn May from The Age argued that the changes to the procedures are:

… the real intent behind the establishment of the Australian Fair Pay Commission. Rather than being an instrument to improve low pay, the commission, with its narrow economic and ideological focus, seems designed more as an instrument for lowering wages. Far from being an instrument of regulation, it will become an instrument of labour market deregulation. The notion of fairness, central to the Australian system of industrial relations for the past 100 years, is not part of the commission’s brief. Instead, it is based on a theory that lowering minimum wages will create jobs, without evidence that this will occur.⁽³⁸⁾

However, it seems to be arguable that notions of fairness, whilst currently not expressly mentioned in the Bill, may still be imported as part of the consultative process. It seems to be at least feasible that the AFPC, for example, could seek guidance from international experience or charters. One example, which arguably dwells the notion of fairness, can be found in the European Social Charter of 1977 which applies a so-called ‘decency threshold’ which creates a relationship between minimum wages and average earnings.⁽³⁹⁾

Part II: Australian Industrial Relations Commission

The Bill proposes to further reduce the role of the AIRC in IR dispute resolution and award making.

Main provisions

Item 11 constrains the AIRC’s ability to act on its own motion, that is, where a specified party makes an application for the exercise of the function which the AIRC is to exercise.

Item 20 inserts proposed new Division 3A which deals with general matters relating to the powers and procedures of the AIRC.

Proposed new section 44A allows the AIRC to take into account the public interest, subject to other considerations, for example, the state of the economy, but the section does not apply to AIRC action in relation to awards and industrial action. Proposed new sections 44B–44E require the AIRC to take into account various anti-discrimination conventions and the health and safety of employees.

Proposed new section 44H sets out how the AIRC must conduct its proceedings. These are to be conducted within its discretion, subject to any contrary provisions of the Act.

Proposed new section 44I allows the AIRC to summon any person, compel the production of documents, and dismiss matters. The AIRC may also authorise a person to take evidence on its behalf. However, these facilities do not apply to the AIRC in industrial action disputes nor allowable award matters.

Proposed new section 44J allows a matter being heard by a single member to be referred to a full bench by application of a party or the Minister, on the basis that the case is of such importance that it is in the public interest for a full bench to hear it.

Proposed new section 44L allows the Minister to apply to the President for a full-bench review of an award or order; and when such an application is made, the President must establish a full bench to hear the matter.

Proposed new section 44N allows the AIRC to make an award or order in respect of public-sector employment matters, overriding inconsistent Commonwealth or territory laws.

Proposed new section 44O allows the AIRC to order a state tribunal to refrain from dealing with proceedings that are before the AIRC.

Proposed new section 44Q allows a full bench of the AIRC, on application from an organisation or the Minister, to suspend or revoke an award or order on the grounds that an organisation has contravened the WR Act 1996, Schedule 1B or an award or order; or, where a substantial number of members of an organisation have refused to accept employment under the order; or, where the award should be revoked or suspended for some other reason.

Items 21–42 remove former powers of an AIRC full bench so as to correlate with other Schedule 1 amendments, for example, removing appeal rights on common rule awards for Victorian workers, and removing the referral of certified agreement issues from the AIRC.

Comment

The issues affecting the AIRC relate to whether an institution with the ability to make instruments having the effect of law (in form of awards) can be subjected to ministerial direction. Also, whilst previous High Court decisions, for example in Re Pacific Coal Pty Ltd; Ex Parte Construction, Forestry, Mining And Energy Union v The Commonwealth (2000) 203 CLR 346, supported ‘award simplification’ measures and the limitations placed on the AIRC’s dispute resolution and award-making roles as legislated in 1996, it may be asked whether further diminution of the role of the AIRC in relation to these powers will be upheld.

Part IVA: The Employment Advocate

The position of Employment Advocate was established by section 83BA of the WR Act 1996.  Item 43 repeals current sections 83BB (Functions) and 83BC (Minister’s directions to Employment Advocate) of the WR Act 1996 and replaces them with proposed new sections 83BB and 83BC. Some of the notable changes to the functions of the Employment Advocate under new section 83BB include:

• new functions such as to ‘promote the making of workplace agreements’ and to ‘promote better work and management practices through workplace agreements’ (proposed new paragraphs (a) and (d))
• a move away from providing assistance and advice for employees and employers about their rights and obligations under the WR Act 1996, to providing assistance and advice to employees and employers (especially employers in small businesses) in relation to workplace agreements, and providing education and information to employers and employees in relation to workplace agreements (proposed new paragraphs (b) and (c))
• the removal of investigative functions of the Employment Advocate in relation to breaches of AWAs and breaches of the freedom of association provisions of the WR Act 1996
• new functions in relation to providing advice to employers and employees about awards and the Australian Fair Pay and Conditions Standard (AFPCS) (proposed new paragraph (f))
• a new requirement to give information and documents to the Minister as required by regulations (proposed new paragraph (i));
• new functions in relation to workplace inspectors (proposed new paragraphs (j)and (k)); and
• a new function to ‘analyse workplace agreements’ (proposed new paragraph (l)).

Proposed new section 83BC provides that the Minister may give directions to the Employment Advocate, by way of legislative instrument, as to how to perform its powers and functions under section 83BB. Proposed new section 83BC prohibits the Minister from giving directions to the Employment Advocate in relation to a particular workplace agreement. However, as was the case under the previous section 83BC, the Employment Advocate must comply with any other direction by the Minister.

Section 83BS of the current WR Act 1996 creates an offence where an ‘entrusted person’ discloses information that will identify a party to an AWA.  Item 47 repeals and substitutes proposed new section 83BS, to redefine the offence of disclosing information that will identify a party to an AWA.  The penalty for contravention of proposed new section 83BS is six months imprisonment.

Part V: Workplace inspectors

Items 49–70 amend Part V of the Act so as to give effect to the Government’s changes to the regime of workplace inspection. The changes include a change to the heading from ‘inspectors’ to the new term ‘workplace inspectors’.

Item 52 inserts proposed new subsections 84(3) and (3A), which provide, in essence, that the Regulations will govern the length of a person’s appointment as an inspector.

Item 58 inserts a proposed new subsection 85(3), which will make it an offence for workplace inspectors not to return their identity card within 14 days of their appointment ceasing.

Item 59 inserts a proposed new subsection 86(1), which outlines the purpose for which a workplace inspector’s powers can be exercised. Under the new subsection, the purposes include for determining whether the following are being observed:

• workplace agreements;
• awards
• the AFPCS
• minimum entitlements and orders under Part VIA,
• other requirements under the Act and Regulations (other than section 541—minimum rate of pay)

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