Chapter 3 - The impact of the workplace relations ACT 1996
The Committee’s terms of reference also required
it to examine the impact of the Workplace Relations Act 1996 on a range of
economic and social variables, including:
- wages, employment, productivity, and industrial disputation
- job security, unfair dismissals, employee entitlements and
- the roles, rights and obligations of employers, employees and
their respective organisations;
- the powers, standing and procedures of the Australian Industrial
Relations Commission, the Office of the Employment Advocate and the Industrial
- industrial democracy and employee ownership.
This Chapter presents the Committee’s findings
on these issues. Some have been addressed in part under the objects of the WR
Act in the previous chapter and are therefore not addressed in full detail
Wages, employment, productivity, and industrial disputation levels
The Committee was presented with evidence that
wages, employment and productivity had all shown positive growth in recent
years and levels of industrial disputes were approaching historically low
levels. Some of the evidence put before the Committee attempted to highlight
the effects on certain sectors of the workforce and the evidence was mostly
Real wages have risen for both high and low paid
employees and for award and agreement covered employees following the passage
of the WR Act. Fundamental to the wage rises for the low paid has been the
safety net adjustments to award rates of pay made in the annual living wage
cases. The WR Act requires the AIRC, in making safety net adjustments, to have
regard to the needs of the low paid and to the living standards generally
prevailing in the Australian community. It is noted in the submission from the
Department of Employment, Workplace Relations and Small Business that the
increases in real wages in the 1990s is in contrast to real wage declines
during the 1980s. It is also noted that all three safety net adjustments since
the WR Act came into affect have reflected real wage increases. This compared
to the previous three increases under the former legislation in which only one
kept pace with inflation.
DEWRSB data from the Workplace Agreements
Database indicates that where the low paid move onto agreements, their wage
outcomes are higher than they would have been under the award safety net
Where agreements are struck at the enterprise level, the outcomes are often
Increases in real wages are not a result of
strong growth in nominal wages. Australian Bureau of Statistics data on
average weekly ordinary time earnings for full-time adult employees, shows that
since 1996, nominal wages growth has been moderate by historical standards, and
in recent quarters has eased further.
Real wages rises have, therefore, been driven by moderate and sustainable wage
increases in a period of low inflation. This compares with the economic upswing
of the late 1980s, where substantial nominal wage growth was required merely to
keep pace with inflation. From an economic perspective the current situation is
far more conducive to sustainable economic growth than the boom-bust cycles of
At the aggregate level therefore there are no
signs that the implementation of the 1996 reforms has had any adverse impact on
wages it is more likely that these reforms have helped maintain more
sustainable wage increases. The issue of how the WR Act has affected wage
outcomes of different population groups, was more contentious.
Some witnesses were concerned that the
introduction of AWAs in some workplaces reflected an attempt by employers to
cut the wages and conditions of staff who were covered by awards or certified
agreements. Anecdotal evidence presented to the Committee suggested that while
base rates of pay were usually higher in AWAs than under the employees’
relevant award or certified agreement, the AWA often removed other provisions
which would normally supplement an employees take-home pay, such as overtime, penalty
rates and bonuses.
Other evidence given to the Committee indicated
quite different outcomes, however, with one witness informing the Committee
that when the company he worked for introduced AWAs the impact on base income
was an increase in the order of $25,000. This was qualified in the context
that it represented a cashing out of other financial components of the
certified agreement such as shift penalties, overtime rates and weekend penalty
rates. Nonetheless the witness estimated that his income was still $10,000 a
year higher under the AWA.
One area of concern raised in submissions
received by the Committee, was how the WR Act had impacted on wage outcomes for
women. Concerns were raised that women, who were perceived to be in a weaker
bargaining position than men, may be fairing badly under AWAs, particularly
where they are employed on a part-time or casual basis. Again, any evidence to this
effect was anecdotal.
However, data from DEWRSB’s Workplace Agreements
Database suggests that under certified agreements the gap between average
annual wage increases for males and females has narrowed considerably since
1997, although increases have still been slightly higher for males.
Associated with the impact on wages is the
subjective question of how the Act has affected living standards. On the one
hand the Committee heard accounts from individuals, particularly those affected
by award simplification, who believed that they had been disadvantaged in one
way or another under the operation of the Act and that consequently their
living standards had fallen. Others, meanwhile, argued that, in general terms,
living standards for the population had improved.
There is evidence to suggest that the general
population is at the least no worse off and many are better off than they were
before the introduction of the WR Act. A key component of this has been the
increase in real wages that have occurred in recent years. Rising real wages
mean people have greater purchasing power and therefore an increased standard
of living. Real wages have risen for the low paid as well as for those on
higher incomes, indicating that, generally speaking, all workers have enjoyed
rising living standards. The increases in real wages over the last three years
for the lowest paid in the workforce, have been the first significant increases
since the beginning of the decade.
DEWRSB presented additional data in its
submission to the Committee on the distribution of income which indicates that
all income groups have experienced increases in real disposable income. DEWRSB
acknowledges that income inequality has increased although this is a trend
which has been evident since the 1980s and not a feature distinct to the period
since the introduction of the WR Act. Furthermore, a recent National Centre
for Social and Economic Modelling (NATSEM) study indicated that the
distribution of income was actually slightly more equal in 1995-96 compared to
1982. Similar analysis prepared by the Department also shows that there had
been little change in the distribution of income between 1994-95 and 1997-98.
The growth in productivity throughout the 1990s
has been strong and appears to have quickened in recent years. The trend
growth of labour productivity from the March Quarter 1997 to the June Quarter
1999 was 3.7%. This compared to 3.1% from the December Quarter 1991 to the
March Quarter 1997 and 1.9% from the December Quarter 1982 to the December
The Department’s submission also draws attention to a recent Productivity
Commission report which found that multifactor productivity growth is faster
now than in the ‘golden age’ during the 1960s. These results have derived in
part from the continuation of microeconomic reforms undertaken in the early 1990s.
The ACTU argue that it is not credible to
ascribe the observed productivity improvements since 1996 to the WR Act and
that the impact of industrial laws on national productivity is at best partial
and possibly only marginal.
It is the view of the Committee, however, that improvements in productivity are
the result of a combination of factors all working in concert, of which
workplace relations is an important part.
Most of the research on the determinants of
productivity do suggests that changes to workplace reform take time to filter
through to observed productivity improvements. To this end the Committee
believes that it is not unreasonable to expect that Australia’s productivity
performance will continue to see further improvement. This is a view supported
by the Australian Chamber of Commerce and Industry who stated that:
...the Act has continued and probably strengthened the focus of
the federal labour relations system on enterprise agreements, both in the
objects of the Act and for awards, in the provision of more flexible agreement
approval processes, and through the introduction of a procedure for approving
individual agreements (Australian Workplace Agreements). These arrangements
are undoubtedly beneficial in productivity terms for the private sector, and
are achieving far better outcomes than for example the sort of labour relations
system that prevailed in the 1970s and 1980s.
It has been argued that there is great
difficulty in isolating the impact of the WR Act on employment and unemployment
levels. Over the last 3 years, and particularly the last 12 months, Australia
has achieved solid labour market outcomes, including continued employment
growth, both full and part-time, and falling unemployment.
Some evidence before the Committee questioned
whether the 1996 legislation has led to an increase in part-time and casual
employment at the expense of full-time work. When questioned on the issue of
casual employment at the Canberra hearing on 1 October, the Department of
Employment, Workplace Relations and Small Business told the Committee:
When you actually analyse
the data on casualisation, job security, the nature of part-time employment,
our assessment of the available evidence indicates that indeed the workplace
relations legislation has not been seeing a deterioration in those areas at
all. For example, casualisation has been a labour market trend that has been
with us for almost a generation in terms of the growth in that area. Under the
period of the current legislation, if anything, we have a seen a significant
deceleration. We have not seen a drop in the level of casual employees in the
labour market, but in terms of that trend to increase casualisation we have
seen a slowing.
An important dimension of
that is evident in regard to part timers where the incidence of part-time
casuals has in fact declined. We have seen an increase in regular or permanent
part-time employment, and the Workplace Relations Act has been an important
contributor to that change because it has actually opened up and facilitated on
a broader plane access by people who are wishing to work part time to be able
to do so on a regular and permanent basis. In many areas previously that was
denied under awards—the only choice available to work other than full time
would have been as a casual...
The slowing in the overall rate of growth of
casual employees was mostly acknowledged and welcomed by other witnesses who
appeared before the Committee. Discussion under this topic also covered whether
the growth in part-time and casual employment was demand or supply driven. The
ACTU presented evidence to the Committee which suggested that 59 per cent of
casual employees wanted their employment to be permanent. On the contrary, the
submission from the Business Council of Australia cites findings from a study
by the National Institute of Labour Studies which, based on AWIRS data,
suggests that a high proportion of male and female casual employees are
satisfied with the hours they work and were more likely to report that they
were generally satisfied with their job than their permanent counterparts. The Department of Employment,
Workplace Relations and Small Business also suggest that the majority of casual
employees are in these types of jobs for family or personal reasons and not
because they could not get permanent employment.
The 1996 legislation amended the Act in such a
way as to allow for a legal right to take industrial action, ‘protected
action’, during a bargaining period and to prohibit other forms of industrial
action which were considered to be incompatible with cooperative working
The aggregate evidence on the level of
industrial disputes in Australia reveals that there has been a significant
decline in their number since the WR Act came into effect. In particular the
number of working days lost per thousand employees in 1997 and 1998 was the
lowest since 1913.
The Department’s submission states that it is not possible to quantify how much
of this decline can be attributed solely to the provisions of the WR Act as the
data does not identify whether employees involved in the disputes are employed
in the federal or state jurisdiction, or whether the industrial action is
protected or not.
The Business Council of Australia indicates in
its submission that despite the significant fall, the total number of working
days lost per thousand employees is still very high compared to other OECD
countries. They emphasise that such large numbers of disputes have significant
consequences in terms of loss of pay, declining production, falling profits,
employment security and inconvenience to customers. In a highly global market
place, disruptions to production also have a significant bearing on our
international reputation as a reliable trading partner.
Some business groups argued that the current Act
still enabled unions to use the threat of industrial action as a means to
circumvent the negotiation process and pressure employers into submission.
Master Builders Australia described in their submission what they believed to
be an abuse of the current provisions by unions:
Protected industrial action has been relied upon by the CFMEU,
particularly in circumstances where they are attempting to force employers to
accept an industry-wide standard agreement. The current machinery provisions
for the taking of industrial action, have, however, been abused by:
- blanket notices of intention to take industrial action being
given...on a regular basis...without there being a real intention to take industrial
- notices being given which do not specify the particular type of
industrial action which is intended to be taken or the time at which it is to
- notices of intention to take industrial action being given
without there having been any discussion or attempt to reach agreement with an
individual employer prior to the notice being issued.
Some witnesses argued that the introduction of
the legislation had created a more adversarial approach to workplace
relations. However, evidence in the submission from DEWRSB shows that the
average duration of disputes has been declining. The Department stated that
this indicates that the compliance functions of the WR Act are generally
successful in dealing with unprotected action,
although some employer groups suggested that the provisions under section 127
of the Act give little effective power to the Commission to order industrial
action to cease.
Job security, unfair dismissals, employee entitlements and conditions
Some submissions to this inquiry suggested that
people felt less secure in their employment and that this could be attributed
to the continuing increase in the proportion of the workforce employed on a
casual or temporary basis such as independent contractors. The ACTU
submission states that evidence is mounting that employees are more insecure in
employment than has previously been the case. They point to a number of
factors, including the continued growth of precarious forms of employment, as
underlying this trend.
The ACTU evidence derives from its own research.
These views are contrary to the evidence
supplied by the Department of Employment, Workplace Relations and Small
Business. The Department suggests that a range of survey evidence indicates
that job security is increasing in Australia and has been since the mid-1990s
following declines in the early part of the decade. It is also suggested that
by international standards, the level of job security in Australia is quite
The Queensland Government, relying on sources
other than the ACTU survey, also suggested that job insecurity has increased.
They argue that the historical relationship between job insecurity and the
state of the business cycle is no longer as relevant and that it is now more
closely associated with industry restructuring. The DEWRSB submission states
that where a major reorganisation of a workplace has been undertaken in the two
years prior to a survey being taken, people are more likely to report that they
feel insecure in their job compared to those who did not undergo any
significant workplace change. They dispute the contention that the link with
the business cycle has been broken and provide evidence which shows that levels
of job security continue to follow closely movements in GDP.
While there were claims that job insecurity had
increased under the WR Act, these were generally the perceptions of those who
were opposed to the legislation and little evidence was supplied other than the
survey of the ACTU. On this issue the Business Council of Australia brought to
the attention of the Committee the findings of a recent study by the National
Institute for Labour Studies:
Within the Australian
context, the NILS study found that despite widespread anecdotal evidence of
rising levels of job insecurity, empirical data in support of this hypothesis
are both scarce and unconvincing.
was no empirical evidence presented to the Committee showing a direct link
between the WR Act and job insecurity. Further
arguments were advanced relating to casual employment. While it is true that
many people work as casuals by choice it is also the case that there are some
workers who work as casuals because that is what they have been offered.
However, the Committee notes that, in this context, the WR Act does not express
any positive preference for one type of employment over another.
Unfair dismissal legislation and its impact on
employment has been an issue for debate since the provisions were introduced by
the Keating Government in 1994. Critics suggest that the provisions are easily
abused and represent a significant deterrent to employers taking on new staff,
especially in small business. It has been the Coalition’s policy since 1996 to
amend the legislation to reduce any incentive for unmeritorious claims to be
pursued. The 1996 legislation introduced a filing fee of $50 in an attempt to
discourage claims that were not genuine.
In line with their 1998 policy statement on
workplace relations, More Jobs Better Pay, the Government sought to make
further amendments to the provisions which would provide an exemption for small
business (those employing 15 persons or less) and introduce a 6 month
qualifying period for new employees in a business of any size. The Bill is
still on the Senate Notice Paper.
Since the introduction of the WR Act the number
of unfair dismissal applications has declined. Despite these falls, there are
operational problems associated with the existing provisions which employer
groups consider act as a disincentive to hiring new staff. Some of these
concerns are being addressed in the amendments contained in the current Bill
and are discussed in Chapter 8 of this report.
There were concerns raised relating to people
who were not currently eligible for protection from unfair dismissal. The
submissions from Job Watch Inc. and the Fitzroy Legal Service both assert that
under the current provisions, trainees and any workers on fixed term contracts
are not eligible to apply for remedies if they are unfairly or unlawfully
Protection of employee entitlements
Submissions and oral evidence presented to the
Committee under this item concentrated on three key areas where employee
entitlements and conditions were believed to be placed in doubt or undermined
under current industrial law. These were the provisions covering awards and
agreements, cases of insolvency, and cases involving a transmission of
On the issue of the protection of employee
entitlements in the event of employer insolvency, there was general support for
the Government’s recent announcement to establish a national safety net scheme
for the improved protection of employee entitlements. The Department’s
submission indicates that the Government is considering two options for
implementation early in 2000 and that these are outlined in the Ministerial
Discussion Paper, The protection of employee entitlements in the event of
insolvency, issued on 27 August 1999.
It was also suggested to the Committee that
entitlements are often put at risk when a business changes hands. Similarly, it
was argued that the Act does not adequately provide for the situation where, in
the case of the merger of two businesses, where both have current and valid
certified agreements in place, which certified agreement will prevail in the
The roles, rights and obligations of employers, employees and their
The WR Act is premised on creating flexibility
in the labour market by facilitating a greater focus on agreement making, and
dispute resolution being undertaken at the enterprise or workplace level.
Accordingly, the 1996 amendments sought to create a framework of rights and
responsibilities for employers, employees and their respective organisations
which ensured that appropriate standards of industrial conduct were observed.
Right of entry
The ACTU was concerned that the requirements for
obtaining permits and giving advance notice were more onerous than under the
previous system. They claim that this has disadvantaged employees because the
balance of power now favours employers. The Government's response to these
allegations are dealt with in Schedule 13 of the Bill and discussed in Chapter
11 of this report.
Awards and Agreements
In relation to negotiations over AWAs the
Committee was informed that the provision allowing employees to nominate the
union as their bargaining agent was ineffective as there was no requirement for
the employer or the Employment Advocate to actually deal with the union.
While the legislation provides for a right to
strike it was argued in many submissions, and by witnesses, that the provisions
are too narrow and exclude other forms of strike action considered by the ILO
to be legitimate. Of concern to many unions was the prohibition on protected
action during the term of a certified agreement or an award made under section
170MX, and the restriction of protected action to single enterprises. The ACTU also criticised
section 127 of the Act which allows employers a quick and relatively cheap
legal avenue to stop or prevent illegitimate industrial action. It is argued
that the availability of this provision allows employers to stop industrial
action by means other than constructive negotiation. The Committee notes that the
industrial action being undertaken is against the law and that employers are
not obliged to negotiate outside of a defined bargaining period.
Employer groups generally supported the Bill,
suggesting that the current provisions were not strong enough to prevent
intended industrial action occurring even once an order was made by the
Commission under this section.
An instance of this is when a one day stoppage occurs, imposing some
inconvenience and material damages on the employer, but by the next day
everyone is back to work. The costs of pursuing the matter in the courts are
such that no further action is taken by employers. Amendments contained in the
Bill in relation to section 127 are discussed in Chapter 10.
The Australian Industrial Relations Commission, the Office of the
Employment Advocate and the Industrial Registrar
This report has already touched on issues
relating to the respective powers of the Australian Industrial Relations
Commission and the Employment Advocate. The Committee recognises that having a
strong and independent umpire available to employers, employees and their
respective organisations is an important feature of a fair an equitable
workplace relations system. The Committee believes that the proposed
legislative arrangements facilitate the continuation of this.
Australian Industrial Relations
The Department gave evidence that under the WR
Act the roles of the AIRC and the Industrial Registry were refocussed to accord
with the new workplace relations framework which gives primary responsibility
for determining wages and conditions to employees and employers at the
enterprise or workplace level. For the Commission, this involved limiting its
capacity for intervention in some areas and providing it with an enhanced role
and new powers in others.
Some witnesses believed that the changes had
diminished the powers and standing of the AIRC. Opponents of the changes to
the Commission’s functions suggest that the most significant of these relate to
the Commission’s conciliation and arbitration powers.
Professor Ron McCallum commented on the role of
having independent tribunals to ensure fairness is maintained in the
application of labour law:
In my view, the Workplace Relations and Other Legislation
Amendment Act 1996 (Cth) weakened these Fairness rights of Australian
citizens at work. It did this by allowing Australian workplace agreements which
override awards and agreements etc, to receive approval not from an independent
and public tribunal, but through a private procedure overseen by the Office of
the Employment Advocate which is a type of compliance agency. My quarrel is
not with individual workplace agreements perse, but rather with the manner in
which they lessen the Australian fairness compact which operates through public
processes by independent tribunals.
The Office of the Employment
A concern expressed by some witnesses was that
the Office of the Employment Advocate did not have the independent status that
the Commission enjoyed and it was criticised during the inquiry because of a
perception that it was skewed toward the promotion of AWAs.
The Employment Advocate was also criticised for
its application of the no-disadvantage test when approving AWAs, and its
perceived inappropriate designation of awards on which to base the
no-disadvantage test where there was no relevant award.
The Committee heard the concerns of employees or
unions that designated award, as determined by the OEA, often appear to be
completely unrelated to their line of work. However the OEA explained the
manner in which appropriate awards are designated and the Committee believes
that the allegations of bias are a matter of perception and unfounded on the
basis of the data put before the Committee by the OEA and other sources.
Industrial democracy and employee ownership
Submissions canvassing the issue of industrial
democracy concentrated on the value to employers and employees of a
consultative, participative and cooperative workplace built around teamwork rather
The Queensland Government criticised the 1996
legislation and the current Bill suggesting that the emphasis on individual
agreements was breaking down the concept of collective cooperation and
With respect to agreement making, however, the WR Act introduced significant
benefits in relation to industrial democracy. There is a greater choice in the
type of agreement and in the case of AWAs there is a high level of democracy in
determining the terms and conditions of employment. While it is acknowledged
that this was entirely possible and frequently occurred prior to 1996, this
legislation provided a formal avenue by which more people can access these
Only a few submissions to the inquiry made any
comment on this particular issue. The ACTU supports for introduction of share
ownership schemes if it is combined with good management practices and if an
adequate consultative process has taken place.
A majority of the Committee notes that employee
share schemes are the subject of an inquiry by the House of Representative
Standing Committee on Employment, Education and Workplace Relations Committee,
initiated by the Minister for Employment, Workplace Relations and Small Business
in March 1999.
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