Chapter 2 - Government Senators' Report
The workplace relations system
2.1
Since 1996, the workplace relations system has undergone significant
reform, resulting in substantial benefits for the Australian economy. These
reforms have given the marketplace (both workers and their employers) the
flexibility that has driven increased productivity, enhanced economic growth, improved
wages (by 20.8 per cent in real terms), far fewer industrial disputes (to the
lowest level in nearly 100 years), and greatly increased opportunities for employment.
The strength of the economy has provided workers with the highest level of job
security experienced for decades and delivered sustained improvement in the
standard of living.
2.2
Despite the real and obvious benefits of these reforms, the workplace
relations debate has been characterised by accusations that the reforms have involved
a campaign to drive down wages, remove entitlements and undermine safety net
provisions. The opposite has occurred. Such accusations were made by those with
antiquated notions of an assumption of adversarial workplace relations.
2.3
Objective commentators have noted the importance of the workplace
relations reforms. In its Economic Survey of Australia 2006, the
Organisation for Economic Cooperation and Development highlighted the material improvement
of Australian living standards since the 1990s and the importance of the
workplace relations reforms 'most notably in the second half of the 1990s'.[1]
Further, it argued that these reforms were essential instruments for
productivity growth, greatly strengthened the economy's resistance to shocks
such as the Asian economic crisis in the late 1990s, the global downturn at the
turn of the millennium, persevering drought and the end of the property boom.
2.4
The Government's reforms have been an essential response to the changes required
in the modern workplace environment and the need for industry and workers to operate
in conditions that allow a more flexible approach to workplace relations and
agreement formulation. Industries with the maximum flexibility in workplace
relations have also had the highest productivity and wages growth. In this
context, the Government's reforms also have been crucial for ensuring Australia's
retention of its competitiveness in the global market, notable for rapid
economic and technological change. It is an approach that conceives of
employers and employees working collaboratively together for a mutually
beneficial outcome.
2.5
In the past, Australia's centralised workplace relations system has allowed
wage rises to be transferred across the economy, including into unproductive
sectors. These wage increases, without justified and linked productivity
increases, artificially held down wages in productive work places and at the
same time resulted in wages break-outs that were inflationary and put upward
pressure on the cost of basic goods and services.
2.6
By moving the industrial relations system away from centralised models,
the Government has allowed employees to maximise their earning potential by
providing incentives to improve productivity with links to wage rises. These
links have instilled a process that has acted as a curb on inflationary
pressure. Consequently, wage rises are sustainable and promote increased
competition that ameliorates price increases. Some elements of the economy,
such as mining, have been extremely profitable and seen substantial
productivity rises, which has translated into wages growth. Productivity has
also been stimulated by facilitating direct negotiation at the workplace level
that is conducive to creating a climate of cooperation. The sustainability of current
living standards and economic growth rests on such continued improvements in
productivity.
The 2005 Workplace Relations reforms
2.7
In 2005, the Government took advantage of the strong mandate for
economic reform evident in the result of the 2004 elections to implement further
reform. On over 40 occasions prior to the 2004 election, the Opposition parties
had voted against various proposed reforms including the removal of the unfair
dismissal laws. This involved the introduction of legislation aimed at
providing further improvements to modernise the workplace relations system. It
was also necessary to enhance the sustainability of the economic benefits
achieved over the previous nine years by making the economy more durable to
future challenges and more competitive. In recent years, global economic growth
has increased dramatically. While this has assisted economic development, it has
also underscored the productivity increases among international competitors and
the need for further reform.
2.8
The 2005 reforms were responsible for establishing a single national
industrial relations system for constitutional corporations, which was crucial
for maintaining global competitiveness. It was also an inevitable development
in an increasingly globalised world and economy. Previously, employees and
employers were forced to contend with separate state and Commonwealth
systems—comprising 130 pieces of legislation and 4000 different awards—that
were confusing and inefficient.
2.9
The centrepiece of the Government's reforms was the strengthening and
streamlining of the Australian Workplace Agreements (AWAs) process and
extending the maximum agreement life from three to five years. This provided a
simpler and more flexible agreement-making process that encouraged efficiency
and took into account the interests of both employees and employers. This was
accompanied by a streamlining of the lodgement process. The award system was an
impediment for ensuring workplace relations accommodated individual workplace
circumstances and; therefore, hindered jobs growth. Consequently, AWAs have
become integral in key industries such as mining. As submitted by the
Australian Mines and Metals Association, a Melbourne Institute study has
revealed that average wage increases to workers on individual contracts
exceeded those under collective agreements and awards.[2]
2.10
The Government also acted to prevent damaging industrial action from threatening
economic growth. Disputes were commonplace before the Coalition assumed
government in 1996. The submission of the Australian Mines and Metals
Association notes in 2006 the total days lost to industrial action in the
resources sector declined by 98.6 per cent from the 1996 levels, and this alone
has resulted in a significant increase in productivity.[3]
The Government's reforms have encouraged employees and employers to resolve
disputes without the intervention of third parties, specifically through
introduction of a model dispute settlement procedure, requiring improved
transparency in decisions to engage in industrial action. They also empowered
the Minister for Employment and Workplace Relations to intercede in unlawful or
damaging action. On 23 May, the CEO of BHP Billiton commented that the
fostering of this direct relationship had resulted in a 25 per cent increase in
productivity.[4]
2.11
The Work Choices legislation established—for the first time at the
Commonwealth level—minimum conditions of employment that included minimum rates
of pay, maximum ordinary hours of work, four weeks annual leave, 10 days
personal/carers leave and up to 52 weeks unpaid parental leave. In many
instances, these conditions represented an upgrade from many awards. The legislation
also made it a requirement for workplace agreements to include pay and
conditions no less favourable than those of the Australian Fair Pay and
Conditions Standard (the Standard). The Australian Fair Pay Commission (AFPC) was
established to set and adjust these minimum wage rates.
2.12
The Government also addressed other impediments to employment growth,
including a review of unfair dismissal laws. Employers, especially small
business owners who lacked the resources to conduct extensive recruitment
process or manage difficult employees, now feel more confident about employing
workers and offering more security of employment.
Benefits for employers and
employees
2.13
The 2005 reforms resulted in a simpler workplace relations system that empowered
employees and employers to negotiate flexible agreements at the workplace
level. The capacity to negotiate conditions has benefited both parties and has
increased the total amount of work available. Under the Government's reform
program over the past 11 years, unemployment has fallen to 4.2 per cent with
more than two million jobs created, and real wages have risen by 20.8 per cent.
Under its 2005 reforms, the Government increased the capacity to offer part-time
or other arrangements that accommodate family requirements. Nearly 95 per cent
of jobs created since their implementation have been full-time. They have also been
granted the ability to offer a higher standard hourly rate of pay, as opposed
to penalty rates, which diminishes the pressure some employees may feel to work
weekend or other unsocial hours to maximise earnings. The Government also has
transferred to individuals the authority to negotiate conditions relevant to
their circumstances and extraneous entitlements in return for direct benefits
to them and their families.
2.14
All of these factors combine to ensure businesses can operate with increased
flexibility. Administrative burdens and non-wage labour costs have been
reduced. Increased profitability has resulted in increased investment. Taxation
revenue has increased and increases in interest rates have been arrested. The
increased competition that has been stimulated has added to the encouragement
for employers to offer greater incentives to employees, in order to retain the
most productive and best workers. The increased tax revenue benefits have led
to greater government ability to support investment in health, education and a
social safety net.
2.15
The figures tell the story of reform. In the 12 months up to February
2007, average weekly earnings rose by 4.9 per cent.[5]
Most workers on AWAs have received higher rates of pay than existing awards.
Between late 2004 and late 2006, the number of employees in the Australian
economy rose by 7.5 per cent, while workers in more precarious and casualised
employment circumstances fell.[6]
Since 27 March 2006, 94.8 per cent of new jobs created have been full
time. As the Australian Chamber of Commerce and Industry (ACCI) told the
committee during the inquiry, the flexibility in the workplace relations system
injected by the Government ensures the economy would be less affected by a
recession and recover more quickly from it.[7]
The current safety net
2.16
In addition to the improvement to flexibility of workplace conditions
over the past eleven years, the Government has been committed to the protection
of minimum wages and conditions. This has included legislative protection of a
safety net of rights such as with respect to unlawful termination of
employment, equal remuneration for work of equal value, parental leave and
freedom of association. The safety net has seen the Government's job creation flourish,
with a solid reduction in the unemployment rate.
2.17
Under the 2005 reforms, the Government established the Australian Fair
Pay Commission to maintain a minimum wage safety net. The AFPC is
independent—guaranteed by a statutory appointment, considers issues from an
evidentiary basis and approaches resolutions from the perspective of the effect
on broader economic prosperity. This responsibility involved setting and adjusting
minimum wages to protect the most vulnerable workers in the community such as juniors,
trainees, apprentices, people with disabilities and piece workers. The conditions
of the Standard have been enshrined in law and include annual leave,
personal/carer’s leave (including sick leave), parental leave (including
maternity leave), maximum ordinary hours of work, and a minimum wage. Employees
in the commonwealth workplace relations system must receive pay and conditions
equal to or more favourable than those in the Standard.
2.18
The Government also retained the awards system, but with further simplification
that preserved minimum safety net entitlements. This involved protection of
certain award conditions that can only be modified or removed by specific
provisions in an agreement. The Government also has preserved specific award
conditions for all current and new award reliant employees.
Provisions of the stronger safety net bill
2.19
The Workplace Relations Amendment (A Stronger Safety Net Bill 2007) (hereafter
the bill) provides for a stronger safety net through the application of a
fairness test, which will be administered and maintained through two
independent statutory authorities—the Workplace Authority and the Workplace
Ombudsman.
The roles of the Workplace
Authority and the Workplace Ombudsman
2.20
The Workplace Authority and the Workplace Ombudsman will receive
additional resources including additional funding of $370 million to be shared
by the two bodies over the next four years. There will also be an increase of
502 staff in the Workplace Authority to perform the fairness test and an
additional 74 staff in the Workplace Ombudsman to undertake compliance checks.
The directors of the bodies will be appointed by the Governor-General.
2.21
The Workplace Authority will be required to provide information
regarding workplace relations legislation, rights and obligations, as well as
accept lodgements. It also will assess whether or not agreements pass the
fairness test, and refer relevant matters to the Workplace Ombudsman.
2.22
The Workplace Ombudsman will assist employers and employees in
understanding obligations under the law and agreement formulation, monitor and
promote compliance to Commonwealth workplace relations legislation, investigate
possible non-compliance, enforce the legislation and represent employees in
proceedings where the representation would promote compliance with the act.
This will include regular random audits of employers of young people.
Application of the fairness test
2.23
The stronger safety net and fairness test will apply to workers on AWAs in
industries or occupations where they would be entitled to protected award
conditions and the AWA modifies or excludes one or more of those conditions,
have a base salary of less than $75 000 per year and on agreements lodged
on or after 7 May 2007. The salary does not include loadings, benefits or
allowances other than casual loadings.[8]
The bill allows regulations to be made to increase the $75 000 threshold
for the fairness test, but not for it to be lowered. The Fairness test applies
to the varying of relevant agreements on or after 7 May 2007 including those originally developed before that date.
2.24
Collective agreements are also subject to the fairness test, although it
is applied when one or more employee subject to the agreement are employed in
an industry or occupation regulated by an award and there is no monetary
threshold. Collective agreements will be required to provide fair compensation
in the overall effect with respect to modification or removal of protected
award conditions to reflect that the test is applied to a number of employees.
2.25
The protected conditions pertaining to the fairness test are penalty
rates, observance of and payment for public holidays, shift and overtime
loadings, monetary allowances, annual leave loadings, rest breaks and
incentive-based payments and bonuses. They are those that apply under a federal
award or a preserved State instrument, which binds the employer. If there is no
such instrument, the Workplace Authority will be able to designate an
appropriate federal award for the purpose of the Fairness Test. The Department
of Employment and Workplace Relations (DEWR) has advised that the minimum
entitlements in the Australian Fair Pay and Conditions Standard cannot be
traded off.[9]
2.26
All relevant working arrangements—both monetary and non-monetary—will be
involved in the application of the test, including where relevant personal
circumstances and family friendly conditions. The explanatory memorandum
provided an example that an employee may negotiate to work irregular hours to
accommodate child care responsibilities, which may involve forgoing
entitlements to penalty rates.[10]
The work obligations of the employee will also be considered, such as to ensure
adequate compensation is provided for the loss of penalty rates associated with
regular shift work or weekend work. Although the Workplace Authority will
consider the complete scope of entitlements and conditions available in an
agreement, it is expected that financial compensation will be provided in most
cases. Non-monetary compensation constitutes compensation that is considered to
be 'a money value equivalent' or provides 'a benefit or advantage on the
employee which is of significant value to the employee'.[11]
The bill provides rights for the Workplace Authority to collect information in
making assessments.
2.27
In 'exceptional circumstances' and if 'not contrary to the public
interest', the Workplace Authority has the capacity to consider various additional
factors in conducting the Fairness Test.[12]
These include the work obligations and employment circumstances of the worker,
the industry, as well as the location and economic circumstances of the
business. Such measures may eventuate as necessary to deal with a short-term
crisis to a business or assist in reviving its survivability and preserving
jobs.
Other key aspects of the bill
2.28
The bill includes protections for employees, including that employees
cannot be dismissed because a workplace agreement fails or may fail the
fairness test. In cases alleging a dismissal has occurred for these purposes,
the onus of proof will be on the employer to prove that the dismissal resulted
from other circumstances. The bill also ensures employees cannot be coerced
into modifying or removing protected award conditions and cannot be required to
sign an AWA as a condition of continued employment when new employers take over
a business.
2.29
In the event that agreements do not pass the Fairness Test, the relevant
industrial instrument will apply until an agreement is formulated that passes
the test. All relevant parties will be notified of the decision and employers
will be liable for back pay to compensate the workers from the time the
agreement was lodged. The employee and employer will have 14 days to address
the problems including with access to advice from the Workplace Authority. The
Workplace Authority will not be able to arbitrate an agreement. However, it
will provide pre-lodgement assessment advice to facilitate the preparation of
fair agreements. If agreements are not rectified within the 14 day window, the
agreement would cease to exist and the parties would be bound by the agreement
that would have applied but for the unfair agreement. Also in the case of an
unfair agreement, employees will be entitled to recover any shortfalls for any
entitlements that should have been paid during the fairness test period.
2.30
Amendments to the bill clarify and simplify existing provisions in the
workplace relations legislation by clarifying that bargaining services will
become prohibited content in agreements. This is designed to ensure employees
are not compelled to pay for bargaining services not sought or desired. It does
not prevent persons from entering their own separate contract with a third
party to provide for such services.[13]
2.31
Other amendments to the bill remove the requirement that federally
registered organisations must have a majority of members in the federal system
to be registered.[14]
This will provide certainty to employers and employees in the Commonwealth
system, relevant to farming, police and the public sector organisations where a
majority of employees may be in the state system.
Support for the bill
2.32
There is strong support for the bill, most evident in the submissions of
ACCI and the Australian Industry Group (Ai Group). In many respects they
considered the bill reasonable but unnecessary as many employees were receiving
higher levels of remuneration and conditions were only traded following
agreement between the parties to an agreement. It was suggested that
perceptions of disadvantaged employees was driven by politically motivated negative advertising and publicity. However, the
supporters of the bill considered that if a fairness test was required, the
prescribed processes under the bill were appropriate, subject to certain
amendments.[15]
Both ACCI and IPA highlighted concerns about the administrative burden that
would be imposed on employers in agreement making.[16]
2.33
IPA also supported the bill, arguing that only a small number of
employers had sought to use legal rights to disadvantage employees. However, it
considered the amendments were necessary to balance the difficulties of
ensuring workplace relations have appropriate flexibility, while recognising the
potential inequality inherent in employment relations. It maintained that the
bill addressed the uniqueness of the unequal nature of the employment contract
and made appropriate provisions to remove the legal right of an employer to
reduce an employee's overall remuneration while imposing additional work requirements.[17]
2.34
ACCI and the Ai Group also supported the additional amendments related
to providing greater certainty regarding federally registered organisations and
the reinforcement of the prohibited content provisions.[18]
Concerns about the bill
2.35
Many of the submissions raised concerns about the bill and called for
substantial amendments. They argued that there was a distinction between the
stated objective of providing a strong safety net and the application of what
was proposed. The Shop Distributive and Allied Employees' Association (SDA) stated
its view that the bill 'will simply keep a weak or nearly non-existent safety
net in operation and...does nothing to provide for a genuine stronger safety
net'.[19]
Many of the submitters suggested that without addressing what they considered
to be the inherent unfairness of the broader legislation and the inequity in
the employment relationship, employees can be misled regarding their
entitlements and will continue to be disadvantaged in agreement formulation.
Main findings of the inquiry
2.36
The committee majority report has addressed the key elements of the bill
that attracted comments from submitters and witnesses over the course of the
inquiry.
The stronger safety net criteria
and employee coverage
The income threshold
2.37
The provisions of the safety net do not apply to employees with a base
salary of $75 000 or more per year. ACCI, the Ai Group and Telstra raised
concerns with the $75 000 threshold and recommended amendment to reduce
the number of people covered and to clarify that this would apply to an
employee's remuneration package, rather than gross basic salary. ACCI's concern
was that the existing provisions would include many employees who are
relatively highly paid.[20]
Telstra raised the concern that incentive remuneration that is not incorporated
in an AWA but forms a substantial component of an employee's remuneration is
not considered. While the AWA is a static document, incentive schemes are
regularly changed to adapt to business goals. Telstra provided an example of a
recent AWA that allowed an employee the opportunity to boost their salary from
$46 000 to $84 000.[21]
2.38
However, some of the submitters called for all employees to have the
benefit of legislative protections and many specifically raised concerns about
the exclusion of employees with earnings above or, on earnings projected to a
full-time basis, to be above the $75 000 threshold.[22]
It was estimated that this would exclude between 1.14 and 1.4 million workers
or 13 per cent of employees, Â and 90
per cent of workers on AWAs.[23]
The Community and Public Sector Union State Public Services Federation Group (CPSU
PSFG) disputed the assumption that workers in this category necessarily had a
greater capacity to negotiate their conditions of employment.
2.39
The Association of Professional Engineers, Scientists and Managers (APESMA)
submitted that, as a result of this threshold, many professional and managerial
employees would not be offered any protections and could lose benefits without
fair compensation. It pointed out this would include 70 per cent of technology
based professionals, and highlighted its concern that many would be junior
employees. APESMA advocated that the safety net benefits should apply to all
employees irrespective of remuneration level, which would not prejudice
flexibility in agreement making. It submitted that, at the least, it should include
all those who would otherwise be subject to award conditions, particularly
because relevant awards do not exclude conditions on the basis of salary.[24]
2.40
The Media, Entertainment and Arts Alliance (MEAA) highlighted concerns
that the threshold would exclude many employees on part-time salaries that fall
well short of the $75 000 threshold. It pointed out that this was a
particular problem in the entertainment industry, due to the short-term,
unstable and irregular nature of many employment arrangements. A calculation of
annual income by projecting payment for one job can dramatically overstate a
worker's income.[25]
In its testimony at the hearing, the Australian Council of Trade Unions (ACTU)
also raised its concern that the fairness test would not be applied to many
part-time workers on much less than $75 000 per year, because their
projected annual earnings would exceed the threshold. It pointed out that many
have deliberately chosen hours around family responsibilities but will not have
protection of benefits such as penalty rate entitlements.[26]
2.41
The Independent Education Union of Australia noted that many and
eventually most of its members would not be offered protections under the
safety net. It argued that most of the AWAs in the non-government school sector
covered senior officials who were remunerated above the threshold. Further, it
pointed out that recent industrial agreements in NSW would mean that all
teachers after three years service would be excluded from the fairness test.[27]
Date of agreement lodgement
2.42
Many of the submitters raised concerns that employees on agreements
lodged between 27 March 2006 and 7 May 2007 would be excluded from the safety
net protections.[28]
It was submitted that many employees had been subjected to agreements that
abolished a large range of key award entitlements including penalty, overtime,
on-call and public holiday rates; annual leave loading; uniform, meals, vehicle
and travelling allowances; long service leave; redundancy pay; higher duties;
meals; time off for apprenticeship training; apprenticeship supervision; tool
allowances; minimum time off between shifts and payment for jury service.
Further, the ANF submitted that often there was no financial compensation with
a cited agreement having excluded an array of conditions, did not provide for a
pay rise over its duration and prescribed the minimum pay of the Standard.[29]
Professor Andrew Stewart of Flinders University argued that these employees
should have the right to seek termination of these agreements, though should
not be entitled to retrospective compensation.[30]
2.43
The Anglican Church Sydney Diocese submitted that these employees signed
their agreements 'in good faith...or...without any genuine choice all all'.[31]
It was argued that this exclusion would create different classes of employees
with different rights and conditions often for the same work. According to the
ACTU this amounted to approximately 961 000 workers employees.[32]
Further, it was also submitted that these employees could be without these conditions
protected under the safety net until May 2011 when some of the agreements are
due to expire. The Queensland Council of Unions (QCU) and the ACTU also submitted
that the exclusion of employees on agreements lodged in this period would protect
a 'competitive advantage to those employers that moved to reduce wages and
conditions' potentially for another five years.[33]
Award designation for the fairness
test
2.44
The exclusion of employees from occupations or industries not 'usually
regulated by an award',[34]
would exclude 1.16 million employees according to ACTU.[35]
The QCU cited a 2000 Government report that indicated 956 000 employees
were not subject to an award noting the proportion has probably increased with
the establishment of new businesses in non-award capacities since March 2006.[36]
SDA pointed out that the retail industry was only covered by federal awards in Victoria,
the ACT and the Northern Territory, leaving 73% of employees in the industry
excluded from the safety net protections.[37]
2.45
In response to some of these concerns raised during the inquiry, DEWR
has indicated that an amendment will be moved in the Senate to ensure that the
policy intention is reflected in the bill. This will guarantee that employees
in ‘traditionally’ award covered areas are subject to the fairness test and
that, in such circumstances, an award may be designated for comparison where
the work of the employee is not regulated by a federal award.[38]
2.46
It was argued that the proportion of employees not 'usually regulated by
an award' is likely to increase as the provisions regarding awards are
restricted to federal awards. Consequently, it was put that they exclude any
employee whose employment was before 27 March 2006 regulated or underpinned by
a state award but subsequently made a workplace agreement. The ACTU, QCU,
JobWatch, the Australian Education Union and Professor Stewart pointed out that
the proposed clause 52AAA of Schedule 8 only applies to workers whose
employment was governed by a Notional Agreement Preserving a State Award (NAPSA)
immediately prior to the formulation of a workplace agreement that is subject
to the fairness test.[39]
The Australian Education Union and the Independent Education Union of Australia
argued that this would mean that most teachers and educators would not be
covered by the fairness test.[40]
2.47
ACCI acknowledged the appropriateness of using an award as a comparator
for the fairness test in cases where the employee would have enjoyed award
coverage, but for entering an agreement or arrangement. However, ACCI, the Ai
Group, the RCSA and the NSW Government highlighted the potential adverse
financial consequences for businesses that may be required to compensate for
the loss of protected award conditions that previously were not applicable.
ACCI and the Ai Group called for legislative amendments to ensure these
provisions are not used to extend or provide award coverage where it would not
have previously existed and impose new obligations on employers. ACCI indicated
it was concerned the existing provisions could result in employers being
dissuaded from bargaining with non-award covered employees. Similarly, both the
Ai Group and ACCI argued that any back-pay should be based on the level of
actual entitlement, rather than a higher rate that has not been part of the
relationship.[41]
2.48
Telstra raised a similar industry specific concern. In Telstra's case
the fairness test would be applied to Telstra enterprise awards, which it
argued have had little application for years and hailed from Telstra's public
service origins. It pointed out that the application of these awards would put
it at a competitive disadvantage as they would force Telstra to raise its
hourly rates by 20 per cent, but would not apply to telecommunications industry
rivals. Therefore, it argued that a relevant industry, rather than enterprise,
award should be allocated that would apply to all competing businesses in the
same industry.[42]
The problem of contract employment
relations
2.49
The Recruitment and Consulting Services Association (RCSA) brought to
the committee's attention its prediction of the potential detrimental effect of
the bill on the contract labour industry. Although it supported the principles
of the fairness test, it argued the provisions only accounted for employment
situations that were static and traditional. In particular, RCSA warned that:
'the Fairness test will effectively eliminate the use of workplace agreements
in on-hired employment other than in select long term assignments'. It
explained that labour contract employment was unique and required terms and
conditions of employment to be set at very short notice and to remain adaptable
to varying client requirements. Its key concern was that in many circumstances
a client does not have time to obtain pre-lodgement advice and an agreement may
not have been offered or be affordable if the terms would need to be increased
following a fairness assessment.[43]
Committee view
2.50
The committee majority notes the concerns raised by many of the
submitters about the exclusion of certain employees from the application of the
fairness test. With respect to the issue of the date of lodgement of agreements
between 27 March 2006 and 7 May 2007, the committee considers that it would be
inappropriate to apply the test to legal agreements made in good faith under the
legislation of the time. Further, it notes the bill captures these agreements
in the application of the test should they be varied.
2.51
The committee considers that the income threshold provided for under the
bill is appropriate, and will capture the overwhelming majority (90 per cent) of
non-managerial employees. The key principle of the bill is to provide a safety
net protection for the lower paid or more disadvantaged workers to ensure
conditions are protected. The committee also notes the bill allows regulations
to be made to increase the $75 000 threshold for the fairness test, but
not for it to be lowered.
2.52
The committee recognises the validity of some of the concerns raised by
the submitters with respect to employees subject to award designation for the purposes
of the fairness test. It considers that those in occupations or industries not
usually covered by awards have no entitlement to protected
matters, as they have no history of award coverage. However, it acknowledges
the concerns raised by some of the submitters that there may have been unintended
technical drafting matters, which should be reviewed by the Government so that
industries traditionally covered by state awards do not fall outside the scope
of the fairness test. This should be aimed at ensuring the stronger safety net
appropriately covers those intended. The committee is reassured by the
submission of DEWR that amendments will be introduced into the Senate to ensure
the intention is reflected in the bill.
Conditions excluded from the safety net
2.53
Many of the submitters raised concerns that the safety net applied only
to a limited number of award protections and would not provide protection to
employees being disadvantaged regarding conditions not listed in the bill.[44] Further, the Anglican Church Sydney Diocese,
the NSW Government and the Finance Sector Union of Australia (FSU) expressed
concern that the safety net was based on award conditions, which they argued were
being weakened under Work Choices to the point that the safety net was becoming
flawed.[45]
2.54
Some of the submitters emphasised the importance of some of the excluded
award conditions, including non-monetary entitlements. The value of notice for
shift and roster changes was highlighted as particularly important for various
industries and employees, particularly nurses, the entertainment industry and
young workers. In its submission to the inquiry, the Australian Nursing
Federation (ANF) noted:
A majority of nurses work continuous shifts and are partially
compensated by an entitlement to additional annual leave. Many nurses also
receive sick leave and long service leave entitlements that are above the
standard.[46]
2.55
The NSW Commission for Children and Young People also highlighted the
omission of rostering notice entitlements as a problem with the bill and
existing AWAs, considering their particular importance for young people. The
Commission argued that additional protections were needed in these areas to
safeguard young people's educational and personal development.[47]
2.56
The MEAA also highlighted concerns about many industry-specific
entitlements not captured in the bill. This included the importance of shift
notice and the right to refuse unscheduled overtime for balancing family
responsibilities and often multiple employment requirements. It also
highlighted rights to compensation for accommodation expenses for short-term
engagements when required to work in a city where an employee does not have
residence. It noted that in the entertainment industry the workplace can change
on a daily basis and that employees can suffer financial loss if an engagement
is cancelled, as they often will have turned down other work. Further, the MEAA
highlighted the need for other requirements unique to its industry, including
notice to perform work that could have an effect on modesty or health, such as
requirements to smoke or work in smoking environments. It also raised the issue
of intellectual rights and entitlements to consent or royalties with respect to
use of work.[48]
Committee view
2.57
The committee majority considers the conditions protected in the
application of the fairness test to be appropriate. The committee notes the
Government's and the Opposition's commitments to simplifying the award system
to improve workplace flexibility and ensure agreements become a stimulus,
rather than hindrance, to jobs growth. Again, the principle of the bill is to
provide a safety net and the mandating of a core of protected award matters is
appropriate to provide a safety net of minimum conditions. It is noted that
this will involve providing employees with additional rights. Employees will
still retain the right to negotiate other conditions outside the safety net. The
committee also notes that the conditions of the Standard provide an additional
protection and cannot be traded.
Subjectivity in the application of
the fairness test
2.58
DEWR submitted that the lack of prescriptive details in the application
of the fairness test was deliberate so as to allow the Workplace Authority to
take account of different circumstances. Further, it indicated a prescriptive
approach would be 'bureaucratic' and 'onerous' and not conducive to quick and
streamlined agreement formulation.[49]
2.59
However, many of the submitters raised concerns about the perceived subjectivity
of the application of the Fairness Test.[50]
They submitted there was a lack of prescriptive direction regarding what could
constitute fairness, non-monetary compensation and 'significant value' to an
employee, as well as the lack of details prescribing how such determinations
would be made. Concerns were raised that the inevitable consequence of
subjectivity would be inconsistencies in the application of the test or the
disadvantaging of the parties.
2.60
In particular, the ACTU submitted that it is aware of 'numerous
instances' where identical clauses in agreements received conflicting advice
from the Office of the Employment Advocate (OEA)—to be renamed as the Workplace
Authority under the bill.[51]
Professor Stewart also cited anecdotal evidence of different interpretations
having been given by the OEA for whether or not agreements included prohibited
content.[52]
2.61
SDA added that its concern was compounded by the fact that its
experiences with the OEA suggested it was not sympathetic to SDA
representations on behalf of workers.[53]
The ACTU also raised concerns about the quality of decisions from the OEA and,
along with the NSW Government, argued that Minister's role in providing
direction undermined public confidence in its independence.[54]
The NSW Government continued that the OEA had a conflict of interest by
promoting AWAs and protection of the rights of employees, which was also
reflected in the role of the Workplace Authority.[55]
2.62
The ACTU and the NSW Government argued that the Australian Industrial
Relations Commission was more appropriate to undertake agreement assessments.
This was because the Commission has experience in the award system and in
applying the former no-disadvantage test.[56]
Extent of consultation during
Workplace Authority investigations
2.63
A particular concern was that the bill permitted the Workplace Authority
to confine its investigations to only one party of an agreement. The ACTU and
the NSW Government were particularly concerned that the bill allowed
information to be sought from either party without verification or the
opportunity to correct any misinformation.[57]
ACCI also acknowledged that the Workplace Authority could consider the value
placed by the employee on benefits involved.[58]
2.64
DEWR submitted that the Workplace Authority may contact the employer or
any employee subject to the agreement to seek further information about an
agreement or the employment circumstances of the employee or employees covered
by it.[59]
2.65
The Australian Rail, Trams and Bus Industry Union (RTBU) highlighted
that certain groups were especially vulnerable to being exploited, including
those with disabilities, young workers, those from non-English speaking
backgrounds and those with literacy problems.[60]
Job Watch argued a similar point, noting its concern that employers could
include a section in an agreement identifying a benefit as of significant
value, despite objections from an employee. Job Watch called for the bill to be
amended to require employers to provide greater explanation of the consequences
of benefit trading and to be lodged as a statutory declaration to the Workplace
Authority.[61]
2.66
The submission from Carolyn Sutherland of Monash University called for a
mechanism to be instituted that would require consultation of employees in
determining the value of benefits. The submission noted the importance of such
a provision because the bill was introduced in response to community concerns
that employees were entering unwillingly into agreements. Carolyn Sutherland's submission
concluded that consultation with employees in all cases would be impractical
and called for the requirement of employees or their representatives to lodge a
declaration on the view of the value of non‑monetary compensation. It
pointed out that due to the Minister's expectation that most compensation would
be financial, such a document would only be necessary in a minority of cases.[62]
Committee view
2.67
The workplace relations system has the principal goal of creating
increased flexibility at the individual workplace level. This includes
increasing flexibility in any kind of assessment methodology. The committee majority
considers that the discretion provided to the Workplace Authority will enable
it to meet this requirement, while still ensuring fairness can be appropriately
assessed. This will allow consideration of the different values ascribed to
various conditions by different employees. Overly prescriptive criteria under
the bill could undermine this process. It could also disadvantage workers, fail
to accommodate different workplace requirements and impose unhelpful
bureaucratic constraints. The committee highlights the protections under the
bill that compensation must be fair and that non-monetary compensation must
confer an advantage on the employee deemed to be of significant value.
2.68
However, the committee majority signals the need for policy guidelines
to be developed to assist assessors and promote consistency of decisions. It accepts
the reassurance of DEWR that it is the intention of the Workplace Authority to
do so. The committee is also confident that the Workplace Authority will
exercise its authority responsibly and provide all parties with the necessary
opportunities to inform its decision-making including the right to verify any
contentious evidence. However, it impresses upon the Workplace Authority the
need to note the concerns that were raised during the inquiry about the
application of the fairness test and ensure that it achieves both the implementation
and perception of fairness.
The scope of factors considered in the fairness test
2.69
DEWR endorsed the Government's policy of recognising the positive
benefits of considering personal circumstances in determining fairness. This would
allow an agreement to take account of different employer and employee needs and
requirements. The Ai Group agreed, noting that different individuals value
different conditions and entitlements.[63]
2.70
ACCI highlighted the appropriateness of provisions that allow
consideration of non-monetary compensation, work obligations and employees'
personal circumstances in determining fair compensation. In particular, it
highlighted evidence provided to the 2003-2005 Work and Family Test Case in the
Australian Industrial Relations Commission of requests by employees for roster
changes to accommodate family circumstances that would have incurred penalty
rate payments. ACCI indicated employers are interested in accommodating the
work-family balance, but difficulties would arise if they were compelled to
increase labour costs or breach award conditions. It also noted that the
fairness test cannot endorse agreements that undercut minimum wages and
conditions.[64]
The RCSA called for section 346M(4) to also include consideration of the
circumstances of a 'host organisation', not just the direct employer, due to
the nature of labour contract employment.[65]
2.71
However, other submitters raised concerns about the scope of factors to
be considered in the Fairness Test when determining compensation. This
particularly related to the potential for non-monetary compensation to be
provided for removal of financial remuneration, despite reassurances from the
Government that this would not be the norm. It also included the potential
disadvantaging of an employee if personal circumstances were considered.
2.72
APESMA argued that taking into account an employee's personal
circumstances in determining whether or not an agreement was fair was
'inappropriate' and prone to 'misuse'.[66]
The CPSU PSFG also argued:
The wage earner's family circumstances must not affect their
rate of pay. Work should be remunerated the value of work performed. To do
otherwise will have a significant impact on gender equity. A fundamental right
of workers is that they be paid for the work that they do. [67]
2.73
The ACTU and Professor Stewart similarly argued that differential
compensation based family responsibilities could be considered to be discriminatory,
even if reluctantly agreed to by the parties involved.[68]
The ACTU argued that unsocial hours were difficult for workers and required
compensation, irrespective of family circumstances and caring responsibilities.
It highlighted that allowing a worker's employment opportunities, or the
industry or location of a business to justify exemptions would have a
disproportionate effect on disadvantaged groups and 'undermines the essence of
the safety net in providing protection for the disadvantaged'. It pointed out
that industry-specific issues would be better addressed through the award
system.[69]
2.74
In its testimony to the committee, the SDA highlighted concerns that the
consideration of non-monetary benefits in providing fair compensation provides
'enormous scope' for employees to experience financial disadvantage, in return
for conditions that would not provide a cost to employers.[70]
The submissions of the NSW Government, Jobwatch and Professor Stewart also
raised a concern that benefits that had always been provided but not part of
the Standard could now be considered part of the compensation for the loss of
protected conditions.[71]
The NSW Government argued that the experience of workers on AWAs was that
family flexible conditions were not included.[72]
2.75
The ACTU, Australian Manufacturing Workers Union (AMWU), JobWatch and
NSW Government warned that the inclusion of non-monetary compensation would
have implications for taxation arrangements. The ACTU highlighted the issue of
Fringe Benefits Tax and whether or not the assessed non-monetary value would be
determined on a pre- or post-tax basis.[73]
The AMWU raised similar concerns regarding potential provision of child care
and affect on the child care rebate.[74]
2.76
The ACTU, the AMWU, the SDA, the Victorian Workplace Rights Advocate,
and JobWatch highlighted the need for review over the course of an agreement to
ascertain the continued value of benefits to the employee. SDA highlighted
concerns that agreements that were originally fair may become unfair over their
lifespan and any any pay rises given for the trading in of conditions can be
eroded over time.[75] The ACTU and
JobWatch cited the example of childcare to highlight that an employee's
requirements could change over a five year period.[76]
The AMWU cited an example of an agreement that passes the fairness test that
negotiated away penalty rates but an employer imposing subsequent
requirements—not considered under the fairness test—for work during unsocial
hours.[77]
The Victorian Workplace Rights Advocate proposed empowering the Workplace
Authority to ascribe weight to an agreement based on the insertion of clauses
preventing changes in conditions, undertakings to reconcile any changes and
indexation of benefits over time.[78]
Committee view
2.77
The committee majority notes that the fairness test is to be applied
after an agreement has been reached by the parties and considers that the provisions
of the bill will allow employers and employees to negotiate benefits that suit
both their circumstances while guaranteeing verification that fair compensation
has been provided for any changes in conditions. At the same time, it will
reduce the administrative burden by retaining flexibility. They strike an
appropriate balance between protecting the rights of workers and not
threatening their jobs or creating disincentives to employing others. The
Workplace Authority will be empowered to investigate as necessary including
confirming information with employees about their personal circumstances and
the significance of flexibilities acquired in return for conditions that may
have been traded off. The committee accepts the reassurance of the Government
that the Fairness Test will give primacy to monetary compensation.
The exemption of 'exceptional
circumstances'
2.78
ACCI and AMMA impressed the need for the Workplace Authority to consider
circumstances that were 'exceptional' and not contrary to the public interest.
ACCI argued that this principle has been observed over the past 15 years to
save commercial operations and jobs, although never widely misused. ACCI
highlighted the protections under the bill for employees to prevent this
section from being misused, including that the circumstances be exceptional, are
not considered contrary to the public interest, and the investigations and
assessment being made by a statutory authority. It also noted that employees do
not have to agree to such strategies, although that could lead to business
failure or redundancy. ACCI indicated it supported the Workplace Authority
querying circumstances following the conclusion of the crisis and that such
agreements would be of limited duration or provide for a return to higher
remuneration following the meeting of certain conditions.[79]
2.79
The ACTU also acknowledged the need for exemptions in cases where a
business suffers from 'a demonstrated incapacity to pay', provided the onus was
on the employer to prove the case.[80]
It argued that employees should have a capacity to challenge such a ruling and
that such agreements should be subject to regular review.
2.80
The AMWU, the Victorian Workplace Rights Advocate, the RTBU and the NSW
Government highlighted concerns about the potential abuse of the 'exceptional
circumstances' and 'public interest' provision largely because decision-making
would not be conducted in a public form to ensure accountability or be subject
to an appeal or independent review process. There was also no stipulation under
the bill of what constituted exceptional circumstances or what information
would be required in order to make a determination that such circumstances existed.
Consequently, it was proposed that the Australian Industrial Relations
Commission would be a more appropriate forum for such decision making.[81]
In particular, The NSW Government raised concerns that there was no provision
under the bill for the review of agreements where 'exceptional circumstances'
were used to lower the threshold of fair compensation. It highlighted concerns
that such agreements could still span five years, potentially long after the
crisis had passed.[82]
Committee view
2.81
The committee majority believes that the 'exceptional circumstances' and
public interest exemption is crucial for the modern day workplace and exists for
the benefit of both employees and employers. It notes that the Workplace
Authority must be satisfied that two thresholds be met before an exception can
be made, including circumstances that are both exceptional and not contrary to
the public interest. Such a provision will allow the protection of jobs and
business survivability following short term crises where otherwise employers
and employees could be severely financially disadvantaged over the long-term.
It clearly would not be available to unscrupulous employers seeking to compel
employees to subsidise the maximisation of profits.
2.82
The committee majority notes some of the concerns raised by various
submitters regarding the duration of such agreements. However, it considers
that the bill takes account of these concerns by giving explicit guidance about
their length such that they are part of a reasonable strategy to deal with a
short-term crisis in, and to assist in the revival of, a business. This
guidance reflects the operation of the previous no-disadvantage test and is faithful
to the intention that such agreements be permitted only in exceptional
circumstances and when not contrary to the public interest.
Accountability and right to review
of decision-making
2.83
ACCI did not support the need for an appeal process and considered that
once the fairness test was applied, the agreement 'must operate without scope
for subsequent challenge or litigation for underpayment or agreement
reversal...any test must stand'.[83]
The Ai Group also argued that there was no need for the legislation to reflect
an appeal or a review process, although it expected that an internal review
process would be available.[84]
However, both ACCI and the Ai Group highlighted the need for review mechanisms
in instances where the Workplace Authority may have incorrectly designated an
award for the purposes of the fairness test.[85]
2.84
The Australian Industry Group argued that the issuing of public reasons
would constitute a breach of privacy. It also considered that written reasons for
the failure of an agreement to affected parties would provide an additional
bureaucratic burden. [86]
2.85
However, many submitters expressed concerns about the lack of
opportunity for a review of decisions and no requirement to notify parties
about the reasons for a decision.[87]
The United Firefighters Union of Australia pointed out that an appeal, such as
to the High Court, would present a prohibitive cost. Therefore, it argued that this
decision making role should be conducted in the open forum of the Australian
Industrial Relations Commission.[88]
2.86
Many of the submitters argued that the reasons for decisions regarding
whether or not an agreement passes the fairness test should be provided, with
some arguing the relevant parties should be informed while others advocating
such reasons should be made public. It was argued that this would assist
transparency, consistency and more effective agreement making in the future.
According to the SDA, the provision of reasons for a finding on a fairness test
was particularly important considering the capacity of agreements to include
non-monetary conditions.[89]
Without such provisions, the MEAA considered that the bill could not provide
'administrative' or 'substantive' fairness.[90]
2.87
The CPSU PSFG highlighted its concerns about the lack of accountability
in the application of the fairness test were based on the past performance
during the earlier no-disadvantage test. It argued that the incorrect award had
often been selected, which resulted in AWAs being approved that should have
failed the no-disadvantage test. It argued that the lack of transparency and
accountability of the Workplace Authority in the application of the fairness
test meant that such errors would go undetected.[91]
Committee view
2.88
The committee majority acknowledges the numerous concerns raised by
submitters from both employer and employee organisations about the potential
need for a review of decisions made by the Workplace Authority. Some of these
concerns pertained to specific aspects of the decision-making, such as award
designation, and others concerned the broader decision on the fairness of an
agreement. However, the committee majority also recognises that agreements
subject to the fairness test will first have been agreed between the parties.
2.89
The committee majority considers it appropriate that the Workplace
Authority has an internal administrative process to ensure the consistency and
integrity of its decisions that would allow the review of decisions if
grievances are raised. This is common with any government agency, as mistakes
can be made. There has been no reason to believe this will not be the case with
the Workplace Authority, and the committee acknowledges the importance of
people's livelihoods highlights its added significance in this case. However,
the committee does not see any need for an amendment to the legislation, which
could undermine the intention of allowing the parties' confidence in the
certainty and speed of the decision-making process.
Application of the fairness test
with respect to collective agreements
2.90
The SDA, AMWU, the Office of the Victorian Workplace Rights Advocate,
Professor Stewart and the RTBU highlighted a concern about the application of
the fairness test with respect to collective agreements and particularly
section 346M(1)(b). This section allows the Workplace Authority to determine
whether or not a collective agreement provides fair compensation in its
'overall effect on the employees'.[92]
SDA raised its concern that this section could allow a minority of workers to
be substantially disadvantaged, provided the majority was not. It explained:
The clearest example of how this abuse can occur is that in the
retail industry, an employer who has the majority of its employees working
Monday to Friday, and a small number of employees who only work on a Saturday
and Sunday, negotiates a collective agreement which removes all weekend
penalties on the basis of increasing the base hourly rate of pay.[93]
2.91
Therefore, it called for an amendment to the section to ensure no
employees could be worse off:
To do otherwise is to retain a significant statutory right for
employers to deliberately and significantly reduce the terms and conditions of
employment of individual employees by the expedient of giving small marginal
improvement to a majority.[94]
Committee view
2.92
The committee majority acknowledges the concerns about the potential
effect of a collective agreement on the minority of workers in a workplace
compared to the majority. However, it considers that the bill provides the
necessary scope to the Workplace Authority to conduct investigations to
properly ascertain such affects in making its decision. The committee urges the
Workplace Authority to take particular note of this concern and ensure that
minorities of employees under a collective agreement cannot be substantially
worse off.
2.93
However, the committee does not believe that the legislation should be
amended, as there needs to be sufficient flexibility to recognise the increased
complexity in collective agreements in catering for individuals in different
circumstances who value different conditions to different extents. The role of
the Workplace Authority is to validate the fairness of agreements, and
employees covered by collective agreements should raise any concerns with
parties negotiating on their behalf prior to the agreements being formulated
and lodged.
Protections against dismissal for
reasons involving the fairness test
2.94
ACCI raised concerns with the reversal of the onus of proof related to
dismissals with respect to a failure or potential failure of agreement to pass
the fairness test. It indicated the provisions had the potential to impede
employers from dismissing employees for serious misconduct or operational
reasons. It also called for a ceiling on compensation payments dismissals
considering employees would already be entitled to back-pay. ACCI maintained
that an entity not party to the employment agreement should not be permitted to
prosecute a case against an employer.[95]
2.95
However, the ACTU, the CPSU PSFG, AMWU, JobWatch Victoria and Professor
Stewart highlighted concerns about the protections provided regarding dismissal
when the 'sole or dominant' reason pertains to a failure or possible failure of
the fairness test. Concerns were raised that an employer could dismiss an
employee if an agreement fails the test, provided the grounds were that there
was no intention to employ a worker under the conditions required for an
agreement to pass.[96]
In particular, CPSU PSFG and the Victorian Workplace Rights Advocate highlighted
the broad interpretation of the Australian Industrial Relations Commission of
the legal legitimacy of dismissal for 'operational reasons'.[97]
It was argued that an employee should be protected from dismissal if any part
of the reason is based on a failure or potential failure of an agreement to
pass the fairness test.[98]
It was also recommended the bill be amended to make dismissal because of the
failure of an agreement to pass the fairness test a new ground of unlawful
termination.[99]
Professor Stewart also highlighted concerns that the bill should address
other reprisals, such as the reduction of hours for casual and/or part-time
staff as a result of a failure of an agreement to pass the fairness test.[100]
Committee view
2.96
The committee majority notes the concerns raised by both employee and
employer groups about the provisions of the bill protecting against dismissal
with respect to the fairness test. It considers the protections to be stringent
and finds an appropriate balance between employee rights and allowing businesses
to conduct activities related to normal operation.
Consequences of agreement failure
2.97
ACCI and the Ai Group criticised the timeframe provided under the bill
for employers to lodge variations, written undertakings and back-pay following
the failure of an agreement to pass the fairness test. They noted that the 14
day timeframe commenced from the time at which the Workplace Authority issues a
notice. ACCI and the Ai Group pointed out that the time was not necessarily
sufficient for consultation with large numbers of employees, multiple sites,
multiple unions, if the period covers employee holiday periods or where there
is a delay in the mail. According the ACCI, the timeframe is particularly
important for agreements pertaining to award designations and potential
requirements for back-pay of employees. ACCI recommended amending the timeframe
to commence from the day following the receipt of the notice.[101]
The ACTU also acknowledged the complexity created by these sections of the bill.[102]
2.98
The ACTU and Professor Stewart also highlighted concerns about some of
the implications of the failure of an agreement to pass the fairness test and
the relegation of employees to the instrument that would have applied but for
the formulation of the failed agreement. In particular, they highlighted
concerns that employees could be forced back onto agreements from between 27 March 2006 and 7 May 2007 where protected award conditions had been removed without
adequate compensation. This could revert employees to a less generous agreement
than the one that failed.[103]
2.99
Professor Stewart raised further concerns about the definition of
'instrument' under Section 346Y of the bill. He argued that the exclusion of
'pay scales' and 'contracts' will hinder calculation of the short-fall owing to
an employee in the event that they are entitled to compensation.[104]
Committee view
2.100
The committee majority acknowledges the validity of some of the issues
raised during the inquiry regarding the consequences and remedial action
required in the event of the failure of an agreement to pass the fairness test.
In this respect, it urges the government to review some of the technical provisions
with a view to considering some of the recommendations suggested by the
submitters to ensure that the stronger safety net reforms adequately meet their
stated objectives. However, the committee majority also notes the availability
of the pre-lodgement checking process that is designed to give more certainty
to parties to agreements once they are lodged.[105]
The capacity and resources of the
Workplace Authority
2.101
DEWR indicated it expects that 400 000 workplace agreements will be
formulated next year. The timeframes will be subject to operational pressures
and decisions will be made as soon as practicable and necessary for a
satisfactory decision. The average time for processing such agreements would be
7–10 working days with a similar timeframe for providing pre-lodgement advice.
If lodgement was preceded by a pre-lodgement assessment, the time-frame for
agreement approval would be expedited. However, these timeframes depend on the
quality of information provided and the complexity of the agreement.[106]
2.102
The IPA indicated that it considered the OEA had provided an efficient
and rapid service for protecting employees' rights. This included prosecution
of employers that abused the system, recovering money for employees and,
correcting and approving industrial instruments.[107]
2.103
However, The ACTU, the QCA, the MEAA, the NSW Government, the Victorian
Workplace Rights Advocate, and the RCSA raised concerns about the capacity of
the Workplace Authority to provide its services in a timely manner with the
level of scrutiny required. The NSW Government highlighted that this could
potentially have serious implications for small businesses that may face a
substantial back-pay requirement.[108]
The RCSA also highlighted the potential adverse effects on the on-hire
industry.[109]
2.104
In particular, some of the submissions highlighted the discretionary and
unique value placed upon non-monetary benefits, which would impose a
substantial resource commitment on the Workplace Authority to adequately
perform its role. The AMWU highlighted child care requirements would be valued
differently by different employees and depend on various factors unique to
different circumstances, including the type of care required, age and number of
children, location of facilities and length of care required. This would
require extensive inquiries.[110]
Similarly, the NSW Government noted the value of a car-space would not be a
constant and would differ between individuals, as well as locations. It also
argued that this would complicate calculations by the Workplace Authority of
the value of non-monetary benefits in greenfield agreements, given the
employees do not exist and; therefore, cannot be consulted when an agreement is
lodged.[111]
2.105
Some of the concerns about the capacity of the Workplace Authority to
perform its duties in a timely fashion were related to the performance of the
OEA. The ACTU submitted that OEA advised parties that the turn-around time
expected for pre-lodgement advice is 30 working days and there have been
instances of it taking 10 weeks.[112]
The Victorian Workplace Rights Advocate highlighted practices such as using
community partners to pre-assess agreements, computer programs to provide
preliminary assessments and pressures to achieve performance goals.[113]
The NSW Government submitted that the training to be provided may not be
sufficient for adequate and timely agreement processing.[114]
Further, the SDA suggested problems would be exacerbated by the lack of
experience of newly recruited contractors or public servants to administer the
fairness test.[115]
Committee view
2.106
The committee majority acknowledges that the discretion provided to the
Workplace Authority and the scope of factors in its mandate for consideration
in the application of the fairness test will require a substantial resource
investment. At this stage, it is unclear if the additional resources allocated
will be sufficient. In particular, the determination of the significance of
non-monetary compensation could prove to be extremely resource intensive.
2.107
However, the committee's concerns are assuaged by the reassurance of
DEWR that employees will most often be compensated with a higher rate of pay in
lieu of protected award conditions,[116]
and notes the testimony of ACCI that such inclusions in agreements are
'ahistorical'.[117]
Nevertheless, the committee notes the emphasis of all parties during the
inquiry of the need for rapid agreement assessment. Therefore, it advocates monitoring
the Workplace Authority in its performance and highlights the importance of it developing
streamlined processes that are conducive to fair but rapid decision-making.
Conclusion
2.108
The committee majority considers that flexibility in workplace
agreements is crucial for improving productivity, employment and suitability of
workplace conditions. This also allows employees to negotiate conditions that
are more appropriate to their circumstances. Some apprehension has been
expressed in the community that agreements could possibly be negotiated that
remove entitlements without adequate compensation. This has been driven largely
by a campaign more remarkable for rhetorical excess than for evidence-based
comment. This has injected unnecessary tension into the relationship between
workers and employers. Nevertheless, the Government has been receptive to
community concerns and in response to perceptions of the need for added protections,
has proposed the bill.
2.109
The committee majority considers that the bill provides a strengthened
safety net for workers. The fairness test will augment the already existing
safety net—particularly as imparted by the Standard—and provide greater reassurance
for vulnerable workers such as young people and those from non‑English
speaking backgrounds. The Fairness Test will extend to more than 90 per cent of
the non-managerial workforce.[118]
2.110
At the same time, the stronger safety net does not change the fundamental
principles of the Government's previous reforms and continues to facilitate
workplace flexibility, higher productivity and a greater degree of cooperation
between employers and employees that is essential for preserving and improving
standards of living. It will be consistent with the 2005 reforms and will allow
the continuation of growth in wages, employment and productivity. Employers and
employees will retain the capacity to negotiate modification or exclusion of
the protected award conditions to ensure flexibility, but will now need to
ensure there is adequate compensation in return.
2.111
The committee majority also notes the concerns raised by many of the
submitters about the bill, most of which relate to the application of the
fairness test. However, the committee is of the view that flexibility is
necessary to take account of different circumstances of employers and
employees. The committee concurs with the conclusion of DEWR that the bill will
provide substantial additional protections for employees through the
application of the fairness test by an independent statutory office. Further, the
committee has confidence in the integrity and capability of the Workplace
Authority to perform its responsibilities in a fair and balanced fashion. It
was further reassured during the public hearing about the Department's intention
for the Workplace Authority to develop policy guidelines to assist in the
application of the fairness test. However, the inquiry highlighted the need for
the Workplace Authority to take account of the concerns raised by interested
parties and detailed in this report, to ensure the fairness test is applied,
and seen to be applied, in a balanced manner.
2.112
The committee also notes the concerns raised during the inquiry about
various technical drafting issues that may complicate the bill achieving its
stated objectives. The committee appreciates that DEWR did a commendable job in
drafting the bill so quickly, especially recognising the importance of ensuring
enhanced protections are provided as soon as possible to employees. As with the
necessary speed in the conduct of this inquiry, it was important to ensure
there were no delays that would deny average workers the access to entitlements
and adequate compensation, or to provide uncertainty to agreement formulation.
Nevertheless, the committee considers it necessary that the Government review
the issues raised and the recommendations proposed during the inquiry with a
view to ensuring potential drafting issues highlighted do not undermine the capacity
of the stronger safety net reforms to provide fairness to both employers and
employees. The committee appreciates the flexibility of the Government and
responsiveness to the inquiry process. The committee notes that the Government
has already undertaken to move an amendment to reflect some of these concerns
and ensure the policy intent is reflected in the legislation.[119]
Recommendation 1
2.113
The committee recommends that the Government consider the various
technical and consequential amendments proposed during the inquiry with a view
to correcting unintentional drafting errors and ensure the stronger safety net
reforms adequately meet their stated objectives.
Recommendation 2
2.114
The committee recommends that the Workplace Authority take note of those
concerns raised during the inquiry about the duration of agreements that might
be made where it is claimed that there are exceptional circumstances. It notes
that Section 346M(5) will provide the Workplace Authority with guidance and
that it will have to be satisfied that it is not against the public interest to
have regard to the matters outlined in Section 346M(4).
Recommendation 3
2.115
The committee recommends that the Workplace Authority take note of the
concerns raised during the inquiry about the application of the fairness test
and ensure that these inform the performance of its duties, so that the
principle of fairness will be considered by all parties to have been observed.
Recommendation 4
2.116
The committee recommends that the bill be passed.
Senator Judith Troeth
Chairman
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