The committee received a range of submissions and heard divergent
stakeholder views on the Fair Work Amendment (Bargaining Processes) Bill 2014
Most of the submissions received broadly supported the bill as 'an
important piece of legislation which will complement other workplace relations
legislation which has been introduced by successive Australian governments.'
However, the committee is aware of reservations expressed by some, notably
This chapter examines key facets of the bill and explores issues raised
Productivity is important
Productivity is critical to ensuring continued improvement in standards
of living, and is a key feature of global economic competitiveness:
Productivity matters because productivity gains allow more
jobs to be created, more investment to take place, higher real wage growth to
occur, and higher living standards to be achieved. Workplace productivity is
the fundamental mechanism by which workers, businesses, families and the
economy are all better off.
As stated by Nobel Prize winning economist Paul Krugman, and quoted by
the Department of Education (the department):
Productivity isn't everything, but in the long run it is
almost everything. A country's ability to improve its standard of living over
time depends almost entirely on its ability to raise its output per worker.
Australia cannot afford to be complacent about productivity. In fact,
the need to lift productivity performance is widely recognised,
as are our economic growth targets:
The need for Australia’s policy settings to support
productivity growth is essential if we are to meet the 1.8% growth target set
by the G20 Finance Ministers and improve the competitiveness of the national
The Fair Work Act
The Fair Work Act 2009 (the Act) was established to help promote
productivity whilst ensuring fairness.
A submission made on behalf of Australian Business Industrial and the New South
Wales Business Chamber Ltd encapsulated the aim of the Act as follows:
The object of the Act is to provide a balanced framework of
cooperative and productive workplace relations that promotes national
prosperity and social inclusion for all Australians. It seeks to do this by providing
workplace laws which, amongst other things, promote productivity and economic
growth and seek to achieve productivity and fairness through an emphasis on
enterprise-level collective bargaining.
Despite this fact, the Act does not explicitly require, or even
encourage, employees to consider productivity requirements in their negotiations
for new enterprise agreements.
Australia's leading national and international business advocate, the
Australian Chamber of Commerce and Industry (ACCI), posited that aspects of the
framework are in fact 'currently acting as barriers to productivity
The committee notes that the government is committed to putting
productivity back on the agenda.
Statistics provided by the department indicate that, on average, 6696
applications for approval of enterprise agreements are made each year.
Enterprise bargaining is clearly an important feature of industrial
legislation. However, attaching no importance to productivity during the
bargaining process does not pass the common sense test.
To address this, the proposed legislation would simply ensure that
improvements to workplace productivity are discussed during enterprise
bargaining. Examples of improvements include, but are not limited to:
elimination of restrictive or inefficient work practices;
initiatives to provide employees with greater responsibilities or
additional skills directly translating to improved outcomes; and
improvements to the design, efficiency and effectiveness of
workplace procedures and practices.
This requirement would not apply to negotiations for greenfields
and there would be no obligation for an agreement to be reached during
negotiations. Parties would merely have to at least consider how productivity
could be improved in their workplace, and the amendment places no extra burden
on the FWC:
[It] is not intended to require the FWC to consider the merit
of the improvements to productivity that were discussed, the detail of the
matters that were discussed, the outcome of those discussions or whether it
would be reasonable for certain provisions to be included in an enterprise
agreement. Further, the new requirement is not intended to modify or delay the
current timeframes for FWC consideration and finalisation of applications for
Submitters were largely supportive of the thrust of the amendment.
ACCI described the measure as a modest improvement:
...while not a guarantee of enhanced productivity arising from
bargaining, [the measure] will at least assist in getting the ‘issue’ of
productivity onto the table. The proposed amendment is modest and may deliver
some benefit if operating in conjunction with other measures set out in the
The Australian Mines and Metals Association (AMMA) also supported the
proposed amendment, but suggested adding a requirement that productivity be not
only discussed, but genuinely considered.
The South Australian Wine Industry Association echoed this position,
Simply mentioning the term productivity or agreeing that it
is important to lift productivity rates does not in itself lead to productivity
The New South Wales state government, meanwhile, saw definite merit in
ensuring that the parties involved in enterprise bargaining turn their minds to
the issue of productivity.
On the other hand, some submitters questioned the fundamental premise
linking productivity with wages growth:
The Bill appears to be based on an economic claim that is
arguable: that any single increase in wages without productivity growth is bad
for a country's economy.
Others, such as Job Watch, described the requirement to discuss
productivity improvements as part of the negotiation process as
Whether the employer and employees have had discussions regarding
improvements to productivity should not impact on whether an Enterprise
Agreement passes the Better Off Overall Test and is approved. Whilst presumably
discussions regarding productivity, and thus the improvement of productivity,
already occur during the Enterprise Agreement negotiation process, this should
be left to the parties to discuss among themselves.
The Australian Workers' Union expressed concerns about some of the
consequences of the proposed amendments, adding that employers may at times be
disingenuous in how they present data and information relating to productivity:
...data and documents relating to productivity in a workplace
are generally not available to employees or unions, except at the discretion of
the employer. This means that employers may pick and choose which data and
information to present as evidence to the FWC, and in what form to present it,
so as to exaggerate the actual impact of the proposed claim.
The committee notes the above concerns but is, however, aware that employees
are able to request that employers provide the relevant data and information. This
request may be followed by an order from the FWC if employers are not
The need to enhance productivity performance is widely acknowledged. In
the committee's view, it therefore follows that productivity improvements
should feature in conversations about work.
The committee notes submitter concerns about employers not always being
forthcoming with employees on issues pertaining to productivity, but is confident
that adequate protections exist to ensure that employees have access to
Protected action ballots
The Act provides that the FWC must make a protected action ballot order
if satisfied that an application has been made under section 437, and that the
applicant has been, and is, genuinely trying to reach an agreement with the
An application for a protected action ballot does not automatically trigger
protected industrial action—rather, it is an application for a determination of
whether such action will occur and how.
The bill seeks to provide clarity on the circumstances in which the FWC may
make a protection action ballot order.
In making its determination, the FWC would have to look at how
the applicant has been trying to reach an agreement with the employer, with
regard to all relevant circumstances, including the following non-exhaustive
list of matters:
the steps taken by each applicant to try to reach an agreement;
the extent to which each applicant has communicated its claims in
relation to the agreement;
whether each applicant has provided a considered response to
proposals made by the employer; and
the extent to which bargaining for the agreement has progressed.
Views on the amendment were varied. A number of unions argued that the proposed
measures would in effect curtail employees' right to strike:
The right to strike equalises the position of the employer
and employees so that they can bargain as equals with approximately equal
bargaining power. Without an ability to bargain as an equal with an employer,
employees will not be able to effectively seek and obtain their fair share of
the growth of the business, which they have played a critical role in
Evidence suggests that these fears are unfounded. Careful analysis of
the bill shows that the proposed amendments are consistent with current
practice in that the 'genuinely trying to reach an agreement test does not
require bargaining to have been exhausted or to have reached an impasse before
a protected action ballot order can be made.'
Submitters such as ACCI pointed out that the Act already requires the
FWC to be satisfied that applicants have been and are 'genuinely trying to
reach agreement,' the only difference is that there is currently no clarity on
matters to be considered in making this determination.
Master Builders Australia went further, suggesting that the requirement
for applicants to merely be 'genuinely trying' is insufficient, pointing out that
the Act does not contain any meaningful requirement that parties be acting in
good faith and offering an example of the consequences of this omission:
One of the adverse effects...is seen in the prevailing culture
in the building and construction industry. This culture is reflective of the
fact that unions force parties to sign up to pattern or template agreements or
they will suffer the consequences of industrial disruption, both lawful and
unlawful ie the ‘sign up or else’ culture that has been identified by the Cole
ACCI was similarly of the view that the 'genuinely trying to reach
agreement' requirement, as it currently stands, is ineffective:
The decision in JJ Richards & Sons Pty Ltd v Transport
Workers Union of Australia opened the door for unions to pursue industrial
action in relation to a proposed enterprise agreement, even before bargaining
has commenced, resulting in a number of significant and negative implications
for the bargaining system. It is hard to imagine this was the intended outcome
when the Act was being drafted. The threat of industrial action pursuant to
such tactics not only undermines the voluntary nature of agreement making
through ‘practical compulsion’ but has potential productivity stifling and
damaging consequences from the outset. Critically, as things currently stand,
the prerequisite that the applicant for a protected action ballot order is
“genuinely trying to reach agreement” does not present as a significant hurdle.
Evidence provided by employer groups clearly articulated the view that
unions engage in disruptive industrial action as a bargaining strategy. Master
Builders Australia further explained that there is no requirement for the FWC
to be satisfied that a party is not engaging in pattern bargaining:
This omission, combined with the absence of any constraints relating
to good faith bargaining, has contributed to the culture of ‘sign up or else’
Under the Act, protected industrial action can be taken even in pursuit
of claims that are excessive or unrealistic.
To address this, the bill would also provide that the FWC must not grant a
protected action ballot order if satisfied that:
the applicant's claims are manifestly excessive; or
the claims would have a significant adverse effect on workplace
In making its determination, the FWC would need to have regard to the
specific conditions at the relevant workplace and industry within which the
employer sits. The department informed the committee that the phrase 'conditions
in the workplace' is intended to be interpreted broadly, and that the FWC would
retain discretion on the matters it takes into consideration in deciding
whether claims are manifestly excessive.
Employer groups welcomed the amendment.
ACCI suggested that the measure would actively work to discourage ambit
claims—which can frustrate the bargaining process—and 'inject reasonableness
into claims ultimately advanced.'
Similarly, Master Builders Australia welcomed the effect the bill would
have in discouraging ambit claims, but reminded the committee that 'some level
of ambit claim may, however, be maintained because of the express limitation in
the language of the phrase "manifestly excessive".'
Not all submitters shared this view. The Maritime Union of Australia
pointed out that the content of claims often changes over the course of a
[T]his requirement [to reject manifestly excessive claims]
would have the Commission make an assessment of a claim in circumstances where
the final form of the proposed agreement is far from settled. It is often the
case that claims which may initially seem to contain ambit may at a later
stage, when "hard bargaining" has seen other claims by the applicant
fall away, no longer be characterised as "manifestly excessive".
The Australian Manufacturing Workers' Union further suggested that views
on what is reasonable or excessive would be inherently subjective:
What may be considered manifestly excessive as a final
outcome could be considered a reasonable outcome early in the bargaining
process by one party, particularly where an employer has refused to engage in
discussions and to provide their perspective about why they do not support
certain claims. Conversely, what may be manifestly excessive from an employee's
perspective may seem reasonable to an employer before they have had the
opportunity to hear from union representatives about why certain entitlements
are important to employees.
The Australian Sugar Milling Council agreed that the terms 'manifestly
excessive' and 'significant adverse effect' were subjective. The Council,
however, pointed out that the FWC will require and rely on significant detail
before making a determination.
AMMA added that the 'threshold for an employer to prove that a claim or claims
have a "significant" adverse impact may be too high a bar.'
The Maritime Union of Australia, however, rejected the premise behind
the requirement prohibiting claims that would have a significant adverse impact
[T]he implicit assumption in the Bill appears to be that
employee claims are adverse to productivity. This ignores the significant
contribution that employees make to productivity improvements, often without receiving
any corresponding benefit, as borne out by ACTU research.
The department emphasised the discretion the FWC would have in
determining whether claims would have an significant adverse impact on
For example, it may have regard to whether the claims would
have a substantial effect on the output of the workplace relative to its time or
cost inputs, if those claims were implemented in an enterprise agreement
covering that workplace. Whether a claim or claims will have a significant
adverse impact on productivity would depend on the characteristics and
capabilities of the workplace, established on the facts and circumstances of
the application. Bargaining claims initially advanced by an applicant but no
longer being pursued would not be relevant to the Fair Work Commission’s
The real cost of industrial action
Industry representatives explained that industrial action affects more
than the particular employer in question, illustrating why such action is
better prevented through good faith negotiation. Mr Daniel Mammone, AMMA, said
he did not see why simply ensuring that claims are not excessive and that they
include a focus on productivity should be of concern to anyone:
The bill is seeking to address the real problems that are occurring.
They are not made-up problems. The explanatory memorandum talks about an
industrial disputation in Port Hedland. The threat of that one particular
dispute had the capacity to affect not only that company but other companies
and their workforces. By and large, it had the capacity of $7 million a day.
That includes royalties lost—foregone—to the Western Australian government.
These are not insignificant matters. Yes, we agree that, by nature, these laws
will affect bargaining across the economy where bargaining occurs. But it will
only affect bargaining in the context of protective industrial action where it
is taken. By and large, the requirement that productivity be discussed—and
there is no formal mechanism other than the commission being satisfied that
productivity was discussed—should not be a problem across the board.
Mr Scott Barklamb, also representing AMMA, added that the cost of the
dispute to the Western Australian state government in terms of royalty income
equated 'in very short order to the entire amount it spends on homelessness in
Mr Barklamb concluded:
The point of this is to say, though, that apparently
localised disputation—what you might describe as sectional or someone might
choose to characterise as sectional or limited to an industry—does affect the
The committee also heard that the impact of industrial action can start
before any action is even undertaken. As posited by the Australian Business
Industrial and the New South Wales Business Chamber Ltd:
[T]he true impact of protected industrial action is not
confined to its actual incidence, protected industrial action also impacts the bargaining
process when it is raised as a credible threat.
AMMA offered a concrete example of an employer left with no choice but
to agree to excessive claims in order to stave off industrial action:
In our submissions, we refer to a project which was an
offshore construction project. It was actually a $4.5 billion project...Halfway
through the project, when they needed to renew the agreement to cover the
project, was where we saw extortionate pressure from the unions because the
client had millions of dollars worth of equipment on site under lease,
certainly over a million dollars a day just for the accommodation vessel. Of
course, the unions were able to use that and the protected action that was on
threat in that project to extract further extortionate claims from the company
that was building this offshore facility, including one example where the
vessel common-use ablutions allowance was paid at $90 a day, which was for the
fact that people had to walk from their room about 30 metres to go to showers
and toilets. On the new accommodation vessel, which was there at the time when
the new agreement was being negotiated, each room had its own ensuite, but they
still insisted on not just the $90 a day; that was escalated up to $110 a day.
I think the pressure in those circumstances was absolute. There was no
discussion of productivity. They had the client and the actual employer and all
of the subcontractors in a position where they could not afford to say no.
The Australian Chamber of Commerce and Industry described this approach
to industrial action as 'strike first, talk later tactics [which] undermine the
economy and a stable industrial relations system.'
The department explained that the bill would address this concern by
encouraging discussion rather than costly industrial action:
The changes in the Bill give effect to the Government’s
Policy that protected industrial action should not be able to be taken at an
early stage in negotiations, before proper and meaningful discussions have
occurred or have had an opportunity to occur.
The committee is persuaded that amendments pertaining to protected
action ballot orders would provide much needed clarity on how and when the FWC
may issue such orders. The amendments are also a reasonable and fair way of
ensuring that industrial action is not used as a first resort in enterprise
The committee recognises that both employee and employer groups
considered terms such as "manifestly excessive" and "significant
adverse effect" to be subjective. Given how complicated it would be for
employers to demonstrate, for example, significant adverse impact, the
committee is confident that this would serve as a protection for employees and
is comfortable with the onus being on employers in this instance.
The committee is concerned that much of the opposition to this bill
appears to be ideologically driven. It does not share the view that requiring
employees to consider productivity improvements in any way impinges on their
rights. In fact, given that the route to improving living standards is through
improved productivity, it is demonstrably in both employers' and employees'
interests to work together to enhance productivity.
It can unfortunately be tempting to fall into the trap of viewing
enterprise bargaining as an 'us-and-them' proposition. As is clear from the
submissions received, unions are of the view that the proposed measures give
employers the upper hand, while in employers' experience the Act doesn't
adequately balance their interests against those of unions.
It is worthwhile remembering that the modern workplace has moved beyond
that clichéd, adversarial model. Today only a small percentage of employees
feel that unions represent them, as evidenced by dwindling union membership.
The vast swathe of Australian employees work in non-unionised sectors. The
committee is very much of the view that the outdated us-and-them way of viewing
enterprise bargaining helps no one, and supports the bill's initiative in
fostering workplace dialogue founded on the concept of mutual responsibility
for mutual gain.
Evidence before the committee confirms that the bill is consistent with
the spirit of the Act in promoting both fairness and economic prosperity. It is
the committee's view that the proposed measures would enhance the Act by providing
clarity where it is desperately needed and promoting flexibility in enterprise
bargaining. The rewards are obvious—the bill would empower employees to play an
active role in the future of their workplace and help build prosperity for
future generations—while the drawbacks are non-existent. The committee has not
heard convincing reasons to impede the progress of these reforms.
The committee recommends that the Senate pass the bill.
Senator Bridget McKenzie
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