Fair Work Act Review: Much to do about nothing

by HCA20 Aug 2012

Gerard Phillips writes that the review of the Fair Work Act has been a failed opportunity to address serious structural issues in Australia's IR system.

The review of the Fair Work Act delivered precisely what most commentators and practitioners in the area of industrial relations had expected long before the report was delivered; namely that not much would be recommended and that not much would change. Why therefore is there all this ado about nothing?

The fact is the review was a significant opportunity which has been missed for the public interest to be brought to the forefront in industrial relations. Assuming that the conservatives win the next election, any attempt to re-balance the industrial laws will be met with fierce opposition from the Labor-Union-Green axis. Depending upon the composition of the Senate at the time, any attempt to re-balance the nation's workplace laws so as to put the public and the nation's economic interest at the forefront may founder. 

That is why the results of the recent Fair Work Act review represent a significant missed opportunity. I hope that this is not an opportunity which Australians will live to repent if the economy deteriorates. 

Let me take a few examples of where review ought to have gone. As readers would be aware, the Full Bench of Fair Work has recently delivered its Decision in the Qantas dispute. Significantly in dispute in the Qantas matter was the union's desire to exercise managerial control over Qantas' operations and in particular Qantas' capacity to utilise contractors or outsource various tasks. The Full Bench of Fair Work has conclusively found in favour of the employer's right to make these fundamental decisions in the business' interest free of union interference. 

This hard won result for Qantas under the present provisions of the Fair Work Act would not have been available to the vast majority of Australian businesses. You will remember that Qantas was only able to enliven the arbitration provisions of the Fair Work Act because of its extraordinary decision to ground its fleet. This caused or had the potential to cause significant damage to the Australian economy thus enabling the dispute to be arbitrated. 

Had the review carefully examined bargaining, this fault line running through the enterprise bargaining process would have been identified. For the vast majority of Australian businesses who are confronted with protected industrial action, there is no way out short of giving in. Protected industrial action is and remains a form of legally sanctioned extortion. One only has to see that in almost every dispute the playbook for Australian trade unions is to take protected industrial action as a means of wearing down an employer's economic capacity to continue bargaining. All this is sanctioned by the law and the public interest is nowhere in sight. 

What the Full Bench delivered in the Qantas decision was redolent of an earlier time in industrial relations where an independent industrial tribunal decided the rights and wrongs of dispute having regard to the public interest and established principles.

This fault line in the Act is highlighted by the conduct of the current Minister, Bill Shorten. Shorten has become the Red Adair of Australian industrial relations. His early days as Minister saw him flying around the countryside bashing heads together to resolve intractable bargaining disputes. This is because the Fair Work Act is by and largely incapable of resolving such matters other than in the extreme circumstances that confronted the nation in Qantas. In summary, the Fair Work Act has created a system of enterprise bargaining, has armed the industrial parties with the capacity to cause economic harm on business and provides little or no means of resolving the dispute these structures give rise to. Expect the trade unions to fight fiercely to retain protected industrial action as a concept simply because a well organised group of employees can exert significant power and muscle. It represents a return a more barbaric age in Australian industrial relations and is in need of urgent review. 

The other signal issue that the review has not come to terms with is the issue of productivity. In broad terms the review found that there was no evidence that the Fair Work Act had an adverse effect upon productivity in Australia. For those of you non-lawyers reading this article, the fact that there is no evidence of something does not necessarily mean that it does not exist. The whole issue of productivity is bound-up in a number of issues including the nature of enterprise agreements which exist at workplaces. How work is to be performed, how flexible the agreement is and whether or not a trade union retains a veto over management decisions will dictate the productivity of any given workplace.  I have been amazed as commentator after commentator has stated that there is no discernable link between productivity and the terms of workplaces enterprise agreement. It is complete nonsense to assert that the way work is arranged and agreed to in an enterprise agreement does not or cannot affect productivity. 

As we have seen in the Qantas dispute, and this is replicated in other industries such as construction and mining, most disputes these days are not about monetary terms in enterprise agreements. Rather they are about non-monetary terms which significantly inhibit a businesses capacity to manage its own operations. For example, in the construction industry, the CFMEU is pursuing clauses in enterprise agreements which would render nugatory the benefit of using contract labour. The CFMEU pattern clause requires a head contractor who retains sub-contractors to afford the same terms and conditions to those sub-contractors as it does to its own staff.  Unions in other industries are to a greater or lesser extent followed this lead. The economic insanity of such a provision is clear. In industries which have seasonal highs and lows, the businesses' capacity to meet those demands by use of contract labour is seriously undermined. These clauses are aimed at maximising a fulltime workforce with all of the benefits associated with that status and of course to maximise union membership.

Of course the panel did not examine the governance issues pertaining to registered organisations such as trade unions. Clearly there is a pressing need for the governance of trade unions to be examined. The answer is simple and yet the inaction is stunning. If one is a company director, the corporation's laws in this country provide for severe sanctions to those who loot company and shareholder monies. When looked at in this way, a trade union is no different, they hold members' funds on trust for their betterment. The laws pertaining to the governance of trade unions should be amended to impose the same duties upon officials of trade unions as are imposed upon company officers under the corporate laws. The same severe sanctions which can be imposed upon errant company officers ought exist for union officials. 

The argument in this country needs to come back to the point where there is an acknowledgment that a worker is better off having a job than none at all. Australia cannot endure more years of the Fair Work Act and its ill-conceived processes of enterprise bargaining.

The Review was an opportunity to deal with these serious structural issues, instead we have been left with nothing. 


About the author

Gerard Phillips is a partner at Middletons


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