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SUBMISSION OF THE VICTORIAN GOVERNMENT

TO THE FAIR WORK ACT REVIEW

February 2012

Victorian Government Submission to the Fair Work Act Review

1 SUMMARY 4

2 INTRODUCTION 7

The Review 7

Victoria’s Participation in the Commonwealth Workplace Relations System 7

3 THE BUSINESS ENVIRONMENT, PRODUCTIVITY AND THE WORKPLACE RELATIONS SYSTEM 9

The Economic Outlook 9

Productivity Performance and Initiatives 10

Case Study – Productivity in the Construction Industry 12

Victorian Government Response to Declining Productivity Growth 12

Imperatives for the Workplace Relations System 13

Capacity of Businesses to Meet These Imperatives under the Fair Work Act 13

Conclusion 14

4 IMPEDIMENTS TO WORKPLACE FLEXIBILITY 15

Key Business Concerns 15

Individual Flexibility Arrangements 17

Transfer of Business 19

Case Study – the Retail Industry 20

Case Study – Minimum Shift Lengths under the Retail Award 21

Conclusion 22

5 ENTERPRISE BARGAINING 24


Constraints on Business Management 24

Greenfields Agreements 26

Good Faith Bargaining 27

Majority Support Determinations 28

Pattern Bargaining 28

Case Study – the Victorian Building and Construction Industry 29

Other Victorian Initiatives 30

Conclusion 31

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6 INDUSTRIAL DISPUTATION 32


Deteriorating Industrial Climate 32

Industrial Action should not be the First Step in Negotiations 32

Expansion of Matters that may be Regulated by Agreements 33

Expanded Rights of Entry 33

Increasing Levels of Industrial Disputation 34

Case Study – High Levels of Industrial Disputation in the Construction Industry 36

Office of the Australian Building and Construction Commissioner 37

Conclusion 38

7 UNFAIR DISMISSAL AND THE GENERAL PROTECTIONS 40


Unfair Dismissals 40

Unfair Dismissals - Impact on Small Business 42

Unfair Dismissals - ‘Go away’ money 43

General Protections 44

Case Study – the Barclay Decision 46

Conclusion 46

8 COMPLEXITY OF THE SYSTEM 48


Victorian Small Businesses and the Impact of the Fair Work Laws 48

Complexities with the Operation of the FW Act 49

Transitional Arrangements 49

Expanded Rights of Entry 50

Bargaining Rules and IFAs 50

Unfair Dismissal and General Protections Claims 51

Case Study – the Equal Remuneration Case 51

Case Study – the Long Service Leave NES 52

Conclusion 53

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1 SUMMARY

1. The Commonwealth Government should recognise that the experience of stakeholders with the Fair Work Act 2009 (FW Act) justifies sensible and reasonable amendments to the Act to better promote employment opportunities for Australians and greater business investment. This will only be achieved through improved productivity and flexibility.

2. In making this submission, the Victorian Government wishes to make it clear that it is committed to the maintenance of a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions of employment. The Victorian Government believes, however, that there is ample scope for the Commonwealth Government to address the many concerns raised by stakeholder groups about the inflexibility of the Commonwealth workplace relations laws, whilst maintaining that guarantee.

3. From the commencement of the FW Act in July 2009, business and employer groups have raised mounting concerns about the impact of the Commonwealth’s workplace relations system on their capacity to meet the challenges posed by the global and Australian business environment and to build and maintain productive and competitive businesses. In light of these concerns, the Victorian Government considers that the Commonwealth’s post-implementation review of the FW Act (Review) is overdue.

4. The Victorian Government is also concerned that the Commonwealth Government has not utilised the inter-governmental consultation arrangements that accompanied Victoria’s industrial relations referral, to engage with Victoria to consider and to address the pressing concerns of business and employer groups about the operation of the Commonwealth’s laws.

5. The current economic climate remains highly uncertain, with many industries not connected to the resources sector experiencing difficult conditions and a weak outlook. Victorian businesses face specific challenges from the high Australian dollar, changing patterns of consumption and investment and low consumer and business confidence.

6. Productivity growth, which is key to long-term income growth, has deteriorated in recent years. Turning this around requires a broad-based agenda from governments.

7. Workplace relations laws that enable responsive and flexible markets to promote productivity and competitive practices are key to improving economic growth and well-being. However, the response from business after two years of the FW Act suggests that the current framework does not adequately support these objectives.

8. The Victorian Government has observed a rising chorus of concerns from business and employer groups that the workplace relations system promised by the Commonwealth Government has not been delivered by the FW Act, and that the Act, in a number of respects, is impeding rather than promoting business flexibility and productivity.

9. Key business concerns include that in practice “flexibility terms” in modern awards and enterprise agreements are too rigid, uncertain in operation and fail to deliver the flexibility promised, and that the “transfer of business” provisions impose severe constraints on business flexibility and may operate against the interests of both employers and employees.

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10. Effective award flexibility arrangements are crucial for small businesses, for which enterprise bargaining will generally not be a practical means of establishing enterprise-appropriate workplace arrangements.

11. Notwithstanding the objectives of the FW Act’s enterprise bargaining framework, business and employer groups are reporting that it has increased the difficulty of negotiating enterprise agreements and is making productivity improvements more difficult to achieve.

12. Key business concerns include: increasing claims for enterprise agreement clauses that regulate the engagement of contractors and labour hire employees; that the arrangements for “greenfields agreements” are encouraging excessive union claims and disputes between unions; that the good faith bargaining obligations have added complexity to bargaining processes without delivering benefits, and that the FW Act has proven ineffective in dealing with pattern bargaining.

13. The Victorian Government is concerned that pattern bargaining continues to be endemic in a number of industries, and in particular, in the Victorian construction industry. The Victorian Government is implementing a range of initiatives in support of a more productive construction industry.

14. Recent statistics showing rising industrial disputation support the concerns of business and employer groups that the FW Act’s bargaining framework and rules governing industrial action are contributing to a deteriorating industrial climate. The Victorian and Australian construction industries provide a particularly acute example.

15. The Victorian Government is concerned that if the Commonwealth Government’s Building and Construction Industry Improvement Amendment (Transition to Fair Work) Bill 2011 is enacted, the framework regulating industrial action and coercion under the FW Act will not be adequate to deal with the continuing high levels of unlawful and inappropriate behaviour in the construction industry.

16. The Victorian Government urges the Commonwealth to consider changes to the FW Act to establish mechanisms that will better assist employers and employees to resolve disputes and settle enterprise agreements without resort to industrial action.

17. Business and employer groups report that the FW Act’s unfair dismissal and “general protections” provisions have failed to strike the right balance between the interests of employers and employees.

18. Key business concerns include: the Small Business Fair Dismissal Code has not operated as intended; many unfair dismissal and general protections claims are speculative; employers are having to pay “go away” money to settle unmeritorious claims, and the general protections are too broad and uncertain in operation.

19. The Victorian Government notes that business and employer groups have proposed a range of changes to the FW Act’s unfair dismissal and general protections provisions that they believe would better balance the interests of employers and employees.

20. Business and employer groups report that the FW Act has not created “a clear and stable framework of rights and obligations which is simple and straightforward to understand” in a number of important respects.

21. Key business concerns include the regulatory burden imposed by the complex transitional arrangements, and the complexity and uncertainty in practice of the new

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union right of entry rules, the new bargaining framework and the general protections provisions.

22. The Victorian Government is particularly concerned about the regulatory burden that the Commonwealth laws impose on small business.

23. The Victorian Government urges the Commonwealth to address the serious concerns reported by business and employer groups regarding the operation of the FW Act, in the interests of Victorian businesses and their employees and the long term economic prosperity of all Victorians.

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2 INTRODUCTION

The Review

1. The Victorian Government welcomes the opportunity to make a submission to the Review.

2. Since the FW Act’s commencement, business groups and employers have raised mounting concerns about the Act’s impact on their capacity to meet the challenges posed by the global and Australian economic and business environments and to build and maintain productive and competitive businesses. The Victorian Government has previously expressed its view that this Review is overdue, in light of these concerns.

3. The Review must rigorously examine the concerns raised by all users of the Commonwealth workplace relations system, and propose changes to the FW Act to promote business productivity and competitiveness, and fairness to employees, for the benefit of all Australians.

4. The Commonwealth Government has committed to conducting the Review in accordance with its best practice regulation requirements and the Review Report is to be assessed by the Commonwealth’s Office of Best Practice Regulation to ensure that it meets those requirements. The Victorian Government supports this scrutiny of the Review Report.

5. This Submission begins by outlining the challenging business environment faced by Australian and Victorian businesses.

6. This Submission then outlines key concerns raised by business groups and employers about the impact of the FW Act on workplace flexibility, enterprise bargaining, industrial disputation, and unfair dismissal and “general protections” claims. This Submission also outlines particular concerns with the complexity of the Commonwealth laws.

7. The Victorian Government urges the Commonwealth Government to respond to these concerns.

Victoria’s Participation in the Commonwealth Workplace Relations System

8. The Commonwealth’s workplace relations system is now constitutionally supported by the corporations power and in Victoria by the Victorian Parliament’s referral of certain workplace relations matters to the Commonwealth under the Fair Work (Commonwealth Powers) Act 2009 (Vic) (Victorian referral). Both large and small Victorian businesses consequently depend upon the Commonwealth laws enabling them to establish and maintain necessary flexibilities in workplace arrangements and efficient and productive workplaces.

9. The Victorian Government recognises the potential for harmonised workplace relations laws to reduce the regulatory burden on business and impediments to businesses operating across multiple jurisdictions. However, nationally harmonised workplace relations arrangements must also meet Victoria’s interests by facilitating business investment, increased employment opportunities and sustained economic growth.

10. As part of Victoria’s 2009 referral arrangements, a new Inter-Governmental Agreement for the National Workplace Relations System for the Private Sector (IGA) was executed by Victoria, other referring States and the Commonwealth. The IGA sets out

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governance arrangements for the Commonwealth’s workplace relations system for the private sector. These governance arrangements provide a vital mechanism for jurisdictions to advocate State interests in relation to the operation of the Commonwealth laws.

11. The IGA mandates consultation on proposed changes to the FW Act and related legislation through a Ministerial council and associated groups of senior government officials.

12. However, there are worrying trends in the Commonwealth Government’s treatment of these consultation arrangements. This includes the failure of the Ministerial council to meet regularly. The Workplace Relations Ministers’ Council (WRMC) only met once in the period from 1 January 2010 to September 2011. The Select Council on Workplace Relations, which replaced WRMC from September 2011, is yet to meet.

13. The Victorian Government is also concerned about recent instances where the Commonwealth has introduced Bills into the Commonwealth Parliament that would change the Commonwealth legislation or significantly impact upon State laws, without sufficient prior consultation.

14. Most importantly, the Victorian Government is concerned that the Commonwealth Government has not utilised the inter-governmental consultation arrangements to engage with Victoria to consider the pressing concerns of business groups and employers about the operation of the Commonwealth’s workplace relations laws.

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3 THE BUSINESS ENVIRONMENT, PRODUCTIVITY AND THE WORKPLACE RELATIONS SYSTEM

1. Section 3 of the FW Act begins “[t]he object of this Act is to provide a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians …”

2. Importantly, as acknowledged by the Review’s Background Paper:

By requiring examination of whether the effects of the legislation have been consistent with the Object set out in Section 3 of the Fair Work Act, the terms of reference encompass consideration of economic goals such as economic growth, productivity, and economic prosperity along with the range of other policy objectives set out in Section 3.1

3. This Section of the Victorian Government’s Submission outlines Australia’s and Victoria’s recent patchy economic performance and the uncertain near-term outlook, before examining the recent deteriorating productivity performance. It then considers the principles which should support the FW Act in delivering greater flexibility, innovation and productivity. The Section finishes by noting business’s concerns about their capacity to meet these imperatives under the FW Act.

The Economic Outlook

4. The current economic outlook is characterised by heightened uncertainty in global conditions, which have largely been dominated by events in Europe.

5. Global economic growth is moderating, as uncertainty stemming from the European debt crisis persists and affects both high-income countries and emerging economies. The outlook remains subdued and the prospect of a slow recovery seems likely, with world growth forecasts for 2012 and 2013 revised down.2 The balance of risks for the outlook are weighted significantly to the downside.

6. While the Australian economy continues to outperform other developed countries, weaker global conditions are dampening Australia’s near-term economic outlook. The Commonwealth Government’s Mid-Year Economic and Fiscal Outlook (MYEFO) forecasts Australian gross domestic product (GDP) to grow 3.25 per cent in both 2011-12 and 2012-13.

7. There has been a significant slowdown in Australian employment growth, with national employment little changed over the year to December 2011. The national unemployment rate increased to 5.2 per cent to be higher than one year ago, while a fall in the participation rate has muted the rise in unemployment. While pockets of skill shortages remain, indicators of labour demand, such as job advertisements, point to a subdued near-term outlook for the labour market.

8. Wage rates growth has recovered significantly since the global financial crisis, but recent official data points to moderating wage outcomes in light of the weaker labour market.

1 Commonwealth Government, ‘Fair Work Act Review Background Paper’ (January 2012) 2.2 World Bank, ‘Global Economic Prospects 2012’ (IV, January 2012) 1; International Monetary Fund, ‘World Economic Outlook’ (Update, January 2012) 1.

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9. The Victorian economy has held up despite challenging global conditions and a weakening national economy. Victorian gross state product (GSP) grew by 2.5 per cent in 2010-11, though growth is expected to be slightly softer in 2011-12.

10. Victoria’s labour market outlook has softened in line with the national market in 2011, with the unemployment rate expected to rise to 5.5 per cent in 2011-12.3

11. Continued strong global demand for resources is resulting in significant divergences in regional and industry performance. While the resources and related sectors continue to perform strongly, other sectors are being squeezed by the high Australian dollar and increased consumer and business caution. Reflecting this, the near-term outlook for industries such as manufacturing,4 international education and tourism is subdued.

12. Intensifying competition, the globalisation of supply chains and shifting patterns of consumption and investment are also weighing on a number of industries, including manufacturing and wholesale and retail trade. Furthermore, although the financial and insurance services industry has been a key source of growth in the Victorian economy, continued global uncertainty is now affecting employment prospects for this sector.5

13. Any changes to the FW Act proposed as a result of this Review should consider the current economic environment. In particular, any proposals should consider the consequences that could flow through to an economy facing an uncertain outlook and softening labour market.

Productivity Performance and Initiatives

14. Productivity measures the efficiency of the production process, namely how many units of output can be produced from a given amount of inputs. It plays a fundamental role in determining long-term economic prosperity and living standards. Research by the Productivity Commission and Victorian Government, among others, suggests that a small increase in labour productivity can have a large impact on economic activity.6

15. The economic reforms of the 1980s and 1990s, such as financial market deregulation, more decentralised wage setting and national competition policy, are widely credited with boosting Australia’s and Victoria’s productivity growth during the 1990s.

16. Figure 3.1 shows that Australia and Victoria recorded relatively strong average annual labour productivity growth over the cycle from 1998-99 to 2003-04. Since then, productivity growth across Australia and Victoria has slowed, including in the current incomplete cycle which incorporates the commencement of the FW Act.

3 Victorian Government, ‘2011-12 Victorian Budget Update’ (Budget Update, December 2011) 12-13.4 Weaker conditions are already resulting in announcements of job cuts in the industry, including the closure of Heinz’s factory in the Goulburn Valley, Toyota’s intention to cut 350 jobs from its Altona plant and Alcoa’s review of the future viability of its Point Henry smelter in Geelong.5 ANZ has recently announced that it will cut a total of 1000 jobs from its Australian workforce by September 2012 in response to weakening revenue and uncertain global economic conditions. In February, Westpac announced a proposed reduction of up to 560 positions in 2012 due to higher funding costs and global economic uncertainty.6 Gary Banks, ‘Back to the Future: Restoring Australia’s Productivity Growth’ (Speech delivered at the Melbourne Institute/Australian Economic and Social Outlook Conference, 5 November 2009); Victorian Government, ‘A More Competitive Manufacturing Industry - New Directions for Industry Policy and Manufacturing’ (December 2011) 10.

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Figure 3.1

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Labour Productivity

Victoria AustraliaABS, National Accounts* incomplete productivity cycle

17. Measures of labour productivity provide only a partial indication of productivity trends, given they ignore the importance of capital in the production process. A more complete measure is multifactor productivity (MFP), which incorporates both labour and capital inputs. Figure 3.2 shows the long-run deterioration in Australian MFP growth over all of the productivity cycles in the past 15 years.

Figure 3.2

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Australian Multifactor Productivity

ABS, Experimental Estimates of Industry Multifactor Productivity, 2010-11, (Cat No 5260.0.55.002) * incomplete productivity cycle

18. While the Productivity Commission has argued that most of the recent decline in productivity growth is accounted for by only a few industries,7 more recent analysis by the Victorian Competition and Efficiency Commission (VCEC) suggests that the productivity slowdown has been more broadly based.8 VCEC notes that other factors

7 Productivity Commission, Submission No.20 to House of Representatives Standing Committee on Economics, Inquiry into Raising the Level of Productivity Growth in the Australian Economy, September 2009, VI.

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may have contributed to the productivity slowdown, including the absence of structural and regulatory reforms.9

Case Study – Productivity in the Construction Industry

19. The national construction industry provides a case study of declining productivity growth. The Victorian Government is concerned that this, along with high costs within the industry, are having a significant negative impact on the Australian and Victorian economies.10

20. Over recent productivity cycles, there has been a clear downwards trend in construction industry MFP growth rates.11 The industry’s productivity performance is also uncompetitive when compared to the United States, a position which has deteriorated further over recent years.12 Productivity in the construction industry has also been negatively affected by the comparatively high levels of industrial disputes, an issue discussed further in Section 6 of this Submission.

Victorian Government Response to Declining Productivity Growth

21. The challenges outlined above highlight the importance of the Victorian Government’s renewed focus on enhancing productivity growth to contribute to the State’s competitiveness and long-term income growth.

22. As outlined in the 2011-12 Victorian Budget Update, the State Government is implementing a broad-based productivity agenda, building on the following themes:

a more competitive business environment (through regulation and competition reform);

fiscal sustainability and efficient taxation;

targeted industry and innovation policy;

enhancing infrastructure provision;

investment in skills and reform of education and training; and

efficient government service delivery.

23. The Victorian Government is placing a renewed focus on competition and regulation reform to reduce costs for businesses, with a particular emphasis on reducing red tape. As the Commonwealth Government’s Best Practice Regulation Handbook notes, high quality regulation that is efficient and effective can result in productivity improvements.13

8 Victorian Competition and Efficiency Commission, ‘Securing Victoria’s Future Prosperity: A Reform Agenda’ (Productivity Information Paper, January 2012).9 Ibid.10 See, for example, Victorian Government, Submission No. 17 to Senate Committee on Education, Employment and Workplace Relations, Inquiry into the Building and Construction Industry Improvement Amendment (Transition to Fair Work) Bill 2011, February 2012.11 Australian Bureau of Statistics, ‘Experimental Estimates of Industrial Multifactor Productivity’ (2010-11) 5260.0.55.002.12 Commonwealth Treasury, ‘International Comparison of Industry Productivity’ (Economic Roundup, Issue 3, 2008).13 Commonwealth Government, ‘Best Practice Regulation Handbook’ (Canberra, 2010).

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Imperatives for the Workplace Relations System

24. Competition and flexible markets, including labour markets, create an environment in which businesses can implement innovative processes and practices in the workplace, introduce productivity-enhancing changes to their operations and drive down costs.

25. Flexible markets allow businesses to make necessary adjustments to weather challenging economic circumstances. They allow businesses to adapt and, where necessary, adjust their capacity to changing demand conditions. This is particularly important given the current uncertain business environment.

26. An essential part of flexible labour markets is wage-setting arrangements that support productivity improvements to encourage investment, increase employment opportunities and sustain growth in economic activity and living standards.

27. Furthermore, businesses require a workplace relations system that delivers flexibility and incentives for productivity improvement through:

promoting flexibility in agreement-making, including through genuine enterprise-level bargaining and individual employment arrangements;

providing an appropriate safety net of minimum conditions, including awards that are simple to comply with and allow for appropriate flexibility; and

encouraging employment growth and increased workforce participation.

Capacity of Businesses to Meet These Imperatives under the Fair Work Act

28. Two years into the operation of the FW Act, businesses have expressed concern that the current legislative framework does not provide sufficient flexibility to support the achievement of the objectives outlined above.

29. In 2011, the Australian Industry Group (Ai Group) conducted a survey of member companies on the impact of the FW Act on productivity and flexibility. 14

Seventy-four per cent of large employers (500 or more employees) surveyed reported that the new bargaining laws had made it more difficult to negotiate flexibility or productivity improvements. Of the respondents who did report an increase in productivity since the FW Act commenced, very few attributed this to the Commonwealth legislation.

30. Furthermore, a 2011 survey of human resource practitioners conducted by the Australian Human Resources Institute (AHRI) found that the Commonwealth laws have led to increased labour costs, a rise in employee absenteeism and declining or plateauing productivity.15 Forty-seven per cent of human resource practitioners surveyed by AHRI believed that the operation of the FW Act would decrease the willingness of their organisation to employ people over the next three years.

31. Small business employers, crucial contributors to the State’s economy, have also articulated concerns about rising employment costs and a lack of flexibility as a result of the FW Act. For example, the Australian Chamber of Commerce and Industry (ACCI) notes that the cost and complexity of the transition to modern awards is a common issue of concern among small and medium enterprises (SMEs). This is

14 Heather Ridout, ‘Taking Charge of Our Future’ (Speech delivered at the National Press Club, Canberra, 30 November 2011).15 Australian Human Resources Institute, ‘The Fair Work Act: Its Impact within Australian Workplaces’ (Research Report, January 2012) 5,23,26.

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especially the case in the hospitality, tourism and retail sectors, where award reliance is high.16

32. Key concerns of business groups and employers with specific aspects of the FW Act are discussed in subsequent sections of this Submission.

Conclusion

33. The current economic climate remains highly uncertain, with many industries not connected to the resources sector experiencing difficult conditions and a weak outlook. Victorian businesses face specific challenges from the high Australian dollar, changing patterns of consumption and investment and low consumer and business confidence.

34. Productivity growth, which is key to long-term income growth, has deteriorated in recent years. Turning this around requires a broad-based agenda from governments.

35. Workplace laws that enable responsive and flexible markets to promote productivity and competitive practices are key to improving economic growth and well-being. However, the response from business after two years of the FW Act suggests that the current framework does not adequately support these objectives.

16 Peter Anderson, ‘Employer Flexibility Versus Job Security: Is the FW Act a Bargaining Disaster?’ (Speaking Notes for speech delivered at the 10th Annual Workforce Conference, Sydney, 5 September 2011).

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4 IMPEDIMENTS TO WORKPLACE FLEXIBILITY

1. The Commonwealth Government has properly acknowledged that the answers to the challenges facing the Australian economy “lie in fresh ideas that can make our economy more flexible, productive and participative”.17

2. The Commonwealth Government promised a workplace relations system “that gets the balance right in the workplace and achieves both fairness and flexibility”.18 This is reflected in the objects in section 3 of the FW Act, including:

(a) providing workplace relations laws that are fair to working Australians, that are flexible for business, promote productivity and economic growth for Australia’s future economic prosperity …

(d) assisting employees to balance their work and family responsibilities by providing for flexible working arrangements …

(f) acknowledging the special circumstances of small and medium-sized businesses.

3. Particular features of the FW Act intended to deliver such flexibility include:

an emphasis on enterprise bargaining to “promote productivity and fairness”;19

modern awards, which “must be economically sustainable, and promote flexible modern work practices and the efficient productive performance of work”;20

flexibility terms in all modern awards and enterprise agreements, “that enables an employee and his or her employer to agree on an individual flexibility arrangement that will vary the operation of the award [or agreement] to meet the genuine needs of the employee and employer”;21 and

transfer of business rules that balance “the protection of employees’ terms and conditions of employment and the interests of employers in running their enterprises efficiently”.22

Key Business Concerns

4. The capacity of Australian businesses to deliver productivity improvements, and to respond and adapt to market pressures and increased domestic and international competition, is critical to the long-term economic prosperity of all Australians. Businesses must have capacity to establish enterprise-appropriate working arrangements subject to a “guaranteed safety net of fair, relevant and enforceable minimum terms and conditions”23 and when necessary, to restructure business operations and workforce arrangements in the longer-term interests of the business, its employees and the Australian economy and workforce as a whole.

5. The Victorian Government supports the objects of the FW Act regarding fairness, flexibility and the promotion of productivity and economic growth. However, business and employer groups report that the workplace relations system promised by the

17 Commonwealth Government, ‘The Future of the Australian Economy’ (Summit Topic Paper for the Australia 2020 Summit, Canberra, April 2007) 1 http://www.australia2020.gov.au/topics/economy.cfm.18 Australian Labor Party, ‘Forward with Fairness – Policy Implementation Plan’ (August 2007).19 Explanatory Memorandum, Fair Work Bill 2008 (Cth) ii.20 Ibid [r 95].21 Ibid [r 570] and [r 860].22 Ibid ii.23 FW Act s.3(c).

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Commonwealth Government has not been delivered by the FW Act and that the Act in a number of respects is in fact impeding, rather than promoting, business flexibility and productivity.

6. Findings of the recent AHRI survey of Australian human resource practitioners include:

32 per cent of respondents report that their organisation had experienced a decrease in flexibility to determine allocation of labour, which they attributed directly to the introduction of the FW Act;24

43 per cent of respondents report that the employee flexibility provisions of the FW Act make it difficult (or very difficult) to achieve productivity improvements, with only 17 per cent believing the provisions would assist somewhat;25 and

47 per cent of respondents report that operating under the FW Act would reduce their organisation’s willingness to employ people over the next three years.26

7. The Ai Group cites a number of barriers to productivity growth and labour flexibility which it considers must be addressed through amendments to the FW Act. These include enterprise agreement provisions that restrict the engagement of contractors and on-hire workers - which it considers “inhibit effective management and the productive and efficient organisation of work”27, the lack of genuine individual flexibility arrangements, and “general protections” provisions which are too loose and uncertain and which should be “tightened to ensure fairness for all parties”.28

8. The Australian Mines and Metals Association (AMMA) has highlighted that in the resource and energy sector, flexibility around hours of work, rostering and overtime is critical to respond to fluctuating demand and maximise productivity.29 However, in relation to flexibility terms in enterprise agreements, “the experience of most employers who have attempted to negotiate IFAs [individual flexibility arrangements] is that the flexibility term … is hard fought and does not result in much, if any, added workplace flexibility”.30

9. Even senior members of the Commonwealth Government have recognised in the last 12 months that bargaining outcomes in the oil and gas sector are not sustainable.31

10. The Australian Chamber of Commerce and Industry (ACCI) reports “a lack of flexibility within the existing framework and the diminished ability of employers to be able to deal directly with employees”.32 ACCI says that for most SMEs, for whom collective bargaining is not a realistic option, “the failure of individual flexibility arrangements to provide an effective alternative option to vary economy wide or industry wide rules … is also a real problem”.33

24 Australian Human Resources Institute, ‘The Fair Work Act: Its Impact within Australian Workplaces’ (Research Report, January 2012) Table 37.25 Ibid Table 71B.26 Ibid Table 70.27 Heather Ridout, ‘The Fair Work Act – Its Time for Some Sensible Changes to be Considered’ (Speech delivered at the International Forum on Employment Relations Reform in a Global Context, 30 March 2011).28 Ibid.29 Australian Mines and Metals Association, ‘Individual Flexibility Arrangements (under the Fair Work Act 2009) – The Great Illusion’ (Research Paper, May 2010) 6.30 Ibid.31 Ewin Hannan, ‘Ministers lash offshore pay lifts’, The Australian, 12 April 2011. 32 Peter Anderson, ‘Employer flexibility Versus Job Security’ (Speaking notes for speech delivered at the 10th Annual Workforce Conference, Sydney, 5 September 2011) 5.33 Ibid 5-6.

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11. The concerns of business and employer groups with enterprise bargaining arrangements under the FW Act are dealt with in more detail in Section 5 of this Submission. Concerns with the FW Act’s individual flexibility arrangements (IFAs) and transfer of business rules are discussed in more detail below.

Individual Flexibility Arrangements

12. The mandating of flexibility terms in modern awards and enterprise agreements was intended to deliver a mechanism under which a business and its employees individually, could agree to establish terms and conditions of employment departing from those imposed by awards and enterprise agreements, to meet their genuine needs.34

13. Business and employer groups however are consistently reporting that the IFA mechanisms are failing to deliver the flexibility promised,35 and in some instances say that they “have led to reduced flexibility for employers”.36

14. More than 90 per cent of Victorian businesses are award-reliant, most of these being SMEs.37 Given the complexity and transaction costs involved in enterprise bargaining, for most of these businesses, enterprise bargaining is not a viable option. They are consequently entirely dependent upon award-based IFAs to establish enterprise-appropriate terms and conditions of employment so far as these depart from the award minimum.

15. One issue is that the flexibility term included in modern awards only permits an IFA to vary the operation of award clauses that relate to arrangements for when work is performed, overtime rates, penalty rates, allowances and leave loadings.38 It does not for example, permit an employer and employee to agree to the working of a shorter shift than prescribed by the award for their mutual benefit (see further the case study on minimum shifts under the retail award below).

16. In the enterprise bargaining context, business and employer groups are concerned that unions routinely use their bargaining power to so restrict the scope of matters covered by agreement flexibility terms, that these terms are incapable of delivering significant flexibility in workplace arrangements in practice.39

17. Given the existence of the “better off overall” test, there is no policy justification for the FW Act permitting what is, in effect, a collective veto over IFAs.

18. An important practical concern about the operation of IFAs, is the lack of clarity as to how the FW Act’s “better off overall” test is properly to be applied to them. While the

34 Explanatory Memorandum, Fair Work Bill 2008 (Cth) [r 570] and [r 870].35 See for example: Heather Ridout, ‘The Fair Work Act – Its Time for Some Sensible Changes to be Considered’ (Speech delivered at the International Forum on Employment Relations reform in a Global Context, 30 March 2011); Australian Chamber of Commerce and Industry, Submission No. DR196 to the Productivity Commission, Inquiry into the Economic Structure and Performance of the Australian Retail Industry, 2 September 2011, 23.36 Victorian Employers Chamber of Commerce and Industry, Submission No. DR217 to the Productivity Commission, Inquiry into the Economic Structure and Performance of the Australian Retail Industry, 8 September 2011, 2.37 Department of Innovation, Industry and Regional Development (Vic), ‘Workplace Industrial Relations Survey, 2008 Data’ (October 2008).38 See for example, Heather Ridout, ‘The Fair Work Act – The Barriers to Productivity Improvement Need to be Addressed’ (Speech delivered at the 10th Annual Workforce Conference, 5 September 2011).39 See for example: Australian Mines and Metals Association, ‘Individual Flexibility Arrangements (under the Fair Work Act 2009) – The Great Illusion’ (Research Paper, May 2010) 10 – 13; Heather Ridout, ‘The Fair Work Act – Its Time for Some Sensible Changes to be Considered’ (Speech delivered at the International Forum on Employment Relations reform in a Global Context, 30 March 2011).

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FW Act requires the employer to ensure that an award or agreement-based IFA meets the “better off overall” test,40 the Act provides no guidance as to how an employer is to assess whether a proposed IFA does so. This is particularly unclear in circumstances where an employer and employee wish to “trade off” monetary benefits under an award or agreement for non-monetary benefits.41

19. The FW Act’s Explanatory Memorandum acknowledges that the value of a non-monetary benefit is subjective to the individual employee, and postulates that where the assessment of value cannot be made in financial terms, then it is “less likely that an employee would be better off overall where the employer initiated a request [to] agree to an individual flexibility arrangement”.42

20. Business and employer groups report that this uncertainty discourages businesses from using IFAs because of the risk that the test will be found not to have been met. If this occurs, the employer will be in breach of the terms of the applicable modern award or enterprise agreement and be exposed to retrospective pay adjustments and penalties.43

21. Business and employer groups are also concerned about the practical utility of IFAs given the FW Act’s requirement that IFAs be terminable by either party on 28 days’ notice, and its prohibition of IFAs being offered to prospective employees as a condition of employment.

22. These requirements have the effect that businesses and employees cannot plan their activities with any certainty that agreed flexibility arrangements will be ongoing, and where businesses have agreed to mutually beneficial flexibilities with existing employees, they cannot be confident that new employees will work under similar arrangements.44

23. The Victorian Government notes the requirement that the General Manager of Fair Work Australia (FWA) conduct research and report to the Commonwealth Minister for Employment and Workplace Relations on the take-up and content of IFAs.45 Given the widespread concerns of business and employer groups as to the practical utility of IFAs, it is unfortunate that the statutory reporting timelines seem to preclude this Review being informed by that research.

Transfer of Business

24. Part 2-8 of the FW Act provides for the transfer of industrial instruments in a much broader range of circumstances than the previous Commonwealth legislation. This includes: cases of business restructuring which result in a change in the employing entity of one or more employees within a corporate group; where work is “outsourced”

40 FW Act ss.144(4) & 203(2).41 A number of “preferred hours” cases have highlighted this issue. See, for example, Bupa Care Services Pty Ltd and others [2010] FWAFB 2762, (in which a Full Bench of FWA held that an enterprise agreement including a clause providing that employees who elected to work their preferred hours would not receive otherwise applicable penalty rates in respect of those hours, did not meet the “no disadvantage” test.)42 Explanatory Memorandum, Fair Work Bill 2008 (Cth) [r 868]. 43 See for example: Restaurant and Catering Australia, Submission No. DR193 to the Productivity Commission, Inquiry into the Economic Structure and Performance of the Australian Retail Industry, 2 September 2011, 9; Australian Chamber of Commerce and Industry, Submission No. DR196 to the Productivity Commission, Inquiry into the Economic Structure and Performance of the Australian Retail Industry, September 2011, 23.44 See for example: Heather Ridout, ‘The Fair Work Act – The Barriers to Productivity Improvement Need to be Addressed’ (Speech delivered at the 10th Annual Workforce Conference, 5 September 2011); Australian Mines and Metals Association, ‘Individual Flexibility Arrangements (under the Fair Work Act 2009) – The Great Illusion’ (Research Paper, May 2010) 8. 45 FW Act s.653.

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with one or more employees taking up employment with the outsourced service provider, and where previously outsourced work is brought back in-house with one or more employees of the outsourced service provider taking up employment with the entity that had outsourced the work.

25. The transfer of business framework in the FW Act was intended to “be simple and fair”46 and:

… to provide a balance between:

protecting employees’ terms and conditions of employment under an enterprise agreement, certain modern awards or certain other instruments; and

the interests of employers in running their enterprises efficiently …47

26. In practice, business and employer groups report that these transfer of business provisions can impose severe constraints on business flexibility and are operating against the interests of both employers and employees.

27. In particular, these provisions are reported to discourage sensible restructures and act as a disincentive to employing employees who will be transferring employees;48 have “the undesirable effect of requiring the transfer of industrial instruments from one entity to another within a corporate group when an employee [is] transferred between entities”;49

and hinder “the ability of business to harmonise labour and employment relationships when businesses are acquired” and “to flexibly move team members across business divisions”.50

28. The FW Act empowers FWA to make certain orders in relation to “transferable instruments” where there is or is likely to be a transfer of business. In deciding whether to make an order, FWA must take into account a range of matters including the views of the new employer and the relevant employees and whether any employees would be disadvantaged by the order.51

29. However, some business and employers groups have reported that these provisions do not address the difficulties associated with the transfer of business rules. Ai Group, for example, considers that FWA orders have: [i]n almost all cases so far … been issued in circumstances where:

the new employer, the employees and the relevant unions have supported the order being issued; and

there was an established relationship between the relevant parties.52

46 Department of Education, Employment and Workplace Relations (Cth), ‘Australia’s Fair Work System’ (Fact Sheet, 2009) http://www.deewr.gov.au/WorkplaceRelations/NewWorkplaceRelations/Documents/FactSheets/FactSheet_11.pdf47 Explanatory Memorandum, Fair Work Bill 2008 (Cth) [r 1211].48 See for example: Heather Ridout, ‘The Fair Work Act – The Barriers to Productivity Improvement Need to be Addressed’ (Speech delivered at the 10th Annual Workforce Conference, 5 September 2011); Australian Mines and Metals Association, ‘Finding Fairness: A Review of the First 12 Months of the Fair Work Act 2009’ (Paper, July 2010) 16.49 Letter from Jennifer Westacott Chief Executive of the Business Council of Australia to Senator Chris Evans, 19 May 2011.50 Woolworths Limited, Submission No. 110 to the Productivity Commission, Inquiry into the Economic Structure and Performance of the Australian Retail Industry, 14 June 2011, 16.51 FW Act ss.317-320.52 Australian Industry Group, ‘Transfer of Business Provisions of the Fair Work Act – Negative Impacts Upon the ICT and Other Industries’ (Paper, July 2010) 19.

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30. Ai Group suggests that this scenario is uncommon in commercial outsourcing situations where there is a confidential tendering process, which means that “an application to FWA before the work is won is typically impossible in practice.”53

Case Study – the Retail Industry

31. The retail industry forms a crucial component of the Victorian and Australian economies. Retail trade accounts for approximately 10.8 per cent of Victorian employees and 10.7 per cent of employees nationally. In the financial year 2010-11, the retail industry contributed $15.1 billion to the Victorian economy and $59.1 billion to National GDP.54

32. In February 2011, the Commonwealth Government asked the Productivity Commission to undertake an inquiry into the implications of globalisation for the Australian retail industry. In conducting its inquiry, the Productivity Commission held informal consultations with retailers, government agencies and peak groups representing the industry, held a roundtable with key stakeholders, received 129 written submissions from retailers and other stakeholders and held public hearings.55

33. In its report, Economic Structure and Performance of the Australian Retail Industry56

the Productivity Commission highlighted the impact of international competition through on-line retailing to the Australian retail industry, noting that overseas retailers are now, “effectively direct competitors in many retail sectors”.57 In this context, the report observed that “narrowing the productivity gap between retailers in Australia and overseas …will be of critical importance for the future prosperity of this industry, its employees and for Australian consumers,”58 and that in order to compete effectively, “the productivity of workers [in the Australian retail industry] will need to more than keep pace with future wage movements”.59

34. The Productivity Commission identified workplace relations regulation as one of the key factors that may be impacting structural change in the retail industry, specifically, that workplace relations regulations may not provide sufficient workplace flexibility to facilitate the adoption of best practice productivity measures in the industry.60

35. Key points made by the Productivity Commission in relation to workplace arrangements and workplace relations regulation included that:

the retail industry is highly labour intensive, and “the way in which workers are employed, their productivity and the flexibility of the workplace practices” are crucial to the future of the industry;61

“increases in penalty rates as a result of award modernisation and the consequent impact on retailers’ ability to trade profitability at times many consumers now prefer to shop” was a particular concern for employers;62 and

53 Ibid, 19-20.54 Australian National Accounts: State Accounts, 2010-11, 5220.0, Australian System of National Accounts, 2010-11, 5204.0 and Labour Force, Australia, Detailed Quarterly, November 2011, 6291.0.55.003.55 Productivity Commission, Inquiry into the Economic Structure and Performance of the Australian Retail Industry, 4 November 2011, 4.56 Ibid.57 Ibid XXIX. 58 Ibid.59 Ibid.60 Ibid XIV.61 Ibid XXIX.62 Ibid 313.

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“it is critical that employers, employees and unions work constructively to implement productivity enhancing workplace arrangements … [including] those focused on operational and trading hours flexibility and customer service.”63

36. The Productivity Commission observed that “some employers have found that it is proving difficult, in practice, to achieve worthwhile productivity improvements through the negotiation of specific flexibility arrangements with individual workers”64 and that “individual flexibility arrangements should, in principle, provide employers and employees with the flexibility required to implement mutually agreeable minimum engagement periods, but the Commission did not receive evidence that this is happening in practice”.65

37. The Productivity Commission recommended that the Commonwealth Government examine these issues and other concerns about the operation of the FW Act in this Review.

Case Study – Minimum Shift Lengths under the Retail Award

38. The inability of the current IFA arrangements to deliver sufficient flexibility to enable employers and employees to enter into sensible arrangements that meet their individual needs, is demonstrated by the General Retail Industry Award 2010 (Retail Award) minimum shifts case.

39. The importance of this case is highlighted by recent Australian Bureau of Statistics (ABS) data, which demonstrates that in 2008 the retail industry Australia-wide employed 239,100 people aged 15-19, with this falling to 215,500 in 2011. From February 2008 to December 2011, the number of jobs held by 15-19 year olds shrank by 92,200, and that this was accompanied by a rise in the teenage unemployment rate to 17.3 per cent in December 2011 (up from 16.2 per cent in December 2010 and 13.6 per cent in December 2008).66

40. In late 2010, the National Retail Association (NRA) applied to FWA to vary the Retail Award to allow secondary school students working casually in the retail sector to agree to work a minimum shift of 1.5 hours after school in appropriate circumstances (rather than three hours).

41. This was in response to concerns by a number of retailers that they are not able to productively employ casual school students after school hours for the full three hour minimum engagement period prescribed by the Retail Award, in circumstances where, for example, their trading hours end less than three hours after the time a school student could attend for work. As a consequence, their after school employment of student casuals was at risk.

42. Shorter shift arrangements could not be implemented through IFAs, because the flexibility clause of the Retail Award (which is consistent with the model flexibility clause) does not permit an employer and employee to make an IFA altering the prescribed minimum shift lengths for casual employees. This meant that the only available means to implement shorter minimum shift arrangements was to vary the Retail Award.

63 Ibid 371-372.64 Ibid 350.65 Ibid 355.66 Australian Bureau of Statistics, ‘Labour Force, Australia’ (December 2011) 6202.0 and ‘Labour Force, Australia’ (Detailed, Quarterly, November 2011) 6291.0.55.003.

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43. Under section 157 of the FW Act, FWA may only vary a modern award outside the four year review cycle where it is satisfied that the variation is necessary to achieve the “modern awards objective”.67

44. The Shop, Distributive and Allied Employees' Association opposed the NRA’s application. The Victorian Minister for Employment and Industrial Relations made submissions to FWA in support of the NRA’s application, and has participated in the subsequent FWA appeal and Federal Court proceedings.

45. In its decision at first instance in June 2011, FWA determined that a variation to the Retail Award should be made to allow a minimum engagement period of 1.5 hours for secondary school students in circumstances where a longer period of employment was not possible (either because of the employer’s operational requirements or the student employee’s unavailability) and with parental consent.68

46. This decision was appealed and stayed. The appeal was dismissed in September 2011, and the Award variation came into effect on 1 October 2011 – some 12 months after the NRA’s application was made. However, the variation is presently under challenge in the Federal Court. Consequently, there is still no certainty for retail employers and student employees that they can take advantage of these more flexible shift arrangements.

Conclusion

47. The capacity of Australian businesses to deliver productivity improvements, and to respond and adapt to market pressures and increased domestic and international competition, is critical to the long-term economic prosperity of all Australians. This includes ensuring businesses have the capacity to establish enterprise-appropriate working arrangements subject to a “guaranteed safety net of fair, relevant and enforceable minimum terms and conditions”.

48. The Victorian Government has observed mounting concerns from business and employer groups that the workplace relations system promised by the Commonwealth Government has not been delivered by the FW Act and that the Act, in a number of respects is in fact impeding, rather than promoting, business flexibility and productivity.

49. Flexibility terms in modern awards and enterprise agreements were intended to deliver a practical mechanism for a business and its employees individually to establish terms and conditions of employment departing from those imposed by awards and enterprise agreements, for their mutual benefit. This flexibility is particularly crucial to small businesses, for which enterprise bargaining is not a practical means of establishing enterprise-appropriate workplace arrangements.

50. The Victorian Government shares the widespread concerns of business and employer groups that in practice, these arrangements are uncertain in operation and are failing to deliver the flexibility promised. The Victorian Government urges the Commonwealth Government to address these concerns.

51. The Victorian Government notes the concerns of business and employer groups that in practice the new transfer of business provisions in the FW Act impose severe constraints on business flexibility and are operating against the interests of both employers and employees. The Victorian Government urges the Commonwealth Government to address these concerns.

67 FW Act s.134.68 National Retail Association Limited [2011] FWA 3777 [48].

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52. The findings of the Productivity Commission’s report Economic Structure and Performance of the Australian Retail Industry reinforce the importance of workplace relations laws facilitating more flexible and productive workplace practices to assist businesses to meet the challenges of the current business environment.

53. The Victorian Government notes the Productivity Commission’s recommendation that issues raised in its report be considered by the Commonwealth Government in this Review.

54. The history of the NRA’s application to vary the Retail Award in respect of minimum shifts for student casuals, illustrates the difficulties and delays businesses may face in establishing enterprise-appropriate working arrangements of mutual benefit to an employer and its employees.

55. The Victorian Government is committed to the maintenance of a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions. The Victorian Government believes, however, that there is ample scope for the Commonwealth Government to address the concerns raised by business and employer groups about the inflexibility of the Commonwealth’s workplace relations laws, whilst maintaining that guarantee.

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5 ENTERPRISE BARGAINING

1. The objectives of the new bargaining framework are:

(a) to provide a simple, flexible and fair framework that enables collective bargaining in good faith, particularly at the enterprise level, for enterprise agreements that deliver productivity benefits; and

(b) to enable FWA to facilitate good faith bargaining and the making of enterprise agreements …69

2. The Commonwealth Government stated that the new bargaining arrangements would be “simpler than the current system”, and that “[c]ollective bargaining will be less bound by regulation and red tape and is designed to have a positive impact on labour productivity”.70


3. Despite these stated objectives, business and employer groups assert that the bargaining arrangements under the FW Act have increased the complexity of negotiating enterprise agreements and that under the new regime, the large majority of employers have been unable to achieve productivity improvements in exchange for wage increases in enterprise agreements.71 In the AHRI survey of human resource practitioners, 61 per cent of respondents reported that no specific productivity improvements had been included in their organisation’s enterprise agreement.72

4. Specific concerns with the new bargaining framework include: increasing claims for agreement terms that constrain engagement of labour hire workers and contractors; greater difficulty negotiating greenfields agreements; the ability of unions to apply for protected action ballots without first satisfying FWA that they are not pattern bargaining; the capacity to initiate industrial action without a majority support determination where an employer has refused to bargain, and the uncertainty in practice of the good faith bargaining requirements. These issues are considered in more detail below.

Constraints on Business Management

5. Under the previous Commonwealth legislation there were strict limits on agreement content. In particular, provisions that placed restrictions on engaging contractors or labour hire workers or imposed requirements relating to their conditions of engagement were ‘prohibited content’.73 Ai Group has previously pointed out that these provisions were effective in:

69 FW Act s.171.70 Explanatory Memorandum, Fair Work Bill 2008 (Cth) [r114; r188].71 See, for example: Heather Ridout, ‘The Fair Work Act – The Barriers to Productivity Improvement Need to be Addressed’ (Speech delivered at the 10th Annual Workforce Conference, Sydney, 5 September 2011); Dr Steven Kates, ‘The AMMA Workplace Relations Research Project – A Survey Based Analysis’ (Research Report No. 3, Royal Melbourne Institute of Technology, June 2011); Peter Anderson, ‘Employer Flexibility Versus Job Security’ (Speaking notes for speech delivered at the 10th Annual Workforce Conference, Sydney, 5 September 2011) 7; Australian Human Resources Institute, ‘The Fair Work Act: Its Impact within Australian Workplaces’ (Research Report, January 2012) Table 71D.72 Australian Human Resources Institute, ‘The Fair Work Act: Its Impact within Australian Workplaces’ (Research Report, January 2012) Table 71D.73 Workplace Relations Regulations 2006 (Cth) reg 8.5.

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preventing unions from insisting upon highly restrictive enterprise agreement clauses which inhibit effective management and the productive and efficient organisation of work.74

6. Under the FW Act, terms in enterprise agreements must be about ‘permitted matters.’ While a general prohibition of an employer engaging labour hire employees or contractors would not come within the scope of permitted matters, terms relating to conditions or requirements about engaging labour hire workers or contractors may be permitted matters.75

7. The Victorian Government notes the concerns of business and employer groups that unions are increasingly pursuing clauses in enterprise agreements that regulate the engagement of contractors and labour hire employees.76 Enterprise agreement clauses regulating the use of contractors that have been approved by FWA include clauses that:

require consultation with affected employees and their union prior to the engagement of contractors or labour hire workers;77

require labour hire workers engaged on a regular and systematic basis to be offered direct employment after six months;78

require employers to engage contractors on terms and conditions ‘no less favourable’ than those provided to employees covered by the enterprise agreement;79 and

require that casual employees and non-direct agency labour not exceed 15 per cent of the workforce.80

8. Business and employer groups have expressed concern that this level of regulation compromises employers’ ability to flexibly organise work and to match the supply of labour with genuine operational needs.81

9. This need for flexibility is particularly evident in the aviation industry, where job security and the engagement of contractors has been a key issue in contention in recent Qantas enterprise bargaining negotiations. Qantas is concerned that clauses that limit the use of contractors would restrict their flexibility to respond to changing operating

74 Heather Ridout, ‘The Fair Work Act – It’s Time for Some Sensible Changes to be Considered’ (Speech delivered at the International Forum on Employment Relations Reform in a Global Context, Sydney, 30 March 2011).75 At least “if those terms sufficiently relate to employees’ job security – e.g. a term which provided that contractors must not be engaged on terms and conditions that would undercut the enterprise agreement.” – see Explanatory Memorandum, Fair Work Bill 2008 (Cth) [672 - 673].76 See, for example: Heather Ridout, ‘The Fair Work Act – It’s Time for Some Sensible Changes to be Considered’ (Speech delivered at the International Forum on Employment Relations Reform in a Global Context, Sydney, 30 March 2011) 5; Australian Mines and Metals Association, ‘The Fair Work Act – Meaningful Change Required’(Paper, 26 September 2011) 3.http://www.amma.org.au/home/home/media_publications/2011/23092011TheFairWorkAct-MeaningfulChangeRequired.pdf.77 Asurco Contracting Pty Ltd v CFMEU [2010] FWAFB 6180; Kagan Logistics v NUW [2011] FWAFB 1724.78 Kagan Logistics v NUW [2011] FWAFB 1724.79 The Australian Industry Group v ADJ Contracting Pty Ltd [2011] FWAFB 6684; Asurco Contracting Pty Ltd v CFMEU [2010] FWAFB 6180; Kagan Logistics v NUW [2011] FWAFB 1724.80 Kagan Logistics v NUW [2011] FWAFB 1724.81 ‘Builders Reject Regulation of Independent Contractors’, International Business Times A.U. Edition (online), 17 October 2011 http://au.ibtimes.com/art/services/print.php?articleid=232068; Letter from Jennifer Westacott Chief Executive of the Business Council of Australia to Senator Chris Evans, 19 May 2011; Heather Ridout, ‘The Fair Work Act – Barriers to Productivity Improvement Need to be Addressed’ (Speech delivered at the 10th Annual Workforce Conference, Sydney, 5 September 2011) 6.

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conditions, including strong international competition (in particular from the Middle East and Asia) and the opening up of the domestic aviation market.82

10. The Victorian Government notes that the Business Council of Australia has called for the FW Act to be amended to specify that agreement terms which purport to place restrictions on the engagement of independent contractors or labour hire workers are unlawful.83 A number of respondents to the AHRI survey believe that amendments to the FW Act to allow for greater flexibility in the use of contractors and labour-hire employees would have some impact on improving productivity in their organisation.84

11. The Victorian Government also notes that the FW Act includes “sham contracting” provisions that are designed to protect individuals from misrepresentation in relation to contractor arrangements and to ensure that such arrangements are freely entered into.85

12. Further, employees of contractors and labour hire firms are entitled to the same minimum conditions and protections under the FW Act as employees elsewhere in the workforce.

Greenfields Agreements

13. Under the previous Commonwealth legislation, employers that were establishing new businesses could set terms and conditions of employment for the new business before employees were engaged (an “employer greenfields agreement”).86 These arrangements were utilised predominantly in the construction, accommodation, food services and retail industries.87 The FW Act removed this mechanism and under the current regime, a greenfields agreement can only be made by an employer (or employers) with one or more unions that are entitled to represent the majority of employees to be covered by the agreement.88

14. It has been reported that unless a greenfields agreement is in place, investors are reluctant to invest in new projects because of the risk of industrial action.89

15. Business and employer groups have reported more difficulties negotiating greenfields agreements under the FW Act, with unions often seeking overly generous and highly restrictive agreement provisions.90 In addition, the requirement for a greenfields

82 Andrew Heasley and Ben Schneiders, 'Engineers strikes loom on horizon for Qantas', Sydney Morning Herald (online), 14 April 2011 http://www.smh.com.au/business/engineer-strikes-loom-on-horizon-for-qantas-20110413-1de8b.html ; Alan Joyce, 'Industrial Relations Update' (Speech delivered at Sydney, 13 October 2011) http://www.qantas.com.au.edgekey.net/travel/airlines/media-releases/oct-2011/0000/global/en; Alan Joyce, ‘CEO’s Address - Qantas Annual General Meeting’ (Speech delivered at the 2011 Annual General Meeting of Qantas Airways Limited, Kensington, New South Wales, 28 October 2011) http://www.qantas.com.au/infodetail/about/investors/CEOAddressAGM2011.pdf.83 Letter from Jennifer Westacott Chief Executive of the Business Council of Australia to Senator Chris Evans, 19 May 2011, 11.84 Australian Human Resources Institute, ‘The Fair Work Act: Its Impact within Australian Workplaces’ (Research Report, January 2012) Table 72C.85 FW Act Part 3-1 Div 6.86 Workplace Relations Act 1996 (Cth) s. 330.87 Peter Gahan, ‘Employer Greenfields Agreements under WorkChoices’ (Research Report, prepared for Victorian Office of the Workplace Rights Advocate, 17 August 2007) 24 http://www.business.vic.gov.au/busvicwr/_assets/main/lib60148/greenfields-interim-report.pdf (23 per cent of respondents said that amendments to allow for greater flexibility in the use of contractors and labour-hire employees would “somewhat improve productivity” and 16.5 per cent said it would “greatly improve productivity”).88 FW Act s.187(5).89 Annabel Hepworth, ‘Fair Work ‘Delaying’ Mine Projects, Says Industry’, The Australian, 17 November 2011.

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http://www.qantas.com.au.edgekey.net/travel/airlines/media-releases/oct-2011/0000/global/en

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agreement to be negotiated with unions having majority representation rights has led to disputation over representation and challenges to agreements.91

16. The Victorian Government notes that AMMA has called for amendments to the FW Act to allow employers to register greenfields agreements directly with FWA, without obtaining consent from a union.92

Good Faith Bargaining

17. A key principle underpinning the bargaining framework in the FW Act, and a significant change from the previous legislation, is the obligation to bargain in good faith. While this was intended to facilitate the bargaining process, these provisions have been criticised as adding greater legalism and process requirements than previously existed, without having had any substantial impact on bargaining outcomes.93

18. Aspects of these provisions have been the source of uncertainty and competing claims about how they should be applied in practice.94 In particular, disputes have centred around how much information must be provided by a party to other parties in negotiations, and what will be regarded as capricious or unfair behaviour.95 AMMA is concerned that employers are being put to the time and expense of responding to such claims.96

19. The Commonwealth Government recently indicated that the Review should examine whether a Code of good faith bargaining should be included in the FW Act. 97 While the Victorian Government agrees that there should be greater certainty, it notes that the proposal for a Code has received mixed reactions from the business community, with Ai Group, for example, suggesting that it would lead to greater uncertainty.98

Majority Support Determinations

20. The FW Act introduced the concept of majority support determinations for collective bargaining. The intent was that most bargaining will be voluntary, but if an employer

90 Heather Ridout, ‘The Fair Work Act – The Barriers to Productivity Improvement Need to be Addressed’ (Speech delivered at the 10th Annual Workforce Conference, Sydney, 5 September 2011); Australian Mines and Metals Association, ‘Finding Fairness: a Review of the First 12 Months of the Fair Work Act 2009’ (Paper, July 2010) 47 <http://www.amma.org.au/home/publications/FindingFairness_12monthReview_FullReport.pdf>91 See, for example, AWU v Leighton Contractors Pty Ltd, Bechtel Limited Pty Ltd, the AMWU, CEPU and CFMEU [2012] FWAFB 207. (In this case, FWA denied the AWU the right to challenge a greenfields agreement reached between the CFMEU, AMWU and CEPU and construction companies Bechtel and Leighton in relation a Gladstone Liquefied natural gas hub project).92 Australian Mines and Metals Association, ‘Top 10 IR Reforms’<http://www.amma.org.au/home/publications/media/Top_10_IR_reforms.pdf>; Australian Mines and Metals Association, ‘Finding Fairness: A Review of the First 12 Months of the Fair Work Act 2009’, (Report, July 2010) 48.93 Arthur Moses SC in delivering the Julian Small Foundation Annual Address 2011: see 'Reach of general protection provisions still unclear, says senior IR QC', Workplace Express (online), 1 November 2011.94 Business Council of Australia, ‘Embedding Workplace Collaboration: Good Faith Bargaining’ (Media Release, 29 January 2010) http://www.bca.com.au/Content/101644.aspx.95 Business Council of Australia, ‘Embedding Workplace Collaboration: Good Faith Bargaining’ (Paper 02, 29 January 2010) 3.96 Australian Mines and Metals Association, ‘Agreement or Argument: What Faith Can We Have in Good Faith Bargaining?’ (Paper, October 2010) 3. http://www.amma.org.au/home/publications/FullGoodFaithBargainingOctober2010Paper.pdf.97 Ewin Hannan, ‘Qantas Row Opens Way for Review of Industrial Relations Bargaining’, The Australian (online), 8 November 2011 < http://www.theaustralian.com.au/national-affairs/industrial-relations/qantas-row-opens-way-for-review-of-ir-bargaining/story-fn59noo3-1226188212573>98 Australian Industry Group, ‘Enterprise Bargaining / Agreement Making: Workshop 1’, National PIR Conference, 28 & 29 November 2011, 5.

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has not agreed to bargain it can be brought to the bargaining table if it can be established that there is majority support amongst its workforce for collective bargaining.99

21. FWA has recently held that a majority support determination is not a prerequisite to granting a protected action ballot where an employer has not agreed to bargain .100

Business and employer groups are concerned that this may allow a minority of the workforce to take industrial action in support of the negotiation of a collective agreement, where the majority has not expressed support for the need to bargain.101

22. The Victorian Government notes that business and employer groups have called for the FW Act to be amended so that FWA cannot make orders for protected action ballots in situations where bargaining has not commenced unless FWA has made a majority support determination.102

Pattern Bargaining

23. Under the FW Act, if an employee bargaining representative engages in pattern bargaining in relation to an agreement, industrial action that is engaged in, threatened, impending or probable could be stopped by FWA or a court may grant an injunction to stop such action.103 These provisions were aimed at outlawing the practice of pattern bargaining by ensuring industrial action could not be taken in support of pattern bargaining claims.104 However, a recent decision of FWA is seen to have challenged the utility of these provisions.105

24. AMMA considers that:Based on the approach taken by Fair Work Australia in applying the pattern bargaining test, it would seem unlikely that a case of pattern bargaining brought by an employer would ever succeed.106

25. The Victorian Government notes the concerns of business and employer groups that the FW Act has proven largely ineffective in dealing with pattern bargaining107 and that it continues in a number of industries. In Victoria, recent pattern deals have been made in

99 See Explanatory Memorandum, Fair Work Bill 2008 (Cth) [946 – 948].100 J.J.Richards & Sons Pty Ltd v Transport Workers Union of Australia [2011] FWAFB 3377.101 Heather Ridout, ‘The Fair Work Act – It’s Time For Some Sensible Changes to be Considered’ (Speech delivered at the International Forum on Employment Relations Reform in a Global Context, Sydney, 30 March 2011) 9 - 10; Letter from Jennifer Westacott Chief Executive of the Business Council of Australia to Senator Chris Evans , 19 May 2011, 5-6.102 See, for example, Letter from Jennifer Westacott Chief Executive of the Business Council of Australia to Senate Chris Evans, 19 May 2011, 2.103 See FW Act ss.409(4), 418 and 422.104 ABC Local Radio, AM, 3 December 2008 (Julia Gillard); Brad Norington, 'Pattern Bargaining is out: Gillard', The Australian (online), 9 December 2008 <http://www.theaustralian.com.au/business/breaking-news/pattern-bargaining-is-out-gillard/story-e6frg90f-1111118261128>; Explanatory Memorandum, Fair Work Bill 2008 (Cth) [1647].105 See John Holland Pty Ltd v AMWU [2010] FWAFB 526. 106 Australian Mines and Metals Association, ‘Agreement or Argument: What Faith Can We Have in Good Faith Bargaining?’ (Paper, October 2010) 45 http://www.amma.org.au/home/publications/FullGoodFaithBargainingOctober2010Paper.pdf.107 See, for example: Heather Ridout, ‘The Fair Work Act – The Barriers to Productivity Improvement Need to be Addressed’ (Speech delivered at the 10th Annual Workforce Conference, Sydney, 5 September 2011) 11; Australian Mines and Metals Association, ‘Top 10 IR Reforms’ <http://www.amma.org.au/home/publications/media/Top_10_IR_reforms.pdf>; Australian Mines and Metals Association, ‘Agreement or Argument: What Faith Can We Have in Good Faith Bargaining?’ (Paper, October 2010) 44 - 45 http://www.amma.org.au/home/publications/FullGoodFaithBargainingOctober2010Paper.pdf..

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the electrical contracting, building and mechanical contracting industries. These have been criticised as failing to deliver any real productivity improvements.108

26. Ai Group has called for the FW Act to be amended to make it clear “that a union cannot obtain a protected action ballot order if the union is pattern bargaining.”109

27. The Victorian Government considers it essential that pattern bargaining on an industry basis not displace genuine enterprise level bargaining. If pattern bargaining remains unchecked, the benefits of enterprise bargaining will be lost to industry-based wage fixation – to the detriment of productivity and flexibility. 110

Case Study – the Victorian Building and Construction Industry

28. Given the critical role that construction plays to the economic and social prosperity of the State, the Victorian Government considers it critical that the FW Act supports a productive and efficient construction industry. This is particularly pertinent in the current environment of escalating costs in the industry.

29. As outlined in Section 3 of this Submission, the construction industry faces major productivity challenges. Productivity is negatively impacted by industrial disputation. The construction industry experiences higher levels of disputation than the national average, as discussed in Section 6 of this Submission.

30. Moreover, pattern bargaining represents a particular challenge for productivity in this industry. The Australian Building and Construction Commissioner (ABC Commissioner) recently observed, “pattern agreements struck in the building and construction industry … do not meet the challenge of the productivity agenda”.111

31. The ABC Commissioner noted that “[b]y definition pattern agreements are not negotiated at the enterprise level. As such they are not tailored to the needs of the enterprise and to its particular employees. Recent examples not only contain no effective productivity improvements; they actually contain terms that will provide for diminished productivity in coming years.”112

32. For example, the pattern agreement negotiated in relation to the building industry contains net accumulated wage increases (including allowances) of approximately 27 per cent over four years but does not contain any explicit provision that would facilitate productivity increases.113 The electrical contractors’ pattern agreement provides for wage increases of five per cent per annum, with only a general clause committing parties to “exercise the necessary flexibility, productivity improvements and broadness of approach”.114

108 See Leigh Johns, ‘ABC Commissioner’s Speech to the Industrial Relations Society of Victoria’ (Address to the Industrial Relations Society of Victoria, Melbourne, 14 October 2011). 109 Heather Ridout, ‘The Fair Work Act – It’s Time For Some Sensible Changes to be Considered’ (Speech delivered at the International Forum on Employment Relations Reform in a Global Context, Sydney, 30 March 2011) 11.110 See further the findings of the Commonwealth Government, Royal Commission into the Building and Construction Industry, Report 5, in relation to pattern bargaining in the building and construction industry (2003) 206 – 215 and 220. 111 Leigh Johns, ‘ABC Commissioner’s Speech to the Industrial Relations Society of Victoria’ (Address to the Industrial Relations Society of Victoria, Melbourne, 14 October 2011).112 Ibid.113 Master Builders Association of Victoria, ‘Master Builders says Building EBA Outcome Illustrates the Need to Maintain the ABCC’ (Media Release, 10 June 2011); Leigh Johns, ‘ABC Commissioner’s Speech to the Industrial Relations Society of Victoria’ (Address to the Industrial Relations Society of Victoria, Melbourne, 14 October 2011).

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33. The Victorian Government is also concerned about the flow-on of generous wages and conditions from one enterprise agreement to another – for instance, from the Wonthaggi desalination project to less complex construction projects.

34. Participants in the construction industry have also noted the challenges pattern bargaining presents to productivity and efficiency in the industry. For example, Master Electricians Australia recently stated that “the electrical trades industry had seen, in recent months, the re-emergence of pattern bargaining across the nation, particularly in Victoria”, observing that “[a]t a time when the construction industry is already struggling, this is adding additional cost to projects and further reduce[s] the viability of businesses in the sector.”115

35. The Ai Group has expressed similar concerns, noting “[d]amaging and unproductive industrial relations practices have been creeping back into the Victorian construction industry day by day as a result of union claims and pattern agreements.”116

Other Victorian Initiatives

36. The Victorian Government is implementing a range of initiatives in support of an efficient and effective construction industry. These demonstrate the Government’s commitment to a strong monitoring and compliance regime, which is of critical importance given the challenges faced by the industry.

37. In October 2011, the Victorian Government released for public comment the Implementation Guidelines to the Victorian Code of Practice for the Building and Construction Industry. These guidelines are aimed at assisting the construction industry to achieve behavioural change on Victorian building sites, in particular in relation to prompt termination of unlawful industrial action and greater observance of freedom of association. By using these guidelines, the Government aims to use its purchasing power to promote productivity in the industry.

38. The costs and productivity challenges faced by the construction industry are complex and involve a high level of interdependency across different policy domains and levels of government. Accordingly, the Victorian Government will raise the matter of construction industry cost and productivity challenges at the Council of Australian Governments. Victoria will seek a Productivity Commission inquiry into the causes of, and possible policy responses to, the construction sector’s cost and productivity challenges.

Conclusion

39. Notwithstanding the objectives of the FW Act’s bargaining framework, business and employer groups report that the bargaining arrangements under the FW Act have increased the complexity of negotiating enterprise agreements and make productivity improvements more difficult to achieve.

40. Business and employer groups report that unions are increasingly pursuing clauses in enterprise agreements that regulate the engagement of contractors and labour hire employees, and that this compromises employers’ ability to flexibly organise work and to match the supply of labour with demand for products.

114 Leigh Johns, ‘ABC Commissioner’s Speech to the Industrial Relations Society of Victoria’ (Address to the Industrial Relations Society of Victoria, Melbourne, 14 October 2011).115 Master Electricians Australia, ‘Master Electricians Backs Calls for More Flexibility in Workplace Laws’ (Media Release, 5 September 2011).116 Australian Industry Group, ‘Strong Stand of the Victorian Government on Construction Reforms is Very Welcome’ (Media Release, 7 October 2011).

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41. The Victorian Government notes the importance of greenfields agreements in the establishment of new enterprises and in attracting investment for new enterprises. However, it appears that the arrangements for greenfields agreement under the FW Act may be encouraging excessive union claims and disputes between unions.

42. The Victorian Government considers it essential that pattern bargaining not displace genuine enterprise level bargaining, thereby discouraging the introduction of more productive and efficient work arrangements. However, business and employer groups consider that the FW Act has proven ineffective in dealing with pattern bargaining and the Victorian Government is concerned that pattern bargaining continues to be endemic in a number of industries, including the Victorian building and construction industry.

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6 INDUSTRIAL DISPUTATION

1. The objects in section 3 of the FW Act include:

(e) enabling fairness and representation at work and the prevention of discrimination by recognising the right of freedom of association and the right to be represented … providing accessible and effective procedures to resolve grievances and disputes and providing effective compliance mechanisms; and

(f) achieving productivity and fairness through an emphasis on enterprise-level collective bargaining … and clear rules governing industrial action.


Deteriorating Industrial Climate

2. Business and employer groups and other commentators are concerned that the workplace and industrial climate is deteriorating, with increasing industrial disputation.117

3. While the FW Act retained much of the regulation of industrial action found in the previous legislation, there are a number of important differences in the overall legislative framework that have had a practical impact on the resolution and settlement of industrial disputes.

4. Particular concerns raised by business and employer groups relate to the capacity to take protected industrial action before bargaining commences, expansion of the matters that can be regulated through agreements and expanded union rights of entry to workplaces.

Industrial Action should not be the First Step in Negotiations

5. Under the FW Act, for industrial action to be protected it first must be approved in a ballot of employees. Before a ballot can take place, bargaining representatives must have genuinely tried to reach agreement with the other negotiating parties.

6. However, FWA has found that employees can obtain protected action ballot orders, even if enterprise bargaining has not actually started and other bargaining avenues under the FW Act have not been pursued (such as seeking a majority support determination).118

7. Business and employer groups consider that access to industrial action by employees has become too easy, and that it is often the first step taken rather than the last in negotiations.119 The interaction between the FW Act’s bargaining framework and the

117 See for example: Australian Human Resources Institute, ‘The Fair Work Act: Its Impact within Australian Workplaces’ (Research Report, January 2012) Table 37; Heather Ridout, 'Taking Charge of our Future' (Speech delivered at the National Press Club, Canberra, 30 November 2011) 7; ‘Work Laws “Need Review”’, Border Mail, 21 November 2011, 16; Jason Murphy, ‘Tough Ask to Give Cause and Effect: Economists’, Australian Financial Review (Sydney) 19 January 2012, 11.

118 JJ Richards & Sons Pty Ltd v Transport Workers’ Union of Australia [2011] FWAFB 3377.119 David Gregory, ‘Industrial Action Must Be A Last Resort’ (Media Release, Australian Chamber of

Commerce and Industry, 23 December 2010); Letter from Jennifer Westacott Chief Executive of the Business Council of Australia to Senator Chris Evans, 19 May 2011, 5-6; Australian Mines and Metals Association, ‘Finding Fairness: A Review of the First 12 Months of the Fair Work Act 2009’, (Report, July 2010) 13; Emily Parkinson, ‘More Talk, Less Action,’ Australian Financial Review (Sydney), 19 January 2012, 10; Australian Mines and Metals Association, ‘The Fair Work Act Meaningful Change Required’ (Paper, 26 September 2011) 4.

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industrial action framework is problematic for this reason. Business and employer groups have called for the FW Act to be amended so that FWA cannot grant a protected action ballot application in circumstances where bargaining has not commenced or FWA has not made a majority support determination.120

Expansion of Matters that may be Regulated by Agreements

8. As discussed in Section 5 of this Submission, the range of matters that may be included in enterprise agreements under the FW Act is considerably broader than it was under the previous legislation (which prohibited certain matters being included in agreements).121 It follows that under the FW Act, parties are often required to bargain over a range of matters that had not previously been subject to negotiations, and in respect of which industrial action could not have been taken under the previous legislation.122 For example, an enterprise agreement may now include terms that regulate the conditions on which contractors may be engaged.

9. Business and employer groups are concerned that this, in turn, means that it is more difficult for parties to reach agreement over bargaining claims, which has resulted in more protracted industrial disputes and increased costs, reverting to an adversarial culture that has fuelled disputation.123

Expanded Rights of Entry

10. An important object of the FW Act is to establish a governing framework that properly balances the rights of organisations in representing their members, with the rights of employers to go about their business without undue inconvenience.124

11. Business and employer groups contend that despite the assurances of the Commonwealth Government that union right of entry arrangements under the previous legislation would be retained,125 in practice, they have been expanded.126 For example,

<http://www.amma.org.au/home/home/media_publications/2011/23092011TheFairWorkActMeaningfulChangeRequired.pdf>; Sid Maher, ‘Strike Ruling Alarms Employers’, The Australian (Sydney) 24 December 2010, 2.

120 Letter from Jennifer Westacott Chief Executive of the Business Council of Australia to Senator Chris Evans, 19 May 2011, 2; Sid Maher, ‘Strike Ruling Alarms Employers,’ The Australian (Sydney), 24 December 2010, 2. See also, David Gregory, ‘Industrial Action Must Be A Last Resort’ (Media Release, Australian Chamber of Commerce and Industry, 23 December 2010).

121 Regulation 8.5 of the Workplace Relations Regulations 2006 (Cth).122 Australian Mines and Metals Association, ‘Finding Fairness: A Review of the First 12 Months of the Fair

Work Act 2009’ (Paper, July 2010) 12; Heather Ridout, ‘Taking Charge of Our Future’ (Speech delivered at the National Press Club, Canberra, 30 November 2011) 7, Workforce, Thomson Reuters (Media Report, 20 January 2012).

123 Australian Mines and Metals Association, ‘The Fair Work Act Meaningful Change Required’ (Paper, 26 September 2011) 3; <http://www.amma.org.au/home/home/media_publications/2011/23092011TheFairWorkActMeaningfulChangeRequired.pdf>; Heather Ridout, ‘Taking Charge of Our Future’ (Speech delivered to National Press Club, Canberra, 30 November 2011) 7; Australian Chamber of Commerce and Industry, Submission No. 58 to the Senate Education, Employment and Workplace Relations Committee, Inquiry into the Fair Work Bill 2008, January 2009; David Gregory, ‘Industrial Action Must Be A Last Resort’ (Media Release, Australian Chamber of Commerce and Industry, 23 December 2010).

124 FW Act s.480.125 Australian Labor Party, ‘Forward with Fairness – Policy Implementation Plan’ (August 2007) 2 and 23;

Australian Chamber of Commerce and Industry, Submission No. 58 to the Senate Education, Employment and Workplace Relations Committee, Inquiry into the Fair Work Bill 2008, January 2009, 205; Australian Mines and Metals Association, ‘Fair for Who? The Rhetoric Versus the Reality of the Fair Work Act’ (Paper, 1 July 2011) 3 <www. amma .org.au/home/publications/290611_ Fair forwho.pdf >.

126 Australian Mines and Metals Association, ‘Fair for Who? The Rhetoric Versus the Reality of the Fair Work Act’ (Paper, 1 July 2011) 3 <www. amma .org.au/home/publications/290611_ Fair forwho.pdf >; Australian

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entry for the purposes of holding discussions with employees no longer requires that there be an industrial instrument in place binding on the union seeking entry. It is also of concern to business and employer groups that enterprise agreements can include terms providing expanded rights of entry.127

12. These expanded union rights of entry have had a number of disruptive consequences for employers, including: increasing costs for businesses when managing greater numbers of workplace visits and diverting management resources; disrupting business operations and workplace productivity due to more meetings being held with employees; and entry by multiple unions with potential coverage under their rules of eligibility, requiring even more resources to be allocated to manage competing union rights of entry.128

13. A number of business and employer groups have called for the right of entry provisions that operated under the previous legislation to be restored.129

Increasing Levels of Industrial Disputation

14. The increasing occurrence and impact of industrial disputation in Australia and Victoria is of acute concern to the Victorian Government.

15. In the 12 months to September 2011, the number of employees involved in and working days lost due to industrial disputes in Australia increased significantly (see Figure 6.1). The number of employees involved in disputes increased sharply by 71 per cent compared with the previous 12 months, and the number of working days lost increased by 49 per cent on the previous 12 months.

Chamber of Commerce and Industry, Submission No. 58 to the Senate Education, Employment and Workplace Relations Committee, Inquiry into the Fair Work Bill 2008’, January 2009, 205.

127 Heather Ridout, ‘The Fair Work Act – Barriers to Productivity Improvement Need to be Addressed,’ (Speech delivered at the 10th Annual Workforce Conference, Sydney, 5 September 2011) 11; Australian Chamber of Commerce and Industry, Submission No. 58 to the Senate Education, Employment and Workplace Relations Committee, Inquiry into the Fair Work Bill 2008, January 2009, 103. See for instance: Australian Industry Group v ADJ Contracting Pty Ltd [2011] FWAFB 6684; Riverside Textiles Pty Ltd v TCFUA [2011] FWAFB 3847.

128 Steve Knott, ‘The New IR Laws – A Challenge or Opportunity for Resource Industry Employers?’ (Presentation to Future GAS 2011, 24 March 2011) 18-19 <http://www.amma.org.au/home/home/media_publications/2011/20110324_SteveKnottFutureGasSummit2011Speech.pdf > ; Australian Mines and Metals Association, ‘The Fair Work Act Meaningful Change Required’ (Paper, 26 September 2011) 3; Australian Mines and Metals Association, ‘Fair for Who? The Rhetoric Versus the Reality of the Fair Work Act’ (Paper, 1 July 2011) 3 <www. amma .org.au/home/publications/290611_ Fair forwho.pdf >; Australian Mines and Metals Association, ‘Finding Fairness: A Review of the First 12 Months of the Fair Work Act 2009’ (Paper, July 2010) 29; Heather Ridout, ‘The Fair Work Act – Barriers to Productivity Improvement Need to be Addressed’ (Speech delivered at the 10th Annual Workforce Conference, Sydney, 5 September 2011) 11.

129 See for example, Australian Chamber of Commerce and Industry, Submission No.58 to the Senate Education, Employment and Workplace Relations Committee, Inquiry into the Fair Work Bill 2008, January 2009, 205. See also, Australian Mines and Metals Association, ‘Unions Drive a Barge Through Right of Entry Laws’ (Media Release, 27 June 2011) <http://www.amma.org.au/home/home/media_publications/2011/20110627_UnionsDriveaBargeRightThroughRightOfEntryLaws.pdf>; Steve Knott, ‘The New IR Laws – A Challenge or Opportunity for Resource Industry Employers?’ (Presentation to Future GAS 2011, 24 March 2011) 18, 19 <http://www.amma.org.au/home/home/media_publications/2011/20110324_SteveKnottFutureGasSummit2011Speech.pdf >.

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Figure 6.1: Working days lost due to industrial disputation and total employees involved, Australia, Disputes occurred 12 months ending September

Source: ABS Catalogue 6321.0.55.001 – Industrial Disputes, Australia, Sep 2011

16. Over this same period, the ‘strike rate’ (defined as the number of working days lost per thousand employees) also rose significantly in Australia. As illustrated in Figure 6.2, the September quarter in 2011 recorded the highest number of working days lost per 1000 employees in Australia since early 2008. Over the same period, Victoria’s strike rate rose from 5.3 days to 10.8 days.

Figure 6.2: Strike rate – Victoria and Australia – September 2001 to September 2011

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17. Increasing industrial disputation, particularly in crucial sectors such as the transport and building and construction industries, has an adverse impact on the Victorian and Australian economies.

18. In particular, the Victorian Government is concerned by a recent spate of high impact industrial disputes and their potential downstream impacts on business and the broader community. These disputes included protracted industrial action in the aviation industry, and strikes by maritime workers followed by lockouts by employers.

19. As an example, the Qantas dispute lasted more than seven months. It has been estimated that Qantas incurred around $70 million in damage, and although the direct impact on the Victorian tourism industry is difficult to quantify, the dispute had an adverse impact on the tourism industry (Australian inbound tourism is estimated to be worth $24 billion per year).130 In their joint letter calling on the Commonwealth Government to intervene in this dispute, the Victorian and New South Wales Governments also highlighted the reputational risks of this industrial action to Australia as an investment location.

20. As it turned out, it was not until Qantas decided to ground its fleet that the Commonwealth Government intervened, by making an application to FWA for suspension or termination of all protected industrial action at Qantas. Victoria and New South Wales made joint submissions to FWA supporting a termination order.131

21. Recent disputes alongside rising disputation levels, support the observations of business and employer groups that the industrial climate is changing, with “discernable negative changes in union culture and behaviour”132 and predictions that future industrial disputation statistics will demonstrate further deterioration in the industrial environment.133

Case Study – High Levels of Industrial Disputation in the Construction Industry

22. The building and construction industry is integral to both the Australian and Victorian economies and is also crucial to the livelihoods of citizens through the provision of housing and public infrastructure. The value of construction work done in 2010-11 was $168 billion nationally134 and $35 billion in Victoria. The industry employed 9.1 per cent of the Australian workforce in 2010 (over one million people), making it the third largest employing industry nationally.135 In Victoria, it is the fourth largest employing industry in the State, employing 9.2 per cent of the Victorian workforce.

23. Notwithstanding its importance, the industry consistently loses more days per 1,000 employees due to industrial disputes than the average of all other industries in Australia (see Figure 6.3).136

130 Minister for Tertiary Education, Skills, Jobs and Workplace Relations [2011] FWAFB 7444 [7]-[10] (This figure relates to damage incurred by Qantas before 29 October 2011, FWA terminated protected industrial action on 31 October 2011. During the FWA proceedings Qantas provided the tribunal with evidence that the industrial action taken by the unions had affected 70,000 passengers, led to the cancellation of 600 flights and the grounding of 7 aircraft).

131 On 31 October 2011 a Full Bench of FWA ordered that all protected industrial action at Qantas be terminated. The Bench decided to terminate rather than suspend industrial action in light of the vulnerability of the tourism and aviation industries to uncertainty should the action only be suspended.

132 See for example, Heather Ridout, ‘Taking Charge of Our Future’ (Speech delivered at the National Press Club, Canberra, 30 November 2011).

133 Ibid. 134 Australian Bureau of Statistics, Construction Work Done, Australia, cat. no. 8755.0, June 2011.135 Australian Bureau of Statistics, Labour Force, Australia, detailed, cat. no. 6291.0.55.003, September 2011.136 Australian Bureau of Statistics, Industrial Disputes Australia, cat. no. 6321.0.55.001, September 2011.

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Figure 6.3 Days lost to industrial disputes per 1000 employees in the construction industry

24. Moreover, in October 2011 the ABC Commissioner observed:

The most recent ABS industrial disputations data show a significant spike in ‘days lost’ to industrial action. In the June 2011 quarter there were 44.7 days lost per 1000 employees in the sector. This was driven by high disputation levels on Queensland Government-funded jobs and at Victoria’s desalination plant. Disputation levels this high are unacceptable.137

25. Since building and construction is a large contributor to Australia’s GDP and has flow on effects to many other sectors, it is clear that these levels of industrial disputation have a negative impact on the Australian and Victorian economies.

Office of the Australian Building and Construction Commissioner

26. The Building and Construction Industry Improvement Amendment (Transition to Fair Work) Bill 2011 (Bill) was recently introduced by the Commonwealth Government.

27. The Victorian Government has made a submission to the Senate Committee on Education, Employment and Workplace Relations opposing the Bill, which would abolish the Office of the Australian Building and Construction Commissioner (ABCC), and repeal many of the industry-specific workplace relations laws that presently apply to the building and construction industry under the Building and Construction Industry Improvement Act 2005 (Cth).138

28. If the Bill is passed, the Victorian Government considers that reliance upon the framework regulating industrial action under the FW Act will hamper the ability of the industry regulator to deal with unlawful industrial action quickly and effectively and make it more difficult for industry participants to recover the costs resulting from such action.

137 Leigh Johns (Speech at the Air Conditioning and Mechanical Contractors Association National Conference, Sanctuary Cove, 7 October 2011)http://abcc.gov.au/Mediaandnewscentre/Latestnewsandmedia/Pages/ABCCommissioner'sAMCAspeech.aspx 138 Victorian Government, Submission No. 17 to Senate Committee on Education, Employment and Workplace Relations, Inquiry into the Building and Construction Industry Improvement Amendment (Transition to Fair Work) Bill 2011, February 2012.

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29. In particular, the Bill would have the effect that the civil penalties available under the FW Act would apply to unlawful industrial action and coercion in the building and construction industry. This would result in a significant reduction in the maximum penalties that could be imposed. The Victorian Government considers that this would reduce the deterrent effect of the civil penalty regime applying to the industry.139

30. In addition, if the Bill is passed, the general provisions of the FW Act dealing with unlawful industrial action and coercion will apply to the building and construction industry. The Victorian Government considers that reliance on the FW Act provisions would narrow the legislative prohibitions of inappropriate and damaging conduct that apply to the industry.140

31. To foster and maintain a more efficient and productive building and construction industry, there must be appropriate mechanisms in place to assist industry participants to resolve disputes without resort to industrial action, to deter participants from engaging in unlawful industrial action and other inappropriate behaviour, and to deal promptly and effectively with unlawful behaviour if and when it occurs.

Conclusion

32. Industrial action results in significant additional direct and indirect costs which must be borne by industry, its customers and ultimately the community as a whole.

33. Recent statistics showing rising industrial disputation support the concerns of business and employer groups that changes to the bargaining framework and rules governing industrial action introduced by the FW Act, are contributing to a deteriorating industrial climate. The Victorian and Australian building and construction industries provide a particularly acute example of this challenging climate.

34. The Victorian Government shares these concerns and is particularly concerned by a recent spate of high impact industrial action, and the potential downstream impacts of industrial action in crucial sectors such as aviation, shipping and building and construction on the Australian and Victorian economies.

35. The Victorian Government urges the Commonwealth to consider changes to the FW Act to establish mechanisms that will better assist employers and employees to resolve disputes without resort to industrial action, and to foster more cooperative and harmonious industrial relations practices that will better facilitate agreement making.

36. The Victorian Government is concerned that if the Commonwealth Government’s Building and Construction Industry Improvement Amendment (Transition to Fair Work) Bill 2011 is enacted, the framework regulating industrial action and coercion under the FW Act will not be adequate to deal with the continuing high levels of unlawful and inappropriate behaviour in the construction industry.

139 Ibid 24-26.140 Ibid 26-29.

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7 UNFAIR DISMISSAL AND THE GENERAL PROTECTIONS

1. Key objects of the FW Act include:

(a) to establish a framework for dealing with unfair dismissals that balances:

(i) the needs of the business (including small business); and

(ii) the needs of employees; and

(b) to establish procedures for dealing with unfair dismissal that:

(i) are quick, flexible and informal; and

(ii) address the needs of employers and employees …141

2. The FW Act was to establish a quick, flexible and informal system that protects employees from being unfairly dismissed and create a clear and stable framework of general protections comprised of rights and obligations that are simple and straightforward to understand.142


3. Notwithstanding these objectives, business and employer groups question whether the FW Act has struck the right balance between the interests of employers and employees, in particular, because of its failure to preclude unmeritorious claims.

4. This is reflected in the results of a recent Victorian Department of Business and Innovation survey of employers, where 52.7 per cent of respondents identified the operation of the FW Act’s unfair dismissal and general protections laws as an important or a very important barrier to improving productivity. It is notable that these responses were evenly distributed across small, medium and large businesses (49 per cent of small business responses, compared with 55.8 per cent of large employers).143

Unfair Dismissals

5. The FW Act has significantly altered the unfair dismissal jurisdiction. One of the key changes was the removal of the exclusion that prevented unfair dismissal claims being brought by employees working in businesses with 100 or less employees. This means that a significantly larger number of employees can now access the unfair dismissal jurisdiction under the FW Act.

6. The Commonwealth Government anticipated an increase in unfair dismissal applications, for this and other reasons.144 This has been borne out by the marked increase in unfair dismissal claims since the FW Act’s commencement: there were

141 FW Act s.381.142 Explanatory Memorandum, Fair Work Bill 2008 (Cth) ii; The Hon Simon Crean MP (Cth) ‘Small Business

Fair Dismissal Code’ (Media Release, Ministers’ Media Centre, Education, Employment and Workplace Relations Portfolio, (online) 16 July 2010).

143 Victorian Government, ‘Victorian Employment Practices and Links to Workplace Productivity Research’ (Unpublished Research conducted between October 2011 – January 2012) (In the second half of 2011, the Victorian Department of Business and Innovation commissioned a research project designed to assess the links between employment practices and workplace productivity. One element of this research project included a Computer Assisted Telephone Interviewing (CATI) survey of 1,000 small, medium and large employers across metropolitan and regional Victoria and across industry sectors. This survey was conducted between October and November 2011. The telephone survey included questions asking the respondents to rate the importance of a number of factors as difficulties or barriers to increasing productivity in their business).

144 Commonwealth Government, ‘Fair Work Act Review’ (Background Paper, January 2012) 16.

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7,994 termination of employment applications under the previous legislation in 2008-2009 (inclusive of unfair dismissal and unlawful termination applications). This increased to 11,116 unfair dismissal claims in 2009-2010 and 12,840 in 2010-2011.145

There have been close to 7,000 unfair dismissal applications in the first half of 2011-12.146

7. Figure 7.1 illustrates that there has also been a substantial rise in Victorian termination of employment applications since 2009.147

Figure 7.1: Victoria – Applications for relief of termination of employment – 1997-98 to 2010-11148

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8. Another change that has been made by the FW Act is to replace the broader “genuine operational reasons” exclusion that had applied to claims under the previous legislation, with the more limited “genuine redundancy” exclusion. To successfully rely on this

145 Commonwealth Government, ‘Fair Work Act Review’ (Background Paper, January 2012) 16; Fair Work Australia (Cth), ‘Annual Report of Fair Work Australia 1 July 2009 – 30 June 2010,’ 2010, 76 and 81; <http://www.fwa.gov.au/documents/annual_reports/ar2011/FWA_annual_report_2010-11.pdf>.

146 Fair Work Australia (Cth), ‘Quarterly Report to the Minister July – September 2011,’ (28 October 2011) 6 <http://www.fwa.gov.au/documents/quarterlyreports/DEEWR_1Q_11-12.docx>; Fair Work Australia (Cth), ‘Quarterly Report to the Minister Oct – December 2011,’ (30 January 2012) 6 <http://www.fwa.gov.au/documents/quarterlyreports/DEEWR_2Q_11-12.docx>. Fair Work Australia and predecessor bodies (Cth), ‘Annual Reports 1997-98 to 2010-1’ <http://www.fwa.gov.au/index.cfm?pagename=aboutannual>. (The FWA quarterly reports indicate that unfair dismissal claims continue to rise in the first six months of 2011/2012 under the FW Act).

147 This data is drawn from Fair Work Australia Annual Reports, Victorian unfair dismissal applications and unlawful termination/general protections claims cannot be disaggregated, although there is a clear upward trend in termination of employment claims generally. The Victorian figures are not affected by any increase in the overall coverage of the FW Act as may be the case with other referring States (since coverage in Victoria has been largely unchanged since Victoria’s first referral of workplace relations powers to the Commonwealth in 1996).

148 Fair Work Australia and predecessor bodies (Cth), ‘Annual Reports 1997-1998 to 2010-2011’ <http://www.fwa.gov.au/index.cfm?pagename=aboutannual>.

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new exclusion, employers must consult over potential redundancies and consider any redeployment options.149

9. Notwithstanding the objectives of the FW Act, it also remains of concern to business and employer groups that even if there is a valid reason for a dismissal, a decision to terminate employment might be considered unfair due to any failure to strictly comply with procedural requirements (such as the redundancy consultation requirements).150

Unfair Dismissals - Impact on Small Business

10. Under the FW Act, employees of small businesses with fewer than 15 employees are eligible to make an unfair dismissal claim if they have worked in the business for 12 months, provided that other eligibility requirements are met. However, a dismissal will not be considered unfair if the employer has complied with the Small Business Fair Dismissal Code (Code).

11. The purpose of the Code was to make clear to small business employers and employees their rights and obligations under the FW Act’s unfair dismissal regime. However, contrary to the stated policy intentions of the Commonwealth Government,151 small business employers consider that they are forced to defend claims despite complying with the Code.152 Business and employer groups consider that the Code should be amended, as it has not operated as intended.153

12. The vast majority of unfair dismissal claims are settled at or before conciliation. For the minority of claims that are tested in arbitration, a smaller number are upheld.154

FWA does not report on employers’ small business status against arbitrated outcomes. However, in the reporting periods 2009-2011, unfair dismissal applications were only struck out on 17 occasions because the dismissal was consistent with the Code.155 The FWA Quarterly Reports for the first and second quarters of this reporting year show that there have only been three claims that have been dismissed because the dismissal was in accordance with the Code.156

149 See FW Act s.389.150 See for example, Australian Chamber of Commerce and Industry, Submission No. DR196 to the Productivity

Commission, Inquiry into the Economic Structure and Performance of the Australian Retail Industry, September 2011, 25-26; Australian Chamber of Commerce and Industry, Submission No.58 to the Senate Education, Employment and Workplace Relations Committee, Inquiry into the Fair Work Bill 2008, January 2009, 188.

151 Australian Labor Party, ‘Forward with Fairness – Policy Implementation Plan’ (August 2007) 19-20.152 Australian Chamber of Commerce and Industry, Submission No. DR196 to the Productivity Commission,

Inquiry into the Economic Structure and Performance of the Australian Retail Industry, September 2011, 26. See also, Australian Mines and Metals Association, ‘Finding Fairness: A Review of the First 12 Months of the Fair Work Act 2009’ (Paper, July 2010) 71.

153 Australian Chamber of Commerce and Industry, Submission No. DR196 to the Productivity Commission, Inquiry into the Economic Structure and Performance of the Australian Retail Industry, September 2011, 28; Victorian Automobile Chamber of Commerce, ‘Small Business Fair Dismissal Code’ (Update V49, No.5, 1 May 2009); Independent Contractors Australia, ‘Reform the Fair Work Act – What the Australian Industry Group Wants: Summary’ (Media Release (online) 9 September 2011) <http://contractworld.com.au/general/ica-reform-the-Fair-Work-Act-AIG-wishlist.php>

154 Fair Work Australia (Cth), ‘Annual Report of Fair Work Australia 1 July 2010-30 June 2011,’ (Melbourne, 2011) 12 (For example, of the 12,301 unfair dismissal matters that were finalised by FWA in 2010-2011 (for claims made under the FW Act and the previous legislation), only 517 were finalised by a decision on jurisdictional or merit grounds. Of the 517 FW Act matters so finalised, in only 151 cases was the dismissal held to be harsh, unjust or unreasonable - 1.23 per cent of the total applications finalised).

155 Fair Work Australia (Cth), ‘Annual Report of Fair Work Australia 1 July 2009-30 June 2010,’ (Melbourne, 2011) 14; Fair Work Australia (Cth), ‘Annual Report of Fair Work Australia 1 July 2010-30 June 2011,’ (Melbourne, 2011) 14.

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http://contractworld.com.au/general/ica-reform-the-Fair-Work-Act-AIG-wishlist.php


Unfair Dismissals - ‘Go away’ money

13. Despite assurances by the Commonwealth Government that the FW Act would remove ‘go away’ money from the unfair dismissal system,157 business and employer groups report that this has not happened.158 It remains of concern to business and employer groups that many unfair dismissal claims are speculative, with employers having to pay ‘go away’ money to settle unmeritorious claims to avoid involvement in more lengthy and costly tribunal proceedings.159

14. FWA’s 2010 and 2011 Quarterly Reports show that about 80 per cent of unfair dismissal claims were resolved at or before conciliation,160 although the reasons for these claims settling are not known.161 FWA data indicates that the majority of settlements involve payment of small monetary amounts. For example, for the period 1 July to 31 August 2010, FWA reported that 73 per cent of payments were for amounts of $6,000 or less, and that 28 per cent of matters settled for amounts of less than $2,000.162 The FWA’s Unfair Dismissal Conciliation Research Survey Results also record that 76 per cent of respondents felt that wanting to avoid the cost, time, inconvenience or stress of further legal proceedings had a medium or large influence on the decision to settle.163

15. The FWA data does not enable an analysis of the extent to which small settlements reflect ‘go away’ money or are made for other reasons (such as payment of outstanding employee entitlements). However, the available data at least raises genuine questions as to whether the unfair dismissal system is operating as intended, particularly with respect to small businesses. The Victorian Government urges the Commonwealth to undertake robust research into the extent to which ‘go away’ payouts are being made to resolve dismissal claims and the effectiveness of the Code for small businesses.

General Protections

16. The “general protections” (freedom of association, discrimination and other wrongful conduct) in Part 3-1 of the FW Act not only consolidated the protections in the previous legislation, but also expanded their scope in some respects.164

156 Fair Work Australia (Cth), ‘Quarterly Report: Report to the Minister Oct 2011-Dec 2011,’ (Melbourne, 30 January 2012) 6; Fair Work Australia (Cth), ‘Quarterly Report: Report to the Minister Jul 2011- Sept 2011,’ (Melbourne, 28 October 2011) 6.

157 Australian Labor Party, ‘Forward with Fairness – Policy Implementation Plan’ (August 2007) 20.158 Australian Chamber of Commerce and Industry, Submission No. DR196 to the Productivity Commission,

Inquiry into the Economic Structure and Performance of the Australian Retail Industry, September 2011, 27; Australian Mines and Metals Association, ‘Finding Fairness: A Review of the First 12 Months of the Fair Work Act 2009’ (Paper, July 2010) 16 <http://www.amma.org.au/home/publications/FindingFairness_12monthReview_FullReport.pdf>.

159 Australian Chamber of Commerce and Industry, Submission No. DR196 to the Productivity Commission, Inquiry into the Economic Structure and Performance of the Australian Retail Industry, September 2011, 25-27; Australian Mines and Metals Association, ‘Finding Fairness: A Review of the First 12 Months of the Fair Work Act 2009’ (Report, July 2010) 15-16, 60-72.

160 See Fair Work Australia, Quarterly Reports, ‘Unfair Dismissals Report’ (Jul-Sep 2010 to Oct-Dec 2011).161 Evidence to Senate Education, Employment and Workplace Relations Legislation Committee, Supplementary

Budget Estimates, 20 October 2010, 82 (Bernadette O’Neill, Director, Fair Work Australia) <http://www.aph.gov.au/hansard/senate/commttee/S13311.pdf>.

162 Ibid 84.163 Fair Work Australia (Cth), ‘Fair Work Australia: Unfair Dismissal Conciliation Research Survey Results’

(November 2010) 51 <http://www.fwa.gov.au/documents/dismissals/report.pdf>.164 Carolyn Sutherland and Joellen Riley, ‘Industrial Legislation in 2009’ (2010) 52(3) Journal of Industrial

Relations 275, 282; Australian Industry Group, ‘Termination/Employment General Protections’ (Paper presented at the Australian Industry Group National PIR Conference, 28-29 November 2011) 11, 13, 15;

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http://www.fwa.gov.au/documents/dismissals/report.pdf

http://www.aph.gov.au/hansard/senate/commttee/S13311.pdf

http://www.amma.org.au/home/publications/FindingFairness_12monthReview_FullReport.pdf


17. As there has been only limited judicial consideration of key aspects of the general protections, business and employer groups are concerned that there remains much uncertainty over the operation of these provisions,165 that they are too broad in a number of respects,166 and it is too easy to pursue general protections claims even where the claims have no merit.167

18. As an example of the potential breadth of the new protections, the protections for “workplace rights” appear to expand beyond protecting an employee from adverse action when making a complaint to a body in relation to their entitlements under the FW Act, an award or agreement (as was the case under previous legislation), arguably to include the making of any “complaint or inquiry to any person or body about any matter relating to their employment” (even if it does not pertain to a workplace law or industrial instrument).168 This suggests that an almost unlimited range of circumstances could be covered by this protected attribute.169

19. The case study on the decision in Barclay v The Board of Bendigo Regional Institute of Technical and Further Education below, provides a further example of the breadth of the new protections.

20. The general protections do not require that the ‘reason’ for the adverse action be the sole or dominant one, it merely needs to include the alleged proscribed reason (under the previous legislation, a sole or dominant reason test applied to some protections). Business and employer groups are also concerned that this ‘multiple reasons’ test, when combined with the general presumption that adverse action is taken for a proscribed reason unless the person alleged to have acted for that proscribed reason proves otherwise (the reverse onus of proof), effectively mean that it is too difficult to defend general protections claims and too easy to pursue claims without merit. 170

21. Business and employer groups also report that many general protections claims may be made as a substitute for unfair dismissal claims by employees who are excluded from access to the unfair dismissal jurisdiction.171 In contrast to an unfair dismissal claim, the period to lodge a general protections claim is lengthy (for general protections claims

Australian Chamber of Commerce and Industry, Submission No. 58 to the Senate Education, Employment and Workplace Relations Committee, Inquiry into the Fair Work Bill 2008, January 2009, 173 [689]; Australian Mines and Metals Association, ‘Finding Fairness: A Review of the First 12 Months of the Fair Work Act 2009’ (Paper, July 2010) 17.

165 Australian Mines and Metals Association, ‘Finding Fairness: A Review of the First 12 Months of the Fair Work Act 2009’ (Paper, July 2010) 18; Australian Chamber of Commerce and Industry, Submission No. 58 to the Senate Education, Employment and Workplace Relations Committee, Inquiry into the Fair Work Bill 2008, January 2009, 173.

166 Australian Industry Group, ‘Termination/Employment General Protections’ (Paper presented at the Australian Industry Group National PIR Conference, 28-29 November 2011) 14; Australian Chamber of Commerce and Industry, Submission No. 58 to the Senate Education, Employment and Workplace Relations Committee, Inquiry into the Fair Work Bill 2008, January 2009, 173.

167 Letter from Jennifer Westacott, Chief Executive of the Business Council of Australia to Senator Chris Evans, 19 May 2011, 3; Heather Ridout, ‘The Fair Work Act – Barriers to Productivity Improvement Need to be Addressed,’ (Speech delivered at the 10th Annual Workforce Conference, Sydney, 5 September 2011) 13; Australian Chamber of Commerce and Industry, Submission No. 58 to the Senate Education, Employment and Workplace Relations Committee, Inquiry into the Fair Work Bill 2008, January 2009, 173.

168 Breen Creighton and Andrew Stewart, Labour Law (The Federation Press, 5th ed, 2010), 560 [17.71].169 Australian Industry Group, ‘Termination/Employment General Protections’ (Paper presented at the

Australian Industry Group National PIR Conference, 28-29 November 2011) 14.170 Heather Ridout, ‘The Fair Work Act – Barriers to Productivity Improvement Need to Be Addressed’ (Speech

delivered at the 10th Annual Workforce Conference, Sydney, 5 September 2011) 13; ‘BCA Calls for Amendments to Fair Work Laws’, Workplace Express, 27 July 2011; Letter from Jennifer Westacott Chief Executive of the Business Council of Australia to Senator Chris Evans, 19 May 2011, 1.

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involving a dismissal, the application must be made within 60 days of the dismissal rather than the 14 days for an unfair dismissal claim). Further, the amount of damages that can be sought for a general protections claim is not capped (whereas it is capped at six months for unfair dismissal claims).

22. In a survey of its members, Ai Group found that just over seven per cent of the 250 respondents had received a general protections claim against their business, and 11.2 per cent had been threatened with a claim.172 Of those respondents subject to a general protections claim:

61 per cent chose to pay compensation to settle the claim before it was dealt with in court;

72 per cent expressed the view that the claim had no merit;

78 per cent believed the claim was pursued as a general protections claim because the provisions are more favourable to employees than the unfair dismissal laws; and

72 per cent stated that the general protections provisions are too loose and encourage speculative claims.173

23. FWA data shows increasing usage by employees of the general protections dismissals jurisdiction. According to the FWA 2010-2011 annual report: “General protections applications under s.365, which involve dismissal, increased from 1,188 in 2009–10 to 1,871 in the reporting period, an increase of almost 60 per cent.” 174 In the first two quarters of the 2011-2012 reporting year, 1,042 applications have been made under s.365.175 General protections applications which do not involve dismissal have also grown significantly – from 254 in 2009-10, 504 in 2010-11 and 289 in the first two quarters of the 2011-2012 reporting year.

24. The Victorian Government notes that business and employer groups have proposed a range of measures that they consider would make the general protections more balanced including: capping the amount of damages that can be awarded to a maximum of six months’ pay; requiring applications to be lodged within two weeks of a termination; applying a sole or dominant reason test; abolishing the reverse onus of proof obligation; and permitting FWA to conciliate the matter, for non-dismissal claims, if all affected parties have agreed in writing for a conference to be held.176

171 See for example, Heather Ridout, ‘The Fair Work Act – Barriers to Productivity Improvement Need to be Addressed’ (Speech delivered at the 10th Annual Workforce Conference, Sydney, 5 September 2011) 13.

172 Heather Ridout, ‘The Fair Work Act – Barriers to Productivity Improvement Need to be Addressed’ (Speech delivered at to the 10th Annual Workforce Conference, Sydney, 5 September 2011) 16; Dr Steven Kates, ‘The AMMA Workplace Relations Research Project – A Survey Based Analysis’ (Research Report No.2, Royal Melbourne Institute of Technology, January 2011) 55.

173 Heather Ridout, ‘The Fair Work Act – Barriers to Productivity Improvement Need to be Addressed’ (Speech delivered at the 10th Annual Workforce Conference, Sydney, 5 September 2011) 16.

174 Fair Work Australia (Cth), ‘Annual Report of Fair Work Australia 1 July 2010-30 June 2011’ (Melbourne, 2011) 11.

175 Fair Work Australia (Cth), ‘Quarterly Report: Report to the Minister Oct 2011-Dec 2011’ (Melbourne, 30 January 2012) 6; Fair Work Australia (Cth), ‘Quarterly Report: Report to the Minister Jul 2011- Sept 2011,’ (Melbourne, 28 October 2011) 6.

176 Letter from Jennifer Westacott Chief Executive of the Business Council of Australia to Senator Chris Evans, 19 May 2011, 3; Heather Ridout, ‘The Fair Work Act – Barriers to Productivity Improvement Need to be Addressed’ (Speech delivered at to the 10th Annual Workforce Conference, Sydney, 5 September 2011) 14. See further, Australian Chamber of Commerce and Industry, Submission No. 58 to the Senate Education, Employment and Workplace Relations Committee, Inquiry into the Fair Work Bill 2008, January 2009, 175.

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Case Study – the Barclay Decision

25. The decision in Barclay v The Board of Bendigo Regional Institute of Technical and Further Education177 (Barclay decision) was the first Full Federal Court interpretation of the “general protections” provisions in Part 3-1 of the FW Act. The Barclay decision expansively interpreted the protections conferred on union officers in the workplace against “adverse action” taken by an employer.

26. The majority of the Full Federal Court held that the FW Act requires a determination of the “real reason” for the taking of adverse action. While evidence of the decision-maker’s subjective intent was relevant to this question it was not determinative, as the “real reason” may be unconscious, not appreciated or understood by the decision-maker.

27. The business community has expressed concern about the potential impact of the Barclay decision on an employer’s right to take disciplinary action against employees who also perform union activities.178

28. The Barclay decision has been appealed to the High Court. The Victorian Government supports the appeal. The Commonwealth Minister for Employment and Workplace Relations has intervened in the High Court proceedings to oppose the appeal.

Conclusion

29. Business and employer groups assert that the FW Act’s unfair dismissal and general protections provisions have failed to strike the right balance between the interests of employers and employees, in particular by their failure to preclude unmeritorious claims.

30. The changes introduced by the FW Act have seen termination of employment claims in Victoria (including unfair dismissal claims) rebound to essentially the same level as in 1997-1998.

31. Business and employer groups report that the Small Business Fair Dismissal Code has not operated as intended and that it should be amended.

32. Despite the intentions of the Commonwealth Government, business and employer groups report that many unfair dismissal claims are speculative and that employers are having to pay ‘go away’ money to settle unmeritorious claims.

33. Business and employer groups are concerned that the general protections are too broad, are uncertain in operation and are being substituted for unfair dismissal claims, and that it is too easy to pursue unmeritorious general protections claims.

34. The Victorian Government notes that business and employer groups have proposed a range of changes to the FW Act’s unfair dismissal and general protections provisions that they believe would better balance the interests of employers and employees.

35. The Victorian Government urges the Commonwealth Government to address the concerns raised by business and employer groups about the operation of these provisions.

177 [2011] FCAFC 14.178 Peter Anderson, ‘Employer Flexibility Versus Job Security,’ (Speaking notes for speech delivered to 10th

Annual Workforce Conference, Sydney, 5 September 2011) 9; Steve Knott, ‘The New IR laws – A Challenge or Opportunity for Resource Industry Employers?’ (Presentation to FutureGAS 2011, 24 March 2011) 27.

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8 COMPLEXITY OF THE SYSTEM

1. One of the key terms of reference for the Review is to examine the extent to which the FW Act is operating as intended in creating a clear and stable framework of rights and obligations which is simple and straightforward to understand.179


2. As discussed in Sections 4 to 7 of this Submission, business and employer groups have reported that key aspects of the Commonwealth workplace relations system such as the bargaining framework, IFAs and the unfair dismissal and general protections regimes are overly complex, confusing and burdensome on business. Other areas where businesses are experiencing difficulties with the operation of the FW Act include its transitional and right of entry arrangements.

3. The complexities of the Fair Work system are demonstrated by the results of the recent AHRI survey of human resource practitioners, which show that 65 per cent of respondents believe that the FW Act has made their job more difficult, reporting that they spent both more time and cost on industrial relations issues.180 They also report an increased need for legal advice in dealing with the FW Act and an increased level of recordkeeping.181 A majority of respondents also reported that the FW Act has created more complexity in employment arrangements.182

Victorian Small Businesses and the Impact of the Fair Work Laws

4. There are more than 495,000 active small businesses in Victoria,183 contributing approximately 30 per cent of the State’s production.184 Through self-employment and employing others, small businesses are a significant source of job creation, providing nearly half (47 per cent) of the State’s private sector jobs - around 1.2 million jobs. A significant strength of the Victorian economy lies in the diversity of the products and services that are provided by small businesses, which operate in all sectors of the State’s economy and are also a vital element of Victoria’s regional economy.185

5. Small businesses, like all businesses, need to keep abreast of relevant government rules and regulations while also managing core business challenges. The Victorian Government recognises that regulatory and compliance costs impose a disproportionate burden on small businesses, given that they are often constrained by a shortage of time, knowledge, staff, skills and access to finance. Many businesses find it difficult to stay

179 Commonwealth Government, Terms of Reference for the Fair Work Act Review; Explanatory Memorandum, Fair Work Bill 2008 (Cth) [4].180 Australian Human Resources Institute, ‘The Fair Work Act: Its Impact Within Australian Workplaces’ (Research Report, January 2012) Tables 13-16.181 Ibid Table 28, 5.182 Ibid Table 31.183 Small Business Victoria, Department of Business and Innovation (Vic), ‘Small Business Victoria Discussion Paper’ (Discussion Paper, September 2011) Introduction from the Minister for Innovation, Services and Small Business, 4. (This cites Australian Bureau of Statistics data, which includes only actively trading businesses with fewer than 20 employees).184 Australian Bureau of Statistics, ‘Small Business in Australia 2001’, 1321.0. 185 Victorian small businesses particularly operate in construction, professional, scientific and technical services; and rental, hiring and real estate services, and comprise 28 per cent of all small businesses based in rural and regional areas: see Small Business Victoria, Department of Business and Innovation (Vic), ‘Small Business Victoria Discussion Paper’ (Discussion Paper, September 2011) 4.

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on top of changing workplace relations and occupational health and safety issues, and access to relevant and reliable information is essential.186

6. The FW Act recognises the needs of small business in section 3(g), which provides that the object of the FW Act is to provide a balanced framework for cooperative and productive workplace relations by: “acknowledging the special circumstances of small and medium-sized businesses”. This was also addressed by the Forward with Fairness – Policy Implementation Plan, which stated that:

Labor understands that small business: - does not have the time, expertise or resources to comprehend pages of industrial legislation and case law; …

Labor will ensure that small business employers have access to advice and assistance directly from Fair Work Australia in relation to the requirements of Labor’s new industrial relations system.

Small business will be able to rely on this advice, which will be prompt and easy to follow.187

7. However, business groups and employers are reporting that the Fair Work laws are not delivering on the Commonwealth’s promise of a simpler and fairer workplace relations system. Specific issues and their impact on small businesses are discussed below.

8. Mr Peter Strong, the Executive Director of the Council of Small Business of Australia (COSBOA) has stated:

We want a [workplace relations] system of our own that is simple to understand, rarely changes and reflects reality not philosophy. A system designed for people, including those who run their own business and those that work in small businesses. Give us a simple system and productivity and transparency will increase.188

Complexities with the Operation of the FW Act

Transitional Arrangements

9. The Commonwealth described the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 as including “sensible and practical arrangements for movement into the new system”.189 However, business and employer groups are reporting that the transitional arrangements create a new regulatory burden for business.190 Russell Zimmerman, Executive Director of the Australian Retailers Association, stated that “transitioning from state-based awards to the new retail award is a highly involved and complicated process”.191

186 Small Business Victoria, Department of Business and Innovation (Cth), ‘Small Business Victoria Discussion Paper’ (Discussion Paper, September 2011) 4, 6, 8.187 Australian Labor Party, ‘Forward with Fairness – Policy Implementation Plan’, (August 2007) 20.188 Council of Small of Australia , ‘AIG is Right - They Got it Wrong - Next Time Ask Us’ (Media Release (online) 5 September 2011) http://www.cosboa.org/webs/cosboa/cosboa.nsf/title/AIG%20is%20right%20-%20they%20got%20it%20wrong%20-%20next%20time%20ask%20us.189 Department of Education, Employment and Workplace Relations (Cth), ‘A Smooth Transition to the Fair Work System’ (Fact Sheet 14, updated 23 December 2009) http://www.deewr.gov.au/WorkplaceRelations/NewWorkplaceRelations/Documents/FactSheets/FactSheet_14.pdf.190 See for example, Victorian Employers’ Chamber of Commerce and Industry, Submission No. DR217 to the Productivity Commission, Inquiry into the Economic Structure and Performance of the Australian Retail Industry, 2 September 2011, 4.191 Australian Retailers Association, , ‘ARA Launches Retail Award Seminar to Get Employers Compliant – Fair Work Ombudsman Retail Visits Are Happening Now’ (Media Release, (online), 19 July 2010) (Quoting

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10. This issue is demonstrated by the results of the Fair Work Ombudsman (FWO) 2010-2011 compliance audit of the national retail industry. Of the 2,098 employers the subject of the audit, 26 per cent were found to be in contravention of the modern award.192 In its report, the FWO acknowledged the challenges experienced by the retail sector and concluded that “many employers underpay as the result of a lack of information or they make mistakes interpreting the information they have”. 193

Expanded Rights of Entry

11. As discussed in Section 6 of this Submission, it is of particular concern to business and employer groups that union rights of entry to workplaces have been expanded under the FW Act, and are also more complex in some respects.194

12. Under the FW Act, a union is able to enter premises if it is entitled to represent the industrial interests of the employees concerned under its rules. This reliance on union eligibility rules for right of entry purposes is considered too complex and legalistic.195

Some business and employer groups have consequently called for the FW Act to be amended so that the earlier rights of entry requirements are restored.196

Bargaining Rules and IFAs

13. As discussed in Section 5 of this Submission, employer and business groups have raised concerns about the complexity of several aspects of the new bargaining framework including employers’ frustration with managing multiple bargaining agents,197 greater difficulty in negotiating greenfields agreements,198 and bargaining processes which can detract from the actual task of reaching agreement on suitable terms and conditions of employment.199

14. The Victorian Government notes that without access to a simple, straightforward bargaining framework, small businesses and other businesses reliant on modern awards can only seek flexibility in workplace arrangements through common law contracts or under the flexibility term contained in modern awards. Concerns with the practical operation of IFAs are discussed in Section 4 of this Submission.

Executive Officer, Russell Zimmerman) http://www.retail.org.au/index.php/articles/ARA_launches_retail_award_seminars_to_get_employers_compliant-_Fair_Work_Ombudsman_retail_visits_are_happening_now ; Fair Work Ombudsman (Cth), National Retail Industry Campaign 2010-11 – Final Report, November 2011, 5.192 Fair Work Ombudsman (Cth), ‘National Retail Industry Campaign 2010-11 – Final Report’ (Final Report, November 2011) 4.193 ‘Retailers Cough Up Half a Million in Back-pay’, Sydney Morning Herald (online) 10 January 2012 http://www.smh.com.au/small-business/managing/retailers-cough-up-half-a-million-in-backpay-20120110-1pt58.html.194 See further: Section 6 of this Submission; Australian Chamber of Commerce and Industry, Submission No.

58 to the Senate Education, Employment and Workplace Relations Committee, Inquiry into the Fair Work Bill 2008, January 2009, 205; Australian Mines and Metals Association, ‘Fair for Who? The Rhetoric Versus the Reality of the Fair Work Act’ (Paper, 1 July 2011) 3

195 Australian Chamber of Commerce and Industry, Submission No. 58 to the Senate Education, Employment and Workplace Relations Committee, Inquiry into the Fair Work Bill 2008, January 2009, 206 - 208.

196 Ibid 205.197 Professor Joellen Riley, ‘Fault Lines Emerging in Good Faith Bargaining Laws, Says Academic’, Workplace Express (online), 4 August 2011.198 Australian Mines and Metals Association, ‘Finding Fairness: a Review of the First 12 Months of the Fair Work Act 2009’ (Paper, July 2010) 11.199 Professor Joellen Riley, ‘Fault Lines Emerging in Good Faith Bargaining Laws, Says Academic’, Workplace Express (online), 4 August 2011.

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Unfair Dismissal and General Protections Claims

15. The Forward with Fairness – Policy Implementation Plan stated:Labor understands that small business: …- is unlikely to have the time, expertise or resources to deal with performance

management issues, employee disruption in a small workplace or managing a dismissal in circumstances of suspected theft or fraud;

- does not have the time, expertise or resources to defend unfair dismissal applications in formal hearings.200

16. However, as discussed in Section 7 of this Submission, compliance with the Small Business Fair Dismissal Code does not prevent an employee of a small business from making an unfair dismissal claim,201 and business and employer groups report that the Code is ineffective as it is still too easy for unmeritorious claims to be pursued.

17. The recent AHRI survey of human resource practitioners reported the administrative burden experienced under the FW Act was a result of “both increased compliance requirements and the risk management processes adopted by their organisation in light of heightened concerns relating to unfair dismissal and adverse action.”202

18. Business and employer groups also report that the general protection provisions are increasingly being used by aggrieved employees to advance unmeritorious claims.

19. Rather than streamlining and simplifying the previous laws concerning freedom of association, coercion, sham contracting and unlawful termination of employment, as was intended,203 the new general protections appear instead to have created further complexity. There also remains much uncertainty over the operation of these provisions, and business and employer groups are concerned that they are too broad in a number of respects.204

Case Study – the Equal Remuneration Case

20. The equal remuneration provisions in Part 2-7 of the FW Act are broader than those in the previous legislation, extending to work of “equal or comparable” value. The Equal Remuneration Case [2012] FWAFB 1000 was the first case to be determined under these new provisions.

21. As an important test case of the operation of the equal remuneration provisions in the FW Act, the Victorian Government made submissions in the case which dealt with the construction of the provisions, their potential application to the case and the development of principles, noting that:

It is appropriate that principles be enunciated which will guide parties as to the appropriate approach to such applications in the future.205

200 Australian Labor Party, ‘Forward with Fairness – Policy Implementation Plan’ (August 2007) 20; Department of Education, Employment and Workplace Relations (Cth), ‘A simple, fair dismissal system for small business’ (Fact Sheet). 201 Australian Chamber of Commerce and Industry, Submission No. DR 196 to the Productivity Commission, Inquiry into the Economic Structure and Performance of the Australian Retail Industry, September 2011, 26; s.385 of the FW Act.202 Australian Human Resources Institute, ‘The Fair Work Act: Its Impact within Australian Workplaces’ (Research Report, January 2012) 40.203 Explanatory Memorandum, Fair Work Bill 2008 (Cth) ii [1335]-[1336]. 204 See further, Section 7 of this Submission.205 Minister for Employment and Industrial Relations, ‘Submissions for the State of Victoria’, Submission in Equal Remuneration Case, C2010/3131, 21 March 2011, [8].

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22. However in coming to its decision, the majority of FWA placed significant reliance on the agreement of the Commonwealth Government and unions as to appropriate wage rates, without providing any clear rationale as to why the applicants had met the relevant statutory test under the FW Act.206

23. The Victorian Government strongly supports the making of equal remuneration orders to address disparities in wage rates which are demonstrated to be attributable to gender. It is concerned, however, that the majority decision does not provide clear principles as to when such orders may be made, creating uncertainty for key stakeholders.

24. This Review should consider how this uncertainty can be addressed so as to provide greater guidance for future cases.

Case Study – the Long Service Leave NES

25. In both the Forward with Fairness policy document and the National Employment Standards Exposure Draft discussion paper, the Commonwealth foreshadowed that it would work with the States and Territories to establish nationally consistent long service leave (LSL) entitlements.207 It is widely considered that the significant differences between State and Territory LSL laws create unnecessary complexity and challenges for businesses operating nationally and that a national standard would reduce the administrative burden on employers.208

26. Pending the development of a national LSL standard (LSL NES), the FW Act includes an interim LSL NES which establishes a complicated set of rules around the source of employee LSL entitlements.209

27. There are many practical difficulties with the interim LSL NES. Firstly, the interim LSL NES can be very complex for employers and employees to apply because it may require them to look at the interaction between the FW Act, old award entitlements and State or Territory LSL laws. Secondly, the interim LSL NES appears to lock-in any old award-derived entitlements, without any mechanism for these eventually to be phased-out or overridden through enterprise bargaining. Thirdly, the rules largely lock-in the differences in LSL entitlements under State and Territory LSL laws, without any mechanism for State and Territory laws to be overridden through enterprise bargaining. In addition, the interim LSL NES provides only very limited means for employers operating businesses across jurisdictions to introduce uniform LSL arrangements for their employees. Further, the interim LSL NES can lead to confusion as to whether the FWO or a State body is the appropriate enforcement agency, depending on whether the entitlements arise under Commonwealth or State or Territory laws.

28. In August 2011, WRMC asked Commonwealth, State and Territory officials to develop a position on the LSL NES.210 However, it is apparent that this process has stalled.

206 Equal Remuneration Case [2012] FWAFB 1000; [62] – [64] (While expressing reservations about the two methods used in the joint submission of the Commonwealth Government and unions to justify the percentage increases proposed, the majority of FWA found that “in general terms” the percentages proposed in the Joint Submissions were appropriate, noting widespread support for the proposals.) 207 Department of Education, Employment and Workplace Relations (Cth), ‘National Employment Standards Exposure Draft’ (Discussion Paper, 2008) 43; Australian Labor Party, ‘Forward with Fairness: Labor’s Plan for Fairer More Productive Australian Workplaces’ (2007) 9. 208 Department of Education, Employment and Workplace Relations (Cth), ‘National Employment Standards Exposure Draft’ (Discussion Paper, 2008) 43.209 FW Act, Ch 2 Pt 2-2 Div 9.210 Workplace Relations Ministerial Council, Meeting 85, Communique, 10 August 2011.

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29. Given the substantial complexities with the interim LSL NES, the administrative burden it places on employers and concerns expressed by key stakeholders about its ongoing operation211, the Commonwealth Government must drive the development of the LSL NES as a matter of priority.

Conclusion

30. A key term of reference for the Review is to consider whether the FW Act is operating so as to create a clear and stable framework of rights and obligations which is simple and straightforward to understand.

31. Business and employer groups report that this objective has not been met in many important respects. Their concerns include: the regulatory burden imposed by the complex transitional arrangements; the complexity in practice of the new union right of entry rules; the complexity of the new bargaining framework and concerns that it is not facilitating agreement making and mutually beneficial bargaining outcomes, and the uncertainty and complexity of the general protection provisions.

32. The Victorian Government is particularly concerned about the regulatory burden the Commonwealth laws impose on small business. Concerns reported by small business include the failure of the Small Business Fair Dismissal Code to deter unmeritorious unfair dismissal claims and the complexity of the award transitional arrangements.

33. The Review should consider how the present uncertainty as to the operation of the equal remuneration provisions in the FW Act can be addressed so as to provide greater guidance for future cases.

34. The interim long service leave National Employment Standard presently in the FW Act provides a further example of the complexity of the Commonwealth regulation. In order to address this issue, the Commonwealth Government must drive development of the new National Employment Standard as a matter of priority.

35. The Victorian Government urges the Commonwealth to address the concerns reported by business and employer groups regarding the practical difficulties that businesses face in complying with the Commonwealth regulation and the regulatory burden this imposes on them.

211 Stephen Smith, Director, National Workplace Relations, Australian Industry Group (Speech delivered to the 10th Annual Workforce Conference, 5 September 2011).

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