Industrial laws change direction

IR laws

By Judith Sloan   

The Fair Work Act has had its first birthday, and the impact of some of its provisions are becoming clearer as various cases are decided by the tribunal, Fair Work Australia.

Of course, the issue of industrial relations, particularly in the sense of potentially militant, unionised workers on collective agreements, matters more to some companies than others.

Unionisation in the private sector in Australia is below 15 per cent. In turn, relatively high rates of unionisation are confined to some sectors, including parts of the resource sector – coalmining, in particular – and infrastructure.

Having said this, one of the effects of the new legislation is to delink the extent of union coverage from the influence of unions.

Unions with relatively small numbers of members in an enterprise now have strong legal rights to be involved in negotiating agreements and other matters.

So even companies with very few union members could be caught up in the provisions of the Fair Work Act.

For companies that opt to continue with award coverage, rather than pursue enterprise agreements, the new Modern Awards also offer challenges, particularly in the transition provisions, and interaction with the National Employment Standards.

For companies with enterprise awards, some planning must go into their future because the law contemplates eventual modernisaton or termination of these types of awards.

But very many large companies – many of them listed – do operate under enterprise agreements with their workers.

To understand the impact of the new industrial relations environment for companies, it is worth exploring what WorkChoices meant for them,

Under WorkChoices, Australian workplace agreements – a form of statutory individual agreement – became fairly common in large companies, particularly resource companies.

AWAs provided considerable flexibility for companies to alter award conditions while enabling some individual tailoring of pay and conditions to suit the employee and the company.

It has to be said that many AWAs in the one company were very similar to one another, but they were seen as vastly preferable to the union-negotiated collective agreements that had been common in the past.

Not that AWAs were ever a cheap round for large companies – that was not their purpose and would not have made any sense in the context of a tight labour market. Rather, the flexibility that AWAs provided was the key feature.

Now that new AWAs are no longer permitted – existing agreements have been allowed to run their terms – companies have had to explore alternative ways of achieving similar ends.

And some companies that had been able to negotiate collective agreements directly with their workers – Telstra and some of the big banks are examples – are now having to bargain with unions to settle the terms of new collective agreements.

In theory, companies should be able to negotiate with unions to deliver win-win outcomes, but there are several features of the legislation that make the going pretty tough for companies.

The new provisions on “good faith” bargaining could impose tribunal directives on how bargaining will be conducted and even the content of the bargaining.

A recent decision by Fair Work Australia is causing concern for some companies. Even though no actual bargaining had taken place, the tribunal granted the union the privilege of taking “protected action”. That is, the union became entitled to recommend strike action to its members even though no bargaining had taken place with the company. This case has been appealed to the Full Bench.

There is some evidence of an increase in strike activity. In the September quarter of last year, some 221 stoppages commenced, compared with 202 for the same quarter in 2009.

And the number of working days lost had risen from 119,000 to some 144,000 between the September quarters of 2009 and last year. Even so, these figures are relatively modest by past standards.

A series of rolling strikes affecting Patrick’s port operations is creating some worries as that union – the MUA – appears increasingly keen to undertake industrial action to pursue its claims.

These developments, along with some of the pronouncements being made by trade union officials, give rise to concern that pattern bargaining is beginning to emerge, notwithstanding this being disallowed by the legislation.

With pattern bargaining comes the loss of scope to negotiate enterprise-specific productivity trade-offs, which can offset the cost of higher wages.

For larger companies, the Fair Work Act’s reinstatement of unfair dismissal provisions for smaller firms

obviously had little impact.

With procedures and systems in place, most larger companies are reasonably well equipped to deal with the requirements to terminate the services of an employee without encountering a claim for unfair dismissal.

However, the changing context on unfair dismissals may embolden some former employees to take action against a company to a greater extent than was the case under WorkChoices.

Moreover, employees can now sue for unfair dismissal in the case of redundancy unless certain steps are followed, including meeting the consultation obligations in an agreement or award and trying to redeploy the affected employee.

There are several other new challenges for larger companies, including general protection claims.

The act makes it unlawful for companies to subject an employee to detrimental conduct because the worker has a workplace right, engages in particular industrial activities, or has a particular attribute.

Companies undertaking workplace change face real traps in these general protection provisions, into which some may unwittingly fall.

For companies that wish to supply goods or services to the federal government, a set of fair bargaining principles must be met.

These include adoption of fair and reasonable work practices, compliance with the act and respect for the principle of freedom of association.

In addition, companies must have a “minimum genuine dispute resolution mechanism”, which in effect means giving Fair Work Australia (or an equivalent third party) the right to arbitrate in a dispute as a last resort.

As a partner of one of our large law firms has put it: “The Fair Work Act is an improvement on some facets of the old laws, which were sticky-taped together and heading in a certain direction.

“These laws are bound together more tightly, but they’re heading in a different direction altogether.”

Professor Judith Sloan is an economist and company director. Article from The Australian, January 22, 2011.

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