Our urgent jobs plan: labour market freedom in Australia

The following is a transcript of a presentation given by HR Board Member Alan Anderson to the HR Nicholls Society XXXIV Conference:

We have heard a good deal this morning about the problems with our industrial relations system and the economic impacts of its failings. Our President, Adam Bisits, has asked me, as a member of the Board, to deliver an overview of the Society’s position on the broad reforms that should be effected to reform Australia’s industrial relations system.

As a non-IR specialist, I claim no deep expertise in the operation of the current regime. In what follows, I draw with gratitude upon a paper prepared by Thereas Moltoni and Des Moore last year for the Society and accepted by the Board, highlighting some of the areas of our industrial relations system requiring the most urgent reform.

The foundation of the Society’s call for reform is a belief that there is no substantive imbalance of bargaining power between the 800,000 employing businesses in Australia and a workforce of 12 million. The dynamic and dispersed nature of our employment market makes it virtually impossible for employers to impose ‘unfair’ conditions on employees on a sustained basis. It follows that the costs of our complex and highly-regulated system are unmatched by any benefits to workers.

The HR Nicholls Society must strike a balance between purism and pragmatism; leading the debate but not so as to consign its recommendations to irrelevance.  It is in that spirit that we advance the following agenda, covering 10 critical areas.

1)      Enterprise Agreements

Enterprise agreements should be restricted to matters that pertain to the employment relationship. They should not include provisions to benefit unions, such as deduction of union fees, paid union training leave or leave to attend union meetings, or restrictions on the engagement of independent contractors or labour hire workers.

Bargaining for agreements should be optional. If employers prefer to fall back on the minimum standards of Modern Awards and National Employment Standards, there should be no basis to force them into bargaining through protected industrial action.

The requirement to make a Greenfields Agreement with a union should be abolished, and there should be no delay in introducing an agreement that complies with industry standards. This change would address Australia’s rampant labour costs growth, which is focused in particular sectors such as resources where unions are effectively empowered to blackmail companies attempting to establish new major projects.

Finally, the Fair Work Commission should not be allowed to publish Enterprise Agreement applications on its web site. This practice allows unions to make vexatious and frivolous objections to agreements to which they are not a party.

2)      Awards

Employment conditions which can be included in Modern Awards are overly burdensome. Under the Workplace Relations Act 1996, only 13 allowable matters could be included, focused on remuneration, hours and leave. Even those 13 matters were excessive, but would provide a better foundation than today’s arrangements.

The recent Commission of Audit highlighted the importance of establishing a minimum wage appropriate for specific geographies and at a level which does not unduly inhibit employment. Few policy objectives are more critical than to help young people secure their first jobs, giving them a foundation for a life of productive employment. Employers lament the dearth of experienced employees, leading to a host of government inquiries and programs to address what is wrongly portrayed as a market failure – yet there can be no restocking of that pool unless the incentive exists for employers to take on young people and give them that experience. Junior rates under Modern Awards need to be urgently reviewed.

3)      Individual contracts

The reintroduction of individual contracts, consistent with the National Employment Standards and subject to a better-off overall test, would restore flexibility to the system. Voluntary exchanges between employers and individual employees are, at present, curtailed by collective bargaining, leaving both parties worse off.

4)      Default superannuation funds

The role of trade unions in managing industry superannuation funds, into which a significant proportion of employee salaries are diverted, often by default, establishes an even more glaring and malignant conflict of interest. In recent days we have seen revelations of an industry fund passing on confidential details of members to a trade union for the purpose of disrupting the business of an employer. Such occurrences are not random incidents; they reflect the systemic flaw of allowing unions to negotiate the compulsory diversion of an element of remuneration to lucrative funds management businesses that are under their control. The Productivity Commission review of June 2012 suggested establishment of a new, independent body to assess the funds to be listed in modern awards. Ultimately, the policy objective should be to create a genuinely competitive superannuation industry, in which the role of default funds is greatly diminished.

5)      Right of entry

The Society believes, at a minimum, that right of entry provisions should be wound back to those applying under the Workplace Relations act 1996, restricting unions’ rights to enter an employer’s premises to circumstances where they are a party to an instrument on site.

Permit me a personal remark on this topic. In my days working in the Howard Government, I remember puzzling over a summary of the right of entry provisions which Minister Andrews proposed to include in WorkChoices. As a non-IR specialist, I found – and still find – the concept of a right of entry puzzling. Laws that empower unions to fulfil the role of regulators, for instance, in relation to health and safety, create obvious potential for abuse.

6)      Industrial action

The Coalition’s policy is to ensure “protected industrial action can only happen when there have been genuine and meaningful talks between workers and businesses, and that the claims made by both parties are sensible and realistic”. If I may put on my non-IR specialist hat again, it seems passing strange that we have established a statutory scheme to allow suppliers of labour to walk away from their obligations as a form of negotiating leverage, without enabling purchasers to walk away from their obligations in response. A complex statutory protection for breach of contract by one party seems a perverse element to introduce into a class of commercial arrangements. Protected industrial action should be abolished.

7)      Unnecessary statutory rights and causes of action

A number of statutory protections for workers are unnecessary and unduly oppressive on employers, leading to lower employment.

General protections claims and adverse actions have become a de facto unfair dismissal system for senior managers, are now measured in the thousands, and should be abolished.

Workplace bullying provisions provide a jurisdiction for dubious and highly subjective claims to be made without any attempt at mediation or informal resolution, and create another unnecessary avenue for disgruntled employees to apply leverage against employers.

And the right to request flexible working arrangements puts the onus on employers to justify the way they choose to run their businesses, and is unnecessary in a competitive labour market.

8)      Unions

Monetary penalties have been insufficient to deter some unions from flagrant disregard for the law, e.g. the Grocon dispute where the CFMEU was found guilty of 30 contempt of court charges. Unions that engage in consistent behaviour of this sort should be deregistered.

In addition, the poor governance standards of unions have been highlighted by recent scandals such as that relating to the HSU and Craig Thomson. It is clear from the evidence given to the Heydon Royal Commission that a culture of corruption has been allowed to fester in the trade union movement for many years. Union governance and reporting requirements should be aligned with those that apply to companies under the Corporations Act 2001.

9)      Critical sectors

The special provisions that apply to the building industry, i.e. the Fair Work (Building Industry) Act 2012 and the Building Code 2013, should be extended into the resources sector, reflecting that sector’s importance to the Australian economy and the growing evidence of unreasonable union demands and conduct threatening resource sector investment.

The Australian Building and Construction Commission should be re-established, as foreshadowed in draft legislation before the parliament.

10)   Transfer of business arrangements

The current legislation subjects transfers of businesses to heavy restrictions, including on the insourcing and outsourcing of work. Australia cannot be internationally competitive if our businesses are constrained from adjusting their business strategies and operating models. At a minimum, the less extreme restrictions of the Workplace Relations Act 1996 should be restored.

 

The reforms we have proposed across these 10 areas are modest, sensible and balanced. They would remove some of the most oppressive constraints on business, boosting employment and enhancing Australia’s competitiveness, while leaving in place foundational protections for workers. These reforms are not the end of the journey, but they would be a significant step towards an industrial relations system that serves Australia’s national interest.

Inevitably, vested interests will attack this agenda as pro-business or anti-worker. In truth, it is neither. The Society’s agenda is pro-employment.

The current industrial relations system reflects, in many ways, an unhealthy consensus built between powerful vested interests. While it swings over time between the interests of established big business and established labour organisations, the true victims of the system are neither of these.

The true victims have no industry association to represent them, nor any union to advocate their cause. They are the unemployed and underemployed of Australia – both those who appear in our national statistics, and those who do not, as they have abandoned the search for work, as reflected in our declining participation rate. It is their interests that are too often forgotten in discussions of industrial relations policy, and it is their interests that the HR Nicholls Society’s agenda seeks to advance.

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