Out with the old in Fair Work Act

Uncompetitive wage rates – whether imposed by modern awards, for instance after-school wage rates for a country hardware store, or imposed by muscle-in unions and hapless employers in the greenfields of the recent mining boom – cause unemployment, or send jobs overseas, as with the processing of Browse gas on a remote floating plant to avoid high Australian wages.

Modern awards are centrally imposed wage terms divorced from any dispute or settlement between employer and employee. In their pervasiveness they continue the antiquated award system. To be really modern the awards should only apply if the parties want them. Greenfields agreements now involve negotiations with unions before even the first worker has appeared on site. However, the arriving workers should be allowed to decide how they will deal with the greenfields conditions offered them. If these changes were made, two significant obstacles to employment or to competitive wage rates would be removed.

Adverse action provisions with a reverse onus of proof promote specious claims, particularly with bullying added. The unfair dismissal jurisdiction over small business deters employment growth in this vital sector. Travel and accommodation to remote sites for union officials at the employer’s cost, also under recent Fair Work Act amendments, is open to rorting. If these provisions were excised from the Fair Work Act, cost and disruption in employment would be reduced. Employees would prefer their union officials by social media rather than in meal breaks.

There are other obvious areas for change: the restoration of the Australian Building and Construction Commission to act on thuggery in the building industry; new employers on a transfer of a business should not be required to take old industrial arrangements; terms of employment should only relate to employment issues and not seek to rig the market against independent contractors or duplicate safety and other regulation; and once agreed the terms of employment should be binding. These measures would reduce cost, but not employee entitlements.

The common thread in these changes – reducing cost and uncompetitiveness and thus reducing unemployment – should also guide the Coalition’s inquiry into the Fair Work Act should it win the election.

Productivity is not a measure of the effectiveness of industrial regulation for it is a product first of firm management and secondarily government regulation in a number of fields of which IR is just one. On the one hand the Prime Minister should not claim, as he did in Sunday’s leaders’ debate, that higher productivity proves the worth of the Fair Work Act. On the other side, the Coalition should not use a typical Productivity Commission inquiry for the act, especially as it could delay change until 2018. An inquiry by actual workers and actual employers, without the IR club, could quickly provide the basis for further changes to the Fair Work Act.

There should be two structural changes: choice of superannuation fund is not an industrial matter and should not be regulated by the act; and monopoly registration of unions, an abject failure with just 13 per cent union membership, and employees denied freedom of union organisation, should be abolished.

Adam Bisits is a corporate and regulation lawyer and president of the HR Nicholls Society. Originally published in the Australian Financial Review and reproduced with permission. 

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