The Productivity Commission has released its draft report on the workplace relations framework, which contains a number of recommendations for improvement.
The terms of reference for the inquiry were released in December 2014, five years after the commencement of the Fair Work Act. The government believed the inquiry was a timely assessment of the operation of the Fair Work system, and a means of ensuring that the laws are meeting their desired objectives. In particular, it was requested that the Productivity Commission focus on social and economic indicators important to the well-being, productivity and competitiveness of Australia and its people.
Initial submissions, which were due by March 2015, revealed conflicting views on the future of the workplace relations environment. You can read a summary of those arguments in our recent article here.
In its draft report the Productivity Commission found that, despite some significant issues, the workplace relations framework should be fine tuned rather than replaced. It noted that the challenge is developing a system that provides balanced bargaining power between parties, encourages employment, and enhances economic efficiency.
Unfair Dismissal Protections
The Productivity Commission has proposed that moderate and incremental reforms can address the current problems with unfair dismissal protections:
- Compensation should be given to employees only when they are dismissed without reasonable evidence of persistent underperformance or serious misconduct;
- Procedural errors alone should not result in reinstatement or compensation;
- There should be more upfront filters that focus on the merits of claims as well as higher lodgement fees;
- The emphasis on reinstatement should be removed as a primary goal of the unfair dismissal provisions in the Fair Work Act; and
- Subject to the implementation of other recommended changes, the (partial) reliance on the Small Business Fair Dismissal Code in the Fair Work Actshould be removed.
It is suggested that the following reforms to the general protections provisions will reduce unnecessary contention caused by the complicated structure of the provisions and absence of active guidance on defences and coverage:
- Compensation should be capped;
- The right to make a complaint or inquiry needs to be better defined;
- There should be exclusions for complaints that are frivolous or vexatious; and
- The Fair Work Commission (FWC) should be required to report more information about general protection matters.
The Productivity Commission acknowledges complaints that the reverse onus of proof for adverse action claims can be problematic, however, it noted that many superior courts have taken significant steps to curtail discovery which has reduced costs and timelines.
Industrial Action and Right of Entry
The Productivity Commission stated that industrial action is at low levels and only minor tweaks are required, which include:
- Limiting the grant of protected action ballot orders to circumstances where enterprise bargaining has already commenced;
- Empowering the FWC to suspend or terminate industrial action where it is causing, or threatening to cause, significant economic harm to the employer or the employees covered by the agreement (as opposed to both parties);
- Introducing more graduated options for retaliatory industrial action;
- Restricting the right of entry of unions that do not have members employed in the workplace and are not covered by (or currently negotiating) an agreement to two occasions every 90 days;
- Allowing employers to stand down relevant employees without pay where employers have engaged in a reasonable contingency response to an aborted industrial action; and
- Increasing the maximum ceiling of penalties for unlawful industrial action.
Wages and Conditions
Recommendations for penalty rates and minimum requirements are as follows:
- Sunday rates in the hospitality, entertainment, retailing, restaurants and cafe industries should be brought into line with Saturday rates; and
- Employers should not be required to pay for leave or additional penalty rates for any newly designated state and territory public holidays.
Individual Flexibility Arrangements
For individual flexibility agreements, the Productivity Commission recommends a minimum termination period of 13 weeks, but with the capacity of employers and employees to agree at the formation of the agreement to a one year period.
The Productivity Commission stated that the contention that existing minimum wage levels are prejudicial to employment is not well founded; however, significant increases in the minimum wage pose a risk for employment.
It recommends that the FWC should be able to make temporary variations in awards in exceptional circumstances after the completion of an annual wage review.
The Productivity Commission noted that enterprise bargaining works well, however:
- The Fair Work Commission (FWC) should have the discretion to overlook a procedural defect in deciding whether to approve or reject agreements;
- There should be a requirement that a non-union party can only act as a bargaining representative if they have the support of a reasonable proportion of the workforce;
- Clauses that regulate the use of contractors and labour hire should be limited;
- In the case of greenfields agreements, goodfaith bargaining requirements should be introduced as well as a limited menu of bargaining options in circumstances where negotiations are at a standstill; and
- Introducing an ‘enterprise contract’ would offer many of the advantages of enterprise agreements without the complexities, making them particularly suitable for smaller businesses.
The Better off Overall Test (BOOT)
In order to reduce uncertainty during the bargaining process, the Productivity Commission proposes that the better off overall test be replaced with a no-disadvantage test. In particular, it states that this would overcome the issue of how to trade off non-monetary benefits against other benefits of an award.
Unions have responded with concerns that the Productivity Commission has fallen short of protecting the rights and entitlements of employees. The Australian Council of Trade Unions (ACTU) claims that the report is an attack on penalty rates, the minimum wage and rights at work, and this view was endorsed by the Community and Public Sector Union (CPSU) and Unions Tasmania in their respective statements.
The ACTU has stated that:
- There is no evidence to show that cutting penalty rates increases employment or productivity and is a “raid on people’s wages”;
- The minimum wage recommendations will cause the minimum wage to stagnate and will not take into account the rising costs of living; and
- The recommendation to expand individual contracts which sit outside the award system will undermine rights at work, particularly those of the most vulnerable.
The BCA congratulated the Productivity Commission on recognising the flaws in the system; however its Chief Executive Officer, Jennifer Westacott, has since stated that the recommendations are insufficient to address problems with awards and the enterprise bargaining process.
Ms Westacott said that the Commission has not grappled with complexities that can arise due to the many and varied clauses in enterprise agreements, which encourage risk aversion. She also dismissed the notion that companies should have to reorient their business models in order to work around difficulties in the system.
While agreeing with the Productivity Commission’s stance that awards should be repaired rather than replaced, she has recommended that they be “stripped back to the essentials”. Accordingly, she believes that there should be economy-wide rates for casual, overtime, penalty and shift work and these should be part of the Minimum Wage Order rather than contained in awards. She also suggested that businesses should be able to add a premium rate for employees working on weekends.
Interested individuals and organisations are invited to examine the report and make submissions by Friday 18 September. The final report will be provided to the government in November 2015.