Copyright Connor Court Publishing Pty Ltd
- FAIR CHOICES
Chapter One - Clearing the air of myths
“‘Woe to you lawyers’ [he told them], ‘for you have taken away the key to knowledge: you yourselves have not entered in, you have hindered.’ And as Jesus was saying these things to them, the Pharisees and the lawyers began violently to urge him, and to stop his mouth about many things. Lying in wait for him and seeking to catch something from his mouth, that they might accuse him.”
- Luke 11:52-54
On 16 February 2007, an article appeared in The Age about an Irish backpacker who was being underpaid for 25 hours casual work as a hostess in a Melbourne restaurant. Her case, according to the article, was an example of the evils of WorkChoices in action. In any case, she complained to the Workplace Rights Advocate, a body established by the Victorian Labor government, which ruled in her favour.
This story was, unfortunately, symptomatic of what has marred much of the public debate over WorkChoices. It was symptomatic in two ways. First, it blamed WorkChoices for an issue that had nothing to do with the legislation. Second, that misunderstanding was handled in such a way as to suggest that a state (Labor) government was protecting a disadvantaged worker from a (non-existent) Federal threat.
In this particular story, the complaint was that the employee was being underpaid. This happens sometimes in all jurisdictions, under all types of employment instruments, because not all employers are saints. A breach of the law is not the law’s fault. As it happens, WorkChoices guarantees minimum wages and it was this guarantee that was being breached. But the news story didn’t mention this. It was silent, moreover, about the two new mechanisms that exist under WorkChoices for addressing this and other similar problems.
The first is something non-unionized workers have never had before: a free dispute resolution procedure direct to the Australian Industrial Relations Commission (AIRC) without the requirement to be a union member. The other is a complaint to the new Federal watchdog, the Office of Workplace Services now called the Employment Ombudsman, a properly resourced inspectorate which prosecutes employers for breaches of the law and has extracted fines of over $30,000 from employers who under pay by as little as $3,000.
From a purely practical point of view, the least effective and most irrelevant mechanism, in cases like this, is to complain to the state Workplace Rights Advocate, because it has no enforcement power. Yet, in this case, the Victorian Workplace Rights Advocate was credited with solving the underpayment problem. While it must be allowed that the offices of Workplace Rights Advocates have been established because of fears or misgivings over the WorkChoices reforms, we should not mistake fear for reality.
Indeed, there is a danger that such offices will degenerate into a political exercise by state governments to seek out and showcase instances of abuse of the law and then blame them on the law itself, rather than on the abusers. In a politicized climate of strong feelings about industrial relations and strenuous bidding for the electorate’s commitment, this runs the risk of directly politicizing poor employment practices by blaming them on WorkChoices.
Press coverage of the debate over WorkChoices has been interesting, in general; but a case like the above indicates how the Federal government, having chosen WorkChoices as its brand for IR reform, was soon at risk of losing control of that brand image. There was abroad, by early 2007, a stock mockery of the brand which runs, “WorkChoices? You mean No Choices!” We need to be clear that there is a difference between analysis of the legislation and its likely impact, on the one hand, and polemical attacks on it by interest groups opposed to it for their own reasons.
The opponents of WorkChoices have, by means of a fairly relentless fear campaign, infused the term “WorkChoices” with a kind of sinister, ‘Orwellian’ connotation, making it a by-word for an ill-founded fear that the legislation will subject working people to a draconian or even Dickensian kind of regime. Insufficient allowance is made, in this campaign, for the genuinely liberal intentions behind the legislation and no allowance at all seems to be made for its possible benefits.
This, unfortunately, has led to a number of myths or distortions in public understanding of the legislation, which badly need to be dispelled if a sound debate is to be had about the significance of the reforms and how to respond to them. The challenge of WorkChoices to the long established system of industrial relations is perfectly real, of course, and it is not altogether surprising that the ACTU and many of its allies stand opposed to the change. It remains, nonetheless, for all who truly want to understand the change to separate fear and fiction from fact in the matter.
The unions’ fear campaign may be as much motivated by fear as designed to cause it. Nonetheless, it should not be allowed to mislead employees regarding the many ways in which WorkChoices actually improves their situation. Nor should efforts to oppose or obstruct the reforms be permitted to prevent useful information about rights and obligations from reaching those who need it most. A culture of fear and victimization helps nobody.
I propose to begin, therefore, by trying to clear the air of what I believe to be five basic myths about WorkChoices which have arisen, or perhaps been deliberately fostered, in the past year or more, by those who are viscerally opposed to the very spirit in which the legislation was conceived. Is this a partisan endeavour? I would like to think not. Does it mean that there is no basis for criticism of the legislation or careful attention to the way it works in practice? Of course not; but it will be quite impossible to analyse WorkChoices constructively unless the fog of misunderstanding and misapprehension can first be cleared away.
Myth #1: WorkChoices broke a system that worked well
Implicit in much critical response to WorkChoices is the attitude that it was quite unnecessary, because the old system served both workers and the society at large very well. As two eminent lawyers expressed it, in an illuminating book on the legislation this year, “Australia had a system of industrial regulation that had operated for many years in a stable and predictable fashion.”25 Anyone who remembers the industrial climate of the 1970s, in the heyday of the Builders Labourers Federation, might wonder quite what they meant by ‘stable’ and ‘predictable’ here.
They themselves allow that the impulse for an overhaul of industrial relations dates from the 1980s, under the Hawke government and continued under the Keating government – often strenuously resisted by the ACTU, just as reduction in tariffs and other major macro-economic reforms were resisted. They allow, further, that the Howard government’s reforms are “an extension” of the Hawke and Keating reforms. When, therefore, the WorkChoices legislation is depicted as the overthrow of a “stable and predictable” or fair and functional system of industrial relations, we should take such remarks with the proverbial grain of salt.
This view has particularly been espoused by state Labor governments, who make a virtue out of not “giving up” or “surrendering their workers” to the Federal government. The fact that the legislation was upheld against the states under the Corporations power in the Constitution does highlight the fact that the Coalition government has had to push the legislation through against considerable opposition. That even so staunch an ally of the Coalition as P. P. McGuinness, at Quadrant, saw fit to express alarm at the constitutional implications of the Corporations power being invoked in such a matter throws into relief just how contentious it is.26
Yet the fact remains that something very like WorkChoices might be regarded as a more or less politically (if not altogether formally) rational response to the complexity of Australian industrial law, as it had grown up over the century since the Australian Industrial Relations Commission (AIRC) was first established.27 If it has not simplified the law sufficiently, that is more a reason to seek further reform than to deplore the effort at rationalization, I would have thought. Industrial relations were complicated for a number of reasons, but among them were constitutional anomalies in Federal to state relations. Those anomalies gave rise to problems which the legislation is at least attempting to iron out.
In brief, the High Court decision has abridged the power of the states to limit the application of Federal statutes on industrial relations. The editor of Quadrant was correct in drawing attention to the fact that the High Court’s ruling, in favour of the Federal government against the states in the matter of WorkChoices, has important implications for the future of economic and social policy, well beyond the industrial relations arena. This is not, however, as he himself allowed, a reason for rejecting the legislation; it merely points to what had been a major roadblock in the way of effecting any such broad reform or systematic rationalization of the old system.
Let’s briefly examine this problem. In the case of industrial relations, instead of giving the Federal Government a comprehensive or at least uncomplicated power to make industrial relations law, the Constitution granted it the power to make laws with respect to “conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one State” (51 xxxv).28 This was the traditional “IR power” the Federal Government used to regulate industrial relations. Unfortunately, it had a range of complications that became vexatious and intractable.
First, the power only related to actual or threatened industrial disputes. Now, it is characteristic of the law in any domain that parties with a strategic agenda will seek to exploit any loophole in the law that they can find. It should come as no particular surprise, then, that those unions seeking to maximize their leverage in the IR arena would, at times, manufacture disputes by sending outrageous demands to employers in the mail (so-called paper disputes), in order to be able to bring the case before the Industrial Relations Commission.
This was a predictable tactical adjustment to the way the law was framed and it came into practice very early in the history of the Commonwealth Court of Conciliation and Arbitration. It is a perfectly good example of what the great economist Mancur Olson would have described as a rational response to an irrational set of incentives. It made sense for the unions to do this, given the way the system had been set up; but it had consequences that were, in fact, irrational and that generated inefficiencies in the way the machinery of actual industrial relations worked.
Second, not only did disputes have to be actual or threatened, they had to involve employers and employees in more than one state. State bodies had their own laws to regulate purely state based industrial disputes. Thus the Federal system tended to regulate large corporations while smaller businesses, which did business only within a single state’s boundaries, were left to state laws. Unions worked around this by simultaneously serving a log of claims on multiple employers in multiple states and then asking the AIRC to settle the dispute by making the businesses parties to the Federal Award, a process called “roping in.”
Third, a dispute had to be about matters pertaining to “the employment relationship”. This seemingly innocuous limitation prevented the Federal Government from using the IR power to enact unfair dismissal laws. A dismissed employee no longer has an employment relationship with the former employer, and so a complaint by the dismissed employee about dismissal was deemed not to be an industrial dispute. This state of affairs allowed a witches’ brew of regulations to grow up around unfair dismissal cases in the states. The new legislation was conceived, in part, to clear away this problem at its source.
Fourth, and crucially, industrial disputes under the old system could only be settled by conciliation and arbitration. This meant the Government could not use the IR power to prescribe minimum employment conditions. All it could do was provide a mechanism for allowing the AIRC to settle disputes about what those conditions should be. Thus minimum wage cases tended to become staged and highly politicized arm-wrestles over whether the AIRC should increase Award rates across the board. The implications were profound, both politically and economically, but the Government’s hands appeared to be tied as regards rationalizing the situation.
It was, of course, in this arena that R. J. Hawke made his reputation as a kind of Henry Kissinger of Australian industrial relations, in the early 1970s, brokering deals as strikes proliferated and wages exploded. Of course, only parties to the dispute could be bound by the AIRC’s rulings. While that put a premium on engineering national award cases, it also meant that state tribunals, unfettered by the AIRC system, were able to prescribe Awards as common rules, meaning the Awards applied to all employers in a given industry, regardless of whether they had been involved in a dispute or not. Needless to say, this put arbitrary pressures on the viability of many businesses, especially smaller ones.
The disadvantages to various parties of so complex and anomalous a set of arrangements are surely clear enough. Certainly, the pain and frustration they caused and the manner in which they aggravated industrial disputes and politicized them; the costs they inflicted on the national economy and on various particular businesses were evident many years ago. Systematic overhaul of industrial relations law, however, was politically and legally an exceptionally difficult challenge and was long put in the too hard basket – on both sides of politics.
Politics, however, as a very old saying has it, is the art of the possible. The commendable efforts of the Hawke and Keating Labor governments between 1983 and 1996 to bring some kind of accord and rationalization to the industrial relations arena helped pave the way for an at least minimal bipartisan consensus on economic reform more generally by the 1990s. The Coalition, gaining strength in the first part of the present decade, nonetheless had to reach deep into the constitutional limits of its governing powers to find the means for effecting more thorough reform.
In order to overcome the various loopholes built into the existing industrial relations framework in the Federal system, the Coalition turned to other sources of power within the Constitution: the Territories power (section 52), the External Affairs power (section 51, xxix) and the Corporations power (section 51, xx).29 In the first of these cases, because the Commonwealth Government has sovereignty over its own territories, such as the ACT and Northern Territory, it could legislate for them. Under the Territories power, an Award could apply as a “common rule” to all employers in an industry within a Territory, not just those who were involved in a dispute.
The Federal Government also has power to make laws with respect to External Affairs (section 51 xxix). Under the External Affairs power, the Hawke/Keating Labour governments signed a range of International Labour Organization Treaties about the rights of workers and then used those as the basis for placing into the Workplace Relations Act a range of minimum standards such as the entitlements to equal pay for equal work, that were designed to meet these international obligations. Such is the business of government and reform is ever a matter of finding loopholes or expedients where impediments make a straight road forward impassable.
Finally, the Government also possesses the power to make laws with respect to foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth (section 51 xx). The Government has used this power to make laws that would otherwise be beyond its scope. For instance, the Trade Practices Act, which is really about consumer protection, is based on the Corporations power. The Hawke/Keating Government relied on this power to enact the previous unfair dismissal provision of the Workplace Relations Act, and the provisions that allowed the Commission to review unfair contracts between corporations and independent contractors.
This patchwork approach left various gaps and unresolved problems in the system, of course. In consequence, the states improvised to address matters that the Federal government could not or would not tackle. Each state developed its own IR system. There was a constant ebb and flow between jurisdictions, depending on the political climate. In the Hawke/Keating years, when most state Governments were Liberal, the ACTU waged an ongoing campaign to rope employers into the union-friendly Federal system and employers resisted bitterly.
Now, with the turning of the wheel of political fortune, employers are embracing the Federal system under a Liberal government, and the ACTU is bitterly resisting the erosion of the state regimes they so happily undermined during the years of Federal Labour domination. In short, given the lack of a coherent system for Federal regulation of IR, the IR arena has long been an arena for intense horse trading and political exploitation of a patchwork system. That, of course, is the subject of “history wars” and partisan memories, but they cannot detain us here.
Much of what occurred during the past four or five decades had little to do with advancing the interests of actual working people and a lot more to do with ideological power plays and political turf wars. There can be no question that many an interest group flourished through playing a part in these wars, but there should be no illusion that the system was a fine one which yielded the best results for workers, even in the heyday of Australian manufacturing industry. The accumulation of frustration with the old system and the considerable changes in the Australian economy over the past twenty years set the scene for what is intended as the nearest the Coalition felt able to get to a root and branch reform of the system. It remains to be seen how effective that reform will be, but the need for thorough reform should not be in doubt.
WorkChoices sidestepped the intractable problems generated by the old IR system by relying almost solely on the Corporations power. The Workplace Relations Act is no longer a law about the settlement of interstate industrial disputes by conciliation and arbitration; it is a law with respect to employment conditions within Corporations. This is a massive shift in concept and practice that, in quite tangible ways, sweeps away the existing power base of the so-called “IR Club” – all those in law firms and the trade union movement or in political economy sections of university departments whose sources of income derived from the old, patchwork way of doing things.
It would appear that one of the reasons WorkChoices has attracted such criticism is that, whatever its flaws, it represents the first genuine attempt at the Federal level to protect workers’ rights directly, rather than leaving such protection to the “IR Club”, whose political, organizational or pecuniary interests may not always be the same as those of the workers they claim to represent. Needless to say, paid up Club members indignantly assert that there is no meaningful distinction to be made between these two objectives. That is something more easily asserted than demonstrated. The new legislation should enable us to test the proposition that IR can be handled better by enabling legislation than by cumbersome class actions.
To repeat: WorkChoices is the Federal government’s attempt, under Coalition auspices, to overcome the limitations of the old IR system by using the Corporations power to regulate employment conditions within corporations. It does away with the complicated process of protecting entitlements through awards made in settlement of artificial interstate disputes and replaces it with legislated minimum entitlements coupled with streamlined rules for people to negotiate conditions in excess of these minimums. Unarguably, it will bring with it its own problems and challenges, but unless we appreciate what problems and challenges it was attempting to address and why it was framed (more or less) the way it was, we will necessarily misunderstand it.
The legislation is an attempt to bring about a fundamental change in industrial relations which will both increase the Government’s ability to manage the economy, and undermine the ACTU and the IR Club more generally, with their long-established commitment to extracting arbitrary and across the board wage increases from the system through industrial action. It will not impede wage increases. It will simply alter the way that they will come about and is intended, at least, to increase both the efficiency and the fairness with which they do so. All this has a number of implications, many of them constituting clear progress over the old IR system.
The greatest cause of what has clearly been widespread community concern about WorkChoices in the first half of 2007 was the fear that it would deprive ordinary working people of protection against potentially rapacious or arbitrary bosses and would lead to a decline in working conditions. Empirical evidence that this was not generally happening seemed to make relatively little impression. Yet WorkChoices was, in fact, framed to protect workers’ entitlements through a mixture of guaranteed minimums and protected award conditions. Importantly, the guaranteed minimums apply to all employees, not just unionized workers, and in many cases provide additional benefits to many employees who never previously had them. This is something widely overlooked in the propaganda wars about the merits of the legislation and it deserves to be carefully underscored.
There will be no new Awards in settlement of industrial disputes under WorkChoices. The AIRC no longer has the power to settle industrial disputes by making an Award. Instead, WorkChoices preserves most existing Award entitlements (including State awards) and opens the way for a comprehensive review and simplification of the Award system by the AIRC. In reviewing Awards, the Commission now has the power to specify that an Award applies to all corporations in a particular industry – effectively a common rule award – avoiding the need for unions to find and “rope in” each and every employer.
Under the old law, individual employees had few options for resolving disputes with their employer short of legal action. This is because access to the conciliation and arbitration function of the Commission depended upon the creation of a dispute, or the escalation of a dispute, by the union. In contrast WorkChoices provides a model dispute resolution procedure under which employees can apply directly to the AIRC for conciliation and, if the employer agrees, arbitration.
Finally, an individual can negotiate and agree on a workplace agreement with an employer. Such agreements will replace the Award. They are expected to include the minimum conditions (which cannot be overridden) plus a select group of protected Award conditions, though these can be explicitly altered. This is the gateway to a very much more flexible system, able to be far more responsive to changing market conditions, rapid shifts in skills and in company structure and far more accommodating to incentives for the energetic and gifted. In short, whatever its technical deficiencies might turn out to be, WorkChoices is very far from being an unwarranted violation of a benign and effective industrial relations system.
Myth #2: WorkChoices will undermine pay and conditions
Another prevalent view of WorkChoices is that it involves or will bring about a wholesale reduction in pay and conditions. Under this view, the moment WorkChoices became law, fundamental entitlements were swept away. A reasonably careful review of the legislation shows this to be untrue. WorkChoices, even as originally drafted, actually preserved all minimum pay and almost all entitlements; at least until a workplace agreement was negotiated. Since then, in an effort to ensure that there really would not be an arbitrary stripping away of minimal conditions, the Coalition has introduced its fairness test, which protects anyone on an income of less than $75,000 from such misadventure.
What the fairness test did was add a whole new set of protected award conditions which AWAs could not omit without due compensation. These are:
· annual leave loadings
· incentive based payments and bonuses
· monetary allowances
· penalty rates
· public holidays
· shift and overtime loadings
· rest breaks
The intent of the legislation was always that these matters were negotiable. What the fairness test seeks to ensure, for better or worse, is that they will now be negotiated over, rather than simply stripped away. This enhances the relevance of the second half of this book, but it does not mean that the original legislation was intended to disadvantage employees. There is, of course, a grey area in this regard. Where the issue of the willingness of businesses to hire new people, arbitrarily fixed wage rates and expensive conditions may inhibit such hiring and contribute to long term unemployment. Is it “unfair” under those circumstances, to deregulate the labour market and have such people be hired at the market rate, rather than not hired at all? This is a matter of economic and social debate which I have not ventured to address in this book, but which must be weighed in the balance in assessing the merits of industrial relations reform initiatives.30
In terms of pay, under the original legislation, all existing award wage classifications became preserved Australian Pay and Classification Scales. If the work you do falls within an award classification that would have applied to you on 27 March 2006, then you remain protected by that minimum wage. These pay scales are reviewed and updated regularly by a new body called the Australian Fair Pay Commission (AFPC). This body consults widely and replaces the adversarial style National Wage Cases undertaken by the AIRC. In its first decision, effective 1 December 2006, the Commission awarded an historically high pay increase of $27 per week, very close to the union’s stated position of a $30 per week increase, which went some way toward confuting the claim that WorkChoices would result in reduced wages for the low paid.
In fact, in many respects the AFPC system is better able to protect the low paid than was the old system. In the past, minimum wage cases were in fact staged disputes created by the ACTU. The Full Bench of the AIRC would settle the dispute by making a decision. That decision then had to be reflected in each and every award which involved separate applications by the individual unions for each award they oversaw. This process could take years and in some cases never happened at all. It all depended on the strength and diligence of the union.
Consider the fact, by contrast, that WorkChoices, coming into effect in March 2006, contains specific clauses to ensure that the wage increases awarded in the AIRC’s 2004 Safety Net Review decision, but which, by dint of union inaction, had still not flowed through to many awards, would promptly do so. The reality under the old system was that only workers represented by unions were protected, with the consequence that large sections of the workforce in fact did not have award protection. WorkChoices has changed this anomalous and inequitable state of affairs.
The AFPC’s decision became law for all employees covered by WorkChoices on 1 December 2006. Further, in reaching its decisions, the AFPC received submissions from groups who would never have been involved in the adversarial processes of the old IR system. Also for the first time, a minimum pay decision took into account the rights and aspirations of the unemployed, the interaction between minimum wages and welfare, and the need to make work an attractive option compared to welfare.
The real losers in these circumstances are not employees or the unemployed, but the unions and employer bodies who were once joint, if largely adversarial overseers of the system, but are now no more relevant than everyone else. The AFPC would have arrived at its decision whether the ACTU made a submission or not, and in the future, all low paid employees will have their wages increased whether unions exist or vanish. So it is hard to say WorkChoices doesn’t protect minimum wages. It was, in fact, designed to do precisely this on the most efficient basis possible.
If anything, WorkChoices was too cautious, because the Coalition was politically nervous about passing legislation that would generate conspicuous groups of losers. For this reason, WorkChoices guarantees that a person’s pay cannot be reduced below its pre-reform rate. The Award Review Taskforce, established to investigate how best to go about reforming the award system, found that Australia had over 105,000 minimum wage classifications in over 3500 awards and recommended a relaxation of the guarantee, because it prevents reform of the wage structure. Yet the decision was made not to follow this sensible recommendation – out of political caution.31
The position with minimum conditions, as opposed to just pay, is much the same: when WorkChoices became law almost nothing changed. While the unions have prophesied a wholesale reduction in conditions – and some small and uninformed businesses have bought the propaganda and behaved accordingly - WorkChoices actually preserves existing award entitlements (until you make an agreement, but we’ll look at that presently) and grants new guaranteed minimum entitlements to employees, who previously had no minimum conditions.
WorkChoices preserves all awards, both state and Federal as they stood at 27 March 2006. What has changed is that there is no power for the AIRC to alter these awards. Future improvements in conditions must be bargained for, rather than awarded by the AIRC as settlements to industrial disputes. This is the absolutely crucial point about the reform of industrial relations effected by WorkChoices. It means that the process of creating industrial disputes, making ambit claims, and then having those claims settled through ever increasing entitlements has come to an end.
The massive institutionalized interests that were at the centre of the old system – the ACTU and the employer groups who fought such prolonged and economically costly battles over wage levels and working conditions – have been effectively emasculated.32 The power base of the ACTU has been stripped away. The reason why Greg Combet and Sharran Burrows, for example, are complaining so vehemently is not necessarily that workers are not protected under WorkChoices, but that the old, inefficient and incomplete way of protecting workers has been swept aside. What evaporated with the advent of WorkChoices was not award conditions, but the illusion that the old system was both necessary and effective.
It should be remembered that even the preserved awards themselves are of questionable relevance. According to data released by the Australian Bureau of Statistics,33 only 19% of employees relied on awards at the time that WorkChoices was legislated. These employees, not surprisingly, comprise mainly juniors and trainees, casual and part-time employees, and those in low paid industries like retail and hospitality. Everyone else relies on individual or collective agreements that pay well above award rates.
It is important to register what the ABS data tells us and its significance. It shows that the average weekly wage of full time, non-managerial employees on awards was $767.30. For individual agreements, by contrast, it was $1,061 and for collective agreements it was $1,103. This was a state of affairs that had evolved even before WorkChoices was passed. What does it tell us? That freezing awards only recognized what had happened anyway. Awards had been languishing in favour of bargaining. It was just that the system did not lend itself to this happening in the most efficient and equitable manner that it might.
In addition to preserving award entitlements for those lucky enough to have a union that bothered to create and maintain one, WorkChoices legislates new minimum standards of employment for all employees of all companies. The importance of these is worth emphasizing. This is the first time under Federal law that all employees – not just those in unionized industries – have access to uniform, guaranteed minimum employment conditions. The minimums, in summary, are as follows:
· Hours: A maximum 38 hours of work per week plus “reasonable additional hours”;
· Annual leave: 4 weeks annual leave with a right to elect to cash in up to half of this in any year if your employer also agrees;
· Personal leave: 10 days personal leave that you can take when you are ill or when a member in your household is ill, plus two paid days compassionate leave every time a close relative dies or is terminally ill;
· Parental leave: 12 months unpaid parental leave on the birth of a child; and
· Public holidays: The right to refuse to work on public holidays in reasonable circumstances.
We will examine each of these in more detail in the context of negotiating your conditions of employment, but it is worth pointing out some matters here just to debunk the myth. In each case the new minimums improve upon what existed previously and this has certainly not been widely recognized in the general press and absorbed by public opinion. Nor would it be, if we relied solely on the ACTU or the broad left for our analysis of what WorkChoices is actually about. The odd thing, certainly as of early 2007, was that neither the Government nor the business community had effectively stepped up to the plate and pointed these things out clearly enough to drive the message home.
In a curious reflection on this state of affairs, the Prime Minister, Mr. Howard, remarked, in early April, “I certainly would hope that, from a political party point of view, the Liberal Party will have the resources to run ads that point out flaws in union and Labor arguments. And I would hope that the business community that supports these policies would see it as important if they want the policies kept that they might invest some money in an advertising campaign to explain that unemployment is at a 32-year low, that real wages continue to go up and that strikes are the lowest they’ve been since 1913.”34
The list of issues to which such attention needs to be drawn does not stop with those mentioned by the Prime Minister. In terms of hours, for example, it is now an offence for an employer to require an employee to work more than an average of 38 hours plus “reasonable additional hours”. Unions complain that WorkChoices removed overtime pay, but actually unreasonable overtime has become an offence, punishable by fines of up to $33,000. What is “reasonable” depends on a range of factors, but mostly on pay and type of work. If you aren’t being paid sufficiently to work long hours then the hours would be unreasonable. Employees with no award protection now have a basis for bargaining for overtime: if you want me to work longer you have to pay me more or risk breaking the law.
Or, again, consider the matter of annual leave. Annual leave has existed under state laws, but those laws generally made it an offence to take annual leave other than in two blocks of two weeks or a single block of four weeks. Flexible use of annual leave was prohibited, as was the cashing out of any portion of your leave and taking extra pay instead of leave. In contrast, WorkChoices gives all employees access to flexible annual leave which they can take at any time in any amount, provided the employer agrees.
Further, under some pre-WorkChoices arrangements you could only accrue six weeks annual leave, meaning you had to take leave at least every 18 months. Now WorkChoices allows you to accrue leave indefinitely, while an employer can only require you to take your leave during a regular shut down, such as over Christmas, or if you have not taken leave for two years. Finally, you can cash out up to half the leave you accrue in a year if your employer agrees. This kind of flexibility and these additional rights are hardly the hallmarks of a wholesale reduction in entitlements and the legislation deserves some measure of praise for making annual leave more flexible.
In terms of personal leave, there is a new standard that amalgamates sick leave, compassionate leave, and carer’s leave. Some improvements include the fact that you can take all your sick leave to look after someone else who is sick, whereas most carer’s leave provisions in awards only entitled you to 5 days a year. You also have the ability to cash out all accrued personal leave above what you would accrue over 18 months (15 days for full time employees), allowing you to be paid for sick leave you don’t use or need. Finally, even casuals have rights to two days unpaid compassionate leave to attend funerals or be with terminally ill relatives. Again, no mention of these additional rights tends to make the general press.
The way WorkChoices deals with parental leave deserves even more public notice. Parental leave has been a part of Australian law for quite some time. However, WorkChoices improves upon it by granting a new form of paid maternity leave, but who has actually heard of this? If you are pregnant and your line of work poses a health risk to your baby, you can request to be assigned to safe work without any other change in your circumstances (such as reduced pay). If your employer cannot find you safe work, you are entitled to paid leave up to the date of birth of your child. Small business owners might be shuddering at this, but it is hardly as family (or female) unfriendly as the ACTU has alleged.
Finally, it is common for unions to claim that WorkChoices has done away with public holidays. One infamous claim was that workers would lose Christmas. Yet again this is a distortion based on the fact that penalty rates are not part of guaranteed minimum wages. What the legislation actually does is give employees a legislated right to take the day off on a public holiday. A “public holiday” here includes all our traditional holidays, particularly Christmas, New Year, Easter and ANZAC Day.35
An employer may ask an employee to work on a public holiday, but the employee is free to refuse this request on reasonable grounds. What constitutes reasonable grounds depends on many factors including nature of work, type of employment and rate of pay. Employers who prejudice employees for taking the day off are exposed to fines and compensation. Again, WorkChoices effectively gives all employees – not just those on awards and protected by unions – the leverage to bargain for penalty rates on public holidays: pay me time and a half and I’ll agree it’s reasonable for me to work on public holidays.
Myth #3: WorkChoices will impose disadvantage through AWAs
The third myth, and the one that has received the most attention, is that individual agreements, so called AWAs will be arbitrary in the terms they set for employment. This is the chief target on which it appears the ACTU will focus its anti-WorkChoices campaign in the lead up to the Federal election. The economy is going well, so jobs are being created rather than people being sacked. No one thinks that the absence of strikes is a bad thing and the AFPC has awarded a decent pay increase to the low paid and is due to award another one in the middle of 2007. This leaves the AWA as a target, given uncertainties about what it might entail or how it might fail a worker.
In their dismay at the revolution being initiated by WorkChoices, unions have made a number of claims about AWAs which appear untrue, or at least exaggerated. The first is a claim that employees are being forced to sign AWAs and so give up their rights. In fact, the law actually states that you can’t be forced to sign an AWA. Coercion to sign an AWA, or the practice of deception in the preparation of an AWA, is an offence for which the OWS may prosecute an employer and it is unlawful to dismiss an employee for failing to sign an AWA.
It is, however, possible for an employer to make signing an AWA a condition of employment and it is this fact that the ACTU seizes upon in declaring that employers are being forced to sign AWAs. What in fact this aspect of WorkChoices means is that an employer is able to specify the conditions under which she will offer you a job. It is being implied, by the critics, that if you like the job, but don’t like the specified conditions, this constitutes duress.
Yet, this simply mirrors the situation for awards and collective agreements. If you agree to work somewhere that is covered by the award, you don’t get a say in whether it applies to you or not and you have no say about its terms. Likewise a collective agreement applies to all employees in a workplace – even those existing employees who voted against the agreement, but were in the minority. It seems a bit hypocritical to condemn AWAs as providing a lack of choice when collective agreements can achieve the same effect even for existing employees. What the unions are really saying is that they know what is best for the employees, better than the employees themselves.
The second distortion is that AWAs are reducing pay, particularly for women. This is a recent claim based on a recent ABS survey, which shows that for non-managerial adult female employees the average weekly earnings of those on collective agreements was $1013.10 but for an AWA it was $957.60. From this it is claimed that AWAs disadvantage women. The same claim has not been made for males, presumably because the same data shows non-managerial males working full time are better off on AWAs – $1,252.40 per week for AWAs versus $1,183.90 per week for collective agreements.36
However, a closer look at the figures reveals that the ACTU claim is based on a logical fallacy that confuses correlation with cause and effect. The survey data shows that females on awards are the worst off of all full time employees, earning just $699.20 on average per week, a full $258 per week less than their sisters on AWAs. By the ACTU’s logic this proves that awards are disadvantaging women and should be scrapped in favour of AWAs. Nobody is arguing this, because everybody knows that awards aren’t the cause of low pay.
What it shows is that different types of agreement are used in different employment situations and this explains why women on AWAs earn less than those on collective agreements. The ABS survey reveals that small business makes the most use of individual contracts for employees, while as the business grows it makes (almost exponentially) increasing use of collective agreements. Thus, 47% of people employed by businesses with fewer than 20 employees are on individual agreements and only 10% are on collective agreements.
In contrast, 84% of people employed by businesses with over 1000 employees are covered by collective agreements, compared to 10% on individual agreements. None of this, of course, should seem particularly surprising. Big business doesn’t want to have to negotiate and register individual agreements for 10,000 employees, while small business doesn’t want to go through the complicated process of collective agreements for just a few staff.
However, the key additional point is that, as well as being the biggest user of individual agreements, small business is also the lowest payer, on average. Thus small businesses with fewer than 20 employees pay non-managerial females an average of $748 per week while big business pays $954 on average, almost $200 per week more. Moreover, this phenomenon is not confined to women. The results are replicated for non-managerial males: $862 per week for small businesses versus $1175 per week for big businesses, an even bigger difference of $313 per week.
The obvious conclusion is that, since big business can afford to pay its employees more and is also the most prolific user of collective agreements, it follows that employees on collective agreements should, on average, be paid more than those on individual agreements. It’s not the case, then, that women are being disadvantaged by individual agreements. It is just that individual agreements best suit small business and small business tends to pay its employees less. Should we insist that small business pay its employees more? We cannot do that in an arbitrary fashion without running the risk that we shall drive small business out of business- at which point, of course, its employees would get no pay.
All this debate about AWAs, in any case, actually obscures the fact that AWAs are not new creatures created by WorkChoices. AWAs have been a feature of Australian law for many years. What then is the reason for the ACTU’s denunciation of them? After all, the ALP has declared it will abolish AWAs, but permit individual common law contracts of employment. What’s the difference? Why is one form of individual bargaining acceptable and the other supposedly a gross infringement of entitlements and expectations among workers?
There are three primary differences. The first difference is that AWAs, like all workplace agreements, prohibit employees from engaging in industrial action until after the nominal expiry date of the agreement, which is a maximum of five years from the date of the agreement. Employers in the mining and construction industries particularly need agreements that give them that kind of protection. Common law contracts, on the other hand, provide no such protection.
In calling for the abolition of AWAs, the more militant unions want to make collective agreements the sole avenue for achieving both workplace flexibility and protection against industrial action. Individual employees may agree whatever they like, but that won’t stop the unions from demanding something different. In this we can see the defence of turf; the determination to have it both ways and to deny the employers the protections afforded by stable agreements.
The second difference is that AWAs override awards, but common law contracts do not. Thus, while an AWA can remove or repackage award entitlements like overtime, penalty rates, and allowances, common law contracts operate subject to the award, as a minimum standard that can be exceeded but not altered. AWAs are a mechanism for reform and flexibility of the complex award system, whereas common law contracts are not – and the ACTU is staunchly defending the inflexible and adversarial character of the old system.
The third difference is that workplace agreements – whether negotiated collectively or individually and with or without a union – extinguish award rights. They are effectively a one way ticket out of the Award system. After your first agreement, no Award can bind you or your employer in your employment. When your agreement ends, all you have left for protection is a limited range of minimum conditions, and what you bargained out of the employer with your own skill.
Plainly, this places a premium on being skilled, canny and tough-minded. It places at risk all those who lack readily marketable skills, or the mental agility and qualities of character required to fend for themselves in a competitive market-place. This and perhaps this alone is the Achilles heel of the legislation. Just to the extent that it results in a significant number of workers floundering and finding themselves at a disadvantage in the new system, that system will be seen, at least by them and those who highlight their disadvantages, as being worse than the old system.
These second and third differences between AWAs and common law contracts are, when it is all boiled down, the reasons for the heat in the current debate about WorkChoices. They quite certainly need to be addressed. However, the fact that there are question marks about the degree of difficulty some workers may encounter in negotiating new agreements does not justify the wholesale denunciation and misrepresentation of what WorkChoices is and does. Whatever the problems might turn out to be, they are not those which are most commonly alleged.
If we turn down the heat a little, we can see that there will be a need to strengthen certain skills and perhaps protections for the weaker elements of the workforce, but also that there are significant advantages in the new system for many of the most enterprising elements of both the workforce and the business community. The key bone of contention is whether workers, especially the less skilled and in least demand, will be able to bargain themselves into good pay and conditions. Not all will be able to, of course; since, if they were, there would be nothing significant to bargain about. The important thing is the extent to which, in general, things will be better.
If bargaining over agreements has now become both more possible and more important than ever, it becomes essential to understand two things: the different way WorkChoices deals with agreement-making compared with the complexities of the old system; and how to think about, negotiate and sustain an agreement under the new rules of the game. These two topics are the subject of the remainder of this book. We shall begin by looking at the distinction between workplace agreements and contracts. This is fundamental as a starting point for understanding the nature of the IR revolution that is under way.
We shall then examine in some detail the basic components of industrial relations agreements and how they stand to be affected by WorkChoices. It will become clear that the risks of the new IR environment are counter-balanced by its promise and that it is less the nature of the new legislation than ignorance of it which is likely to disadvantage those seeking a new workplace agreement. Once reasonably informed, those seeking such an agreement then need to think through their negotiating position. This will demand a whole new set of skills.
It could be that lack of skill in this area is an irremediable disadvantage in many workers. In that case, there is a new role for those who used see unions as the only answer: specialization in advocacy skills on behalf of individuals and groups. Should it transpire, as a result of a good deal of this work being done, that the relative weakness in bargaining power of many workers becomes starkly apparent, there will be a sound basis for reconsidering how to remedy the actual or perceived injustices that follow from this state of affairs.
That such weakness is either general or irremediable, however, are propositions in need of being tested. They are not self-evident. Least of all are they sufficiently evident as to justify unyielding adherence to the old system of industrial relations, with all its unproductive conflict and its destructive effect on economic productivity. Reform of industrial relations was called for and it has arrived. It remains to test the new system and, just to the extent that that new system proves to be deficient, to seek clear evidence of its weaknesses and then move to redress them. Let’s start by understanding it and then seek to test it.
Myth #4: WorkChoices legitimizes arbitrary dismissals
The fourth myth is that WorkChoices allows employers open slather when it comes to dismissal. This was a prevalent theme of the ACTU’s first series of anti-WorkChoices advertisements, the struggling single parent sacked for not working on weekends, the father who could not kick a football in the park with his son. The spectre was raised of mass sackings as employers ruthlessly dismissed employees who would not do as they were told, just because they could. Doubtless, there are employers who do this and get away with it, but it is not the intent of the law. As it happens, 54 pages of legislation are devoted to employee protections against arbitrary dismissal.37
Under WorkChoices all employees are protected against unlawful dismissal. This is actually unprecedented. Unlawful dismissal means being terminated for reasons listed in the legislation. The list is as follows:
· temporary absence from work because of illness or injury within the meaning of the regulations;
· trade union membership or participation in trade union activities outside working hours or, with the employer’s consent, during working hours;
· non-membership of a trade union;
· seeking office as, or acting or having acted in the capacity of a representative of employees;
· the filing of a complaint, or the participation in proceedings, against an employer involving alleged violation of laws or regulations or recourse to competent administrative authorities;
· race, colour, sex, sexual preference, age, physical or mental disability, marital status, family responsibilities, pregnancy, religion, political opinion, national extraction or social origin;
· refusing to negotiate in connection with, make, sign, extend, vary or terminate an AWA;
· absence from work during maternity leave or other parental leave;
· temporary absence from work because of the carrying out of a voluntary emergency management activity, where the absence is reasonable having regard to all the circumstances.
This is quite a list, surely. It protects people against dismissal just because they are ill, just because they are unionists, just because they have reported the employer to a regulatory agency, or made a complaint; just because they have refused to make an agreement, refused to work instead of attend to their family responsibilities and so on. In fact most, if not all, of the mini-horror stories pictured in the ACTU commercials fall into this category. They were, and remain, unlawful grounds for someone to terminate your employment.
Where WorkChoices does affect your rights is in relation to “unfair” dismissal. Unfair dismissal is dismissal in circumstances that are simply harsh, unjust or unfair. There are three ways in which WorkChoices does circumscribe protection against unfair dismissal. First and most notoriously, it exempts small businesses with 100 or fewer employees from unfair dismissal claims. The reason is that the fear of the unfair dismissal laws was seen as a brake on small business’s ability to hire (and fire). Given that costs were rarely awarded against an unsuccessful applicant, unfair dismissals were increasingly seen as a means of extracting money even for fair dismissals, because it was almost always worth the employer’s while to pay money just to be quit of the aggravation.
Consider the example of Ansett who in December 1998 caught a group of employees on video stealing alcohol. With the advice and assistance of a major law firm, they dismissed the employees, two of whom took the matter to the AIRC challenging their dismissal. In March 2000, 18 months after the incident, the Commission declared the dismissal unfair and reinstated the workers with full back pay.38 Is it any wonder Ansett went out of business in this kind of industrial relations environment? What small business owner would not pay $5000 rather than go through that kind of exercise?
The Federal government claim is that the exemption for small businesses is creating rather than destroying jobs. According to the ABS, over 240,000 new jobs have been created since WorkChoices was put into effect; 83% of those being “proper” full time jobs. It’s not possible to determine whether or to what extent these jobs are the result of small business being free of unfair dismissal claims. Clearly a large number are due to economic prosperity, since economic activity and not rights or their absence creates jobs. However, it is not hard to see how freedom from the fear of cases like the one Ansett suffered would encourage small business to hire rather than make do with existing staff levels, and, given that small business employs nearly half the workforce, it is equally easy to see how this might translate into noticeably better employment statistics.
The second way in which unfair dismissal protection has been circumscribed under WorkChoices is that employees who have been with an employer less than six months are unable to claim unfair dismissal, regardless of the size of the employer. This is like a legislated six month probation period. It is a problem for employees in the context of corporate restructures and is something we will return to in chapter 9 dealing with mergers and acquisition.
The third way is that employees are unable to claim unfair dismissal if they have been dismissed for “genuine operational reasons”. The intent of this section appears to have been to overcome some decisions dealing with redundancy. Effectively, even in redundancy where employers had to dismiss somebody they had to make the choice fairly. The problem was that this was often difficult. A possible objection to the new section is that “operational reasons” are very broadly defined as:
… reasons of an economic, technological, structural or similar nature relating to the employer’s undertaking, establishment, service or business, or to a part of the employer’s undertaking, establishment, service or business.
This is certainly broader than traditional redundancy. However, the onus is on the employer to prove that the dismissal was for genuine operational reasons and it is difficult to see how someone could be dismissed for operational reasons without also being redundant.
Of course, the dismissal must still not be unlawful. Adjusting your organization and then choosing to dismiss only pregnant, Muslim, or unionized employees would still be a problem. So the key point remains: employers are not free to dismiss as they please. There are, however, some hurdles for employees to negotiate and we will discuss these later.
Myth #5: WorkChoices abolishes the independent umpire
The fifth myth is that not only will people lose some of their rights, but they will lose the ability to enforce the rights that remain. This myth is founded upon the removal of the AIRC’s “independent umpire” powers to make awards in settlement of an industrial dispute. It is true that the AIRC’s powers have been reduced and its role minimized. This does not, however, mean the function of independent review has been abolished. Let’s see why.
The AIRC used to sit at the centre of the system with a general power to hear and make awards about any matters in settlement of interstate industrial disputes. As we have seen, that power was the cornerstone of the old system, because of the way the constitution was drafted. The Federal government only had power to legislate for the conciliation and arbitration of interstate disputes. So there had to be a body to hear and settle those disputes. With no direct ability for the Federal government to determine wages and conditions, the AIRC had to have the ability to make awards.
WorkChoices, by contrast, is about employment conditions for employees of companies, not the arbitration of highly politicized industrial disputes. The most promising feature of the new system is that employees do not need unions to manufacture artificial disputes just to have their entitlements protected. Instead, minimum entitlements are automatically protected by the legislation itself. This is unprecedented. The AIRC’s power to increase pay has been given to a new body specifically charged with ensuring a fair safety net that is consistent with Australia’s economic prosperity and the employment prospects of the long term unemployed. The AIRC’s authority to improve conditions has been given over to the parties themselves through workplace agreements underpinned by minimum standards.
In place of the AIRC, employees have gained innovative mechanisms for enforcing their own rights.
First, while the AIRC’s power to arbitrate disputes has been curtailed, its jurisdiction to conciliate disputes has been widened to all employees in respect of disputes over the minimum standards including pay, reasonable additional hours, and reasonable refusal to work on public holidays. No artificial industrial dispute is required. It is a legislated right for all employees of corporations to have the AIRC conciliate.
Second, WorkChoices sees the creation of the Office of Workplace Services (OWS), a separate regulatory agency charged with the task of enforcing workplace laws. It is well resourced and has already imposed some significant penalties on employers who have failed to meet their obligations.
Given these twin measures - a universal mechanism for conciliating disputes and a strong mechanism for enforcing rights - it seems more than a little unfair to dismiss WorkChoices on the grounds that it removes the “independent umpire”. What it removes is an authority to arbitrate the kind of disputes that used to arise or be tactically generated to exploit the rules of the old system. “Disputes” now are only relevant in the context of making agreements and the government has chosen not to force agreements on parties who cannot agree.