Focus should now turn to real workplace reforms

by Kyle Scott, Associate Director at Australian Business Lawyers & Advisors

Since the return of the Federal Coalition government last year, the government’s industrial relations reform agenda initially focused on trying to pass its ‘union focussed’ legislation. The proposed Ensuring Integrity Bill and the Proper Use of Worker Benefits Bill would have increased transparency and governance requirements within registered organisations and make it easier to de-register parts of unions.

However, given that union density now sits at less than 10% across the private sector, the reality is that these type of reforms will be largely irrelevant for most businesses, and so in many ways are a sideshow that are distracting the government from meaningful reform proposals for most businesses.

With the resolution of these Bills imminent, hopefully the Government can direct their attention towards other areas of the workplace relations system that are in desperate need of attention, and which will have a meaningful impact on all workplaces.

Shifting the reform focus 

Last year, the head of the Fair Work Commission gave a speech in which he talked about the need to lift the standard of debate about industrial relations, and for stakeholders to start building a ‘reform consensus’ underpinned by evidence-based policy making.

In that context, there are various parts of the workplace relations system that are contributing to an unreasonable regulatory burden for employers, and which are effectively acting as a hand-brake on productivity and the Australian economy more broadly. Outlined below are three simple fixes to reduce the regulatory burden on business and make our workplace relations system more efficient and user-friendly.

1. Fixing the EA approval process

The primary object of our Enterprise Agreement system is to provide a “simple, flexible and fair framework” that enables collective bargaining in good faith at the enterprise level that delivers productivity benefits.

While that is undoubtedly a worthy objective, the sad reality is that the system is not currently delivering on that objective. 

The EA making process under the Fair Work Act has always been littered with procedure. However, a 2017 Federal Court decision (CFMEU v One Key Workforce Pty Ltd) amplified these requirements even more.  

Under the Fair Work Act, there has always been a requirement that employers “take all reasonable steps” to ensure that the terms of the proposed EA, and their effect, are explained to the relevant employees in the lead up to the vote. This requirement was historically fulfilled by employers holding a meeting and taking the employees through the key aspects of the proposed EA: pay rates, key changes compared to the last EA, etc.

However, the One Key decision effectively found that this is not good enough.  Since that decision, employers are now required to be able to demonstrate that they explained each clause of the proposed EA to each employee, including what the clause means, what practical effect the clause has on the employee, and how the employee fares in relation to that clause compared to the previous EA or relevant modern award.

This more rigorous requirement has caught out countless employers since 2017 and has led to their EA not being approved, forcing them to go back and re-do the entire process from the start (in many cases to the frustration of the employees as well as the employer). 

The way in which the Federal Court has interpreted these procedural requirements stands in stark contrast to the object of providing a “simple, flexible and fair framework”.  Unless there is a modest relaxing of these procedural requirements, enterprise bargaining will continue to decline.

2. Addressing the casual conundrum

Another Federal Court decision that exposed significant cracks in our workplace relations system was the 2018 decision of WorkPac Pty Ltd v Skene.

In WorkPac, the Court was asked to determine whether an employee who had been engaged as a casual employee was entitled to annual leave under the National Employment Standards.  The NES provides annual leave entitlements to permanent employees, but has a specific exclusion for “casual employees”. However, the NES does not define the phrase “casual employee”. The Court was therefore required to determine what the term “casual” meant in the NES. 

In so doing, the Court held that the phrase “casual employee” in the NES referred to an employee who has “no firm advance commitment to continuing and indefinite work according to an agreed pattern of work”.

The difficulty with that, however, is that most employees are covered by a modern award, and most modern awards contain a completely different definition of “casual”. Almost all the 100+ modern awards define a casual employee as one “engaged and paid as such”, meaning that so long as the employee is called a ‘casual’ by the employer and paid a casual loading, they meet the award definition and can be lawfully engaged as a casual. 

This created a bizarre situation where an employee can meet the definition of “casual” under the relevant modern award, but not meet the definition of “casual” for the purposes of the NES.  This is an unacceptable situation which creates unnecessary complexity for employers when trying to understand how employees should be engaged or paid. 

Each part of our workplace relations system (including the NES, modern awards and enterprise agreements) needs to operate in harmony with the rest of the system.  We need consistency across the system when it comes to the nature of casual employment.

3. Tweaking the unfair dismissal system

While the unfair dismissal system provides an important avenue for employees to challenge the fairness of their dismissal before a specialist tribunal, the reality is that the barrier to entry to bring a claim is too low and the tribunal’s powers to dismiss unmeritorious claims are insufficient.

Under the current system, an employee who is dismissed may bring an unfair dismissal claim for the modest fee of $73.20.  This fee can also be waived in cases of financial hardship and refunded where the matter is concluded prior to reaching a conference or hearing before a tribunal member.

This low barrier to entry, combined with the  legal profession to be paid a percentage of any settlement in most cases, has created a system whereby employees have very little to lose in lodging a claim, and employers are faced with the reality that it is almost always significantly cheaper and less time consuming to settle the claim rather than fighting it all the way to a formal hearing.  

The practice of employers paying ‘go away’ money to settle unmeritorious claims is now so widespread that it has led to a cottage industry of businesses who assist employees to lodge claims and offer them ‘no win no fee’ representation knowing they will most likely be able to use the system in their favour to leverage a quick settlement from which they take their cut.

One of the objects of the unfair dismissal regime is to ensure that both employers and employees are afforded a "fair go all round".  Unfortunately, the current system drives outcomes which in many cases are not fair.  Increasing the filing fee would be a useful starting point towards addressing this issue.

Conclusion

These three areas of reform will go some way towards addressing the complexity of our workplace relations system, reducing some of the unnecessary red-tape, and improving productivity and fairness for the long-term benefit of both employers and employees. Sadly, without reform the Fair Work Commission’s hands will remain tied. 

Kyle Scott is an Associate Director at Australian Business Lawyers & Advisors. Voted #1 Workplace Relations and Employment Team of the Year 2019 and 2018, Australian Law Awards.