Enterprise contracts echo 'take it or leave it' world of WorkChoices

The Productivity Commission’s newly released draft report into Australia’s workplace relations framework must be treated with great caution.

Prima facie, it appears supportive of “the Australian way” to developing and enforcing labour standards.

Contrary to perceptions, Australia’s labour market performance and flexibility is relatively good by global standards, and many of the concerns that pervaded historical arrangements have now abated. Strike activity is low, wages are responsive to economic downturns and there are multiple forms of employment arrangements that offer employees and employers flexible options for working.

Closer reading reveals, however, it is committed to deepening the further erosion of Australia’s distinctive approach to achieving fairness as well as productivity at work.

This corrosive dynamic commenced under the Keating government in 1991. It was turbo-charged in 2006 when the Howard-era WorkChoices redefined the terms around which the debate on workplace relations reform has been couched.

The report makes some sensible suggestions. Prime amongst these are its proposals for a more realistic (that is, tolerant) approach to pattern bargaining and controls on non-union bargaining agents (who it suggests should gain 5% employee support to gain recognition).

The core recommendations, however, concern three fundamental matters.

First is the erosion of the independence of Australia’s labour standards setting authority.

The Productivity Commission report claims “several major deficiencies” must be addressed, criticising the FairWork Commission for being overly-legalistic in the way it determines awards and claiming the appointment process for FWC members leads to inconsistencies in its decisions.

In place of tenure, Fair Work Commissioners are to have five year contracts, be subject to performance management and be appointed by the relevant Federal minister alone. Labour standards are to be set be people with research and analytical expertise alone.

Those with practical experience of the operation of labour standards are to be excluded from shaping them in any way. Any notion of a quasi-judicial process to determine labour standards would be completely eradicated if these recommendations are implemented. It would mark the complete severance with Australia’s distinctive - and well respected – regime of labour standards determination.

The second concern is the further fragmentation of bargaining with employer driven “collective contracts”.

The report asserts there is “a gap in contract arrangements between individual arrangements (broadly defined) and enterprise agreements” (page 37, 57). It proposes this “gap” be filled by employer-determined collective “enterprise contracts”. There are strong echoes here of “take it or leave it” collective Australian Workplace Awards (AWAs) of WorkChoices.

The Commission appears to be totally unaware of decades of industrial sociology and industrial psychology on workplace dynamics. Social space of work is governed as much, if not more, by trust as well as contractual relations. Improving “trust relations”, not creating yet another form of contract is needed to fill this alleged “gap”.

Introducing the notion of “contract” in this context only has relevance if one is endeavouring to weaken the coherence and effectiveness of a labour standards regime.

The final one is further erosion of union bargaining power.

The final swag of recommendations have a very strong WorkChoices flavour of tilting bargaining power towards employers. The proposal that strike action can be terminated if it does “significant economic harm to the employer alone” betrays either naivety or bias of the highest order. That is the primary reason why strikes are undertaken.

In short, while the Commission advocates “repairing not replacing” our current system, the effects of its proposed changes would profoundly shift power in it. This would be achieved by weakening the independent standing of the Fair Work Commission as a body comprised of thoughtful practitioners and a major erosion of unions’ ability to act effectively in the labour market.

John Buchanan is Director of the Workplace Research Centre. This is a self-financing research unit based in the University of Sydney Business School. The Centre is funded by end users of the research it produces. Clients are based in the government, non-government and private sectors. Between 2011 - 2013 he lead two large scale projects worth just over $2m for the Fair Work Commission that examined the reach of award across the private sector and the impact of minimum wage decisions on the incentive to bargain. These projects were awarded to the Centre after an open tender process.