Fair Work Act needs to address Australia’s ‘dismal’ productivity

The arguments in support of amending the Fair Work Act to address Australia’s dismal productivity performance are getting louder, and they are coming from widening quarters. Heather Ridout writes for Manufacturers’ Monthly.

Of course, changes to the Fair Work Act alone cannot deliver the productivity growth that Australia needs. This will require action in a number of areas, including training and education, infrastructure, taxation systems and our convoluted regulatory systems.

However, where provisions in the Act are presenting barriers to productivity improvement, the Act needs to be amended in ways that preserve fairness for employees, employers and others in the community. Ai Group has pursued or intervened in 14 appeals against worrying bargaining decisions with much success over the past two years, but in a number of areas the legislation has still been found wanting.

Recently, we conducted a comprehensive survey involving 250 of our members to obtain their views on the Act. Survey respondents painted a bleak picture of productivity and flexibility outcomes under the Fair Work Act, with large employers (more than 500 employees) in particular reporting that the Fair Work bargaining laws had made it more difficult to achieve flexibility or productivity improvements.

Further, 69% of respondents stated that they would like to see some form of statutory individual agreement option introduced into the Fair Work Act, rising to 80% among large employers. 

In this regard, the Government’s Individual Flexibility Arrangements (IFAs) have promised much but delivered little. Ai Group believes that legislative change is needed to ensure a workable structure for IFAs. The parameters and conditions for individual flexibility need to be set out in the Act, with no ability for awards or agreements to detract from that framework.

Another issue our members have illustrated is the increase in union power under the Fair Work Act. Many employers are encountering problems with unions seeking to use provisions of the Act to disturb workplace arrangements supported by the majority of their employees.

Of the respondents to Ai Group’s survey, 64% expressed the view that union power had increased in the enterprise bargaining process, with only 13% having the opposite view; 86% of large employers said that union power had increased in the bargaining process. A third of employers also reported that unions had become less cooperative under the Fair Work Act.

Ai Group’s survey also highlights problems being experienced with the Act’s ‘transfer of business’ provisions, which require employers who take over outsourced work to adhere to enterprise agreements and other instruments that applied to the old employer. 

Unfortunately, the Fair Work Act provides many reasons in this regard for a company not to outsource work, even if it would be more efficient to do so. It also provides many reasons for employers taking on outsourced work to not employ any employees of the client company – even if all parties want the transfer to occur. As such, more than half of our survey respondents who had been involved in a transfer of business under the Fair Work Act reported that the legislation had a negative impact in the process.

Finally, the General Protections in the Fair Work Act – which deal with freedom of association, termination of employment for an unlawful reason, coercion, discrimination, sham contracting and other topics – are extremely broad and are routinely being used by unions and lawyers to threaten employers and to drag them into conciliation proceedings in FWA, often over highly speculative claims.

For example, 83 respondents to Ai Group’s survey stated that the Fair Work Act had made it more difficult for their organisation to make employees redundant, with 41% of those citing the risk of a General Protections claim.

Of survey respondents who had been subject to a General Protections application, 72% expressed the view that the claim had no merit, and 78% stated that the claim was pursued as a General Protections claim because the provisions are more favourable to employees than the unfair dismissal laws. Clearly, sensible changes are required to achieve a better balance.

Senator Chris Evans, the Minister for Tertiary Education, Skills, Jobs and Workplace Relations, has announced a review of the Act from January next year. Ai Group intends to play a major role in the review to inform the Government about the experiences of our member companies, such as those revealed in our survey, and to argue the case for constructive changes that will reduce barriers to productivity growth and labour flexibility.