Workplace Relations Reform: Tentative Steps now Likely to Hasten in 2005

In the immediate post-election period, there was considerable media speculation, fuelled by the comments made by the Prime Minister and senior industry representatives, of the prospect of further workplace relations reform. In the ensuing weeks, the rhetoric has continued. In his speech at the opening of parliament on 16 November 2004, the Governor-General said that '... the government will accelerate the reform of workplace relations as a means of raising productivity and Australian living standards'.

In particular, the government has continued to press the case for the immediate passage of its unfair dismissal reforms in the parliamentary session which commenced on 16 November 2004. The government has also stressed the importance of its legislation to clarify the impact of the High Court's Electrolux decision, as well as the substantially modified right of entry laws.

But what other changes can we expect?

Since Peter Reith's landmark 1996 reforms, the Federal Government has been forced to adopt an approach of piecemeal reform, ostensibly because the Australian Democrats, holding the balance of power in the Senate, had rejected the need for ongoing reform. Largely with the support of the Australian Democrats, a small amount of amending legislation has passed over recent years. Now that the Senate outcome from July 2005 is known, the constraints will be eradicated.

However, this does not mean that legislative reform will wait until midway through next year. The government has already announced its intention to pursue key planks of its election policy notwithstanding a potentially hostile Senate until next July.

In this article we will summarise the changes already proposed by the government for the remaining 2004 sittings. We also speculate on some of the key areas of reform which are likely to follow with the constitution of the new Senate in July 2005. Finally, we also summarise the results of our client survey on the priority areas for reform.

For some time the government has maintained the importance of its small business unfair dismissal exemption legislation. The Workplace Relations Amendment (Fair Dismissal) Bill 2004 has, in its various forms, been blocked by the Senate 41 times over eight years. And more recently, the government has sought to exempt small business from the obligation to pay severance pay when implementing redundancies.

The four pieces of legislation to be introduced before the summer break are:

• The Workplace Relations Amendment (Agreement Validation) Bill 2004 . This Bill was introduced by the government on 17 November 2004. Its effect is to validate certified agreements and Australian Workplace Agreements (AWAs) which were certified or approved on or before 2 September 2004, being the date of the High Court's decision in Electrolux. In essence, the Bill seeks to validate those instruments, whilst also ensuring that specific matters contained in agreements or AWAs which do not pertain to the employment relationship are void. After accepting a Democrat amendment designed to validate protected action taken prior to 2 September 2004, the Act was passed on 2 December 2004.

• The Workplace Relations (Right of Entry) Bill 2004, which was introduced on 2 December 2004 and has been referred to a Senate committee for report on 7 March 2005. The Bill is in response to the Federal Court's decision in BGC to exclude the operation of state right of entry laws where federal right of entry laws also apply. It also specifies that unions must comply with reasonable requests by an employer in relation to where employee/union discussions take place. This is intended to overcome the position established in the AIRC's decision of ANZ v FSU. According to Workplace Relations Minister, Kevin Andrews, the bill 'is certainly not an attempt to stop unions entering the workplace, but it will ensure that stringent criteria be satisfied before anyone is granted a right of entry permit'. (This bill is discussed in greater detail in our separate article in this newsletter.)

• The Workplace Relations Amendment (Fair Dismissal Reform) Bill 2004. This Bill seeks to protect small businesses, with fewer than 20 employees, from unfair dismissal claims. It was introduced into parliament on 2 December 2004 and has been referred to a Senate committee which will report on 14 June 2005.

• The Workplace Relations Amendment (Protecting Small Business Employment) Bill 2004. This Bill seeks to exempt small business employers with fewer than 15 employees from redundancy payments. It was introduced in the week of 6 December 2004 and has been referred to a Senate committee which will respond on 14 March 2005.

These latter two Bills were previously introduced into the Senate in August 2004 where they were blocked. It is most likely that they will face continued opposition in the Senate, at least until the new Senate convenes in mid-2005.

It is difficult to speculate on the extent to which the government will vigorously pursue reform prior to the new Senate taking effect in July next year. On the one hand, why would the current Senate now agree to pass legislation which has consistently been rejected by it in the past? On the other hand, the Australian Democrats are still a significant force in the Upper House and may be prepared to compromise on certain matters before their influence dissipates entirely. The Democrats spokesperson, Senator Andrew Murray, was a key player in the 1996 Reith reforms and has previously expressed his support for a unitary industrial relations system. Accordingly, the government's plans for a comprehensive review of the duplication that currently exists in Australia's industrial relations system may well receive widespread support in the short to medium term. There is clear scope to use the corporations power to legislate federally in order to overcome the rivalry and forum shopping which now commonly occurs between the six different state and federal systems in Australia.

On any view, there are a number of unsatisfactory aspects of the current industrial relations laws which have resulted in a regime of complexity and over-regulation, which do not deliver any actual or significant benefits to employers or the economy. Realistically, however, a federal takeover of this area will require considerable political will and community support and cannot be expected during the first half of the government's term in office.

As an observer of the current debate on workplace reform it is difficult to conclude the government's commitment to genuine reform, even after July next year. On the one hand, there are clear signals from the government that the bills rejected by the last parliament constitute the significant extent of its current agenda. Conversely, the Minister for Employment and Workplace Relations, Kevin Andrews, has been consulting privately with many employers and industry groups over recent weeks. And it's likely he's being told that much more can be done.

Despite the government's preference to confine its reform agenda to legislation which was previously rejected by the last Parliament, there are strong arguments in favour of a re-write of much of the Workplace Relations Act 1996 (Cth) (WR Act)—particularly those provisions dealing with enterprise bargaining, transmission of business, freedom of association and unfair dismissal. Another area crying for reform, at least from a business perspective, is section 166A of the WR Act. The section currently grants an effective immunity to unions from having to compensate employers for damages they cause during the first 72 hours of unprotected industrial action.

The task of re-writing the WR Act could simplify the provisions, insert clear statements of principle, clarify the role of the Australian Industrial Relations Commission (AIRC) and address specific problems which have already been identified in case law over the past eight years of the operation of the 1996 reforms. There is surely a case to argue that such a course is to be preferred to piecemeal amendments to the current provisions.

When Freehills notified its clients in October this year about some of the likely areas for workplace relations reform, we also asked them to respond to us with their priorities for reform. Some of the key findings of our survey were:

• approximately half of the respondents considered that the government's proposed exemptions for small business from unfair dismissal laws and redundancy pay was not a priority at all

• more than 70 per cent of respondents thought that legislation to clarify the validity of certified agreements in light of the Electrolux decision was a high priority, and

• although reform towards a unitary system was not ranked as the highest priority, more of our clients saw this as a high or medium priority than any other reform proposal.

The top five areas of reform which received high or medium priority ratings in the Freehills survey were, in order of priority:

• a unitary system

• compulsory secret ballots before strikes

• overcoming the Emwest decision (which allows for unions to take protected industrial action during the life of an existing certified agreement)

• limit the scope of matters which can be included in enterprise agreements, and

• validation of certified agreements post-Electrolux.

Of course, these results are just a guide to what business is thinking. Moreover, they are skewed because most of the respondents fall within the medium to large business categories. Accordingly, a survey of smaller employers may well indicate different priorities. Nevertheless, it is possible to glean a clear preference for significant reform which, had the current Senate composition remained unchanged, would have been extremely unlikely to be on the political radar.

If the government considers that a fundamental revision and re-write of the WR Act is not desirable, employers can at least expect them to pursue most of the reforms rejected by the last Parliament. The key elements of this will involve:

• allowing collective agreements to last for five years instead of three

• protecting the status of independent contractors as a legitimate alternative to the employment relationship

• requiring unions to apply to conduct a secret ballot of employees before being able to take 'protected action' in enterprise bargaining negotiations

• streamlining and simplifying the AWA procedures

• amending the objects of the WR Act to ensure that the primary focus of the award safety net is to address the needs of the low paid

• further reduce the number of allowable award matters by removing matters such as skill-based career paths, bonuses, long service leave, notice of termination and jury service. In addition, specify in the WR Act matters which are specifically non-allowable matters, including transfers between locations or from different types of employment, accident make up pay and minimum or maximum hours required for part-time employees

• outlawing 'pattern bargaining' and enabling the AIRC to suspend a bargaining period to allow for a 'cooling off' period where protected action is occurring

• banning all industrial action, regardless of purpose, during the life of a certified agreement

• expanding the circumstances in which the parties may seek to terminate a bargaining period

• strengthening secondary boycott laws and the sanctions for their breach under the Trade Practices Act 1974 (Cth), and

• creating a separate arm of the AIRC specialising in voluntary mediation of disputes.

Whether workplace relations reform continues to be piecemeal or comprehensive, it is almost certain that the bargaining landscape will change dramatically over the next one to two years.

A version of this article was published in the Human Resources magazine, 30 November 2004.

Tony Wood is a partner in the Freehills employee relations group, based in Melbourne.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.