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2019 Federal Election Primer, Part 2: Enterprise Bargaining

28th April, 2019

This is the second in a series of posts discussing the major aspects of workplace relations policy in the lead-up to Australia’s federal election on 18 May 2019.

Labor’s proposals to revamp Australia’s regulatory framework for collective bargaining are probably the most significant aspect of its IR policy for this election.

This is because the ALP’s plans, if implemented, would see a departure from the enterprise focus for workplace bargaining which emerged under the Hawke/Keating Labor Governments in the early 1990s.

Enterprise bargaining was a consensus solution – agreed between the union movement, big business and Labor – to the perceived inflexibilities of the traditional award system of setting minimum wages and conditions for Australian workers.

The logic was simple: if businesses could reach agreements with their workforce and relevant unions to trade off some award conditions with offsetting benefits (subject to a ‘no disadvantage’ test), then productivity benefits would flow for firms. The nation’s international competitiveness would also be improved.

It’s not clear that enterprise bargaining ever delivered those outcomes. But it has become a mainstay of Australia’s workplace relations system, with some large corporates now into their 11th or 12th round of agreement negotiations over a 25-year period.

The precise shape of the legal rules for enterprise bargaining has shifted over that time: from the original Hawke model, with unions and the IR Commission playing a central protective role for employees – to Keating’s 1993 changes which (controversially) allowed non-union agreements to be made, the Howard Coalition’s 1996 reforms which prioritised individualised bargaining, and its 2005 Work Choices legislation which further downgraded collective agreement-making – right through to the current system introduced by the Rudd Labor Government’s Fair Work Act 2009.

The 2009 legislation shifted the focus of regulation firmly back to collective bargaining. Unions can compel reluctant employers to engage with them by obtaining a majority support determination from the Fair Work Commission. All bargaining representatives must negotiate in good faith. Parties can seek assistance from the FWC when negotiations hit a wall. They can also whack each other about by taking ‘protected’ industrial action in support of their bargaining claims.

However, a key focus of the Australian Council of Trade Unions’ #changetherules campaign has been to highlight the deficiencies of this ostensibly supportive framework for collective bargaining, in practice, over the last decade.

The ACTU’s reform demands have had some influence over ALP policy formulation. Labor has committed to make the following changes if elected to office:

  • Providing more scope for multi-employer or industry bargaining. The ACTU argues that modern businesses have evolved, with many workers now engaged through franchises, labour hire agencies and gig platforms. However the bargaining framework remains trapped in the early 1990s – only allowing an agreement to be made for an ‘enterprise’ (i.e. a single business, or part of a business, which must be the direct employer of the relevant employees). Instead, the ACTU wants to be able to bargain with the entity that holds the power on the employer side – whether that be across supply chains or even entire industries. Last Friday, Opposition Leader Bill Shorten sought to put distance between Labor and the ACTU’s agenda. The ALP has committed only to opening up sector-wide bargaining to low-paid employees (e.g. those in child/aged care, security, hospitality). According to the Sydney Morning Herald, Shorten said he was not convinced of the need to go further with industry-level bargaining.
  • Closing down, or limiting, several employer strategies which have been used to circumvent enterprise agreements and/or genuine bargaining. Employers have increasingly been able to bypass an otherwise applicable agreement by persuading the FWC that it should be terminated after its expiry date on ‘public interest’ grounds. Another strategy has seen some companies make an agreement (providing minimal above-award benefits) with a handful of employees, which is then extended to a much larger workforce across multiple sites. Labor has accepted the ACTU’s argument that these devices, and the use of labour hire workers not covered by a site enterprise agreement, have been used to circumvent the statutory objective of encouraging collective bargaining.
  • Toughening up the good faith bargaining rules and access to arbitration. Despite the provisions of the Fair Work Act that facilitate bargaining, determined employers are still able to resist union efforts to negotiate an enterprise agreement. Strict adherence to the procedural rules for good faith bargaining can be undertaken, while refusing to table an offer or ultimately conclude an agreement (a tactic known as ‘surface bargaining’). Labor proposes to strengthen the good faith bargaining requirements and provide easier access to arbitration by the FWC in long-running bargaining disputes. It has talked about exploring the various Canadian models of first contract arbitration.

The limitations of the 2009 legislation – which employers have no doubt taken advantage of – partly explain its failure to extend the reach of collective bargaining over the decade it has been in operation. Another factor has been the continuation of declining union membership, especially in the private sector where Alison Pennington’s recent research report for the Centre for Future Work shows bargaining coverage has collapsed dramatically. This has contributed to the wage stagnation we have seen over the last five years, with more workers having their pay and conditions set at lower levels under awards rather than enterprise agreements.

Business groups and the Coalition Government argue that changes to the current framework, especially any shift away from an enterprise focus towards sector-wide bargaining, run the risk of creating wage blowouts. They also raise the spectre of turmoil across critically important parts of the economy if industry bargaining is accompanied by the right to take protected industrial action.

However these claims are over-stated. The union movement does not have anything like the strength and potential to disrupt industry that it held in the 1970s. There is a strong case for changes to the collective bargaining rules that recognise the transformation in the nature of employing enterprises since enterprise bargaining began. The artificial devices used to bypass agreements and collective negotiation need to be shut down. It will then be up to Australia’s unions to utilise a more favourable legal framework to tackle the key problem of low union and bargaining density in private sector workplaces.

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