Submission to the Fair Work Act Review Panel
On
The Fair Work Act Review
17 February 2012
Prepared by Mr Brian Duggan
Member Organisations
TABLE OF CONTENTS
1. Executive Summary......................................................................................................4
2. Introduction...................................................................................................................7
3. The Fair Work Act - An Overview.............................................................................10
4. The Fair Work Institutions..........................................................................................15
5. Reply to Fair Work Act Review Background Paper...................................................17
General - Questions 1 to 7.............................................................................................18The Safety Net - Questions 8 to 19................................................................................19Bargaining & Agreement Making - Questions 20 to 31................................................20Transfer of Business - Questions 34 to 36.....................................................................21General Protections - Questions 37 to 41......................................................................24Unfair Dismissal - Questions 42 to 51...........................................................................25Industrial Action - Questions 52 to 61...........................................................................27Institutional Framework - Questions 64 to 69...............................................................27
6. Agriculture Flexibility................................................................................................28
7. Agriculture Productivity.............................................................................................32
8. NFFs Survey of Members...........................................................................................42
9. Conclusion..................................................................................................................47
10. Appendix A - Australian Farmers as Employers........................................................49
11. Appendix B - ‘Your thoughts: the Fair Work Act Review’.......................................50
12. Appendix C.................................................................................................................52
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1. Executive Summary
The Fair Work Act needs to be understood in the context of three waves of neo-liberal
and labour market reforms that preceded it. The first wave was the Industrial Relations
Reform Act introduced in 1993 by a Labour government which moved the traditional
system based on conciliation and arbitration towards a North America collective
enterprise bargaining base system, but which retained compulsory arbitration for an
award safety net of minimum wages and conditions. The second wave was a Workplace
Relations and Other Legislative Amendment Act introduced by the Coalition government
in 1996. The third wave of reform, constituted the Workplace Relations Amendment
(Work Choices) Act 2005 (Work Choices), was introduced by the Coalition government
following its 2008 election victory. It is generally acknowledged that changes made by
Work Choices constitute the most radical changes to individual and collective
employment relations in Australia since the enactment over one hundred years earlier of
the Conciliation and Arbitration Act 1904.
In some ways the Fair Work Act is a radical departure from its statutory predecessor,
Work Choices. However, in some major areas of regulation the Fair Work Act reflected
the Federal government's reluctance to depart from the most fundamental Work Choices
Chains, particularly in some key areas such as the regulations of industrial action and the
maintenance of a legislated (rather than arbitration) safety net of minimum conditions. In
these important respects a system of regulation in the Fair Work Act continues the Work
Choices regime.1
Australian agriculture has faced many challenges in recent decades, not the least of which
has been worst drought on the country's history. However, national policy issues such as
managing our water, climate variability, international trade, infrastructure, global
financial turmoil and trade policy have each been central to the future of a vital
agricultural industry. The National Farmers’ Federation (NFF) has always been at the
forefront of industrial relations reform in Australia, primarily because for a long time not
been shielded from international competition.
1 See the Chapter 1 – Employment Law after the Fair Work Act 2009 (Cth) in Sappideen, O’Grady, Riley & Warburton, Macken’s Law of Employment, (2011) (7th Edition) Law Book Co, Sydney.
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NFF has participated extensively in the national workplace relations debate through its
membership of the National Workplace Relations Consultative Council, the Committee
on Industrial Legislation, its involvement in award modernisation and more broadly,
through its history of contribution to industrial relations. An analysis of the agriculture
industry as employers can be found in Appendix ‘A’ of this submission.
NFF views the current national workplace relations system as an evolving construct
regulating individual and collective employment relationships. We make the following
TEN recommendations understanding that economic prosperity and growth requires
fairness and security in the workplace:-
Recommendation 1
An appropriate commitment by Government to funding and programs is allocated to the
Fair Work Ombudsman’s office, which allows the provision of timely and correct advice
to the agriculture industry.
Recommendation 2
Employers and employees must have the option of agreeing to individual contractual
agreements or annualised salaries below the current minimum cap nominated in the Fair
Work Act that provides certainty. The failure to provide workable plain English contracts
of employment between the parties is not reflective of a modern industrial relations
system nor is it conducive to promoting innovation and progressing workplace
arrangements.
Recommendation 3
The National Employment Standards be amended to clarify when the cashing out of
personal leave and/or the payment of annual leave loading upon termination may apply.
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Recommendation 4
The impost of a previous employer’s industrial arrangements on new owners of a
business should be removed. A six (6) month end date for transferable industrial
instruments rather than their open-ended application following a transfer of business
would make it more attractive for employers to engage employees from the previous
employer. As it stands, the current laws are acting as a disincentive for a new employer to
take on the existing employers.
Recommendation 5
The introduction of damages cap and reducing the six (6) year time frame for bringing
claims to 60 days.
Recommendation 6
In matters which are protracted, a costs order on a party-party basis should follow the
event. This in NFF’s view would reduce jurisdictional shopping and unmeritorious cases,
while assisting with case management and reducing the reporting of “go away money”
are being paid by employers.
Recommendation 7
Any industrial action should result in a full day’s deduction of pay (without exception).
Recommendation 8
Establishment of an industry specific working group within the Fair Work Ombudsman
office, to aid with the regulators understanding of long standing custom and practice
within agriculture.
Recommendation 9
Broaden the model Individual Flexibility Agreements clause as this will enhance
flexibility at the enterprise level and this can best be achieved through the removal of any
restrictions in IFA content.
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Recommendation 10
Reduce red tape, confusion and complexity within the Fair Work Act. This will increase
productivity and allow farmer to remain strong in an increasingly competitive global
economy.
This submission details the concerns that need to be addressed by the Australian
Government across the Fair Work Act. Both sides of politics should take on board or risk
squandering the current economic opportunities. As its flexibility, productivity and
profitability are drivers of job creation and economic well being.
2. Introduction
The 1904 Commonwealth Conciliation & Arbitration Act created the system of dispute
resolution described by H.B Higgins as “a new province for law and order” whereby
“reason is to displace force… the might of the State is to enforce peace between industrial
combatants… and all in the interest of the public”. For much of the twentieth century
industrial relations in Australia maintained an almost unique focus on conciliation and
arbitration, both at state and federal levels.
An essential feature of that system was industrial tribunals charged with resolving
industrial disputes in the public interest and the interests of the parties. In practice, as the
concept of an industrial dispute developed, the awards of industrial tribunals came to set
the conditions of employment on industry-wide bases for most Australian workers, these
were supplemented by the state and federal legislation on specific issues such as annual
and long service leave.
For all its longevity, the arbitral system was much criticised. Recently, the major sources
of dissatisfaction with the system have been the perceived inefficiency of industry-wide
awards and ‘third parties’ – that is, unions and the Commissions. Those concerns resulted
in several rounds of reform, including in 1993, when Labor established enterprise
bargaining and 1996, when the Coalition Government introduced individual statutory
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agreements and reduced the powers of the industrial commission and trade unions,
although both presupposed the existence of the arbitral system.
However, the passing of the Workplace Relations Amendment (Work Choices) Act 2005
(Work Choices) completely rejected that premise. It placed an emphasis on industrial
arrangements employers and individual employees determined, ousted the traditional role
of third parties such as unions and the Australian Industrial Relations Commission
(AIRC) governing terms and conditions and jettisoned the award “safety net” system,
effectively replacing it with a set of statutory minima.
Transitioning Forward… with Fairness
Almost immediately, public opinion rejected the severity of Work Choices. Employers
and employees became frustrated with procedural and administrative complexity and the
confused transitioning to the new regime. The resulting pressure for industrial relations
reform from all sides proved to be the driving force.
The initial product of the Government’s mandate has been the Workplace Relations
(Transition to Forward Fairness) Act, which came into effect on 28 March 2008. There
has been a lot of coverage of this legislation and its three key elements: preventing the
making of new AWAs (whilst introducing Individual Transitional Employment
Agreements (ITEA), another form of statutory individual contract), introducing a new
‘No-Disadvantage Test’ now called ‘Better Off Overall Test’ (BOOT) and award
modernisation.
There have also been a number of other significant but less publicised amendments that
affect the interaction between industrial instruments, and employers and employees. In
particular, the transitional legislation focuses on enterprise agreements as the primary
basis for industrial regulation; including removing the prohibition on incorporation into
agreements of terms from other industrial instruments and removing the ability of a party
to unilaterally terminate the agreement, reintroducing the arbitral role of the Australian
Industrial Relations Commission (AIRC) in deciding whether such a termination is in the
“public interest”. The legislation also allows the consideration of former State awards to
apply to employees who cease to be regulated by an Australian Workplace Agreement
(AWA).
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These minor amendments reflect a repositioning of enterprise agreements as the preferred
arrangement, supplemented by common law contracts and underpinned by awards and
legislated minima (the National Employment Standards (NES)). Indications suggest that
many farming businesses are willing to concede to the end of statutory individual
contracts, and some are seeking alternatives – that being individual flexibility agreements
(IFAs) that assist with workplace flexibility.
Background and Purpose of this submission
This submission is made in response to the review (the Review) into the Fair Work Act
2009 (Cth) (Fair Work Act) being undertaken by the ‘Review Panel’ comprising Dr John
Edwards, Professor Emeritus Ron McCallum AO and the Hon Michael Moore. The
Review was foreshadowed in the Explanatory Memorandum to the Fair Work Bill 2008
(Cth) (Fair Work Bill) in which the Government stated that ‘consistent with best practice
regulation requirements, the Australian Government… commits to undertaking a post-
implementation review within two years of the full implementation of [the Fair Work
Act] on 1 January 2010’.2
NFF strongly supports the Review into the Fair Work Act. As expressed in the
Explanatory Memorandum, the Review is intended to be broad ranging, providing a
‘comprehensive analysis’ of both the practical mechanics of ‘how the Government’s new
workplace relations system is operating’ and of its ‘impact on employers, employees, the
community and governments’.3 The Explanatory Memorandum also indicates that were
the Fair Work Act is operating with ‘differential impacts across… industries’ such as
agriculture, will also be considered.4 This appears to be encompassed in the notion that
the ‘Review Panel’ will examine whether the legislation is operating as was intended by
the Government. NFF makes this evidence based submission in reply to the following
terms of reference:-
1. The extent to which the Fair Work legislation is operating as intended including:-
the creation of a clear and stable framework of rights and obligations which is
simple and straightforward to understand;
2 Explanatory Memorandum, Fair Work Bill 2008 (Cth).3 Ibid.4 Ibid.
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the emphasis on enterprise-level collective bargaining underpinned by simple
good faith bargaining obligations and related powers of Fair Work Australia;
the promotion of fairness and representation at work;
effective procedures to resolve grievances and disputes;
genuine unfair dismissal protection;
the creation of a new institutional framework and a single and accessible
compliance regime; and
any differential impacts across regions, industries occupations and groups of
workers including (but not limited to) women, young workers and people
from non-English speaking backgrounds; and
2. Areas where the evidence indicates that the operation of the Fair Work legislation
could be improved consistent with the objects of the legislation.
Other issues addressed in this submission go to the need for simplicity and clarity in
regulating employment and workplace relations as they relate to farm employers. We
note that the complexity and burdens of modern awards is a major concern for agriculture
employers. This will be addressed by NFF in the Modern Award Review before Fair
Work Australia (FWA) in 2012.
Further, this submission does not consider all aspects of the Fair Work Act, but rather
those most pressing issues as they relate to farm employment. Replies to the specific
issues/questions raised in the ‘Background Paper’ are to be found in section five (5) of
this submission.
3. The Fair Work Act - An Overview
The Fair Work Act is the key piece of Commonwealth legislation regulating employment
and workplace relations. It provides for terms and conditions of employment and sets out
the rights and responsibilities of employees, employers and employee organisations in
relation to that employment.
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The Fair Work Act establishes a safety net comprising: the NES, modern awards and
national minimum wage orders; and a compliance and enforcement regime.5 It also
establishes an institutional framework for the administration of the system comprising
FWA and the FWO. The Fair Work Divisions of the Federal Court and Federal
Magistrates Court and, in some cases, state and territory courts perform the judicial
functions under the Fair Work Act.6
Background
The Fair Work Act was introduced into the House of Representatives in November 2008
and was given Royal Assent on 7 April 2009. Most provisions of the Act took effect on 1
July 2009, replacing the Workplace Relations Act 1996 (Cth).
The history surrounding the enactment of the Workplace Relations Amendment (Work
Choices) Act 2005 (Cth), the Federal election campaign in 2007 - including Forward with
Fairness,7 which preceded the Fair Work Act - and the introduction of the Fair Work Act,
have been the subject of much debate and commentary.
The introduction of the Fair Work Act was the result of extensive consultation with
stakeholders throughout the drafting process. There was also significant lobbying by
various groups prior to its introduction, in particular unions and business groups, for
changes to the proposed Act. The Government engaged in consultation with key non-
government stakeholders, primarily through the:-
National Workplace Relations Consultative Council and sub-committees;8
Business Advisory Group;9
Workers Advisory Group;10 and
Small Business Working Group.11
5 Part 4-1 of Fair Work Act 2009 (Cth) (Civil remedies).6 Part 4-2 of Fair Work Act 2009 (Cth) (Jurisdiction and powers of courts).7 K Rudd and J Gillard, Forward with Fairness: Policy Implementation Plan (2007).8 Established by the National Workplace Relations Consultative Council Act 2002 (Cth). A tripartite body constituted by seven ACTU representatives and seven employer representatives (including NFF) which is chaired by the Deputy Prime Minister and meets every six months to consider workplace relations at a national level.9 Established in 2008 and constituted by representatives from a range of industries and sectors to discuss the Fair Work Bill 2008 (Cth): Explanatory Memorandum, Fair Work Bill 2008 (Cth).10 Established in 2008 and constituted by high-level union representatives to discuss the Fair Work Bill 2008 (Cth): Explanatory Memorandum, Fair Work Bill 2008 (Cth).11 Established in 2008 and constituted by small businesses, including peak small business organisations to advise in relation to the development of the Fair Dismissal Code: Explanatory Memorandum, Fair Work
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The Government also conducted a number of other specific consultations in relation to
the NES.12
Constitutional basis
Prior to 2006, the limitations inherent in the conciliation and arbitration power under
section 51(xxxv) of the Australian Constitution, essentially led to a dual industrial
relations system in Australia, in which the power to legislate with respect to industrial
relations was held by both Commonwealth and State governments.13 According to Sir
Anthony Mason, the limitations under s 51(xxxv) meant that there was a ‘dual’ (federal
and state) system of arbitration and that it [had] unnecessary complexity and
technicality’.14
However, the Work Choices legislation, and later the Fair Work Act, sought to rely on the
corporation’s,15 territory,16 and external affairs17 powers under the Australian Constitution
as well as a referral of power to the Commonwealth, in order to create, as far as possible,
a new national industrial relations system.18
Coverage
The Fair Work Act regulates ‘national system’ employers and employees.19 From 1
January 2010, all states other than Western Australia, referred their industrial relations
powers to the Commonwealth, essentially creating a new national industrial relations
Bill 2008 (Cth).12 Ibid, vii, viii.13 Section 51(xxxv) of the Constitution allows the Commonwealth to make laws with respect to ‘conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one state’: Australian Constitution s 51(xxxv).14 A Mason, ‘The Australian Constitution 1901–1988’ (1988) 62 Australian Law Journal 752, 759.15 Section 51(xx) of the Constitution allows the Commonwealth to make laws with respect to foreign, trading or financial corporations: Australian Constitution s 51(xx).16 Section 122 of the Constitution allows the Commonwealth to make laws with respect to territories: Australian Constitution s 122.17 Section 51(xxix) of the Constitution allows the Commonwealth to make laws with respect to external affairs: Australian Constitution s 51(xxix).18 Section 51(xxxvii) of the Constitution allows the Commonwealth to make laws with respect to ‘matters referred to the Parliament of the Commonwealth’ by any state: Australian Constitution s 51(xxxvii). The states challenged the constitutional validity of the Work Choices legislation, however it was upheld by the High Court in New South Wales v Commonwealth (2006) 219 CLR 1.19 The definition of ‘national system employee’ and ‘national system employer’ are contained in ss 13 and 14 of the Fair Work Act 2009 (Cth) and are extended by ss 30C, 30D, 30M and 30N to cover employers in referring states: Fair Work Act 2009 (Cth) ss 13, 14, 30C, 30D, 30M and 30N.
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system.20 As a result, the national system covers the Commonwealth, Commonwealth
authorities and constitutional corporations,21 as well as all other:-
Employment in Victoria, ACT and the Northern Territory;
Private sector employment in New South Wales, Queensland and South Australia;
and
Private sector and local government employment in Tasmania.
The system does not cover:-
State public sector or local government employment or employment by non-
constitutional corporations in the private sector in Western Australia;
State public sector and local government employment in NSW, Queensland and
South Australia; or
State public sector employment in Tasmania.
Employment that is not covered under the national industrial relations system remains
regulated by the relevant state industrial relations systems. However, some entitlements
under the Fair Work Act extend to non-national system employees.22
The Fair Work Regulations 2009 (Cth) address matters of detail within the framework
established by the Fair Work Act. For example, the Regulations provide additional
definitions, explain the application of the Act and elaborate on certain terms and
conditions of employment.
Objects
Section 3 of the Fair Work Act contains the objects of the Act, as well as the manner in
which the Act intends to achieve its specific objectives, which are to:-
20 In 1996 Victoria was the first state to refer key industrial relations powers to the Commonwealth.21 Constitutional corporations are those to which the federal corporation’s power applies. The corporation’s power allows the Australian Parliament to make laws with respect to certain types of corporations: Australian Constitution s 51(xx).22 For example, non-national system employees are entitled to unpaid parental leave, notice of termination, payment in lieu or notice and protection from unlawful termination of employment: Fair Work Act 2009 (Cth) pts 6–3, 6–4.
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Provide a balanced framework for cooperative and productive workplace relations that
promote national economic prosperity and social inclusion for all Australians by:-
(a) Providing workplace relations laws that are fair to working Australians, are flexible
for businesses, promote productivity and economic growth for Australia’s future
economic prosperity and take into account Australia’s international labour
obligations; and
(b) Ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms
and conditions through the National Employment Standards, modern awards and
national minimum wage orders; and
(c) Ensuring that the guaranteed safety net of fair, relevant and enforceable minimum
wages and conditions can no longer be undermined by the making of statutory
individual employment agreements of any kind given that such agreements can
never be part of a fair workplace relations system; and
(d) Assisting employees to balance their work and family responsibilities by providing
for flexible working arrangements; and
(e) Enabling fairness and representation at work and the prevention of discrimination
by recognising the right to freedom of association and the right to be represented,
protecting against unfair treatment and discrimination, providing accessible and
effective procedures to resolve grievances and disputes and providing effective
compliance mechanisms; and
(f) Achieving productivity and fairness through an emphasis on enterprise-level
collective bargaining underpinned by simple good faith bargaining obligations and
clear rules governing industrial action; and
(g) Acknowledging the special circumstances of small and medium-sized businesses.
The objects reflect, on the one hand, the need to provide a legislative framework which is
flexible for businesses and promotes productivity and economic growth and, on the other,
the desire to ensure the framework is fair and protects the rights of employees to a
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guaranteed safety net, flexible working arrangements and fairness and representation at
work.23
4. The Fair Work Institutions
Part 5-1 of the Fair Work Act established Fair Work Australia (FWA) as the national
independent workplace relations tribunal. FWA is an independent statutory agency, with
both administrative and judicial roles, carried out by separate independent divisions. It
commenced operation on 1 July 2009, assuming the functions of the Australian Industrial
Relations Commission (AIRC), the Australian Industrial Registry, the Australian Fair
Pay Commission (AFPC) and some functions of the Workplace Authority.
Under section 577 of the Fair Work Act, FWA is required to perform its functions and
power in a manner which:-
(a) is fair and just; and
(b) is quick, informal and avoids unnecessary technicalities; and
(c) is open and transparent; and
(d) promotes harmonious and cooperative workplace relations.
Jurisdiction and appeals
FWA has its functions conferred by section 576 of the Fair Work Act, including the
following subject areas of relevance to this submission:-
The National Employment Standards (Part 2–2);
Modern Awards (Part 2–3);
Enterprise Agreements (Part 2–4);
General Protections (Part 3–1);
Unfair Dismissal (Part 3–2);
Unlawful termination protections (Part 6–4).
23 J Murray and R Owens, ‘The Safety Net: Labour Standards in the New Era’ in A Forsyth and A Stewart (eds), Fair Work: The New Workplace Laws and the Work Choices Legacy (2009) 40, 66.
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NFF views the regulator as performing adequately since its inception. However, it co-
exists with the Fair Work Ombudsman (FWO) which is a separate agency that exercises
important enforcement functions and advises parties on their rights and responsibilities.
The consolidation of workplace institutions by itself does not necessarily result in more
easily accessible services. This is an ongoing challenge that requires continuous attention
to, and funding of, the resources available online, both from FWA and from the FWO.
Over the counter information is still highly important as is face-to-face advice and the
continued operation of advice lines. We must be cautious that the consolidation of
workplace relations institutions does not result in over simplification and the decline of
services available.
NFF industrial relations representative from around Australia have experience difficult
when seeking clarification and at time conflicting advice, from the FWO office. For this
reason, NFF recommends the following:-
Recommendation 1
An appropriate commitment by Government to funding and programs is allocated to the
Fair Work Ombudsman’s office, which allows the provision of timely and correct advice
to the agriculture industry.
Evidence of conflicting interpretation provided to member of NFF [(Victorian Farmers
Federation (VFF), CANEGROWER, & Primary Employers Tasmania (PET)] by the
office of the Fair Work Ombudsman is provided in Appendix ‘C’.
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5. Reply to Fair Work Act Review Background Paper
The Fair Work Act Review Background Paper (Background Paper)24 confirms many of
the fears that people have about the operation of the act. It shows that productivity is
declining, but fails to mention that real unit labour costs have increased over the past six
(6) years. This is an issue that cannot be ignored in the productivity debate. NFF
addresses this issue in some detail in section 6 and 7 of this submission.
Interestingly, the ‘Background Paper’ confirms that the biggest spurt in productivity
occurred under the previous Workplace Relations Act of 1998 to 2004. The ‘Background
Paper’ confirms that after a slump in the mid-2000, productivity grew by 1.8 percent..
Since the Fair Work Act was introduced, productivity has grown by just 1 percent. While
productivity is a result of many factors, these figures make for revealing reading. They
confirm that labour productivity cannot be taken out of the productivity equation.
The number of working days lost due to strikes is increasing, and even though the
government claims this is probably due to the large number of agreements up for renewal,
such a spike was not evident in the past when equally large numbers of agreements were
being renegotiated.
It also appears that the general protection’s applications are being used as an unfair
dismissal tactic, with the number growing from 1188 in 2009-10 to 1871 in 2010-11. The
questions posed by the Background Paper are slanted towards employee’s rights rather
than the impact on employers. The Background Paper confirms that the numbers of
unfair dismissal claims are increasing and that most of them are settled via
“Conciliation”, which indicates “go away money” is back in vogue, but it does not tell us
the cost settlements. NFF can confirm this observation from its Workplace Relations
Committee Members, which is comprised of Industrial Relations Offices and farmers
from around Australia.
The Background Paper deals with IFAs in a very cursory manner and fails to mention
that they do not have any significant take-up rate because they can be terminated within
24 Published in January 2012.
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28 days. It also fails to mention that IFAs offer a limited number of items that can be
negotiated. NFF views this as a Government policy failure. The Background Paper
should have dealt at length with this and given more background. The questions posed by
the Department of Education, Employment and Workplace Relations Department of
Workplace Relations (DEEWR) about IFAs deals with the issue only from an employee's
perspective.
There is no discussion in the ‘Background Paper’ about rights of entry, merely some
questions that have been posed. The ‘Background Paper’ also reveals that 96 percent of
the private sector workforce is covered by the operation of the FWA.
All rolled together, despite the policy cherry picking of the ‘Background Paper’, it
confirmed that the Fair Work Act is really not all unfair to the economy. NFF makes the
following industry positions in reply to the ‘Background Paper’ and the workings of the
Fair Work Act, with the stated aim of increasing flexibility and productivity of Australian
Farms.
Agriculture Industry Position
Below are replies to the questions posed in Appendix ‘B’ of the Fair Work Act Review
Background Paper of January 2012.
General - Questions 1 to 7
The Fair Work Act simply does not live up to what was promised; it is neither simpler,
fairer, nor more conducive to promoting national economic prosperity. Without the
amendments to the workplace relations framework outlined herein, the progress achieved
in modernising Australia’s workplace laws over the past two decades will come to an
abrupt halt. The current workplace relations laws provide a conduit to a return to the
worst aspects of our industrial relations system by entrenching third party interference
and influence at the expense of workplace productivity, competitiveness and flexibility.
NFF advocates a workplace relations system that encourages employment, is dynamic,
and assists with employment and does not hinder progress at the workplace level.
Workplace flexibility is therefore mandatory to allow employers to compete
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internationally and to produce the associated benefits to Australian employment and the
economy generally.
The Fair Work Act in its current form is impacting on Australia’s productivity and
international reputation. This ultimately will have an adverse impact on future investment
and the ability to maximise opportunities as they present themselves. The laws are not in
keeping with an advanced and modern economy.
A system which protects the lower-paid and allows for the removal of inefficiencies
while providing for the flexibility needed to compete in a global market must be the
centrepiece of our workplace relations system. For this reason, NFF recommends the
following:-
Recommendation 2
Employers and employees must have the option of agreeing to individual contractual
agreements or annualised salaries below the current minimum cap nominated in the Fair
Work Act that provides certainty. The failure to provide workable plain English contracts
of employment between the parties is not reflective of a modern industrial relations
system nor is it conductive to promoting innovation and progressing workplace
arrangements.
The Safety Net - Questions 8 to 19
The safety net since 1 January 2010 has consisted of the ten (10) National Employment
Standards (NES) together with the modern awards. Prior to that period, the safety net
consisted of the five (5) elements of the Australian Fair Pay and Conditions Standard
together with a plethora of federal instruments, the most significant being pre-reform
awards, transitional awards, notional agreements preserving State awards and State
preserved agreements. In the period before 26 March 2006 the safety net comprised of
either a State or Federal award together with statutory leave entitlements.
By way of example, the FWO revealed it apply a new interpretation of the Fair Work
Act’s in relation to section 90(2) – which is part of the NES - under which employers are
required to pay a 17.5 percent loading on accrued annual leave. Leave loading would also
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have to include the loading when making termination payments to employees.25 For this
reason, NFF recommends the following:-
Recommendation 3
The NES be amended to clarify when the cashing out of personal leave and/or the
payment of annual leave loading upon termination may apply.
Bargaining & Agreement Making - Questions 20 to 31
Unions should be prohibited from seeking to manage Enterprise Agreement (EA) content
which impedes flexibility and managerial control of an enterprise. Prohibited content
restrictions should be reintroduced into EAs and the BOOT test clarified to increase
certainty for all concerned.
If the Government is accepting that a ‘fair bargaining code’ should be implemented, its
NFF’s view that it should be equitable to all concerned in workplace negotiation and be
limited to negotiations concerning pay and conditions of employment.
Collective bargaining and good faith bargaining are inextricably connected. Most
developed countries have endorsed collective bargaining as the basis of regulating terms
and conditions of employment, and many have also tried to ensure that such bargaining
occurs in good faith. Voluntary, good faith bargaining has also been endorsed by the
International Labour Organization (ILO) as the most appropriate means of regulating
terms and conditions of employment.
Seeking to promote both fairness and productivity, the Fair Work Act attempts to
radically reshape Australia’s workplace relations system. It does this by establishing a
legislated safety net consisting of the ten NESs and a comprehensive network of modern
25 The advice, from Jeffrey Philips SC, said it was significant that s 90(2) omitted a reference to the employee's "base rate of pay" found in s 90(1).
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awards, and the formal endorsement of collective bargaining as the basis for negotiation
of terms and conditions of employment at the enterprise level.
To try to make collective bargaining effective, the legislation requires that the parties
negotiate in ‘good faith’. How fairness is to be achieved in the new system is clear; what
is less clear is how the productivity objective is to be achieved.
The implicit assumption in the Fair Work Act is that productivity is enhanced when
workplace relations are harmonious and collaborative and that these are optimised when
bargaining is collective, conducted in good faith and at the enterprise level.
Transfer of Business - Questions 34 to 36
The Fair Work Act has redrafted the old ‘transmission of business’ provisions for awards
and agreements as new ‘transfer of business’ provisions. The new provisions differ
considerably from the immediately prior Work Choices rules, and they also mark a
change from the pre-Work Choices law. The ‘business characterisation’ test applied in
the PP Consultants case26 has been overruled and a test much more like the old
‘substantial identity’ of the work test has been restored. Nevertheless, the most important
practical feature of the new rules is that broad powers have been given to Fair Work
Australia to hear and determine applications on particular circumstances. The exercise of
these powers has the potential for a flexible application of the rules, to accommodate
business needs in the future.
The Fair Work Act has dispensed with the terminology of a ‘transmission of business’
and adopted the expression ‘transfer of business’, perhaps to avoid any implication that
the legislature has intended to adopt old case law. Indeed, the Explanatory Memorandum
to the Fair Work Bill states that the provisions are not intended to focus on what the
“business” of the old employer is and whether the new employer has in some way taken
over that “business”.27 It goes on to say:-
“They [the provisions] instead focus on whether there has been a transfer
of work between two employers and the reason for the transfer of that
26 (2000) CLR 46827 Explanatory Memorandum, Fair Work Bill 2008 (Cth), Para 1206 at p. 191.
Page | 21Submission to the Fair Work Act Review Panel
work, or, viewed another way, the connection between the two
employers.”28
This is a clear indication that the Fair Work Act is not intended to operate in the same
way as the Work Choices or the pre-Work Choices Workplace Relations Act rules.
The objects in section 309 of the Fair Work Act clearly recognise the tension between the
interests of employees in maintaining their working conditions and thereby their living
standards, and the interests of the business community in improving efficiency.
These objects assist FWA in the exercise of the broad discretions it has been given in
sections 318 and 319. The central provision dealing with the question of when a transfer
of business takes place, section 311, outlines four elements for identifying a transfer of
business. They are:-
1. An employee’s employment with an old employer must have been terminated.
2. Within three months of termination, that employee must be employed by the new
employer. (This allows for the revival of named employer awards and agreements
when insolvent businesses are resuscitated after a short period of closure.)
3. The work performed by the transferring employee (called the ‘transferring work’)
must be the same or substantially the same as the work the employee performed
for the old employer. (‘Substantially the same’ ensures that small changes in duty
statements will not defeat a transfer.)
4. There must be a ‘connection’ between the old and new employers, as a result of
one or more of four kinds of circumstances. These circumstances, set out in sub-
sections 311(3) to (6), are:-
The new employer now owns or has the beneficial use of tangible or
intangible assets that are used in connection with the transferring work and
were owned or beneficially used by the old employer.
The old employer has outsourced the transferring work to the new employer.
The new employer has ‘in-sourced’ the transferring work which was
previously outsourced.
28 Ibid.
Page | 22Submission to the Fair Work Act Review Panel
The new and old employers are associated entities when the transferring
employee takes the job with the new employer.
It is clear that the restrictive test of the PP Consultants case has now been overruled by
section 311(4) (the outsourcing provision). An example in the Explanatory Memoranda
about Kambo & Partners outsourcing its security work to Elvis Security demonstrates
that outsourcing a function of a business will constitute a transfer of business, even where
no assets change hands. Whether the Gribbles29 decision would still hold is less certain.30
The ‘Transfer of Business’ rules in the Fair Work Act shifts the balance between the
interests of workers (in continuation of their conditions) and the interests of business
enterprises back towards the interests of workers, at least in as far as the default rules in
the legislation now favour a return to a ‘substantial identity’ of the work test, and ensure
that outsourced employees, and employees who are shifted around within corporate
groups are treated as transferring employees, entitled to continuation of their benefits.
The twelve (12) month time limit imposed by Work Choices has now disappeared.
Nevertheless, in place of the hard statutory rules of Work Choices, and the ‘business
characterisation’ test from the court decisions, we now have a return to a system which
allows considerable flexibility in particular cases. For example, it is clearly open for a
new employer to make a strong case for exemption from the terms of a transferring
instrument, in the interests of reviving a failing enterprise. Nevertheless the flexibility in
the system depends upon approval by FWA. For this reason, NFF recommends the
following:-
29 (2005) 222 CLR 194.30 Stewart A., ‘A Question of Balance: Labor’s New Vision for Workplace Regulation’ (2009) 22 Australian Journal of Labour Law 3 at 44.
Page | 23Submission to the Fair Work Act Review Panel
Recommendation 4
The impost of a previous employer’s industrial arrangements on new owners of a
business should be removed. A six (6) month end date for transferable industrial
instruments rather than their open-ended application following a transfer of business
would make it more attractive for employers to engage employees from the previous
employer. As it stands, the current laws are acting as a disincentive for a new employer to
take on the existing employers.
While the definition contained in section 311 may be clearer, further thought as to
whether the definition itself is appropriate may be required. In NFF’s view the ‘Transfer
of Business’ rules are inflexible for agriculture businesses and are not meeting the
objectives of section 3(a) of the Fair Work Act.
General Protections - Questions 37 to 41
The “consolidation and streamlining” of the various protections into one part has made it
easier, in NFF’s view for employees and employers to understand their rights and
obligations compared to the protections that the Workplace Relations Act provided. Part
3-1 is laid out in a coherent fashion that makes it easier to follow for all concerned.
Despite being easier to understand than the Workplace Relations Act, there is still a level
of uncertainty in the scope of the general protections. NFF is aware of some novel claims
being brought by applicants. This may be part of the testing of the terms that is common
when new legislation is introduced. As the terms continue to be reviewed through the
judicial process, further clarification on the scope of the protections will be made. For
this reason, NFF recommends the following:-
Recommendation 5
The introduction of damages cap and reducing the six (6) year frame for bringing claims
to 60 days.
Page | 24Submission to the Fair Work Act Review Panel
The general protection provisions have created a new field of litigation such that every
employer/employee action needs to be assessed against the potential of a general
protection claim.
By way of example, if an employee can't bring an unfair dismissal claim because they
haven't done the minimum period they may lodge a claim under the general protections.
In the view of NFF, there needs to be a minimum period introduced. We view this as a
glaring omission from the Fair Work Act.
Unfair Dismissal - Questions 42 to 51
Part 3-2 of the Fair Work Act seeks to establish a framework for dealing with unfair
dismissals to balance the need of business and the needs of employees through the use of
quick, flexible and informal processes.31 It seeks to provide remedies if a dismissal is
found to be unfair, with an emphasis on reinstatement.32
An employee has fourteen (14) days from the date the dismissal took effect, to make the
application to FWA.33 However, in exceptional circumstances, FWA has the discretion to
accept an application that is lodged, out of time.34 Consistent with the objectives of the
Part 3-2, FWA has flexibility as to the procedures it may wish to adopt when dealing with
an unfair dismissal claim, after first determining that it has jurisdiction to deal with the
matter.35
In determining whether a dismissal was harsh, unjust or unreasonable, FWA is required to
take into account a number of matters specifically identified in section 387.
If the tribunal concludes that the person was unfairly dismissed, it may make an order for
reinstatement, including reinstatement to an associated entity.36 Alternatively, if it thinks
that reinstatement is inappropriate, it may make an order requiring the employer to pay
the employee an amount of compensation in lieu of reinstatement to the equivalent of six
31 Fair Work Act 2009 (Cth) , 381(1)(a),(b)32 s 381(1)(c)33 s 394(2)(a)34 s 394(2)(b)35 ss 396 to 39936 s 391
Page | 25Submission to the Fair Work Act Review Panel
(6) months remuneration.37 Subject to any right of appeal to the Full Bench38, a person to
whom an order applies must not contravene the order.39 If so, they may be subject to
enforcement proceedings under Pt 4-1, including an injunction issued by the Federal
Court of Australia or the Federal Magistrates’ Court of Australia.40
The issue which government has to be conscious of in the unfair dismissal jurisdiction is
that an employee and employer involved in an unfair dismissal case before FWA must
generally meet their own costs. In the view of NFF, the current procedures are effective,
assisting with quick, flexible and informal resolution of disputes. For this reason, NFF
recommends the following:-
Recommendation 6
In matters which are protracted, a costs order on a party-party basis should follow the
event. This in NFF’s view would reduce jurisdictional shopping and unmeritorious cases,
while assisting with case management and reducing the reporting of “go away money”
being paid by employers.
The Fair Work Act has brought a return to "the bad old days of employers being hit with
unmeritorious [unfair dismissal] claims". Most applicants know that employers would
rather settle at conciliation than pay quite expensive litigation fees to law firms, and they
just make commercial decisions - particularly the small to medium-size farming
businesses.
Small Business Fair Dismissal Code
Under section 385(c) a person is not “unfairly dismissed” if the dismissal was consistent
with the Small Business Fair Dismissal Code (Code). FWA is required to consider
whether the dismissal was consistent with the Code as an initial matter, prior to
considering the merits of the case.41 As its name suggests, the Code applies only to small
business employers, as defined in section 23 of the Fair Work Act.37 Capped at a specific sum as per section 39238 s 40039 s 40540 s 539(2), item 13 and s 545(2)(a)41 s 396(c). If so satisfied, it must dismiss the matter: Re Industrial Automation Group Pty Ltd [2010] FWAFB 8868 (2 December 2010, Kaufman SDP, Richards SDP, Hampton C) at [34].
Page | 26Submission to the Fair Work Act Review Panel
The Code is an instrument of declaration by the Minister under section 388(1). It is brief
in its terms and is accompanied by a checklist to assist employers to determine whether
they have complied with the Code.
It is noticeable that it is fair for a small business employer to justify summary dismissal if
it believes on reasonable grounds that the employee's conduct is sufficiently serious to
justify summary dismissal. This seems to relieve the small business employer from the
burden of proving, by way of evidence before FWA that the employee engaged in such
contract.42
NFF questions the utility of the Code, although we will acknowledge it may assist some
employers comply with their obligation under the Fair Work Act.
Industrial Action - Questions 52 to 61
Any restrictions upon employer’s right to lock out employees should be matched with
restrictions upon the right of employees to commence protected action (strikes). Under
the current interpretation of the laws, employees can ‘strike first, ask questions later’.
NFF views industrial action as a disruption to business activity and for this reason, NFF
recommends the following:-
Recommendation 7
Any industrial action should result in a full day’s deduction of pay (without exception).
Institutional Framework - Questions 64 to 69
With the recent unflattering image of the FWO providing incorrect pay advice to an
employer, NFF’s view is that an industry specific point of contact should be nominated
within the FWO office for all major representative bodies (Employees and Employers).
This proposal in our view will increase consistency of advice and establish a working
relationship for specific industries. Such an approach will also assist with increase
compliance in relation to the Fair Work Act. NFF recommends the following:-
42 Compare the test which applies to the burden of proving a valid reason for the dismissal under the Fair Work Act (Cth), s 387 (a).
Page | 27Submission to the Fair Work Act Review Panel
Recommendation 8
Establishment an industry specific working group within the Fair Work Ombudsman
office, to aid with the regulators understanding of long standing custom and practice
within agriculture.
Evidence of conflicting interpretation being provided to the agriculture industry
representative by the office of the FWO is provided in Appendix ‘C’.
6. Agriculture Flexibility
While flexibility is a key feature of the Fair Work Act, this part of the submission
suggests that employer and employee control and agreement over flexible working hours
via IFAs in modern awards and enterprise agreements are not allowing for genuine
flexibility at the enterprise level. NFF understands that a review into the ‘extent to which
IFAs under modern awards and enterprise agreements are being agreed to, and the
content of those arrangements’ is scheduled for the end of May 2012. However, NFF
submits that notwithstanding this separate research and review agenda, the operation of
IFAs must be an integral part of the Fair Work Act review being undertaken from 1
January 2012.
NFF accepts that regulations are essential for the management of workers. In NFF’s view,
IFAs are not as efficient or effective as possible and the current Fair Work Act imposes
direct costs on businesses and distracts from day to day business operations. In particular,
time-consuming, poorly-designed, ineffective or excessive red tape impacts on the
efficiency of farms and ultimately results in extra costs to consumers.
In the election year of 2007, Kevin Rudd and Julia Gillard stated that:-
‘Working families face the daily challenge of balancing the pressures of
work with the demands of family life... This is a difficult task, but when
Australian working families face cuts to their take home pay… the task
Page | 28Submission to the Fair Work Act Review Panel
becomes almost impossible. Labor believes in supporting Australian
working families.’43
On the 28 April 2007, the ‘Forward with Fairness’ policy document was launched by the
Australian Labor Party. This policy committed that ‘A Rudd Labor Government will
guarantee a right for parents to request flexible work arrangements until their child
reaches school age. Employers will only be able to refuse any request on reasonable
business grounds.’44 This policy document promoted working families and flexibility, and
did not mention ‘Industrial Flexibility Agreements (IFA)’. The policy document stated in
relation to agreements, ‘Once an agreement is made then a deal is a deal. The agreement
must be complied with.’45 Not only is there no mention of IFAs as a required term of
enterprise agreements, the policy document states that: ‘The only requirements will be
that the terms of the agreement are lawful, the bargaining is conducted in good faith, the
employees covered by the agreement are better off overall against the safety net, and a
majority of employees vote in favour of the agreement.’46
Yet, by the time of the introduction of the Fair Work Act in 2009, employee access to
flexibility by means of the right to request provisions has resulted in a minimal,
unenforceable legislative standard. IFAs became a requirement of awards and
agreements, and since the commencement of the Fair Work Act, IFAs are promoted by
government agencies as a means by which employees can gain access to flexible working
hours in awards and agreements.47
The IFA must be genuinely agreed to by the employee, can be terminated by the
employee with twenty eight (28) days notice, and must leave the employee ‘better off
overall’ (the better off overall test (BOOT)) than their award or enterprise agreement. The
Fair Work Ombudsman’s guide to IFAs explains that, ‘It is the employer’s responsibility
to ensure that the employee is better off overall than if there was no IFA’.
The employer’s BOOT assessment will usually involve comparing the employee’s
financial benefits under the IFA with the financial benefits under the applicable award or
43 Forward with Fairness, p. 844 Forward with Fairness, 2007, p.845 Forward with Fairness, p.13.46 Forward with Fairness, p. 16.47 Fair Workplace Ombudsman, 03 Best Practice Guide Use of Flexibility Arrangements, 2009
Page | 29Submission to the Fair Work Act Review Panel
enterprise agreement. The employee’s personal circumstances and any non-financial
benefits which are significant to the employee can also be considered.48
It is important to note that non-financial benefits, such as flexible working hours, can be
considered in assessing whether an employee is better off, even if the employee earns less
for working the differing hours. An IFA in an award, the employer or an employee can
propose to vary arrangements for when work is performed such as working hours,
overtime rates, penalty rates, allowances, and leave loading.
NFF does not think that IFAs provide enough flexibility, we are asserting that IFAs do
not work due to requirements such as having to be assessed against the BOOT, employers
not being permitted to make an IFA a condition of employment, employees are entitled to
terminate an IFA with twenty-eight (28) days notice, and that the model IFA is not broad
enough.
It is a common held view of the ability of IFAs to reduce wages through variations to
penalty rates, overtime and when hours are worked The Making it Fair Report49
compared IFAs with Australian Workplace Agreements (AWAs) highlighted the
contribution of AWAs to the gender wage gap, and concluded that, ‘…there is a
significant similarity between the AWA and the IFA being introduced. It is therefore
important that these new agreements be monitored to ensure there is not a similar
outcome.50 The report recommended that the Fair Work Act be amended to require that
IFA arrangements are lodged with FWA, to enable research on the outcomes of these
agreements. This should not be a controversial recommendation, for when discussing the
impact of AWAs on wages, and the actions of the Howard Government in not providing
data on AWAs, Minister Gillard (as she was then) had stated:-
‘What our whole policy platform, not just our workplace relations
system, insists on is an evidence based approach to decision making’51
48 Fair Workplace Ombudsman, IFA Guideline, 2009, p.249 The Australian Council of Trade Unions and Joint State Union Peak Councils Making it Fair, November 2009, p. 18850 Workplace Express, 23 November 200951 Gillard, 20 June 2008, p. 3
Page | 30Submission to the Fair Work Act Review Panel
The above concerns and recommendations regarding IFAs were noted in the early days of
the operation of the Fair Work Act. There are now enterprise agreements that illustrate
employer proposed flexibilities for employees. These IFAs provide the employer with
ability to propose to employees at a variety of working hours.
If IFAs are to be held up as a central plank of the Labor Government’s workplace
relations policy, as outlined in its Forward with Fairness – Policy Implementation Plan
Its NFF’s contention that the aim of the flexibility clause is to enable individual
arrangements which are genuinely agreed by the employer and an individual employee.
NFF recommends the following:-
Recommendation 9
Broaden the model IFA clause as this will enhance flexibility at the enterprise level and
this can best be achieved through the removal of any restrictions in IFA content.
Farmers have reported to NFF that the onerous paperwork and red tape that employers
currently have to wade through often impedes employment and as a result, farmers have
often been forced to invest in plant and machinery rather than hiring people.
NFF is of the view that there is a need to simplify and reduce the level of regulation and
prescription in the Fair Work Act. Small farming businesses in particular have greater
regulation than under previous laws and many need significant support to comply. Even
large farming companies require technical experts to navigate their way through the Fair
Work Act. This does not support productivity.
7. Agriculture Productivity
‘Productivity’ is, at its simplest, a measure of how effectively or efficiently a workplace,
a business or government agency, a region or a nation as a whole uses the resources at its
disposal to produce goods and services which are in turn valued, in some way, by those
who consume or use them. At the level of individual workplaces or firms, productivity
Page | 31Submission to the Fair Work Act Review Panel
measures are often expressed in terms of output per unit of a single factor of production,
such as land or livestock (as in agriculture), some measure of ore extracted (in mining), or
in manufacturing and services businesses, some measure of labour input such as person
hours. At more aggregated or economy wide levels, productivity is usually expressed as a
measure of value added (such as gross product) per unit either of labour input (labour
productivity) or per unit of labour and capital services inputs (multi-factor productivity).
Productivity growth in Australian agriculture is a problem.
In the context of a growing world population, demand for dietary protein and issues of
environmental sustainability, a lack of productivity growth is significant. If production is
to increase, that can only occur through additional inputs (i.e. expanded farming areas,
more fertilisers, equipment, labour, etc) or by increasing productivity (i.e. a higher ratio
of production to inputs).
Paul Krugman52 wrote that “a country’s ability to improve its standard of living over time
depends almost entirely on its ability to raise its output per worker”. This sentiment has
been echoed more recently by Australia’s most senior policy makers and advisers.
Stevens53 identifying productivity as “the only real basis for optimism about future
income” and more recently in 2011 that “there is only one source of ongoing higher rates
of growth of real per capita incomes, and that is higher rates of growth of productivity”,
while Parkinson54 observed that “in the long run, productivity growth – producing more
from the same inputs – is the only sustainable way for future generations to enjoy higher
living standards”.
For Australian farmers there is an additional consideration – productivity growth is what
keeps us internationally competitive. At the very least we should be increasing their
productivity at the same rate as other exporting countries.
Australia’s productivity performance in the 2000s
52 Krugman, Paul (1992), The Age of Diminished Expectations: US Economic Policy in the 1980s, MIT Press Cambridge.53 Stevens, Glen (2009), ‘Challenges For Economic Policy’, Address to the Anika Foundation, 27 July. (2011), ‘The Cautious Consumer’, Address to the Anika Foundation, 26 July.54 Parkinson, Martin (2011), ‘Sustaining Growth in Living Standards in the Asian Century’, Address to the Seventh Economic and Social Outlook Conference, Melbourne, 30 June.
Page | 32Submission to the Fair Work Act Review Panel
Saul Eslake55 in August 2011, states in a paper presented to the annual policy conference
of the Reserve Bank of Australia that Australia’s productivity performance, however
measured, has deteriorated substantially since the late 1990s. In terms of simple decade-
average comparisons:-
Labour productivity for the Australian economy as a whole grew at an
average annual rate of 1.5 percent over the ten years to 2009-10 (or 1.4
percent per annum using the ABS’ ‘quality-adjusted’ estimates for hours
worked), compared with 2.1 percent per annum over the ten years to 1999-
2000, 1.4percent per annum over the ten years to 1989-90 and 2.8 percent per
annum over the ten years to 1979-80.
Multi-factor productivity for the Australian economy as a whole was
unchanged over the course of the 2000s (or declined at a 0.2 percent average
annual rate using ‘quality-adjusted’ hours worked), compared with growth
averaging 1.6 percent per annum in the 1990s, 0.7 percent per annum in the
1980s and 1.5 percent per annum in the 1970s.
Labour productivity for twelve of the industry components of the ‘market
sector’ (that is, excluding sectors in which productivity growth is notoriously
difficult to measure, in particular public administration and safety, education
and training, and health care and social assistance) for which the Australian
Bureau of Statistics (ABS) has estimates going back before 1994-95 grew at an
average annual rate of 1.9 percent during the 2000s, compared with 2.6
percent in the 1990s and 1.6 percent in the 1980s; and
Market sector’ multi-factor productivity grew at an average annual rate of 0.2
percent in the 2000s, compared with 1.4 percent in the 1990s.
Growth in all the above measures of productivity deteriorated as the 2000s progressed
(see Figure 1 which presents growth in the above four series over rolling five-year
55 Eslake, Saul (2011), Paper presented to the annual policy conference of the Reserve Bank of Australia on 15-16 August 2011.
Page | 33Submission to the Fair Work Act Review Panel
periods). In particular, multi-factor productivity growth was negative during the second
half of the past decade.
Figure 1: Australian labour and multi-factor productivity growth in the 1990s and 2000s
Growth in ‘market sector’ labour productivity decelerated from an average of 3.3 percent
per annum over the productivity growth cycle which ran from 1993-94 through 1998-99,
to 1.2 percent per annum over the cycle which ran from 2003-04 through 2007-08 (or to
0.8 percent per annum if the four additional ‘market sectors’ for which the ABS publishes
estimates from 1995-96 onwards are included), while in the as yet incomplete cycle
which began in 2008-09 labour productivity growth has averaged 1.5 percent per annum.
Growth in ‘market sector’ multi-factor productivity slowed from an average of 2.1
percent per annum in the 1993-94 through 1998-99 cycle to -0.3 percent per annum in the
2003-04 through 2007-08 cycle (or to -0.8 percent per annum including the four
additional ‘market sectors’), and has averaged -1.0 percent per annum in the as yet
incomplete cycle which began in 2008-09.
As shown in Figure 2 productivity growth during the most recent completed cycle was,
on either measure, the worst of any cycle since the 1970s.
Page | 34Submission to the Fair Work Act Review Panel
Figure 2: Australian productivity growth cycles, ‘market sector’, 1973-74 to 2009-10
Productivity performance: ‘sectoral’ explanations
Official explanations of the deterioration in Australia’s productivity performance have
tended to emphasise the contribution of especially sharp declines in productivity in three
sectors of the economy – agriculture, forestry and fishing, mining, and electricity, gas,
water and waste services (‘utilities’). For example, the Productivity Commission56
estimates that these three sectors account for almost 80 percent of the decline in multi-
factor productivity growth between the 1998-99 to 2003-04 and 2003-04 to 2007-08
growth cycles.
The output of the agriculture sector has obviously been affected by drought during the
past decade, but it’s not obvious that agricultural sector productivity has detracted from
Australia’s overall productivity performance over the past decade (see Figure 3). On the
contrary, partly as a result of substantial labour shedding in the early years of the decade,
agricultural sector productivity rose at an average annual rate of 3.9 percent over the
2000s, the second-fastest of any of the sixteen industries making up the market sector,
56 Productivity Commission (2010), Annual Report 2009-10, Canberra. (2011), Economic Structure and Performance of the Australian Retail Industry, Canberra, July.
Page | 35Submission to the Fair Work Act Review Panel
while multi-factor productivity in agriculture rose at an average annual rate of 1.9 percent
a more rapid rate than any other sector. The NFF suggest that this is also attributable to
farming employers choosing to capitalise labour, that is invest in plant and machinery due
to the inflexibility of the current workplace relations systems.
Figure 3: Agriculture, forestry and fishing sector labour and capital stock, output and
productivity
In order to circumvent this problem, Eslake and Walsh57 constructed ‘dollar-
denominated’ estimates of labour productivity by industry sector. This required the
derivation of estimates of actual hours worked by industry by multiplying the published
figures for average weekly hours worked in each industry by those for employment in
each industry, both of which are available for the middle month of each quarter. The
resulting estimates were then averaged for each financial year, and multiplied by 52 to
derive an estimate of annual hours worked in each industry. These estimates of aggregate
hours worked were then divided into the published estimates of gross value added (GVA)
by industry to derive estimates of GVA per hour worked or labour productivity.
57 Eslake, Saul and Walsh, Marcus (2011), Australia’s Productivity Challenge, The Grattan Institute, Melbourne, February.
Page | 36Submission to the Fair Work Act Review Panel
This estimate is shown for 2009-10 in Figure 4 below and shows agriculture as fifth from
the bottom. In NFFs view, this substantiates that productivity growth performance within
agriculture has been quite poor since at least the mid 2000s.
Figure 4: Gross value added per hour worked, in dollars, by industry, 2009-10
As with the diminished enthusiasm for productivity enhancing reforms at the political
level, this low emphasis on the measurement of and accountability for productivity at the
enterprise level is to at least some extent understandable. Productivity enhancing change
in individual work places is often disruptive and unpleasant; both for those on the
‘receiving end’ of that change and those (typically ‘middle managers’) who have to
communicate it to those affected and implement it. When making such changes is no
longer a matter of survival, as it was for many businesses in the 1990s, it is not surprising
that there is less desire to make them.
Another important and, in this context, pertinent development of the past decade, has
been the increasing volume of legislation and regulation. The Fair Work Act was aimed at
improving productivity and simplifying the regulatory burden of employing people as
specified in section 3 of the Fair Work Act. In NFF’s submission, the Fair Work Act has
reduced productivity and flexibility for employees and employers within agriculture.
Although difficult to verify in any empirical manner, there is considerable anecdotal
Page | 37Submission to the Fair Work Act Review Panel
evidence suggesting that the increased recourse to legislative and regulatory means of
eliminating various types of risks has prompted business owners and managers to devote
increasing proportions of their time and attention to compliance and risk management
activities. They have become less willing to take on some of the risks inevitably
associated with decisions to undertake organisational change or engaging in other forms
of productivity-enhancing innovation.
It would be wrong to suggest that there is any single, or overwhelming, ‘cause’ of
Australia’s poor productivity performance over the past decade. But there seems to be
little doubt that the broader economic and political environment (one in which there has
been little pressure on either policy makers or individual firms) to pursue productivity
enhancing structural or organisational change) has been of critical importance. As
Parkinson58 put it, “the root causes of Australia’s present productivity performance are
embedded in the decisions of the last decade”.
As shown in Figure 5, the combination of growth in average compensation per non-farm
employee of more than 5½ percent over the year to the March quarter 2011 (a figure
which is high by the standards of the past two decades but by no means unprecedented)
so with a fall in labour productivity of 1¾ percent over the same period has resulted in
unit labour cost growth of almost 8½ percent, the fastest since the late 1980s.
58 Parkinson, Martin (2011), ‘Sustaining Growth in Living Standards in the Asian Century’, Address to the Seventh Economic and Social Outlook Conference, Melbourne, 30 June.
Page | 38Submission to the Fair Work Act Review Panel
Figure 5: Employee compensation, labour productivity and unit labour costs
Given the role played by unit labour costs in most contemporary models of the
inflationary process, this is a clear warning sign of upward risks to inflation emanating
from this source despite the continued moderation (by historical standards) evident in
other measures of wages growth.
But if Australian policy makers were to decide to seek public policy solutions to the
problems posed now or for the future by Australia’s deteriorating agricultural
productivity performance, what might those look like? At the outset, it is important to
keep in mind that productivity improvements occur as the result of decisions taken by and
implemented in enterprises and workplaces, not as the direct result of public policy
initiatives.
Page | 39Submission to the Fair Work Act Review Panel
NFF productivity reforms going forward:-
Gary Banks59 lays particular emphasis on industrial relations and the labour market,
pointing out that:-
“Whether productivity growth comes from working harder or working
smarter, people in workplaces are central to it. The incentives they face
and how well their skills are deployed and redeployed in the multitude of
enterprises that make up our economy underpins its aggregate
performance. It is therefore vital to ensure that regulations intended to
promote fairness in Australia’s workplaces do not detract unduly from
their productivity … If we are to secure Australia’s productivity potential
into the future, the regulation of labour markets cannot remain a no go
area for evidence based policy making.”60
The Productivity Commission’s recent report entitled ‘Economic Structure and
Performance of the Australian Retail Industry’,61 noted that closing the productivity gap
between Australia and countries such as the US “will require greater workplace flexibility
so that employers and employees can work cooperatively and creatively together, to
deliver the required productivity improvements”, suggested that “some aspects of the
‘Fair Work’ system may be inhibiting the adoption of flexibility enhancing provisions” in
retailing workplace arrangements, and observed that the ‘workplace flexibility
provisions’ in the ‘Fair Work’ system appear to have been used to place “greater
emphasis on strategies for developing family friendly workplaces, rather than
productivity”. NFF agrees that these findings are equally applicable to agriculture and
concur with the then Chairman of the US Federal Reserve, Alan Greenspan, when he
stated that:-
59 Banks, Gary (2010), ‘Successful Reform: Past Lessons, Future Challenges’, Address to the Annual Forecasting Conference of Australian Business Economists, Sydney, 8 December; available at http://www.pc.gov.au/speeches/successful-reform.60 Ibid.61 The report can be downloaded here http://www.pc.gov.au/projects/inquiry/retail-industry/report
Page | 40Submission to the Fair Work Act Review Panel
“Many working people, regrettably, equate labour market flexibility with
job insecurity. Despite that perception, flexible labour market policies
appear to promote job creation, not destroy it. An increased capacity of
management to discharge workers without excessive cost, for example,
apparently increases companies’ willingness to hire without fear of
unremediable mistakes.”62
Although Australia’s economic performance during the 2000s has been impressive on
many dimensions, especially by comparison with that of other ‘advanced’ economies,
productivity is not among them. When considering how agricultural productivity growth
rates can be maintained or increased in the future, there are a number of important
questions to answer. The first is, ‘what is the rate of agricultural productivity growth that
needs to be achieved to keep the sector competitive both domestically (in order to secure
investment, resources and labour) and internationally?’ The second question is, ‘What are
the most promising technological developments that might be available for farmers to
help them achieve the required rate of productivity growth?’
Recommendation 10
Reduce red tape, confusion and complexity within the Fair Work Act. This will increase
productivity and allow farmer to remain strong in an increasingly competitive global
economy.
Ultimately, whether agriculture returns to its productive growth path and can feed a
relatively prosperous population of nine billion people by 2050 will depend more on how
well society accepts new technology and implements flexible work practices which
resurrect the agriculture industry in Australia. It is our own fault that productivity growth
is in decline, and it will be own fault if it does not recover. NFF calls on Government to
assist agriculture with the implementation of a flexible workplace relations system by
amending the Fair Work Act, as outlined in section five (5) of this submission.
62 Alan Greenspan 2005, ‘Economic Flexibility’, Remarks before the National Italian American Foundation (Washington DC), 12 October, p. 5.
Page | 41Submission to the Fair Work Act Review Panel
8. NFFs Survey of Members
The Fair Work Act has increased the administrative burden on Human Resources (HR)
professionals in significant ways, with most saying they now devote more time to
industrial relations issues, and have to seek legal advice more often.63 The Australian
Human Resources Institute (AHRI), in partnership with Deakin University, surveyed
close to 700 HR professionals for its report, which documents changing perceptions of
employment laws and their impact in the workplace.64 The findings of the survey are as
follows:-
Record keeping demands have increased for 63 per cent of respondents, up from
58 percent in 2010. Some 67 percent of professionals now spend "more time" on
industrial relations issues (up from 66 percent), and 47 percent expect this focus
to increase further over the next year.
Some 62 percent of professionals say they have to spend more budget on IR
issues (up from 53 percent in 2010), and half (51 percent) expect costs to continue
to rise in 2012.
Some 59 per cent of respondents say labour costs have increased as a direct result
of the Fair Work Act (up from 45 percent). Most employers (61 percent) say the
new unfair dismissal threshold has not had an impact on the number of claims
they face, but 26 percent claim it has led to an increase. Further, 15 percent of
respondents say the Fair Work Act have discouraged their employment of more
people. Some 35 percent of professionals believe it's now harder to make jobs
redundant.
Overall, 65 percent of respondents now say the Fair Work Act has made their job
"more difficult", compared to 57 percent in 2010.
63 NFF concurs with this finding and evidence is present to the Review Panel in Appendix ‘B’64 The latest results of the AHRI are similar to a study in 2010.
Page | 42Submission to the Fair Work Act Review Panel
Agriculture Industry Survey - ‘Your thoughts: the Fair Work Act Review’
NFF can speak with authority on what is happening in agriculture. We have conducted a
national workplace relations survey.65 The general consensus from farmer employers is as
follows:-
Cost increases and loss of flexibility in some sectors from the new awards, despite
government promises to the contrary;
The vast majority of employers are unable to negotiate productivity increases;
Undue technicality and red tape in getting bargaining agreements approved;
One size fit all minimum engagement rules in some sectors and regions that have
impacted employment; and
Inconsistencies and grey areas in the application and interpretation of some
aspects of the new awards and national employment standards between industry,
tribunals and regulators.
Replies to the NFF ‘Your thoughts: the Fair Work Act Review’ survey are reproduced
below:-
Question 1 - What positive impact/s (if any) has the Fair Work Act had on your
operations?
Clearer framework for applying conditions;
Reduced number of Awards to consider. Clearly brought all employees under
federal awards and dispensed with old state awards; and
NES ensure level playing field and consistency for the Australian workforce regardless of industry.
Question 2 – What negative impact/s (if any) has the Fair Work Act had on your
operations?
Increased workload with employment;
We have horticulture and employ casual seasonal workers. The new wage rates
have increased and penalty rates are severe - all of which gives us reduced
flexibility of operation and reduced profitability;
65 The performa questionnaire is in Appendix of ‘B’ of this submission.
Page | 43Submission to the Fair Work Act Review Panel
The perception that it is "too difficult" and yet another huge change. Obtaining
enough of the correct information is difficult;
It is too difficult to understand for many of our pork farmers when trying to
provide overseas employees with work and accommodation and pay structure that
equates with award rates;
More regulation;
Employees can be demanding with regard to flexibility in working arrangements.
it seems very pro employee;
Has disadvantage employers on flexibility;
Reduced flexibility. Increased complexity of employment negotiations - this
makes employees suspicious and uncertain. E.g. an AWA could specify a flat
hourly rate quite clearly but for an IFA to do the same thing requires complex
language and comes with the award. Creates division between old AWA/ITEA
employees (who were/are happy with that arrangement) and new Award/IFA
employees.
The process for lodging Enterprise Agreements and associated documents (i.e.:
notices of representational rights etc.) is very bureaucratic and time consuming.
The ability of Unions to take protected action comes too easily and in our
experience Unions use this as an opportunity to create a "threat" to the business.
They may have no intentions whatsoever to actually take action, but go through
the motions of obtaining the right to take action to use as a "stick" against
companies. This impact negatively on negotiations as well as relationships
between companies, employee representatives and unions;
Minefield re seeking information, long-term impacts on the business owner;
Increased cost and inflexibility of work hours;
Administration time/expense. Increased number of payroll mistakes/queries
Additional costs per hour, loss of flexibility in working arrangements; and
Increased paperwork and compliance costs, increased legal costs, increased
employment costs, fear of inadvertent non compliance, reduction in productivity.
Page | 44Submission to the Fair Work Act Review Panel
Question 3 - What changes should be made to the Fair Work Act to make a real
difference to your efficiency, productivity or ability to provide more work?
Remove/change the inflexible hours and higher rate provision for casual workers.
Allow workers who wish to work when needed to work to do so without penalty
provisions. We are in a competitive world market for our produce with an over-
protected labour market;
Flexibility of hours - so that work can be undertaken when the work needs doing
without penalty. Employees are often happy to work these different hours as they
fit in with their own personal life;
Flexibility for employers to make agreements with staff that both parties are
happy with;
With Queensland being challenged with limited available employees due to the
mining boom we need a better understanding of this real issue and assist the
industry in developing pathways to meet both Fair Work Act requirements and the
pathways to fast tract the introduction of off shore employees and more simple
payment evaluation plans;
Better clarification of roles of volunteers;
Simplify documentation;
Allow flexibility on more award terms and a clear "no disadvantage" test or
process to protect employees. (Allow for individual Agreements) Reduce union
powers of entry/involvement in negotiations. Restrict definition and availability of
"carer's" personal leave in NES - this is being abused;
Recognition of additional benefits often delivered by rural enterprises to
employees;
Farm efficiency relates to quality of staff, not the conditions they work under;
The process for protected industrial action needs to be reviewed so Unions cannot
simply use this as a "stick" against companies. The ability to take protected action
should only ever be used as an absolute last resort. The current process is too easy
on the Unions;
Simplify the details of awards;
Page | 45Submission to the Fair Work Act Review Panel
Review ordinary working hours (38 hours per week/152 per month) to reflect
'real' working hours of Australians. As penalty rates or higher salaries apply for
additional hours worked, and agricultural industries often work over and above
these hours, businesses as such may find it difficult to recruit, retain and/or
pay/record hours of work and penalty rates;
Removal of unfair dismissal would mean employers would be prepared to give
more people a go;
Ability to terminate unproductive workers, without the threat of an unreasonable
unfair dismissal case;
Greater fairness to employees and management; and
Maintain penalty rates for >38 hours/week. Remove penalty rates around Sat/Sun
when part of a normal working roster. Build in greater flexibility and less
confusion into the system.
Question 4 - Have you had any interaction with the Fair Work Ombudsman? If yes,
what area of the Fair Work Act was it regarding, and what was your experience?
88.5 percent of respondent to the survey indicated that they had no interaction
with Fair Work Ombudsman; and
Although where employees had alleged there were unpaid wages and unpaid leave
entitlements. The process was viewed as very long and detailed.
Question 5 - Do you have any additional comments re the Fair Work Act?
It will make us less profitable and threatens our ability to survive. It will make
more people dependent on Government support as we mechanise where possible -
with imported machinery;
Agriculture requires seasonal work and at times longer hours than usual due to
animal husbandry needs etc and the opportunity for price recovery of an increased
input costs is very difficult;
It is difficult enough to find and hold employees when competing with the
resources sector. Further impositions and constraints as a result of the Fair Work
Act don't help our cause; and
Complicated, difficult to comply with, reduction in productivity
Page | 46Submission to the Fair Work Act Review Panel
9. Conclusion
The NFF has participated extensively through its membership of the National Workplace
Relations Consultative Council, the Committee on Industrial Legislation, its involvement
in award modernisation and more broadly, though its history of contribution to workplace
relations.
The competition for labour and skills within the agriculture jobs market has meant that
the capacity to increase productivity, workforce participation and people management has
required farmers to rely heavily on flexible arrangements at the workplace, in order to
retain staff and maintain a productive workplace.
Competing for valuable labour and skills for farm workplaces, the changing nature of
family and rural community life is further advancing the need for greater flexibility from
an employee's perspective. Farming workplaces across the nation continue to experience
a broader range of values among employees. This is a compelling reason to ensure that
modern awards, and the modern safety net, are in fact, modern and have diverse values
and are affordable to employers and employees.
Farm businesses view workplace relations as consumed by red tape, confusing and
complexity. A confusing industry relations system presents a serious obstacle to
Australian farmers seeking to streamline workplace arrangements. At stake is the
capacity of farmers to make decisions in consultation with their employees about how
they will run their businesses locally and internationally to remain strong in an
increasingly competitive global economy.
Farmers have told us that the onerous paperwork and red tape that employers currently
have to wade through often impedes employment, and as a result, farmers have often
been forced to invest in plant and machinery rather than hiring people.
In NFFs view, the ‘Review Panel’ should recommend a simplification and reduction in
the level of regulation and prescription within the Fair Work Act, in line with the TEN
recommendations contained within this submission.
Page | 47Submission to the Fair Work Act Review Panel
This submission focus upon the application, technical and finally policy concerns relating
to the Fair Work Act. NFF welcomes the opportunity to elaborate on the TEN
recommendations contained within, at the Review Panels convenience.
Page | 48Submission to the Fair Work Act Review Panel
10. Appendix A - Australian Farmers as Employers...
Australian agriculture has important linkages with other sectors of the economy and,
therefore, contributes to these flow-on industries. Agriculture supports the jobs of
324,500 Australians, in farming and related industries, across our cities and regions.
- Department of Agriculture Fisheries and ForestryAustralian Food Statistics 2009-10.
As of May 2011, 236,200 people were directly employed full-time in the
Australian farm sector – 90,000 down on pre-drought levels – accounting for
around 3 percent of the national workforce.
- Australian Bureau of Statistics, Labour Force, AustraliaDetailed, Quarterly, May 2011 Catalogue No. 6291.0.55.003
The number of people employed in direct farm jobs in each State and Territory
follow (please note, these numbers are ‘smoothed’ by the Department and rounded, so
do not add up exactly with the total numbers above):-
NSW: 63,400 VIC: 51,000QLD: 56,300 SA: 23,800WA: 29,700 TAS: 8,800NT: 3,000 ACT: 200
- Australian Bureau of Statistics, Labour Force, AustraliaDetailed, Quarterly, May 2011, Catalogue No. 6291.0.55.003
Page | 49Submission to the Fair Work Act Review Panel
11. Appendix B - ‘Your thoughts: the Fair Work Act Review’
Below is the survey entitled ‘Y our thoughts: the Fair Work Act Review’ issued to
agriculture employers across Australia.
Name
Contact number
Only address the questions which are relevant to you. When you have completed your
response please email it to NFF – [email protected].
Question Comments
What negative effects did the Fair Work Act have on your
operations when it started to apply to you?
The Fair Work Act introduced a number
of significant changes, such as:-
The National Employment Standards
Modern Awards
Individual flexibility arrangements
And new rights and processes, such as:-
Bargaining requirements and process
Union bargaining rights
Access to industrial action
Unfair dismissal provisions
General protections provisions
Union right of entry
Outsourcing, contracting out, using labour hire
What negative effects does the Fair Work Act have on your
operations now?
Page | 50Submission to the Fair Work Act Review Panel
Continued:-
What changes should be made to the Fair Work Act to make
a real difference to your efficiency, productivity or ability to
provide more work?
What positive impacts has the Fair Work Act had on your
operations?
Have you had any interaction with the Fair Work
Ombudsman? If so about what and what was your
experience?
Any other comments?
Page | 51Submission to the Fair Work Act Review Panel
12. Appendix C
Page | 52Submission to the Fair Work Act Review Panel