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Submission to the Fair Work Act Review Panel

On

The Fair Work Act Review

17 February 2012

Prepared by Mr Brian Duggan

Member Organisations

http://www.alpa.net.au/

http://www.nff.org.au/%20http:/www.ava.com.au

http://www.canegrowers.com.au/

http://www.gica.com.au/

http://www.graincorp.com.au/Pages/default.aspx

http://www.ridley.com.au/corp

http://www.tfga.com.au/

http://www.vff.org.au/

http://www.waff.org.au/

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

Page | 3Submission to the Fair Work Act Review Panel

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.


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.


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.


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


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).


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.


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.


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


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.


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.


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


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.


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’.


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.


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


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


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).


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.


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.


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.


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.


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


(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].


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).


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


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


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


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


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.


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.


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.


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.


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.


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


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.


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.


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


http://www.pc.gov.au/projects/inquiry/retail-industry/report

http://www.pc.gov.au/speeches/successful-reform

“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.


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.


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.


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.


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;


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


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.


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.


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


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?


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?


12. Appendix C


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