Statement to the Senate Education and Employment References Committee Inquiry into Corporate Avoidance of the Fair Work Act
Jenny Lambert, Director of Employment, Education and Training
Canberra | June 9, 2017
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The Australian Chamber thanks the Committee for this opportunity to address it today. We have made a written submission to this inquiry and rely on the principles adopted in that submission.
The Fair Work Ombudsman has previously stated that in her experience, most employers want to do the right thing. The Australian Chamber shares this understanding, notwithstanding that Australia does have a very complex system of workplace relations that can be very difficult to navigate and the scope for inadvertent error high.
However, we note that this inquiry is concerned with “avoidance” of the Fair Work Act and we understand the term “avoidance” to have a negative connotation, generally implying deliberate non-compliance. The Australian Chamber denounces deliberate breaches of employment laws, which create an unfair competitive advantage for legitimate operators, and we support continued efforts by the Fair Work Ombudsman to facilitate compliance and pursue enforcement action where appropriate.
However, the Australian Chamber does not consider it sinister or evidence of “avoidance” if businesses organise their labour affairs in a manner permitted by the law and in a way that best suits their often changing operational needs.
In our submission, where we comprehensively address each issue within the terms of reference, we challenge the notion of avoidance being characterised in a way that suggests that options legitimately available to businesses should not be utilised, or worse still, not even available. This implies further regulation on top of a system that is already more regulated in the second decade of the 21st century than it has been since the 1980s and earlier. Is the implication of the inquiry such that options for businesses should be so narrow as employment within a Monday-to-Friday 9-to-5 model is the only acceptable option?
By way of example from our submission, the engagement of labour hire workers and independent contractors does not constitute avoidance. Contractual arrangements in which people provide services on commercial terms to other businesses as independent contractors or through a labour hire agency are legitimate and no less appropriate than other forms of genuine and consensual labour engagement.
The Productivity Commission has observed that not everybody wants to work under the same conditions, and that these alternative forms of working partly satisfy the wide variety of preferences across the workforce. Many will be attracted to the flexibility and variety of work opportunities, the autonomy of independent contracting or working with a labour hire firm that reduces the time and cost involved in job searches. While labour hire and subcontracting remain a relatively small part of the labour market in most industries, where they do exist, they provide flexibility, efficiency and productivity dividends.
The Fair Work Act prohibits the deliberate disguising of an employment relationship as a contract for services and the Fair Work Ombudsman is actively and effectively enforcing these sham contracting provisions. An employer, whether they are conducting a labour hire business or a business of another kind, has obligations under the Fair Work Act, as well as many other laws, and failing to comply can result in penalties, reputational damage, exposure to liability for back pay and potential litigation.
In our submission, we have also considered the term of reference that asks “whether the National Employment Standards and modern awards act as an effective floor for wages and conditions and the extent to which companies enter into arrangements that avoid those obligations”.
The Australian Chamber and its members strongly and consistently oppose deliberate and wilful non-compliance with a genuine safety-net of minimum terms and conditions. We should, though take the opportunity of saying that we remain concerned that that multi-layered and highly regulated approach to minimum wages and conditions via the National Employment Standards and awards is overly complex and inflexible. We have highlighted these concerns in our submission.
This inquiry appears to be mounting a case for more regulation and that “avoidance” is widespread. Instead, it should be looking deeper into understanding what is driving the changes in work arrangements. Rather than looking at narrowing the options, the Senate is encouraged to support broadening them within the regulatory framework.
There remains a clear case for a reduction in the influence of centralised regulation, including through awards, and to encourage workplace based bargaining with wages and conditions linked to productivity as intended by the reform trajectory commenced in the 1990s. The Australian Chamber has consistently expressed concern about the decline in enterprise bargaining and increased reliance on awards.
The risk versus reward assessment for bargaining has changed under the Fair Work Act. Employers are increasingly calculating that the risks of embarking on bargaining outweigh the potential benefits. There are many more procedural landmines or points of potential error in the system, at which enterprise bargaining can go wrong. Bargaining will typically require legal or expert representation that can be costly and can still fail to deliver an agreement due to the framework’s inherent uncertainty. There is a bill before the Parliament, which we support, that will take steps to address some of these concerns but a broader reform is required.
Finally, the characterisation in this inquiry about “corporations” would seem to be a faceless big impersonal entity. In reality, corporations come in all sizes, and are purely legal forms of people; whether it is an owner who has taken a risk to buy or create a business and employ people, or in larger businesses, managers who have often risen through the ranks and who regularly face difficult choices to look at more efficient and effective ways of doing businesses. Australia wants these people to succeed, we need them to succeed, and we should broaden and not narrow the options available to them.
While it may not always seem apparent in the politically charged workplace relations debate, employers and employees share a genuine interest in ensuring businesses in Australia are productive, sustainable and offer a broad range of options for participation in paid work. The reform task ahead should complete the evolution from the complex, centralised and adversarial system toward a workplace relations framework that empowers employers and employees to work co-operatively and make decisions in their shared interests.
Thank you and we will be happy to answer questions.