Alana Matheson | Statement to the Senate Education and Employment Legislation Committee Inquiry into Fair Work Amendment (Repeal of 4 Yearly Reviews and Other Measures) Bill

18 Apr 2017 |

Statement to the Senate Education and Employment Legislation Committee Inquiry into Fair Work Amendment (Repeal of 4 Yearly Reviews and Other Measures) Bill, Fair Work Amendment (Corrupting Benefits) Bill and Fair Work Amendments (Protecting Vulnerable Workers) Bill

Alana Matheson, Deputy Director of Workplace Relations Policy
Sydney | April 13, 2017

The Australian Chamber thanks the Committee for this opportunity to address it in relation to the three bills before you today.

The first is the Fair Work Amendment (Repeal of 4 Yearly Reviews and Other Measures) Bill 2017. The Australian Chamber supports the passage of this bill and there are two key measures contained within it that we would like to address.

The first is the repeal of the requirement for the Fair Work Commission to automatically review modern awards every four years.

In principle, the Australian Chamber generally supports mechanisms to ensure regulation is fit for purpose, often including scheduled review processes.

However:

  • The burden of these matters on unions and employers has become unacceptable, and the level of reward or improvement to the system does not justify the resources these reviews are soaking up.
  • In the absence of the passage of this Bill the current four-yearly review risks running into the next one scheduled to commence in 2018.
  • Where concerns remain, and unions or employers want to vary awards, they will be able to do so on application.

To be clear, in supporting bringing the automatic review process to an end, the Australian Chamber does not concede that we have a perfect system of award regulation – very far from it.

The second aspect of the Bill that we wish to address will enable the Fair Work Commission to overlook minor procedural or technical errors including errors relating to the Notice of Employee Representational Rights, when approving enterprise agreements.

The Productivity Commission identified a number of reasons why fundamentally-sound enterprise agreements, supported by employers and employees, should not be rejected on the basis of technical impurity, including:

  • Delays in agreement approval delay benefits for employees.
  • Delays in agreement approval create uncertainty about future labour costs.
  • The rejection of an agreement creating mistrust and harming workplace relations, which is the polar opposite of what of what bargaining is intended to achieve.
  • Hyper technical, impractical approaches influence perceptions of the cost and complexity of bargaining, and can discourage businesses and employees from pursuing enterprise agreements – leaving them on award rates of pay.

The Australian Chamber has concerns regarding the state of collective bargaining in Australia. Agreement coverage is falling as a proportion of employment, and award reliance is increasing. There will be debates about the cause of this but something is turning potential users off our bargaining system. The myriad procedural landmines or points of potential error in the system is not helping, and should be addressed.

The second bill we would like to discuss is the Fair Work Amendment (Corrupting Benefits) Bill 2017. This Bill creates new criminal offences in for the giving and soliciting or receiving of corrupting benefits.

As a matter of general principle the Australian Chamber favours an approach that separates criminal and industrial law and avoids overlap of and conflict of law between jurisdictions.

Despite this the Australian Chamber acknowledges that there are currently failures in properly addressing corrupt, criminal behaviours in the industrial context, identified by the Royal Commission into Trade Union Governance and Corruption. This includes payments and benefits to union officials to “secure industrial peace”.

New offences to deal with such behaviour are not only directed to union officials and employees. The changes in the Bill also capture employers, and will require some businesses to reflect on their existing practices and better ensure that practices such as paying for “industrial peace” are eliminated.

A stronger framework to deal with such payments will help to drive positive cultural change within both workplaces and unions.

Aside from criminality, corrupting payments reward bad union behaviour, create unfair competitive advantage through unethical behaviour and create corporate cultures that normalise bribery, corruption, blackmail and extortion.

We have approached our input to you on a principles basis, but foresee that employers and their representatives directly involved in bargaining practices may, throughout the course of this inquiry identify practical examples of conduct that should not be considered bribery and corruption, and this may warrant consideration of further exemptions. We encourage the Committee to be open to technical amendments that would better align the bill with its intended purpose and practical considerations.

The third bill we wish to address is the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017. To very clear, the Australian Chamber opposes underpayment or non-payment of wages in defiance of legal obligations.

Aside from the negative impacts on employees denied their due entitlements, deliberate non-compliance sets up unfair competition between businesses.

Appropriate penalties should apply to employers who deliberately underpay their employees.

However we urge caution in assuming that compliance problems always demand, or will be solved by, higher penalties, more inspectors or more inspectorial powers.

We also urge caution in assuming that the worst cases of wilful and deliberate wrongdoing employers are reflective of employer behaviours generally.

The Fair Work Ombudsman stated that in her experience, most employers want to do the right thing, and Australia does have a very complex system with considerable scope for oversight and misunderstanding.

The Chamber welcomes the approach the Ombudsman takes to compliance and enforcement, and in particular the emphasis on partnerships and cooperation, and securing voluntary compliance where problems are discovered.

We also note that Fair Work Ombudsman has $20 million in additional funding to deal with the issues that led to this Bill.

We are concerned that the proposed approach could lead to unintended consequences and have raised some of these in our submission.

In particular, if penalties are to be increased tenfold they must be directed toward behaviour of the most egregious kind and only used very sparingly in the worst possible cases.

Fines of this magnitude risk not only business bankruptcy and closure, but also the loss of the family home. Corporations come in all sizes and a maximum penalty of up to $540,000 should only apply where this is proportionate to the nature of the offence and the circumstances.

The focus of the bill should be on deliberate and systematic underpayment not paperwork errors, which are important and should be addressed, but not at the highest levels of penalty.

Attribution of liability for breaches to persons who are not the direct employer is also a significant step to take. The Act already does in part through section 550, however the Bill goes further again proposing regulation targeted at franchisors and holding companies.

There would be merit in considering narrowing the types of offences for which holding companies and franchisors can be held liable to better target efforts toward breaches of the nature described in the policy, i.e. the practices of systemic and deliberate underpayment.

Matters such as a failure to provide a Fair Work Information statement in breach of the National Employment Standards or failure to strictly adhere to the prescriptive record keeping requirements are not systematic and deliberate underpayment under the Act but could nevertheless give rise to a significant liability for a franchisor or holding company if the Bill passes unamended.

It is also worth noting that new provisions will apply to commercial franchise arrangements already in place, and practical problems will arise if the franchise agreement does not allow the franchisor to exercise influence or control over employment matters to the extent required to meet the obligation.

Amendments to the Bill to better direct liability toward those franchisors who have control over the franchisee’s compliance with relevant matters in the Fair Work Act are worthy of consideration.

Thank you and we’re happy to answer questions.

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