Fair Work Review: What leaders really want

This week, the Labor Government is likely to publicly release its review of the contentious Fair Work Act 2009. For leading companies, it cannot come a moment too soon.

The bristling tension between leading employers and unions over industrial relations has led to some big industrial conflicts since Labor took government. Most notably, Qantas CEO Alan Joyce grounded the airline’s entire fleet last October to end industrial action by Qantas engineers, a piece of breathtaking brinkmanship.

The problem that led to Joyce’s choice, the good faith bargaining provisions, is one of several labour laws that are a big headache for leaders of medium-sized and large companies.

Complexity and uncertainty are the issues, in summary, that irritate leading companies and cost unnecessary money to administer. Leaders also believe the FWA prevents clear communication between them and their employees.

In detail, experts identify three changes that are essential for smoothing the way for a more productive and less adversarial industrial landscape:

Enterprise Bargaining

Provision: The good faith bargaining provisions of the FWA involve adhering to six principles of good faith, including attending meetings, disclosing relevant information, responding in a timely manner, genuinely considering proposals and responding with reasons among others. Industrial action and the employer’s response to it are governed by the act.

Problem: While good faith bargaining is sensible in principle, it is used by both sides in practice to drag out negotiations. The disclosure of relevant information, in particular, can lead to lengthy delays. Andrew Douglas, principle of workplace relations at M+K Lawyers, says: “It does not have the teeth to force agreement. People used to do a deal. Now we are losing productive time. It is complex.”

Employers have to wait for industrial action, rather than “bringing on” a dispute. “You have to wait and wait for something big enough to respond to,” Douglas says. “The test of damage to the business is not real – you have to prove colossal damage. Hence Qantas’s apocalyptic reaction.”

Proposal: Douglas suggests dumping the “good faith” provisions entirely and reverting to rules that up to 10 years ago made for quicker, simpler deal-making. “Commence industry negotiations from the moment of nominal expiry of the existing agreement, remove all good faith obligations so people can get on and do it, and re-instate the employers right around ‘lock-out’,” he says, referring to an employer’s right to lock employees out of its premises. “Qantas and the nurses strike have taught us there must be a quick way through intractable disputes. In the old days, employers could call on the fight and speed up the process.”

Transfer of business

Provision: This section of the Fair Work Act (313) means that when employees transfer to a new employer their industrial agreement goes with them.

Problem: This can result in a spaghetti of agreements for companies managing multiple mergers or acquisitions, and for companies with multiple entities. Tim Frost, workplace relations partner at Allens Arthur Robinson, says: “I have an ASX listed client with 25 entities. When they want to shuffle people from entity one to entity two, now they take their agreement with them. So they have to have payroll and systems to handle multiple awards.”

Douglas says: “This has meant that companies have just failed. They haven’t been able to get out the unviable parts of their business, they are not making a profit, and have no capital to invest. The world has to understand, businesses must be able to divest unviable operations.”

Proposal: One possible solution is that the transfer of business provisions should not operate if there is an enterprise agreement that would cover the new employees and satisfy the “better-off overall” test. Even better, revert to the old system of the agreement following the enterprise, says Frost.

Douglas suggests the definition of transfer of business relate to the transmission of asset. “If I transfer a factory over to you, with plant and equipment, and the people went with it, that is transfer of business. Not just the people.”

Individual flexibility arrangements

Provision: Individual flexibility arrangements allow employers to agree to vary the terms of a modern award or enterprise agreement for a particular employee. For example, an employee might arrange that their normal work hours be 7am to 3pm rather than 9am to 5pm.

IFAs cannot be a condition of employment.

Problem: Employers are not using IFAs because either party can terminate the IFA with 28 days’ notice, creating uncertainty for both sides.

Since IFAs cannot be a condition of employment, employers struggle to match the conditions of new staff to those already in the business. This can affect rosters, or conditions. “Holiday leave loading is a classic example,” Douglas says. “The administration this causes is quite substantial. Why not offer a global wage that includes that as a condition of employment.”

Proposal: In its submission to the FWA review, Allens suggests setting IFAs for an agreed period – not more than three years – and cancelling them only with the agreement of both parties.

Douglas says IFAs must go entirely. “They are not working. They are no use to business because they don’t allow any proper planning or true engagement.” Instead, Douglas says “set off” or “annualisation” provisions can provide the flexibility the IFAs were intended for, and with the certainty that both sides need.

This article first appeared on LeadingCompany.