Australian industrial relations in 2015

Introduction

The Annual Review issue of the Journal of Industrial Relations provides an opportunity to reflect on key developments over the previous year in Australia and emerging issues in the practitioner field and on the international stage. For Australian industrial relations, 2015 is likely to be remembered for the ground laid for potentially significant future decisions. Aside from growing momentum in the campaign for domestic violence leave, changes in the government’s paid parental leave policy and the passage of the Fair Work Amendment Act 2015 (Cth) (see Forsyth, 2016; Kaine, 2016), the year was not especially eventful by historical standards, in that no major legislation was passed and few significant judgements were handed down. However, the inquiries held over the course of 2015 and the consequences arising from changes in political leadership might ultimately be seen as ‘critical junctures’ from which important developments subsequently unfolded.

The Productivity Commission’s inquiry into the workplace relations framework recommended several major changes that may eventually come to fruition. However, in contrast to the Productivity Commission’s hitherto consistent criticism of the Australian industrial relations system for its supposed inefficiencies and rigidities, the inquiry was also remarkable for its observations that the system is functioning effectively overall. The Royal Commission into Trade Union Governance and Corruption raised serious questions about the governance structures and practices of several unions, but criticism of its credibility and motives poses a challenge to its recommendations becoming law. The replacement of a Prime Minister and an Employment Minister identified with the conservative wing of the Liberal Party with leading moderates was widely seen as marking a major philosophical realignment in senior leadership and on many policy issues, but by the year’s end, the likely impact on industrial relations policy of these personnel changes remained uncertain. This article will discuss these issues and the policy implications of emerging issues in the low-wage sector relating to migrant workers and equal remuneration, before providing an overview of the articles in this Annual Review issue.

Productivity Commission inquiry into the workplace relations framework

The Productivity Commission handed down its much anticipated final report on the workplace relations framework in November, which the government released to the public the following month. This was the first time that the Productivity Commission had conducted a broad review of the regulatory framework governing relations between employers and employees. The Productivity Commission had been asked previously to examine such issues as part of inquiries into individual industries such as automotive, construction, and textile, clothing and footwear manufacturing. During these inquiries, the Productivity Commission gained a reputation for making recommendations aimed at enhancing market efficiency at the expense of other relevant industrial relations imperatives such as fairness and voice (Hart and Richardson, 1993; Wright and Lansbury, 2014). This explains the longstanding hostility from the trade union movement, which has consistently criticised the Productivity Commission and its predecessor the Industry Commission for ‘predetermined views based on the ascendancy of neo classical economic theory over social and equity imperatives’ (Australian Council of Trade Unions (ACTU), 1996).

Consistent with this viewpoint, the ACTU argued from the outset of the Productivity Commission’s workplace relations inquiry that its recommendations would ‘see wages, conditions and rights at work slashed’ (ACTU, 2014). However, the Productivity Commission’s final report was more nuanced, as signified by an opening passage that could be seen as more pluralist rather than neoclassical in orientation:

A workplace relations (WR) framework must recognise two enduring features of labour markets. Labour is not just an ordinary input. There are ethical and community norms about the way in which a country treats its employees. Without regulation and an ability to act collectively, many employees are likely to have much less bargaining power than employers, with adverse outcomes for their wages and conditions. Equally, poorly-designed regulation can risk bestowing too much power on organised labour in their dealings with individual employers. The challenge for a WR framework is to develop a coherent system that provides balanced bargaining power between the parties, that encourages employment, and that enhances economic efficiency. It is easy to both over and under regulate (Productivity Commission, 2015: 2).

The Productivity Commission weighed into the debate over the relationship between the workplace relations framework and productivity, which has been a prominent focus of policy debates in recent years (e.g. Hancock, 2012; Jefferson and Preston, 2013; Peetz, 2012). Its final report concluded that enterprise agreements aimed at promoting productivity improvement are ‘highly desirable, but such agreements, and the gains they deliver, should arise from better management, not from a regulated requirement, which is likely to have perverse effects’ (2015: 58). The Productivity Commission also argued that tighter controls are needed to prevent employers from escaping prosecution for sham contracting and to strengthen the protections for migrant and undocumented workers susceptible to exploitation (also see Clibborn, 2015).

In contrast to the Productivity Commission’s opening observations that the system is functioning effectively overall, the final report also criticised it for being ‘clunky’ and ‘incoherent’ and containing ‘absurd anachronisms’ (Productivity Commission, 2015: 7–8). These observations provide the basis for several recommendations that would require major changes to the workplace relations framework if enacted. Of particular note is the recommendation to introduce ‘enterprise contracts’ that would supposedly be easier for small business owners to administer than enterprise agreements or individual flexibility arrangements. Enterprise contracts would apparently be subject to a no disadvantage test benchmarked against the relevant award and would need to comply with the National Employment Standards (NES) and other statutory employee protections. However, the general lack of detail surrounding the proposal explains the surprise, scepticism and hostility from various quarters, especially from unions (Forsyth, 2016; Pekarek and Gahan, 2016).

Unions also criticised the Productivity Commission’s recommendations relating to penalty rates. As several articles in this Annual Review note, the Productivity Commission accepted that penalty rates provide a necessary role in compensating those working long hours, shifts or weekends. Nevertheless, the final report recommended that Sunday rates for the hospitality and retail sectors be reduced in line with Saturday rates to create a single weekend penalty rate, a proposal broadly consistent with the positions of employer associations representing these sectors (Barry, 2016; Forsyth, 2016).

The Productivity Commission report contained several other notable recommendations including:

creating a new Workplace Standards Commission with specialised expertise to determine minimum wages and awards, thereby removing these functions from the Fair Work Commission (FWC), which would continue to retain responsibility for its current tribunal and administrative functions;

At the time of writing, it was unclear whether the Turnbull government would seek to implement the Productivity Commission’s recommendations. The mixed messaging in the final report, namely that the workplace relations system is broadly effective yet in need of reform, provides grounds for the government either to justify the need for significant change or to decide that no major changes are necessary. While the government can be expected to receive pressure from the business community and its media supporters to act on matters such as penalty rates and enterprise contracts in the lead-up to the forthcoming federal election (likely to be held in 2016), the impact of the union movement’s Your Rights @ Work campaign on the Howard government’s 2007 election defeat (Ellem, 2013; Wilson and Spies-Butcher, 2011) continues to cast a shadow over the Coalition’s industrial relations policies.

Royal Commission into Trade Union Governance and Corruption

In late December, the Royal Commission into Trade Union Governance and Corruption chaired by Justice Dyson Heydon handed down its findings and recommendations in a five-volume report. Following its establishment in March 2014, the Heydon Royal Commission lasted 21 months and heard from 505 individual witnesses in public hearings. The terms of reference called for the investigation of two broad issues: unlawful or unprofessional conduct by union officials and the existence and operation of ‘relevant entities’, better known as slush funds. The Heydon Royal Commission’s attention focused primarily on the activities of six unions: the Australian Workers’ Union (AWU), the Construction, Forestry, Mining and Energy Union (CFMEU), the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU), the Health Services Union (HSU), the Transport Workers’ Union of Australia (TWU) and the National Union of Workers (NUW).

Like previous royal commissions into trade union activity, such as the Cole Royal Commission into Building and Construction (Sheldon and Thornthwaite, 2003) and the Costigan Royal Commission on the Activities of the Federated Ship Painters and Dockers Union (Hearn, 1982), the Heydon Royal Commission was widely perceived as a partisan initiative by a conservative government aimed primarily at damaging political adversaries. Such perceptions were heightened by mid-year revelations that Justice Heydon had accepted an invitation to speak at a Liberal Party fundraiser, which he later withdrew from, and by his questioning of the credibility of the Leader of the Federal Parliamentary Labor Party and former AWU National Secretary Bill Shorten as a witness when called upon to give evidence.

Whatever the Heydon Royal Commission’s motives, its findings of widespread misconduct among the unions investigated were damaging and distracting for the labour movement (Pekarek and Gahan, 2016). Prominent union leaders, such as Victorian Labor parliamentarian and former AWU Victorian Secretary Cesar Melhem, former HSU National Secretary Kathy Jackson and former NUW New South Wales (NSW) Secretary Derrick Belan, were referred to the authorities for possible prosecution. According to the Heydon Royal Commission’s final report,

This conduct has taken place among a wide variety of unions and industries … Of course what has been described is not universal. It may not even be typical … [But] these aberrations cannot be regarded as isolated. They are not the work of a few rogue unions, or a few rogue officials. The misconduct exhibits great variety. It is widespread. It is deep-seated (Royal Commission into Trade Union Governance and Corruption, 2015: 12).

Emerging policy issues in the low-wage sector

Widely publicised media reports relating to the evasion of wage standards and employment regulations in low-wage sectors, particularly among temporary migrant workers, generated pressure for regulatory change that is likely to continue over the coming year. These cases involved sham contracting, complicated labour hire and franchising arrangements, and supply chain pressures. Large companies including 7-Eleven, Pizza Hut, Myer, Australia Post, United Petroleum and the Baiada Group were implicated (Gahan and Pekarek, 2016; Healy, 2016). Problems with the regulation and enforcement of employment protections among temporary migrant workers in these cases indicates major problems with the intersection of Australia’s employment and immigration policies. Since the 1990s, these policies have evolved to prioritise higher-skilled visas but have also opened significant scope for migrants to work in lower-skilled jobs in situations characterised by institutionalised dependence on unscrupulous employers, particularly in horticulture, hospitality, retail, food processing and business services (Clibborn, 2015; Howe and Reilly, 2015; Wright, 2015). Several government inquiries into these and related issues, due to release their findings in 2016, could influence future industrial relations policy, particularly to strengthen protections for vulnerable and temporary migrant workers, and to ensure that the employers and related business entities engaging these workers comply with legal and socially accepted standards.

A decision by the FWC in November could also have ramifications for a group of workers often considered to be low paid. In establishing principles for the equal pay case for early childhood teachers and child care workers to be heard in 2016, a full bench of the FWC found that the decision to issue an equal remuneration order for an application involving a group of women workers is a discretionary one. It deemed that the equal remuneration provisions of the Fair Work Act 2009 (Cth) were not intended to operate automatically if gender-based undervaluation was found, but instead require reference to a male comparator group. This is despite these provisions being considered in the social and community services workers case when a full bench in 2012 first made an equal pay order (Macdonald and Charlesworth, 2013). In its November 2015 finding, the full bench of the FWC asserted that before making an equal remuneration order for a group of employees, it needed to be satisfied that ‘there is not equal remuneration for work of equal or comparable value’ (quoted in Workplace Express, 2015). The implications of the FWC’s decision will not be fully apparent until the child care case is heard and the principles are tested in relation to other applications (Smith, 2015).

Articles in the Annual Review

As is customary, six of the articles in this Annual Review examine aspects of Australian industrial relations during 2015. These articles were originally submitted in November–December 2015 and revised in January–February 2016 following the standard blind review process. This issue also contains a practitioner review article on the FWC’s procedural innovations and engagement strategies, and an international review article on the relationship between industrial relations and inequality.

The article by Joshua Healy (University of Melbourne) on the state of the Australian labour market in 2015 finds that employment growth, increased hours and resilient demand for highly-skilled workers signify that the labour market is showing signs of strength after several years of stagnation. In contrast to these positive developments, various problems linger in the form of rising underemployment and long-term unemployment, continuing weak demand for lower-skilled workers and slow nominal wage growth. The high level of underutilisation among younger workers is particularly concerning, with the youth unemployment rate in Australia now marginally below the Organisation for Economic Co-operation and Development (OECD) average. There are deficiencies in the market for recent university graduates who are experiencing major barriers to employment. While the Australian economy continues to perform strongly by international standards, Healy (2016) concludes that it is still too early to declare that the labour market has fully recovered.

Sarah Kaine (University of Technology Sydney) reviews key developments relating to women, work and industrial relations. Recent workforce participation and incomes data reveals that gender inequality remains an ongoing problem which, according to certain indicators, is worsening. The gender pay gap increased in 2015 and women continue to experience significant disadvantage through higher rates of underemployment, lower likelihood of receiving leave and other entitlements, and strikingly lower rates of superannuation savings and retirement incomes compared with men. Kaine (2016) also examines policy developments over the past 12 months. These include the Coalition government’s attempt to limit access to government-funded paid parental leave entitlements, the abandonment of its earlier commitment to introduce a more generous scheme, and the campaign for the introduction of paid domestic violence leave in the NES. Arguing that industrial relations scholarship tends to overlook the role that key individuals play in policy administration and reform, Kaine also examines the contribution of the outgoing Sex Discrimination Commissioner Elizabeth Broderick in helping to bring about several significant initiatives for advancing gender equality.

Employer and employer association matters are analysed in the contribution from Michael Barry (Griffith University). The policy objectives of many employer associations focused primarily on diminishing employment entitlements, particularly penalty rates, and curtailing the activities of unions relating to bargaining and industrial action. Barry (2016) notes that these organisations spent the past 12 months lobbying policymakers and developing public relations campaigns to achieve favourable reform on these issues ahead of the forthcoming federal election. The prioritisation of these issues reflects the focus of employer association submissions to the Productivity Commission inquiry. While the final report contains many recommendations that accord with employers’ policy objectives, peak employer associations nonetheless expressed dismay with the Productivity Commission’s general message that the industrial relations system is generally functioning effectively. Whether the Turnbull government will be more receptive to the demands of employers and employer associations over the next year remains to be seen.

The article by Andreas Pekarek and Peter Gahan (University of Melbourne) examines trade union activity and collective bargaining outcomes in 2015. The release of new statistics indicating a further decline in union membership density should be alarming for the union movement. Following the trajectory of membership decline in countries such as the United States and the United Kingdom where unions are marginalised in the workplace (e.g. Forth and Bryson, 2015), union membership in Australia is increasingly concentrated among older workers and in industries associated with the public sector. In another worrying sign for unions, the number of new collective agreements registered in 2015 declined from the previous year. Pekarek and Gahan (2016) note that these trends have occurred in a year when several high profile cases in low-wage sectors have highlighted the vulnerability of workers without union representation to exploitation, as discussed above. While membership decline indicates that the future for unions looks increasingly bleak, these cases signify the need for unions to identify strategies to ensure that vulnerable groups most in need of collective representation are sufficiently protected.

Anthony Forsyth (RMIT University) examines industrial legislation in 2015, a year when the Coalition government achieved little in seeking to implement its policy agenda. Of the six industrial relations bills that the government has introduced to the Commonwealth Parliament since the 2013 election, the Fair Work Amendment Act 2015 (Cth) – which made changes to greenfields agreement making, protection action ballot orders, unpaid parental leave and unclaimed entitlements – is the only one that has passed. Legislation relating to registered organisations, the building and construction industry, the Fair Entitlements Guarantee scheme, bargaining processes and paid parental leave were either stalled or blocked in the Senate. Forsyth (2016) also reviews developments in industrial legislation across the Australian states and provides an assessment of the Productivity Commission inquiry.

Major court and tribunal decisions are analysed by Carolyn Sutherland (Monash University) and Joellen Riley (University of Sydney). Their article reviews a range of important decisions in 2015 relating to the determination of workers as employees or contractors, adverse action, unfair dismissal, anti-bullying and enterprise bargaining. Sutherland and Riley (2016) argue that despite their distinct institutional roles, both the FWC and the Federal Court shifted between technical and more flexible approaches to resolve individual and collective disputes, with their decision-making shaped partly by the constraints imposed by prescriptive legislation.

We are pleased to include a practitioner review article by the President of the Fair Work Commission, The Honourable Justice Iain Ross AO. His article outlines the FWC’s Future Directions programme, a series of innovations implemented in response to a fundamental shift in the nature of the FWC’s activities from handling mainly collective disputes to mainly individual disputes and a corresponding rise of often self-represented parties appearing before the FWC. In many cases, these parties lack experience of the FWC’s procedures and detailed knowledge of the relevant legislative provisions. In this context, the central objective of Future Directions is to ensure that the FWC continues to deliver public value. Justice Ross (2016) explains that public value can be understood in terms of providing just and predictable decisions, delivering procedural justice and ensuring efficient and fair dispute resolution. To this end, his article outlines the four central themes of the Future Directions programme: promoting fairness and improving access; efficiency and innovation; increasing accountability; and productivity and engaging with industry.

The international review article by Thomas A Kochan and Christine A Riordan (Massachusetts Institute of Technology) examines the issue of industrial relations and inequality. As Thomas Piketty’s (2014) ground-breaking book Capital in the Twenty-first Century illustrates, the period since the 1980s has seen rising income inequality within as well as between countries. Although industrial relations is fundamentally important for understanding inequality, there have been few contributions from an industrial relations perspective in light of Piketty’s work, which largely overlooks the causes and consequences of rising inequality relating to changes in the employment relationship and its regulation. In rectifying this, Kochan and Riordan’s (2016) article represents a major scholarly contribution. Focusing primarily on the United States, where increased inequality has been especially pronounced, the authors examine the multiple contributing factors and outcomes such as the weakening of unions and collective bargaining, declining real minimum wages, the deterioration of labour enforcement and the fragmentation of organisational structures and employment relationships. Kochan and Riordan also consider potential industrial relations solutions to addressing inequality, including living wage campaigns, changes to government procurement regulations, innovative strategies by unions and labour inspectorates and the modernisation of industrial relations policies. Given the corrosive impact of widening inequality on the economic, social and political fabric of many countries, the analysis of the underlying causes and potential solutions presented in the article is highly instructive for industrial relations practitioners and scholars in the United States, Australia and beyond.

In conclusion, the forthcoming year, 2016, looks likely to be an important one for Australian industrial relations, especially in light of the inquiries of the past 12 months. A federal election looms, the policy agendas of a relatively new Prime Minister and Employment Minister remain largely undefined, and key actors and institutions continue to face questions over how they will respond to a rapidly changing economy and labour market. These and other key matters for Australian industrial relations will be examined in the 2017 Annual Review issue.