The Australian industrial system in the era of COVID-19

Introduction

The COVID-19 pandemic was not exclusively a health crisis; it also disrupted Australia’s economy and standard of living. During the course of 2020, the pandemic exposed many of the fault lines that had become ingrained in our economy and workplace structures over decades. There were early doubts about whether our public health system had the resources to cope with a pandemic. A lack of basic personal protective equipment, even for frontline health workers, was symptomatic of our declining domestic manufacturing capacity. Our tertiary education system looked vulnerable and overly reliant on international student fees. Those on temporary work visas, once considered essential, were now expendable and urged to somehow make their way back home. ¹ The outsourcing of quarantine arrangements to private security firms with a business model reliant on a casualised workforce would later prove disastrous. But the near instantaneous translation of insecure working arrangements into long unemployment queues, as health restrictions and workplace closures left hundreds of thousands of Australians with neither work nor income, had the most immediate and devastating consequences.

Public health and insecure work

Despite decades of recession-free growth, even pre-pandemic Australia’s economy posed many challenges to workers. Record-low wages growth, rising inequality, a declining share of national income apportioned to labour, sustained underemployment and high levels of insecure work (including casual workers, labour hire workers, sham contractors and those in the gig economy) meant the benefits of economic growth had by-passed many people. It also made them particularly vulnerable to the shock that the coronavirus would deliver in 2020.

The impact of the pandemic has been felt very unevenly. Casual employees were among the first to lose their jobs, and the industries most affected by the restrictions also happened to be highly casualised. Among the hospitality workforce, the pre-pandemic casualisation rate was 78%. ² Accommodation and food services suffered the sharpest fall in this early period, and women in the sector lost jobs in greater numbers than their male counterparts. ³ Younger workers were also disproportionately affected. ⁴

Because casuals are paid less than permanent employees, ⁵ and because there are no accumulated leave entitlements for casual workers to fall back on, the effects of being thrown out of work with little or no notice were severe. While some permanent employees were able to access paid sick leave if they contracted the virus, casual employees and other insecure workers had no such access. The economic imperative to simply keep working for those workers who had symptoms, or who would have ideally presented for testing or been in isolation, created an impossible dilemma. These basic economic realities undermined the public health response and national efforts to control the spread of the virus.

Annual wage review

The Fair Work Commission conducted its annual review of the minimum wage largely over the course of the of second quarter of 2020. Circumstances were changing quickly, posing significant challenges to any assessment of the impact of wage movements on the economy overall. By the time submissions were completed, trading restrictions and more general limitations on movement had been gradually wound back. The Government had also introduced a range of measures designed to soften the impact of the restrictions on workers and employers. While our own economic recovery was clearly dependent on the success in controlling the virus both domestically and abroad, a vaccine still appeared to be some way off and wide discrepancies were emerging in international efforts to bring the outbreak under control. The level of uncertainty about economic prospects remained high.

Not surprisingly, in its interventions to the wage review, the Australian Council of Trade Unions (ACTU) emphasized the importance of wages in lifting aggregate demand and contributing to a consumption-led recovery. Employer groups sought to highlight the precarious conditions in which their members were operating and the likely impact of any increase on employment and business viability. Ultimately the Fair Work Commission delivered a small increase of 1.75%. In a major departure from usual practice, the increase was phased in by industry groupings: workers in industries least effected by the pandemic were to receive their increase on 1 July, but increases in two other industry ‘clusters’ considered to be more acutely affected by the restrictions were delayed until November 2020 and February 2021 respectively.

This unconventional approach was based on the Commission’s conclusion that the varied impacts of COVID-19 across industries justified a break from the usual universal increase. Many frontline health care and social assistance workers, teachers and early childhood education and care workers and employees in other essential services (who had continued working throughout the pandemic) were granted their wage increases on 1 July. However, other frontline workers such as supermarket workers received no such recognition and had their pay increase delayed by 7 months. Many other low-paid workers who had already faced cuts in hours and pay were left waiting months to see an increase in their hourly rate.

COVID-related award variations

Before the pandemic, Modern Awards were often described by employers as too complex, too rigid or an obstacle to ‘flexibility’ and productivity improvements. However, award reliance remains significant and had increased in recent years as coverage in the enterprise bargaining system reduced. It turned out that the award system would be a vital part of the workplace response to the pandemic.

Since the 1990s, awards have no longer been the prime movers of change for industry or workplace standards. And by the time of the Fair Work Act, awards were no longer dispute settlement instruments with identifiable parties. They were now overseen by the Fair Work Commission with reference to a fixed statutory ‘modern award objective’, ⁶ namely to ‘provide a fair and relevant safety net’. ⁷

Despite this constrained role, during the pandemic awards proved to be a mechanism that could quickly facilitate broad changes without the need to wait for parliamentary processes or workplace-by-workplace negotiations.

As the impact of trading restrictions became clearer, employer groups approached the ACTU and certain of its affiliates seeking agreement on temporary variations to Awards citing various clauses as impeding a ‘flexible’ business response to the crisis. These proposals were to allow for more latitude for employers to change duties, hours of work and leave arrangements. Unions recognised the need to save jobs but also to ensure that changes were only made where strictly necessary for the preservation of employment and business viability. Appropriate limits and procedural safeguards also needed to be put in place so that workers did not bear a disproportionate share of any adverse effects.

The first of the proposed temporary variations were to apply to the clerical and hospitality industries. These variations included changes that would allow employers to more readily negotiate reduce working hours. Job demarcations could also be relaxed at the instigation of the employer. Businesses could also require workers to take accrued leave or to take leave for extended periods at half pay. Ultimately the applications were supported by government, unions and employers and this consent position was quickly approved by the Commission.⁸ The objective of the variations was to save jobs and ensure the continuing viability of businesses most clearly impacted by government restrictions. Importantly, as there was wide acceptance that the measures formed part of a temporary response, the variations were time-limited.

Clerical workers were given the right to vote on proposed reductions in hours of work, with a 75% majority required in affected workplaces. Other variations permitted employers to change hours of work, leave and duties in some circumstances, but subject to safeguards (such as consultation with the affected workers and their union, and limits on hours reductions).

Temporary variations to other awards followed. ⁹ Employers continued to apply for rolling extensions to these temporary variations in some awards. As social distancing measures eased, unions opposed the extension of variations where they were no longer necessary. Nonetheless, the Commission showed a general willingness to extend the schedules upon application by the employers. ¹⁰

JobKeeper and Fair Work Act amendments

Escalating calls for adequate income support for workers displaced by the pandemic led to the government introducing the JobSeeker Coronavirus Supplement, which effectively doubled the level of pre-pandemic JobSeeker benefits as a temporary measure.

Following a campaign by the union movement for a wage subsidy (similar to those already introduced in other countries), the government also introduced the ‘JobKeeper’ scheme in April. It provided for $1500 per fortnight to be contributed by government to the wages of employees of employers who had experienced a decline in turnover of at least 30%. However, short-tenure casual employees (including those in key affected industries, many of them women) were ineligible for the program, as were some gig economy workers, most visa workers, and those in higher education.

Changes to the Fair Work Act which accompanied JobKeeper enabled those employers receiving the payment to also issue partial or temporary stand-down directions, reduce the hours of work of their workers, and expand their duties and determine locations at which work could be performed (including work from home). The changes also permitted individual agreements around the use of accrued leave and hours of work, which could be entered into irrespective of contrary prescriptions in awards or enterprise agreements.

Unions argued these changes were unnecessary, since the award system had already proved its capacity to quickly implement logical and necessary changes to address emergency circumstances related to the pandemic. In this sense, the Fair Work Act changes entirely by-passed both the award system and negotiations in the existing bargaining stream. The ‘JobKeeper enabling directions’ thus constituted an extension of managerial prerogative. This was constrained by some important limitations and safeguards, implemented following union advocacy. The Fair Work Act changes also empowered the Commission to determine disputes related to these new provisions by arbitration.

The introduction of the temporary JobKeeper amendments and the new capacity for employers to issue unilateral directions had flow-on consequences for award variation applications. For example, the variations relating to two Awards (fast food and the sale and repair of vehicles), excluded those employers who were receiving the JobKeeper payment on the basis that they already had a legislative means to reduce working hours. ¹¹

However a dispute resolution procedure which included arbitration, was to apply to these new employer award rights. The Commission considered that an arbitration mechanism was relevant in providing a ‘fair and relevant safety net’ and accepted that the absence of arbitration would put these workers at a disadvantage compared to those whose hours had been reduced under the JobKeeper amendments given those employees already had access to arbitration. ¹²

The reappearance of arbitration in an award context is significant. Clauses of this kind disappeared in the awards ‘modernisation’ process over a decade earlier, after the Commission concluded that the Fair Work Bill 2008 prevented it from exercising any compulsory arbitral function through disputes clauses. Legislated access to the arbitration of ‘JobKeeper’ disputes thus joined only a handful of other instances in the Fair Work Act where the Commission is expressly empowered to arbitrate without the consent of the parties. Unions argued strongly that given the fundamental nature of the changes being made, it was inevitable that disputes would arise and important that the Commission be given the role of resolving those disputes.

Whether these changes prove to be a turning point for the concept of arbitration in Australian industrial practice remains to be seen. Given that the emergency legislation delivered significant (and temporary) rights to employers, it was, at the very least, accepted as a necessary protective counterbalance for employees. This in itself shows the efficacy and importance of arbitration as a concept that will endure well after JobKeeper and the changes that came with it have disappeared.

Pandemic leave – Paid and unpaid

From early during the pandemic, the union movement called for paid pandemic leave for all working people, including writing to the Prime Minister seeking support for a legislated entitlement. The ACTU argued that having 30% of the workforce without any paid sick leave left a huge hole in our pandemic defence. But with no government support for the proposal in sight, unions campaigned and went workplace by workplace negotiating and winning paid pandemic leave; by mid-April, up to a million workers were covered.

Then the Commission, acting on its own motion, varied 99 awards to permit workers to take up to twice their normal annual leave at half pay (by agreement), as well as a new entitlement to 2 weeks unpaid pandemic leave. ¹³ These two temporary variations were rolled out across most awards, with an initial expiry date of 30 June 2020.

The ACTU and affiliated unions continued to campaign for the government to legislate paid pandemic leave. The union movement’s rationale was ultimately accepted by the Commission: namely, to avoid the employee being ‘placed in the invidious position of either contravening public health directions or guidelines, or placing their employment in jeopardy’. ¹⁴ But neither the Commission nor the government has yet to fully address this challenge.

The ongoing absence of a universal paid pandemic leave entitlement left the ACTU and the unions in health and related sectors with little option but to progress a claim in the Fair Work Commission. Health workers were more likely to have contact with persons at high risk and to contract and spread the virus. They were also subject to requirements to self-isolate or quarantine. For these workers, the high risks associated with being potentially exposed to the virus and continuing to work rather than self-isolate were obvious. A paid leave entitlement was therefore not only in the interests of the employees themselves, it was a critical public health measure.

The claim did not succeed in the first instance.¹⁵ The Commission concluded that success in controlling the outbreak meant the elevated risk had not, at that point at least, ‘manifested itself in actuality’.¹⁶ The applications were adjourned to allow the Commission to re-assess prevention measures in light of subsequent events. Just a matter of weeks later, a second wave emerged in Australia, concentrated in Victoria and in aged care facilities in particular. The Commission brought the matter back on and granted paid leave for 2 weeks of self-isolation or quarantine but only for award-covered workers in residential aged care rather than the health sector more broadly.¹⁷ The pandemic had tragically exposed the vulnerability of the aged care sector, characterised by widespread reliance on temporary labour hire, inadequate staffing levels, cost cutting and privatisation.

Working from home

Government social distancing and trading restrictions during the pandemic led to a swift transition to working from home for millions of Australian workers, leaving little time for formalising this fundamental transformation of working arrangements. Again, unions quickly negotiated temporary arrangements with enterprises and many government departments. It was only in the latter part of the year, and with the prospect of working from home becoming a more permanent fixture of the labour market, that the parties began grappling with its broader implications.

In August, the Commission took the unusual step of publishing a draft set of provisions for parties to consider in the event they were seeking further temporary variations to awards to deal with the fallout from COVID-19. ¹⁸ Some of these provisions are similar to those contained in the JobKeeper legislation and variations already granted. They included provisions allowing employers to direct changes to work location, duties and working hours, with the agreement of 75% of the affected workers. They also granted power to employers to direct changes to start and finish times to minimise congregation in common areas or on public transport. They also included a limited employee right to request work from home and/or compressed working weeks. Any arrangement made by an employer under these provisions would be conditional upon consent to the arbitration of any dispute. Paid leave for workers to self-isolate or quarantine was not a feature. To date, there has been very limited movement from employers or unions on the uptake of these provisions.

In November 2020, the ACTU Executive endorsed a ‘Working from Home Charter of Rights’, which called for those working remotely to enjoy pay and conditions equal to those offered to on-site employees, and to have access to the arbitration of disputes. ¹⁹ The Charter followed an extensive survey conducted by the ACTU on the impact of working from home arrangements. It argued that workers should not be disadvantaged by working from home, and should be paid for all time worked; that productivity benefits should be fairly shared; that work health and safety requirements be respected; and that a proper work/life balance should be maintained, with workers retaining a clear ‘right to disconnect’ from work.

Working from home is, for many people, likely to be one of the enduring changes to working life brought about by COVID-19. The full extent of this change, and its impact on employment rules and standards, will be a major industrial issue in 2021.

Industrial relations working groups and legislative change

On 26 May, the Prime Minister announced the establishment of five ‘working groups’ to examine key aspects of the industrial system: bargaining, casual employment, awards, compliance and enforcement, and greenfield agreements. Much of this subject matter had been heavily contested terrain in the pre-pandemic era. However, there was a wide acceptance among stakeholders that circumstances demanded a new approach. The first step in the process was to seek solutions through tripartite engagement.

The working groups met for several months. While the details of the deliberations were not made public, the groups received and interrogated statistical material and evidence from experts in each area, and debated contrasting proposals for change. In the end, however, no broad consensus was achieved through the working groups. On 20 November, the Prime Minister then announced the government’s intention to introduce a package of legislation arising out of these discussions into Parliament in the last two sitting weeks of the year.

The ACTU has stated its intention to oppose any legislative changes which would reduce pay, conditions or protections for working people – whose dedication and bravery, after all, carried Australia through this crisis. Many of the key features of the November ‘omnibus’ package, including weakening the ‘better off overall’ test and the statutory definition of casual employment, do just that. A Senate inquiry is now examining the government’s proposals; their legislative prospects remain uncertain. The union movement is intent to resist any reduction in the rights and conditions of working people through this process.

Conclusion

The social isolation and economic dislocation of 2020 made the COVID-19 experience traumatic for too many Australians. But it also gave us an opportunity to recognise and appreciate the strength of Australia’s social contract. Our public health system and its workers put their own well-being at risk, and once again earned the gratitude of the nation. Other essential workers did their jobs despite the risks and stresses.

Throughout the crisis, the Australian trade union movement campaigned for flexible, fair responses to the pandemic that were beneficial for workers, businesses, the economy and society. The overall industrial system, including the Fair Work Commission, responded quickly and flexibly, allowing the economy to continue functioning, while ensuring fairness was not thrown out the window. The capacity to deal with the crisis in a coordinated way at a national level, with all major voices present, proved to be a valuable feature. Our social institutions have once again demonstrated their uniqueness and their enduring worth.

The crisis also threw into sharp relief some of the serious structural shortcomings in our labour market, and our industrial relations system. It affirmed why the union movement continues to campaign against insecure work and the damage it causes to individuals and society. With the third-highest rate of non-standard work in the Organisation for Economic Co-operation and Development, hundreds of thousands of people were left with no income security, facing compulsion to continue working even when their own health and the health of others was at stake.

This needs to change. For the union movement, the top priority is to continue to address these problems as the economy continues to recover from the pandemic. We need an approach to national economic reconstruction that is grounded in the creation of secure, permanent jobs with permanent rights – jobs that workers and their families can rely on. The pandemic shows that the bargaining system should be able to negotiate at a national level with industry agreements: addressing common issues, and the needs of both employers and workers. Industry bargaining is a flexible mechanism that would have allowed industrial parties to strive for a quick consensus in an unexpected and pervasive crisis. In short, we need to move forward to a ‘new normal’ with more secure jobs, better bargaining rights, and improvements to awards such as stronger rights for people working from home.

We know that the contribution of working people was fundamental to our success in fighting the pandemic. And we saw the constructive and flexible approach that workers and their unions adopted in responding to the pandemic. We now need to ensure that the representative voice of workers becomes an ordinary and respected feature of industrial decision-making – not just a temporary measure in a time of crisis.