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IR reform - it's not in the detail

By Des Moore - posted Wednesday, 10 August 2005


Moreover, the opportunity is being missed to remove the charade that the minimum wage is an important social policy instrument. To the contrary, it is grossly unfair to have a regulation that actually inhibits the legal employment of many at the bottom of the income spectrum. At present, no wage is allowed to be paid between the minimum of around $25,000 a year and the unemployment benefit of close to $11,000 (for a single adult) and the proposals hold out little prospect of a significant change in this situation. And social unfairness will remain, with the minimum wage continuing to be provided to the more than half of low wage earners who are in the top half of household incomes. The prime minister implicitly acknowledged this unfairness when he said, “Minimum wage workers are not concentrated in low-income households. A significant proportion live in households with relatively high incomes.”

The serious problems with the minimum wage proposal also raise a question about continuing to regulate wages above the minimum. At present the AIRC makes an absurd number of awards setting some 20,000 separate wage rates that purport to provide a safety net that, unbelievably, extends to wages in excess of $1,000 per week. The government says it will hold an inquiry into this situation and Minister Andrews has indicated he hopes the number of awards could be reduced to “a few hundred”.

The most hopeful features of the promised new regime are that it will exempt businesses with up to 100 employees from unfair dismissal claims and make it easier to enter into less-regulated individual and collective agreements. Indeed, the prime minister indicated the first objective of the changes is to “encourage the further spread of workplace agreements”.

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Accordingly, there will be a replacement of the existing requirement that agreements must contain no overall reduction in the terms and conditions set by awards - the so-called “no-disadvantage” test. In its place agreements will be required only to meet the minimum “protected” conditions to be laid down in legislation, plus of course the minimum wage set by the FPC. These protected conditions cover “4 weeks annual leave, personal-carers leave, parental leave, and a maximum number of 38 ordinary working hours per week”. This reduction in award-imposed requirements certainly seems an improvement, although it remains to be seen to what extent workplace negotiations on new agreements result in a diminution of existing award conditions, such as leave loadings and RDOs.

There is also a question as to whether unions will be able to force a literal interpretation of the legislated minima for leave and hours. Will employers and employees be able to continue existing arrangements under which 21 per cent of existing employees work for no paid leave and 4.5 million people work over 38 hours? Or will the legislation make some provision for exemption from the protected conditions?

A highly important associated question arises as to what roles the “new” AIRC and the Federal Court will play. For the government to say the AIRC will now “focus on disputes” tells us nothing of substance because that is exactly what it has been doing for the past century. Both the AIRC and its Federal Court soul mate have engaged in decision-making on workplace relations that has been based on assumptions and beliefs that have had serious adverse effects on employment and productivity. These decision-makers have operated on the totally erroneous basis that tribunals and courts have social policy responsibilities independent of parliament and they need to play an interventionist role, because they perceive a major imbalance of bargaining power between employers and employees.

If, as seems almost certain, the new legislation continues to contain extensive regulatory clauses, it seems likely that there will continue to be considerable scope for disputes over its interpretation and for one-sided interpretive judicial decision-making. The fact the right to strike will be maintained will in itself ensure the AIRC has an on-going role unless the new legislation imposes some watertight limit to its capacity to intervene. A similar problem could arise in regard to disputes over the trade union rights to enter business premises under, for example, states’ occupational health and safety legislation.

And, even if its role is limited, will anything be done to stop the Federal Court extending its already large role in “interpreting” not only the new workplace relations legislation but other existing legislation and court decisions that are relevant?

This is pertinent to unfair dismissals claims, a large proportion of which are not contested in courts, because of the widespread belief that judicial attitudes do not favour employers.

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Employees may, for example, be able to bring what are in effect claims that they received “unreasonable notice”. Even with the unfair dismissals regime in place, each year a large number of such claims are made against Victorian employers, with around 1,000 a year actually going to courts and, contrary to ACTU assertions, costs are awarded if cases are sustained. There are also an increasing number of cases under the Trade Practices Act seeking to convert pre-contractual representations into promises that must be fulfilled.

Finally, the Federal Court will retain an “unlawful” termination jurisdiction on grounds of discrimination (i.e. sex, age, disability, and so on). Given current attitudes in the AIRC and the Federal Court, the concern here is that attempts will be made by the judiciary to extend these jurisdictions as substitutes for unfair dismissal exemptions.

In short, whether the proposal to exempt a large proportion of businesses from unfair dismissal claims will have much substantive effect is unclear given the on-going problem with the existing judicial arrangements. The Federal Government’s proposals give no indication of even recognising this is a very serious problem that significantly limits the scope for improving Australia’s economic and social situation.

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This is an edited version of an address given by Des Moore, Director, Institute for Private Enterprise, at a breakfast given by Robert Clark, Shadow Treasurer, Victoria on July 29, 2005.



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About the Author

Des Moore is Director, Institute for Private Enterprise and a former Deputy Secretary, Treasury. He authored Schooling Victorians, 1992, Institute of Public Affairs as part of the Project Victoria series which contributed to the educational and other reforms instituted by the Kennett Government. The views are his own.

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