Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion.
Briefing Paper No. 02/2006 by Lenny Roth
Page Content
Work Choices reforms
On 7 December 2005, Federal Parliament passed the Workplace Relations Amendment
(Work Choices) Bill 2005, which is said to contain the most significant changes
to the regulation of industrial relations in Australia since 1904, when the
Federal industrial relations system was established. The reforms rely,
controversially, on the corporations power in the Constitution to largely
increase the coverage and change the content of the Federal system. The reforms
are expected to commence some time in March 2006.
High Court challenge
The NSW Government and other State Governments are challenging the
constitutional validity of the legislation in the High Court. The basis for the
challenge is that the corporations power does not support industrial relations
laws of the kind that have been enacted. The case is likely to be heard in May
2006 but it may not be decided until 2007.
Coverage of new Federal system
With a view to creating a single national industrial relations system, the
Federal system will be extended to cover all constitutional corporations and
their employees. The various State industrial systems will be excluded from
covering these employers and employees. The new Federal system will cover up to
85 per cent of employees in Australia but coverage will be lower in some States
(about 75 per cent of employees in NSW).
Changes to award wages
Award wages will be adjusted by a new body – the Australian Fair Pay
Commission – rather than by the Industrial Relations Commission. The Fair
Pay Commission will operate according to different parameters and it will
undertake research and consult with relevant stakeholders rather than
arbitrating in the context of competing claims by unions and employer
organisations. The Government has said that the Fair Pay Commission will ensure
that the unemployed and low paid are not priced out of the labour market.
Critics believe that real minimum wages will fall and that this will not lead
to employment growth.
Changes to award conditions
Certain employment conditions can no longer be included in awards, including
those covered by the new Australian Fair Pay and Conditions Standard and those
relating to long service leave, notice of termination, jury service and
superannuation. However, provisions in existing awards relating to these
matters will continue to have effect. Another change is that awards cannot
require small businesses to make redundancy payments.
Changes to legislative conditions
There is a new set of four legislative minimum conditions relating to: maximum
ordinary hours of work, annual leave, personal/carer’s leave and parental
leave. These four conditions will, together with minimum wages, comprise the
Australian Fair Pay and Conditions (AFPC) Standard. The conditions in this
Standard will apply to all employees covered by the Federal system. Employees
who are covered by an award will continue to be entitled to their award
conditions if those conditions more generous than the Standard.
Changes to workplace agreements
The most significant change is that workplace agreements no longer need to pass
the nodisadvantage test (an agreement would not pass this test if it
disadvantaged an employee compared to their award wages and conditions).
Workplace agreements will only need to comply with the minimum wages and four
minimum conditions in the AFPC Standard. The Government argues that this will
enhance choice and flexibility in agreeing on wages and conditions, which will
increase productivity, leading to a stronger economy and higher living
standards. Critics argue that most employees lack bargaining power and that
they will lose important entitlements (eg overtime and penalty rates), which
will be detrimental to their living standards and their ability to balance work
and family commitments.
Changes to industrial action
Unions and employees will not be able to take lawful industrial action when
negotiating a workplace agreement unless this has been authorised by a majority
of employees, voting by secret ballot. In addition, the Industrial Relations
Commission can now prevent industrial action during negotiations if it is
causing significant harm to a third party. The Minister now also has the power
to stop industrial action which is threatening health, safety or the economy.
The Government argues that secret ballots will ensure that industrial action is
a genuine choice of the employees involved and that the other changes recognise
the legitimate interests of those affected by industrial action. Critics argue
that the changes will severely restrict employees from taking action, weakening
their bargaining power.
Changes to dispute resolution
The century -old system of compulsory conciliation and arbitration is to be
abolished. The Industrial Relations Commission will become a voluntary dispute
resolution body and parties will also be able to refer disputes to private
dispute resolution services.
Changes to unfair dismissals
The most significant change is that businesses with up to 100 employees will be
exempt from unfair dismissal laws. The Government argues that unfair dismissal
laws discourage employers from putting on more staff and that the exemption
will create thousands of jobs and a stronger economy. Critics argue that there
is no valid evidence to support the Government’s claim about the link
between unfair dismissal laws and employment. Critics also argue that, in any
event, there is a powerful case for the continued operation of laws that
protect workers against arbitrary or unfair deprivation of their livelihood.
General debate about reforms
The Federal Government and business groups argue that the reforms will reduce
complexity and give employers and employees more choice and flexibility in
setting their wages and employment conditions. This, it is argued, will lead to
greater productivity and a stronger economy, which will result in more jobs,
higher wages and better living standards. Critics (which include trade unions,
many academics, welfare groups, and State Governments) argue that the
Government has not made out the economic case for the reforms. They also argue
that the reforms tilt the balance of power too far in favour of employers; and
that, over time, the reforms will lead to lower wages and reduced working
conditions, which will mean decreasing living standards and greater difficulty
in balancing work and family life. They argue that the reforms are likely to
impact hardest on vulnerable workers such as women, indigenous Australians,
employees with a disability and young people.