Note to The Hon. Chris Bowen MP on 3 May 2007
Labor’s policy on workplace reform, Forward With Fairness, spells out Labor’s approach to achieving fairer, more productive workplaces throughout Australia.
The policy outlines broad principles that a Labor government will follow.
Now is the time to elaborate on one aspect of that policy: individual agreements and their relationship to enterprise bargaining, awards and Labor’s approach to achieving the most productive workplace culture.
Forward With Fairness acknowledges that ‘no one size fits all’. Labor also recognises that the Australia’s productivity growth in the 21st century can only be driven by the achievement of flexible working arrangements, based on fair conditions that suit Australian workplaces.
Labor governments pioneered such changes. The merry-go round system of highly regulated, arbitration court-led wage rounds gave Australians high inflation and labour market inflexibility. Labor governments broke that system. Labor under Bob Hawke and Paul Keating developed a system of enterprise bargaining and labour market flexibility which led to an explosion of labour productivity. They did this without throwing fairness out the back window. They gave Australians a fair go.
In that spirit a Rudd Labor government will fix John Howard’s unfair industrial relations laws.
Labor believes in a robust, fair, flexible industrial relations system that is good for all times, both bad, for the mining boom and beyond.
Labor’s approach is focused on outcomes; fair working conditions, safe workplaces and higher productivity. These are the outcomes that matter.
Individual Agreements are part part of Labor’s industrial relations system but they are part of an integrated system.
The Liberal’s Work Choices legislation is not about choices for workers. It is about employer’s dictating conditions for them.
Working Australians deserve better.
Labor is committed to achieving fairness, flexibility and firm employment standards for the benefit of all working Australians.
Unlike John Howard’s unfair and one-sided approach to individual agreements, Labor will guarantee a safety-net of decent, relevant and enforceable wages and conditions for working Australians.
Labor’s message on individual agreements is clear. AWAs will go, but fair individual agreements will be an important part of the Industrial Relations system for the 21st Century.
Australian Workplace Agreements
Labor will replace individual Australian Workplace Agreements (AWAs) with a fairer system of individual agreements.
In contrast to the current situation, the key point is that Labor will insist on fairness in the development of individual agreements.
Under the Workplace Relations Act, AWAs cover individual agreements (s.326). There can also be employee collective agreements (s.327) covering a workplace and union collective agreements (s.328), among others. The present debate has concentrated on AWAs as individual contracts.
Forward With Fairness refers to individual contracts and conditions which have always been a feature of the Australian work system. The Hawke Keating governments did nothing to undermine such arrangements.
But it is now time to state minimum conditions for all employment agreements. This protects employees and provides certainty – supplementing what the courts have established – over time with common law contracts – that certain minimum conditions will apply.
Forward With Fairness states that Labor’s safety net will be in two parts.
• A Rudd Labor government will guarantee 10 legislated national employment standards which will apply to all employees in Australia. Labor’s new national employment standards will contain entitlements for all employees regardless of their industry or occupation.
These Australian standards cannot be removed or replaced – without a ‘no disadvantage’ test.
• Awards will continue to play an important part in the industrial relations system and Labor will ensure a further 10 minimum employment standards will be included in awards, tailored to the needs of the industries, occupations or enterprises they cover.
Labor’s safety net will underpin Labor’s collective bargaining system and common law arrangements. This will allow employers and employees to create flexible and fair workplace arrangements which best suit their needs.
In our lifetime dramatic changes have occurred in the nature of the labour market, technological change, productivity and labour relations. Australian workplaces reflect those changes. Employees’ expectations have changed with those of the general community. Fewer private sector employees are members of unions than ever before. Awards underpin many of the features of individual arrangements – together with the basic conditions reflected in national and state legislation.
Yet there is a deep well of uncertainty that pervades some Australian workplaces. Although employees are more individually motivated with less attachment to traditional ‘labour’ approaches than in the past, there is uncertainty about what is fair and appropriate in negotiating working conditions.
Bargaining power varies considerably across different industries. Although the overwhelming number of employers are fair, there should not be incentives in the legislation to enable the wrong kind of practices. Labor has never stood for an uncontrolled, deregulated labour market. Labor’s historic goal has been to civilize capitalism, to insist on a ‘fair go’ in the workplace. What is appropriate in one industry or workplace may not be reasonable somewhere else. So Labor insists on both flexibility and fairness – with an eye on the outcome being the achievement of a more prosperous and productive workplace.
Collective arrangements negotiated with trade unions, of course, have an important continuing role. The Australian award system is a collective arrangement, and there are a large number of collective agreements negotiated each year in Australian enterprises. These agreements provide considerable benefits for the businesses concerned and their employees.
There is also a need for a legislative procedure for the registration of individual agreements. Such recognises the modern reality of Australian working life.
The Howard government, after achieving an absolute majority in both Houses of Parliament in 2004, reneged on the commitments it gave when originally introducing AWAs, by weakening fair standards, cancelling the no disadvantage tests and reducing minimum conditions. This loaded the bargaining power too far in one direction.
Labor intends to apply a fair balance to the process.
Labor believes we need a robust, fair, flexible industrial relations system that is good for good times and bad, for the mining boom and beyond.
AWAs were introduced under the Workplace Relations and Other Legislation Amendment Act (WROLA) in 1996. Facing defeat of its legislation, the then government claimed that the scheme of AWA procedures as envisaged in 1996 was to promote flexibility and self-regulation under AWAs accompanied by appropriate employee protections and sanctions against those who abuse flexibility under the legislation.
To enable the WROLA 1996 Bill to pass the Senate certain amendments were accepted by the government. Important amendments were outlined in the Agreement between the Commonwealth government and the minor parties in the Senate (October 1996). Many of the provisions concerning the operation of AWAs were put into legislation as a result of that agreement.
The Workplace Relations Amendment (Australian Workplace Agreements Procedures) Bill 2000 encouraged the spread and use of Australian Workplace Agreements (AWAs) by reducing some procedures. After the last Federal election, new legislation (“WorkChoices”) was introduced and the WorkChoices legislation took effect from 27 March 2006. The Workplace Relations Act incorporated the amendments from the WorkChoices Act.
The law now refers to the Australian Fair Pay and Conditions Standard (the Standard) as the relevant minimum entitlement for employees. The Standard is set out in Part 7 of the amended Workplace Relations Act. The Standard provides for minimum conditions of employment relating to wages (including the Federal Minimum Wage), annual leave, personal/carer’s leave, parental leave (including maternity leave) and maximum ordinary hours of work. Though this Standard falls well short of what is fair and what a Rudd Labor government would support.
Some of the key legislative provisions deriving from the 1996 agreement determining AWA procedures were:
— AWAs must meet the no disadvantage test when compared to the relevant award (rather than a set of minimum conditions);
— Consultation processes are specified, and the Employment Advocate (EA) must approve and vet the agreement;
— The EA can designate the ‘appropriate’ award where employees are not covered by an award to assess the AWA;
— Existing employees must have been given a copy of the agreement for 14 days prior to signing it, and 5 days in the case of new employees;
— Employee/s have genuinely consented to the agreement;
— There would be no intervention by a third party although the EA could contact parties if there was a need.
Where an AWA appears less favourable than the award, the EA can suggest an amendment, or accept an undertaking that no-one will be worse off. If an AWA does not meet the No Disadvantage Test (NDT), the EA can refer it to the Australian Industrial Relations Commission (AIRC) for resolution, which allows an application of the public interest test.
AWAs covering more than one employee will take effect from date of approval, and for new employees from date of lodgement, or a date specified. All employees doing comparable work must be offered the same AWA, to be stated in the employer’s application for approval. AWAs must be lodged within 14 days of being signed. Bargaining agents can be appointed and intimidation or coercion in an AWA negotiation is prohibited. AWAs cannot displace an applicable certified agreement until the expiry of that agreement.
Labor believes that the spirit of those arrangements should underpin new legislation covering individual agreements. Fair Work Australia will replace the Office of the Employment Advocate in monitoring such arrangements.
The problem with the practice of workplace agreements under the Howard government is that the no-disadvantage test was not applied in the spirit of the 1996 Agreement. The process was secretive. Even if minimum standards were not adhered to, the government’s Employment Advocate could ratifiy an agreement as “in the public interest”. From 2006, even this flawed process was rescinded with the Work Choices legislation (2006).
Equity and Individual Agreements
Labor supports an open and transparent system of industrial relations. Labor proposes that tests for fairness need to protect employees on equity grounds, such that:
— the employee must receive a copy of the individual agreement before signing an individual agreement;
— the employer must explain the effect of the individual agreement to the employee;
— before the employee signs the individual agreement the employer must explain to the employee his entitlement to representation, including by a union, in negotiating or agreeing to the individual agreement;
— the employee must have genuinely consented to making the individual agreement.
In addition, such agreements would be tested under the ‘no net disadvantage’ test against the provisions of the relevant Award.
No Net Disadvantage Test
Labor believes that the minimum standards referred to in this policy can only be modified subject to a no net disadvantage test.
Above a certain level of entitlement, say $100,000, the ‘no disadvantage test’ need not apply. Though such workers would have the right to opt out and go back to the award. Labor wants flexibility and choice. And we want to protect the most vulnerable members of the workforce.
This should be the position with all new individual agreements, after the expiry of existing contracts.
Additionally, a Rudd Labor government will guarantee the following minimum standards in law for all Australian employees. This is noted in Forward With Fairness:
1. Hours of work
Under Labor, the standard working week for a full time employee will be 38 hours. Employees may be required to work additional hours, but cannot be required to work unreasonable additional hours.
2. Parental leave
Labor recognises that many families want to have a parent provide all or most of the care for a child during the first two years of the child’s life.
A Rudd Labor government will guarantee that both parents have the right to separate periods of up to 12 months of unpaid leave associated with the birth of a baby.
Where families prefer one parent to take a longer period of leave, that parent will be entitled to request up to an additional 12 months of unpaid parental leave from their employer. The employer may only refuse the request for the additional 12 months’ leave on reasonable business grounds.
This will guarantee that Australian working families have the flexibility of up to 24 months’ unpaid leave to provide care for their child.
3. Flexible work for parents
A Rudd Labor government will guarantee a right for parents to request flexible work arrangements until their child reaches school age. Employers will only be able to refuse any request on reasonable business grounds.
4. Annual leave
All full time non casual employees will be guaranteed 4 weeks’ paid annual leave each year. Part time employees will be entitled to 4 weeks’ annual leave paid pro rata. Shift workers will be entitled to an additional paid week of annual leave.
5. Personal, Carers and Compassionate leave
All full time non-casual employees will be entitled to 10 days’ paid personal and carers leave each year. Part time employees will be entitled to 10 days’ personal leave paid pro-rata. These employees will also be entitled to 2 days’ paid compassionate leave on the death or serious illness of a family member or a person the employee lives with.
All employees will be entitled to an additional 2 days of unpaid personal leave where required for genuine caring purposes and family emergencies.
6. Community Service Leave
Employees will be entitled to leave for prescribed community service activities, for example paid leave for jury service and reasonable unpaid leave for emergency services duties.
7. Public holidays
Labor’s industrial relations system will guarantee public holidays including Christmas Day, Boxing Day, New Year’s Day, Australia Day, Anzac Day, Queen’s Birthday, Good Friday and Easter Monday. Public holidays prescribed in State law such as Labour Day, Easter Saturday, Easter Tuesday, and local public holidays like Cup Day, will also be recognised in those states in which they are prescribed. Where an employee works on a public holiday, they will be entitled to an appropriate penalty rate of pay or other compensation. This will be set out in the applicable award.
8. Information in the workplace
Employers must provide all new employees with a Fair Work Information Statement which contains prescribed information about the employee’s rights and entitlements at work, including the right of the employee to choose whether to be or not to be a member of a union and where to go for information and assistance.
9. Termination of Employment & Redundancy
All employees will be entitled to fair notice of termination in accordance with the following scale:
Length of continuous service Minimum period of notice
Less than 1 year At least 1 weeks
More than 1 year but less than 3 years At least 2 weeks
More than 3 years but less than 5 years At least 3 weeks
More than 5 years At least 4 weeks
Where an employee is over 45 years of age and has at least 2 years’ continuous service, the employee will be entitled to one additional week of notice.
Employees who are made redundant and who are employed in workplaces with 15 or more employees will also be entitled to redundancy pay as determined by the Australian Industrial Relations Commission in the 2004 Redundancy Test Case:
Length of continuous service Redundancy pay
Less than 1 year Nil
1 year and less than 2 years 4 weeks’ pay
2 years and less than 3 years 6 weeks’ pay
3 years and less than 4 years 7 weeks’ pay
4 years and less than 5 years 8 weeks’ pay
5 years and less than 6 years 10 weeks’ pay
6 years and less than 7 years 11 weeks’ pay
7 years and less than 8 years 13 weeks’ pay
8 years and less than 9 years 14 weeks’ pay
9 years and less than 10 years 16 weeks’ pay
10 years and over 18 weeks’ pay
10. Long Service Leave
As part of its commitment to national industrial relations laws, Labor will work with the States to develop nationally consistent long service leave entitlements. In the transitional period, Labor’s guaranteed entitlement to long service leave will reflect the long service leave arrangements currently contained in State laws or federal awards and federal agreements. Under Labor, long service leave entitlements accrued under these arrangements will be protected in the transition to nationally consistent long service leave entitlements so Australian employees are not disadvantaged.
Modern, simple industry awards
Additionally, Forward With Fairness states that Labor understands that some minimum terms and conditions will vary depending on the needs of particular industries, occupations or enterprises and cannot be reduced to a ‘one size fits all’ approach.
Labor believes that awards are an important safety net and an effective floor for collective bargaining. Collective agreements will be able to override award entitlements provided the agreement means employees are genuinely better off overall.
Under Labor, awards may build on and also provide industry detail on Labor’s legislated minimum standards. Labor’s new awards may contain a further 10 minimum employment standards:
1. Minimum wages. This will include skill-based classifications and career structures, incentive based payments and bonuses, wage rates and other arrangements for apprentices and trainees;
2. The type of work performed, for example whether an employee is permanent or casual, and the facilitation of flexible working arrangements, particularly for workers with family responsibilities, including quality part time employment and job sharing;
3. Arrangements for when work is performed, including hours of work, rostering, rest breaks and meal breaks;
4. Overtime rates for employees working long hours;
5. Penalty rates for employees working unsocial, irregular or unpredictable hours, on weekends or public holidays, and as shift workers;
6. Provisions for minimum annualised wage or salary arrangements that have regard to the patterns of work in an occupation, industry or enterprise as an alternative to the payment of penalty rates, with appropriate safeguards to ensure individual employees are not disadvantaged;
7. Allowances including reimbursement of expenses, higher duties and disability based payments;
8. Leave, leave loadings and the arrangements for taking leave;
9. Superannuation; and
10. Consultation, representation and dispute settling procedures.
Under Labor, award coverage will not be extended to cover those who are historically award free, such as managerial employees.
In setting and adjusting awards, Fair Work Australia will be required to:
• ensure awards are simple to understand, so that employees and employers have certainty regarding their rights and obligations;
• ensure awards promote the efficient performance of work, having regard to the nature of the work and the characteristics of the workforce covered by the award; and
• encourage work-family balance.
Awards will be reviewed every four years by Fair Work Australia to ensure they remain relevant to those covered.
A Rudd Labor government will also complete the task that the Howard government has found too hard. Labor will provide Fair Work Australia with the resources to simplify and reduce the number of awards operating in Australia. This will be done in a timely manner, free from political interference and with consideration of the views of those affected.
Labor’s message on individual agreements is clear. AWAs will go but individual agreements will still remain part of Labor’s integrated Industrial relations system.
There shall be no return to over-regulation and inflexibility.
I wrote a cover note to Chris Bowen which read:
Thank you for the opportunity to contribute through you to the policy debate. As discussed last night, the attached is a draft of a policy position on “Fairness and Individual Agreements”.
When I began this exercise I thought that Labor should draft our “individual agreements policy”. But the more I thought about it, the more I thought it looked too cute, and we would find it hard to explain. I thought again about Golda Meir’s dictum: “[In politics], if you have to explain, you’ve already lost”.
I feel very strongly that Labor’s message must be fair, clear and strong. Labor’s message on individual agreements should be this: AWAs will continue, but they must be fair. Labor will apply a ‘no disadvantage test’ to low paid workers.
I understand from what you said last night that you favour a slightly different approach.
In the politics and marketing of our policy, I think AWAs should stand. That’s a significant difference in approach. So I favour your suggestion that my recommendation and mine might both go to the Leader.
I would also like to speak to Kevin about this.
This would be the last time I wrote something on industrial relations reforms. By 2007 I was well out of date, long since having any direct involvement in industrial relations matters, 13 years on from when I was Secretary of the Labor Council of NSW.
Bowen, whom I knew well, wanted to know my thinking on how to ensure that flexibility and fairness could be married. The above was my invited suggestion, written before Labor was elected on 24 November 2007.
I suspected that Rudd and Bowen wanted confidential input from someone other than the Shadow Minister.
In what I wrote, I crafted my thoughts and shopped the draft to a few trusted confidants before finalising.