Australia: Productivity Commission releases draft report on its Workplace Relations Framework Inquiry

In December 2014, the Federal Government asked the Productivity Commission (Commission) to conduct an inquiry into Australia's workplace relations framework (WR Framework). After conducting public consultations earlier in the year, the Commission has today released its draft report of recommendations.

The Commission's objective was to assess the performance of Australia's WR Framework, including the Fair Work Act 2009 (Cth) (FW Act) and its associated institutions and instruments, and make recommendations as to how the WR Framework can be improved. The Commission has considered a number of topics including the minimum wage, National Employment Standards, modern awards, penalty rates, the bargaining framework and the protections under the FW Act.

Overall, the Commission has found that Australia's WR Framework 'needs repair not replacement'.

Draft recommendations

Highlighted below are some of the areas where the Commission has recommended reform:

• Reducing the penalty rates for work on a Sunday in the hospitality, entertainment, retail, restaurant and café industries (HERRC Industries) where the work is not overtime or shift work. The Commission recommends that the Fair Work Commission (FWC) introduce the new penalty rates for HERRC Industries during the current modern award review process, and include a period of one year's advance notice. This means that any changes in the penalty rates for HERRC Industries are unlikely to commence before 2017.
• Changing the unfair dismissal regime to prevent an employee from receiving compensation where they have been dismissed with reasonable evidence of persistent underperformance or serious misconduct. This recommendation was made on the basis that procedural errors of an employer should not result in reinstatement or compensation for the employee, but should, at the FWC's discretion, result in counselling, education or financial penalties for the employer. It was also recommended that the FW Act be amended to remove the emphasis on reinstatement as the primary remedy for unfair dismissal. The Commission also recommended that if these changes are made, the Small Business Fair Dismissal Code should be removed from the FW Act.
• Amending the FW Act to clarify the meaning and application of a 'workplace right' in respect of general protections claims. In particular, the Commission has recommended that the FW Act should be amended to define how the exercise of a workplace right applies where a complaint or inquiry is indirectly related to the person's employment, and to require that complaints are made in good faith. Further, it is recommended that an exclusion be inserted into the general protections provisions for complaints that are frivolous and vexatious.
• Amending the FW Act provisions relating to enterprise agreements to replace the 'better off overall' test with a new 'no-disadvantage' test, which the Commission believes will be more workable for employers. The current 'better off overall' test requires that all employees are better off overall under an enterprise agreement than they would be under the relevant modern award. Whereas the proposed 'no-disadvantage' test involves an assessment of whether an enterprise agreement makes a 'class of employees' no worse off overall under the enterprise agreement.
• Amending the National Employment Standards so employers are not required to pay leave or additional penalty rates for any newly designated State or Territory public holidays. Additionally, the Commission has recommended that as part of the next four yearly reviews of modern awards, the FWC incorporate a new term into all modern awards that allows for an employer and an employee to agree to substitute a public holiday for an alternative day.
• Splitting the FWC into two divisions, a Minimum Standards Division and a Tribunal Division. The proposed Minimum Standards Division would be responsible for minimum wages and modern awards. All other functions of the FWC would remain with the Tribunal Division. The members of the Minimum Standards Division would have experienced backgrounds in economics, social science, commerce or equivalent disciplines and have well-developed analytical capabilities.
• Amending the FW Act to remove the requirement for the FWC to conduct four yearly reviews of modern awards, and adding a requirement that the Minimum Standards Division review and vary awards as necessary to meet the modern award objectives.
• Provide the Fair Work Ombudsman with additional resources to investigate and audit employers suspected of exploiting migrant workers. Further, the Commission has recommended that the Migration Act 1958 (Cth) be amended so employers found guilty of exploiting migrant workers can be fined at least the value of any unpaid wages and conditions, in addition to the existing penalties under the migration legislation.
• Amending the FW Act so the FWC may suspend or terminate industrial action where it is causing, or threatening to cause, significant economic harm to the employer or the employees who will be covered by the agreement. This will be a change from the current provisions that allow for suspension or termination of industrial action only when both parties are affected.
• Amending the FW Act so that unions which:
• • do not have members employed in the workplace; and
  • are not covered by, or are not currently negotiating, an enterprise agreement at the workplace,
  • would only have a right of entry for discussion purposes for up to two occasions every 90 days. This is aimed at overcoming some of the complexities and the potential for abuse of the current right of entry provisions in the FW Act.

In addition to the above recommendations, the Commission has also suggested that a new form of agreement, referred to as an 'enterprise contract', be implemented to bridge the gap between enterprise agreements and individual arrangements. It is proposed that enterprise contracts would be a statutory agreement, set out in a standard form and lodged with the FWC. This would seem quite appealing to small businesses as it would offer the advantages of enterprise agreements without the associated procedural complexities.

Next steps

The Commission's recommendations present a strong basis for reform of the current WR Framework. However, this is only a draft report, with the final report of the Commission due to be released in November 2015.

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