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Before calling for reform, let’s get our Fair Work facts straight

In debate over the Qantas IR dispute, the truth of the Fair Work Act is the elephant in the room. AAP

The drawn-out dispute between Qantas and unions that led to the airline’s entire fleet being grounded over the weekend has sparked calls for reform of Australia’s industrial relations laws.

Business leaders, including former Patrick Stevedores boss Chris Corrigan, have complained that the Fair Work Act favours unions and has led to an increase in industrial action.

Union leaders have argued that the Act, which replaced the Howard government’s WorkChoices legislation in 2009, gives employers disproportionate power in workplace negotiations.

Economist Judith Sloan, The Australian’s Paul Kelly and ACTU Secretary Jeff Lawrence have all pointed to apparent deficiencies in the the Act this week, but how accurate are their assertions?

University of Sydney Senior Lecturer in Law Shae McCrystal tests the veracity of their claims.

Judith Sloan, a Westfield Group director and former commissioner of the Productivity Commission, wrote in the The Australian on Wednesday:

“The act says nothing about the types of issues that can be demanded by unions as part of enterprise bargaining. This contrasts with the prohibited-content clause in the previous act.”

This is not true. There are significant content limitations on the types of issues that can be demanded by unions as a part of enterprise bargaining under the Fair Work Act. While they were slightly wider under WorkChoices, they are still reasonably stringent under the Fair Work Act.

The Qantas grounded left thousands stranded. AAP

The main restrictions are that unions can only seek to include matters in an agreement that “genuinely pertain to the relationship between an employee to be covered by an agreement and the employer to be covered by the agreement”; or matters that “genuinely pertain to the relationship between an employer to be covered by the agreement and a union that will be covered by the agreement”.

The “matters pertaining” provision has a long industrial pedigree and dates back to the conciliation and arbitration system concept of “industrial matters”.

It means that the claims may only be about the relationship of an employer as an employer and the employees as employees. In other words, claims can not extend to matters that affect employees in other aspects of their life, and is generally considered to prevent claims extending into matters of managerial prerogative (which can be a slippery concept).

On the question of contracting out, the Federal Court in Wesfarmers Premier Coal Ltd v AMWU (2004) has held that provisions that restrict or qualify an employer’s right to use independent contractors are not matters that genuinely pertain to the relationship between an employer and employees because they are not sufficiently related to the employment relationship.

The primary difference between WorkChoices and Fair Work on this point is that under WorkChoices you could not seek to include any term that dealt with contracting-out.

Under Fair Work, you can seek a term which deals with contractors as long as it does not “restrict or qualify an employer’s right to use contractors”. Unions could, for example, seek a clause under which an employer agrees to consult with a union over a contracting-out decision.

In addition to this provision, which is restrictive in and of itself, there are significant restrictions around content requests by unions in relation to right of entry for unions, strike pay, bargaining services fees, strike action and terms that would otherwise breach the adverse action provisions under the Act.

“There is no doubt that Qantas would have preferred to move to conciliation and arbitration without recourse to locking out its employees and grounding the fleet. But the Fair Work Australia decision revealed that the unions’ actions alone would not have formed the basis for termination.”

The union’s actions alone may not have formed the basis for termination, but this does not mean that Qantas had to actually ground its fleet in order to get a termination order. Under the relevant section of the legislation, FWA may make an order terminating protected industrial action that “is threatened, impending or probable”.

In this case, all Qantas had to do was threaten to take the industrial action, without actually grounding its fleet, and then make an application to FWA (which Qantas had the right to do ITSELF under the Act) for a termination.

Labor scrapped WorkChoices after the 2007 election. AAP

Perhaps Qantas was concerned that FWA would have thought it was bluffing, but Australian air travellers paid a high price because Qantas did not want to take that risk.

The Australian’s Editor-at-Large Paul Kelly wrote in The Australian on Wednesday:

“The Fair Work Act has changed the industrial relations culture and bargaining in three critical respects. First, it shifts statutory power from employers to unions. Non-union enterprise agreements are virtually impossible. Individual contracts are banned. Union-run enterprise agreements are the name of the game.”

It is not fair to say that the Fair Work Act has created these conditions.

All agreements under the Act are ‘non-union’ agreements. Agreements under the Act are negotiated between an employer with the bargaining representatives of their employees (which may or may not include a trade union) and are voted upon and agreed to by the employees – not the bargaining representatives.

When an agreement is made, it is made between the employer and the employees. A union that was a bargaining representative may subsequently opt to be covered by the agreement.

So, agreements that do not involve any union bargaining representatives at the negotiating table continue to be made in workplaces where employees either are not union members or, if they are, where they choose not to be represented by a union.

With respect to individual agreements, the Act removed individual statutory agreements. Nothing stops an employer from engaging workers on a common law contract at above award rates.

Common law individual contracts are not – and have never been – banned. The controversy about removing Australian Workplace Agreements (AWA) is that under WorkChoices, AWAs could be signed that lowered workers’ award pay and conditions, or that gave some employees in a business lower rates of pay and conditions than an enterprise agreement.

So, it is not that you can’t individualise employment arrangements for individuals – you can do it through a contract that has over award or agreement terms and conditions, or through an agreement or award flexibility clause. But you can no longer single out individual employees and pay them less than award or collectively determined pay and conditions.

ACTU Secretary Jeff Lawrence was quoted in the Australian on Wednesday as saying:

“The position is now if you’re a multinational employer like Qantas and you lock out your workers, you can get arbitration.

But if you’re a low-paid worker or workers pursuing a claim and the employer says no to it, you can’t get arbitration. I think the role of arbitration needs to come into particular focus.”

This is an overstatement. The essential services termination provision used by FWA in the Qantas dispute has been in various iterations of federal legislation since 1993 and is rarely used.

Jeff Lawrence says the Act favours employers. AAP

One decision by a FWA Full Bench in a very exceptional set of circumstances, such as the national nature of the industry and the extent of damage and harm, will not lead to a slew of decisions.

FWA and its predecessor, the Australian Industrial Relations Commission have been very careful about their use of the provision.

In the Hunter Valley Coal Mine Dispute in the 1990s, an employer sought arbitration during a widespread industrial dispute and it was not granted – a decision upheld at the time by the High Court.

If this was a new provision, or if there was no precedent for careful use of the provision in the case of applications for termination (suspension is a different matter – some FWA commissioners have been very liberal in their interpretation of the provision when it comes to suspending industrial action) then I would be concerned.

However, lockouts in most industries don’t have the flow-on effects that a lockout in the airline industry has. I think we will continue to see a very careful approach to termination by FWA, and that such a case is unlikely to arise again in the near future.

Parties can also agree to private arbitration or put a compulsory arbitration clause in their enterprise agreements, but employers resist this because it means the union can ask for arbitration.

Arbitration is also available under another provision of the Act (section 423) when significant economic harm to the bargaining parties can be established (although I have simplified the Act here).

I agree that there is room for a general discussion about the role and availability of arbitration under the Act, but not because I think that this FWA decision has opened up any floodgates.

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