Features Australia

Out of Commission

The Fair Work Commission cries out for reform

28 February 2015

9:00 AM

28 February 2015

9:00 AM

The starting gun on industrial relations reform has been fired. The Productivity Commission is about to begin a comprehensive inquiry into workplace matters; the Coalition Government is promising to look at industrial relations in a second term; and the chorus of both big and small business has begun over penalty rates and broader workplace regulation.

However, even the most steely spined reformer is nervous. Highly regulated labour markets are widely recognized as anachronistic in a modern open economy such as Australia’s. Few people outside the public sector are members of a union, or would even know what an industrial award was. Yet, the trade union movement need only whisper the words Work Choices and political advisers fall over like Superman in front of kryptonite.

Clearly, winning the fight for reform will not be easy, but as long as our productivity is stalled and most of our industries are less competitive than their international cohort, industrial relations cannot be ignored. Despite the need for change, there is a whiff of defeatism in the air. There are those who understand the case for reform, yet are reluctant to pick a fight with workers; or bemoan the lack of evidence for poor workplace outcomes.

However, one of the strongest forces historically against the liberalisation of the labour market lies impotent. The Fair Work Commission (FWC) is a shadow of itself. Previous political debates have invoked the name of the ‘independent umpire’, yet after almost a decade of blunders and self-sabotage, the Commission stands as a justification for reform, not a guardian for the status quo. Make no mistake, the Commission is pragmatic and resilient. Its origins hail back to Federation, with Paul Kelly arguing that its role was embroidered into the ‘Australian Settlement’.


Yet, ‘whom the gods would destroy, they first make mad.’ Under the Commission’s watch the Health Services Union has become a punch line for a joke. But it is not just the Carry On film storylines that have embarrassed the Commission in recent times. Its handling of economy wide issues like superannuation have been equally maddening. For many employees, if they do not nominate a super fund for themselves, the Commission decides where these contributions go. To help them make this decision, the Commission established an expert committee, which is sensible given total superannuation assets are worth more than $1.8 trillion.

First, the Commission was forced to remove its panel members due to their conflict of interest. They were subsequently replaced by a former ACTU official and the Commission President, which compounded the financial services sector’s criticism, arguing a lack of specialised skills in superannuation. Superannuation joins a list of matters that a growing number consider as simply too important to be dealt with through this jurisdiction. When you cast your mind back to the early 1980s, when the Fraser government pursued its wage freeze as a response to its most pressing economic conditions, the Arbitration Commission was an integral part of the economic infrastructure. That cannot be said of today’s economy.

The predecessors of the FWC used to sit at the apex of what Gerard Henderson called the Industrial Relations Club – a cosy environment of unions, government, and employer organisations that prescribed all aspects of the workplace in the latter part of the 20th century. The Club may be gone; the tribunal remains.

When I appeared before this jurisdiction in the early 1990s (on behalf of employers), I wrote in a submission that the then Australian Industrial Relations Commission was in fact a ‘price setting tribunal’. This crass comment somehow riled the judicial prerogatives of those that considered themselves judges. The reaction from the bench of the day to what I thought was a self-evident observation was searing. What I did not realise in my naiveté was that to accept that their decisions inhabited the real economy was to bring the edifice tumbling down.

Since the Harvester Judgement of 1907, industrial tribunals have operated under the conceit that their decisions did not reduce employment; affect profits; and in some cases put companies out of business. Instead of dealing with supply and demand, this jurisdiction tried to set wages that met the lofty concepts of ‘the normal needs of an average employee, regarded as a human being in a civilised community’, regardless of any business’s capacity to pay or the displacement affect in the labour market.

The father of this jurisdiction, Justice Henry Bournes Higgins, saw himself as crafting a new ‘province of law and order’ perhaps as Lord Denning was to do in equity. However, history may prove this to be a vanity. Higgins could not even rely upon his brother judges. Justice Jim Staples in 1980 gave a lie to this canon by revealing in his judgements that rather than any scientific endeavour, industrial relations was merely a personal view. He went as far as to pursue a literary flurry giving wool trade storeman a wage increase (beyond what they sought) based on a random number. He wrote in his judgement: ‘I shall simply select a figure as Tom Collins (author of Such is Life) selected a day from his diary and we shall see what turns up.’ Although this sealed the end of his career, it also signalled that as far as any new province of law and order was concerned, the jig was up.

When confronted with a fork in the road, the Commission always seems to choose the fork. Their bizarre decisions are proving vexing for the Federal Government. In response to successful unfair dismissal claims by employees like the ferry driver who failed a drug test after a crash; a childcare worker that smacked kids; and a worker who urinated all over his workplace – the Government is considering a special jurisdiction to appeal FWC decisions. The frustration is understandable, but an unnecessary level of regulation does not get solved by another level of regulation and oversight.

It is time to change the system; to one where the workplace is driven by productivity, and performance is rewarded. The Commission stands, Ozymandius like, a once towering figure, but now broken and stranded in an empty desert.

Robert Skeffington is Managing Director of strategic communications firm FTI Consulting

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