Flat White

We need industrial relations reform for post coronavirus recovery

12 July 2020

5:00 AM

12 July 2020

5:00 AM

Prime Minister Scott Morrison has announced there will be an overhaul of Australia’s industrial relations laws. He wants business groups and unions to come together and find solutions to keep people in jobs and even suggested “we’ve got to put down our weapons”.  It reminds me of the famous battle at Thermopylae 2,500 years ago where the invading Persians demanded that Spartan King Leonidas put down his weapons.  Leonidas replied Molon abe  — in other words,come and get them.   

If recent Liberal Party history is any indication when it comes to fighting the left and taking on the unions the government may face its own molon labe moment.   

The primary legislation that underpins the industrial relations system in Australia is the Fair Work Act.  The FW Act was implemented by the Rudd-Gillard Labor Government following its election victory in 2007.  The FW Act replaced the existing legislation (the Workplace Relations Act 1996) and included many of the ‘Work Choices’ amendments that were implemented by the Howard Liberal Government in 2006.   

It only takes a quick analysis of our current system to see how existing IR laws destroy our productivity.   

Take modern awards. Despite the intention to simplify the award system, modern awards remain incredibly complex The complexity is evidenced by the fact that the Fair Work Commission has so far taken over six years to review and make some changes to the awards.  I predict this review will continue for at least another year.   

The Building and Construction General On-site Award is currently 148 pages in length and contains approximately 200 individual pay allowances that are in addition to the extensive and complex pay classification structures It is unrealistic to expect small businesses to understand the complexities of modern awards.   


The outdated notion of ‘penalty’ rates prevents employers and employees in most industries from agreeing to undertake work at mutually beneficial times More generally, the penalty rate provisions in many awards do not reflect current community behaviours and expectations. Many industries need to operate over seven days but cannot due to award constraints. 

All modern awards require part-time employees to have their precise hours of work confirmed in writing upon commencement of employment Where a part-time employee works outside of these times, overtime provisions apply.  These provisions impose an unnecessary burden on employers who have a genuine need to engage labour where there are fluctuating workloads.   

The Building and Construction On-site Award also requires employers to pay redundancy pay to full-time and part-time employees on termination of employment for any reason (other than misconduct or refusal of duty). This means employees receive redundancy pay even when they resign.   

Next is enterprise agreements. The enterprise bargaining system does not provide employers with sufficient flexibility to make agreements that are genuinely reflective of their particular enterprise.  This is mainly because the FWC applies the better off overall test (BOOT) in a restrictive and inflexible way.  This makes it difficult for employers to depart from the terms of the award, even if those terms are not relevant to their particular enterprise.  The current system also allows unions to challenge the approval of enterprise agreements, even where they have not been involved as bargaining representatives.  The CFMMEU, in particular, will often challenge agreements that have been voted in by a majority of employees in good faith.  

These challenges often cause extensive delays.  BHP recently spent approximately 15 months putting in place enterprise agreements across its labour supply companies. The agreements were eventually approved by the FWC in January 2020, but the unions appealed and a Full Bench overturned the approval of the agreements in May 2020.  The company, therefore, has to effectively start the process again from scratch.  Another example is the Hungry Jack’s Enterprise Agreement that was eventually approved by the FWC in April 2020 after being lodged for approval by the company in May 2019. 

Also worth mentioning is the issue of unfair dismissal and general protections. All employees who earn less than the high-income threshold (currently $148,700) and who have been employed for six months are “protected” from unfair dismissal (this is 12 months for small business employers).  If dismissal occurs, even where an employer has done everything it can to demonstrate that it had a valid reason and complied with all procedural fairness requirements, the employee can, and often will, make an unfair dismissal claim.  In that event, the employer has very limited options:  either incur significant legal costs and put up with the time, stress and inconvenience of defending the matter at a hearing, or pay ‘go away’ money at conciliation. 

Employees who are not “protected” from unfair dismissal (and also those who are) can alternatively bring a general protections claim against their employer.  These claims make it unlawful for an employer to take “adverse action” (such as termination or other detriment) against an employee There is a reverse onus that applies to GP claims, and there is no cap on compensation.  

Further, on the topic of union right of entry, union officials who hold entry permits can enter worksites under both the FW Act and state work, health and safety legislation.  It is not necessary for officials to have this right, as the relevant legislation can be enforced by taxpayer-funded government regulators. This includes the Fair Work Ombudsman, the Australian Building and Construction Commission and the State and Territory SafeWork regulators These laws are exploited by some union officials.  The WHS laws allow officials to enter a site without prior notice for a “suspected contravention” of the Act.  This is a very low threshold and officials with knowledge of work environments, in particular industries like construction, are able to fabricate a basis for entry.   

Any failure by a site occupier to refuse or delay entry can result in significant penalties and/or the inconvenience and cost of defending court proceedings.  The CFMMEU, in particular, is willing to, and has, commenced Federal Court proceedings against a number of site occupiers for such refusal. 

The ACTU and Sally McManus were suffering from relevance deprivation after Scott Morrison’s election victory but this new government initiative has put them back in the game.  This was a lifeline that perhaps shouldn’t have been given.  If Australia wishes to lift its productivity, strengthen its economy and put people back to work we need a different approach to this problem.  By all means talk, but the government must be willing to fight fire with fire, in a non-traditional way- Trump-like if necessary. Any failure to do so could mean after “putting down its weapons” the government would leave the negotiating table with trade-offs that leave it in a worse position.   

Time will tell, but the modern conservative lacks fire in the belly is hesitant to take on unions and reluctant to take back control of institutions.  Think “climate change.   

Ian Markos is the CEO of Master Builders, South Australia.

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