It is worth noting that under the original timetable of the Hon Tony Burke MP for the Closing Loopholes Bill, it would have been passed as law this week.

Instead, in the face of Senate scrutiny, the Bill was pushed into Committee for examination until February 2024. In the time since, fundamental problems with the Bill have been identified (as have been extensively covered in this blog and media commentary).

This week, the Australian Government tabled proposed amendments aimed at a tidy up. But key amendments fail to resolve the issues they purport to address. And others introduce new significant measures not contemplated by the initial Bill. We explain below.

The tidy up is ineffective

For example, let’s look at the changes in relation to two of the hottest issues:

  1. “Regular” casuals: The Bill proposed wholesale amendments to the casual employment test (see our blog here) imposing a complicated multi-factorial test that had the potential to disrupt casual employees from working regular days. After a long negotiation with the AHA, the Government claimed it had reached agreement, such that casuals with regular patterns of work could remain casual. The proposed amendment to achieve this is: regular pattern will not “automatically” mean they are not casuals but does not mean that they are casuals. What does that mean?
  2. “Service-based” contractors: The labour hire provisions of the Bill introduced a new regime for determining when contractors (as opposed to employees) could be required to be paid the same rates as employees who perform like work. The test was inexplicably broad and immediately acknowledged by practically everyone, including Minister Burke, as going too far and risking capturing all sorts of service providers (see our blog here). The proposed amendment here makes things better, but remain obscure. On the one hand, it says that the Fair Work Commission (FWC) must not make orders where a work arrangement relates to the provision of service rather than the provision of labour, but on the other hand, it requires the FWC to have regard to a range of factors, not about the services being provided, but rather the “employment-like” arrangements in which work is performed. So, the test is aimed at an objective skewed by the lens through which it is assessed. Why is there not consideration of the services being performed?

These are just two examples of the problems that have received most significant attention since the Bill was first tabled. Both these amendments are designed to achieve a simple outcome but fail to do so, leaving contestable issues and uncertainty. One could be forgiven for thinking that this is deliberate, as simple drafting of both measures would not be hard to achieve. A more detailed review of the legislation and the amendments reveals a longer list, which we will cover in future posts.

Bargaining determinations: all one way

The amendments include further significant changes to the bargaining regime introduced only last year.

Most concerning is the proposed amendment to the arbitration rules after the FWC determines that bargaining is intractable. A new provision will mean that that any term determined by the FWC must not be “less favourable” to each employee covered by the agreement and any union than the terms of any current enterprise agreement.

So there’s no give and take here – it’s all one way. Employees and the union must not go backwards from their position under any prior agreements. This is an extraordinary measure that fundamentally alters the dynamics of bargaining.

Intractable disputes are almost invariably about difficult issues. Employers commonly want to achieve changes to existing terms and conditions as part of any new deal. The objects of the Fair Work Act 2009 require a fair and flexible framework for collective agreement making to deliver productivity. How unfair that an employer, particularly one trapped by conditions in an outdated enterprise agreement, should ever be able to achieve any such reforms.

The effect of this provision is that militant unions can hold out in bargaining to prevent any such changes (all the while taking protected industrial action). And do so without any risk that an unreasonable position on their part could be rectified by the FWC (even where the FWC considered that it was otherwise fair and appropriate to make changes to existing terms of enterprise agreements). The reform would drive ambit claims and disincentivise any reasons for unions or employees to make concessions. There would now be no risk of them being imposed. The result for the employer: stuck with restrictions in current agreements with no mechanism to address them and where bargaining becomes about managing downside risk and cost.

Who is not listening to the umpire’s decision now? But why bother when it is so much easier to rig the game from the start so the umpire cannot decide against you. More to follow on this change and its impact.

This instalment of our series on the Closing Loopholes Bill considers new measures aimed squarely at union empowerment.

The Bill mandates rights for union workplace delegates that must be included in all Modern Awards and future enterprise agreements. As a minimum, these rights will be to:

  • represent members and non-members who are eligible to join the union;
  • “reasonable” communication with members and prospective members;
  • “reasonable” access to the employer’s facilities; and
  • for all except small businesses, “reasonable” access to paid (delegates) training.

The “loophole” these unprecedented new laws intends to close is unstated. Because there isn’t one: this is a lifeline to provide unions universal representation in workplaces regardless of their declining membership or employee choice.

The context

We know that union membership has been declining in real terms over many years. It’s hit an all-time low of 8.2% in the private sector.

Unions say they need more rights to arrest this decline. But it might also be true that the value proposition to prospective members is not attractive enough. Perhaps all employers aren’t “bad” after all. Perhaps the strong suite of ever-growing individual rights (more leave, more protections against discrimination and harassment, robust safety laws, and well-resourced regulators) makes unions less relevant. Perhaps the positive employee engagement strategies many employers adopt mean unions are less needed. And perhaps the way some unions conduct themselves is unappealing to workers.

Whatever the cause, fewer and fewer employees across the labour market choose to join and be represented by unions.

This makes unions less relevant. Pretty much every unionised workforce comprises three groups:

  • Group 1: Union members who look to leadership from the union on most workplace issues.
  • Group 2: People who want to make sure they are treated fairly and get good conditions, some of whom will be members of the union, but many will not.
  • Group 3: People without interest in joining the union or participating in its activities. In some industries, a subset of Group 3 is those who join a union because they are coerced into doing so. “No ticket, no start”, as they say.

The proportions of each group vary significantly across different workplaces.

Traditionally, unions engage with employers on behalf of their members. Falling membership means, even in unionised workplaces, Group 1 is commonly only a small proportion, well short of the majority. Unions no longer speak on behalf of enough people in workplaces to achieve their objectives. They no longer represent the majority for the purposes of processes like enterprise bargaining and raising workplace disputes. So, getting employee interest in union business, such as “union rights” clauses in agreements (aimed at delivering the type of rights the new laws will mandate), is getting harder.

This is why the statutory extension of workplace delegate rights to represent non-members (eligible to join the union but have chosen not to) is essential for them.

Unions would only need one member in any workplace to trigger these rights. With it comes a right to ‘represent’ and speak on behalf of all workers eligible to join the union (members or not) on any issue and to communicate with all such workers. Effectively, a right to intervene whether the employees directly involved want them to or not.

Why wouldn’t you want to be a workplace delegate? Paid time during working hours to communicate and represent, and some additional time off for training with the union.

The reality on the ground

Unions talk about “campaigns” and “organising”. What will the new laws look like on the ground?

Meet our example employer, FoodCo. The union endorses three union delegates representing different groups in FoodCo’s manufacturing business: Daisy Delegate, Doug Delegate and Dave Delegate. Each delegate exercises their new rights as follows:

  • Daisy Delegate books a meeting room. She does so to make a call to a union official. She does this daily. Her supervisor asks her to do this during breaks, but that’s not convenient for the union. The calls last up to 30 minutes. There’s no apparent outcome other than FoodCo is down a worker on the production line. A cause for delay. A cause for overtime to be worked as a result.
  • Doug Delegate also conducts regular ad-hoc meetings during the afternoon shift. He’s been asked to do this in the tearoom, but there is no whiteboard there. So, the meetings occur in an office building on an adjacent site. Production is regularly interrupted. He’s asked to work with the supervisor to conduct meetings in a less disruptive way. He does so for a few days and then returns to ad hoc meetings. He says this is the only way he can talk to workers. And sometimes he forgets to book the meeting room as is expected of anyone else. On one occasion, he wouldn’t leave a room that management had already booked.
  • Dave Delegate wants to meet with the two others for two hours. But he’s on the night shift. So, he wants to meet with them as part of ordinary hours. This enables him to receive overtime. They want the boardroom, a speaker phone, and no other rooms booked nearby lest their calls can be overheard.

All this calls into play what’s “reasonable”. But “reasonableness” can only provide a partial answer. What can’t be overcome is the regular attempts to press management’s tolerance in the quest to assert “delegate rights”, which is in and of itself draining and disruptive.

This will happen because the changes require employers to “deal with delegates” and “not hinder or obstruct delegates exercising their rights”. Employers face liability for doing the wrong thing. There is no such sanction for delegates who overstep the mark in the exercise or purported exercise of their powers.

Sure, the scenarios above will not be universal. But neither are they fanciful: they are based on real disputes under union rights clauses in existing enterprise agreements. And there are countless other examples.

The upshot

Five key implications follow from these measures:

  1. The ability of an employer to limit delegate time on union business (as opposed to what they are paid for) will be compromised. They will be paying employees whose attention will necessarily be diverted elsewhere and antithetical to the interests of the employer and, potentially, employees.
  2. Expect to see more delegates on the floor. Working under union direction will be more fun for some Group 1 employees – especially if the boss pays.
  3. Work will be more prone to interruption. Unions have the potential to have on-the-job discussions with employees during paid time.
  4. Non-union members will be caught in the wash of workplace issues they have no interest in.
  5. The question of whether and to what extent an employer can discipline an employee who misbehaves whilst exercising “delegate rights” will again arise – an issue ripe for union litigation against employers as they seek to press the boundaries in reliance on these new rights.

Where to from here?

That a broad legislative mandate is required to compel employers and non-members to recognise and deal with union representatives is telling of a much deeper problem for the union movement: that not enough workers want them involved in their affairs. How workers who have chosen not to be union members will react to this forced intervention remains to be seen.

Of course, unions will still want members; they are businesses, too, and that is how they make money. If past attempts to try and deal with that problem by stronger statutory rights (e.g. a right to meet in break rooms) is any guide, these representative rights are unlikely to win workers over to join them.

And what happens to freedom of association when a union can speak and agitate “on my behalf” even though I disagree with the union’s position and I am not a member?

You know, the other side of freedom of association.

Anything but casual…

In the first of our series examining the Closing Loopholes Bill introduced into Parliament yesterday, we look at the new measures for casual employment.

The Orwellian title of the Closing Loopholes Bill foreshadows its intentions: casual employment is double-plus-ungood. Premised on the doublethink notion that casual employment is a bad moon on the rise, the Bill proposes wholesale changes to the casual employment test, including measures to protect casuals from their own choices.

The objective

The stated objective is to close the “loophole” of what the Minister has called “permanent casual employment”, by introducing a new “what’s really going on” test. For more information, see the article in The Australian Financial Review Labor is closing the permanent casual worker loophole.

Accepting this is the genuine policy intention, the test of the measures is: do they do what they say, and will they work as they want?

We have serious reservations.

The new test

In their steely determination to place choice about status in the hands of employees, and to prevent abuse of casual employment, the Government has devised a test that:

  1. Requires employers to evaluate and re-evaluate the “true nature” of each casual’s employment circumstances on an ongoing basis;
  2. Introduces a complex definition based on the absence of something (A Future Advance Commitment), effectively requiring employers to disprove a negative to defend their decisions;
  3. Defines the absence of advance commitment by a multi-factorial test of relative considerations, none of which is decisive, but any of which could be in a given case;
  4. Relies on a combination of abstract novel terms, that are very much in the eye of the beholder: “real substance”, “practical reality”, “true nature”, “regular” but not uniform: who knows what they mean sitting here;
  5. Introduces a right for casuals to request conversion every six months and requires employers who wish to refuse to provide detailed reasons informed by the test and based on the circumstances of each employee: administratively burdensome but very convenient for later evidence collection;
  6. Continues the existing obligations for employers to offer conversion after 12 months; and
  7. Creates ongoing liability for misrepresentation of casual arrangements at any point in time, including penalties and back payments (think sham contracting for casuals – so don’t get it wrong).

These measures, however well-intentioned, risk having precisely the opposite effect. Driving uncertainty and insecurity for those people who actually want, and feel well-served by, casual employment.

We will explain why.

The practical implications

Our concern is that the thinking does not take into account how businesses manage risk in the real world. The practical reality is that by failing to define clearly what casual employment is, and using a complex test based on what it isn’t, any ongoing casual relationship is going to carry substantial risk for businesses.

Simply put: too uncertain + serious consequences = high risk. Well-resourced employers will identify and take steps to mitigate this risk. As they do with any risk. And how can a small business owner possibly hope to apply more than 10 abstract notions, to assess the “real substance” and “true nature” of their casual employees on an ongoing basis?

This means that the use of casual employment will change at the initiative of employers, regardless of the choice exercised by employees. It will not result in casual employees having the choice of permanent employment in all circumstances. Some employers will avoid casual employment altogether. Others will change their work practices to reduce the risk.

The risk profile created by the Bill means employers must manage their affairs to:

  1. Avoid regular patterns: Employees will not have the certainty of working on particular days, employers will be compelled to change it up. To ensure not just that there is not a uniform pattern of days but a sufficiently disrupted pattern to avoid the test of “regular” but not “uniform”.
  2. Avoid any future commitments: This is not focussed on the casual with the 12 month roster or, even the promises made during the employment. It will be assessed by things like “mutual expectation” and “understandings” derived from conduct (that do not have to be sufficient to be contractual terms) and the likelihood of future work. What you do and what you say – even how you say it – can affect the outcome.
  3. Increase turnover: Longer service under this test increases risk. The rational thing to do will be to turnover casual employees so the time-based tests are not triggered. Casuals will end up having multiple short-term jobs rather than building experience and potentially other career opportunities with one employer.

The bottom line is that any casual employment relationship is now contestable. The Bill creates a world where legitimate casual employment is confined to fragmented occasional single day employment (on different days). Anything else will carry increasing risk over time.

The result is unlikely to be good for most casual employees.

Most casuals want to be casuals….but now they can make claims

The Minister has said that he sees the legislation providing employees choice and that most will decide to remain casual. The data on that is in: just to illustrate, a large employer who made offers to more than 500 casuals to convert to equivalent part-time, had fewer than 10 acceptances (a conversion rate of under 2). Our experience is that sectors that rely heavily on casual employment typically have conversion rates of 5-10%. Most of those are long-term casuals with settled employment. The Minister seems to acknowledge this, but the Bill does not. Rather than address the specific harm (long term casuals in permanent arrangements) it applies to the norm: all casuals at any point in time.

This is a critical point where the new test fails: it removes the capacity for employers to get certainty from the decision of a casual to remain a casual in respect of their past period of employment. The relationship is all contestable and carries significant financial risk if employers are later found to have got it wrong.

And it is important to remember how these risks manifest as claims. As explained above, very few casual employees elect to change status while they remain employed. The challenges will come when the relationship breaks down. Where arrangements that were agreed are re-characterised through a prism of discontent. And the legislation permits events throughout the relationship to be contested. We know where this ends…

Not all aggrieved employees bring claims. But some will. The choice not to convert will be characterised by fear of losing their job or claims that they were forced not to convert. Most claims will fail. Or be settled to avoid the high cost of litigation that outweighs the value of the claim (rather than because of any genuine wrongdoing). However, this will compel employers to further alter their use of casual employment to reduce that risk.

Where to from here?

You could be forgiven for thinking that the Bill views all casual employment as a subversive form of exploitation to be treated with suspicion, and deserving of legal sanction. This is where the ideology of the Bill bites hard: an underlying assumption that casual employment could not possibly be in anyone’s interests.

This law is not just about the perceived evil of the “permanent casual”, it would apply to all casual employment from day one. And in doing so, it would impose an unworkable test that opens the door for a range of bad outcomes for all involved.

The extent of the changes is unnecessary to address the “permanent casual” loophole the Minister wants to close. They are clumsy, heavy-handed and will affect people who, even on the government’s position, are doing no wrong. These are the hallmarks of bad legislation. If the government really wants to address “permanent casual” employment, the Bill should be substantially amended. It would be a simple fix to introduce positive limitations on the use of long-term casual employment.

Unless what the government really wants is to stamp out casual employment more widely. In which case, this presents as an old-school bait and switch: to hold up the example of the casual truck driver with eight years’ service and a 12-month roster (that most people think shouldn’t happen) and use it to make wholesale changes to something the government and their union stakeholders don’t like (but which most people won’t read in the detail).

The Bill squarely raises that question.

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Seyfarth just celebrated ten years of service to leading employers in Australia. To mark the occasion, we invited some of our partners to share insights on the evolution of employment, industrial relations and workplace safety in Australia over the past ten years.

What have been the biggest changes in employment law, industrial relations and workplace safety over the previous ten years?

“In my view, one of the biggest changes has been the challenge for employers of all sizes to comply with increasingly complex employment laws and, more specifically, modern awards.” – Rachel Bernasconi, Partner

“The changing health and safety enforcement climate for organisations and individuals. The enforcement setting is shifting to a more assertive and higher stakes regulatory environment.” – Paul Cutrone, Partner

“An increased community awareness and engagement with respect to workplace safety, and with that, greater expectations on both organisations and the individuals within them. This change in community expectation has been reflected across Australia with the introduction of outcome-based industrial manslaughter laws, the increased use of reckless endangerment provisions (against both companies and senior managers), significantly increased maximum fines and, more recently, a heightened regulatory focus on psychosocial risk.” – Marissa Dreher, Partner

“The biggest changes have involved the courts and government grappling with what the concept of “employment” really means in modern society, and how far regulation should stray into the private relationships between parties in the 21st century. We have seen the High Court of Australia hand down decisions in relation to what “casual employment” means, as well as where the line is drawn between an employment relationship and an independent contracting relationship. And then the government has legislated to change the result of both of those cases.” – Ben Dudley, Partner

“Business leaders and HR have never been under more pressure when it comes to the workplace. A tight labour market combined with ever increasing regulation has underscored the difficulty. Related to this we’ve seen the bolstering of individual rights and a wellness zeitgeist as workplaces have never spoken more of resilience but seen less of it. The rise of the individual and a certain entitlement mentality has seemingly coincided with a decline in individual accountability with everything left to institutions (the employer being but one) to solve. For HR, “risk” has been the big theme.” – Chris Gardner, Partner

“Workplace issues have become significant business and brand risks, while increasing in complexity. Formerly, many businesses would have a siloed approach, with separate teams dealing with safety, HR, compliance, workers compensation and payroll issues. The issues that employers need to deal with have increasingly required a cross-disciplinary approach. To take some simple examples: workplace bullying and sexual harassment issues need input from HR and from safety teams. Award compliance increasingly requires legal and payroll teams to work closely together, often with external experts as well. We are also seeing a trend of claims that would previously have been addressed as employment grievances (e.g. performance management or organisational change concerns) lead to allegations of safety breaches and/or workers compensation claims.” – Erin Hawthorne, Partner

“Managing people is a first order priority for Boards and senior leaders. Employers are increasingly deploying risk-management based approaches in all facets of the employment relationship – whether ensuring their people are paid in accordance with applicable industrial instruments, meeting multi-layered work health and safety regulation, and discharging the positive legal duty introduced under the Respect@Work reforms. There is little latitude for error, with enhanced penalties for non-compliance and enforcement activity reinforcing the expectation that businesses will get it right the first time.” – Justine Giuliani, Partner

“The regulation of hazards and risks – psychosocial and sexual harassment being two examples – in the workplace that have traditionally been considered within business to be outside the ‘WHS’ sphere. And the introduction of industrial manslaughter as a consequence based offence into risk based legislation.” – Sarah Goodhew, Partner

“Ten years ago, employers were nervously anticipating the impact of new (typically, individual) claims introduced under the Fair Work Act 2009 (Cth) including general protections claims and applications for stop bullying orders. With that in mind, over the last ten years, employers have been very focused on managing individual claims, which has in turn led to a huge focus on workplace investigations. It is now very common to see employers skilling up their workforces (including HR and ER teams, and managers generally) to undertake robust investigation processes or seeking external investigation assistance for complex matters.” – Philippa Noakes, Partner

“For me, while so much has evolved, there are three major changes. The first is that compliance with employment obligations have emerged as a much higher order risk item for companies. This has been as a result of greater complexity in our laws, but also more active enforcement by regulators and the representatives of worker groups. Related to that, the second is that compliance with workplace obligations is a major reputational issue for company boards, much more so than a decade ago. Finally, we are seeing a significant lifting of the bar in the standards of behaviour expected in our workplaces, and a much greater preparedness for workers to assert their rights when these they feel these expectations have not been met.” – Darren Perry, Managing Partner

“Only 18 months ago, my top three would have been the ever increasing complexity of workplace regulation, the success of human resources and organisational leadership in response, and a commensurate weakening of union penetration and influence in most workplaces (with a few notable exceptions). Today, the answer is the four rounds of “Closing Loopholes” reforms. These changes dwarf anything that has happened in workplace relations since the introduction of enterprise bargaining in the early ‘90s. And those who remember (then) Minister Gillard proudly proclaiming in 2008 that the Fair Work Act shifted the “pendulum” back to the middle, should be aghast at just how far Minister Burke has managed to push it to one side. The reforms touch all points of the workplace: imposing increased regulation of engagement, individual rights to access arbitration, collective rights to commence bargaining and arbitration of actual conditions, new sector-wide bargaining and capacity to impose employment rights on contractors and labour hire workers, and universal workplace delegates rights to speak for both members and non-members. And you will not find anywhere in the reforms any new measures to improve productivity or even to require that it be taken into account.” – Henry Skene, Partner

“The introduction of industrial manslaughter for employers in most Australian jurisdictions signalled an increased focus by regulators on strengthening workplace safety and accountability. This legislative development underscores a critical shift towards prioritising the wellbeing of employees, demanding stricter adherence to safety protocols, and holding employers responsible for ensuring a secure work environment.” – Penny Stevens, Partner

“In my view, the biggest changes we’ve seen to the law are in areas where the law lagged social attitudes and has now caught up, namely:

  1. Compliance with workplace obligations and standards such as timely and correct payment is now a Board issue: Ten years ago, it would have been rare for a Board to spend time on this kind of issue. Now systemic underpayments attract a high level of scandal and can damage reputations – corporate and personal. As a result, organisations are spending much more on IT and auditing at the front end and litigation at the back end.
  2. Individuals and vulnerable individuals and groups empowered: Both generational shifts in thinking and social movements such as #MeToo have reset expectations about what is acceptable. In legal terms there is focus on practices such as confidentiality agreements to resolve harassment claims and many recommendations and changes that have come out of the Respect@Work report.
  3. Government intervention in IR: After decades of incremental or no reform, the Labor Government has shown a willingness to enter the IR landscape and make far reaching changes to the point of nearly prescribing outcomes. Companies in some industries are heavily impacted and succeeding with this level of regulatory risk and intervention requires a planned approach.” – Michael Tamvakologos, Partner

On behalf of the team, we would like to thank our valued clients. We are excited to continue working with you in 2024 and beyond.

In our next post, our partners look forward to sharing their insights on the changes and trends that are poised to significantly impact employers over the next five to ten years.

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In his press club speech on 31 August 2023, just days before the public release of the Closing Loopholes Bill, Minister for Employment and Workplace Relations the Hon Tony Burke MP described the problem of the labour hire loophole as follows:

But if you have an enterprise agreement in place, the labour hire loophole is where the employer has agreed for particular tasks, particular classifications, that there’ll be a particular rate of pay. And then, having agreed to it, having had it registered, says, “But I’m now going to use someone who’s technically a different employer,” and those rules instantly disappear, and now we go right back down to the award again. That’s a loophole. It’s not what’s intended. It’s currently legal for the companies that are doing it.

And later:

…labour hire shouldn’t be used as a device to undercut what’s been registered and agreed to.

The Minister defiantly stated, “for anyone who does want to stop us closing the loopholes – defend them. Because so far, no-one has defended any of the loopholes I’ve described”.

The invitation to examine the problem, the policy to deal with it, the implementation of the policy, and even the politics is accepted.

Let’s start with agreeing on the problem. The Minister claims labour hire can be used as a device where a company agrees to a rate of pay in an enterprise agreement and then avoid that agreement by shifting the work to a different employer which pays an inferior rate. This is the “loophole” that allows companies to circumvent how the current law is intended to work. Notice the language used of a “device”. The Minister apparently now sees a device, a trick, a scam that has been taking place for 14 years under the Gillard Government legislation enacted in 2009.

So, is there a loophole that allows companies to circumvent the way the current law is intended to work? To answer that question, let’s examine how the current system deals with this problem.

First, outsourcing work because your employees have entitlements under an enterprise agreement is not lawful. Not under this legislation or previous versions of it. So, the loophole claim does not get off the runway.

Second, employees of the labour hire company working alongside employees earning more have a fairly simple path to higher wages. It is the same path that the host employer’s employees took – that is, to use the system to make an enterprise agreement that contains a higher rate of pay. They would have all the industrial weapons afforded by the legislation, including protected industrial action. This is the premise of enterprise bargaining which underpins the legislation and has done so since 1993, but now staff have the benefit of new options like seeking to engage in multi-employer bargaining, and in many cases, to initiate bargaining simply by requesting that the employer do so.

Third, even the Minister acknowledges there are good reasons for labour hire. So, which are good and which are a device? Read the Bill and see if you come away any wiser.

The reality is that describing this problem as a loophole is wrong. It is a standard issue industrial problem which the legislation already deals with. There is no policy or legal vacuum that needs to be filled.

That’s the problem and the policy – what about implementation?

This is where the Bill has the capacity to create serious distortions.

Consider the situation where a labour hire company has negotiated its own enterprise agreement with its employees. As with any enterprise agreement, the terms and conditions agreed are a mix of swings and roundabouts. That might mean a higher rate of pay than at other enterprises in return for other conditions being changed or reduced, but it may also mean a lower rate of pay in exchange for other benefits such as additional leave. The point of enterprise agreements is that they are negotiated at an enterprise level and are right for that business at that time. The way the system will work if the Bill passes is that those employees can take the high-water mark of the rate of pay in their own agreement or the rate of pay of the “host employer” plus all other conditions provided by the direct employer. The integrity of the agreement making system suffers in return for a pick and choose approach to pay rates.

There are other issues. As mentioned above, the Bill makes no distinction between the use of labour hire as a so-called device and its integrous and proper use. There is a long list of factors that the Tribunal must take into account (if the parties raise them) in deciding whether the legislative bias towards making an order is displaced, but it can also take into account any other factors it considers relevant in ultimately deciding what is “fair and reasonable” – about as vague and amorphous as it gets. Different Tribunal members, each deciding the matter diligently and in line with the legislation, can come to different conclusions because the standard adopted is discretionary and impressionistic. What it does supply, though, is a great political defence – who can argue against a law that is directed to achieving a “fair and reasonable” outcome?

In addition, rather than specialised services labour hire being permissible – as was promised to be the case – it is just one factor that goes into a long shopping list of factors before a result gets spat out. There is no reason why this would necessarily result in an order not being made. Indeed, the default position with specialised labour hire is the same as for any other case – an order must issue unless the employer convinces the Commission it would not be “fair and reasonable”.

The new provisions also jar with other parts of the system. The transfer of business provisions permit the Commission to make an order to stop an enterprise agreement (and its rates of pay) from moving with employees to a new employer in some cases, including outsourcing scenarios. Such an order is the result of a judgment call by the Commission that it’s not appropriate for that instrument – including sometimes a higher rate of pay – to transfer. That outcome could be undermined by the subsequent making of a protected rate of pay order that imports a host employer’s rate of pay where those employees later provide services to the host employer. Again, the system is, by design, weighted towards that outcome.

This legislation is not, however, ill conceived. Not in the real politik sense. It is there for a reason – just not the reason stated. It is not closing a loophole or preventing the use of a device to undercut agreements. If it were really about closing a loophole, then it manifestly goes further than its intended aim. If the government is really targeting a narrow range of abuses, it is obvious that its scope must be narrowed now. As noted, English Parliamentary Draftsman Stephen Laws CB has warned, Acts of Parliament “… cannot be steered to the right target: they have to have been well aimed before having been launched. If an Act misses its target, it may take at least a couple of years to put things right. In the meantime, the government’s policy will not be delivered, and the law may be producing the wrong result in case after case”.

So why make this change to the law when its scope and effects so clearly exceed its stated purpose? One can readily speculate that the real issue is distaste for developments at workplaces that have moved us away from centralised negotiations, usually with one or more powerful unions, that would implement a single set of rules for a workplace or business.  A dispersal of work across different providers, who compete with each other on factors including labour costs and have their own sets of conditions, does not fit that mould, and in turn, reduces unions’ influence and the attraction of membership. This change seeks to reverse those trends, or at least buck the trend.

What we see here is a workplace-level implementation of the same centralising impulse that drove the government’s earlier amendments, allowing employers to be dragged into multi-employer bargaining, and indeed permitting employers to be added against their will to the coverage of enterprise agreements they had no role in negotiating.   

Now, we can debate whether these macro system changes are good or bad. There are complex policy debates to be had here – but we cannot have them if these changes are positioned as ‘closing a loophole’ to cover for their real purpose.

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