HR/IR Strategy

Subscribe to HR/IR Strategy

On 12 December 2013 Seyfarth Shaw announced our Australian offices were officially open for business. Today marks five years since those doors opened.

What better way to reflect than to ask ourselves, what have been the biggest changes in our specialist areas of law over those five years?

“It has become increasingly difficult to make enterprise agreements that are compliant, genuinely enterprise-focused and fit for purpose due to increasing modern award complexity combined with the unworkable approach adopted in decisions of the Fair Work Commission and Federal Court to the BOOT and other procedural aspects of agreement making.”
– Rachel Bernasconi

“Over the past five years, I have observed the tension between sharing improved safety lessons and legal risk. I am concerned about compounding this potential unintended consequence with the rise of the industrial manslaughter offence.”
– Paul Cutrone

“I think the biggest development in employment and industrial law is how courts and tribunals are grappling with modern expectations of what ‘working’ looks like. This means they are looking at how to deal with the gig economy, flexible working arrangements (including working from home and telecommuting), employees wanting lengthy periods away from work and ‘portfolio’ careers. There is a real tension as employers seek flexibility to ensure customer demands are met while balancing the costs of labour vs employee representative groups seeking to pull the other way, seeking automatic casual conversion rights and laws that treat gig workers as employees. The next five years will see this tension play out in the policy debate.”
– Ben Dudley

“The most significant change I have seen is increasing employee mobility. Employees of large international organisations are spending more time on assignment in locations throughout the Asia Pacific, on both a short-term and long-term basis. We see this occurring as a result of organisations expanding their operations throughout the region. Employers are increasingly seeking specialist employment advice on both a single jurisdiction and multi-jurisdiction basis, including to confirm compliance with new frameworks and to ensure the appropriate arrangements are in place.”
– Luke Edwards

“The last five years has cemented a realisation that has been brewing for the last ten years. Enterprise bargaining amidst the current regulatory environment has reached its use-by date for many employers. Enterprise bargaining is no longer an opportunity to secure win-win outcomes but rather a process aimed at reducing the risk to on-going operations.”
– Chris Gardner

“There has been a shift away from spending money on large, wordy paper systems written by lawyers. I question whether anyone is any safer once they are developed. Smart organisations are investing heavily in understanding their key risks, controls and testing the effectiveness of those controls. This is where their efforts need to be.”
– Jane Hall

“One of the most significant developments I have seen in the last five years is the rise in the influence of workplace regulators. Consistent with the overall dynamic facing corporate Australia, we are seeing far more active, better resourced and assertive regulators across various workplace issues. The environment is one of heightened focus on compliance with workplace and safety laws; the financial and reputational stakes are higher than ever for employers who fall short.”
– Darren Perry

“Over the past 5 years, we have seen a number of areas where our Fair Work Commission cannot speak with one voice. While many parts of its jurisdiction have been affected, it is most noticeable in individual claims. How the Fair Work Commission balances even very serious conduct against mitigating factors remains unpredictable and has resulted in flip-flopping which creates ongoing uncertainty. This is costly and time consuming. Faced with cost and uncertainty we are seeing our clients feel pressure to settle rather than defend a sound and rational decision to uphold reasonable standards of conduct. The absence of clear statements of principle from the Fair Work Commission (such as we had in the past) and its increasingly subjective approach creates uncertainty, inefficiency and unfairness of a different kind.”
– Henry Skene

“The changes have been many and varied. What I am seeing is increased competition across a number of industry sectors, which means there is a war to retain and protect the most talented staff, who are the engine of the business. This has led to a big uptick in restraint of trade work – a highly specialised area which can be compared to a game of chess. We are passionate about this area of law and have built a specialist service model that in our opinion is market leading – whether it be getting into court within a matter of days when necessary, to defending applications for injunctions or damages. Our clients recognise that a good restraint is a business asset, and invest accordingly.”
– Michael Tamvakologos

On behalf of the team, we would like to thank the truly valued supporters of Seyfarth Shaw in Australia. We are excited to continue to work with you into 2019, and beyond.

Subscribe to receive the next Workplace Law & Strategy blog direct to your inbox.

An enforceable restraint of trade can be a key business asset. Some might think about it as an insurance policy. The capacity to preserve customer connections, protect confidential information and discourage key executives from setting up their own business or moving to a competitor can be critical to information rich businesses operating in a competitive market.

This is the case now more than ever given that the Supreme Court of Victoria’s decision in Just Group Limited v Peck [2016] VSC 614 (later affirmed on appeal) has arguably raised the bar for correctly drafting an effective restraint.

As we pointed out in our second blog piece on post-employment protections, ensuring the currency of your restraint provisions is an important exercise in risk management.

This success can be attributed to the practice of regularly revisiting the questions of which key executives or employees should be subject to restraints, and how those restraints should operate. The yearly promotion, pay rise or management re-shuffle cycles are perfect opportunities to update restraint provisions. Often, this is when operational changes (such as the make-up of roles) become effective, so restraints can be tweaked to align with these changes. A promotion or pay rise can be tied to a new contract or restraint provision. Instead of adopting a one-size-fits-all approach when an employee first joins the business, employers can increase the likelihood that a restraint will be enforceable by showing it was the subject of specific negotiation during the employment.

Experience in this area reveals one key distinction which separates cases where restraints are successfully upheld and those where compromise outcomes are achieved. In successful cases, typically, the restraint provision has been drafted neatly around the key protectable interests. When seeking to enforce a restraint, an employer will be required to show there is a protectable interest capable of supporting the restraint. This is the first limb of the test for enforceability. The scope, duration and geographical operation of the restraint are logically tied to the protectable interest (see our map below). An employer will need to make out each of these elements to meet the second limb of the test.

Post-Employment Protections Legal Dimension – Map

If the restraint then needs to later be relied upon down the track, the employer has the benefit of a provision which protects a current business asset (e.g. key connections with important customers or suppliers who the employee is in contact with) this is likely to be enforceable in court. If the opportunity to update a restraint has been missed, it may be necessary to try to force fit the facts into a restraint that might have been drafted years earlier in a very different business context – for example, when the employee was performing a different role. This can increase the degree of difficulty when enforcing a restraint.

Although courts will give employers some latitude – because the reasonableness of a restraint is judged at the time it was entered into – that latitude is limited. Regular housekeeping means that it won’t be necessary to call on this latitude because the restraint is fit for its purpose, and enforcement proceedings can be approached with confidence.

Doing this work inevitably pays dividends over the long term. Preparing an effective restraint is similar in concept to buying an insurance policy. You hope you won’t have to call it in. But if you do need to call on it, you are very glad you have it. The past decision to do the work inevitably looks very wise.

Subscribe to receive the next Workplace Law & Strategy blog direct to your inbox.

A Senate Select Committee report on the Future of Work and Workers handed down this week after a year-long inquiry, gives some insight (which is likely to be startling to most employers) into the likely Labor legislative agenda in the workplace relations space if there is a change of government at the next election.

The employment and IR related recommendations from the Committee’s majority (dominated by Labor, Greens and Independents) include the following that have general application to employers, particularly those with unionised workforces:

  1. Stronger legislative requirements for employers to consult with workers and trade unions before and during the introduction of major technological and other change in the workplace.
  2. Workplace legislation be amended to strengthen the protections available to workers and their unions.
  3. Legislate to extend workers’ and trade unions’ rights to collectively negotiate terms and conditions of employment.

The following additional recommendations of the Committee’s majority are likely to be a cause for concern for employers who regularly engage casuals, labour hire workers, contractors or other gig workers – on top of the already problematic landscape given recent decisions relating to casuals (for example, the Full Federal Court’s decision in WorkPac Pty Ltd v Skene [2018] FCAFC 131) and labour hire workers (for example, the Fair Work Commission’s decision in Kim Star v WorkPac [2018] FWC 5745):

  1. Review the definition of “casual” work.
  2. Legislative amendments to crack down on sham contracting and employment arrangements which classify workers who are in fact dependent as independent contractors, in order to avoid employment obligations.
  3. Improve superannuation rights for workers who are not classified as employees and/or who perform non-standard work.
  4. Legislative amendments that broaden the definition of employee to capture gig workers and ensure that they have full access to protection under Australia’s industrial relations system. The formulation proposed is: if a company makes money directly as a result of workers’ labour, and if workers are dependent on the company for work and income, then those workers are employees of that company.
  5. Introduction of a national labour hire licensing scheme and a requirement that labour hire workers have access to and be paid at least the same wages and conditions as the directly engaged employees working alongside them.
  6. Further consideration be given to implementing portable leave schemes.

If any of these recommendations come to pass, it will add to the existing challenges for businesses seeking to use alternative labour models. Watch this space…

Subscribe to receive the next Workplace Law & Strategy blog direct to your inbox.

Traditionally, alternative labour models – including outsourcing and contracting – have been used by business to defray cost and risk and deal with workflow fluctuations. Today’s environment is creating new challenges for organising and engaging alternative labour. Here’s 5 key reasons why:

  1. Increased accountability for those at the ‘top’

Changes to the Fair Work Act 2009 in 2017 introduced new vulnerable workers laws under which certain corporate group holding companies and franchisor businesses can be held directly liable for breaches by other companies within their broader commercial operations.

  1. New labour hire regulations

New laws in Queensland, South Australia and Victoria require labour hire companies to be licensed. The broad definitions used could also pick up other labour models (eg, some types of contractors or secondment arrangements). ‘Host’ companies and other people involved in the labour arrangements can also be liable, meaning a degree of due diligence may now be required for all parties involved in sourcing labour.

  1. Supply chain reporting

Modern slavery legislation imposes mandatory reporting requirements on the activities of others in their supply chains, with the requirement to produce a ‘Modern Slavery Statement’. Many companies are already subject to reporting in the US or UK. New legislation imposes requirements on companies in NSW, with Commonwealth legislation currently being drafted. Companies above the reporting threshold will need to assess the labour arrangements of their suppliers, and potentially their suppliers’ suppliers as well.

  1. Regulatory responses to the gig economy

“Gig” work is coming under increasing legal challenge both in Australia and globally. Some political parties, and the ACTU, are also pushing for legal changes to regulate gig work. Watch this space – changes directed at gig work could also affect freelancers or other task-based labour.

  1. Union campaigns

Outsourcing is far from new. The use of third party labour with their “built for purpose” workplace arrangements is common. But in some sectors, union campaigning to compel a different outcome, attacking “Trojan horse” and “sham” arrangements (drawing on activist methodologies), is as powerful as ever.

The above trends result in increased risk and liability for those businesses that use labour models other than direct employment. But these risks can be navigated with due diligence with alternative labour remaining a viable strategy.

Subscribe to receive the next Workplace Law & Strategy blog direct to your inbox.

Allegations of sexual harassment have dominated headlines, most visibly with the #MeToo campaign.

Sexual harassment complaints, and the laws that attempt to curb the behaviours, are not new. Despite regulation, sexual harassment is still occurring in workplaces. Why?

One answer may be that organisations guard against sexual harassment through policy and lecture style training without reference to the broader workplace context.

To counter this, an alternate approach may be to use existing risk management frameworks, that have traditionally been used in the workplace health and safety context.

Step 1: Identify hazards

This step requires a deep and honest assessment of the:

  • Structure of the organisation and the industry context.
    For example: Highlighting potential hazards, such as reliance on informal recruitment practices and extreme competition for jobs that could combine to create a higher risk environment.
  • Type of work.
    For example: Physically demanding work and roles that seek attributes where appearance determines recruitment could increase risks.
  • Way work is performed.
    For example: If work is performed in environments that isolate workers, and where workers are required to be alone with a superior, colleague or customer this could lead to increased risks.
Step 2: Assess the risks

Understand the nature of harm that could be caused by the hazard, how serious the harm could be and the likelihood of it happening.

To assess this, ask:

  • How often are people exposed to the hazard? Does this make the harm more or less likely?
  • Has sexual harassment ever happened before arising from the identified hazard, either in your workplace or somewhere else? How often?
Step 3: Identify control measures and assess whether they are reasonably practicable

The most important step in managing risks involves eliminating them so far as is reasonably practicable, or if that is not possible, minimising the risks so far as is reasonably practicable. This requires higher order controls.

Can a hazard or risk be eliminated?

If lower order controls are used are these the right type of the controls? Our experience is that lecture style, text book training to address sexual harassment rarely works by itself. Interactive, engaging sessions which avoid regurgitating the legal definition of sexual harassment are likely to better engage a workforce.

Step 4: Implement the control measures

Implementation of the control measures may require changes to the way work is performed. This may require new procedures, additional training and supervision.

Step 5: Review and revise

Viewed through a risk management lens, polices and training which have typically been the tools of choice for addressing sexual harassment are low on the hierarchy of the controls. If organisations approach sexual harassment with a risk management approach, and identify appropriate higher order controls might we decrease instances of sexual harassment?

For example:

It is identified that in a highly competitive niche creative business which uses short term workers, recruitment is frequently informal and takes place at industry events.

All else being equal, the likelihood of (an allegation of) sexual harassment is higher in these circumstances than if recruitment were to occur in an office where a formal interview was conducted with a representative mix of interviewers.

The organisation seeks to minimise the risks, by putting in place processes that ensure even when contacts are met at industry events, a formal interview occurs within working hours in the office environment.

These control measures are reviewed and reviseded. Ensure the control measures remain effective. Are complaints of sexual harassment decreasing? What does formal and informal consultation with workers tell us about the effectiveness of controls?

We are working with our clients to trial this approach – combining our specialist expertise across workplace health and safety, and employment law.

Subscribe to receive the next Workplace Law & Strategy blog direct to your inbox.

Employment class action lawsuits are a common cause of action in North America, and while we have traditionally seen fewer in Australia, there has been a recent uptick in occurrences. What does this mean for Australian employers? Without large numbers of cases and their precedents to study, how you plan for and prevent class actions may be an ‘unknown’ for many employers. Given the unique bet-the-company issues for employers arising from class actions – we have outlined some risks and strategies.

The Australian context

Whilst uncommon in Australia, there are high-profile examples of employment class action lawsuits.

Indeed, proceedings brought during the 1998 Waterfront Dispute were brought on behalf of approximately 1,400 employees under the Federal Court of Australia’s class action regime. Another example dating back to the days of Australian Workplace Agreements involved proceedings brought on behalf of over 700 academic and general employees of a university.

More recently, two employment class actions have been commenced targeting companies who provide marketing services for large and well-known brands, alleging contravention of minimum labour standards.

Why is the class action landscape changing now?

There are many reasons for the uptick in claims, and those relevant to employment include:

  • diminishing union membership across the private sector, but an increase in individual rights and prominence of plaintiff law firms organising class actions
  • an increased public awareness of minimum labour standards and broadly applicable laws, such as the general protections provisions, brought into focus as a result of a number of well documented scandals
  • an increase in the activity of litigation funders willing to venture outside their traditional stomping ground of commercial litigation.

We also predict that there will be many more such actions in the future, particularly given the ramped up penalties for franchisors and holdings companies found to have been complicit in the underpayment of employees or failure to keep proper employment records by their franchisees and subsidiaries.

Learnings from the US

At Seyfarth, our team of workplace law experts analyse and breakdown the mosaic of US class actions each year compiling a report that highlights the trends. In 2017 they recognised:

  1. Settlements skyrocket
    The monetary value of settlements rose dramatically, with the top 10 settlements in employment-related categories totalling a record high of US $2.72 billion — nearly US $1 billion more than 2016. In Australia, settlements are already causing an increase in insurance premiums for directors.
  2. A favourable landscape
    Evolving case law precedents and new defence approaches resulted in better statistical outcomes for employers in opposing class certification requests for the second straight year. In one of the most active categories, wage & hour litigation, employers won 63% of decertification rulings, a success rate up almost 20% from 2016.
  3. More enforcement
    With the federal government in transition, 2017 results were heavily influenced by Obama administration holdover policies and personnel as government enforcement litigation increased. This balloon is expected to burst in 2018 as the Trump administration settles in further, pulling back these policies and positions; yet, at the same time, it is expected that the private plaintiffs’ class action bar will step up their lawsuit filings and “fill the void”.
  4. Pivotal rulings
    Several key decisions in 2017 of the Supreme Court were arguably more pro-business and pro-employer than in the past. In May 2018 the Supreme Court profoundly changed the class action playing field with its highly anticipated ruling on the Epic Systems, Murphy Oil, and Ernst & Young trilogy of cases which found workplace arbitration agreements with class action waivers were lawful and enforceable.

To access the full report, and additional commentary visit www.workplaceclassactionreport.com.

For a discussion on the ‘best of breed’ strategies in class action and litigation globally – contact one of our partners.

Subscribe to receive the next Workplace Law & Strategy blog direct to your inbox.

At a recent industry conference, a keynote speaker talked about great outcomes a number of our clients achieved in a critical enterprise bargaining round.

One observation was the importance of “patience“ – with which we would wholeheartedly agree.

So it got us thinking about ingredients for success.

Here are some key ones, borrowed from our bespoke workshop process dedicated to this end.

  1. Clarity of need: articulated and connected to the business needs
  2. Gain v Pain: clarity of what’s needed and the pain points along the way
  3. Leadership: the bedrock of any project
  4. Strategy: integrated – articulated – understood
  5. Planning: which falls out of the strategy and in respect of which one can never do enough
  6. Alignment: cemented by sound governance
  7. Resilience: which comes back to leadership

Each can be strengthened for any employer embarking on a bargaining campaign by the taking of tangible steps. You might not be perfect on each but it’s possible to ‘move the dial’.

Would you like to hear more about our workshop process for enterprise bargaining? Contact Chris Gardner.

Subscribe to receive the next Workplace Law & Strategy blog direct to your inbox.

For years, the emergence of truly global supply chains and the rise of large, increasingly skilled workforces has wrought havoc on labour supply in Western developed countries. It seems that these days nearly every industry, profession or occupation is facing an existential threat due to automation, artificial intelligence or other advances in technology (indeed, lawyers are said to be the next to go!). This is seen as the next frontier.

In this environment, there is a soothsaying comfort in taking measures that might “future proof” your organisation from the potentially terrifying effects of change and disruption.

But is that really possible? More to the point, is this thinking even helpful?

We work with many of the most successful global organisations. We are always curious to learn why some organisations are successful in the long term, on a massive scale, whilst others fall by the wayside or are diminished over time.

One feature stands out. The most successful organisations do not pretend that there is one initiative – that can be implemented now – to forever insulate them from the effects of change. Rather, their leadership (and these organisations have great leaders at all levels) cultivate a mindset of constant, very often brave, change.

They disrupt themselves before any competitor will have the chance. They make bets on the future and are open to doing things differently, seeing failure as an inevitable part of the learning process. These organisations know that in a truly dynamic and global business environment, there is huge risk in just repeating what has worked in the past. These organisations do not fall into the trap of trying to “future proof” their organisation. They intuitively understand there is no such thing, and that bold leadership, and a learning and calculated risk-taking orientation are a better bulwark against disruption than any future proofing initiative will ever be. These organisations know that an opportunity-driven approach is the only way, and that a risk-driven business model “don’t change anything, don’t break anything” is the riskiest business model of all.

In the last six months we at Seyfarth have seen so many great examples of these types of organisations. Here are a few:

  • An Australian big 4 retail bank with extensive overseas operations, introducing new ways of working that are breaking down silos and making collaboration within the bank much easier
  • A global e-commerce and data services client establishing its operations in Australia, in what is sure to be its latest successful international expansion
  • A global manufacturer and seller of solar panels, investing in Australia given the enthusiasm of various State and Territory Governments to promote renewable energy, whilst somewhat dismayed and discouraged by President Donald Trump’s introduction of tariffs on their products imported into the United States
  • An Australian based manufacturer of a unique biodegradable resin moving its manufacturing from China to Europe in order to take advantage of the friendly production environment in some European countries combined with the progressive and environmentally conscious nature of European consumers of its products.

These organisations are strong examples of opportunity driven leadership – willing to make bold decisions to position themselves well, always thinking in global terms, and always willing to incorporate new and better ways of working. That may mean incorporating or even inventing new technologies, or simply making constant incremental operational improvements. They don’t try to future proof, because they accept that tomorrow will bring more change – some of it unforeseen and perhaps unwelcome.

The cycle of change and transformation is constant. The tension between stability and change, between order and chaos, is ever present: but it is accepted and managed, not denied. These organisations accept the uncertainty that must be managed in today’s world. In fact, they embrace it, knowing that this attitude is itself a competitive advantage.

Subscribe to receive the next Workplace Law & Strategy blog direct to your inbox.

Automation is a game changer that is altering the industrial landscape. A Committee for Economic Development of Australia publication estimates that over the next 10 to 20 years, 40% of jobs in Australia have a high probability of being susceptible to computerisation and automation.

Smart businesses will approach the automation process from the front end and engage with their workforce in a manner that ensures the business is able to harness all of the productivity benefits from automation, without suffering the industrial dissention and dislocation which so often coincides with dramatic workplace change.

Planning and practical implementation is critical

McKinsey recently published “A CEO action plan for workplace automation”, highlighting the benefits of business harnessing automation processes within their workforces. However, it cautions the need for an appropriate plan of action.

From an industrial relations standpoint, preparing for automation sooner rather than later can provide a business with payoffs down the track.

Where the opportunity presents itself for a business to enter into a carefully tailored enterprise (or greenfields) agreement prior to implementing automation measures, such an opportunity should be seriously considered. If timed properly, this will minimise the impact on the business from workplace change, and maximise workplace flexibility to allow the business to easily transition, saving time, cost and mitigating the risk of workplace disputes arising.

Left to the last minute, an enterprise may face pitfalls in implementing technological change. For instance, should a round of enterprise bargaining be imminent, employees and their representatives will push for greater job security during bargaining through superior redundancy and retention type arrangements. These could slow change, and add cost and complexity. Late engagement and consultation may also create resentment and cause further disputes and delays.

Where workforce engagement occurs early, these issues may not be so prevalent, and a business can ensure that it has the appropriate flexibility mechanisms in place to easily transition. As reported in The Australian recently, NAB’s Andrew Thorburn reflects on the importance of planning for NAB to “retrain and redeploy” workers post-automation. Clearly, planning can deliver the best outcomes for all stakeholders.

Enterprise bargaining in the post-automation world

There are implications on an employer bargaining for a new enterprise agreement (or for a greenfields agreement over a new enterprise) that will cover the business post-automation.

For example, the ability to influence new roles that will be required from technological advances comes with the ability for an employer to:

  • effectively bargain for terms and conditions off a fresh slate as post-automation roles may result in coverage of employees with vastly different terms and conditions
  • use a different modern award (if any) as a base for terms and conditions
  • provide an employer with greater leverage in bargaining through dealing with a smaller, more specialised workforce
  • bargain in circumstances where the agreement’s coverage will dictate which union (if any) has a right to represent employees.

Of course, the need to engage workers with a different skill set may also provide a business with an opportunity for workers to grow in their careers, and present an environment in which cultural change might be effectively promoted and achieved. Viewed through this lens, technical change need not be seen as a negative from an employee relations perspective.

Implementation of process

‘Redundancy’ is the word that comes to most employees minds when they catch wind of an employer taking steps to automate elements of their work.

However, despite many claims made to the contrary, major technological change does not necessarily result in a workforce being decimated. Opportunities are inevitably presented from change for employees to upskill in order to fulfil different roles in the business (or elsewhere).

Unfortunately downsizing a workforce is, in a number of cases, a necessary step in achieving the full productivity benefits that are so attractive in implementing technological change. Again, early and effective planning can minimise forced job losses, and maximise opportunities to upskill.

Transparency and appropriate engagement with employees is critical during the process, as is implementing an appropriate consultation plan.

In a world where so many businesses are moving to automation, failure to take these steps may result in your business falling behind its competitors, change (and its benefits) being seriously delayed, or the often significant capital costs required blowing out.

Subscribe to receive the next Workplace Law & Strategy blog direct to your inbox.

Within eight days of each other Bill Shorten and ACTU head, Sally McManus, have called for changes to the enterprise bargaining regime which is a central feature of Labor’s own Fair Work Act. Whilst we will no doubt hear more on this these statements would be chilling to many an employer who regards the current system as stacked against them.

To be fair, finding the right balance in a system which directly effects wage outcomes is difficult. But Labor’s legislation cemented collective bargaining as a central platform for agreement making and did away with a statutory regime to make individual agreements. In doing so unions were given the best legislative platform to date to compel employers to bargain – even with a union that has a minority membership interest in the business.

Mr Shorten cites low wage growth to make the case for change amidst greater productivity. The wages-work bargain is unfair it seems. Conversely employers will tell you that the “productivity lemon” has been well and truly squeezed from enterprise bargaining with little or no incentive for unions to countenance genuine trade-offs. In its inception back in the 1990s, enterprise bargaining presented an opportunity – to move away from inflexible centrally set terms and conditions to outcomes which better reflect the needs of the enterprise. It paved the potential for “win-win” outcomes. But no more. If macro data points to increased labour productivity, the nexus between this and collective bargaining will be very tenuous.

To this extent there is universal acceptance of a system unable to meet the needs of the workplace today and certainly not the future. If no agreement is reached, the status quo typically remains. In negotiations, speak the “Best Alternative to a Negotiated Outcome” for a union and employees is the status quo being the existing enterprise agreement. Very often, the genesis of these agreements were struck when the business was in a very different place – many years ago and when current competitive conditions were beyond contemplation.

Enterprise bargaining, once an opportunity is now an exercise in managing risk. This involves stemming the tide of increasing labour costs and avoiding claims which, for instance, prevent outsourcing or mandate third party involvement in legitimate business decisions. But there’s more. The system relies on a game of leverage. Unions can organise industrial action to effectively coerce employers to agree. Employers can lock employees out in response. Neither are very constructive in the long run. Ms McManus is calling for greater ease to take industrial action and tighter controls on employer lock outs. Mr Shorten wants to shut down the Fair Work Commission’s (limited) ability to terminate old enterprise agreements – which provides employers with a precious opportunity to remove outdated and restrictive clauses albeit not without a contested hearing process usually over some months.

So, inherent in the thinking of both Labor and the ACTU is a re-setting of the legislative levers of leverage which drive bargaining outcomes. For employers more of the same but worse. Employers will make agreements palatable in the short term only because the short term cost of the bargaining process (industrial action) is too high. Rational economic outcomes are thus easily distorted. Of course in the medium-long term the cost of making an agreement becomes intolerable. Restructuring, outsourcing, and offshoring become part of an inevitable ‘solution’ for employers.

Subscribe to receive the next Workplace Law & Strategy blog direct to your inbox.