Workplace reform

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The ways we work, the structure of our businesses and the economy continue to be transformed by emerging technologies and cultural shifts. Seyfarth Shaw’s annual survey of business leaders seeks to understand how they are coping with, and adapting to, the rapidly changing landscape.

From talent readiness to cybersecurity, the 2018 Future Enterprise Survey Results give a flavour for the top-of-mind issues facing our clients. Take a look at the Survey Results here and consider whether they resonate with you and the way your business is responding to current opportunities and challenges.

Our experience is that clients who accept the changing world and take calculated risks through opportunity driven leadership are gaining a competitive advantage – we recently discussed this in our blog Why “Future Proofing” Is A Myth.

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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.

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In the last working week of 2017, the Victorian Government quietly released the Independent Review of Occupational Health and Safety Compliance and Enforcement in Victoria. As we settle into the new working year, we consider whether the Review is likely to change the compliance and enforcement landscape in Victoria – whether more ‘carrots’ will be proffered, or whether duty holders will suffer more ‘stick’.

Is the Review likely to result in a seismic shift of compliance and enforcement activities for occupational health and safety offences in Victoria? Probably not. However, this is no bad thing – it symbolises an old adage that “if it ain’t broke, don’t fix it” – we have previously commented that this adage is a sound approach to regulatory and policy reform.

Rather than fundamental change, the report indicates incremental changes to the way WorkSafe Victoria is likely to:

Plan and target compliance and enforcement activities

Publishing its annual compliance and enforcement priorities.

Adopting a risk based approach to compliance and enforcement activities.

Establishing performance based measures which reflect health and safety outcomes.

Responding to the changing workplace context (ie the “gig economy”).

Communicate and implement its compliance and enforcement framework

Identifying and documenting its compliance and enforcement framework with a guide developed by mid-2018.

Communicating the circumstances in which each compliance and enforcement tool may be used.

Developing a process to regularly review documents in the compliance and enforcement framework.

Updating the visual representation of its regulatory approach.

 Provide information and support to duty holders

Engaging more with stakeholders in shaping its strategies.

Being increasingly proactive in risk scanning and monitoring.

Publishing its research agenda.

Increasing the amount of published guidance and resources including some inspector checklists.

Implementing targeted media campaigns.

Increasing the publication of enforcement outcomes.

Collaborate and engage with other regulators and duty holders.

Introducing infringement notices for some offences.

Continuing to use enforceable undertakings (EUs) with an updated policy on when an EU may be accepted and what an EU may contain.

Undertaking “blitzes” of particular industries/high risk activities.

Increasing strategic prosecutions of offences in priority areas and for exposure to risk (as opposed to reactive prosecutions of injuries and fatalities).

The proposed reforms therefore seem to offer a balance of carrot – by way of greater transparency on WorkSafe’s compliance and enforcement activities and some stick – in the form of the suggested infringement notices and increased prosecutions in strategic areas and for exposure of persons to risk.
As the year progresses, it will become clear which of the recommendations assume priority and whether our prediction of only incremental change is correct.

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In a dynamic and fast paced business environment, structuring the workforce to meet changing operational requirements is front of mind for most employers.

These requirements will often necessitate changes to an employee’s duties to ensure the business has the right skills in place in a competitive market – for example, to keep pace with technological change. Employers may also look to fill a resourcing gap by utilising existing employees in a different role, rather than recruiting.

The ability to direct an employee to perform additional or different duties will depend on the specific employment instruments that are in place, and their terms. The starting point is to consider the contract of employment, job description and any applicable industrial instrument to confirm what the job involves, whether a variation is permitted, and in what circumstances.

In some cases, organisational change may give rise to a redundancy, entitling the employee to severance pay. A redundancy situation may occur where the duties performed by an employee change so substantially that there is no longer any function or duty attached to the position. But where is the line? The Federal Court of Australia recently considered this question on appeal, from the Federal Circuit Court.

Sensis Pty Ltd v Robert Gundi

Seyfarth Shaw acted for the successful appellant, Sensis (Sensis Pty Ltd v Robert Gundi [2017] FCA 1519), in this case. A Sensis sales employee was directed to focus his sales activities on winning new business from prospective customers, rather than selling to customers that already had a relationship with the company. This was the only change to the role. The job description required the employee to sell advertising products and services to both existing and prospective customers of Sensis.

Mr Gundi asserted he had been made redundant, however the Court found that the employee’s position was not redundant, because at all times, he was required to service new and existing customers of Sensis. While the split between new and existing business had changed (quite a lot), the basic duties he was directed to perform were within the scope of the position, as contemplated by the contract of employment and job description.

The upshot is that employers will have some flexibility to change an employee’s duties at their prerogative, provided it is within the scope of the employment, and specifically, the employee’s contract. Think about giving the business this kind of ‘flex’ when drafting contracts.

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Social, technological and economic forces impacting the workplace will continue to pose challenges for employers, employees, unions, policy makers and regulators in 2018.

Disruption

In 2016 the CEDA reported that 40% of Australia’s workforce could be replaced by automation within the next 10 to 20 years. Of course, automation has been happening since the industrial revolution – but the nature, pace and scale of automation is now being fuelled by digital disruption. These changes are happening now, or their seeds are being sown in many a workplace.

The Government recently established the Senate Select Committee on the Future of Work and Workers. Expect its report in June.

Corporate accountability for workplace breaches

This is one for boardroom ‘risk buckets’. Expect to see increased activity from the Fair Work Ombudsman targeting holding companies and franchisors following the enactment of the Protecting Vulnerable Workers legislation in September 2017. These changes bring home accountability to holding companies and franchisors for certain workplace contraventions by their subsidiaries and franchisees. These changes take individual and corporate responsibility for workplace compliance to a new level.

Wage growth and bargaining

There are mixed views here with economists tipping a return to healthy wage growth. Low wage outcomes have been reflected in collective bargaining. Tight economic conditions have seen many an employer “bunker down” to avoid high wage outcomes – effectively acknowledging the medium to long term impact of high cost outcomes is not worth the short term expediency of buying workplace peace. More than ever, collective bargaining and “workplace strategy” is grabbing the attention of the C-Suite, given their outcomes significantly impact the bottom-line and with compounding effect.

In the area of major project infrastructure, labour shortages will intensify in 2018. This will see a return to high cost “greenfield” agreements to incentivise project stability. Expect higher than average wage outcomes for skilled and semi-skilled labour, at least in some sectors.

Sexual harassment claims

In the wake of high-profile sexual harassment allegations against prominent individuals both here and abroad, expect to see an increase in the number of claims made in 2018. The tolerance for sexual harassment has never been lower and incentive to bring a claim has never been higher.

CFMEU and MUA merger

Make no mistake – the proposed merger of the CFMEU and MUA will be high impact. The construction and mining sectors’ reliance on port services bears this out. In circumstances where massive shipments of infrastructure hit our shores for major project construction, the nationwide impact of greater CFMEU-style control will be tangible.

Litigation funded union claims

Expect to see large union claims backed by litigation funders. These funders, typically from the UK, bankroll large scale litigation punting on a profit from the outcome. For unions, such financial backing facilitates litigation with the aim of extracting large financial settlements. This will encourage claims on a scale rarely seen in Australia, with medium and large employers with “deep pockets” in their sights.

Modern slavery and supply chain reporting

Another issue for the boardroom. Globally, there is a growing commitment to eliminate the exploitative practices of modern slavery which includes forced and child labour. Corporates are reviewing their respective labour supply chains lest they are exposed to allegations of being complicit in slavery. Details can be found in A Modern Slavery Act for Australia.

Change of government?

Federal elections inevitably shine a spotlight on the workplace. Expect the same if an election is held in 2018. The ALP has already expressed its concerns with the current workplace regime – despite it being largely a product of its own making. The “tilt of bargaining power away from workers and to employers has gone too far” according to Shadow Minister for Workplace Relations Brendan O’Connor.

Many an employer would beg to differ. Workplace laws have moved like a pendulum with changes to government in Australia, albeit remaining relatively static under the Abbott /Turnbull Governments. But it seems the pendulum will continue in its current trajectory under Labor. The Government will seek to remain a small target on workplace relations in 2018 as the recent Cabinet changes reflect. For employers, the regulatory environment will only get tougher should we see a Labor Federal Government.

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According to the Shadow Minister for Workplace Relations, Brendan O’Connor, (collective) bargaining power has tilted too much in favour of employers. This would rankle many an employer who, amongst other things, would feel the intense irony of Labor asserting that its workplace law, The Fair Work Act (The Act) carries employer bias.

A key tenet of Shadow Minister O’Connor’s National Press Club speech is that employers are “gaming” the Act. He relies on the example of an employer that sought to outsource work and have the services performed by a third party. Hardly remarkable. So what might employers say about this? In what ways do unions “game” the Act? Here’s a short list. Some involve taking advantage of existing laws and are therefore legal. Some are not.

Unlawful picketing – the relatively slow, expensive and difficult legal process to remove an obstructive picket provides a union with massive leverage in bargaining or a dispute (such as was the case in the example cited by Shadow Minister O’Connor). The ends justifies the (illegal) means it seems.

Unlawful industrial action – often taken for short periods but with maximum impact knowing the employer is unlikely to seek meaningful redress because the cost, effort and ‘pay-back’ is not worth it.

“Subterranean” industrial action – mass sickies or “go-slows” which are often hard to prove as industrial action and again very potent.

Threats of industrial action – made in bargaining but often not followed through. Sure, it’s better to not have the industrial action, but the employer needs to assume it is happening and in turn that it won’t be able to meet supply needs. Try running an airline on this basis.

Minority interests rule – in a system aimed at ‘the collective’, it’s nonetheless very often the interests of a powerful minority in the workplace that dictate bargaining outcomes. True, the majority are often passive and hence you might say ‘in agreement’. But the reality is very different.

Agreements made without union involvement are undermined – agreements are technically made with employees. Many have union involvement. Some do not. As you can imagine, unions will often take every point and make every attempt to delay the making of a ‘non-union’ agreement whatever the consequences for the employees who have made the deal.

Taking industrial action without bargaining in good faith – because the law doesn’t require this.

Preventing legitimate change – using legal processes to stymie change, because the union and typically a minority don’t like it. Delay costs an employer money and/or progress and who knows what can be extracted from more time. Sometimes the change is for the better health and safety of employees and delay is potentially at their expense.

Bad employee behaviour is supported – not always, but all too often, where the behaviour is that of a loyal union delegate whose absence from the site means the loss of a vulnerable union foot soldier.

Am I generalising? Yes. Would there be plenty of employers and peers of mine who agree with the above assessment? Yes.

See our related blog Proposal to outlaw “unrepresentative” enterprise agreements – when will an enterprise agreement be undone? for additional commentary on the Shadow Minister’s speech.

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On Wednesday 18 October, the Shadow Minister for Industrial Relations Brendan O’Connor foreshadowed amending the bargaining regime in the Fair Work Act to outlaw so-called “sham agreements”.

The target of the changes seems to be enterprise agreements that are voted on by one group of employees, but have the potential also to cover a much broader group, or to cover a similar group who will be employed in a different geographic location. The Shadow Minister referred to these situations as employers “gaming the system”. 

However,  we note that the Fair Work Act already contains a number of safeguards to prevent “gaming the system”, including that agreements are genuinely made, that employees who vote to make the agreement are “fairly chosen”, and employees are not coerced to vote or not vote for an agreement.

While we do not have the benefit of any detail (such as a draft Bill) – there are some things to be said about the potential effects of the foreshadowed changes.

The concept put forward by Shadow Minister O’Connor in his speech would allow an agreement that has been made, to be challenged and potentially reversed on the basis that the employees who made the agreement are not “representative” of those who will be covered by it.

This raises a number of important questions including:

  • What factors are to be taken into account in determining representativeness?
  • Which characteristics of the employment will be given priority over others in determining representativeness?
  • Who could challenge an agreement that has been made? For example:
    • Could a competitor union to that which represents the employees use the provisions to unwind an agreement that has been made?
    • Could another company challenge the approval, with the goal of ensuring the employer is hindered in achieving competitive terms and conditions for its business?

These questions may not be answered unless and until the provisions are enacted and tested by the many varied situations real life throws up.

Our initial impression is that any amendments that allow agreements that have been made to be effectively “undone” could cause enormous problems that go well beyond the immediate issue being addressed. This exemplifies the danger of focussing on first order consequences, at the expense of equally (sometimes more) important second and third order consequences.  By trying to plug a perceived gap in the legislation, these amendments have the potential to open up a new form of “litigation sport” – where agreements that have been made are subject to lengthy legal challenges and then undone much later down the track. There are many industrial reasons – which have nothing to do with the supposed problem being addressed – which might provide motivation for such challenges. Continue Reading Proposal to outlaw “unrepresentative” enterprise agreements – when will an enterprise agreement be undone?

Trade union conduct is constantly changing, and our team have observed trends that are reshaping the boundaries, and that have already begun to impact our clients.

Policy Measures: increased scrutiny on trade union conduct

On the policy front, the conservative government has implemented three measures addressing unlawful behaviour by unions and their members based on the findings of former High Court Justice John Dyson Heydon AC QC in the Royal Commission into Trade Union Governance and Corruption in 2015.

Two key measures passed in late 2016.

Continue Reading United we stand. But lawfully.

The gig economy is only one of the reasons that workers of the future will not have close connections with one employer or business – another is the movement towards arranging their life so that they spend substantial periods of time not working at all.

The trend towards regularly spending long periods of time away from the workforce is highlighted in an article by Christine Long in the Sydney Morning Herald considering people who only work a few months of the year, and the renowned demographer Bernard Salt’s column in The Australian that looks at changes that millennials will bring to the workforce. Continue Reading The future of work: managing a workforce that is away half the year

We have been watching with close interest the exponential expansion of crypto-currencies. These instruments, such as Bitcoin, Ethereum and Litecoin, are methods of secure, electronic transfer of value between individuals using advanced digital encryption techniques – without any central regulation by government.

Recent research published by The Conversation suggests that crypto-currencies are showing no signs of being merely a speculative bubble. With their recent translation from purely online origins into tangible interfaces, for example, the establishment of Bitcoin ATMs in Australia, employers need to consider not only the future of work, but the future of the ways in which businesses will be able to, or might want to, reward contribution. Continue Reading The future of work: when will I be able to pay employees in Bitcoin?