With unions re­fus­ing pro­duc­tiv­ity off­sets, many com­pa­nies are re­turn­ing to awards


The de­cline in the num­ber and cov­er­age of en­ter­prise agree­ments is about to ac­cel­er­ate

Is en­ter­prise bar­gain­ing on its last legs? This is an im­por­tant ques­tion be­cause the shift away from cen­tralised awards to en­ter­prise bar­gain­ing was an im­por­tant mi­cro-eco­nomic re­form.

But there are many signs that the process of en­ter­prise bar­gain­ing is now in its death throes.

The his­tory of en­ter­prise bar­gain­ing is rel­a­tively straight­for­ward. In the early 1990s, a La­bor prime min­is­ter, Paul Keat­ing, in­tro­duced a lim­ited form of agree­ment-mak­ing be­tween em­ploy­ers and trade unions.

This was then ex­tended by the Howard gov­ern­ment to in­cor­po­rate non-union and in­di­vid­ual agree­ments as well as union ones. These agree­ments were sub­ject to a “no dis­ad­van­tage” test.

Leav­ing aside the brief pe­riod of Work Choices, La­bor’s Fair Work Act ush­ered in a new era of en­ter­prise agree­ment-mak­ing that was sub­ject to a “bet­ter off over­all” test.

While union and non-union agree­ments are per­mit­ted, indi- vid­ual agree­ments are pro­hib­ited.

What has hap­pened more re­cently is that en­ter­prise agree­ments have be­come less pop­u­lar in terms of num­bers of agree­ments and em­ploy­ees cov­ered.

In­ter­est­ingly, the Aus­tralian Bureau of Statis­tics now lumps to­gether em­ploy­ees on awards or col­lec­tive agree­ments when de­scrib­ing meth­ods of set­ting pay, hav­ing split these two meth­ods in the past.

On the most re­cent fig­ures, nearly 60 per cent of em­ploy­ees are cov­ered by awards or agree­ments. The re­main­ing work­ers, who tend to be higher paid, are on var­i­ous forms of com­mon law in­di­vid­ual deals.

If we look at the fig­ures col­lected by the Department of Em­ploy­ment, we note that the over­all num­ber of em­ploy­ees cov­ered by agree­ments is about two mil­lion, which is only 17 per cent of em­ployed peo­ple.

Note that most of those two mil­lion agree­ment-cov­ered em­ploy­ees work in the pub­lic sec­tor.

There has been a clear down­ward trend in the num­ber of agree­ments be­ing cer­ti­fied by the Fair Work Com­mis­sion dur­ing the past four years or so. (Hint to Em­ploy­ment Min­is­ter Michaelia Cash: time to cut the fund­ing for the FWC.)

A trend as­so­ci­ated with the de­clin­ing pop­u­lar­ity of en­ter­prise agree­ments is the grow­ing num­ber of em­ploy­ers seek­ing to have their en­ter­prise agree­ments ter­mi­nated. Note that en­ter­prise agree­ments run on af­ter their tech­ni­cal ex­piry dates.

There is scope within the Fair Work Act for agree­ments to be ter­mi­nated as long as this is not con­trary to the pub­lic in­ter­est (what­ever that means) and the FWC con­sid­ers it ap­pro­pri­ate to ter­mi­nate the agree­ment.

There have been hundreds of ap­pli­ca­tions in the past sev­eral years and, with some ex­cep­tions, the ap­pli­ca­tions for ter­mi­na­tion have been suc­cess­ful. Many em­ploy­ers, it would seem, would pre­fer to op­er­ate on the ba­sis of the award, which doesn’t pre­clude them top­ping up the pay and con­di­tions of in­di­vid­ual work­ers.

The FWC thinks it knows why em­ploy­ers shun agree­ments: be­cause they are happy with the award, they would pre­fer to deal with their work­ers in­di­vid­u­ally or the process of agree­ment-mak­ing is too com­plex.

No doubt these are some of the rea­sons, but the main rea­son at the mo­ment is that en­ter­prise agree­ments have be­come a union-con­trolled cost es­ca­la­tor for busi­nesses. They are sim­ply un­af­ford­able in many in­stances.

The de­cline in the num­ber and cov­er­age of en­ter­prise agree­ments is about to ac­cel­er­ate as the agree­ments cov­er­ing large em­ploy­ers in retail and fast food are likely to be ter­mi­nated by the FWC, even though this same body ap­proved the agree­ments in the first place. Fol­low­ing on from the de­ci­sion by the FWC to ter­mi­nate the agree­ment cov­er­ing Coles su­per­mar­ket work­ers made un­der the Fair Work Act (it has been re­placed tem­po­rar­ily by a pre­vi­ous agree­ment made un­der Work Choices), it has be­come ap­par­ent that many retail and fast food agree­ments made with the Shop Distribu­tive and Al­lied Em­ploy­ees As­so­ci­a­tion are in tech­ni­cal vi­o­la­tion of the Fair Work Act’s bet­ter-off-over­all test.

These agree­ments typ­i­cally trade off week­end and pub­lic hol­i­day penal­ties for slightly higher rates of base pay. They also pro­vide for the em­ploy­ers to en­cour­age the work­ers to join the union, col­lo­qui­ally known as the Shop­pies. These cost-sav­ing agree­ments have been of­fered se­lec­tively to some em­ploy­ers, gen­er­ally the largest ones, by the union.

For em­ploy­ees who work most of their hours dur­ing the week­end and on pub­lic hol­i­days, they are clearly worse off than the un­der­ly­ing award would pro­vide.

If the BOOT is to re­quire that every worker work­ing every pos­si­ble per­mu­ta­tion of ros­ter is bet­ter off than un­der the award, then there is no doubt that the agree­ments should not have been cer­ti­fied in the first place. Note, how­ever, that most of the work­ers who voted did sup­port these agree­ments.

That these agree­ments were ap­proved by the FWC tells us a lot about the in­tegrity — or lack thereof — of the prac­tice in which union agree­ments are sim­ply waved through while non-union agree­ments are thor­oughly vet­ted. That there were as­sur­ances given by the com­pa­nies and the union that work­ers were bet­ter off makes the pro­ce­dures even more lu­di­crous — in­de­fen­si­ble, in fact.

Many of these large com­pa­nies in retail and fast food may end up re­ly­ing on the award, as every con­di­tion in an agree­ment must be equal to or bet­ter than those con­tained in the award.

For the Shop­pies, such a de­vel­op­ment is ex­tremely un­wel­come as the com­pa­nies are also likely to with­draw from their com­mit­ment to pro­mote union mem­ber­ship among their work­forces.

And fewer union mem­bers mean lower in­come for the union. This, in turn, will af­fect the La­bor Party; the Shop­pies have al­ways been a gen­er­ous donor.

What are the pol­icy im­pli­ca­tions of the demise of en­ter­prise bar­gain­ing? The ini­tial prom­ise of en­ter­prise bar­gain­ing in­volved the es­cape from the rigid sys­tem of wage de­ter­mi­na­tion based on pre­scrip­tive awards and the prin­ci­ple of com­par­a­tive wage jus­tice. There were in­deed early gains, partly be­cause of the broader nodis­ad­van­tage test in place com­pared with the BOOT.

In more re­cent times, how­ever, re­fus­ing to of­fer any pro­duc­tiv­ity off­sets has be­come a badge of hon­our for union of­fi­cials. And, let’s face it, en­ter­prise bar­gain­ing in the pub­lic sec­tor is a joke since those rep­re­sent­ing the em­ployer side of the bar­gain sim­ply send the bill to the tax­payer.

It is ap­par­ent that a rolling se­ries of en­ter­prise agree­ments for com­pa­nies mainly in­volves more and more ben­e­fits be­ing given to work­ers with the costs es­ca­lat­ing, of­ten with­out due re­gard to ca­pac­ity to pay. Many agree­ments also in­volve sig­nif­i­cant in­ter­fer­ence in man­age­ment rights, in­clud­ing in re­la­tion to dis­miss­ing work­ers and tak­ing on ca­sual work­ers and con­trac­tors.

It is re­ally no sur­prise that more em­ploy­ers are seek­ing to ter­mi­nate the agree­ments that cover them; Mur­doch Univer­sity is a re­cent case in point. The ben­e­fits for em­ploy­ers of be­ing cov­ered by an agree­ment — pro­tected in­dus­trial ac­tion is tech­ni­cally not al­lowed dur­ing the course of an agree­ment, for in­stance — are too small in com­par­i­son with the costs.

There is no doubt that La­bor is wary of this de­vel­op­ment and wants to make it more dif­fi­cult for the FWC to ter­mi­nate agree­ments. But the tide has turned and even amended leg­is­la­tion is un­likely to re­verse the slow death of en­ter­prise bar­gain­ing.

The fact is that pri­vate sec­tor agree­ments have been com­mon only in man­u­fac­tur­ing and con­struc­tion. Rigid col­lec­tive agree­ments are not suit­able for ser­vice in­dus­tries or higher-paid work­ers. With the de­cline of man­u­fac­tur­ing and the cycli­cal na­ture of con­struc­tion, we may sim­ply end up read­ing about en­ter­prise bar­gain­ing in the his­tory books.

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