EMPLOYERS GIVE COSTLY ENTERPRISE AGREEMENTS THE BOOT
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.