Fair Work Act Review

Submission by Anthony Forsyth* and Andrew Stewart#

February 2012

1. Introduction

This submission is made in our capacity as academic labour lawyers with substantial experience in researching, analysing and commenting on the Fair Work legislation. It draws not just on our scholarly work, but on insights gained from the substantial and regular contact we have with employers, workers, unions, practitioners, tribunal members and government agencies.

In framing the submission, we have assumed that the primary aim of the Review must be to assess the effectiveness of the Fair Work legislation by reference to its stated objects, considered as a whole rather than in isolation, and understood by reference to the policy framework that informed its drafting.1 We say this for two reasons, both of them pragmatic. One is the extremely limited timeframe, not just for the drafting of submissions, but for the completion of the Review. The other is the lack of any obvious commitment on the part of the government to making wholesale changes to the legislation, in the absence of compelling evidence that something has ‘gone wrong’ with its implementation.

To that end, we have ignored many of the exceedingly broad questions posed in Attachment B of the Background Paper, which can be read as an invitation to suggest how parts of the Fair Work Act 2009 (FW Act) could be entirely rewritten. Our submission is not a critique of the current legislation, nor an attempt to reformulate it. Rather, it makes a limited number of observations as to the way in which the legislation has been interpreted and applied, with a view to identifying possible improvements that would be consistent with its overall design.

We will start with some general observations about the operation of the FW Act and the debate concerning its effectiveness, and touch on the ‘hot button’ issue of productivity. We then offer a range of comments, some more detailed than others, on the following broad areas:

the National Employment Standards;** Associate Professor and Director, Workplace & Corporate Law Research Group, Faculty of Business & Economics, Monash University.## John Bray Professor of Law, University of Adelaide; Consultant, Piper Alderman.1 As to that framework, see K Rudd and J Gillard, Forward with Fairness: Labor’s plan for fairer and more productive Australian workplaces, April 2007 (‘FWF Policy’); K Rudd and J Gillard, Forward with Fairness: Policy Implementation Plan, August 2007 (‘FWF Implementation Plan’).

bargaining and agreement-making;

industrial action;

unfair dismissal; and

the general protections.

2. General Observations

In our view, there is little that can be said to have ‘gone wrong’ with the Fair Work legislation in its first two and half years in operation. For the most part, we believe, it has been interpreted and applied in accordance with the expectations of those who drafted it, and indeed of the stakeholders (from business, unions and the State and Territory governments) who had input into the drafting process. There have been relatively few decisions, whether on the part of Fair Work Australia (FWA) or the courts, that we would regard as having misinterpreted the legislation – and many of those have either been corrected on appeal or review, or are still under challenge. Nor have many unintended effects or consequences been exposed.

In saying that, we are not suggesting that every one of the government’s stated objectives has been fully achieved. For example, and for reasons we will explain, we do not believe that the legislation has had a great effect either in promoting the spread of collective bargaining, or in eliminating the practice of employers paying ‘go-away money’ to settle marginal or even frivolous unfair dismissal claims. But in both cases, that is arguably a consequence of limitations in the policy framework, rather than the legislation failing to work as expected. Similarly, while the FW Act’s provisions on industrial action fail to comply with the ‘international labour obligations’ to which s 3(a) refers, there is nothing unexpected or surprising about that. As has been pointed out, the government has steadfastly refused to address the shortcomings with those provisions repeatedly identified by various organs of the International Labour Organisation (ILO).2 Clearly then, the non-compliance is by design, not accident.

We would also observe that many of the more general complaints that have been levied by business groups or (less commonly) by individual employers against the legislation are really attacks on the general philosophy and content of the legislation, not on its operation as such. To address some of those complaints would involve a fundamental realignment of the balance struck by the current regime between the interests of employers and workers.

For example, it is apparent that what some employers in the resources sector are seeking is a capacity to manage their businesses without the involvement of trade unions, and to undertake projects entirely free of any threat of industrial action. These aspirations are simply not compatible with the principle of freedom of association, nor with the support 2 See S McCrystal, The Right to Strike in Australia, Federation Press, Sydney, 2010, ch 10.

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that the present Act lends to collective bargaining. Indeed to allow them to be fully realised would involve restrictions on the taking of industrial action, or on union rights of entry, that would go far beyond anything envisaged by the Howard Government, even during the Work Choices period. We are not suggesting that every claim for reform by employers in the resources sector, or in other unionised industries, should be dismissed out of hand. Some will undoubtedly be worth considering, even within what we regard as the limited scope of an operational review. But what we do say is that talk of the Act having unnecessarily bolstered ‘union power’3 should not only be kept in proportion,4 but understood in the context of a broader ideological agenda that is profoundly antithetical to the principle of collectivism.

It is also worth emphasising that the concerns about union activities that so animate certain employers in the resources, manufacturing and construction sectors are very far removed from the issues confronting businesses in other parts of the economy. For the small to medium enterprises (SMEs) that predominate in sectors such as retail and hospitality, both unions and indeed collective bargaining are largely absent. Their concerns are much more likely, in our experience, to revolve around the costs and ‘inflexibilities’ imposed by the award system, and the renewed exposure to unfair dismissal claims that the FW Act has brought.

We will deal later in the submission with the impact on employers of both unfair dismissal claims, and also dismissal-related claims under the ‘general protections’ in Part 3-1 of the FW Act. As for the modern award system, we would simply make two general points.

The first is that in our experience, the element of the Fair Work regime that has caused by far the most difficulty for managers and their advisors has been the transitional arrangements for pay rates in awards.5 Although that matter is not within the purview of the Review, it should be borne in mind when assessing complaints about the ‘complexity’ of the current system. In our view, the Fair Work legislation is considerably less complex overall than the legislation it replaced; and once the transitional arrangements have run their course by mid-2014, we are confident the modern award system will prove to be much easier to understand and apply than the chaotic patchwork of instruments it is in the process of replacing.

The second point is that to the extent employers are seeking greater ‘flexibility’ to engage staff under enterprise agreements or individual flexibility arrangements that vary award

3 See eg ‘It's all going unions' way, says AiG’ Workplace Express, 30 November 2011, referring to a speech by Heather Ridout from the Australian Industry Group.4 For example, the statistics quoted on p 17 of the Background Paper scarcely bear out claims that industrial action has increased under the FW Act: see further the discussion later in the submission, under the heading of Industrial Action.5 For a description of those arrangements and an attempt to provide guidance as to how they should be interpreted and applied, see Fair Work Ombudsman, Transitional Arrangements in Modern Awards, Guidance Note No 7, FWO, Melbourne, 2010.

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standards, particularly in relation to working time or penalty rates, the present legislation offers all the freedom they could reasonably want to employ staff on conditions that are more favourable overall. It is clear, therefore, that the ‘flexibility’ desired involves setting conditions that undercut award standards, and would require the abandonment of the ‘better off overall’ requirement.6 Whatever the merits or otherwise of such a change, it would again be contrary to one of the fundamental principles underpinning the legislation. To the extent that it is considered that particular award standards are set too high, that is a matter that can and should be ventilated before FWA, not in this Review.

3. The Productivity Debate

It has become common over the past year to hear business leaders complaining about the ‘barriers’ that the FW Act is said to impose on attempts to lift productivity.7 There are many problems with the current debate about productivity, as John Buchanan has pointed out.8 But even if we gloss over the conceptual difficulties that he highlights, two points stand out.

The first is the absence of any credible link, at the macro level, between productivity (at least as recorded by the ABS) and changes in labour regulation. This point has been tellingly made by a number of recent studies.9 During the 1990s Australia experienced what is generally regarded as a surge in productivity, under both the Keating Government’s enterprise bargaining-oriented reforms of 1993, and the Howard Government’s initial (and in retrospect relatively modest) amendments in 1996.10 Over more recent years, as the figures on pp 9–11 of the Background paper reveal, recorded productivity growth has slowed, notwithstanding the apparently dramatic shifts in regulatory policy wrought first by the Work Choices amendments, and then the Fair Work legislation. There is no evidence in these figures to bear out the Labor Government’s prediction that the renewed emphasis on collective bargaining in the Fair Work legislation would lift productivity.11 But nor, by the same token, is there anything to suggest that the current laws are ‘sapping productivity

6 See FW Act ss 144(4)(c), 186(2)(d), 193, 203(4).7 See eg P Anderson (Chief Executive, Australian Chamber of Commerce and Industry), ‘Employer Flexibility versus Job Security’, Workforce Conference, Sydney, 5 September 2011; G Bradley (President, Business Council of Australia), Address to Australia–Israel Chamber of Commerce, 12 September 2011.8 ‘Productivity and Labour: Four Paradoxes and their Implications for Policy’ in M Baird, K Hancock and J Isaac (eds), Work and Employment Relations – An Era of Change, Federation Press, Sydney, 2011, p 124.9 See eg Working by Numbers: Separating Rhetoric and Reality on Australian Productivity, ACTU Working Australia Paper, Melbourne, 2011; K Hancock, ‘Enterprise Bargaining and Productivity’, Twenty Years of Enterprise Bargaining Workshop, Melbourne, 5 November 2011.10 For a ‘leximetric’ assessment of the scope of changes to the ‘protective strength’ of Australian labour laws over the past four decades, see R Mitchell, P Gahan, A Stewart, S Cooney and S Marshall, ‘The Evolution of Labour Law in Australia: Measuring the Change’ (2010) 23 Australian Journal of Labour Law 61. This concludes that the 1993 reforms were by far the most significant over that period, notwithstanding the apparently more ‘radical’ changes made more recently by the Work Choices and Fair Work legislation.11 See Explanatory Memorandum, Fair Work Bill 2008 (Cth) (‘FW Bill EM’), [r.194]–[r.198].

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across the country’.12 As the President of FWA has helpfully pointed out, ‘much of the debate about productivity seems to be based on political positioning rather than on hard analysis’.13

The second point is that even the most superficial scrutiny of many employer group complaints about the FW Act reveals that their primary concern is not in fact labour productivity (as conventionally defined),14 but profitability. To the extent that a workplace law requires an employer to comply with certain minimum standards, or permits workers to take collective action to improve their wages and conditions, it obviously impacts on labour costs, and hence profits. But it does not necessarily make any difference to the amount that employees produce, or how efficiently they work. We do not deny that there may be situations where the impact of a particular award provision or collectively bargained term may impede a business from introducing new work practices or payment systems that would enhance productivity. But it cannot be assumed that giving employees a voice at work, or allowing them to challenge the arbitrary exercise of managerial prerogative, must necessarily have that effect. Indeed the contrary may well be true.15 In any event we would maintain that labour regulation is likely to have far less impact on productivity than factors such as education and training, the deployment of new technology, or the quality of management.

4. National Employment Standards

For reasons already explained, we do not propose to offer a general critique of the National Employment Standards (NES) or the modern award system, nor offer suggestions about how the ‘safety net’ they provide could be made more ‘fair and relevant’. We would simply make the following brief comments:

1. Much of the content of the NES is far from new, having already been part of the previous legislation, and/or standard features of pre-Fair Work awards.16 As such, although some of the drafting has raised issues that will no doubt be ventilated in submissions to the Review, we have seen nothing in our professional work to suggest that the NES have caused major problems for employers.

12 Australian Mines & Metals Association, ‘Tsunami of consensus building for IR change’, media release, 5 September 2011.13 G Giudice, Address to Australian Labour and Employment Relations Association National Conference, Fremantle, 7 October 2011, p 7.14 That is, as ‘the amount produced per hour worked’: ABS, Measuring Australia’s Economy, Cat No 1360.0, 2003.15 For well-known arguments to that effect, see eg R B Freeman and J L Medoff, What Do Trade Unions Do?, Basic Books, New York, 1984; P C Weiler, Governing the Workplace: The Future of Labor and Employment Law, Harvard University Press, Cambridge, 1990.16 See generally J Murray and R Owens, ‘The Safety Net: Labour Standards in the New Era’ in A Forsyth and A Stewart (eds), Fair Work: The New Workplace Laws and the Work Choices Legacy, Federation Press, Sydney, 2009, p 40.

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2. The most novel element in the NES is the right for carers of pre-school or disabled children to request flexible working arrangements, under s 65 of the FW Act. In principle, we would agree with the suggestion that this should be extended to workers with other caring responsibilities, and with the view that enforcement mechanisms should be strengthened.17 But we would also caution that there may not yet have been sufficient time to assess the practical impact of the new standard. We note that, as required by s 653(1)(c) of the FW Act, the General Manager of FWA has commissioned research into ‘flexibility request making and its outcomes’.18 It may be prudent to await the publication of that research before forming any definite views as to possible changes, not least given previous findings that even prior to the NES, flexible arrangements were already a common feature of employment relationships in Australia, albeit by consent rather than legal right.19

3. One practical problem that we have encountered in our professional work, and that could usefully be addressed, concerns the definition of ‘service’ in s 22 of the FW Act. Continuity and accrual of service is important to the operation of most of the NES. Section 22(1) provides that ‘service’ with a national system employer includes any ‘period during which the employee is employed by the employer’. Although the provision does not say so expressly, this presumably covers employment under either a single employment contract, or a succession of such contracts, and regardless of whether the job the employee is performing changes during that period. If there is a ‘transfer of employment’ involved, it is clear from s 22(5)–(7), in conjunction with s 311(1), that a break of up to three months between finishing one job and starting the next will not break the employee’s continuity of service. But nothing is said about the effect of any break between two jobs with the same employer. This could usefully be clarified.20

4. A further definitional issue concerns the exclusion of casual employees from various entitlements under the NES, including annual leave (s 86), paid personal/carer’s leave (s 95), notice of termination and redundancy pay (s 123(c)). There is no definition of ‘casual’ in the FW Act, just as there was none in the Workplace Relations Act 1996 (WR Act).

17 See B Creighton and A Stewart, Labour Law, 5th ed, Federation Press, Sydney, 2010, paras [13.96]–[13.97].18 See http://www.fwa.gov.au/index.cfm?pagename=admingmreporting. The research is to be conducted by the Centre for Work + Life at the University of South Australia.19 See N Skinner and B Pocock, ‘Flexibility and Work-life Interference in Australia’ (2011) 53 Journal of Industrial Relations 65.20 Compare the provision commonly found in long service leave statutes (see eg Long Service Leave Act 1987 (SA) s 6(1)(i); Long Service Leave Act 1992 (Vic) s 62(2)(g)) that an employee’s period of service is not broken where they are dismissed but then re-employed within two or three months.

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In Williams v Macmahon Mining Services Pty Ltd21 it was held that an employee was entitled to be paid out for untaken annual leave, despite having been engaged as a casual and paid an all-in rate that was intended to compensate him for not having such leave. This was on the basis that, in the absence of any statutory definition in what was then the WR Act, the term must be understood to comprehend only someone engaged on an informal, irregular or uncertain basis.22 The employee here was working stable and predictable hours and hence could not be regarded as a ‘true’ casual.

It is clear that there are many so-called ‘permanent casuals’ who have regular, stable and often long-term employment arrangements, yet who have been engaged on a casual basis.23 One reason for this is that most awards (and many enterprise agreements) explicitly confer on employers a broad discretion as to whether someone is engaged and paid as a casual, without reference to the expected duration or regularity of their work. Those instruments require a casual to be paid a loading, on the clear understanding that this is compensating for foregone entitlements to annual leave, paid sick leave and so on.24

The problem is that, on the face of it, there is nothing in s 55 of the FW Act to suggest that an award or an enterprise agreement can define who constitutes a casual for the purpose of the exclusionary provisions in the NES. Although this point was not addressed in Williams v Macmahon Mining, it would be open to a court to take the view that if, like the employee in that case, a particular worker did not qualify as a true casual, then they should receive annual leave or other benefits under the NES – regardless of whether they had been engaged and paid as a casual pursuant to an award or enterprise agreement. For employers with long-term casuals in industries such as retail or hospitality, the potential liability could be huge. It should also be noted that in Williams v Macmahon Mining it was held that the employer could not offset any loading already paid to the employee against the value of his accrued leave entitlements.

Like many other academics,25 we believe that a policy response is required in the face of the casualisation of the Australian workforce. We are far from convinced that awards should continue to allow employers to take on ‘permanent casuals’ at will. But those are arguments that range far wider than the limited scope effectively permitted for this Review. That being the case, in order to ensure consistency

21 (2010) 201 IR 123.22 See Reed v Blue Line Cruises Ltd (1996) 73 IR 420 at 425.23 See eg the figures as to job tenure in B van Wanrooy et al, Working Lives: Statistics and Stories, Workplace Research Centre, University of Sydney, 2008, p 72.24 See eg Award Modernisation (2008) 177 IR 364 at [47]–[50].25 See eg B Pocock, J Buchanan and I Campbell, ‘Meeting the Challenge of Casual Work in Australia: Evidence, Past Treatment and Future Policy’ (2004) 30 Australian Bulletin of Labour 16.

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between the award system and the NES, and to protect employers against what might be a substantial and unforeseen liability, we recommend that s 55 be amended to make it clear – even if only for the avoidance of doubt – that awards and enterprise agreements may define who constitutes a casual for the purpose of the NES.

5. Bargaining and Agreement-making

5.1 Objects

Section 3(f) of the FW Act indicates that the legislation’s overall objective of providing a ‘balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians’ is to be attained by:

achieving productivity and fairness through an emphasis on enterprise-level collective bargaining underpinned by simple good faith bargaining obligations and clear rules governing industrial action.

Section 171 outlines the objects of Part 2-4 of the FW Act (Enterprise Agreements), as follows:

(a) to provide a simple, flexible and fair framework that enables collective bargaining in good faith, particularly at the enterprise level, for enterprise agreements that deliver productivity benefits; and

(b) to enable FWA to facilitate good faith bargaining and the making of enterprise agreements, including through:

(i) making bargaining orders; and

(ii) dealing with disputes where the bargaining representatives request assistance; and

(iii) ensuring that applications to FWA for approval of enterprise agreements are dealt with without delay.

In addition to the statutory objects referred to above, further indication as to how the new collective bargaining system was intended to operate was provided in the ALP’s 2007 Election Policy ‘Forward with Fairness’,26 and in the FW Bill EM.

These documents clarify that Part 2-4 of the FW Act aimed to achieve three key objectives:

1. To encourage and promote the practice of collective bargaining in Australian workplaces. This was intended to address the absence of any positive obligation to bargain collectively under the previous Work Choices laws:

26 See above, n 2.

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The WR Act provides no avenues of assistance for employers or employees in the circumstances where collective bargaining breaks down … As such, the existing bargaining framework does not actively encourage employers and employees to bargain and reach agreement.27

Support for collective bargaining was also articulated in terms of fairness,28 ie a fundamental shift away from the preference under Work Choices for individualised bargaining (which had been clearly shown to lead to unfair outcomes for many employees).29

2. To promote democratic values in the workplace, eg: ‘There are times where a majority of employees at a workplace want to collectively bargain and this choice is not respected by their employer.’30 The FW Act therefore positions collective bargaining as both a matter of democratic choice (based on ‘the will of the majority’ or ‘majority support’), and as part of a framework of rights that are essential in a functioning democracy.31

3. To enhance productivity in workplaces and the Australian economy. This is premised on the political consensus of the last 20 years supporting ‘enterprise bargaining’ as a key instrument of economic reform, and the best way to ensure that wages and other employment conditions are linked to productivity improvements.

Points 1 and 2 above are discussed further below, in the context of examining the operation of the various mechanisms in Part 2-4 of the FW Act for promoting collective bargaining and ensuring that the will of the majority of employees is respected.

Point 3, and the extent to which the FW Act bargaining provisions assist in obtaining productivity outcomes, are not fully explored in this submission. However aside from reiterating the general point made earlier, that it is difficult to establish any link between productivity data and labour regulation, we would simply note that there are very few provisions in the legislation actually directed at productivity considerations in the bargaining and agreement approval processes.32 In particular, there is no requirement that FWA be satisfied that an enterprise agreement should only be approved if its provisions require or facilitate productivity improvements. Of course to give FWA such a vetting role would in effect restore the position that applied before 1992, when the Australian Industrial Relations Commission (AIRC) could reject agreements in the public interest, for example if

27 FW Bill EM, para [r.135] (emphasis added).28 See eg FWF Policy, pp 13–14.29 See also the object stated in FW Act, s 3(c). 30 FW Bill EM, para [r.166]; see also FWF Policy, p 14.31 FWF Policy, p 12.32 For exceptions, see eg ss 241(b), 243(3)(a), 262(4)(b), 275(e).

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they provided for ‘excessive’ wage increases.33 We doubt that the reintroduction of such a role, and the reduction of autonomy it would imply for those engaged in workplace bargaining, would be welcomed either by employers or trade unions.

This in turn raises another important aspect of the FW Act bargaining framework. It is made clear in the FW Bill EM that the various statutory mechanisms supporting collective bargaining are intended to operate in the background. Voluntary bargaining relationships developed between employers, employees and unions are meant to be the norm, eg: ‘Where there is new regulation it is focused on facilitating the bargaining processes in situations where an employer and their employees are unable to successfully bargain together.’34

In the sections that follow, we consider whether the bargaining provisions are operating in accordance with the statutory objects, and as the government intended. In addition to the evidence about the operation of the FW Act bargaining framework provided below, we note that further empirical data will emerge later this year upon completion of an FWA-funded study examining ‘FWA’s Influence in the Enterprise Bargaining Process’.35

5.2 Encouraging collective bargaining and respecting the wishes of the majority

(a) Incidence of bargaining and agreement coverage

In considering whether the policy goal of promoting collective bargaining is being realised, statistics indicate that the FW Act has had (to date) a modest – but not insignificant – effect on the coverage of collective agreements.

The Background Paper refers (at p 13) to ABS data showing that the number of Australian employees covered by collective agreements (registered and unregistered) increased from 39.8% of the workforce in 2008, to 43.4% in 2010. Further, DEEWR data shows an increase in the number of operative enterprise agreements from 22,371 (covering 2.05 million employees) in July 2009, to 23,403 agreements (covering almost 2.6 million employees) as at 30 June 2011.

Analysis by Cooper and Ellem of DEEWR data on enterprise bargaining trends indicates that the number of enterprise agreements being lodged with FWA is ‘picking up pace’, and is consistent with the average level of lodgements in the period of operation of the WR Act.36

33 See Creighton and Stewart, above n 17, para [12.05].34 FW Bill EM, para [r.114].35 See http://www.fwa.gov.au/index.cfm?pagename=admingmreporting. The chief investigators on this project are Associate Professors Anthony Forsyth, Peter Gahan and John Howe.36 R Cooper and B Ellem, ‘Getting to the Table? Fair Work, Unions and Collective Bargaining’ in B Creighton and A Forsyth (eds), Rediscovering Collective Bargaining: Australia’s Fair Work Act in International Perspective, Routledge, New York (forthcoming in 2012). See also, in the same volume, P Gahan and A Pekarek, ‘Collective Bargaining and Agreement Making in Australia: Evolution of the Legislative Framework and Practice’. Copies of these chapters can be supplied on request.

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Overall, however, the evidence to date suggests that the FW Act has not had a major impact on the spread of collective bargaining – and is unlikely to have altered van Wanrooy et al’s assessment (in 2009) that such bargaining is confined mainly to large, unionised workplaces in the public sector and to some sections of the private sector.37 It must be borne in mind that many of the new agreements are effectively non-union instruments drafted by employers to replace the individual workplace agreements that were formerly available under the WR Act. Such agreements may be presented as ‘collective’, and they do require the endorsement of a majority of employees to be registered under the FW Act – but only rarely are they the product of anything that could be said to resemble a bargaining process (this point is discussed further below).38

(b) Combating employer resistance to bargaining – majority support determinations

Connected to the above discussion of whether the incidence of collective bargaining has increased under the FW Act, is the issue whether the legislation has had any impact in reducing the ability of employers to resist efforts by employees/unions to engage in bargaining on a collective basis. As outlined above, the FW Act was intended to redress the problem of vigorous resistance (in some cases, hostility) to collective bargaining by certain employers, which was made possible under the WR Act (particularly following the Work Choices amendments).39

The mechanism for dealing with employer resistance – and ensuring that the wishes of a majority of employees in a workplace to engage in collective bargaining are respected – is the power given to FWA to make majority support determinations (MSDs) under ss 236–237 of the FW Act. In research examining case law and other developments in the first 15 months of operation of the FW Act bargaining framework, Forsyth concluded that:

MSDs are proving to be an effective mechanism for overcoming strident employer resistance to [collective bargaining]. Although certain new strategies of obstruction have been adopted by some employers, these have proven to be unsuccessful where a majority of employees have demonstrated to FWA (mainly through petitions) that they want [collective bargaining]. It remains to be seen, though, whether the obtaining of MSDs by unions will ultimately lead to the widespread negotiation of collective agreements.40

37 See B van Wanrooy, S Wright and J Buchanan, Who Bargains?, Report for the NSW Office of Industrial Relations, Workplace Research Centre, University of Sydney, 2009, pp 45–49.38 See C Briggs and R Cooper, ‘Between Individualism and Collectivism? Why Employers Choose Non-Union Collective Agreements’ (2006) 17(2) Labour & Industry 1; van Wanrooy et al, above n 37, p 10.39 See R Cooper, B Ellem, C Briggs and D van den Broek, ‘Anti-unionism, Employer Strategy, and the Australian State, 1996–2005’ (2009) 34 Labor Studies Journal 339.40 A Forsyth, ‘The Impact of ‘Good Faith’ Obligations on Collective Bargaining Practices and Outcomes in Australia, Canada and the United States’ (2011) 16 Canadian Labour and Employment Law Journal 1 (copy available on request) at 48; and see ibid at 33–47 for a detailed study of the operation of MSDs. Another important finding made by the author relates to the ability of FWA to determine whether majority employee support for collective bargaining exists, using any ‘appropriate’ method (FW Act s 237(3)). This, he argues, has ensured that US-style ‘union-busting’ methods have not prospered under the legislation (because petitions, rather than workplace ballots, have in practice been the main method utilised by unions – and accepted by

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On the latter point, a classic example of the lack of potency of the MSD mechanism – ie that it can be used to force an employer to the negotiating table, but not (ultimately) to conclude an agreement – is the long-standing bargaining dispute at Cochlear.41 The fact that no agreement has been reached at Cochlear since the making of an MSD compelling the employer to bargain with the AMWU in August 2009 may also be seen as illustrating shortcomings in the good faith bargaining provisions, as discussed in the next section.

Another important effect of the MSD provisions, identified in Forsyth’s research, is the voluntary reversal by a number of major Australian employers of their former position of trenchant opposition to collective bargaining.42 However, this ‘shadow effect’ of the regulatory scheme43 (ie the extent to which employers have changed their bargaining strategy due to the prospect of being compelled to bargain through an MSD) is difficult to measure precisely.

(c) The good faith bargaining obligations

The good faith bargaining obligations contained in s 228(1) of the FW Act – and the qualification set out in s 228(2) – reflect the Government’s intention that:

if bargaining representatives are not effectively bargaining together, FWA will have the power to issue bargaining orders requiring representatives to bargain in good faith.

The good faith bargaining requirements over which FWA can make bargaining orders relate to procedural matters only and not the content of the agreement. …

Good faith bargaining requirements aim to ensure that all bargaining representatives act in an appropriate and productive manner when working towards a collective agreement. The requirements also facilitate improved communication between bargaining representatives, which is expected to reduce the likelihood of industrial action.

During agreement making, where representatives are failing to bargain in good faith, the good faith bargaining requirements will act to avoid protracted disputes by allowing FWA to make orders. This facilitation of agreement making is in the interests of both bargaining representatives and the general public.44

Forsyth’s research (based on FWA decisions on the good faith bargaining provisions in the first 15 months of their operation)45 concluded that:

Bargaining orders have been useful in addressing certain employer resistance strategies (e.g., bypassing union representatives, submitting agreements to ballot prematurely, and

FWA – to establish majority support): ibid at 36–38.41 See ibid at 42–43.42 See ibid at 45–47. 43 For discussion of the ‘shadow effect’ of UK collective bargaining legislation, see G Gall, ‘The First Ten Years of the Third Statutory Union Recognition Procedure in Britain’ (2010) 39 Industrial Law Journal 444.44 FW Bill EM, paras [r.167]–[r.170].45 Forsyth, above n 40 at 13–33.

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direct dealing in the form of unilateral pay increases). However, FWA has permitted other debatable employer tactics (e.g., direct communication with employees, and restructuring during [collective bargaining]).46

That conclusion is drawn upon here, along with further case law developments up to February 2012, to support the following assessment of the good faith bargaining provisions. The evidence to date indicates that the good faith bargaining obligations and FWA bargaining orders have proved effective in facilitating collective bargaining in many instances.47 However, two features of the provisions, as interpreted by FWA, have, in the eyes of many, limited their effectiveness as an instrument to promote collective bargaining in practice:

the ability of parties (mainly, employers) to engage in conduct or tactics that may be considered counter to the notion of ‘good faith’ negotiations, without FWA finding such conduct to be in breach of s 228(1);

the ability of parties (mainly, employees/unions) to engage in protected industrial action at such an early stage of the bargaining process as to render the good faith bargaining obligations almost meaningless.

These two features are discussed in turn below.

(d) Acceptable bargaining tactics

FWA has found the following kinds of employer conduct not to constitute ‘bad faith’ (ie not to be in breach of any of the obligations in s 228(1)):

bypassing a union bargaining representative by communicating directly with employees, through meetings held in the union’s absence and sending information packages regarding the employer’s final offer in negotiations to the employees’ homes;48

implementing a significant restructure of the business (including the positions of employees who were originally to be covered by the proposed agreement, but would not be after the restructure), while negotiations were continuing;49

46 Ibid at 48.47 See eg the cases referred to in Forsyth, above n 40 at 15 (fn 53 and text accompanying); and FWA’s decisions precluding employers from making direct offers to employees or unilaterally altering employment conditions during bargaining: FSU v Commonwealth Bank of Australia [2010] FWA 2690; AMWU v Galintel Rolling Mills Pty Ltd T/A The Graham Group and Others [2011] FWA 6326.48 CFMEU v Tahmoor Coal Pty Ltd [2010] FWAFB 3510; and see also LHMU v Mingara Recreation Club Ltd [2009] FWA 1442; NUW v Patties Foods Ltd [2011] FWA 4103.49 LHMU v Coca-Cola Amatil (Australia Pty Ltd) [2009] FWA 153.

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withdrawing, or reneging upon, already agreed items at a later stage in the negotiation process;50

submitting a proposed enterprise agreement to ballot, where the employer had complied with the pre-approval requirements for making an enterprise agreement under Part 2-4 Division 4 (Subdivision A) of the FW Act – despite the union’s insistence that it wished to continue to meet with the employer as bargaining representative for some of the employees.51

We do not suggest that these decisions are necessarily incorrect, as a matter of statutory interpretation. But we do note that the types of conduct referred to in the first three dot points above are considered to run counter to the notion of good faith bargaining in the long-standing collective bargaining systems operating in the USA and Canada.52 Further, by permitting such conduct, FWA can be seen to have taken a minimalist approach to the obligations set out in s 228(1), which arguably limits their effectiveness as a mechanism to achieve the policy objective of promoting collective bargaining. In particular, direct engagement strategies of the kind allowed by the Full Bench of FWA in Tahmoor Coal potentially have the effect of undermining the representative role of a union bargaining representative (contrary to s 228(1)(e)-(f) of the FW Act).53

Another problem that has emerged in some bargaining contexts is that of ‘surface bargaining’. Recently, FWA found that an employer was not bargaining in good faith, where it was bargaining with no real intention of entering into an enterprise agreement.54 The long-running Cochlear dispute (mentioned above) looms as a test case of this issue, with the AMWU having recently applied for a bargaining order seeking to expedite the negotiations and require the employer to provide a comprehensive response to the union’s claims.55

Some of the problems that have been encountered with the operation of the good faith provisions could be addressed through clearer articulation of the good faith bargaining requirements. This could be done either through amendments to the FW Act, or through

50 CFMEU v Shinagawa Refractories Australasia Pty Ltd [2011] FWA 8304.51 ASU v Global Tele Sales Pty Ltd [2011] FWA 3916. Generally, FWA has permitted employers to submit agreements to ballot once negotiations with bargaining representatives have reached the point of ‘impasse’: see the cases discussed in Forsyth, above n 40 at 20–23 (especially CFMEU v Tahmoor Coal Pty Ltd [2010] FWAFB 3510).52 See Forsyth, above n 40 at 17, 24–25, 32.53 See A Bukarica and A Dallas, with A Forsyth (consulting editor), Promoting Good Faith Bargaining under Australia’s Fair Work Act: Lessons from the Collective Bargaining Experience in Canada and New Zealand, Construction, Forestry, Mining and Energy Union (Mining and Energy Division), Sydney, 2010, esp pp 85–87.54 APESMA v Endeavour Coal Limited [2012] FWA 13. FWA was careful to distinguish the employer’s approach from ‘hard bargaining’, the legitimacy of which has been upheld in a number of decisions (based on s 228(2) of the FW Act): see Forsyth, above n 40 at 16–17; TWU v United Resource Management Pty Ltd [2010] FWA 8765.55 See ‘AMWU seeks to halt “surface bargaining” by Cochlear’, Workplace Express, 15 December 2011. Note also ‘Cochlear seeks bargaining order against AMWU’, Workplace Express, 20 December 2011 (the employer argues that the union has breached s 228(1) by failing to adhere to agreed bargaining protocols).

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another instrument such as a good faith bargaining ‘code’. In the immediate aftermath of the Qantas dispute, the government expressed interest in the idea of a bargaining code, of the kind operating in New Zealand,56 as one mechanism to shift parties away from an adversarial approach to collective bargaining.57 An Australian good faith bargaining code58 – which clearly stated the kinds of conduct, tactics and strategies that constitute both ‘good’ and ‘bad’ faith – would no doubt assist negotiating parties by clarifying their legal obligations. However, amending the statutory provisions would amount to a stronger statement of the Government’s desire for employers, unions and other bargaining representatives to engage in genuine good faith bargaining.

The ability of employers to submit a proposed agreement to a vote of employees, even though negotiations with bargaining representatives may be continuing,59 highlights a broader concern. This arises from the conflict between the ‘agreement making’ provisions, and the ‘collective bargaining’ provisions, in Part 2-4 of the FW Act. The tension is illustrated by Vice President Watson’s conclusion in Global Tele Sales that:

It appears to me that the process of agreement making between an employer and its employees at a workplace in accordance with the provisions of the [FW Act] is a process of collective bargaining. The ASU appears to infer that only through its involvement can collective bargaining occur. I am unable to find any support for that notion in the [FW Act].60

The nub of the problem is that ‘the process of agreement making’, whereby an employer simply requests employees to vote on a proposed agreement after providing information and meeting certain other requirements within defined time-frames,61 does not accord with accepted definitions of ‘collective bargaining’.62 It is likely that a great number of the enterprise agreements approved by FWA are not the product of any meaningful ‘bargaining’ process at all – although, again, the extent to which this occurs is not easily measured.In a number of decisions, FWA has refused to approve proposed agreements where it was apparent that employees were not given any opportunity to negotiate with the employer,

56 NZ Department of Labour, Code of Good Faith in Collective Bargaining, 9 August 2005, at http://www.dol.govt.nz/er/starting/unions/code.asp.57 See E Hannan, ‘Qantas row opens way for review of IR bargaining’, The Australian, 8 November 2011; M Skulley, ‘Bargaining code on review agenda’, Australian Financial Review, 9 November 2011.58 See further the discussion in Bukarica and Dallas, above n 53, pp 82–85, including consideration of the legal basis for the making of a code (ie the regulation-making power in s 796 of the FW Act).59 See ASU v Global Tele Sales Pty Ltd [2011] FWA 3916, referred to above.60 [2011] FWA 3916 at [41].61 See FW Act, ss 173, 180, 181, discussed in A Forsyth, ‘Chapter 12: Enterprise Agreements’ in Creighton and Stewart, above n 17, pp 317–321.62 See eg A I Marsh and E O Evans, The Dictionary of Industrial Relations, 1973 (as cited in W B Creighton, W J Ford and R J Mitchell, Labour Law: Text and Materials, 2nd ed, Law Book Co, Sydney, 1993, para 25.1), defining collective bargaining as: ‘a method, or process, of conducting negotiations about wages and working conditions … between an employer, or group of employers or employers’ associations on the one hand, and representatives of workers and their organisations on the other, with a view to arriving at collective agreements’ (emphasis added).

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finding that the resulting agreement had not been ‘genuinely agreed’ to by employees in accordance with ss 186(2)(a) and 188.63 However, the approach adopted by Vice President Watson in Global Tele Sales, while arguably a correct reading of the legislation as it stands, allows the collective bargaining rights of employees and their representatives to be circumvented by an employer’s compliance with the agreement making rules.

Where bargaining representatives assert the right to negotiate on behalf of employees in accordance with the requirements of Part 2-4, even if this occurs late in the employer’s agreement-making process, that right should be respected as required by s 228(1)(e)-(f). One way of ensuring this would be to give FWA a discretion to refuse approval of an enterprise agreement, where the tribunal is satisfied that there has been a failure (by the employer or any other bargaining representative) to bargain in good faith, and that a bargaining order should be made instead. Presently FWA’s ability to consider the good faith bargaining requirements, at agreement approval stage, is limited to situations where a scope order is in operation (s 187(2)).64 An illustration of the constraints this imposes on FWA’s ability to deal with allegations of a lack of good faith, once it has an application for approval of an agreement before it, is provided by Application by Inco Ships Pty Ltd.65 We are not suggesting that FWA be required to consider, in all applications for agreement approval, whether there has been good faith bargaining in respect of the proposed agreement. Rather, giving FWA the discretion to refuse to approve an agreement where an absence of good faith bargaining is proven would address an important flaw in the present architecture of Part 2-4 – which, in practice, has seen the tribunal giving priority to ‘agreement making’ over ‘collective bargaining’.

(e) Good faith bargaining and protected industrial action

Several recent bargaining disputes, in particular the Qantas dispute in late 2011, have highlighted a number of difficulties arising from the uneasy fit between the good faith bargaining obligations in Part 2-4 of the FW Act and the right to take protected industrial action under Part 3-3. The collective bargaining framework requires parties to bargain in good faith, but allows them to take industrial action in support of bargaining claims (subject to complying with the detailed requirements for taking such action set out in Part 3-3).

The legislation therefore provides for two processes which are fundamentally at odds with each other: co-operative negotiation, and industrial conflict. Further, the capacity of parties to utilise protected industrial action is not limited by any requirement to engage (first) in

63 See eg MIGD Pty Ltd T/A Healthy Habits Queens Plaza [2010] FWA 1131; Waterdale Enterprises Pty Ltd as Trustee for the Boag Family Trust T/A Peel Finance Brokers [2010] FWA 4509.64 See Appeal by Philmac Pty Ltd [2011] FWAFB 2668, in which the Full Bench indicated that the good faith bargaining requirements might nevertheless be relevant in deciding whether the requirement of ‘genuine agreement’ by employees (ss 186(2)(a) and 188) has been satisfied.65 AG2010/2247 AG2010/2248; see the FWA transcript in this matter (24 September 2010), at: http://www.fwa.gov.au/documents/Transcripts/240910ag20102248.htm.

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good faith bargaining – or indeed any bargaining at all. In JJ Richards& Sons Pty Ltd v TWU,66 FWA Full Benches have twice confirmed that employees/unions can organise and take protected industrial action to compel an employer to bargain, without having to obtain an MSD. This allows industrial action to be utilised at a very early stage of the bargaining process.

As a matter of statutory interpretation, we consider the JJ Richards decisions to be correct. To hold otherwise would be to suggest that the government intended, in creating the MSD process, to remove a right that had formerly existed under the WR Act: that is, for employees to take industrial action in support of a new agreement, regardless of the level of support for collective bargaining amongst other workers.67 We can find nothing in the FW Bill EM or Forward with Fairness to suggest such an intent. Furthermore, we believe that it would be an inappropriate restriction on what is already a heavily constrained ‘right to strike’, to insist that employees can only take action with the consent either of the employer (through an expressed willingness to bargain) or a majority of their co-workers (through the MSD process). If nothing else, allowing an employer to insist on a well-organised group of employees first obtaining an MSD before taking any action would open up an obvious delaying tactic.

All that said, where bargaining has in fact commenced, we believe that it would be consistent with the scheme of the legislation as a whole either to make bargaining in good faith (and not merely genuinely trying to reach agreement) a prerequisite to taking industrial action, or to give FWA a discretion to halt protected industrial action and issue a bargaining order instead, where that would better promote the reaching of agreement.68

(f) Low-paid bargaining stream

The special provisions in Division 9 of Part 2-4 were intended ‘to assist and encourage low-paid employees and their employers, who have not historically had the benefits of collective bargaining, to make an enterprise agreement that meets their needs’ (FW Acts 241(a)). These provisions recognise the constraints that may have prevented low-paid employees from participating in enterprise bargaining in the past, including their limited bargaining skills, resources and bargaining power (s 241(c)). Accordingly, the low-paid bargaining stream provides for multi-employer, good faith-based collective bargaining, facilitated by FWA (including the power to order third parties such as government funding providers to be involved in these processes).69

66 [2010] FWAFB 9963; [2011] FWAFB 3377.67 The key provision in this respect was s 423(2) of the WR Act (as amended), which allowed any employer, union or employee (on behalf of a group of other employees) to initiate a ‘bargaining period’ in respect of a proposed agreement, without reference to the wishes of any other potential party to that agreement.68 See the further discussion of FWA’s role in assisting parties to resolve bargaining disputes in section 6 of the submission, below.

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However, the low-paid bargaining stream has been barely utilised, with only three applications for low-paid authorisations made to date. A major factor here is the complexity of the provisions, and the many requirements that must be satisfied in order to obtain a low-paid authorisation (see ss 242–243). This is borne out by the only decision on the provisions so far, involving an application for the aged care sector.70 The decision also highlighted an important limitation of the low-paid bargaining provisions: FWA excluded from the operation of the low-paid authorisation it made those employers to which an agreement made under the FW Act or previous legislation applied. The effect was to exclude from access to the low-paid bargaining stream many thousands of employees covered by agreements which had resulted in little improvement in their wages and conditions (for example, non-union agreements made under Work Choices).

Given this outcome, and the considerable investment of time and resources required to run an application for a low-paid authorisation and the subsequent bargaining process, it is little surprise that unions have not made more use of Part 2-4, Division 9.The low-paid bargaining stream has not fulfilled the potential it was thought to hold for extending collective bargaining to many vulnerable workers (including young employees and women),71 and (in turn) the overall coverage of collective agreements among the Australian workforce.

5.3 The emphasis on voluntary bargaining

The Government’s intention, that the mechanisms in Part 2-4 of the FW Act to assist parties with collective bargaining should operate mainly in the background, has been realised. The Table below shows that the number of applications for bargaining orders, MSDs, scope orders, low-paid bargaining authorisations and FWA assistance under s 240 represents only a small proportion of the total number of agreements submitted to FWA for approval.

Table: Applications for FWA Involvement in Bargaining under FW Act, Part 2-472

Matter Type 1st Year(1 July 2009 –30 June 2010)

1st

Quarter 2010-11(1 July –30 Sept

2nd

Quarter 2010-11(1 Oct –31 Dec

3rd

Quarter 2010-11(1 Jan –

31 March

4th

Quarter 2010-11 (1 April – 30 June

1st Quarter 2011-12 (1 July – 30

Sept 2011)

2nd

Quarter 2011-12 (1 Oct 2011-

31 Dec

69 See FW Bill EM, paras [r.177]–[r.182]; and for commentary, see R Naughton, ‘The Low Paid Bargaining Scheme – An Interesting Idea, But Can it Work?’ (2011) 24 Australian Journal of Labour Law 214.70 Application by United Voice and The Australian Workers’ Union of Employees Queensland [2011] FWAFB 2633.71 van Wanrooy et al, above n 37, p 49.72 FWA, Annual Report of Fair Work Australia: 1 July 2009-30 June 2010, Melbourne, 2010, pp 73–77; FWA, Annual Report of Fair Work Australia: 1 July 2010-30 June 2011, Melbourne, 2011, pp 80–83; FWA, Quarterly Reports to the Minister, available at: http://www.fwa.gov.au/index.cfm?pagename=aboutquarterlyreports.

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2010) 2010) 2011) 2011) 2011)

Applications for bargaining orders (s.229) 121 26 19 24 27 25 34

Application for serious breach declaration made (s.234)

0 0 0 0 0 0 0

Applications for majority support determinations (s.236)

111 29 25 14 25 16 19

Applications for scope orders (s.238)

48 5 6 9 11 11 6

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Applications to deal with bargaining disputes(s.240)

506 55 44 55 67 84 115

Applications for low-paid authorisations (s.242)

2 0 0 0 0 0 1

Applications for approval of enterprise agreements (s.185)

7420 2127 2036 1210 1700 1967 2379

We will return later, under the heading of Industrial Action, to the question of whether FWA’s powers to intervene in bargaining disputes should be augmented, especially in the case of ‘intractable’ disputes.

6. Industrial Action

6.1 Objects

As indicated in 2.1 above, according to s 3(f) of the FW Act, the overall objective of the legislation is to be achieved by enterprise-level bargaining underpinned by the good faith bargaining requirements and ‘clear rules governing industrial action’. Unusually, no specific objects are stated in Part 3-3 of the FW Act (Industrial Action).

The Government’s often stated commitment was to retain ‘clear, tough rules regarding industrial action’.73 Generally, the intention was to minimise the incidence of industrial disputes due to their harmful effects on the economy, productivity, and the businesses, employees and communities involved.74

While seeking to reassure employers that unions would not have a greatly enhanced capacity to take protected action, it was proposed that ‘aspects of the framework [would] be streamlined and simplified’.75 Inevitably, this involved the removal of some of the restrictions on protected industrial action introduced under Work Choices.

73 FWF Policy, p 16; FWF Implementation Plan, p 21; FW Bill EM, para [r.315].74 See eg FWF Implementation Plan, p 21.75 FW Bill EM, para [r.315].

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The balance which the Government has sought to reach through the provisions in Part 3-3 of the FW Act is usefully summarised as follows:

While, generally speaking, industrial action has a negative impact on productivity, these proposals recognise the right of bargaining participants to take protected industrial action and provide the employer with a proportionate response.76

It was also intended that the processes for approval of protected action by employees in a secret ballot would be made ‘fair and simple’, to ensure that a ballot ‘is a means of determining [employees’] views … , not to frustrate or delay the action’.77

The federal tribunal’s powers to deal with ‘ongoing industrial disputation’ were enhanced, based on the view that: ‘where protracted industrial action is causing significant harm to the bargaining participants, there must be a process to resolve the dispute’.78 In addition, previous provisions enabling the tribunal to terminate protected action on grounds of significant harm to the Australian economy or to community safety/welfare were retained.79

6.2 Overall levels of industrial disputation

Official figures on days lost to industrial action disclose no significant increase in industrial action since the FW Act took effect, although to be fair those figures would not reveal action threatened but not actually taken. It should also be noted that the ABS figures quoted on p 17 of the Background Paper include action taken by State public sector workers who are not (outside Victoria) subject to the FW Act. In addition, as the Background Paper notes, we would also expect industrial action to become more prevalent as and when a larger than normal number of agreements expire at one time, depending on the sector concerned.

The reality is that industrial action has all but disappeared in most parts of the private sector, and only a tiny minority of Australian businesses now experience co-ordinated work stoppages.

6.3 Use of lockouts by employers

The use (or threatened use) by employers of ‘employer response action’ under s 411 of the FW Act appeared to increase in the latter part of 2011 and early 2012.80 While we should be cautious about identifying any sort of ‘trend’ from so few instances, the increase may (at 76 Ibid, para [r.316].77 FWF Policy, p 16; see also FW Bill EM, paras [r.285], [r.290]–[r.298].78 FWF Policy, p 16; see also FW Bill EM, para [r.313].79 FWF Policy, p 16; see also FW Bill EM, para [r.312].80 See eg ‘Soft drink giant locks out workers’, Workplace Express, 15 December 2011 (lockout at Schweppes); ‘Evans calls for brawling waterfront parties to settle in FWA’, Workplace Express, 14 December 2011 and ‘FWA to conciliate after truce called on waterfront’, Workplace Express, 15 December 2011 (lockout at POAGS); M Dunckley and M Bleby, ‘Shorten stays off the waterfront’, Australian Financial Review, 6 January 2012 (threatened lockout at DP World).

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least in part) be attributable to the action taken by Qantas on 29 October 2011, whereby the airline sought to resolve its long-running bargaining dispute with three unions by grounding its fleet world-wide and proposing a lockout to commence two days later.

Concern has been expressed about the airline’s ability to achieve the same effect as a lockout through the decision to ground its fleet. The grounding prevented all Qantas employees from being able to work, not just those who were involved in the three bargaining disputes, until normal operations resumed following FWA’s termination of all protected action.81 Questions have also been raised about the ‘proportionality’ of the airline’s response to what was, at least in the case of the airline’s long-haul pilots, quite minor forms of employee claim action. Given that some at least of these matters may yet be ventilated in court proceedings,82 we would simply say at this point that the incident illustrates the desirability of requiring the same notice of employer response action as is ordinarily required of employee claim action under s 414(2) – that is, three clear working days.

In some instances, lockouts (or threatened lockouts) form part of a deliberate strategy by employers aimed at forcing a dispute into arbitration (ie the making of an industrial action related workplace determination by FWA under s 266 of the FW Act). In one example, the employer sought the termination of its own lockout on the grounds that it was causing serious economic harm to the employees concerned, under s 423 of the Act. The employer’s application was initially unsuccessful,83 but eventually succeeded when supported by the union concerned.84

The apparent increased use of lockouts (which requires confirmation by empirical study) does tend to detract from the Government’s intention to ‘reduce the incidence of lockouts and their negative impact on productivity and the economy’ – an objective that was sought to be achieved by removing the ability of employers to engage in pre-emptive lockouts.85

6.4 FWA’s powers to resolve intractable disputes

The Qantas dispute (along with other recent disputes) also drew attention to the issue whether the various provisions enabling FWA to resolve protracted bargaining disputes are functioning well – and in particular, whether the tests for access to arbitration of such disputes are appropriate.86

81 See Application by Minister for Tertiary Education, Skills, Jobs and Workplace Relations [2011] FWAFB 7444.82 See ‘Pilots’ union challenges FWA’s Qantas ruling’, Workplace Express, 10 November 2011.83 Schweppes Australia Pty Ltd v United Voice – Victorian Branch [2012] FWA 9329.84 See ‘FWA terminates lockout at Schweppes’, Workplace Express, 10 February 2012; ‘Schweppes back in production, as pre-arbitration talks commence’, Workplace Express, 16 February 2012.85 FW Bill EM, paras [r.299]–[r.300], [r.326].86 See eg J Sloan, ‘The Fair Work Act has three big flaws’, The Australian, 2 November 2011; M Skulley, ‘Unions want stronger hand’, Australian Financial Review, 14 November 2011.

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(a) FWA’s powers to suspend or terminate protected industrial action

FWA’s powers to suspend or terminate protected action are available:

where action is causing significant economic harm to the bargaining parties (FW Acts 423);

where action threatens community health, safety or welfare, or to cause significant damage to the Australian economy (or an important part of it) (s 424);

where a ‘cooling off’ period would assist the parties to reach a resolution (s 425);

where action is threatening significant harm to a third party (s 426).

The case law dealing with each of these provisions establishes that they are not easily activated.87 This is consistent with the Government’s intention that they only operate in rare cases:

It is not intended that these mechanisms be capable of being triggered where the industrial action is merely causing an inconvenience. Nor is it intended that these mechanisms be used generally to prevent legitimate protected industrial action in the course of bargaining.88

However, the question remains whether these provisions are adequate to resolve intractable disputes. The Qantas episode shows that the provision for termination of protected action based on damage to an important part of the economy (s 424(1)(d)) can operate to provide a pathway to resolution of an intractable dispute. But the case also demonstrates the extremity of the dispute required to enable FWA to intervene. For example, the Full Bench of FWA found that the protected action taken by the three unions over many months was ‘unlikely … [to be] threatening to cause significant damage to the tourism and air transport industries’. It was only Qantas’ proposed lockout that satisfied the ground for termination in s 424(1)(d).89

Sections 423–426 do not, in our view, adequately make provision for situations where, after a long period of protected action, the parties are simply unable to reach agreement. This limitation is examined further below.

At this juncture, the Minister’s power to terminate protected action under s 431, on the same grounds on which FWA is empowered to terminate under s 424, warrants brief mention. The s 431 power, which provides another pathway to the making of a workplace determination by FWA, was first introduced under Work Choices but has never been

87 See eg Prysmian Power Cables and Systems Australia Pty Ltd [2010] FWA 9402; Nyrstar Port Pirie Pty Ltd v CFMEU [2009] FWA 1144; Tyco Australia Pty Ltd t/a Wormald v CEPU, Queensland Divisional Branch [2011] FWAFB 1598; Transit Australia Pty Ltd v Transport Workers’ Union of Australia [2011] FWA 3410; Patrick Stevedores Holdings Pty Ltd v MUA [2011] FWA 3059; CFMEU v Woodside Burrup Pty Ltd [2010] FWAFB 6021.88 FW Bill EM, para [1709].89 See Application by Minister for Tertiary Education, Skills, Jobs and Workplace Relations [2011] FWAFB 7444 at [10].

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exercised. Its use seems to have been contemplated by the government in the Qantas dispute, but this was ruled out on the basis of a likely court challenge by the unions involved;90 and because the government would end up ‘owning’ industrial disputes.91 That being the case, an obvious question arises as to why the government retained the Ministerial power to end industrial action in the FW Act. It is a controversial provision, inviting the prospect of political interference in industrial disputes, and for this reason – along with the fact that it is all but a ‘dead letter’ – should be repealed.

(b) The role of compulsory conciliation and arbitration

The FW Act provides for compulsory conciliation in bargaining disputes, as follows:

on the application of any bargaining representative (s 240(1)–(2));

to facilitate negotiations in the low-paid bargaining stream (s 246(2)–(3)).

The figures in the Table set out in section 5.3 of this submission show that frequent use is made of FWA’s dispute resolution role under s 240. Although it is not possible to determine from these figures the exact nature of the dispute resolution function performed by FWA in these matters, it is likely that in most cases, the tribunal exercises its conciliation powers. As outlined earlier, given that very few applications have been made for low-paid authorisations, FWA’s conciliation role in this area has been minimal.

As for arbitration,92 Labor had originally maintained, under its 2007 election policy, that ‘compulsory arbitration’ would not be a feature of the Fair Work system. Then in late 2008, the Government announced that there would be some limited circumstances in which arbitration would be available under the new collective bargaining framework. This is reflected in the following provisions of the FW Act, under which FWA can arbitrate bargaining disputes in four circumstances:

1. by agreement between the parties, following a joint application for arbitration under s 240(4);

2. following the making of a ‘serious breach declaration’, after serious/sustained breaches of good faith bargaining order(s) by one of the parties, a ‘bargaining related workplace determination’ can be made under Part 2-5, Division 4, if agreement cannot be reached during a 21-day (or up to 42-day) negotiating period;

3. following the termination of protected industrial action by FWA on public interest grounds, such as disputes affecting essential services (or, as in Qantas, causing

90 P Kelly, ‘Blame game misses need for IR reform’, The Australian, 2 November 2011.91 M Priest, ‘Fair Work umpire back on centre stage’, Australian Financial Review, 31 October 2011.92 This section of the submission draws upon Anthony Forsyth, ‘Qantas case shows the need for interest arbitration’, The Conversation, 28 November 2011, http://theconversation.edu.au/qantas-case-shows-the-need-for-interest-arbitration-4436.

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damage to a significant part of the economy), an ‘industrial action related workplace determination’ can be made under Part 2-5, Division 3, again following a 21 (or 42)-day negotiating period;

4. in the low-paid bargaining stream, where parties are unable to negotiate a first agreement after extensive efforts, a ‘low-paid workplace determination’ can be made, either on a consent basis or on FWA’s own initiative, under Part 2-5, Division 2.

There has only been one instance of FWA arbitrating under these provisions (apart from voluntary arbitrations under s 240, which have been few in number).93 The workplace determination settling the dispute between Qantas and the ALAEA, based on an agreement reached between the parties, is the first such determination made under the FW Act.94 Two other workplace determinations are scheduled for hearing before FWA in respect of Qantas (relating to the company’s bargaining disputes with the TWU and AIPA).95 Another matter involving agreement negotiations in the Victorian public sector is also before FWA presently.96 In each of these cases, FWA is exercising its power to make an industrial action related workplace determination.

There have been no applications, to date, for FWA to make a bargaining related workplace determination or a low-paid workplace determination. A significant reason for this is that the tests for accessing these provisions are very difficult to satisfy. For example, to have FWA make a serious breach declaration that could then lead to the making of a bargaining-related workplace determination, the applicant must show that (s 235):

another bargaining representative has contravened one or more bargaining orders previously made by FWA;

the contraventions are serious and sustained and have significantly undermined bargaining;

all reasonable alternatives to reach agreement have been exhausted (eg seeking assistance from FWA under s 240); and

agreement will not be reached in the foreseeable future.

The tests that must be satisfied before FWA can make a special (ie compulsory) low-paid workplace determination are similarly onerous (see ss 260(4)–(5), 262–263).

93 There are few published decisions indicating that FWA has arbitrated bargaining disputes under s 240; but see eg North Goonyella Coal Mines Pty Ltd v CFMEU [2010] FWA 1112.94 ALAEA v Qantas Airways Ltd [2012] FWAFB 23695 ‘Qantas arbitration dates’, Workplace Express, 13 December 2011.96 ‘Determination of Vic PS wage agreement moves closer’, Workplace Express, 6 February 2012.

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What the above tests do not provide for is a situation where the parties are simply unable to reach agreement after protracted negotiations. There is a strong argument for adjusting the tests for accessing arbitration under the FW Act, so that the emphasis is not so much on establishing extreme bad faith (or ‘fault’) by one party, or that industrial action by one side is causing so much damage to the other that it should be ended. Rather, one of the tests for access to arbitration should be focused on whether parties – having negotiated with each other in good faith – have reached the point where further negotiation is unlikely to be productive. The Cochlear dispute, discussed earlier, is a prime example: where employees have won the right to bargain collectively with their employer, but no agreement has been reached after more than two years, it is surely in the interests of the parties involved and the public interest that FWA has power to make a workplace determination resolving the impasse.

Providing FWA with such powers would enable it to address the problem of surface bargaining, and the difficulties faced by some employees/unions in obtaining a first agreement with an employer.97 In Canada, arbitration in ‘first agreement’ or ‘first contract’ situations is an entrenched feature of the bargaining landscape. Canadian labour boards have the power to arbitrate in negotiations for a first agreement, because in such situations a union (having obtained ‘recognition’, ie the right to bargain with the employer) is most vulnerable to employer delay tactics which might frustrate the making of a collective agreement.

Seven of Canada’s eleven labour law systems make provision for ‘first contract arbitration’ – mandatory interest arbitration of private sector collective bargaining disputes. These provisions enable a union or employer involved in unsuccessful negotiations for an agreement to apply to a federal or provincial labour board, to have an agreement imposed through interest arbitration. There are four different models of first contract arbitration operating in Canada:98

a ‘fault’ or ‘exceptional remedy’ model (Federal, Quebec and Newfoundland) – referrals are made by the relevant Minister of Labour to the labour board, based on a demonstrated breach of good faith bargaining obligations by one of the parties;

a ‘no fault’ model (Saskatchewan and Ontario) – a party seeking first contract arbitration may apply directly to the labour board, by showing simply that bargaining has been dysfunctional;

97 The ACTU has called for FWA to have power to arbitrate in these two circumstances: see eg E Hannan, ‘ACTU war on “militant employers”’, The Australian, 23 November 2011.98 See S Slinn and R Hurd, ‘First Contract Arbitration and the Employee Free Choice Act: Multi-Jurisdictional Evidence from Canada’, in Advances in Industrial and Labor Relations, Emerald Group Publishing, vol.18, 2011, p 41 at pp 44–54.

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an ‘extended mediation’ model (British Columbia) – the parties must participate in comprehensive mediation of a bargaining dispute before it will be submitted for arbitration;

an ‘automatic access’ model (Manitoba) – if no collective agreement is reached after 90 days of negotiations, an arbitrator must determine the terms of the agreement within 60 days (interest arbitration can also be utilised to settle subsequent collective agreements between the parties, eg based on a failure to bargain in good faith and where there is no prospect of an agreement).

The evidence from Canada99 is that the application rate for first contract arbitration is fairly low across all seven jurisdictions (with the exception of Manitoba, where it is more easily accessed). The actual rate of imposition of first agreements through first contract arbitration is even lower, as the parties often resolve agreement terms themselves after an application for arbitration is made – or the arbitrator only determines some contract provisions for them. Research has shown, however, that the existence of first contract arbitration has a ‘shadow effect’, in that the possibility of arbitration leads employers and unions to negotiate their own outcomes.100

Given the contribution of first contract arbitration to the development of stable bargaining relationships among industrial relations parties in Canada, the concept warrants further examination and analysis from an Australian perspective – as a means of advancing the Government’s policy objective of encouraging collective bargaining.

To be clear, we envisage an increased role for arbitration, not just for the resolution of intractable negotiations for a first enterprise agreement – but also in negotiations for subsequent agreements. However, arbitration should not be too easily accessed, lest parties simply ‘go through the motions’ of bargaining with a view to having an outcome arbitrated by FWA. Giving FWA a residual discretion to determine that an intractable bargaining dispute should go to arbitration – based on one or other (or some combination) of the Canadian first contract arbitration models – could provide a way forward.

99 See ibid; S Johnson, ‘First Contract Arbitration: Effects on Bargaining and Work Stoppages’ (2010) 63 Industrial and Labor Relations Review 585; R Eisenbrey and P Eagan-Van Meter, ‘Business Success and First Contract Arbitration’, EPI Issue Brief #275, Economic Policy Institute, Washington DC, 2010.100 Johnson, above n 99.

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7. Unfair Dismissal

7.1 The economic impact of unfair dismissal claims101

The annual number of claims of ‘harsh, unjust or unreasonable’ dismissal made under federal law has jumped from 8,000, in the last year of operation of the WR Act, to just under 13,000 under Part 3-2 of the FW Act.102 According to a written answer supplied by FWA in response to a question from Senator Eric Abetz, over a quarter of such claims now involve employers with less than 15 workers.103 As the Background Paper notes (at p 16), the increase in such applications was entirely to be expected, given the removal of the restrictions on claims against employers with 100 or fewer employees, and the expansion of federal coverage as a result of State referrals.

More importantly, there has been no evidence of any adverse impact on employment levels or economic performance – just as none could be found when the Howard Government was endeavouring to justify the removal of unfair dismissal protection for workers at ‘small’ businesses.104 This is borne out by the few independent studies that have been done on the effect of employment protection laws in Australia. For example a survey of small businesses, undertaken just before the introduction of the 100-employee exemption in 2006, found that unfair dismissal laws ‘had minimal influence on job creation in the respondent businesses’, and that there was ‘no evidence’ to suggest that the new exemption would affect their short term plans for job creation.105 Other case studies have shown that while there is a strong degree of opposition on the part of small business owners to the idea of employees being protected against unfair dismissal, few of those surveyed had actually experienced any claims – and those that had were generally satisfied with the process and outcome.106

It is perhaps not surprising that small business surveys would struggle to find respondents with actual experience of claims. According to the most recent ABS figures, as at February 2010, some 917,300 Australians had ceased a job involuntarily during the previous 12 101 Parts of this section of the submission are taken from an unpublished report prepared by Andrew Stewart for the ILO in 2010.102 See Annual Report of Fair Work Australia, 1 July 2010–30 June 2011, above n 72, pp 10, 81.103 See ‘FWA says investigations on track, President defends his speech in fiery Estimates’, Workplace Express, 19 October 2011.104 See eg the finding in Hamzy v Tricon International Restaurants (2001) 115 FCR 78 at 95; and see also a similar finding about the impact on small businesses of severance pay obligations in the Redundancy Case (2004) 129 IR 155 at 211. See also Senate Employment, Workplace Relations and Education Legislation Committee, Provisions of the Workplace Relations Amendment (Termination of Employment Bill) 2002, Commonwealth, Canberra, 2003; B Freyens and P Oslington, ‘Dismissal Costs and Their Impact on Employment: Evidence from Australian Small and Medium Enterprises’ (2007) 83 Economic Record 1 at 9.105 M Bryson and D Howard, ‘‘The Impact of the WorkChoices Unfair Dismissal Exemption for Small Businesses on Job Creation: A Study in the Richmond-Tweed Region of New South Wales’ (2008) 16 International Journal of Employment Studies 141 at 165.106 See eg the various studies referred to in W M Robbins and G Voll, ‘The Case for Unfair Dismissal Reform: A Review of the Evidence’ (2005) 31 Australian Bulletin of Labour 237.

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months.107 Assuming around 13,000 applications for relief against unfair dismissal per year (though this is a figure derived from the later period of 2010–11), this would suggest that less than 1.5% of all involuntary exits from employment result in some form of legal challenge, at least under the FW Act. Even allowing for the fact that the FWA figures do not include claims lodged under State unfair dismissal laws, or proceedings instituted under other legislation (such as anti-discrimination statutes), it is still apparent that challenges to the fairness of a termination are very much the exception rather than the rule.

It is also worth highlighting what is known about the outcome of unfair dismissal claims. AIRC statistics show that over the entire period that the WR Act was in operation, from January 1997 to June 2009, some 6,606 termination of employment applications (including both unfair dismissal and unlawful termination claims) were disposed of by final decision of the AIRC, as opposed to being settled or withdrawn (or in the case of an unlawful termination application, pursued in court). Of those, the applicant succeeded only 24% of the time, with reinstatement being ordered in 4.5% of cases and compensation in 19.5%. The remaining 76% of cases were dismissed either on the merits or for jurisdictional reasons.108 Where cases did actually go to arbitration, employees could expect to succeed in establishing unfair treatment in around only one out of every two cases.109 A broadly similar pattern can be discerned under the FW Act. Of the 517 claims finalised under the FW Act provisions in 2010–11, only 29% resulted in a finding of harsh, unjust or unreasonable dismissal. Of those whose claims were not ruled out for lack of jurisdiction, less than one in two succeeded; and for those applicants, only 17% secured reinstatement – a higher proportion than under the WR Act, but still far less common than an award of compensation.110

It should also be emphasised that few compensation awards are substantial – not least because under s 392(5)–(6) of the FW Act they are capped at six month’s remuneration or (currently) $59,050, whichever is less. One study of claims under the WR Act (which had a similar cap) recorded that in over 40% of the decisions sampled in which compensation was awarded, the amount was less than $5000. Around the same number involved sums of between $5000 and $15,000, with less than 10% exceeding $20,000.111 It is common for employers to settle claims by making some sort of payment to applicants, in order to avoid the expense of taking a matter to arbitration. But for reasons explored further below, these payments also tend to be small. According to evidence given by FWA to a Senate Committee, over a two-month period, 75% of conciliated claims involved some form of 107 Labour Mobility, Australia, February 2010, Catalogue No 6209.0, ABS, Canberra, 2010.108 Australian Industrial Relations Commission, Annual Report of the President of the Australian Industrial Relations Commission 1 July 2008 to 30 June 2009, 2009,, p 11.109 See J Chelliah and B D’Netto, ‘Unfair Dismissal in Australia: Does Arbitration Help Employees?’ (2006) 28 Employee Relations 483 at 489; K Southey, ‘Forward with Unfair Dismissal Claims’ (2008) 19(1&2) Labour & Industry 25 at 35.110 Annual Report of Fair Work Australia, 1 July 2010–30 June 2011, above n 72, p 14.111 Southey, above n 109 at 36.

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payment to the employee. 28% of applicants settled for less than $2000, and a further 30% for between $2000 and $4000. Only 5% of payments exceeded $15,000.112

As to the costs for employers of dealing with termination, a large survey of small or medium sized enterprises conducted in 2004 found that the average estimated cost of dealing with an uncontested dismissal was $3044, or around 10.3% of the annual wage cost of the workers concerned. This primarily reflected the time spent by the employer’s staff in dealing with the dismissal. The average cost rose to $9780 (17.1% of annual wage costs)113 for a dismissal that was contested, but where a settlement was reached prior to any arbitration or court decision. The figures in this category included any settlement paid to the dismissed worker. For dismissals challenged and arbitrated, the average cost rose to $11,661 (25.3%). The authors of the study noted that some of these figures were inflated by a small number of ‘outliers’, but also observed that there was nothing to suggest that dismissal costs were proportionately higher for small businesses.114

In conclusion on this point, there is a lack of any obvious correlation between the introduction, strengthening or weakening of employment protection measures in Australia, and overall levels of employment, productivity or profitability. There have been a number of significant changes in Australia over the past 40 years: starting with the progressive introduction of State unfair dismissal laws in the 1970s and 1980s, through to the introduction of federal award standards in 1984, the enactment of federal unfair dismissal laws in 1993, their dramatic weakening in 2005–06, and finally the restoration of unfair dismissal rights in 2009. No study has been presented that shows a significant macro-economic impact for any of these changes – and if there was any evidence to find, it would surely have been found by now.

7.2 The process for dealing with claims115

Forward with Fairness envisaged that FWA would deal with unfair dismissal claims at a single, informal conference, with ‘no formal written submissions, no cross examination and no hearing’.116 It would be ‘a fast and simple system, which left lawyers out of the picture’.117

By contrast, the FW Act makes no mention of claims being resolved at a single, lawyer-less conference. The Act leaves it up to FWA to determine whether to resolve a claim by private

112 See ‘Three quarters of conciliated unfair dismissal claims involve money’ Workplace Express, 20 October 2010.113 Note that the workers in this category had lower wages on average than those whose dismissals were uncontested, hence the lower than expected percentage.114 Freyens and Oslington, above n 104.115 Parts of this section of the submission are taken from A Stewart, ‘Fair Work Australia: The Commission Reborn?’ (2011) 53 Journal of Industrial Relations 563.116 FWF Policy, p 20.117 FWF Implementation Plan, p 18.

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conference, or by way of a formal hearing – or indeed, if no facts are in dispute, without either (ss 397–399). It should also be noted that there is no special rule for legal representation in unfair dismissal cases. FWA must determine, as in any other type of matter, whether representation by an external lawyer or paid agent would enable the matter to be dealt with more efficiently, or whether it would be unfair to deny representation (s 596).

In theory, FWA could have attempted to adopt the approach envisaged by Forward with Fairness – except that it is hard to imagine how such a system could have survived the inevitable challenges for denial of procedural fairness.

In practice, FWA has adopted a set procedure, which starts with the details of an application being checked by FWA staff to ensure it is complete and valid. The employer is asked to complete a form outlining the reasons for the dismissal and its response to the applicant’s contentions. The matter is then swiftly listed for conciliation. This is usually conducted on the telephone, rather than face-to-face, by a specialist conciliator who is not a ‘member’ of FWA as such, but a public servant appointed to its staff. These conciliators have not been formally delegated with the power to convene conferences, as s 625(1)(c) of the Act would allow. The processes they conduct therefore have no status under the Act, making the conciliation completely voluntary – something FWA does not always make clear.118 It also means that the conciliators cannot, for instance, make determinations on whether a party may be assisted or represented by a lawyer or paid advocate. At any event, most parties choose to participate. About an hour and a half is allocated to each conciliation, with conciliators typically conducting three conciliations per day.119

If the matter is not settled right away, the application is immediately listed for determination by a Commissioner or presidential member, with directions to the parties to file witness statements and outlines of argument. No further opportunity is offered for conciliation, although the parties may be given the option of having the claim resolved at a conference, rather than a more formal hearing. External lawyers or advocates are typically allowed to be present, although it is not unknown for leave to be refused where the other party is unrepresented.

As the Background Paper notes (at p 17), FWA statistics reveal that 80% of unfair dismissal claims are being resolved at conciliation, with less than 1% ultimately going on to arbitration. Claims are also being resolved quickly. Most applications go to conciliation within four weeks, and to any merits determination within a further four to eight weeks.120 By contrast, under the WR Act around 75% of claims typically settled at conciliation, with

118 For example, there is no mention of the conciliation being voluntary in the guide to the unfair dismissal procedure that appears on the FWA website: see www.fwa.gov.au/index.cfm?pagename=dismissalsprocess. 119 See J Acton, ‘Where Have All the Cases Gone? Voluntary Resolution of Unfair Dismissal Claims’. Australian Labour Law Association National Conference, Adelaide, 19 November 2010.120 Acton, ibid.

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the first conference typically being held between eight and nine weeks after lodgement.121 A survey of applicants, respondents and their representatives commissioned by FWA has also found strong levels of satisfaction with FWA’s administration of the new system, the approach taken by the conciliators and indeed the conciliation process itself. Representatives were noticeably less enthusiastic than their clients about the merits of conducting conciliations over the phone, but a majority still supported the idea. Nearly 80% of representatives were satisfied with the overall outcome of the claims in which they were involved, although both respondents (64%) and more particularly applicants (58%) recorded lower (but still positive) levels of satisfaction.122

From our own experience, we would say that this research perhaps overstates the degree of satisfaction that representatives have with the system of conducting conciliation over the phone rather than face-to-face. We would also question how a system of this kind can send the right signals to management and workers about what constitutes fair or unfair dismissal, when the vast majority of claims are neither ruled to be untenable at some initial stage nor dealt with by way of formal adjudication.

Nevertheless, in terms of dealing quickly with claims and minimising costs, the present system must be considered a success.

7.3 ‘Go away money’

In Forward with Fairness, Labor promised that it would effectively end the payment of ‘go away money’ by employers to settle unmeritorious unfair dismissal claims.123 This practice had been a feature of the unfair dismissal system under the WR Act, both before and after Work Choices. From our professional experience, and from feedback received from other practitioners, we can say without hesitation that it remains a feature under the FW Act.

The willingness of employers to settle marginal or indeed sometimes (though perhaps less commonly) what they perceive as groundless claims is a function of two features of the unfair dismissal system which have remained unchanged from the WR Act to the FW Act. The first is the general rule that in any proceedings before FWA, the losing party will not be ordered to pay the winner’s costs. Costs may only be awarded against a party who has acted vexatiously or without reasonable cause, or who has pursued a matter where it should have been apparent that there was no reasonable prospect of success (FW Act s 611). The second is the aforementioned cap on compensation, in s 392(5)–(6).

Taken together, these two provisions create a powerful economic incentive for an employer to settle almost any claim. As already noted, most arbitrated claims result, if successful, in

121 Australian Industrial Relations Commission, above n 108, pp 10, 47.122 TNS Social Research, Fair Work Australia Unfair Dismissal Conciliation Research, TNS Social Research, Fyshwick (ACT), 2010.123 See FWF Implementation Plan, p 18.

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the payment of up to $15,000 in compensation (but usually less). It will usually cost an employer a similar amount to take a matter to arbitration, with minimal prospects of recovering any of those costs even if the claim is successfully defended. Hence unless a manager’s personal feelings are at stake, or the employer wants to take a stand as a matter of principle, offering a percentage of any likely compensation award to make the claim ‘go away’ is simply a good business decision.

There are three obvious reforms that might reduce this practice, either singly or in combination. One would be to make unfair dismissal a ‘costs’ jurisdiction. But that would immediately erect a barrier to industrial justice for most workers. The second would be to substantially increase compensation payments for successful applicants, giving employers more of an incentive to fight what they regarded as groundless claims. But that is almost certain to be resisted by business groups. The third is to have FWA make more effort to filter out unmeritorious claims. But given the requirements of procedural fairness, that would almost inevitably add significantly to the time taken for claims to be finalised.

Our own view is that some combination of these three changes might be feasible. For example, the threshold for the award of costs might be lowered. The Act could require a basic award of compensation (based on length of service) to be paid to a successful applicant, plus additional compensation for proven economic or non-economic loss, with a cap of a year’s remuneration in total. And conciliators could be required to give an initial assessment of the merits of any unresolved claim, to feed into any later decision about the award of costs.

However, it needs to be understood that the price of such changes would be to lengthen the time and expense incurred in dealing with unfair dismissal claims. That seems unavoidable to us if more effort is to be made both to reject unmeritorious claims, and to ensure that well-founded ones are appropriately redressed.

8. The General Protections

The purpose of introducing the general protections in Part 3-1 was to ‘incorporate’, ‘streamline’ and ‘rationalise, but not diminish’ the protections that already existed under the WR Act against unlawful termination of employment, freedom of association, sham contracting arrangements, and other provisions concerning matters such as coercion or misrepresentation as to the exercise of certain rights.124

A number of business groups have expressed concerns that the general protections are too broadly drafted.125 There are certainly one or two provisions that give cause for concern. One is the ‘discrimination’ provision in s 351. It is clear enough that the aim was to expand

124 FW Bill EM, paras 1335–1336.125 See eg ‘BCA calls for amendments to Fair Work laws’, Workplace Express, 27 July 2011; ‘It's all going unions' way, says AiG’ Workplace Express, 30 November 2011.

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the protection formerly given to employees by s 659 (and formerly s 170CK) of the WR Act against unlawful termination of employment on the ground of race, gender, age, etc, so that other forms of adverse action (such as refusing to hire, or prejudicial alteration of conditions) would be caught.126 But the wording of the provision has thrown up many queries,127 including the extent to which it covers both ‘direct’ and ‘indirect’ forms of discrimination; and whether the very broad defence in s 351(2(a) means that the provision cannot be breached unless the action concerned would also breach an otherwise applicable State or Territory law. To date, however, these issues have not been explored in any case law. Furthermore, the relationship between s 351 and other federal discrimination laws is capable of being addressed as part of the broader inquiry into the possible consolidation of such laws.128

Another provision that has attracted comment is s 341(1)(c)(ii). This is part of the definition of a ‘workplace right’, for the purpose of the protection in s 340 against adverse action in relation to the exercise or non-exercise of such a right. Section s 341(1)(c)(i) indicates that a person has a workplace right where they are able to make a complaint or inquiry to a person or body having the capacity under a workplace law to seek compliance with that law or workplace instrument. While that is uncontroversial, s 341(1)(c)(ii) goes on to cover the situation where an employee is able to make any type of complaint or inquiry in relation to their employment. As Creighton and Stewart note:129

[T]he addition of sub-para (ii) ... opens up the possibility that an employee who makes any complaint or inquiry to any body or person about any matter relating to their employment, even if the ‘matter’ does not pertain to a workplace law or workplace instrument, would still be entitled to the protection of Division 3. This appears to mean, for example, that if an employee has made a complaint or inquiry to their employer about a contractual entitlement, or a possible improvement in their terms and conditions, or indeed about some other issue that has arisen in their workplace, they are entitled to protection against adverse action by their employer because of their having done so. If that were indeed found to be the case, it would give employees and their industrial representatives a new basis for challenging the actions of employers in the workplace – an option that is made all the more potent by the reverse onus provisions in s 361. It might also be taken to extend the limited statutory protection currently afforded to those who ‘blow the whistle’ on wrongdoing by their employers. In determining the scope of s 341(1)(c)(ii), there would appear to be two crucial issues of interpretation. The first is whether the reference to an employee being ‘able’ to make a complaint or inquiry extends beyond a situation where the employee has some pre-existing legal right to do so. Although the context of protecting ‘workplace rights’ might suggest the need to identify such a right, what is said about the new provision in the FW Bill EM does not support such a limitation.130 The second question concerns the breadth

126 See FW Bill EM para 1424.127 See eg S Rice and C Roles, ‘“It’s a Discrimination Law Julia, But Not as We Know It”: Part 3-1 of the Fair Work Act’ (2010) 21(1) Economic and Labour Relations Review 13.128 See www.ag.gov.au/Humanrightsandantidiscrimination/Australiashumanrightsframework/Pages/ConsolidationofCommonwealthantidiscriminationlaws.aspx129 Above n 17 at [17.71] (some footnotes omitted).

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of the phrase ‘in relation to his or her employment’ – and on this the EM offers no guidance at all.

The drafting of this provision might usefully be tightened up to avoid broadening the scope of the general protections well beyond their original objectives.

That said, there have been few if any signs to date that the courts are inclined to take a broad view of the new provisions. For example, in Barnett v Territory Insurance Office131 it was held (correctly in our view) that an employee may not claim under s 340 that adverse action has been taken against them because of a ‘workplace right’, where the only right in question arises under their employment contract. Where court actions have succeeded to date, many have involved the type of victimisation for union activities or pursuit of workplace rights, that have long been prohibited under federal industrial law.132 Others have involved instances of unlawful termination that, again, would have been prohibited under the WR Act.133

There has certainly been concern about the decision of the Full Federal Court in Barclay v Board of Bendigo TAFE.134 This suggests that if, objectively, the ‘real’ reason for disciplinary action against an employee lies in something lawfully done by them in their capacity as a union delegate or member, that is sufficient to contravene s 346, regardless of whether the employer genuinely believes its action is motivated by concerns about the employee breaching their employment obligations. But we would stress that the issue in this case could just as easily have arisen under earlier versions of the legislation. Given too that the High Court has granted leave to appeal, we suggest that a decision from that body should be awaited before jumping to any hasty conclusions about the need to amend the ‘reverse onus’ provision in s 361. We would also highlight the fact that there are many other recent cases in which employers have been able to show that action taken against an employee was in fact motivated by concerns about their performance or conduct, or their ‘fit’ with the employer’s business, rather than for a reason prohibited under Part 3-1.135

130 See FW Bill EM para 370, suggesting that it is enough that an employee makes an inquiry or complaint to their employer, and also giving the example of an employee being victimised for making a complaint about being underpaid to a government agency that in fact has no power to deal with the matter.131 [2011] FCA 968.132 See eg AMWU v Phillips Engineering Aus Pty Ltd [2010] FCA 611; Australian Licensed Aircraft Engineers Association v Qantas Airways Ltd [2011] FMCA 58; Australian Licensed Aircraft Engineers Association v International Aviation Service Assistance Pty Ltd [2011] FCA 333; TWU, NSW Branch v No Fuss Liquid Waste Pty Ltd [2011] FCA 982.133 For recent examples, see Fair Work Ombudsman v Wongtas Pty Ltd (No 2) [2012] FCA 30; Ucchino v Acoro Pty Ltd [2012] FMCA 9.134 [2011] FCAFC 14.135 See eg Khiani v Australian Bureau of Statistics [2011] FCAFC 109; Hodkinson v Commonwealth [2011] FMCA 171; Bayford v Maxxia Pty Ltd [2011] FMCA 202; Ramos v Good Samaritan Industries (No 2) [2011] FMCA 341; Farah v Ahn [2012] FMCA 44; Stevenson v Airservices Australia [2012] FMCA 55.

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The larger problem, for us, is the veritable flood of dismissal-related claims now being lodged with FWA under s 365. The making of such an application is effectively mandated by s 371(1), which makes the issue of a certificate by FWA a prerequisite to any application to the Federal Court or the Federal Magistrates Court for a remedy under Part 4-1 of the Act. The Background Paper notes (on p 16) that the number of s 365 applications increased from 1188 in 2009–10 to 1871 in 2010–11. More recent figures show further growth, with 526 such applications lodged in the second quarter of 2011–12.136

It is widely believed or acknowledged amongst practitioners that a significant proportion of these claims involve speculative or tenuous allegations. Although we know of no statistics to support this belief, or to say with any exactitude just how many claims fall into this category, it is commonly asserted that many are effectively claims of harsh, unjust or unreasonable treatment that could have been made under Part 3-2 of the Act, but have not been lodged in time. The key here is the respective time limits: whereas unfair dismissal claims under s 394 must be lodged within 14 days of the dismissal taking effect, the equivalent limitation for dismissal-related general protections claims is 60 days (s 366(1)). Knowing that a claim of the latter kind will automatically lead to a compulsory conciliation conference at FWA, there is an incentive to lodge even a groundless claim, either to compel the employer to justify the treatment in question, or to offer a monetary settlement to save further expense. In theory, frivolous claims could be discouraged by costs orders, but this does not seem to happen in practice.

In passing on this admittedly anecdotal evidence, we do not mean to suggest that all or even most adverse action claims are frivolous. But it would appear that there is enough of a problem here to warrant some action. We would identify four possible reforms that may be worth considering:

1. The time limit for both unfair dismissal and dismissal-related general protections claims could be standardised at 21 days. This would not only reduce the possibility of general protections claims being used in effect to run out-of-time unfair dismissal claims, but also address the common criticism from employee representatives that the 14-day cut-off for unfair dismissal claims is too tight. By reason of the ‘multiple remedy’ provisions in ss 725–732, it would remain necessary to choose between making one type of claim or the other.

2. FWA could be permitted to convene a conference to deal with a dismissal-related general protections claim only where both parties agree, as is presently the rule for non-dismissal claims under s 374(1). Hence an employer could not be forced into FWA proceedings, but in effect require the applicant to take the matter to court.

3. FWA could be required, before proceeding with a conference (and/or before issuing a certificate under s 369), to be satisfied that the applicant has a tenable claim.

136 FWA, Report to the Minister Oct-Dec 2011, Quarterly Report, 2012, p 6.

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4. The threshold for the award of costs in relation to a dismissal-related general protections claim could be lowered.

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