Friday, October 24, 2008

New IR law contains unnecessary risks

So far the Rudd government's Forward with Fairness policy has been debated in the context of what it is not.  That is, it's not Work Choices.  Also it has largely been a policy explained in broad terms.  But now that detail is emerging it needs consideration on its own merits.

Most importantly, given the collapsing global economic environment, does Forward with Fairness (FF) create economic risk?

Broadly, FF is good.  It has legislative minimum employment rights and simplified awards that underpin collective agreements and individual flexibility possibilities.  In overview it has balance.  But details indicate significant economic risk with a likely contribution to rising unemployment.  There are several examples.

The first relates to the reintroduction of unfair dismissal laws for businesses employing between 16 and 100 employees.  In toughening economic times, if these businesses are to survive they have a narrow window to mid-2009 in which to adjust workforce numbers and dismiss employees without facing unfair dismissal litigation.  After that they will face higher risks when employing because of their limited capacity to manage complex unfair dismissal laws.

The simpler "fair dismissal" laws apply only to businesses with 15 or fewer employees.  But mid-sized businesses face new exposure with significant disincentive to employ.

Another risk is the introduction of the puzzling concept of "good faith bargaining".  Under FF, if a majority of employees want an enterprise agreement, employers can have orders imposed upon them forcing them to negotiate in good faith.  The means being forced to attend and "participate" in meetings, disclosing business information, responding to and giving "genuine" consideration to proposals and not acting capriciously or unfairly.

Each of these subconcepts of good faith will require significant litigation to understand them.  Good faith will become a complex legal concept removed from everyday meaning.  In particular, where class warfare mentalities prevail in workforces, managers will have to appear to comply with process.  This will complicate business focus on performance.

A third risk relates to the removal of prohibited content clauses.  Enterprise agreements now cannot have content that, for example, requires a business to use a specific supplier.  Typically, when these clauses were allowed in the past, such clauses restricted businesses to using suppliers who had union approved agreements.  In effect this allowed industrial agreements to subvert competition provisions of the Trade Practices Act.  It was a form of market manipulation.

FF will now allow the insertion of such clauses in industrial agreements.  But oddly such clauses will be "void and unenforceable".  This makes the government look confused.  Why allow things in agreements that have no force?  Unnecessary litigation will occur over determining what is or is not enforceable.  This will increase business costs and blur the line between employment and competition law.

These details are igniting speculation over other matters.  For example "drop dead" clauses are said to be in discussion that would require all existing enterprise agreements to cease in 2012 or at their nominated expiry date.  Normally agreements continue past their expiry dates while negotiations for new agreements continue.  A change of this nature would create a pressure cooker of uncertainty around negotiations after 2010.

Further speculation exists over increasing union rights to enter worksites.  Under NSW industrial relations laws unions have entry and document seizure rights that exceed that of the police and the Australian Taxation Office.  The thought of such arrangements going national is spooking business.

What's emerging in the detail is that FF will introduce areas of complexity of process.  This always retards economic efficiency, growth and employment.  Concerns about anti-business agendas being introduced by stealth are surfacing.

Risk factors heighten when considering changes to the construction industry reforms.  The government maintains it will keep a "strong cop on the beat".  But the detail of how this will operate is hazy.  A review is being conducted for the government by a judge, Murray Wilcox.

The only indication of possible policy direction is in a discussion paper inviting submissions.  Perhaps it's intended to be provocative.  It accepts union allegations that the operation of the construction reforms breaches discrimination laws and International Labour Conventions.

The paper asserts that claimed economic benefits flowing from the reforms are a myth.  The construction industry would disagree, having produced significant documentation demonstrating major productivity and employment gains.  But the discussion paper dismisses the industry reports as lacking "hard evidence".

If the government undoes the construction reforms, they arguably put at risk the new-found efficiency claimed by the sector.  This would threaten infrastructure development, which the government hopes will assist Australia to ride out the global economic crisis.

Politically the risk is also high for the government.  Originally FF was not to be implemented until 2010.  Workplace relations changes take time to affect the economy.  Any negative economic or employment impacts would arguably not hit until after the next federal election due by late 2010.

But the government has moved much of the implementation agenda forward to mid-2009.  This creates opportunity for the government to be blamed for higher unemployment at the next election.

There's also an issue of electorate credibility.  The promise of FF was one of balance between necessary work flexibility and employee rights.  If implementation detail deconstructs that promise, a risk to electorate credibility exists.


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