Commonwealth Governments Work Choices Legislation - Essay Example

Running head: COMMONWEALTH GOVERNMENT'S WORK CHOICES LEGISLATION To What Extent Does The Commonwealth Government's Work Choices Legislation Constitute A Break With The Past Why Do You Think This Is The Case Gopi Abstract Formulated as part of their Election Manifesto 2004, by the Liberal and National Coalition, the Workplace Relations Amendment (Work Choices) Act 2005, carried out wide-ranging amendments to the corporation laws in the Constitution to introduce a more flexible workplace relation environment in the economic activities in Australia. The new legislations envisaged a radical shift in the workplace relationships. It introduced a commission to monitor fair pay, perks and service conditions to the employees through separate work place agreements between the employer and the employees. Reviewed the award system mired in bureaucracy and simplified the procedures. It rationalized the existing classification structures so they remain relevant to the modern workplace relations system while recognizing the different skill sets of employees. Revitalized dismissal laws whereby the Government will protect all employees from unlawful termination and dismissal on discriminatory grounds such as race, colour, sex, union membership, pregnancy, etc. Any liberalization moves are bound to inconvenience some self-serving caucus who are the beneficiaries of non-competitive enterprise arrangement. In Australia it included Trade Unions, Business Community and opposition political parties who has the natural accumen to fish in muddled water. In a modern democratic set up such constitutional disputes finally land up in the highest court of law for legitimacy. The Australian High Court decreed this with a majority verdict in favour of the government. The battlefield has now shifted to the political arena. Who wins the next general elections, slated end this year; will decide the fate of this epoch making legislation. Commonwealth Government's Work Choices Legislation The organized working class consists of a large chunk of the population in any country. They mainly constitute the middle class and are the opinion makers and can exert envious influence on the polity of a nation. In a democratic country they constitute sizable vote bank, which a political party can ignore at their own peril. The successful Bolshevist Revolution, the decisive defeat of Communism in Germany with the help of organized labor movement, the progressive metamorphosis of American capitalism into a "welfare capitalism", etc. are indelible models where working class became important tools to usher in lasting impact on the contemporary society. Therefore, we see a deep-rooted nexus between political parties and trade unions all over the world. Theirs is a husband and wife relationship, indispensable to both. With mutual understanding and cooperation both can survive the travails of life; and any impudence on the part of one can destroy the prospects of both. In most modern democratic countries we see political parties with the imbibed philosophy and names of the working class struggle. Instances are many where trade union leaders have risen to positions to guide the destiny of their nation. It is therefore, inevitable for any ruling setup in a country to succumb to the influence of the organized labor unions. The intense lobbying by trade unions for the passage of The Employee Free Choices Act of America, by the US Law-Makers is a live example of the trade union domination over political parties. Recently, with Democrats gaining majority in the Congress the Bill was passed in the House of Representatives and is struggling to get past the Senate where Democrats do not have majority. It will certainly become a law after the next presidential elections due to strong labor pressures and lobbying. Background to the Work Choices Legislation The Liberal and National Coalition's 2004 Election Manifesto1 had committed to the electorate to introduce a "Flexible Workplace Relations" in the economic activities of the country. A New Workplace Relations System In a notification on the official web site, the Australian Government2 claims that from 1996 the Government's Workplace Relations reforms have contributed to a stable and low-inflationary climate in the country. Combined with higher productivity, this has ensured increase in real wages, which have gone up by more than 14 per cent, higher than under any previous governments. Australia has the lowest unemployment of below 5% in nearly 30 years and a low interest rates regime. Reforming Australia's labor market is an ongoing task. In order to sustain Australia's economic expansion and build upon recent achievements the Government's next round of workplace relation reforms must succeed. Over the last decade there has been significant restructuring of the workplace relations legislation. However, the arrangement is still complex and further improvements are needed to make it simple, friendly to stake holders and more efficient.Australia needs a more flexible labor policy to maximize economic growth, employment opportunities and to improve standard of living in a competitive globalized economy. The Australian Government intends to achieve this by introducing a series of improvements to the workplace relations as under: Establish an Australian Fair Pay Commission (AFPC) to protect minimum and award classification wages. Enshrine minimum conditions in legislation. Introduce the Australian Fair Pay and Conditions Standard (AFPCS) to protect workers in the bargaining process. Simplify the agreement making process at the workplace. Provide modern award protection for those not covered by agreements. Ensure a prominent role, for the Australian Industrial Relations Commission (AIRC). Bring better balance to the unfair dismissal laws. Introduce a national system of workplace relations. The reforms however will NOT: Cut minimum and award classification wages. Abolish awards. Remove the right to join unions. Take away the right to industrial action. Outlaw union agreements. Abolish the AIRC. The guiding principle will be to retain a 'genuine safety net' while encouraging conditions of employment to be negotiated at the workplace through agreements. The approach outlined by the Government will remove the complex and bureaucratic rigmarole of the old system, remove barriers to workplace bargaining and create a more dynamic and modern workplace relations system for the coming generations. The Australian Government is committed to improving business productivity and creating an entrepreneurial culture. A unitary modern workplace relations system with a single set of rules for minimum terms, conditions, awards and agreements will provide the long overdue simplified framework that will work as a catalyst to the productivity improvements necessary to create more jobs and increase the standard of living of all. Overview Of The Legislation The Drafting of the Australian Constitution and Corporations Power As discussed by John M. Williams3 in The Economics and Labor Relations Review, the drafting of the Australian Constitution was a process that spanned the decade of the 1890s and an extensive exercise in public participation (La Nauze 19724, Irving 19975, Hirst 20006). The distillation of political agreements into constitutional framework involved a lot of compromises and was based on a number of premises. A guiding concern for many of the framers were the creation of a nation without compromising the autonomy of the self-governing colonies. This sentiment is evident in the deliberation over the nature of the Commonwealth Parliament's authority over corporations. Arguably the most influential documents in the drafting of the Australian Constitution were those provided by three delegates to the Constitutional Convention held in Sydney in 1891. Drafted by Andrew Inglis Clark, Charles Cameron Kingston and Sir Samuel Griffith, they became the foundations upon which the final 1901 Constitution was built. The Inglis Clark and Kingston constitutional drafts7 were prepared in advance of the 1891 Convention and were obviously intended to influence the deliberations. Both Inglis Clark and Kingston devised a close relationship between trade and commerce and the corporations' power. In the case of Inglis Clark this was presumably the influence of his understanding of the United States Constitution and the example provided by the Federal Council Act 1885 (Reynolds 19588, Neasey 19699). The Australian Constitution grants to the Commonwealth's Parliament legislative power with respect to forty competencies under section 51 including the power to make laws with respect to foreign corporations and trading and financial corporations formed within the limits of the Commonwealth. Work Choices A Year On In a Newsletter prepared by the Law Firm, Minter Ellison10, they argue that one year is too less a period to assess the efficacy of a very important legislation like the Workplace Relations (Work Choices) Amendment Act 2005, which has far reaching consequences. However a beginning can be made to see the emerging trends being made by the act that became operative on 27 March 2006. It is described as an industrial revolution bringing major changes to the Workplace Relations law since Federation. The High Court Challenge Most significantly, in November 2006, the High Court upheld the constitutionality of the Work Choices Act, rejecting challenges by some State Governments and Trade Unions. In particular, the High Court said the corporations' power enabled the Federal Government to pass laws establishing industrial rights and obligations of constitutional corporations and their employees. This means that the regulation of workplace relations in Australia is now almost the exclusive domain of the Federal Government, with the state systems playing a peripheral role. State Government And Union Responses The State Governments chose to respond to the verdict with some ingenuity introducing a range of legislations and policies. Leveraging the existing legislations within their ambit many states introduced laws to protect employees of less than 18 years of age, compensation criteria to injured employees, right of unions to interfere in matters of health and safety of workers, etc. Some employees were brought under the tutelage of state government protecting them from Work Choices preview. Some state public sector employers were told to apply terms and conditions prevailing before the introduction of Work Choices awards to their employees. The Award System Under the Work Choices Act minimum wages classifications structures and casual loadings were transferred from federal and state awards to an independent body called the Australian Fair Pay Commission (AFPC) and introduced the Australian Pay and Classification Standards (APCSs) subsuming the state and federal systems for those employers covered by Work Choices. The Government decided that enterprise-specific awards should continue, instead of it being included into rationalized industry-based awards. The whole gamut of awards is under process and the Australian Industrial Relations Commission (AIRC) who will take a final view on it soon. The Australian Fair Pay Commission In its 'Spring 2006 Wage Review 'the AFPC announced its first award with a two-tier increase as under: $27.36 per week for minimum wage rates up to $700 per week. $22.04 per week for minimum wage rates $700 per week and above. The quantum of increase surprised many critics. For employees earning less than $700 per week, this award was nearly as high as the Australian Council of Trade Unions (ACTU's) original claim of $30 per week increase. The next general wage review by the AFPC is expected to cover specific wage review on junior rates and rates for trainees and apprentices. Termination Of Employment The Government willnow exempt businesses that employ up to 100 employees from unfair dismissal laws. This exemption is expected to generate jobs in small to medium businesses, the prime mover of the Australian economy. The Government continues to protect all employees by providing remedy to unlawful termination and prohibits dismissal on discriminatory grounds such as race, colour, sex, union membership, pregnancy, etc. For companies with over 100 employees dismissal redress becomes operative on completion of six months service of an employee. This is an improvement on the earlier three-month qualifying period.The new system replaces an existing complex state and federal laws.The immediate result of this act has been a decline in the number of unfair dismissal applications being filed. It is felt that the ACTU's advertising and awareness campaigns have convinced employees that there is no unfair dismissal rights to any employers. Record Keeping The recording keeping regulations, especially those relating to recording hours of work and the inclusion of hourly rates of pay and award classification on pay slips were various irritants cited by employers. The Federal Government re-wrote the record keeping provisions and the new record keeping regulations no longer require employers to record hours worked by employees, unless it pertains to overtime hours for which the employer is required to make additional payment or loadings. In the case of casual or irregular part time employee all hours worked will be recorded. Collective Bargaining And Industrial Action Work Choices introduced a series of changes to workplace agreements. It retained the two broad classes of workplace agreements - Australian Workplace Agreements (AWAs) and collective agreements. However, a new category called the employer green fields agreements (which apply to new establishments only) has been introduced. The agreement documents are prepared by the employer and do not require the approval of unions or employees and does not include awards. However the agreement is subject to the AFPCS. Workplace agreements are to be filed with the Office of the Employment Advocate (OEA) and are not subject to any approval process. Workplace agreements cannot contain prohibited content, which include many traditional union rights such as right of entry and trade union training leave, and some other matters like penalties for taking sick leave, etc. A workplace agreement may be terminated with 90 days' notice. On termination 'protected award conditions' from an old federal award will apply while the rest of the old awards do not. The redundancy pay provisions from the agreement will apply for up to 12 months. It is seen that the modifications have introduced a consolidation of the award and collective agreements. This is because workplace agreements now exclude awards altogether. However, some of the agreements are becoming voluminous and difficult to comprehend raising considerable concern in practice. The unions are seeking simpler agreements that are easy to understand and implement. Work Choices made a series of significant changes concerning industrial actions. It terms industrial action unlawful during the nominal term of an agreement. Unions and employees can be fined for any disruptions and damages. A secret ballot is required before protected industrial action can be taken. This requires the union or employees to obtain a secret ballot order from the AIRC. Amongst other things, the law requires that the unions must be genuinely trying to reach an agreement and is not indulging in pattern bargaining. It is comforting to note that industrial actions have dramatically declined, falling to 2.3 days per 1000 employees in the quarter ending September 2006. Compare this with around 100 days at various stages in the late 1980s and 1990s. Interestingly, industrial actions in the construction industry were even lower at 1.6 days. Protected industrial actions also declined due to the preconditions such as secret ballot etc. Other Legislative Developments The Federal Independent Contractors Act 2006 commenced on 1 March 2007. Although this Act is less significant than anticipated, it breaks the ice of Federal regulation in this important area. Who knows what future governments may do Amongst other things the Act introduces a new national unfair contracts regime, which for the first time applies to some incorporated independent contractors. The Act, however, preserves the operation of owner-driver laws in New South Wales and Victoria. The Trade Practices Act 1974 (TPA) has been amended to introduce a collective bargaining regime by the transport industry. A Research Paper issued by University of Melbourne11, Centre for Employment and Labour Relations Law, articulates that nations traditionally focus on labor laws to shape industrial relations and employment practices. Indeed, the role of a government is to frame policy parameters through legal legislation; however it has to ensure that the regulations conform to the demand of the day. Forums have to be constituted where industrial relations involving conflicts between employers and unions/employees are resolved in a fair manner. The traditional manners of resolving disputes have not been able to cope up with the all-round growth in industry. Doubts have been raised about the effectiveness of the legally prescriptive and hierarchical models of regulation. To meet the rising demands some European Countries and the United States have come up with soft or light touch approaches to control labor problems. Such regulatory approaches are yet to receive due consideration in Australia. With the arrival of Work Choices Australian States will be required to embrace light touch labor regulations to meet the complex industrial relations scenario. Awards, which had been the most influential and comprehensive form of legal regulation of employment conditions, will no longer enjoy that goodwill. Also the federal nature of Work Choices severely restricts the jurisdiction of State Governments to enact laws to regulate corporate labor practices within the States. Nevertheless, the federal coup has the potential to bring a 'cauldron of innovation' to the boil by forcing State Governments and perhaps local governments to adopt creative approaches to labor regulation such as soft or light touch approaches. The Aftermath There has been very impressive growth in the Australian labor market after the legislation was enacted. Employment growth over the last 12 months has been particularly strong, increasing by 356 400, or 3.46 per cent. The unemployment rate at 4.3 per cent is the lowest in nearly thirty years. Please see Table 12 Like any landmark legislations, the Australian Government's Work Choices legislation is also not beyond scruitiny. The Sydney Morning Herald in an article titled "The High Court Changes The Balance Of Power"13 dated November 15, 2006, alerts its readers about the future ramifications of the legislation. More than a century after the Australian constitution became law, the High Court has interpreted for the first time the scope of corporations power which was hibernating all this while. Areas that was considered the preserve of the states so far has now been opened up for invasive surgery from Canberra. Without changing a word of it, the court has reoriented the constitution. Welcoming the clarity and certainty the verdict brings to the new workplace relations the article acknowledges the constitutional revolution, which has transposed industrial relations from a legal structure to the market forces. However, the Paper expresses its anxiety in the usurpation of states' powers which may excite future federal govts to interfere in areas, which the constitution reserves primarily for the states such as education, health, etc. Like any statutes the work choices legislation will also see many ups and downs in the coming days. There will be duplication of effort and confusion as the two levels of governments brawl with each other. There will be grey area requiring revisits to the High Court. This tangled administrative skein will probably get worse before it gets better. However, the High Court's decision should be welcomed along with collateral consequences since it is an acceptance of ground reality and an path-breaking step in the right direction. Eventually this will lead to reduction in Australian government heirarcy from three levels to two: Canberra as the policy maker and the provider of funds, and the states as the deliverers of the services. Anxieties Ahead It is argued that had Australians been given an opportunity through a referendum to express themselves they would have given a thumping 'no' to this new experimentation. Restless politicians have, therefore, found ways to browbeat the system using backdoor menthods. It should be borne in mind that in a modern democratic setup the best way forward to bringabout a fair industrial relation system would be through discussions, persuations and consensus and not through draconian backdoor legislations. Opposition to Work Choices Legislation is gaining momentum. Trade Unions have vowed to get the Labor Party elected in the 2007 elections. They expect the worker's friendly party to throw out the Liberal and National Coalition's unfair laws and replace them with tried, tested, and retrograde so called labor friendly system. The opposition Labor Party is making full use of the discontent amongst the working class and those states that feel let down by the High Court order. It is contented that what a Coalition government can do, a Labor government can as easily undo. The Work Choices Legislation has thus presented the Federal Opposition with an opportunity to come back to power. Only time will tell whether the Labor Party will muster enough courage to undo this this epic legislation, which is the need of the time or wring in the moribund system to keep up with their working class friendly facade. References Australian Government-Notification - Work Choices - A New Workplace Relations System on official web site accessed on 12 August 2007 https://www.workchoices.gov.au/ourplan/overview/Anewworkplacerelationssystem.htm A.C. 'Clark, Kingston and the Draft of 1891' in R. Ely (ed), A Living Force: Andrew Election Manifesto Liberal & National Coalition's 2004 Election Manifesto on their Official web site accessed on 12 August 2007. https://www.workchoices.gov.au/ourplan/overview/Electioncommitments.htm Hirst J (2000), The Sentimental Nation: The Making of the Australian Commonwealth. John M. Williams As discussed by in The Economics and Labor Relations Review 62 [2006] ELRRev 4, (2006) 16(2) "The Constitution and Workplace Relations Act 1996". Irving, H. (1997) To Constitute a Nation: A Cultural History of Australia's Constitution, Cambridge University Press, Cambridge, U.K. Minter Elison - In a Newsletter prepared by the Law Firm Minter Ellison and published in HR & IR Updates dated 20th March 2007 available at http://www. minterellison.com/public/resources/file/ebc0f308d54c08a/HR%26IRUpdate_0326.pdf Accessed on 12 August 2007. Neasey, F. M. (1969) 'Andrew Inglis Clark Senior and Australian Federation' Australian Journal of Politics and History, 15: 1-24. Nauze, J. A. (1972) The Making of the Australian Constitution, Melbourne University Press, Carlton, Vic. Reynolds, J (1958) 'A. I. Clark's American Sympathies and His Influence on Australian.Federation', Australian Law Journal, 32: 62-75. The Balance of Power - The Sydney Morning Herald in an article titled "The High Court Changes The Balance Of Power" dated November 15, 2006, http://www.smh.com.au/news/editorial/the-high-court-changes-the-balance-of- power/2006/11/14/1163266545646.html Accessed on 12 August 2007. University of Melbourne Centre for Employment and Labour Relations Law Working Paper No. 40 'LIGHT TOUCH' LABOUR REGULATION BY STATE GOVERNMENTS IN AUSTRALIA: A PRELIMINARY ASSESSMENT John Howe and Ingrid Landau December 2006 This paper can be downloaded at: http://ssrn.com/abstract=961528 EMPLOYMENT STATISTICS JUNE 2006 TO JUNE 2007 6202.0 - Labor Force, Australia, Jun 2007 Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 12/07/2007 Australian Bureau of Statistics Employed Persons Unemployment Rate http://www.abs.gov.au/ausstats/abs@.nsf/mf/6202.0 Read More