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In March this year, WorkChoices celebrated its first birthday. Matthew Hourn takes us through some of the biggest controversies to date, and what to expect in the future.


WorkChoices has been described as the most comprehensive and significant change to Industrial Relations in Australia for almost 100 years.

Active ImageThe new legislation is supported by some employer groups such as The Australian Chamber of Commerce and Industry but is opposed by the Australian Council of Trade Union and the Australian Labor movement. Over the past 18 months, WorkChoices has had substantial media coverage and it has become increasingly difficult to ascertain the real effects the new legislation has had on SMEs.

To understand the impact WorkChoices has had, it is essential to firstly discuss the fundamental changes. WorkChoices was introduced to provide a single national industrial system to replace the separate state and federal systems for ‘constitutional corporations’.

There have been substantial changes in relation to minimum wages and other conditions of employment with the establishment of the Australian Fair Pay Commission. WorkChoices provides that no new awards will be made and existing awards will see a reduction in allowable matters. One of the most significant and controversial changes is in the area of unfair dismissal. Companies with less than 100 employees are exempt from unfair dismissal laws. All companies will be exempt from unfair dismissal if the dismissal is for a bona fide ‘operational reason’. WorkChoices has introduced a streamlining of certified agreements, making it more difficult for unions to be involved in agreement making under WorkChoices.

The WorkChoices legislation was introduced to streamline many areas of employment law so that the legal obligations will be easier for both employers and employees to understand.

The Impact Of Workchoices

As a legal practitioner, acting for both SMEs and individuals, I have seen a huge impact in the area of unfair dismissal. The statistics provided by the Australian Industrial Relations Commission show that since the introduction of WorkChoices, there has been a 20 percent reduction in the number of applications involving termination of employment. However, this varies dramatically from state to state.

[design: following table to go here]

Termination of employment matters

March 2005 to March 2006

March 2006 to March 2007

Adelaide

132

280

Brisbane

311

699

Canberra

160

78

Darwin

162

46

Hobart

96

70

Melbourne

3,688

1,994

Perth

287

381

Sydney

1,291

1,450

Total

6,127

4,998

An impact that is very real, but one which may go unreported, is the impact I have seen on employees’ morale and job security. Despite unemployment being seen to improve, there appears to be an increase in anxiety about job security. A major research project by the Centre for Work and Life identified a deep sense of insecurity and concern, fundamentally on the issue of the unfair dismissal rights.

Obviously workplaces exempt from unfair dismissal laws have the greatest employee anxiety. ACTU President Sharon Burrow provided a report on the impact on the new IR laws on Australian working families at Parliament House on March 26, 2007. The report states: "Job security for Australian workers has eroded. 3,761,000 Australian workers employed in businesses with less than 100 staff have lost the protection of unfair dismissal laws. 99 percent of all private sector employees are now exempt from all unfair dismissal laws. Another 6,590,000 workers employed in business, with fewer than 100 staff, are also not protected from unfair dismissal laws as long as their employers say that the sacking is for operational reasons."

Burrow provides an example of the Cowra Abattoir workers where 29 workers were sacked for operational reasons and were offered their jobs back with a 30 percent pay cut. The Federal Government Office of Workplace services found these sackings were legal under the Industrial Relations laws.

Active ImageAustralian Workplace Agreements

Part of WorkChoices is aimed at shifting workers from collective to individual forms of employment contracts such as Australian Workplace Agreements (AWA). During 2006 the millionth AWA was signed, but as this included all AWAs since January 1997, the majority of those agreements have expired. Although there has been an increase in AWAs, it may not be as substantial as the figures show.

Under WorkChoices it is not duress or coercion for an employer to make an AWA condition of engagement, in other words, to refuse to hire a person unless they agree to sign an individual agreement on whatever terms the employer is proposing is allowed. Nationally, 3.1 percent of employees were covered by registered individual agreements of which the vast majority were AWAs.

A strong focus of AWAs is to reduce or remove protected award entitlements. The rate at which conditions are being removed is substantially higher under WorkChoices AWAs than under pre-WorkChoices AWAs. The Federal Government’s report, given as evidence to the Senate’s Budget Estimates Hearing in May 2006, shows that its new AWA individual contracts are cutting the pay conditions of Australian workers.

Burrow’s report shows that of all the AWA individual contracts surveyed in the report:

    • 100 percent cut at least one protected award condition;

    • 22 percent provided workers with no pay rise, some for up to five years;

    • 51 percent cut overtime loading;

    • 63 percent cut penalty rates;

    • 64 percent cut annual leave loading;

    • 46 percent cut public holiday payment;

    • 52 percent cut shift work loadings;

    • 40 percent cut rest breaks;

    • 46 percent cut incentive based payments and bonuses;

    • 48 percent cut monetary allowance for employment expenses, skills, disabilities;

    • 36 percent cut declared public holidays; and

    • 44 percent cut days to be substituted for public holidays.

Australia Bureau of Statistics (ABS) data, released in March 2007, shows that the average weekly hours worked has increased in the past year. Other recent ABS data also shows people in full time, non-managerial jobs, that are on AWA individual contracts, work 2.3 hours a week more than people on registered collective agreements.

It is evident that under WorkChoices, unscrupulous employers can utilise AWAs to erode employees’ entitlements.

Unemployment Statistics

As of April 12, 2007 ABS figures show the national jobless rate is 4.5 percent, with 276,000 new jobs created in the past 12 months. For instance, Prime Minister John Howard said that it was fair to say that WorkChoices Industrial Relations changes introduced a year ago have played a significant role, especially the removal of unfair dismissal laws for companies
with fewer than 100 employees.

In a media release from the Australian Chamber of Commerce and Industry (ACCI), a National Employer Survey stated that 70.9 percent of employers say that jobs increase with unfair dismissal exemption. The ACCI received survey responses from 1,337 employers about workplace reform. The employers were asked:

      • Jobs will increase if small businesses can employ without being at risk from an unfair dismissal claim;

      • Thinking about my business, I would be likely to hire more staff if I am not at risk from unfair dismissal.

Of those surveyed, 70.9 percent of employers either agreed or strongly agreed that jobs would increase if small businesses can employ people without being at risk of unfair dismissal claims. Even more telling, 46 percent of employers agreed or strongly agreed that they would likely hire more staff if their business was not at risk of unfair dismissal claims. However, opposition leader Kevin Rudd has dismissed the PM’s claims that WorkChoices is responsible for Australia’s record low unemployment rates. Instead, Rudd has indicated that this is largely as a result of the growth in the booming resource sector.

In my experience in advising SMEs, it is evident that business owners are willing to employ more staff due to the abolishment of unfair dismissal laws. But it is very difficult, if not impossible, to assess the very real impact that WorkChoices has had on SMEs, as the surveys and statistics can be manipulated in such a way to place a positive or negative impact on implication of WorkChoices. However, in my experience, it appears that the introduction of AWAs has led to a loss of employees conditions of employment, particularly in areas such as penalty rates, overtime rates and shift allowances. The hourly rates of workers on AWAs are on average lower than those for workers on Collective Agreements, but the impact on particular employees depends on their position in the labour market, in particular whether the particular skills they have are in short supply and the alternative employment opportunities available to them are local.

WorkChoices has had a significant impact on unfair dismissal laws in Australia, as the statistics show that 99 percent of all private sector employees are now exempt from all unfair dismissal laws. Evidently, this has had an impact on employees morale in workplaces where unfair dismissal laws are exempt. It appears that WorkChoices has had a positive effect on unemployment rates in Australia, which are at an all time low. I have noticed that business owners are finding it easier to manage employment related issues due to the abolishment of unfair dismissal laws. However, as I have mentioned, there are some unscrupulous employers taking advantage of the unfair dismissal laws and terminating staff without cause and unfairly.

As to what changes can be expected in the future, this will very much depend on the up and coming federal election. The opposition leader Kevin Rudd’s industrial relation plan shows that he has strongly sided with the unions by announcing that he will reinstate penalty rates and workplace entitlements if he defeats the coalition government. Rudd will also scrap workplace agreements and legislate for the return of collective bargaining.

As always, the controversy surrounding Industrial Relations in Australia continues. The impact of WorkChoices legislation in my view cannot be determined after 12 months, as the effects of some provisions will probably not be observed for several years. However, at this stage it does appear that there has been a slight transfer in power from employees to business owners due to the WorkChoices legislation.

*Matthew Hourn is a business law partner with Clinch Neville Long Lawyers (www.clinchnevillelong.com.au). This article reflects the opinion of the author only, and is not to be taken as advice. For advice on this specific topic, readers are encouraged to seek professional legal advice

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