Productivity Commission identifies major deficiencies in workplace relations framework

By Simon Dewberry
Employment & Safety

In brief

The Coalition's industrial relations policy for the last election included a proposal to have the Productivity Commission review and make recommendations about improving the Fair Work Act so that the Coalition could take the recommended changes to the next election. The proposal is now unfolding, with the Productivity Commission releasing its draft report today. Partner Simon Dewberry and Managing Associate Andrew Stirling look at what the report means for you.

Predictably, the Productivity Commission's report concludes that there are several major deficiencies that need to be addressed, including those summarised below.

Submissions in response to the draft report are due by 18 September 2015, with the Productivity Commission's final report due to be submitted to the Government by the end of November 2015.

Please contact us if you would like us to address any issues relevant to your business in our submission.

Unfair dismissal

The Productivity Commission has accepted that the current laws and practices incentivise employers to pay 'go away' money to employees who claim unfair dismissal. To tackle this issue, it recommends that the Fair Work Commission have greater discretion to consider unfair dismissal applications ‘on the papers’ before conciliation; or alternatively, that the conciliation process focus more on the merits of the claim.

In our view, care will need to be taken to ensure an increased focus on the merits during conciliation conferences does not dissuade the parties from properly exploring a reasonable commercial resolution of disputes at this early stage. Removing the current tendency for telephone conciliators to say the merits are irrelevant to the conciliation (which invariably emboldens applicants with unmeritorious claims to not accept a reasonable settlement outcome) should be enough to correct the balance.

The report also recommends that:

  • compensation be payable only when the employee has been dismissed without reasonable evidence of persistent underperformance or serious misconduct; and
  • any missteps by the employer during the termination process should not result in reinstatement or compensation.

We expect that these changes will be too radical to make their way into the Coalition's workplace relations policy.

General protections

Sensibly, the Productivity Commission recommends tightening the protection against adverse action being taken against employees who make complaints in relation to their employment. This is important because recent court cases have interpreted this protection very broadly, giving an almost limitless scope to what can be a complaint in relation to employment. For example, in Evans v Trilab [2014] FCCA 2464, the court accepted that an employee’s complaint about scientific testing methods used by his employer could be a complaint in relation to his employment. In Henry v Leighton [2015] FCCA 1923, the court accepted that a complaint about an employer’s financial reporting and compliance with the Corporations Act 2001 (Cth) could be protected.  

Greenfields enterprise agreements

The Productivity Commission has acknowledged how important greenfields agreements are to major construction projects. In particular, having an agreement in place before the project starts is critical to managing industrial relations risks.

The current system gives employers little scope to avoid pattern union agreements. Further, the greenfields agreements for most major projects have a nominal expiry date that occurs before the project finishes. This leaves the project exposed to renegotiation of the agreement (and protected industrial action) during the project, often when the project is nearing completion.

The recommendations to address these issues include allowing:

  • the term of a greenfields agreement to match the life of the project; and
  • employers to submit proposed greenfields agreement for approval (with a 12-month nominal expiry date) if negotiations for the agreement go on for more than three months.

Industrial action

The Productivity Commission has also acknowledged the union bargaining tactic of notifying industrial action only to withdraw it after the employer has spent time and money planning to manage the action. The Productivity Commission recommends that employers be allowed to stand down employees without pay if they do not go ahead with notified industrial action. If the recommendation is adopted, the stand down could be for the duration of the employer’s planned contingency response. There is a further recommendation that the Fair Work Commission have the discretion to withhold a protected action ballot order for up to 90 days where employees have previously used repeated withdrawals of protected action as an industrial tactic.