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Will we now finally act on industrial relations – or lose even more jobs?

30 March 2020

5:33 PM

30 March 2020

5:33 PM

As the national cabinet scrambles to implement policies to contain coronavirus and lines stretch hundreds of meters outside Centrelink offices, it has become clear that an economic depression may be imminent. Now, more than any time since the GFC, perhaps even World War II, significant reforms are crucial in order to weather the storm of this unprecedented event. 

There have been several criticisms levelled at the Fair Work Act over the years — and for good reason. From its assumption that there is unequal bargaining power held by businesses to its interventionist approach to industrial relations, the FWA has shown time and again that it is ill-equipped to deal with a modern workplace relations system. This fact has never been so glaring as we are now seeing during the current crisis. The sheer lack of flexibility in the current regime is crippling the economy and politicians seem incapable of addressing it. 

The recent spate of underpayment reports by everyone from Woolworths to their ABC shows that the modern award system is broken and requires an overhaul. Even businesses with dedicated payroll departments are finding themselves on the wrong side of the law, purely because they can’t figure out what the law is. Australian small businesses have no chance.  

Then, of course, there’s the minimum wage, now the highest in the world, pricing the low-skilled, indigenous and the disabled out of sorely needed jobs. Over the past three years, the minimum wage has increased 81 per cent faster than prices but despite this, there are renewed calls for it to be increased further. A union calling for greater barriers to entry to the workplace shouldn’t surprise anyone, but it is particularly jarring at a time like this.  

One of the most damaging sections of the FWA is the unfair dismissal provision that dictates a dismissal may be unfair if it is harsh, unjust or unreasonable. A dismissal may be harsh on the employee due to the economic and personal consequences resulting from being dismissed or harsh because the outcome is disproportionate to the gravity of the misconduct (the punishment does not fit the crime).  

There are a few concerns this raises, least of all the requirement for an employer to subjectively assess the impact a dismissal may have on an employee, regardless of any objective reasoning the employer may have had at the time. An employer must have the ability to fire a bad employee without the need to consider how that may negatively affect someone’s circumstances.   

At the 2019 HR Nicholls Society annual conference, Satya Marar, former Director of Policy at the Australian Taxpayers Alliance noted that almost 15,000 unfair dismissal applications are lodged with the Fair Work Commission each year. Around 80 per cent of applications are settled, and 80 per cent of settlements involve reinstatement and/or monetary compensation. 

Marar also remarked that the broad nature of the tribunal’s discretion means that arbitrated outcomes can vary considerably depending on the FWC member who hears the case. Whereas employers were previously successful in over 60 per cent of unfair dismissal cases, this figure dropped below 50 per cent in 2013-4 and 2014-5 and below 40 per cent in 2015-6. In the same period, the number of FWC appeals doubled. Most involved unfair dismissal applications. 

If state and federal governments are serious about protecting ordinary Australians, not just during a crisis, but far into the future, they must implement dedicated and carefully directed reforms of the industrial relations system.  

Businesses had been doing it tough long before this pandemic and we are likely to see an enormous number of small and medium-sized businesses closed for good, especially considering the recently announced shutdowns. Reforms that can be introduced now to significantly assist both employers and employees include abolition of payroll tax (a tax on hiring workers), an overhaul of the compulsory superannuation system and a slew of tax cuts for all Australians.  

Any reform agenda must also address the truckloads of red tape and regulation facing businesses across Australia. Research from the Institute of Public Affairs has shown that red tape costs the Australian economy $176 billion each year in lost output. This simply will not do. 

It is time for some real leadership, accountability and action from our government. Slow reactions and half-measures will not be enough to stave off a depression but meaningful reforms for the benefit of all Australians will.  

John Gray is the executive director of the H.R. Nicholls Society.

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