This morning, the Productivity Commission (PC) released its draft report in relation to the Australian workplace relations framework. 

In a nutshell, the PC has concluded that the system is 'not dysfunctional' but is in need of repair. 

The PC:

  • expresses concerns about the process adopted by the Fair Work Commission (FWC) for award determination, which it describes as giving too much 'weight to history, precedent and judgments on the merits of cases put to it by partisan lobbyists'
  • says that Sunday penalty rates for hospitality, entertainment and retail should be aligned with Saturday rates
  • makes recommendations for modest changes to the unfair dismissal, adverse action and enterprise bargaining provisions – including replacing the BOOT with a no disadvantage test, capping compensation for, and exempting frivolous or vexatious complaints from, the adverse action provisions.

Finally, it has floated the idea of a new hybrid type of agreement - the 'enterprise contract' - to fill the gap between enterprise agreements and individual arrangements. These contracts would be filed with FWC but not require their approval and could utilise sample templates from the FWC website. Employees could opt out of the enterprise contract after a specified period (say 12 months).

It does not advocate the reintroduction of AWAs or an equivalent – although it does propose an extended notice period for termination of individual flexibility arrangements (IFA).

Importantly, these recommendations are not final. The PC will consider further submissions of the parties before finalising its report, probably in December.

It will then be over to the Government to decide what it does. Presumably though, it will use at least some of the PC's recommendations to help formulate its workplace relations platform to take to the next election.

What are the Productivity Commission's Key Draft Recommendations?

Click here to view table.

What happens next?

The PC has asked for written submissions on the draft report by mid September. 

It is envisaged that the PC will provide its final report in December 2015. 

Why is this important?

The PC's final recommendations could result in important changes to the Fair Work Act, although not for some time.

Once the PC has finalised its recommendations, the Government will consider them and, to the extent it adopts them, will take them to the next election – presumably in 2016.

Most of the PC's draft report is relatively modest - with the exception of enterprise contracts and penalty rates, which are likely to prove more controversial. While it is always dangerous to make predictions, the modest nature of the proposals may encourage the Government to adopt most (perhaps all) of them, once finalised.

However, it also has to be appreciated that – if the Government is re-elected but does not gain control of the Senate – then there is no guarantee the Senate will pass the amendments. Most of the Government's current reforms have been stuck in Parliament for well over a year – despite their modest nature.