This article was first published in the Australian Financial Review on Tuesday, 29 September 2015
Curiously for a conservative Prime Minister, Malcolm Turnbull has little or no track record in the area of industrial relations. The three Liberal prime ministers who preceded him, Tony Abbott, John Howard and Malcolm Fraser, all had strong credentials and interest in the contest between employers and trade unions. This was one of the signature ideological debates of the 20th century, but is not one that Turnbull has ever engaged in deeply.
This means he will have to rely heavily on new Minister for Employment Senator Michaelia Cash, from Western Australia. Assistant Treasurer Josh Frydenberg has already sparked the industrial relations debate with his weekend comments about penalty rates and the Prime Minister in early remarks has ruled "nothing in or out" in terms of policy issues.
Fortunately for the government, Cash brings to the portfolio a previous career as an industrial relations lawyer in one of the country's premier legal practices. Since the passage of Work Choices in 2005, industrial relations law has become increasingly complicated and legalistic. Minister Cash will be well served by her legal training in this area. Frydenberg's comments suggest a government eager to make the arguments for the necessity of industrial relations reform in challenging economic times.
Perhaps a starting point for the new minister's priorities will be the publication of the Productivity Commission's report in November. This is an interesting undertaking because the commission is not a member of what is often derided as the "IR Club". Minister Cash could do worse than making a priority of the following propositions being considered by the commission.
Penalty rates. The union movement seems incapable of discussing this rationally. The Productivity Commission's draft proposal is to align the penalty rates paid for Sunday work to the Saturday rate. Generally in hospitality the double time penalty rate becomes time and a half. Hardly cruel and unusual punishment but the ACTU has already worked itself into a state of apoplexy over this proposal. In many respects this totemic issue will tell our community whether modest change to industrial laws remains possible in this country. The government would do well to remember that the ACTU speaks for only a risible 13 per cent of the private workforce in Australia. In short, it does not have the mandate or right to stop this reform.
Life-of-project agreements. There is a significant economic case to be made for enterprise agreements on large infrastructure or resources projects to have a life-of-project duration. It is difficult now for those funding such projects to accurately anticipate the unit price for labour with any certainty. The larger the project the more likely that existing enterprise agreements will expire during the project, leading to protected industrial action. The problem in the area of construction is that the builders are contractually subject to liquidated damages clauses if the project is delayed. The damages payable are immense, leaving the constructor a Hobson's choice of fighting the union or exposing itself to damages. A life-of-project approach would break this vicious cycle and lead to certainty and, curiously, job security.
Content of enterprise agreements. The Productivity Commission thinks the Fair Work Act could be changed to limit the capacity of agreements to regulate the use of contractors and labour hire. This should be an issue of priority. It is relatively commonplace in agreements, and it certainly appears in the construction unions pattern agreement, that the use of subcontract labour is rendered so burdensome as to vastly reduce, if not eliminate, its utility. These types of clauses are not only anti-competitive, but they add to the cost of projects. In government projects they seek to impose public sector-type conditions on private contractors. These types of provisions should be outlawed.
The enterprise contract. One of the commission's most interesting proposals is a new "enterprise contract", which would permit an employer to vary terms of a modern award for classes or groups of employees without the need to have an enterprise agreement ballot or the need to negotiate with every employee. The legislation now provides for two instruments, an enterprise agreement and the little-used "individual flexibility arrangement". It is unclear the enterprise agreement was ever meant to be the pre-eminent instrument in Australian workplaces – and most workplaces do not have them. But the current gap between them and individual flexibility arrangement ought be addressed, because a large number of employees, particularly in small business, work.
Protected industrial action. This is a blight on the legislative landscape. Its protectors say it is merely compliance with Australia's international obligations under an International Labour Organisation convention. I fail to see the connection between the convention and the repeated, intentional infliction of economic harm on an employer. In any other circumstance the recipient of such action could sue for damages. This is a matter under consideration by the Productivity Commission and it deserves proper consideration.
None of the above matters ought be controversial. They do not require wholesale amendment to the Fair Work Act and could start overdue improvements to workplace flexibility and efficiency without attacking existing terms and conditions. This is a principled field on which battle could be had with the trade unions and their politicians.
As they say, timing in this life is everything. The 2005 Work Choices legislation failed because it was passed at a time of relative prosperity and the public did not understand the need for its introduction. With the Australian economy in trouble, changes to our industrial laws are required to unlock productivity and open the way for the next era of economic development. It is said that one of the reasons Malcolm Turnbull was elected Prime Minister was his superior communications skills. These skills will be needed, because in industrial relations lasting reform needs broad support. The question is not whether the unions will oppose this but rather will business, large and small, support it?