Productivity Commission: Workplace Relations Framework

Published 28 March 2016

The Productivity Commission handed down its report into the workplace relations framework on 21 December 2015. The report concludes that the current industrial relations system is largely working well, but that it does require some tweaks to address the issue of balance between parties with interests in the workplace.

The Productivity Commission focused in its report on various areas of reform that it concluded, after its lengthy public inquiry, need addressing. The key areas where reform has been recommended include:

  1. A new body separate from the Fair Work Commission, the Workplace Standards Commission, being created to set minimum wages and award terms. The Productivity Commission stated that the Fair Work Commission is too backwards looking, a necessary component of legal decision making, and is therefore not placed well to carry out these functions, which largely require a forward looking approach.
  2. That the Fair Work Commission is sometimes too focused on process over substances and that this should be remedied to ensure fair outcomes. The example of minor defects in enterprise bargaining which could require an employer to start the process over again was proffered as an example.
  3. In relation to unfair dismissals, reinstatement should be removed as the primary remedy. Further, there should be an upfront assessment of whether there was a valid reason for dismissal. It was recommended that procedural errors should not result in compensation or reinstatement being awarded. Instead, information about improving procedures should be provided to employers or penalties could be imposed on repeat offenders.
  4. Weekend penalty rates should be set for certain industries. There should be no Sunday penalty rate in industries including hospitality, entertainment, retail, restaurants and cafes, but only a single weekend rate. This took into consideration some of the parties whose interests are often ignored in this conversation including consumers, the underemployed and unemployed.
  5. The better off overall test should be replaced with the previously applicable no disadvantage test. This shift would mean that the onus is not placed on employers but rather on the Fair Work Commission who could only refuse to approve an agreement if it can identify how it leaves employees worse off.
  6. It was recommended that individual flexibility arrangements should be utilised more. A combination of providing more information about individual flexibility arrangements, implementing the no disadvantage test to the arrangements and extending the termination period was suggested by the Productivity Commission. Currently they are only used for approximately in 1.6% of the 11.8 million employees in Australia.
  7. A new type of contract called the ‘Enterprise Contract’ was proposed by the Productivity Commission to be used in place of enterprise agreements in some workplaces. These contracts would be set up by individual employers as templates for particular classes of employees in their workplaces. It was suggested by the Productivity Commission that these contracts would be used particularly by small to medium sized businesses who cannot afford the time and money spent on enterprise agreement bargaining and approval processes.
  8. The statutory sham contracting test should be altered to ensure that it is not so easy to avoid prosecution for companies and directors that engage independent contractors who are in reality employees. The proposal is to change the current broad exception to finding an employer liable of sham contracting. If the employer can show firstly, that it did not know the person was actually an employee, and secondly, it was not reckless about the person being an employee rather than an independent contractor then it cannot be found liable of sham contracting. In its place, it is suggested that an employer would have to show that it did not know and that it was reasonable to believe that the person hired is an independent contractor, rather than an employee.
  9. A package of measures should be implemented for vulnerable employees, including illegal migrant workers, to try to make it easier for them to report the illegal actions of companies.

The report raised many other proposals by employees and employer groups, associations and interested parties. The above are the areas of reform most likely to be considered by the Government in framing its new workplace relations agenda.

This content is general in nature and provides a summary of the issues covered. It is not intended to be, nor should it be relied upon, as legal or professional advice for specific employment situations.

Olexo Workplace Law recommends that specialist legal advice should be sought about specific legal issues.