Policy Approach

Labour market reform – Phase 3

The changes that were made to the Workplace Relations Act in 2005 were extremely unpopular with the Australian public, and as a result the Howard government was voted out of office at the end of 2007.  A major platform of the Rudd government’s election was the promise to change the industrial relations landscape in Australia.  Their program – dubbed “The Fair Work Act” – began being phased in during the first months of 2008.

The basic theme of the Labor party’s approach to industrial relations is that it is possible to have economic prosperity and a sensible balance between work and family commitments.  To achieve this, they have implemented reforms aimed at restoring this balance.

1.    The Australian Workplace Agreement, which was one of the key components of the Liberal party’s approach, has been abolished.  However, it is worth noting that during the transition phase AWAs that were submitted prior to the new laws continue to operate.  This means that AWAs were phased out slowly during this period.

2.    A new type of agreement was created.  This is known as the Individual Transition Employment Agreement (ITEA).  This type of agreement was designed to act as a bridge between the old system and the new; some rights (such as the right to collective agreement, and the right to industrial action) are restored for employees that sign ITEAs.

3.    The “fairness test” was replaced by the “no-disadvantage test”.  This means that any new agreement must be assessed to ensure that those signing will not be worse off as a result.  As a result, each new agreement must be checked, including ITEAs.  No new agreement can be enforced until it has been determined that it has passed this test.  This role is performed by the Workplace Authority Director.  (It is worth noting that, according to the law, it is possible for an agreement to pass the initial test, and then be judged to have failed once implemented.  If this happens, employees are entitled to compensation.)

4.    The “award modernisation process” was enshrined in law.  This process aims to simplify awards, which might otherwise cause significant regulatory problems for the relevant labour market bodies.  The main part of this process is the introduction of the National Employment Standards.  (These include ten key areas, including hours of work, parental leave, public holidays, notice of termination and long service leave.)

5.    Some technical changes to the law were also enacted.  For example, under the old system section 354 of the act protected certain award conditions.  This section was deleted, because under the new system the entire award agreement can be used as the basis of the no-disadvantage test.  Also, under the previous approach an agreement could be terminated by agreement between the employer and employees.  This process is no longer possible; today the Australian Industrial Relations Commission must approve the end of any agreement.

It is too early to determine whether or not these changes have been effective, but it is relatively easy to see the economic goals that are being pursued by the government.  For example, there is a clear recognition that the efficiency gains that were achieved under the previous system, and as such the government is keen to ensure that the regulatory requirements of the new system do not add to the burden of businesses.  However, the government is equally keen to ensure that the benefits of economic success are shared more equitably between employers and employees.  This is most apparent with the re-introduction of the no-disadvantage test.

It is very likely that the Australian industrial relations landscape will continue to change over the next few years.

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