Five into four doesn't quite fit but who's counting?

31st January 2018

“The single distinguishing feature of a Royal Commission my friend is it lasts a thousand years, and that is how we will bill them”

Australia’s seemingly never ending 4-Yearly Review of Modern Awards, now entering its fifth year, would undoubtedly attract the interest of Cleaver Greene, raffish anti-hero of the fictional TV series Rake as much as any royal commission. However, in the real world this quasi-judicial review with no end in sight has attracted little attention and worse, no one is counting the cost.

The failure to conclude the review within a reasonable timeframe is not just a product of the usual disinterest shown by the legal fraternity in meeting deadlines. It illustrates, as the Productivity Commission has previously observed, the inadequacy of the overly legalistic approach of the Fair Work Commission to the performance of its statutory role. The inordinate delay would be tolerable if the resulting variations were an improvement. Alas, the results of the Commission’s exertions are less than optimal for Australian businesses.

The so-called modern awards were established in quick time in 2009 largely as codifications of federal and state minimum wages and conditions that had been in existence prior to the ill-fated ‘Workchoices’ system. The Fair Work system, dare I say, introduced with an attitude akin to France’s reinstatement of the l’ancien regime, in the post Napoleonic period, empowered the Commission on behalf of the government to swiftly re-instate the old tightly prescriptive awards under a uniform national regulatory system.

The redeeming aspect of the legislative framework is the statutory 4-yearly review prescribed in section 156 of the Fair Work Act 2009, allows a more relaxed time frame in which to address the very obvious shortfalls of that initial action, so as to achieve truly modern terms and conditions of employment.

On the face of it, the job should not be particularly onerous as the legislation clearly limits the matters that may be included in awards, prescribes the modern award objectives to guide the deliberations, and allows the Commission broad discretion in managing the review procedure. The Fair Work Commission must ensure modern awards, together with the National Employment Standards provide a fair and relevant minimum safety net of terms and conditions taking into account a range of economic and social issues such as relative living standards, the needs of the low paid, promoting flexible modern work practices and the efficient and productive performance of work, the likely impact on productivity, employment costs and regulatory burden, and the need to ensure a simple, easy to understand system.

Justice Ross, President of the Fair Work Commission originally set himself the task of reviewing each of the 122 modern awards within eighteen months. So what has gone wrong?

Firstly, the Commission failed to limit the scope of matters for review under each award. It opened up the field to all and sundry neither filtering nor prioritising the most important issues. Consequently, it has lost control of the agenda.

Secondly the President’s predilection for copious written decisions, statements, and directions at each stage of the review combined with multiple versions of every possible variation proposed followed by a period of consultation is beyond any individual’s capacity to digest let alone respond with rational and timely feedback. As a result there has not been one modern award actually finalised.

Thirdly, the adversarial methodology too readily legitimises dubious claims pushed by vested interests, generally the old IR club of peak employer associations and unions, to the detriment of more objective sources of information, and whilst encouraging interminable litigation of conflicting claims. An inquisitorial method would have more effectively and efficiently served the objective of the enquiry.

For example, the Commission is currently considering twenty-seven proposed variations to the General Retail Industry Award, none of which address the ridiculous number of classification levels and irrelevant descriptions. Video stores and door-to-door sales are almost as extinct as the Tasmanian tiger but each is referenced in the award. When was the last time you had a surgical corset fitted at Myer or David Jones? Don’t worry; the award has a classification for that occupation as well.

The Commission’s attempt to produce ‘Plain Language’ versions of the modern awards is also beset with an overload of unresolved issues and time overruns. The Clerks Private Sector Award, at last count, has fifty items identified in the plain English exposure draft yet to be resolved. There are still thirty-five outstanding items of fifty-seven identified in the exposure draft of the Security Services Industry Award, and twenty-seven of forty-two items still outstanding for the Cleaning Services Award. Assuming all of these items are resolved, one could still expect the plain language versions will include no less than eight parts, fifty clauses and seven schedules A through G.

Almost one quarter of the Australian workforce mostly engaged in small to medium enterprises is reliant on awards for their pay. A higher proportion is subject to award conditions of employment such as hours of work, leave arrangements, penalty rates, shift work and overtime. It is difficult to see how this review is benefiting in any respect the vast bulk of such employees and employers.

It doesn’t take a degree in economics to understand that productivity is an important means to improving income and living standards. Although notoriously difficult to measure the drivers of productivity are education, training, skilled management and innovative use of technology and efficient work systems. Access to capital doesn’t hurt either. However, productivity is inhibited by over-regulation and lack of competition.

The award system is an important social safety net, and over-regulation and additional cost of employment do weight down the path to more productive and prosperous business and employment. Australians should take note next time an Australian politician bemoans low wage growth.