Modern Award Review a Drag on Productivity

3rd February 2015

One could be excused for thinking that the Fair Work Commission has interpreted it’s statutory obligation to conduct a 4-yearly review of modern awards quite literally. The review formally commenced in December 2013. If the timetable recently published is any guide, it won’t conclude anytime soon.

The Commission’s President, Justice Ian Ross AO has adopted the most excruciating and unnecessarily laborious procedure that I can recall, in reviewing 122 generally homogenous modern awards. If I were cynical I would suspect the inordinate length of this review was deliberately designed to outlast the political cycle and protect the current archaic system re-established by the previous Labor government.

The vast majority of issues drawing the Commission’s attention were thoroughly canvassed in the 2012 review and therefore do not require a repeat round of endless public submissions, responses, counter-claims, further submissions, directions, conferences, conciliation, hearing and decision. For example, in September 2013 a Full Bench decided ten issues affecting the entitlement to annual leave commonly prescribed by the modern awards. Although the Commission was limited at that time to making only technical variations to awards, the law is pretty clear and it has the benefit of the extensive evidence on the substantive arguments that may be considered in this review. If it is not entirely satisfied with this evidence, it could simply ask it’s research unit to prepare a report or supplement the evidence with independent research. If it were to follow that path it could publish discussion papers in the first month, assesses submissions from the usual suspects (unions, employer groups and academics) in the next month, conduct some public hearings in the third month and then make a decision in the fourth month. Pretty simple stuff.

It is sadly ironic that the one useful task that the Commission should be undertaking has received virtually no attention. Wage classifications in modern awards bare little resemblance to the nature of jobs performed in the modern Australian economy. Importantly, they do not reflect the vastly more flexible approach to when and how work is performed by many small to medium enterprises, especially in new and emerging industries. They were cobbled together from a mishmash of outmoded state and federal award descriptions created for Australian workplaces that no longer exist. As such, the minimum wages prescribed in the modern awards are equally outmoded and an impediment to fair and efficient minimum wage regulation.

Finally, and again somewhat ironically, the Productivity Commission Inquiry into the Workplace Relations Framework will address many of the issues the Fair Work Commission is reluctant to tackle, in the next six months (including the Commission’s performance) and will publish it’s final report in November of this year. Now that is productivity!