IR revolutions have spun out enough change
Parts of the media have worked assiduously to convince us industrial relations law is in terrible shape and in need of sweeping reform. So Tony Abbott has promised a major review, to be conducted by the hyper-rationalist Productivity Commission, with any proposals for legislative change to be taken to the election after this one.
But we've already had four "wholesale rewrites of Commonwealth industrial law" in the past 20 years. Do we really need another? Are we doomed to keep waking up to another day of system change until, after innumerable goes, we finally get it right? Should we keep striving for perfection, or is there something to be gained from a period of stability and certainty?
The first big change was in 1993, when the Keating government abandoned the highly unusual centralised system of conciliation and arbitration we installed at Federation and replaced it with a decentralised system of collective bargaining at the enterprise level.
Then we had Peter Reith's Workplace Relations Act in 1996, which downgraded the role of industrial awards and the Industrial Relations Commission, greatly reduced union power and inaugurated legislative recognition of individual contracts, known as "Australian workplace agreements", subject to a "no-disadvantage test".
In 2005 John Howard introduced Work Choices, which replaced the federal and state systems with a single national system, further reduced the role of the unions and the commission, further restricted the right to strike and further downgraded awards, essentially replacing them with a short list of legislated minimum conditions and annual minimum wage adjustments.
Initially, at least, he sought to encourage employers' use of individual contracts by removing the no-disadvantage test, meaning workers moved onto an Australian workplace agreement could indeed suffer a loss of pay or benefits.
And then in 2009 Julia Gillard passed her Fair Work law. It suits both sides in the eternal union-Labor, employer-Liberals IR battle to have you believe Fair Work completely reversed Work Choices.
In truth, it reversed some of it, but retained large parts. It ended statutory recognition of individual contracts, making collectively bargained enterprise agreements the main form of wage-fixing.
It restored the authority of the commission - now called the Fair Work Commission - and a greatly simplified "modern" award system, applying only to workers on less than $100,000 a year. It increased to 10 the number of legislated minimum "national employment standards" and restored streamlined unfair dismissal rules.
But it retained and strengthened Work Choices' national system and many of its measures to limit union power, including limits on unions' right of entry to workplaces, mandatory secret ballots before strikes, and bans on industry-wide strikes and pattern bargaining. It kept the ban on "secondary boycotts" (actions aimed at businesses other than the employer) in trade practices legislation.
It continued to limit the commission's power to settle disputes by compulsory arbitration, and to permit employers to lock out their staff without notice.
So where are we now? According to a speaker at the conference, Richard Bunting, a lawyer who usually represents employers, the present system has nine principal features. First, the state industrial relations systems have been emasculated.
Minimum wages and conditions are specified by statute, supplemented by modern awards. But these are very much minimums, with industry- or calling-wide awards no longer "owned" by particular unions and employer groups.
The system recognises only collectively bargained enterprise agreements, with workers not necessarily represented by unions and with "enterprise" defined only loosely. Workers have a statutory right to strike, but only during the bargaining period for a new agreement.
Individual workers enjoy freedom of association (to join or not join a union) and protection against certain "adverse action" by employers. Unions are less central to the operation of the system, but are still facilitated and protected. Finally, unions retain some rights of entry to workplaces.
The question is, are the industrial parties so unhappy with the operation of this system that another big review is needed, with major changes to follow?
Bunting said most of his nine principal features were settled.
"They reflect the contemporary society and economic circumstances," he said. "No mainstream political or industrial participant advocates a wholly different approach, much less a return to former regimes. We are in the midst of a new period of stability affecting the main features of our labour law. However, there are some aspects in contention and some aspects where there is an apparent lack of balance ... "
Another speaker, Tim Lyons, assistant secretary of the ACTU, agreed we already have a stable regime. "With the exception of the issue of statutory individual contracts (a feature basically without parallel in overseas jurisdictions), the essential components of the current architecture . . . are seriously contested only at the margins," he said.
According to the keynote speaker, former justice Geoff Giudice, long-time president of the commission, "while there are some deep-seated differences in the positions of the major interests, it is important that many of the fundamental elements of the system are widely accepted. Policy differences tend to be at the margins or to be based on special pleading.
"There are some proposals for radical reform it is true, but extreme positions seldom provide a sound basis for change," he said.
Even Stephen Smith, of the employers' Australian Industry Group, though he had a long list of complaints, really only wanted change at the margin.
But the last word goes to Geoff McGill, former wages policy bureaucrat and employer consultant. "It is the substance of the employment relationship not its legal form which determines whether people are engaged and productive," he said.
"Productive workplaces are not the outcome of legislation but of the quality of leadership and culture at the workplace.
"There is a significant productivity dividend available to those organisations that have the leadership capability to harness discretionary effort of employees, through increased employee engagement."
Frequently Asked Questions about this Article…
Australia has seen four big shifts: the 1993 move from a centralised arbitration model to decentralised enterprise bargaining; the 1996 Workplace Relations Act (Peter Reith) that reduced award and union roles and recognised individual contracts under a no‑disadvantage test; the 2005 Work Choices reforms that created a single national system and further limited union power; and the 2009 Fair Work laws (Julia Gillard) which reversed some Work Choices measures while retaining the national framework and many limitations on unions.
Fair Work reversed some Work Choices policies but kept large parts of the national system. It restored the authority of what became the Fair Work Commission, introduced a simplified modern award system (applying mainly to employees earning under $100,000), added 10 national employment standards, and made enterprise agreements the main form of wage‑setting. At the same time it retained limits on union power such as restrictions on right of entry, mandatory secret ballots before strikes, bans on industry‑wide strikes and pattern bargaining, and limits on compulsory arbitration.
Enterprise agreements are collectively bargained workplace agreements and, under the current architecture, are the principal mechanism for fixing wages and conditions. They can be negotiated with or without union representation and the term “enterprise” is defined fairly loosely. For investors, enterprise agreements matter because they influence labour costs, industrial flexibility and the scope for workplace disputes that can affect company performance.
Speakers at the conference argued the system is entering a period of relative stability: many of the system’s principal features are widely accepted and most debate is at the margins. While political proposals for reviews (for example, a promised Productivity Commission review) do appear from time to time, the article’s experts suggest wholesale, fundamental change is unlikely in the near term.
Reforms over the past decades have generally reduced union power compared with earlier eras: awards have been downgraded to minimums, unions are less central to wage‑setting, and there are limits on some union activities (such as restrictions on right of entry, mandatory secret ballots for strikes, and bans on secondary boycotts and industry‑wide strikes). For companies this can mean fewer large‑scale industrial actions but still some retained union rights and potential for bargaining during enterprise negotiations.
Yes — the status of statutory recognition for individual contracts is one contentious area. The article notes that Australia previously recognised individual contracts (with the no‑disadvantage test in earlier reforms) and that the existence or removal of statutory individual contracts remains a debated issue. Any policy shift here could affect flexibility, pay structures and risk for some employers and sectors.
According to the article’s speakers, particularly Geoff McGill, it’s primarily the substance of the employment relationship — leadership, culture and the ability to harness employee engagement — that determines whether people are productive. Legislation sets the framework, but productive workplaces tend to result from good management and workplace culture rather than laws alone.
Investors should track proposals that affect the Fair Work Commission’s powers, any moves on statutory individual contracts, changes to awards or national employment standards, limits on union rights (entry, strike rules, secondary boycotts), and high‑profile enterprise bargaining disputes. These items can influence labour costs, operational flexibility and the risk of industrial disruption for companies in a portfolio.
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