It's highly probable that the Rudd government's new Fair Work Bill could result in the slow withering or even death of the enterprise agreement process in Australia. This would be counter to the stated intention of the government, which is to place collective negotiations at the centre of its workplace relations system. A study of the structure of the bill makes this clear.
The Fair Work Bill creates a layered approach to compulsory employment standards. First there are the 10 national employment standards (NES) embedded in legislation, including requirements on working hours and holidays. Second there are the 10 minimum industry awards standards, mostly covering pay rate issues determined by the Australian Industrial Relations Commission.
Enterprise agreements are the third layer. This is where the productivity drivers are supposed to exist. It's recognised that legislative and award standards create rigidities that don't suit the varied operational requirements of businesses. Rigidity prevents innovation and flexibility. Innovation is particularly vital to minimise the impact of recession pressures and to aid economic recovery. Enterprise agreements are intended to provide innovation opportunities without undermining minimum employee entitlements. The structure makes sense.
There's a fourth aspect that has not received the attention it should. At each of the three layers are compulsory "flexibility clauses". In reality these are individual employment contracts. At the legislated level, all employees earning more than $100,000 a year have individual contracts -- the terms of which cannot fall below the 10 NES.
At the award and enterprise levels, individual employment contract options are compulsory. The contract terms cannot fall below minimums under the respective awards or enterprise agreements. They are intended to offer opportunity for flexibility. The operation of individual agreements is simple. They must be between only an individual employee and the employer and specifically prevent union involvement or oversight.
To this point, the system looks attractive, as it offers straightforward business options balanced against securing employee entitlements.
But a problem emerges with the enterprise agreement process. It's so red tape-dependent that it's probably useless as a change and innovation initiator or manager. The bill has many bureaucratic triggers that lock the negotiation process and outcomes into narrow, complex requirements. This has created sharp criticism and debate.
Businesses can be forced into the enterprise negotiation process against their wishes. The oversight body, Fair Work Australia, has only to declare that a majority of employees want to negotiate and the employer must sit at the table.
It can force a reluctant employer to insert terms into an agreement. Unions have an automatic right to act as bargaining agents if employees fail to nominate another body. There are no restrictions on unions in seizing commercial records from a business.
If a union is involved in negotiations, it can declare itself to be party to an agreement, even without employee or employer approval. An agreement can be approved even if only a minority of employees vote for it. New business ventures may have agreements only with unions. Employers can be forced into multi-enterprise agreements and there is little scope to avoid this process. It's pattern bargaining under another name.
Further, unions are given a new legislative authority that is independent of their employee membership. This is unprecedented in Australian industrial relations law. It forces unions into the centre of the enterprise agreement system and pushes employees out.
The outcome is a rigid process. It works against the relationship building between management and workers that's necessary to create win-win innovation and flexibility. For most employers, the enterprise stream under the Fair Work Bill looks exhausting and daunting. Employees will be like sideline observers.
But there's an out that employers and employees may realise. None of these problems exist if businesses stay clear of enterprise agreements. The viable option is to remain or revert to awards and seek innovation and flexibility through individual contracts. This process has no imposed bureaucratic requirements other than to ensure that award and legislative minimums are maintained.
This is why enterprise agreements are likely to wither. The system won't produce the needed results and there's a workable alternative process. The bigger test, however, will be with management capability. Succeeding with individual contract arrangements requires managerial skills that are not the norm in Australia. But because the Fair Work enterprise stream is so restrictive a shift in management culture is a probable outcome.
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