McManus is right: workers are underpaid, thanks to some unions

The Weekend Australian, March 25, 2017, Grace Collier:

Late last week, ACTU secretary Sally McManus said in a statement that there is “rampant lawlessness in the workplaces of Australia and this is occurring in the form of chronic underpayments of workers … which are … a business model for some corporations’’ and “this is what our government should be focusing on”.

McManus is right. However, what she didn’t say is this: the business model these corporations use is made possible only by the agreement of key unions.

It is estimated 250,000 Australian workers are being underpaid, with below-award wage rates, to the tune of $300 million a year. This shocking situation is the result of these employees being covered by dodgy union enterprise bargaining agreements.

I call these EBAs dodgy because they fail the “better-off overall” test, meaning that under their terms some workers earn less than they would under the relevant award.

Such EBAs are in place because employers and unions have colluded to make them and the Fair Work Commission has approved them, negligently.

This week, Malcolm Turnbull responded to McManus’s request, although perhaps not in the way she might have preferred. The Coalition declared its intention to outlaw corrupting payments between companies and unions. Generally speaking, dodgy EBAs and corrupting payments go together. A company can’t expect to buy a dodgy EBA for free, and a union official can’t be expected to sign one for nothing.

Under the proposed laws, companies will still be able to deduct union dues from employees’ wages and they will still be able to pay unions for services provided, at market rates — although it defies belief that any company would want to do that. All other payments would be forbidden, and penalties for breaching the law would stretch to a maximum of 10 years in prison and/or fines of up to $4.5 million for organisations and $900,000 for natural persons.

This draft legislation is sensible; such a law should have been in place already. And it is likely to succeed. Even if it doesn’t, the government has focused national attention on the issue — and, as a result, many MPs have a bit of a spring in their step, because their narrative has a catastrophic effect on unions and the opposition.

The Coalition team seems determined to start winning battles on the industrial relations front. The weapons they need to win this fight are all within easy reach. Finally, it seems they are picking them up with gusto. This week is just the start.

Many backbenchers are now scouring their electorates to find workers who are being ripped off under dodgy EBAs, so they can bring their cases forward. Companies with dodgy EBAs should probably apply to the Fair Work Commission for termination, which would be preferable to the brand damage that would flow from exposure and heated debate in parliament.

Take, for example, Kentucky Fried Chicken. There are a few KFC EBA’s around, but one is listed proudly on the Shop, Distributive and Allied Employees Association website, the KFC National EBA — 2010. This EBA has eliminated all penalty rates, other than those for public holidays, for all employees hired after October 27, 2010. Instead, a flat rate, which is the same as the relevant award base rate, applies seven days a week, 24 hours a day.

The EBA base rate has not been raised by a single cent to compensate for the loss of penalties. For example, a worker aged 21 or over is on $19.44 an hour, which is the award base rate. This applies for all 24 hours of the day and all seven days of the week. Casuals have a 23 per cent loading instead of the mandated 25 per cent and overtime does not kick in until after 11 hours of work.

Under the award, a level-1 worker would earn $29.16 an hour on a Sunday, but in the KFC EBA they would earn only $19.44. This EBA endorses wage theft to the tune of hundreds of dollars a week.

Further, clause 40.2 of the EBA says: “It is the policy of the employer that all its employees subject to this agreement shall join the union.” And there is the payoff for the EBA, you see.

Shall, in the legal sense, strictly means will, must or have to. Shall does not mean may, can or might. This clause imposes compulsory unionism on workers in an industry where many young people find their first job. Workers under this agreement are compelled to join the union, in accordance with their employer’s policy, which is legally enforced by a binding EBA.

This EBA is staggering, an outrage, a disgrace. There is no way in the fiery pits of hell it would pass the “better off overall” test. It imposes compulsory union membership, which is a breach of the Fair Work Act. I cannot comprehend in my wildest dreams why Fair Work commissioner Francis Raffaelli approved it.

My message to the government is this: great job this week but you’ve got to go further, harder, do more. We need an inquiry into these EBAs that fail the test; they must be struck down, and back pay must be ordered. Unions, with all their millions, can chip in to help the workers they have shafted.

And here is the message to all those recalcitrant corporates, in typical Australian style, still running their industrial relations via the lazy old big business, big union, corrupt and collusive business model: the game is up, it’s over. Correct your ways pronto, because even if the government doesn’t come after you, I will.


But Master Grocers Australia chief executive Jos de Bruin told SmartCompany this morning those still citing a “lawyers’ picnic” as a defence against an effects test should talk to small businesses who feel they have no power to fight big corporations.

He says independent grocers have long campaigned to have these “mandatory factors” removed, and says the current situation of competition in Australia presents a big disincentive for small businesses to grow or start their own businesses at all.

“We have advocated have those mandatory factors removed, because they are definite hurdles for the ACCC to overcome,” de Bruin says.

“I think the first thing is that small to medium family owned businesses right now feel that they have absolutely no protection and there are no deterrents. That, in effect, is a disincentive to grow your business.”

While Master Grocers hopes the effects test will ultimately force big businesses to “look over their shoulders to say ‘are we a good corporate citizen?’”, de Bruin says the planned changes to the Competition Act are still not enough, because the worst that can happen to a business is a fine.

“The current laws as such [if you misuse market power] means that you’re heavily, heavily fined. But there’s nothing in there to say, ‘well if we’ve proven you’ve misused your market power, we order you to divest,’” he says.

The Australian Competition and Consumer Commission also supports the strengthening and simplification of Section 46 of the Competition and Consumer Act, with chairman Rod Sims telling Fairfax this week the removal of “mandatory factors” would make the law much easier to enforce and would prevent lawyers coming up with ways to argue a company’s behaviour wasn’t anti-competitive.

“Keep it simple as that way everyone knows what it is and it’s easier for the courts to enforce,” Sims said.

Legal experts have previously told SmartCompany it will be some time before small businesses actually saw the results of an effects test in action. Big businesses are unlikely to pre-emptively change their behaviours, says de Bruin, but he believes the legislation creates an expectation of good corporate citizenship, and puts Australia in line with the rest of the world on this issue.

“This law won’t do anything based upon current behaviours. Like, is Coles going to stop expanding? Or Woolworths? But it does create a check,” he says.

“We need to check some of the behaviours out there. I think this is clearly a step in the right direction, and it only puts us in sync with other economies.”