The game’s up as FWC gives cosy union deals the BOOT

The Australian, January 31, 2018

Bill Shorten declared yesterday that the system of enterprise bargaining was on life support. That would be the system of enterprise bargaining enshrined in Labor’s Fair Work Act, designed with unions for unions.

He complains that the number of new agreements is as low as it was at the start of the enterprise bargaining experiment in the mid-1990s. He complains that employers are seeking to have enterprise agreements terminated and reverting to awards. He complains that employers are refusing to bargain. He links these phenomena to low wages growth.

In fact, wages are behaving as you would expect. They have grown in line with productivity. At the end of the day, the only way to increase wages sustainably is to raise the rate of productivity growth. On this latter point, ­Shorten and Labor are out of ideas.

The irony is that if there are ­issues with the rules of enterprise bargaining, they are very much Labor’s doing. After the fiasco of the Coles supermarket enterprise agreement in which the rights of one class of workers (casual employees working on weekends and public holidays) were traded off against the rights of another class (permanent employees working during the week), it was clear the Fair Work Commission’s interpretation of the better-off- overall test would be tightened.

Instead of taking the employer and unions’ word for it that the BOOT was met under the terms of a proposed enterprise agreement, the FWC is assessing whether the test is met. The trade-offs that were part and parcel of the enterprise bargaining system are now not readily available.

Is it any wonder employers increasingly are taking the view that it is simply not worth negotiating an enterprise agreement and have it certified? If enterprise agreements are simply formalised over-award documents, why bother?

Several unions are very unhappy about this development. Their modus operandi has been to offer trade-offs in enterprise agreements to big employers in exchange for union preferences, including recruitment, payroll deduction of dues, sole nomination of union-linked superannuation funds and the like. The Shoppies union (the Shop Distributive and Allied Employees Association), in particular, is seeing its business model being blown up.

When it comes to the termination of enterprise agreements, more businesses are realising that these agreements are often inconsistent with modern work practices, growing the business and achieving higher productivity through efficiencies. Under the terms of the Fair Work Act, it is reasonably simple for a business to seek the termination of an enterprise agreement, although not all decisions have gone the way of the businesses making the application.

If there is any suggestion Labor will make it more difficult for businesses to terminate enterprise agreements, we would expect a rush of applications in the meantime as well as a greater disinclination for businesses to reach agreements in the future for fear of being locked in for ever and a day.

Is there a link between strike action and wage outcomes? The extent of industrial disputes has been falling for years, here and overseas. There is simply no appetite among most workers to go on strike. Through this period of declining industrial disputes, there have been times of both reasonably strong and reasonably weak wages growth.

While the BOOT sounds well and good, it is an extremely rigid test as being applied. It’s hardly surprising employers are opting for the award while paying some individual workers top-up pay.

As the labour market tightens further and if productivity picks up, wages will begin to grow more strongly. That’s the outcome Shorten should be focusing on, not faffing around with the rules.