While the froth and bubble from both sides of politics about Australia’s industrial relations system (IR) continues to create considerable noise in the media, deeper inspection of the reforms and their subsequent changes reveals they’re not as revolutionary and controversial as they’re portrayed. 
 
Peter Anderson, director of workplace policy at the peak industry body Australian Chamber of Commerce and Industry, says that it’s inevitable that the IR policy has found itself in the political realm. 
 
“The IR debate has unfortunately become highly politicised and WorkChoices is not the radical reform agenda that’s being described. You can’t expect political systems to divorce themselves from policy development, but you should expect this issue to be debated on objective and factual grounds. The current debate is far from that, and the trade union movement has made it into a primary political issue in order to serve its industrial and political objectives,” says Anderson. 
 
Main Changes 
WorkChoices is the third major step towards a less regulated IR system in Australia and follows on from the changes the Keating Labor Government made in 1993 and the introduction of the Howard Government’s Workplace Relations Act in 1996. WorkChoices is designed to bring all the different award and enterprise agreement systems under one regime. This is attractive to national and multinational employers. As a result, WorkChoices seeks to improve productivity, boost employment and raise wages. Prior to WorkChoices, IR power was shared between the federal and state governments. 
 
It covers about 85 per cent of the Australian workforce (because they work for trading corporations) but excludes state government departments, partnerships, sole traders and most churches. These exclusions do extend to Victoria (which transferred its state IR powers to the federal government in 1996), the Australian Capital Territory and Northern Territory, which are all under federal jurisdiction. 
 
Under WorkChoices, the regulatory role of state industrial commissions has shrunk dramatically. They no longer have any jurisdiction in regard to trading corporations and they have lost their authority to make awards and approve enterprise agreements or address unfair dismissal cases. 
 
Sole traders will now fall under the jurisdiction of each state government body and if they want to be covered by WorkChoices, they must become incorporated. The key disadvantages of not being covered by WorkChoices include the lack of access to protection from industrial action and a more simplified award system and exposure to state unfair dismissal laws. 
 
There have been changes to the unfair dismissal laws which are particularly good for small business operators. In organisations with 100 employees or less, there are now prohibitions on former employees seeking reinstatement or damages for being dismissed. This change has led to an increase in the confidence of small to medium-sized employers who employ full-time employees. 
 
Fine Tuning 
Whether it’s called fine tuning or political adjustment, the federal government amended WorkChoices earlier this year to include a fairness test for workplace agreements (irrespective of whether they are individual agreements (AWAs) or collective agreements). The fairness test is designed to strengthen the safety net and regulatory controls associated with agreement making and the bargaining system. The fairness test was introduced to address community concern that employee penalty rates and conditions could be bargained away under WorkChoices. 
 
The new fairness test came into force on 7 May 2007 and operates in a similar way to the no disadvantage test that applied from 1996 to the introduction of WorkChoices. It will only apply to workplace agreements lodged after 7 May. 
 
The fairness test is primarily a financial test. It applies to collective agreements and AWAs where employees are earning less than $75,000 per year. It is designed to ensure that these employees receive fair compensation and that they’re not financially worse off under any modified or excluded protected award conditions. 
 
A workplace agreement needs to be assessed against the fairness test if it changes or excludes any protected award conditions such as penalty rates, rest breaks, annual leave loadings, public holidays, overtime or shift loadings. If the Workplace Authority finds that the modified agreement doesn’t pass the fairness test, the employer has 14 days to make the agreement fair. The employer will have to make up any back pay due to employees. 
 
According to Brian Williamson, managing director of boutique law firm Workplace Law, the new fairness test adds another layer of complexity to the IR system. “Compared to the no disadvantage test which was easy to administer, the fairness test is quite complex as it is enshrined in 100 pages of legislation. It appears to have been introduced due to the government’s concern that the ACTU and Labor Party campaigns against WorkChoices were gaining electoral traction,” says Williamson. 
 
Under the new fairness test, if a workplace agreement does not meet the test then employers are now prohibited from dismissing an employee. Employers also cannot force an existing employee to agree to remove or change a protected award condition. And when an employer takes over a business, they are prohibited from forcing an employee to sign an AWA as a condition of continued employment. 
 
Richard Bunting, employment partner at law firm Blake Dawson Waldron, says that employers need to carefully consider the introduction of AWAs and collective agreements. “AWAs are useful in helping employers combat collective bargaining pressures. They also allow for different provisions and greater flexibility for individual employment situations. However, to pass the fairness test they must now be measured against the applicable award. An additional problem is that many companies are not covered by an award which means it’s up to the Workplace Authority to choose an appropriate award to apply. 
 
“One of the drawbacks is that if the fairness test is failed, the Workplace Authority’s designated award will continue to apply to the employer in respect of that individual employee. The employer may be left in a situation where it has to comply with some inconvenient award which didn’t apply to it previously.” 
 
Changes 
The legislation which introduced the fairness test also caused an evolution of the two WorkChoices independent statutory offices – the Workplace Authority director and the Workplace ombudsman. These two institutions will continue to play key roles in maintaining the WorkChoices safety net. 
 
The Office of Employment Advocate has been renamed as the Workplace Authority. Its responsibilities have been boosted and will include providing assistance, information and advice in relation to workplace agreements. It is charged with applying the fairness test and provides a pre-lodgement facility to check agreements. All workplace agreements must be lodged with the Workplace Authority. 
 
Under the old system, the Australian Industrial Relations Commission (AIRC) had much more power as it approved collective agreements and was involved in wage fixing. Today, the AIRC has virtually no role in wage fixing and instead focuses on dealing with unfair and unlawful dismissals, industrial action, award rationalisation and simplification. 
 
A new Workplace Ombudsman replaces the Office of Workplace Services and is a policing body. Its purpose is to provide more protection for workers and, as a result, it has greater power to investigate employers who fail to meet their obligations under WorkChoices. This will involve undertaking random audits of employers and conducting prosecutions. 
 
Facts Sheets  
The latest amendment to WorkChoices this year has included the obligation that employers provide their employees with workplace relations fact sheets. These fact sheets have been prepared by the Workplace Authority director and include information about employee entitlements under WorkChoices and the role of the Workplace Authority director and the Workplace Ombudsman. 
 
Role Of The Unions  
It’s no surprise that the role of the unions has diminished under WorkChoices. Given that their power has traditionally resided in both the federal and state industrial systems, the move to a nationally based IR system has substantially weakened their influence. Union membership continues to decline as the industrial landscape shifts toward the adoption of individual contracts and away from collective bargaining. According to figures released in April this year by the Australian Bureau of Statistics, the number of union members fell by 125,900 or 6.6 per cent to 1.78 million in the year to August 2006. 
 
Impacts Of The Reforms  
Tony Steven, CEO of the Council of Small Business of Australia, supports the WorkChoices legislation and the additional protection provided to employees through the fairness test.  
 
“The legislation provides business with confidence and flexibility to recruit and retain high quality staff. The political nature of the debate is regrettable because so many of our members are screaming for stability,” says Steven. 
 
According to the Workplace Authority, more than 326,000 new jobs have been created in Australia – 85 per cent of these full-time – since WorkChoices was introduced in March last year. The unemployment rate dropped to 4.4 per cent in April 2007, which is its lowest level since November 1974. Real wages have continued to grow and strikes in 2006 were at the lowest level on record. While these figures are positive and the move to a federal IR system can only be good, the new system brings a much higher level of policing and complexity that was missing from the old system. 
 
The reality is that there are likely to be more changes to the industrial relations system over the next three years, irrespective of which government is in power. Until the outcome of the federal election is known, the more interventionist approach behind WorkChoices means that employers will need to get used to more policing and greater regulation in the workplace. It will be important that employers ensure they are complying with the minimum standards introduced by WorkChoices. They will also need to ensure that their employees’ conditions of work and remuneration and the way they look after their staff is up to scratch. 
 
The shift in power from employers to employees is one aspect of the industrial relations landscape that is likely to continue. The skills shortage and ageing workforce mean that Australian employers will need to work hard to get their people strategy right. 
 
Implementing policies which address issues such as equal employment opportunities, gender diversity, anti-discrimination and harassment, maternity/paternity leave provisions, superannuation and annual leave simply makes good business sense. 
 
A robust complaint and internal resolution process should also not be forgotten. Companies that want to outperform their industry competitors will make sure they have the most appropriate human resource systems and processes in place to attract and retain the best staff. As Williamson says: “An empty seat makes the employer no money at all.” 
 
Labor’s proposed IR laws  
The main changes proposed to WorkChoices include: 

• uniform national IR system for the private sector. Labor plans to expand the current national system by seeking to include unincorporated employers such as sole traders and partnerships. State sector and local government employees will continue to be regulated by the state IR systems 
   
  
• fair work Australia. A single regulatory body called Fair Work Australia would oversee the IR system. It would replace the Australian Fair Pay Commission, the Office of the Employment Advocate, the Office of Workplace Services, the Australian Building and Construction Commission and the Australian Industrial Relations Commission. Fair Work Australia will set minimum wages and conditions 
   
  
• agreement making. AWAs would be abolished with three types of industrial agreements left in place: 
  
  • - union collective 
    
  • non-union collective 
    
  • union collective greenfields.
 
Note that Deputy Labor leader Julia Gillard has conceded that AWAs might continue in the mining industry in Western Australia. Qantas since requested a similar concession 
 

• safety net of employment conditions. A safety net will underpin collective enterprise bargaining and common law arrangements. The safety net will include 10 legislated national employment standards and 10 more in the awards 
   
  
• unfair dismissal. There will be a new unfair dismissal regime and the small business exemption from unfair dismal laws will be reversed.

• understand the new legislation. Seek professional assistance to gain a greater understanding of how the WorkChoices legislation will impact your business. Don’t be leap frogged by competitors who have a better grip on how to use the new industrial relations laws to improve organisational practices and maximise productivity 
   
  
• manage your workforce. Use the new legislation as an opportunity to increase engagement with your employees. Work closely with them to identify their needs and consult with them regularly on major changes that may impact them. Is your management team equipped to deal with your workforce directly? 
   
  
• take a culture health check. Consider the impact the new reforms will have on the culture of your work force. How will a more non-regulated/flexible workforce affect your existing culture? Is your workplace culture harmonised, adversarial or unionised? Do your competitors now look more appealing as employers from your own staff’s point of view? 
   
  
• invest in your people. Businesses need to allocate appropriate resources to their people management systems. Invest in appropriate attraction and retention strategies and do not ignore reward and remuneration systems 
   
  
• revisit your operations. Quantify the cost implications of the new changes across your supply chain. Determine the processes in your business that will be most impacted. Do you know the current administration costs of managing your workforce? 
   
  
• consider your customers. Investigate the potential benefits that you can pass on to your customers from supply chain efficiencies. How will you align your customer and employee experience? 
   
  
• keep the board informed. Ensure your board fully understands the implications of the new legislation on your workplace. What role will the risk and remuneration committee have in identifying risks and opportunities? What will be the impact on the governance process? 
   
  Source: PricewaterhouseCoopers Business Insights Survey Breaking Clear: May 2006 Survey of Australia’s mid-sized businesses