Is your productivity tied up in inflexible enterprise agreements?

During our consultation with member companies in the preparation of the Ai Group submission to the Productivity Commission’s review of the Workplace Relations Framework, we found a very common, major problem identified was that many companies are locked into unproductive and costly enterprise agreement provisions.

These agreements were negotiated in more profitable times, but they are now leaving companies uncompetitive and unable to implement the most efficient and productive work practices.

This is particular a problem for large companies in the manufacturing, construction, transport and other sectors with militant unions. While a business can of course seek to negotiate more appropriate enterprise agreements when the existing agreements expire, there is the risk of protected industrial action, which can be very damaging.

It’s easy for armchair commentators with no idea about the circumstances of the individual businesses concerned to criticise employers who, quote, ‘cave-in’ to union demands rather than just saying ‘No’. Often employers do say ‘No’, but sometimes commercial decisions have to be made – industrial action can cripple a business, its customers and its suppliers, and sometimes just saying ‘No’ to all union claims is not a sound commercial decision.

Regardless of the differing views on the concessions that some employers have made in the past during bargaining, the fact remains that there is a multi-faceted problem that the workplace relations framework needs to address with a multi-faceted solution.

Our submission, released this week, contains a detailed plan to ensure that enterprise agreements are more productive and flexible.

‘Productivity Terms’ should become mandatory terms for enterprise agreements, just like ‘Flexibility Terms’, ‘Consultation Terms’ and ‘Dispute Settling Terms’ currently are. Similar to these other terms, there should be a model term in the Fair Work Regulations. If an agreement does not include a ‘Productivity Term’, a model term should be deemed to be included in the agreement. You can read the relevant new section of the Fair Work Act proposed by Ai Group here.

Including Productivity Terms in enterprise agreements would allow employers to manage their businesses productively and efficiently, particularly in workplaces where these rights have been seriously eroded by a bargaining framework under the Fair Work Act which has given unions too much power to impose restrictive and unproductive work practices on businesses.

Of course, employers would still be required to implement workplace changes in a consultative manner, as provided for in the Consultation Term in agreements.

Other changes needed to the Fair Work Act to address this problem include:

  • The ‘permitted matters’ for bargaining should be tightened and the ‘unlawful terms’ expanded;
  • It should be easier for parties to terminate enterprise agreements after they expire; and
  • There should be a requirement that productivity improvements be discussed during bargaining.

Without a doubt, Australia’s current framework is hobbling our ability to address economic imperatives, including the pressing need to increase productivity and workforce participation. The Productivity Commission inquiry into the workplace relations framework is very welcome – and we’ll be pressing to help ensure it delivers some much-needed outcomes.

Is your business bound by costly and unproductive enterprise agreements? Do you have an opinion regarding our proposed solutions – or would you recommend a different approach?

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Stephen Smith
Ai Group's Head of National Workplace Relations Policy, Stephen Smith is responsible for workplace relations policy development and advocacy. He regularly represents industry’s views to governments and opposition parties, and in numerous inquiries and major cases. He is Special Counsel for, and Chairman of the Board of, Ai Group Workplace Lawyers, a national law firm operated by Ai Group.

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