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STANDING COMMITTEE ON EMPLOYMENT, WORKPLACE RELATIONS AND EDUCATION
08/06/2007
Workplace Relations (Restoring Family Work Balance) Amendment Bill 2007 Workplace Relations Amendment (A Stronger Safety Net) Bill 2007

CHAIR —Welcome. The committee prefers all evidence to be given in public. It will consider any request for all or part of the evidence to be given in camera. Thank you for your submission. Are there any changes or additions?

Mr S Smith —Just the supplementary submission.

CHAIR —Yes, thank you. I invite you to make a brief opening statement before we begin our questions.

Mr S Smith —Ai Group welcomes the opportunity to express its views about the Workplace Relations Amendment (A Stronger Safety Net) Bill and the Workplace Relations (Restoring Family Work Balance) Amendment Bill. With regard to the stronger safety net bill, we regard the changes as fair and sensible measures which should allay the view within the community that more protection is needed to prevent unfairness in agreement making. We support the bill but we have proposed a few amendments to improve clarity and workability. Most Ai Group member companies will be unaffected by the bill because, as we assess the situation, their agreements already easily meet the proposed fairness test. No doubt there will be a cost to some businesses in some industries. But, very importantly, the fundamental architecture of the national workplace relations system we do not believe is affected by the bill. We believe that agreement making will continue to be a relatively simple and flexible process and there will not be an excessive compliance burden on companies.

The bill’s provisions are broadly consistent with the position that we advocated during the development of the Work Choices package whereby we proposed that workplace agreements, other than for highly paid employees, should be compared against award penalty rates and other key conditions of employment to assess their fairness. We are a strong supporter of the existing agreement-making system and the flexibility that it offers to both employers and employees. We are satisfied that the bill does not compromise this flexibility.

Our position on the specific provisions of the bill is set out in our written submission. As you are aware, we did file a supplementary submission proposing a consequential amendment to section 355 of the act. This section imposes substantial restrictions on workplace agreements importing, by reference, the terms of awards. We believe that, given the introduction of the fairness test, that provision should be repealed or substantially amended for the reasons that we have set out in that submission.

Finally, with regard to the restoring family work balance bill, we are supportive of the recognition that that bill gives to the need to assist employees to balance their work and family responsibilities. However, the amendments that are proposed in the bill, we believe, would create operational difficulties for employers, as we have set out in the submission. We would be happy to discuss those practical issues in more detail.

CHAIR —Thank you. I will ask Senator Barnett to open.

Senator BARNETT —Madam Chair, I table the two documents I referred to before lunch regarding the High Court and the Figgins Holdings workplace agreement 2006.

CHAIR —Does the committee agree that they be tabled? There is agreement.

Senator BARNETT —Thank you. Thank you, Mr Smith and the AiG, for your submission. I have noted your supplementary submission this morning. I asked for the department’s response to your views on section 355. You can check the Hansard for their response, and I am happy to have any further feedback that you may wish to provide to that in due course, as soon as convenient.

Mr S. Smith —Thank you.

Senator BARNETT —I am not sure if you have had a chance to look at the AMMA submission to the inquiry. They refer to the Melbourne Institute report that refers to the increase in wages of those on an AWA, those on a collective agreement and those on an award. The Melbourne Institute indicated, according to the AMMA:

... average wage increases to workers on individual contracts (6.8%) exceeded those under collective agreements (3.9%) and awards (3.3%).

I wonder whether, based on feedback from your members, that is accurate and consistent. Do you have any feedback on the wage increases for those sectors?

Mr S. Smith —While we do not have any specific details, we have no reason to believe those figures are not accurate. We have not had an opportunity to study the AMMA submission in detail.

Senator BARNETT —On pages 8 and 9 of the AMMA submission—and I draw this to your attention—they say, on the mining sector:

A review of resource sector agreements lodged in the 12 months to 31 May 2007 reveals that 73.5% of resource sector employees were covered by an AWA ...

That is a very high percentage. They have some other statistics there supporting their view that AWAs are very important to their sector. Do you have any comments or a response as to the importance of AWAs to your members? Do you have any statistics or feedback in terms of the different industries that your members represent other than the mining and resources sector?

Mr S. Smith —Yes. We view AWAs as an important part of the flexibility that exists within the agreement-making system. We believe that employers and employees should have the right to make an individual agreement, a collective agreement, an agreement with a union, an agreement without a union, a registered agreement or an unregistered agreement. We strongly support the retention of AWAs. Our membership exists across many sectors like manufacturing, construction, ICT, labour hire and others. There are some sectors of our membership—for example, the telecommunications sector—with a heavy penetration of AWAs. That is even so for the manufacturing sector. I think the latest statistics show that the manufacturing sector is third on the list of sectors as to the number of AWAs. There certainly are large numbers of AWAs in the industries that we have a heavy membership in; but we also have many members that have collective agreements, many of those being with unions and many without unions. We do not favour one particular form of agreement over another. We just say that flexibility should be there.

Senator BARNETT —Yes, and choice should be there. I refer to the discussion we had earlier with the ACTU regarding ABS statistics which show that, on average, those on an AWA were 94 per cent higher than those on an award and, according to the ABS, nine per cent higher than those on a collective agreement. There was some debate as to whether or not they agreed with those statistics. What is the AiG response to the ABS statistics? Do you agree or disagree with them?

Mr S. Smith —We have no reason to believe that they are not correct. We do not have the details at hand. You would assume, given ABS processes, that those figures were accurate.

Senator BARNETT —We had some discussion about the merit of an appeals process. I have tabled a document today regarding the view of at least some legal authorities that there is really very little to no difference as to the no disadvantage test and that appeals would go to the High Court under either. Can you share your view—and your experience—on the appeals process under the proposed legislation and under the no disadvantage test?

Mr S. Smith —My colleague Mr Baragry may have something to say on this. I will just make one point. When we were having a look at this issue we did consider whether there should be an appeal mechanism. But, for the reason that you have identified, Senator, it did not seem to us that anything had really changed from the process that was there with the OEA. Indeed, you can appeal a commission decision to a full bench of the commission, but if you wish to go any further you need to go to the High Court. We would hope, for the reasons identified in some of the other submissions, that the Workplace Authority would review any of its decisions, which parties objected to, in a sensible way. We do not see, given that it is a decision of the Workplace Authority that, logically, you could really have, in effect, an appeal process to the Workplace Authority. That is the body making the decision. But you would hope that, if a decision was made by a fairly junior person within the authority, there would be an administrative process whereby you could have that decision reviewed by a more senior officer. We have no reason to suspect that that would not be the case, because we have always found the OEA to be receptive to issues like that. We have also said in our submission that the OEA—and we believe the Workplace Authority—through the Acts Interpretation Act would have the ability to revoke or amend any decision that it made.

Mr Baragry —With reference to people saying that there are proceedings in the High Court, it is some years since I have been involved in these, but there is a procedure available where you would go to the High Court for a writ of prohibition—the old prerogative writ—where you would say that the officer concerned had exceeded their authority or not exercised their authority. But, from my experience, it is automatically remitted then by the High Court to the Federal Court. It does not go straight to the High Court; they remit it back to the Federal Court. That is my understanding, but it could be a bit out of date.

Senator BIRMINGHAM —Thank you both for the very positive submission you have made. I would like to turn to aspects of the fairness test and particularly non-monetary compensation and, in particular, the assessment of exceptional personal circumstances. Could you offer experiences of your member companies as to how variations have been made which benefit individual personal circumstances?

Mr S. Smith —We heard the evidence given by the ACTU and this argument about discrimination, but we do not see it that way. We see that people are individuals, and the sorts of things that they value could differ quite dramatically from one person to another—and that is not discrimination. One person may substantially value flexible working hours, based on their family responsibilities or just their lifestyle choice, whereas someone else may value monetary compensation. Some people value leave much more than other people do. Some people are happy to trade off annual leave. People like me would never trade it off in a million years because I value my leave, but I do not say that other people should not have the right to trade off a certain amount of it if that is what they value. I think it is a legitimate part of the fairness test.

Senator BIRMINGHAM —You think that the way it is currently constructed gives employees a fair say and, indeed, with respect to the determination that is made at the end of the day an employee must see that trade-off as being of value?

Mr S. Smith —Yes. There is a process for seeking information from employees. I think the thing that was not highlighted so much with the ACTU is that it is an agreement so, at the end of the day, the individual has to agree. That is a very significant issue relating to this discrimination argument. The individual will make a decision about whether they value those things, subject to the fairness test, but the Workplace Authority will be making its decision based, amongst other things, on the information that the employee provides about how much they value that particular flexibility.

Senator BIRMINGHAM —The individual has to agree and then, when it is subject to assessment, if it looks unusual, one would think the individual employee will be asked whether they do value it, such that it warrants trading off?

Mr S. Smith —Yes, and it would be looked at in a practical way in that the monetary aspect would be looked at first and, if that is satisfied, it would move into other areas if there was still an argument that the agreement did not provide fair compensation across the board. If these other concepts come into it then you would expect—and I am sure it would happen—that the Workplace Authority would be seeking information from the employees and that that information would be assessed on its merits.

Senator BIRMINGHAM —Your submission is quite positive about the new fairness test. How do you believe it compares with the old no disadvantage test?

Mr S Smith —We would see it as being a lot more flexible than the old no disadvantage test, but the concepts are still there largely. It is a test about the fairness of an agreement, but it does bring in these own attributes like the value that an individual might place on non-monetary aspects and also on their particular circumstances. I think in contemporary society that is entirely appropriate.

Senator BIRMINGHAM —With regard to the position of employers trading off annual leave provisions or sick leave provisions, do you see this new fairness test as being on par or stronger than the old no disadvantage test?

Mr S Smith —I was a bit surprised with the SDA and ATCU’s evidence on this issue of trading off annual leave because some unions do trade off annual leave. Under the old system there were many collective agreements. We provided evidence about them in the work and family test case that we were involved in, as were the ACTU. Some unions, such as the Australian Services Union, have entered into agreements to cash out all annual leave above four weeks annual leave—for example, all long service leave. Under the old system there were no restrictions, but it was subject to the no disadvantage test. I certainly never saw any agreements that traded it all off. Typically there was a certain amount and a lot of employers would worry about excessive leave balances and employees in many cases wanted to trade that off. So it was always at the initiative of the employee. But different unions have different policies about it. Now, of course, there are all the protections built in. You can only trade off two weeks, it has to be in a formal agreement and it has to be at the initiative of the employee. We have seen quite a number of agreements that do this and the employees have strongly supported this flexibility, even senior people and junior people. It is one of those things that some people value. It is not something, as I said before, that I myself value because I value the leave.

Senator BIRMINGHAM —There have been arguments put by both the SDA and the ACTU that seem to suggest that they would rather the assessment of both collective agreements and individual contracts or AWAs occur by, say, the Industrial Relations Commission rather than as is suggested in the bill before us. What type of burden do you think that would place on business if that were to be the alternative?

Mr S Smith —We think the existing processing system is working effectively. There is no need to go back to the scenario that was there. When all agreements were being processed by the AIRC, it became a fairly contrived process where we would go along to a hearing every Monday, say, with a long list of agreements on a running list and it would just be like a sausage factory anyway. There was a public hearing and there was an opportunity to raise any issues, but most of them went through very readily and it was an enormous waste of resources to do it that way. The Labor Party’s policy now says that agreements should be approved on their papers, so even the ALP’s latest policy is not suggesting that we go back to public hearings other than, it seems, in exceptional circumstances. So we think the Workplace Authority is the obvious party to register agreements.

Senator BARNETT —I have a quick follow up to the comment you made about the trading in of annual leave and sick leave. We did have some debate earlier today with the SDA. They were not aware that you could trade in sick leave and annual leave. I am not sure whether you heard that advice from them. Is there any debate about that as far as you are concerned?

Mr S Smith —I do not think there is any debate about it. I think you could find many certified agreements on the public record that have traded off an amount of sick leave and an amount of annual leave by agreement with the unions. All those I have seen are always about excess leave. With the sick leave, often there are incentive schemes and so on where there is an ability to cash out beyond a certain level. In many cases those schemes have worked very well at reducing absenteeism. With the annual leave, there are many examples of that under the old system, subject to the no disadvantage test.

Senator BARNETT —That is right, but the law prior to Work Choices was that you could trade in your annual leave and sick leave.

Mr S Smith —Yes, without any restriction, but subject to the no disadvantage test.

Senator BIRMINGHAM —I assume that you are not aware offhand of any instances where, say, the SDA has made such agreements.

Mr S Smith —No, we do not have a big membership in the retail sector. I am not aware of any, no.

Senator BARNETT —There has been some debate with regard to the penetration of AWAs as a percentage of the total workforce. The department tabled for us this morning and the OEA tabled last week the fact that it is 8.4 per cent of the total workforce who are on AWAs. That is effective of March 2007. That is a public statement—it was made last week and is public today. Is there any debate about that as far as you are concerned, in light of the fact that various members of the Labor Party have indicated that it is three per cent, four per cent or even five per cent of the workforce?

Mr S Smith —We would like to have a look at those figures. It is very confusing because the ABS stats show it at 3.1 per cent and we did see the comments of the OEA on the figure of eight per cent, so we really do not know which one it is. I think it is something that is legitimately part of the public debate and we would be very interested to have a look at the statistics that were provided today.

CHAIR —They have been tabled, so they are now public information and you may like to look at those later on.

Mr S Smith —Thank you.

Senator FIELDING —Looking at the submission I have, on page 4 it says that the stronger safety net bill provisions are:

... broadly consistent with the position advocated by Ai Group during the development of the WorkChoices package whereby we proposed that workplace agreements ... should be compared against award penalty rates and other key conditions to assess fairness.

I think that is the rub and the reason this fairness test has come in—to compare with something. The issue that we have heard consistently today are that there appear to be some industries and some areas where awards are not applicable. Some industries never had awards from that basis. Communications is one, for example—they have other awards with bits and pieces of it—but predominantly the IT sector. What are your thoughts on how you provide a fairness test against something where you do not have an award? The reason why Family First put forward their bill was to provide some of that so there was something there on some basic working conditions. Obviously the fairness test has overtaken some of that, but generally speaking your position was that there should be some fairness in comparing it back to awards. So I come back to: what about those areas where you have nothing to compare it with?

Mr S Smith —We are the main employer association involved in the IT and communications sector. The awards that do exist in those sectors we have negotiated and we are the parties to, like the telecommunications services industry award, the IT professional employees award—there is about half a dozen of them. In the last three to five years, there has been penetration of award coverage in those areas and, interestingly, those awards, by agreement with unions like the ETU, the CPSU and even the ACTU, cut the penalty rates out at a certain level—in particular C7. That was the basis of that position that we put in our reform submissions.

But those sectors, to the extent that they still do not have any award coverage—and there certainly are a lot more than there was—do not have any rights to penalty rates anyway. But the Fair Pay and Conditions Standard is quite comprehensive in providing benefits in the area of sick leave, and hours of work and so on are more generous than what was there before. I do not think a lot of people recognise the significant improvements in areas such as sick leave and so on that have come from the establishment of the standard.

Senator FIELDING —So you are saying that, even though there may not be an award, those people are still better off than they would have been beforehand. There are some people who may have some sort of agreement with their companies at the moment but, if an AWA is struck, all of a sudden it will be compared back to the minimum conditions and maybe not to what they might really have been on beforehand. I think that is a genuine concern from people.

Mr S Smith —In my opening statement I made the comment that we are sympathetic towards the apparent intent of your bill to recognise people’s work and family balance needs and so on, but we do think there is a significant problem every time you try to legislate for minimum conditions because it brings in every employee from a managing director to an IT professional to a store person and creates enormous difficulties. We agree with one comment the ACTU made, which is that issues such as hours of work are certainly best addressed at the industry level because the sorts of flexibility that is needed in a contract call centre sector on hours of work might be entirely different to the construction sector, as a couple of examples. It is quite problematic to deal with some of these concepts in legislation to go beyond a certain point of regulation. Like for the hours of work, for example, you can say that there are certain parameters there but, once you start defining the hours of work, it does create a lot of potential unintended consequences, we believe.

Senator FIELDING —Some of the other issues I raised with a few of the others were, firstly, the redundancy issue—the Tristar issue was one—and, secondly, about how operational reasons can now basically include, ‘I am restructuring and I can sack you now.’ I have to say that most employers do the right thing and most workers do the right thing. It is about getting balance between the two. Is that a concern to you at all?

Mr S Smith —I will let my colleague deal with the issue of operational reasons, but just on the issue of redundancy protection and the Tristar scenario, as everyone is aware, that situation is before the courts and the courts will assess that on its merits. We do not seek to put any view one way or the other. There has certainly been a public debate about it, but the only decision on the issue at the moment has gone in the company’s favour—the decision of Deputy President Cartwright. So the matter is before the court and we will wait for and watch the outcome like everyone else will. Ron, did you want to deal with the other issue?

Mr Baragry —Yes. The operational reasons are very wide, but the case law is such that they must be genuine operational reasons. Having said that, it has to be genuine. It is tested to see if it is genuine. But, then again, an operational reason can be restructuring. If you decide to reallocate positions within a company and change people’s positions and salaries, those would be operational reasons.

Senator FIELDING —Previously you could restructure for sure and if someone was redundant they were redundant, but the issue of restructuring and saying ‘you are sacked’ I think takes it a lot further than currently.

Mr Baragry —It is not as easy as that. You have to have a genuine operational reason. You have to have a good business case for what you have done and that is tested.

Mr S Smith —The other thing is that, when you have a look at all these cases, you see that in virtually every one of them the situation was a classic redundancy scenario. There has been a lot of debate about the fact that it is quite broad, but all of these famous or infamous cases—however you want to describe them—were just classic redundancy scenarios where there was a job there one day and there was not a job there the next day. So it is broad on its face.

Senator FIELDING —I think redundancy is obviously a legitimate issue. The issue is one of basically just saying one day, ‘You are sacked.’ I think that is a bit rich really. Anyway, we may just have to disagree on that.

Mr Baragry —It is not as easy as that. You have to have a genuine business case. There was a decision a few weeks ago when a company tried to argue that because an employee had molested another employee they could terminate them for operational reasons because there was no position to employ them in. That was rejected completely as not being an operational reason.

Senator FIELDING —Maybe they just needed to restructure then. To me, it is very broad. I think it is a lot broader than most Australians would think is reasonable.

Mr Baragry —It is broad.

Senator SIEWERT —Earlier you were answering some questions about looking at personal issues in assessing AWAs, which leads me to how much time is available and whether it is actually going to be possible for the Workplace Authority to actually carry out a proper assessment to look at those issues. Have you had a look at the capacity that the Workplace Authority has to carry out assessments of AWAs? Do you think there will be genuine assessment of them?

Mr S Smith —I think the legislation will be quite clear on what their responsibilities are. AWAs and collective agreements will be coming into force upon lodgement and then they will be assessed—it means that we would all hope and expect that it will be done in a timely way, but it is not necessary that it all be done on the day of lodgement, for example. So we would expect, and all the appearances are, that there will be a lot of resources devoted to this task by the Workplace Authority and through government funding. So we are not aware of any problems and we are not anticipating any.

Senator SIEWERT —We heard evidence this morning to suggest that there is already a huge backlog and secondly that the department said they are expecting about 400,000 to be lodged and dealt with beyond the backlog. We heard that there may be up to 800 staff. My calculation is that that is about 500 AWAs per person per year. Given the time that is supposed to be allocated for assessing AWAs, I actually do not see how it could work.

Mr S Smith —It is certainly a resource issue and the government does need to provide sufficient resources to enable the task to done. The legislation is quite clear and the Workplace Authority needs to have sufficient resources. We are not in a position to know what that level of resourcing should be but, if it turns out that the existing plans in that area are not sufficient, we would be seeking more funding from the government to provide more resources. But at this stage we are not aware of any problem.

Senator SIEWERT —What would you see would be the acceptable time for delay between when an AWA is lodged, assessed and a result as to whether it is fair or unfair comes out the other end—particularly if the result is that the AWA is unfair?

Mr S Smith —It needs to be done as quickly as possible. We would be concerned if it dragged on. There is a backlog of course that needs to be addressed, but you would hope that it would be done certainly within a month but much quicker than that if possible. It is hard to put a figure on it.

Senator SIEWERT —In your submission and from your comments, you seem to be supporting these amendments, whereas the ACCI this morning does not support the amendments—but you do. Do you think they are a step forward?

Mr S Smith —Yes. We believe there is a public perception that does need to be addressed that the prior legislation is resulting in unfairness to some segments of the community and we do support this legislation, yes.

Senator SIEWERT —You only see it as a perception, not as a fact?

Mr S Smith —We have not seen any evidence of it ourselves, but we do believe there is certainly a perception that does need to be addressed, yes.

Senator MARSHALL —Can I just then clarify this annual leave and sick leave issue? I think what you said is that you are aware of some agreements that have enabled a cashing out of annual leave and sick leave in a surplus sense, so it is sick leave and annual leave that is accrued above and beyond an annual entitlement. Is that what you have said?

Mr S Smith —Yes. All those that come to mind are, for example, on sick leave you can cash out your sick leave beyond, say, 10 days and with annual leave you can cash out your annual leave beyond four weeks. All those that come to mind off the top of my head are structured in that way, yes.

Senator MARSHALL —So it is not the wholesale cashing out of the entitlement; it is cashing out of an accrued benefit.

Mr S Smith —Yes. It is a partial cashing out, a bit like the current legislation.

Senator MARSHALL —I just want to be clear on that because there has been some argy-bargy. You indicated that you would support an internal process of review or appeal if people are unhappy with the outcome of the application of the fairness test.

Mr S Smith —Yes, we would hope and expect that that would be the case anyway. We did have a look, as I said before, at the ability for the Workplace Authority to rescind, amend et cetera the decisions it made and we were satisfied, after looking at the Acts Interpretation Act, that that is a general power that is there. So, if a decision was made by an officer within the Workplace Authority that the employer or indeed the employee was concerned about and thought was wrong, we would think that there would be a process of being able to seek a review. We do not think necessarily that it needs to be put into the legislation, but we would be concerned if it were not available. We have found that the OEA has been cooperative in the past when those sorts of issues of concern about their decisions arise and we do not expect that it would be any different with the Workplace Authority. Of course there is this ultimate ability to appeal to the High Court or on remittance back to the Federal Court if there is a substantial problem with the powers exerted et cetera.

Senator MARSHALL —For any process, even an internal process of review or appeal, people would need to know the grounds that their AWA either passed or failed the fairness test. In turn, would you then support publication of the reasons why an AWA passed or failed the fairness test?

Mr S Smith —No, we would not support that because that would breach privacy. If there is a publication of the reasons for it, then there is a publication of the parties to the AWAs and that is inconsistent with the whole notion of AWAs being agreements made between the parties.

Senator MARSHALL —Maybe I should not have used the word ‘publication’, but the ability for the individual to access reasons for the decision of whether their AWA passed or failed the fairness test.

Mr S Smith —We think, if there had to be written reasons, it would just bog the whole process down. At the end of the day all of these again are agreements; they are agreements reached. So it is more likely to be the case that the employee or the employer is worried that their agreement failed the fairness test rather than that it passed the fairness test in a sense. These are individuals who have reached agreement and the agreements are just being validated after that. So we are not expecting many instances perhaps other than employers or employees who really want their agreement to be in place—

Senator MARSHALL —Then you cannot see any need for this legislation at all, can you?

Mr S Smith —We can, because we think there is this public perception that needs to be addressed. The government has addressed it and we think the legislation is balanced and fair.

Senator MARSHALL —At the moment, prior to this legislation being passed, technically there is an agreement between both parties for every agreement to be lodged. So it is purely a perception that there is unfairness in your view?

Mr S Smith —There is certainly a perception. Whether that perception is reality we do not know. We have not seen any evidence of it ourselves. But the government has decided to address this perception of the reality. We do not have the statistics of course on AWAs, but now that the legislation has been introduced we do think it is a sensible piece of legislation that is workable.

Senator MARSHALL —So it is to address a perception.

Mr S Smith —We believe it is to address a perception. Even if it is a reality then it will address that problem. Presumably the government has look at the issue of the perception and the reality in deciding to introduce—

Senator MARSHALL —The point I am trying to make is that you cannot really have it both ways. If it is a reality, then there will be the difficulty of people understanding whether they pass or fail the fairness test and whether they freely entered into those agreements in the first place. You are using the argument that there is no real need for any formal review or appeal process because you have to remember that these are agreements between the parties, so there will not be a need for that.

Mr S Smith —I see them as two completely different things. There is the issue of the fairness test, which is about the content, and then there is a whole series of issues about the lawfulness of the agreement, which go to things like coercion, duress, compliance with the fair pay and conditions standard and a whole range of other things. That is a different set of legal requirements that have always been there and will continue to be there. The fairness test is just one more specific set of requirements that deals with the content.

Senator MARSHALL —You have indicated that you support the current $75,000 threshold for the income test as reasonable if deemed to constitute remuneration. You also indicate that most member companies have agreements that already meet the criteria of the test. Would you support the $75,000 threshold being indexed each year to ensure that it maintains its value?

Mr S Smith —We think the way the legislation is currently drafted is workable when it stays at $75,000, but, as we understand it, there is an ability for the minister to review that. So we do not see a need to automatically index it. There is a process, of course, and it does not require legislative change to increase it, as we read the legislation.

Senator MARSHALL —What is your view on why the threshold is there anyway? If as you say, employers are doing the right thing, it is simply a matter of applying the test to everybody, so why does there need to be a threshold?

Mr S Smith —It is a bit like those awards about which I was talking to Senator Fielding—awards that were reached across the telecommunications and call centre sectors by agreement with the ACTU, the ETU, the CPSU and other unions. There was a recognition and a consent position that there is something different about higher paid staff versus lower paid staff. Lower paid staff need the protection of penalty rates and so on. When you look at the award negotiations for higher paid staff—the people in professional roles and managerial roles—it is widely recognised that senior people need less protection than less-senior people.

Senator MARSHALL —You indicated that you would like to be able to call up the provisions of the award that were not going to be modified in a general sense. Is that the way it is done now?

Mr S Smith —As you would be well aware, in sectors like manufacturing it was extremely common to have a workplace agreement that linked in with the relevant award. Work Choices has enabled the first Work Choices agreement to link in with an award. But as section 355 says, the only way you can link in with an award is if the award applied immediately prior to the workplace agreement. So it is only the first generation of them that you can have linked in with an award. For those that are being linked in with an award at the moment, it does have the complexity that Cath Bowtell mentioned, which is that you have to oust specifically all of the prohibited content areas. But a lot of employers are still willing to do that. They prefer to have a workplace agreement that links in with, say, the Metal Industry Award—even though there is a little bit of complexity and you have to knock out 10 or 12 provisions of the award to address prohibited content issues. They will not have the option after their first agreement and they will be forced to have a 50 or 60 page workplace agreement. But, for the reasons we set out in our submission, it seems a very sensible way for an employer, by agreement with its employees or by agreement with the relevant unions, to simply have the agreement linked in with the relevant award if that is what all the parties want it to do. Then they know they are meeting the fairness test. When the Workplace Authority looks at it they can readily see what the relevant award is and that the agreement meets the terms of that the award without going through it line by line—it might be a 50 or 60 page document. It just seems a very practical and sensible way to go, and we think section 355 should be looked at in the context of this fairness test.

Senator MARSHALL —I want to clarify that this what you are talking about, because this is what came to mind—for instance, the annual leave provisions. If an employer and employee actually cannot agree about the use of an accrued entitlement then the award has a number of processes that have been developed over many years that protect both the employer and the employee around how that annual leave disagreement will be dealt with. That is something that will happen rarely; but it is something that both parties actually need to fall back on as a way to resolve a difference. Is that the sort of thing you actually require in awards but would not necessarily want to reproduce in every agreement that you have?

Mr S Smith —There are issues about the relationship between an agreement and the fair pay and conditions standard in an area like annual leave, but you can certainly improve on the standard. Section 355 requires, and will require even more when the first generation of Work Choices agreements elapse, is a fully comprehensive agreement. Some parties support that of course. It does mean that you then end up having a discussion about every issue when in many cases the parties really were quite happy to leave that issue as something that the award dealt with, something that was settled and so on. So there are a lot of employers, employees and unions who are quite happy to have an agreement that links in with an award. We think the fair test is another good reason. There is a clear relationship now between the legislation and awards. Workplace agreements are very closely linked to awards through the fairness test. The other point that we made in that submission is that we do see an inconsistency between section 354 and section 355. Section 355 says you cannot import award conditions as terms of an agreement and section 354 talks about protected award conditions—which really means that if you are going to modify an award condition then you really have to refer to the award to do that. It is one of these issues that we believe should be tidied up as part of this bill.

CHAIR —Before we go to Senator Campbell, Senator Siewert, I want to if possible correct something that you said. I think you said that ACCI gave the impression they did not support the bill. Is that correct?

Senator SIEWERT —I said that they did not see the need for the bill. I will correct that. They did say that they did not see the need for the bill.

CHAIR —That is fine.

Senator GEORGE CAMPBELL —Coming back to the issue of annual leave, I would like to clarify this because there seems to be a total misunderstanding of what has applied in the past with respect to annual leave and sick leave. It is true that there are many agreements across industry for people to cash out annual leave over and above the immediate year’s entitlement of four weeks that exists. That has been around for require a while. At the time that that was first introduced in areas in the metals industry the argument that was put, and which has some validity, was that people in some areas were accruing substantial entitlements—for example, they would accrue annual leave at a wage of $150 a week and then by the time they got around to taking it the employer was up for $300 a week to meet that annual leave payment because of wage increases that had occurred over the period of time. That was one of the reasons there was an agreement in part to the cashing out of annual leave beyond the immediate 12-month entitlement. So there were some valid reasons as to why that was put in place. But there was never a position in place before where you could actually reduce your entitlement of annual leave from four weeks to two weeks and cash out the two weeks for that year.

Mr S Smith —There was nothing to stop that, but it was subject to a no-disadvantage test. We really do not know, because it would be a matter for a member of the commission to determine, but you would think that if there was a situation where the employees in a workplace—if there was the agreement of the union—could have a mechanism where half the annual leave could be cashed out then there is a very good argument that that does not disadvantage anyone. That case the ACTU mentioned really went to that issue.

Senator GEORGE CAMPBELL —The Arrowcrest one?

Mr S Smith —Yes.

Senator GEORGE CAMPBELL —I suspect that they were very rare cases indeed.

Mr S Smith —They were, because unions like the AMWU and others strongly opposed any cashing out other than the overflow, if you like.

Senator GEORGE CAMPBELL —I just want to get that issue on the record. The issue you raise in respect of section 355 I raised with the department this morning when they were before the committee. I must say I thought the arguments of the department were spurious; nevertheless, they put up some reasons as to why they would not accept that sort of proposal. Could I ask you to look at the transcript and give us a response to some of their reasoning why 355 is not valid? They say that it may pick up old awards or obscure conditions and provisions. I do not necessarily see that that would be the case in the current agreement.

Mr S Smith —Yes, I would be happy to do that.

Senator GEORGE CAMPBELL —Thank you. In terms of the industries that your association covers, is there a high incidence of non-monetary compensation currently in existence?

Mr S Smith —No. That is why we made that comment in our opening.

Senator GEORGE CAMPBELL —Sorry, I was not here to hear your opening comments, unfortunately.

Mr S Smith —It is similar to what is in the opening of the written submission: we do not expect that many of our members will have difficulties with the fairness test, because the agreements that we see—and we process large numbers of them for our members—would easily meet the fairness test and easily meet it on the monetary aspects, we believe.

Senator GEORGE CAMPBELL —In respect of the industries that you service, do you provide employers in those industries with template AWAs?

Mr S Smith —No, we would give them some advice on how to draft an AWA, which would be what sort of clauses they would have to put in there from a mechanical point of view. But we do not have template AWAs, no.

Senator GEORGE CAMPBELL —You have never had template AWAs?

Mr S Smith —At different times we have put together some documents. For example, under the old system there was an interest amongst some employees in cashing out of their annual leave or long service leave, so we put together some drafting guidelines. But we do not have a template AWA, no.

Senator GEORGE CAMPBELL —Again, in those industries, the essence of this legislation, Work Choices, is choice and negotiating individually with an employer. Do you have any idea of the average time spent by employers in your industry negotiating with each individual?

Mr S Smith —You are asking in the context of AWAs?

Senator GEORGE CAMPBELL —In the context of AWAs, yes.

Mr S Smith —I would not think it is that lengthy. When a company has AWAs across its operations, there are often similar clauses and themes in those agreements. At the end of the day the individuals have to agree to that document.

Senator GEORGE CAMPBELL —I understand there is a difference between individuals having to agree to the document as opposed to individuals sitting down and negotiating an individual document—which is really my next question. If I were to go to a boilermaker’s workplace out in Granville, would I find much variation in the AWAs that applied to boilermakers in a particular factory?

Mr S Smith —Amongst our membership, we would not have a lot of instances where there are AWAs in those sorts of workplaces. I think it depends a bit on the type of work also. Other unions like APESMA do get involved in negotiating AWAs in that professional area. A lot of the time in those areas there is quite a process of negotiation, we believe. But in workplaces with production employees and so on, where those companies do have AWAs, often there is quite a lot of similarity between different AWAs.

Senator GEORGE CAMPBELL —You anticipated my next question. I was going to ask you if there is a wide variation in the approach that is taken at senior management and professional level as opposed to what is taken at the shop floor level, if I can use that term to describe it.

Mr S Smith —I think it does vary a lot, Senator, but in general I would think—I am just speculating—there would be more time spent negotiating in those professional areas because you do end up in negotiations about issues of restraint of trade and all sorts of things that might apply to a professional versus a semiskilled or unskilled or skilled worker.

Senator GEORGE CAMPBELL —The Employment Advocate, or whatever his new title is these days—the workplace director—told us at estimates two weeks ago that there were going to be an additional 200 employees. The minister said 600 but the department had a different figure this morning, so we are not too sure what it is going to be. But the Employment Advocate told us that roughly 20,800 AWAs had been lodged from 7 May, none of which had been subject to any scrutiny at that point in time. And if they are lodging them at the rate of a thousand a day we must assume there has been an escalation in the number that are sitting there waiting to be looked at. He did indicate that they would be bringing employees in from labour hire firms initially to start addressing the backlog and then people would be offered permanent positions in the Public Service. I have since been told that people are being given two weeks training and then expected to do this assessment of AWAs. From your experience as an advocate dealing with awards and agreements over a long period of time, is it realistic to expect someone with two weeks training to have the knowledge to be able to make the sorts of comparisons that are required under these provisions?

Mr S Smith —I think there are ways that this process could be handled administratively in a fair and managed way. People who are less skilled at the process should not have as much difficulty looking at the monetary aspects of an agreement. They will be faced with, you would presume, paperwork that will be filed at the time the agreement is filed which identifies the awards and so on, and obviously that issue will have to be looked at. But the OEA had, under the old system, a calculator that was applied to AWAs and identified whether or not they met the monetary aspects. So one way that the Workplace Authority could look at this from an administrative point of view would be to have the lesser skilled staff applying the fairest test to the monetary aspects, and any that do not pass in that area could get dealt with by more senior people, as an example, looking at the harder cases. We really do not know how they are going to handle this administratively, but processes like that might make sense.

Senator GEORGE CAMPBELL —We have been told that there are going to be 5,000 or 6,000 of these a week.

Mr S Smith —It comes back to what I said before, that we expect, as other parties do, that there would be sufficient resources to do this. We have no reason to believe that the resources are not sufficient.

Senator GEORGE CAMPBELL —I am not suggesting the resources in themselves may not be sufficient. I am suggesting that there is a question mark over whether the competency is in the resource to be able to do it effectively.

Mr S Smith —It is hard to comment because we are not aware of that information that you say is fact—that there will be labour hire employees doing this. We are not aware of that.

CHAIR —It is now 2.30 and we will need to come to an end. Thank you very much, gentlemen, for appearing before us today.

Mr S Smith —Thank you.

CHAIR —I thank Hansard, other senators and the secretariat. Thank you for this expeditious hearing.

Committee adjourned at 2.29 pm