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Opening Statement to Senate Committee Inquiry into Corporate Avoidance of the Fair Work Act

Stephen Smith, Head of National Workplace Relations: Ai Group welcomes the opportunity to appear at the hearing today. We have filed a detail written submission that addresses the various issues in the terms of reference for the inquiry.

The terms of reference are disappointing because they have been framed in a very one-sided manner. They focus only on avoidance of the Fair Work Act by employers. The terms of reference do not deal at all with avoidance of the Fair Work Act by unions.

The terms of reference appear to be framed on the premise that certain provisions of the Fair Work Act are inadequate and are allowing employers to avoid their obligations under the Act. This premise is not correct. The Fair Work Act increased employee and union entitlements in a very large number of areas and imposed many barriers to productivity and efficiency, which need to be removed. When the Fair Work Act was implemented, many longstanding flexibilities were removed to the detriment of employers, employees and the broader community. Examples of this can be readily found in the transfer of business laws and the bargaining laws.

Australia is a medium-sized country with a very open economy and high labour, energy and other costs. In order to survive and grow, our businesses need to remain globally competitive.

To enable this, the Fair Work Act needs to be amended to increase flexibility, and to boost productivity and competitiveness. The last thing that is needed is for the Act to be amended to impose even more barriers to productivity and competitiveness, as the unions are arguing for.

Some of the key themes and arguments dealt with our submission include:

1. Labour hire is a well-established and essential part of the labour market. The Fair Work Act, awards and enterprise agreements apply to labour hire companies in the same manner as they apply to other employers. The vast majority of labour hire companies are reputable in their employment practices and comply with relevant laws and regulations. Further regulation is not necessary.

2. Independent contracting arrangements are also an essential part of the labour market. The existing common law approach to defining an independent contractor remains the best approach, coupled with the existing tough sham contracting laws under the Fair Work Act which are working effectively.

3. The transfer of business laws in the Fair Work Act are not working effectively. They are far too rigid and create a major disincentive for the incoming employer to employ any of the employees of the outgoing employer. The “character of the business test” that operated prior to the implementation of the Fair Work Act needs to be reinstated and various other changes need to be made to the transfer of business laws, as outlined in Ai Group’s submission.

4. The bargaining laws in the Fair Work Act are too rigid, and need to generally be freed up. There is one important exception to this – i.e. enterprise agreement content. The content requirements in the Act need to be tightened to ensure that protected industrial action cannot be taken to force businesses to only use those contractors that the unions support. The Productivity Commission Inquiry into the Workplace Relations Framework, the Heydon Royal Commission, and the Harper Competition Review all recommended that enterprise agreements not be able to restrict the engagement of contractors, but disappointingly the Government has not yet acted on these recommendations. We urge the Committee to recommend that this matter be addressed without delay.

We would be happy to endeavour to answer any questions that the Committee may have.

Statement by Stephen Smith

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