While the final recommendations are still being established, the initial findings of the Productivity Commission’s workplace relations inquiry are, in general, quite promising for Australia’s hospitality industry.

The Productivity Commissions inquiry into the workplace relations framework has recently released its draft report. Hearings and further examination is still to come, however the initial findings set out a largely positive reform agenda. The key findings were:

  • The Fair Work Act 2009 (Cth) and sometimes the Fair Work Commission can give too much weight to procedure and too little to substance, leading to compliance costs and, in some cases, poor outcomes. Issues that need to be addressed include:
    1. some minor procedural defects in enterprise bargaining can require an employer to recommence bargaining
    2. an employee may engage in serious misconduct but may receive considerable compensation under unfair dismissal provisions due to procedural lapses by an employer.
  • Penalty rates have a legitimate role in compensating employees for working long hours or at unsociable times. They should be maintained. However, Sunday penalty rates for cafes, hospitality, entertainment, restaurants and retailing should be aligned with Saturday rates.
  • Enterprise bargaining generally works well, although it is often ill-suited to smaller enterprises.
  • The ‘better off overall test’ used to assess whether an agreement leaves employees better off compared with the award can sometimes be applied mechanically, losing some benefits of flexibility for employees and employers. Switching to a no-disadvantage test with guidelines about the use of the test would encourage win-win options. The same test should be used for individual arrangements.
  • There is scope for a new form of agreement – the ‘enterprise contract’ – to fill the gap between enterprise agreements and individual arrangements. This would offer many of the advantages of enterprise agreements, without the complexities, making them particularly suitable for smaller businesses. Any risks to employees would be assuaged through a comprehensive set of protections, including the right to revert to the award.
  • While the Fair Work Commission undertakes many of its functions well, the legalistic approach it adopts for award determination gives too much weight to history, precedent and judgments on the merits of cases put to it by partisan lobbyists. A preferred approach to award determination would give greatest weight to a clear analytical framework supported by evidence collected by the Commission itself.

The draft report highlights some key areas of the workplace relations framework that are in need of reform. In particular the recommendation to alleviate penalty rate burdens across the hospitality
industry for Sunday work will come as welcome relief to many operators.

A recent survey by Jetty Research suggested that roughly 40,000 new jobs could be created by reducing penalty rates, demonstrating the deleterious effect penalty rates have on employability in the sector.

The much-maligned BOOT (better off overall test) looks set to be examined more thoroughly after the commission found that a no-disadvantage test, similar to that of tests that existed in previous
legislation, would be more appropriate to facilitate ‘win-win’ enterprise agreements.

The Commission also focussed on the relative underutilisation of individual flexibility arrangements which currently exist in Modern Awards. The draft report found that individual agreement making needed to be overhauled, and one initial suggestion is the development of ‘enterprise contracts’. This proposal would allow an individual to negotiate with their employer a variation, or series of variations to the relevant Modern Award before having it tested against the no-disadvantage test.

Once approved the employee would be protected by strict safeguards, allowing for a review after 12 months whereby the employee could choose to stay on the agreement or revert back to the award. This flexibility measure would make for a more dynamic, tailored workforce.

The protective measures would alleviate any adverse risks that may arise from employee-employer power imbalances. Several changes were also floated in relation to the powers, functions and structure of the Fair Work Commission; as were a range of measures to reduce over-compliance issues. These changes along with many others mentioned in the 1,000 page draft report will form part of the Commission’s upcoming hearings and eventually their final report and recommendations.

Stay tuned …

This article was written by the Workplace Relations Team at Restaurant & Catering Australia. Contact them on 1300 722 878.

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