Labour reform: a key issue for employers in the Federal Election

The Australian Prime Minister, Scott Morrison, has visited the Governor-General, His Excellency General the Honourable David Hurley AC DSC (Retd), and writs were issued for a Federal Election to be held on 21 May 2022. 

This election will be held in an Australia that is facing, what must feel to many of us, a very challenging and complicated world — the erosion of the rules-based order with Russia’s invasion of Ukraine, on-going and persistent tensions in Australia’s relationship with China, the trials of exiting the COVID-19 pandemic, climate change, inflation, rising interest rates and energy costs, and challenges in supply chains from shortages of labour.

Organisations have much to contemplate — and we will continue to hear lots about these issues in the election campaign.

Unlike other elections, workplace regulation is unlikely to feature prominently. This is, however, concerning as the current system has shown itself to not be suitable to meeting the demands of tomorrow. The system is complex with significant compliance challenges and in many areas it is not keeping up with the needs of employers or workers. For example, collective bargaining is not generating productivity gains and has stalled as a means to drive flexibility and better jobs. It is a system that has not yet delivered the required certainty to support the delivery of Australia’s vast infrastructure needs. It does not facilitate flexible work patterns for workers. 

Yet, whilst there is unlikely to be a heavy focus on labour reforms, the reality is that this remains a key issue for business. And in this fog Labor have not been idle. They have quietly put out a series of positions that with election to government are likely to be framed as a mandate for significant workplace change. 

The return of a Coalition Government presents a more modest agenda and one businesses are urging to raise its ambition. The Coalition have indicated that they will instead again push for the Omnibus Bill measures rejected just last year and further more modest reform in targeted areas, including improvements to the National Employment Standards (NES).

The importance of workplace regulatory system to supporting the growth and success of Australia remains – and is something many businesses and organisations are watching keenly. To help you better understand what the next few years may bring and how they could impact your operations, our national Employment and Labour team will publish a series of articles leading up to the election, tracking the key proposals for workplace change. 

Our aim is to break these topics down for you and identify impacts and opportunities. Specifically:

• Enterprise bargaining - The Government undertook a major reform process during this term. Following a broad and detailed ‘working group’ process, a package of reforms were introduced into the parliament at the beginning of 2021, the majority concerning enterprise bargaining. For a variety of reasons, all but one of them were narrowly defeated. Those proposals will be pursued if the Coalition are re-elected. We anticipate that significant changes to enterprise bargaining rules will be pursued by a Labor Government. With wage growth already a hot button issue, tracking the progress of the debate on enterprise bargaining will be critical.
  
  
• Casual employment - The sole government proposal which passed with the Omnibus Bill concerned the definition of ‘casual employees’ and a mechanism for conversion to permanent employment. It only passed narrowly, and the Labor Government remains opposed. Labor has announced an ambitious plan to address ‘insecure work’ in many different manifestations, including altering the casual definition. Approximately 20% of the Australian workforce remains casual, so the changes proposed will have a significant impact. The extent of their operation remains unclear – the proposed ‘objective definition’ has not yet been revealed.
  
  
• Respect at Work – Remains a very important workplace issue. With the continued rise in the importance placed on environmental, social and governance (ESG) compliance, this is a licence to operate issue that is unlikely to change. The Jenkins report made detailed recommendations. Both sides have had much to say about them, particularly the proposal for a broad, positive duty, to prevent sexual harassment at work. There is great cost to not getting compliance right in this area.
  
  
• Labour models - Through its 2021 National Platform and its Secure Australian Jobs Plan, Labor has outlined quite an ambitious blueprint for reform. It is a position that sits uncomfortably with its apparent ‘small target’ approach across most major policy areas. It can be expected that ‘same job/same pay’ legislation will be introduced and that it will significantly alter the labour market in all areas where labour hire, and perhaps other forms of contracting, are being utilised. This kind of regulation would be new to the Australian economy. It will affect the entire labour hire industry and all of its clients – which includes many Australian businesses. Much will hinge on definitions, as the scope of the regulation may be even greater than the labour hire sector.
  
  
• Extended coverage - Another proposal involves significantly altering the coverage of the Federal Government’s workplace regulation. The scope of the federal system has always been defined by the employment relationship. Awards, enterprise agreements and the range of rights afforded by the system apply to employees and employers. In a bold move, Labor proposes to increase that scope to include ‘employee like arrangements’ – which means contractors will be significantly regulated. It’s important to understand how it might play out in practice.
  
  
• Changes to leave and portability - Labor has consulted with state governments and other stakeholders about introducing a suite of portable entitlements to various forms of paid leave. Again, beyond existing portable schemes applying in the construction industry (which relate to long service leave only), there is no precedent for this kind of regulation. Accrued leave is an enormous liability for all major Australian businesses. What is proposed is that for an unspecified group, those balances will transfer between employers. Keeping abreast of the proposal as it develops will be critical for business.

The ambition of Labor should not be ignored by employers and they will need to pay attention to the clear and discernible impact they are likely to have on the economy and their operations. These are changes that all employers should be across, in order to understand how they might impact existing strategies and business plans. 

Our team has been actively tracking all public comments on workplace issues for an extended period, making us well placed to break down what you need to know. 

Our approach will be to describe the proposals, how they change the status quo, identify the policy objectives behind them, and then canvass various potential consequences. Specific industries or sectors will be identified as those most likely impacted.