Originally published by Workforce Daily.

The end of the mining boom has meant business can no longer “paper over” flaws and restrictions in the Fair Work (FW) Act as it is forced to adapt to changing market conditions, a resources industry conference has heard.

A panel on workplace relations reform at the Australian Mines and Metals Association conference in Perth on Thursday (August 4) said that currently the biggest challenge for the resources industry was seeking to adjust their labour costs to match the new market.

Bis Industries HR director Karen Bradshaw argued the FW Act was probably formed for when there was a “steady state” of affairs. But during periods of economic change – “particularly prolonged changes like we’ve had” where business must re-base its costs quickly and effectively – the situation became “very challenging”.

Corrs Chamber Westgarth partner Simon Billing noted it was “easy to paper over seams” in a high growth environment, but they were “impossible to hide from” in a low growth environment.

Billing said the legislation had “three pillars” that generated “huge transaction costs”, which became “very hard to swallow” during low growth.

He highlighted a “very technical and difficult” enterprise bargaining system; “very restrictive and anti-innovation” transfer of business laws; and giving extensive rights for unions to get involved in workplaces despite low membership.

Seyfarth Shaw partner Henry Skene said the economic situation was a “strong wake up signal” to policy makers that the existing regulation was not suited to “how we work now”.

“Businesses across the labour market are confronted with a need to change existing legacy conditions,” he said. “The capacity to actually review those existing terms and conditions that were set in very different market contexts is very limited under the current regulatory framework.”

Resource employers have been attempting to re-negotiate high wage deals over the last several months, with some having to resort to terminating their EA because no agreement is reached (WF 22/07/16)(WF 24/06/16). Most recently a mining contractor succeeded in varying its EA to cut pay to meet market conditions despite not negotiating with the union or the workers (WF 29/07/16).

Don’t overlook power of ‘subtle change’

The panel at the AREEA conference declined to call for wholesale change of the IR system and instead emphasised the power of “subtle change”.

“I don’t think we need to discard the system in its entirety to achieve meaningful reform,” Skene said.

“One of the reasons the FW Act has been a very successful piece of legislation in giving small groups of people – unions – a disproportionate voice is because it was prepared by someone [then IR minister Julia Gillard] who was  a former practitioner and who understood very completely the power of subtle change.”

As an example, Skene cited default provisions that gave unions rights in bargaining and workplace entry if they only had one member.

“At the moment, it only takes one person to trigger off a whole range of rights and effectively give standing and access to a whole set of legal processes which sit well beyond the actual voice of a number of people in the workforce [yet] extensively impacts the rest of the workforce,” Skene said.

“There are a range of things that could be done in legislation very simply to remove that default status.”

CEO of project services contractor Clough Ltd, Peter Bennett, said “certainly [the IR system] is workable” and that the industry was going through a tough period for a lot of different reasons “so we can’t complain too much”.

“We just have to get in good shape to seize opportunities the market provides.”

He urged industry to stop its past practice of simply rolling over enterprise agreements and instead concentrate on having “sensible and adult” conversations with parties about the EAs’ potential impact on long-term project development.

‘Direct engagement’ is important IR strategy

Billing argued businesses didn’t use the opportunities in the existing system enough, warning them “don’t expect the political environment to actually provide any solution any time soon”.

He cited direct engagement of the workforce as an important change that could be done under the current rules.

WA Chamber of Commerce and Industry president Agu Kantsler affirmed the importance of direct engagement, saying that training supervisors to deal with workforce issues and “really nip them in the bud before they go anywhere, and basically wedged the unions out” was a “very, very successful technique”.

The suggestions were echoed in separate panels at the conference on leadership and strategy.

Fortescue Metals Group (FMG) Ltd CEO Nev Power, a strong proponent of direct engagement, said the whole of the Pilbara was “a direct engagement model generally” and FMG didn’t have a lot of IR issues as a result.

FMG’s engagement model involved openness and transparency about why the business was making decisions and ensuring there were “lots of channels of communications” that workers can go to. “Every one of our sites has a chaplain,” Power said, with the chaplain providing pastoral care to workers over mental health and social issues.

Power cautioned that IR legislation that “puts barriers and impediments to [direct engagement] is what we need to be very, very careful of”.

But while there were “some real catches in the current legislation” he accepted it was not “wholesale bad”. “It just needs tweaks and fine tuning.”

Coalition shift to Left led to ‘anti-business’ rhetoric: FMG CEO

Power did say he had major concerns about the growing “anti-business” rhetoric in the last election and urged business to “do a lot more engaging with our government and our opposition to address that”.

“One of the sad things about this last election is I think we’ve seen the traditional conservative parties significantly swing to the Left, and that’s crowded out the Labor Party, which has adopted an increasing anti-business stance in reaction to that.”

Power said business needed to have both the major parties “straddling the centre ground” so they embraced “key fundamentals” to drive economic growth and develop communities.

“It is only through business growth and business investment that we create jobs, we build strong communities and therefore build economies.”

“There is no other mechanism where that happens. To try and pretend there’s another one is very dangerous and is going to hold the economy back.”

It’s the code, stupid: ‘Big stick’ doesn’t work on CFMEU

On the Australian Building and Construction Commission (ABCC) Bills, Billing said it was actually the attached building code that would make the most difference rather than a revived ABCC.

Billing noted the ABCC tripled penalties for industrial behaviour and removed administrative appeal tribunal oversight of compulsory interrogation and ‘star chamber’ provisions.

“Great, but I think they are the smaller part of the reform. The bigger part of the reform is the economic lever that the code becomes.”

The code covers any employer doing project work that receives Commonwealth funding. It restricts agreement content and requires employers not to enter into “cosy arrangements in relation to union access to the work sites”.

“That’s the instrument that will actually bring about behaviour change,” Billing said.

“The big stick over the head of the CFMEU has been tried for decades and can anyone tell us today that it’s made any difference? It’s the behavior change that makes a difference right across the industry.”

Asked why not go ahead and try to deregister the CFMEU, Billing said attempts to do so to the Builders Labourers Federation in the 1980s had seen “huge legal issues” with “litigation that would go on forever”.

“Experience has shown imposing penalties and engaging the CFMEU in litigation doesn’t actually change their behaviour – they just go out to members, impose a levy, pay the fine and move on to the next target,” he said. “It’s better to control those things.”

He said the Coalition’s proposal to have a “public interest” test for union mergers including historical compliance with IR laws would put the planned CFMEU-MUA merger in “great doubt”. He warned that such a merger would “create a huge problem for businesses in a number of sectors”.