Presentation on theme: "The damaging costs and risks of doing business under the Fair Work Act: The Experience of the Resources Industry SCOTT BARKLAMB Executive Director."— Presentation transcript:
1The damaging costs and risks of doing business under the Fair Work Act: The Experience of the Resources Industry SCOTT BARKLAMB Executive Director – Industry Australian Mines and Metals Association HR Nicholls Society XXXIII Conference Melbourne, 8 July 2013
2OVERVIEW Context Industry challenges Focus on 2 challenges: - Productivity- MigrationFair Work ActRight of EntryAgreement ContentNew Project AgreementsGeneral Observations
4CRITCIAL INDUSTRY FOR AUSTRALIAN INDUSTRIAL RELATIONS Very relevant industry to understanding Australia’s IR journeyCrucible of Australian trade unionismKey battleground for historical strikes (including 1890s strikes)Central to spread of arbitration / development of C+A powerLed change from the1980s – Robe River, Bell Bay etcChanged from worst industry culture to one of the bestDual effort: Used the law + changed hearts and minds / culturesAt forefront of (for example) AWAs, non-union agreementsNow going backwards as IR system goes backwards.
5THE AUSTRALIAN RESOURCES INDUSTRY 1.1 m Australians employed9.75% of total employment (2012) ( X 2 from mid-2000s)18% of Australia's gross value addApprox $250 billion of the nation's annual outputIndustry reaching a peak around 2013/2014A further $350 bn in viable but uncommitted projects:Some cancelled / delayed = need to reverse this.Need to continue to encourage exploration + new projects.
6INDUSTRY CHALLENGESConsiderable and mounting challenges:New competitors = Emerging + OECD countriesIncreasingly difficult + expensive place to do businessFalling productivity, high labour costs, slow approvals etc.Compete both for investment $$, and to sell products.Are seeing project cancellations + delays (End of the boom?)(But still damaging Skills shortages.....)
7A WIDE RANGING POLICY ATTACK ON THE AUSTRALIAN RESOURCES INDUSTRY SO, THE GOVERNMENT IS HELPING, RIGHT………..?…ARE ACTUALLY IN THE MIDST OFA WIDE RANGING POLICY ATTACKON THE AUSTRALIAN RESOURCES INDUSTRYFAIR WORK ACTMIGRATIONCHANGESCARBON TAXMRRT
9Multifactor productivity: Australia vs. Canada Mining Industry Resource industry productivityDeclining since 2001.45% off its peak.Don’t buy the 7 +ve quarters argument (from Bill Shorten)short term only, not trendRapid increase in capital investment not efficiency
10PRODUCTIVITYLabour policy is critical to our productivity decline / trajectory.Labour productivity “a disaster” in mining industry – BIS ShrapnelAustralia’s labour market efficiency:7th in the OECD in18th in the OECD inNeed wide range of reforms to productivityNot solely labour reform, but must include labour reform.Growing consensus “…industrial relations regulation is arguably the most crucial [area of regulation] to get right. Whether productivity growth comes from working harder or working ‘smarter’, people in workplaces are central to it” – Gary Banks
11Most problematic factors for doing business in Australia PRODUCTIVITY – SITUATION CRITICALMost problematic factors for doing business in Australia
12Australia’s ‘hit and miss’ rankings on international competitiveness PRODUCTIVITY – SITUATION CRITICALAustralia’s ‘hit and miss’ rankings on international competitiveness‘Top 10’ rankings‘Situation critical’Efficiency of corporate boards4thFlexibility of wage determination123rdStability of banking system5thHiring and firing practices120thIntensity of local competition6thPay and productivity80thQuality of scientific research institutions7thCo-operation in labour relations67thFinancial market development8thOverall labour market efficiency42nd
14Recent government changes to the 457 visa system: MIGRATION POLICY – 457 VISASRecent government changes to the 457 visa system:Reintroduce labour market testing application fees - inspectors – new hotlineAdministrative ‘go slow’ in government.Resources not a major user of migrant / 457 labourBut, international skills are vital when we require themExpect delays, costs, over-inspection (Which is what CFMEU and MUA wanted all along!)
15Reversal of Gray, Ferguson, Bowen paradigm. MIGRATION POLICY – 457 VISASPushed by rich unionsReversal of Gray, Ferguson, Bowen paradigm.Exemplar of attack on the industry by Gillard/Swan:Opportunistic + poll driven.Rushed, contrary to independent reviews/advice.No evidence of massive rorts at any stagePolitics first, policy justification later (if at all)Policy by prejudice + supposition – not evidenceLast days of Rome / Russians crossing River Oder into Berlin
16Extending our migration zone contrary to international law MIGRATION POLICY – MIGRATION ZONECrazy IncongruityExtending our migration zone contrary to international lawAt the same time – we are excising the mainland for humanitarian migration.Australia for Humanitarian MigrationAustralia for Employment Migration
17________________________________________________________ MIGRATION POLICY – 457 VISASMost concerning.... Flirting with Industrial XenophobiaDeeply rooted in Aust. union & labour politicsDirect line from White Australia > Current union campaignWhite Australia = Supported by arbitration + protectionismLanguage of gov and unions = verging on our ugliest pastWhen the dust settles – various people will not be proud of what they have said in recent months. (Although the left writes history......)________________________________________________________Interestingly for HR Nicholls Society – Higgins was a strong supporter of White Australia, with trade unions.Underpinned his social experiment with compulsory arbitration
18This isn’t a joke…..Asia and the rest of the world is listening…….
21457 457 Visas Visa John McTiernan Media Adviser to ex PM Gillard MIGRATION POLICY – 457 VISAS“Slavery... Human Trafficking”John McTiernan Media Adviser to ex PM Gillard457Visas3 TWU Media Advisers457Visa
23Address first 3 FAIR WORK ACT 2013 – PROBLEMS Myriad problems with Fair Work Act, but 6 specific industry priorities:Right of EntryGreenfields / New Project AgreementsAgreement / Strike MattersIndividual Agreement OptionsRules on Industrial ActionAdverse action claimsAddress first 3
24RIGHT OF ENTRYUnion entry into workplaces is a major employer concern.Was fixed prior to WorkChocies – had balance pretty right.DPM Gillard realised this, promising to retain the then existing laws:“I’m happy to do whatever you would like. If you’d like me to pledge to resign, sign a contract in blood, take a polygraph, bet my house on it, give you my mother as a hostage, whatever you’d like … we will be delivering our policy as we have outlined it.”Then Leader of the Opposition Rudd promised the same.These promises were not kept.Entry laws were deliberately skewed to favour trade unions.
25RIGHT OF ENTRY – The Consequences Now based on union coverage rules, not being party to an award or agreement applying at the workplace.Unions competing for members in our workplaces.Unwarranted disruptions due to excessive visits for recruitment (hundreds per year in some cases)Very difficult to ascertain which unions are entitled to enter, and which employees they are entitled to meet with.Unions use enterprise agreements to broaden entry or overcome legislative rules governing entry.Costly, Complex, Uncertain, Union aggression, Being “Gamed”
26RIGHT OF ENTRY – The Solutions Simple =Just do what Rudd/Gillard said they would do in 2009.Restore the pre-WorkChoices / pre-FWA system.Make ROE a matter that cannot be undone in agreements.Effective sanctions against union officials / their permits.Area of clear policy difference – ALP and CoalitionALP 2013 Amendments make bad situation worseResource projects / lunchrooms as default meeting places
27RIGHT OF ENTRY – More fundamentally Do we need a more fundamental discussion.....Is this is an historic relic of the early 20th Century?May need a more fundamental discussion.....Should there be right of entry in the future (esp. for recruitment)?Have new technologies to contact unions / MembersUnions are a service and should market themselves.....If “clients” are interested – they contact the trade union.See: New AMMA Paper on our website
28RIGHT OF ENTRY – The Problems  FWC 2498 Bechtel (WA) Pty Ltd v CFMEU DP McCarthy, 26 APRIL 2013Abusive language + Racist languageIgnoring lawful employer instructions + breaching the ActInciting / inviting violenceExisting law, but shows the conduct we deal with.
29BUT IN FAIRNESS TO THE UNIONS….. one of the quiet achievements ofAustralian public policy… (and) one of the great success stories of the past decade”.“The much maligned temporary 457 sponsored skilled worker program responds to the economic cycle… employer-sponsored migration is a demand-driven model that places skilled migrants directly in the jobs they need and where locals cannot be found”.“a price signal in the 457 program that ensured localemployees were a more attractive proposition than foreign workers”, largely as a result of thebenchmark criterion for 457 applicants being market rates of pay rather than the awardminimum.
30GREENFIELD / NEW PROJECT AGREEMENTS Major concern for our industry – New projects > require new staffUnique situation – needs special arrangements:No IR benchmark – no legacy of workplace arrangementsNo staff to approve an agreementNeed IR arrangements in place for final investment approval + before we start hiring.Pre FW ActCould make greenfield agreements for12 months (employer)Up to 5 years with a union
31GREENFIELD / NEW PROJECT AGREEMENTS Under FWA, employers can only make a GF agreement with union(s) entitled to represent majority of employees, max 4 years.Caused delays and complications + unions compete + invites unions into new projects + new rights of veto.Unions well aware employers need investor approval to proceed. And they play it for all its worth.Problem often not wages – its union clauses on disputes, consultation, contractors and flexibility.Bargaining is being gamed by unions that have been dealt into these projects by the FW Act.Clear case to look again at the Act to fix these problems....
32GREENFIELD / NEW PROJECT AGREEMENTS But government wanted to head 180° the wrong direction2013 amendments allow unions to initiate arbitration.Reward unions for not doing business with employers.Recipe for project delays and investor reticenceShould be extraordinary, but sadly not Not passedCoalition policy better:Must be completed within 3 monthsIf not employer can have FWC make / approve agreement.
33GREENFIELD / NEW PROJECT AGREEMENTS Longer term and more fundamentally....Why do we need to bargain with unions, meet additional standards, or impose limits on these agreements?The employer should set the wages for new projects:If we meet the relevant tests/minima, that should be enough.If we get the market rates wrong, the skilled staff will not come.That should be the risk calculation we take.Perhaps should be time limited – could be explored.
34AGREEMENT / STRIKE MATTERS Seen a loosening of what can be included in agreements .Similarly - what can be subject to union claims / strike threats.Provided unions with:New options to manipulate in bargaining – i.e. new claims.New clauses – pro union provisionsCapacity to undo / limit flexibility – IFA provisionsObjection is the clauses, but in addition....Unions are deliberately “gaming” or “playing” the system through creative use of agree clauses.
35AGREEMENT / STRIKE MATTERS Need:Employment agreements limited to employment matters.(Plus) Previous WR Act prohibited matters restoredRigorous + ongoing policing of “objectionable terms”Continuous regulation making powerProhibit a list of objectionable clauses (and update the list)Don’t allow unions to undo leg. intent through bargainingRecall: System protects employees from themselves on wages.Should similarly protect employers on various issues.
36GENERAL OBSERVATIONSSpent last 3 years in GenevaWorked with labour relations experts / laws in many countriesHave some concluding perspectives coming back into our systemAustralia has “unique” labour market regulationNot in good waysWe have uniquely world’s worst practice in many areas (at least compared to many comparable OECD countries).
37GENERAL OBSERVATIONSVastly over-regulated – with no gain for either party.Very pervasive and spreading regulation.Have pursued labour market regulation more comprehensively that other nations – we regulate more of working relations than comparable countries / perhaps any country.Fair work architecture is flawed.Took some very poor legislative directions in WorkChoices.2009 FW amendments made this worse.But both leading parties would retain it!
38GENERAL OBSERVATIONSIncreasingly regulate too many “what ifs”.Can’t protect everyone from every exigency in work.Fundamentally misguided goal, not attempted in other systems.No sense of shared risk / endeavourOther systems either regulate processes or outcomesWe are over-regulating both.Why have both good faith barg + strong agreement tests?Far too much regulation of processes and obligations to notify, consider, consult etc.Keep it simpler – what we must pay or provide, do or not do.
39GENERAL OBSERVATIONSLess capacity for flexibility than 20 years agoNES less flexible than previous NDT.Can deliver less in bargaining than in previous EBAsBargaining fatigue + Productivity increasingly “off the table”Our WR system doing nothing to productivityVery strong personal property rights in employmentUnfair dismissal, adverse action, now bullying.We mix regulation of the individual and collective.Largely unknown in other systems. FWC a hybrid.
40GENERAL OBSERVATIONSCompliance and enforcement is completely OTTFinancial punishment + moral opprobrium.High penalties for simple obligations, or lower for complex ones – we have worst of both.Signed on to far too many ILO ConventionsOur system is still unique, badly unique – but uniqueIt is not sufficiently taken into account in most ILO standardsNeed the US approach of low ratificationse.g. Recent Minimum age matter.
41GENERAL OBSERVATIONSPut unions at the centre of the system:System predicated on union bargaining, but <14% members, and > 90% workplaces no union.That’s not unique,But its unique to make a system more reliant on trade unions when their membership and support is in sustained decline.Unique to have a system that pulls in contradictory directions on regulation v deregulation, centralism v decentralism, and collectivism vs individualism.The costs and risks are too high. Discourages job creation, investment.
42GENERAL OBSERVATIONSLeave you with some final data that is very telling...Compare how Australian management ranks our performance on regulating doing business in this country, against our international peers.Clearly makes the case for labour market reform and fixing the problems with the Fair Work Act.The international investment market is well aware of this.Makes it increasingly hard to attract international investment to Australian resource projects.
43Australia’s ‘hit and miss’ rankings on international competitiveness PRODUCTIVITY – SITUATION CRITICALAustralia’s ‘hit and miss’ rankings on international competitiveness‘Top 10’ rankings‘Situation critical’Efficiency of corporate boards4thFlexibility of wage determination123rdStability of banking system5thHiring and firing practices120thIntensity of local competition6thPay and productivity80thQuality of scientific research institutions7thCo-operation in labour relations67thFinancial market development8thOverall labour market efficiency42nd
44The damaging costs and risks of doing business under the Fair Work Act: The Experience of the Resources Industry SCOTT BARKLAMB Executive Director – Industry Australian Mines and Metals Association HR Nicholls Society XXXIII Conference Melbourne, 8 July 2013