Is the novelty of Enterprise Bargaining Agreements wearing thin and at what risk to corporations?

It is 25 years since enterprise bargaining was established as the preferred way to regulate Australian workplaces. Hundreds of thousands of agreements have been signed, with employers and employees eagerly seizing the opportunity to have a direct say in what goes on in the workplace. But has the novelty worn off and is the game about to change?

A return to a centralised system is the least likely outcome of the options available because the enterprise genie is well and truly out of the bottle and signs are already emerging of a more likely scenario – expanded modern awards and more National Employment Standards. If this occurs, future agreements will require the recognition of and compliance with a wider range of obligations than currently exists.

The current modern awards Review conducted by the Fair Work Commission, still running after two and half years, is a case in point. The average award has grown in size and will grow further before this Review is over, because of the array of claims made by unions and employer associations at the outset of the Review.

Topics covered across all awards include annual leave, casual conversion, part-time restrictions, training and apprenticeships, award flexibility, blood donor leave and more. Then there are additional claims in individual awards by industry or occupation.

There is no doubt, the quantity of regulation is growing.

In addition, the National Employment Standards (NES) are likely to be expanded if there is a change of government. The ALP will try re-establish penalty rates recently reduced in the service industry awards. Similarly paid domestic violence leave may be dealt with in that way and there will be other similar claims.

The merits or otherwise of these benefits to employees is not the point; if the legislature and its administrative tribunals create more impositions on employers, it increases the potential for missteps and disputation. This is turn creates more pressure on employers and their advisors to get it right. Reputations will be at stake and senior leadership liability will be a growing source of pressure on the compliance chain.

The ACTU and its affiliates have recently adopted the phrase ‘wage theft’ which refers to any underpayment of wages. It has been successful in seeing legislation before the parliament to steeply increase penalties for employers for breaches. Every breach will be attacked by activists or employees, especially through social media channels. A firms’ reputation as a good employer can often be as important as their reputation with their customers.

All of this does not mean larger firms should eschew bargaining. In any event, with union and activist attention, it would be unlikely. And bargaining is good for the economy. The IMF recently reported (May 2017) that enterprise bargaining played a significant and beneficiary role in Australia’s weathering of several nasty economic shocks over the last two decades. It partly attributes the low levels of unemployment Australia currently enjoys to the success of the flexible labour market ushered in by bargaining in the early 1990s.

A smarter approach will be for firms to take the initiative. Parliaments, courts and tribunals will continue to layer regulation – it’s what they do. But it doesn’t mean employers should merely turn bargaining into an exercise of enshrining over-award conditions into a legally binding document either. On the contrary, a set agenda, with identified vulnerabilities along the way and counter-measures discussed and ready to implement, is the way to deal with the realities.

Furthermore, the senior leadership team, which often will not be in the room, needs to have a good handle on the agenda to assure customers, the board, shareholders and the wider public that its approach is in line with good corporate citizenship.

Enterprise bargaining has slowed in smaller business, but the core benefits haven’t changed. It affords employers and their employees the opportunity to take control of their workplace regulation to the greatest extent possible under Australia’s complex and extensive employment laws. But planning is key. It is fundamental for the agreement being negotiated and the way it evolves and plays out internally and externally.

Employers who plan their strategy, map out the process and engage at difficult stages along the way will weather whatever the system throws up and will continue to improve productivity in their businesses, which is ultimately the objective of the exercise.