Fwd: Thinking 07 Aug 2018 Managing transformational workplace change - the road ahead

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The dynamics of industry and the economy remain challenging. The OECD has reported that globalisation, technological progress and demographic change are having a profound impact on labour markets. Employers face the triple threats of stagnant labour productivity, persistent cost pressures and disruptive change.

Transformational change is necessary to obtain a competitive edge in this landscape. Achieving that change may become more challenging as Australia moves towards the next Federal election, and industrial relations firms as a key battleground.

Industrial changes on the horizon?

The Australian Council of Trade Unions is pushing the ALP to the left of the current Fair Work Act, seeking a return to a pre-1990s industrial regime, on the basis that the present laws are not achieving their objectives and there is a need to "change the rules", despite those laws being implemented by the Rudd/Gillard Government. The unions are seeking changes to provide for:

  1. broader bargaining, involving negotiations with those at the top of the supply chain, or in a sector, industry, or on a project, on the basis that "enterprise only bargaining is failing to deliver in the new economy"
  2. a return to compulsory arbitration powers, and restoration of the Fair Work Commission's arbitral powers on collective and individual disputes
  3. labour hire and other similar workers being paid the same as the employees of the host employer
  4. making strike action easier to take, including removal of protected action ballot orders and removal of employer lock-outs
  5. the removal of the Commission's power to terminate enterprise agreements during bargaining, other than in exceptional circumstances and not where bargaining is underway or is sought
  6. enhanced job security, including by providing for compulsory casual conversion to permanent employment, a national labour hire licensing regime (already in place in Queensland, Victoria and South Australia) and potential new rights for labour hire workers such as unfair dismissal style rights against host companies
  7. union involvement in the bargaining of enterprise agreements, and removal of content limitations
  8. providing for employee representatives on the boards of companies.

Developments at the State levels, and opposition parties' policies, have seen changes to labour hire licensing, the announcement of regulation of new forms of working, and measures to deal with so-called "wage theft".

Which aspects of these proposed reforms will form part of the ALP policy into the next election is yet to be seen. However, the ALP has indicated that it is committed to "restoring fairness in workplaces" and redressing "declining bargaining power of workers and insecure work". Regulation through a nationwide labour hire licensing scheme has already been foreshadowed. The ALP has already committed to changes to the Fair Work Act so that employers must pay labour hire workers the same amount as direct employees. The facilitation of multi-employer bargaining will also be considered by the ALP at its next National Policy Forum in December 2018. Reform of regulatory bodies, including the FWC, ABCC and ROC, appears likely.

The rationale for each of these changes has not been fully articulated, and the views of whether they are necessary is, of course, divided. What is apparent is that if the changes are made they will provide a more substantial role for unions and the Fair Work Commission. The changes have the potential for making the management of industrial relations substantially more challenging, may impact the ability and efficiency of achieving change, and ultimately have an impact on the financial bottom line.

While there have been calls for industrial relations reform by employers, on the other side of the ledger, the likelihood of the Coalition Government pursuing substantial reforms in the present term, or as an election platform, seems unlikely. While the Coalition has taken steps to reform union conduct and regulation, the political history of Work Choices has had a chilling effect on the conservative side of politics seeking labour market reform leading into an election.

Planning for transformational change

If there was a change of government and these proposed fundamental changes were to become law, employers considering transformational change in their businesses would need to consider carefully developing a new strategy to achieve the necessary change.

Transformational changes that employers may be considering to gain a competitive advantage may include outsourcing or insourcing significant functions or parts of a business; enhanced flexibility and rightsizing to achieve increased productivity; implementing new technology or automation (such as robotics, unmanned plant or artificial intelligence); changing customer engagement models; developing new lines of business and commencing new operations. How these changes might be achieved in a changed regulatory environment, while also establishing or maintaining a competitive advantage, and keeping disruption to business as usual to a minimum, will require a well thought out strategy and contingency plans.

An employer may need to assess:

  • whether enterprise agreement terms currently contribute to inflexibility, inefficiency or making change difficult to achieve, and if so, whether change can be achieved through bargaining 
  • the bargaining context, with bargaining becoming potentially more robust, and agreement pre-approval and approval steps are becoming increasingly technical
  • what alternate options are available if change cannot be achieved through bargaining, such as terminating an existing enterprise agreement or developing an alternative labour model, and how reforms may affect, or close off, those options at some stage
  • consultation arrangements, redundancy, redeployment and potential disputes or litigation where substantial outsourcing is being considered, and how labour licensing reforms and potential "jump up" rate requirements, will impact on the viability of such proposals, and
  • where new operations are planned, whether existing industrial arrangements may be extended to the new business or a greenfield approach taken, and whether seed strategies could be adopted.

A potentially reformed environment will require a well thought through but flexible and tactical approach to achieving strategic goals. Whether changed regulation will eventuate is difficult to predict with certainty, however it is clearly in the wind.

In the meantime, the best way an employer can immunise itself from any future ALP law change is to ensure its engagement and alignment with its workforce is as strong as possible. At the end of the day, if a company has a workforce that is fully engaged and if the interests of the company and its workforce are fully aligned, then it will be much better placed to withstand any changes to IR laws.


Authors: Trent Sebbens, Partner; and Ian Humphreys, Partner.

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Read more of Fwd: Thinking - August edition here

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The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Readers should take legal advice before applying it to specific issues or transactions.

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