Industrious Conversations: A Second Labor Term and Industrial Relations in Australia

Kathy

Hello and welcome to Ashurst Legal Outlook and the second episode in our Industrious Conversations series for 2025; bringing you insights into workplace developments in Australia from our leading Employment team here at Ashurst.

I'm Kathy Srdanovic, a partner in our Employment practice based in Sydney, and I'm pleased to be joined today by Jon Lovell, another partner in our Australian Employment practice, based in Melbourne.

In this episode, we'll be talking about the implications for Australian employers after the resounding Labor victory at the recent Federal election, particularly with respect to industrial relations.

So, the question we're all asking ourselves is: what might come next?

Well, based on our insights gleaned from everything we read and heard leading up to the election from the Labor Party, the ACTU, the Greens and other unions, Jon and I have characterised the major themes into four main areas.

Firstly, restraint of trade reforms.

Secondly, security of employment and enhancements to the safety net.

Third, bargaining—a single word, but a lot comes with it.

And the fourth one we’ll label “other”, and we'll see how many we can get through.

Now, Jon, the one that we heard the most about coming into the election was the proposed reforms around restraint of trade. Talk us through these.

Jon

Thanks, Kathy, as the Federal Treasurer reflected on the day following the election, the focus of a second term government is going to be around productivity. And one of the hallmark reforms that is being proposed is a prohibition on certain forms of post-employment restraints, particularly non-competes. The very common example that has been touted is that of the suburban hairdresser who moves from one salon to another.

So, what is this policy likely to look like? Well, essentially, any employee under the high-income threshold is likely to have the benefit of being able to freely move between workplaces, and you can see some of the productivity benefits that might flow from such change.

Of course, though, it's not that simple. Where do we see potential issues? Well, particularly around small innovation based firms, often with founders on zero or very low dollar employment contracts, who innovate, take a product or a business to a particular stage of development and then are trying to bring in additional capital to support growth.

In those circumstances, various restrictions including post-employment restraints, are critical to ensuring the maintenance of the goodwill in the business and the ability to continue to grow and scale. Our concern is that a blunt reform that simply prohibits post-employment restraints at large is likely to inadvertently capture precisely those kinds of scenarios, stifling innovation and, of course, having a negative effect on productivity over the medium term.

So, we've discussed briefly Kathy, the post-employment restraint regime. Once people get into employment, we're sensing a much greater (or continued) focus on security of employment and enhanced safety net protections. What do you think we're going to see in that space?

Kathy

Absolutely, Jon, based on everything that we read and heard leading up to the election, security of employment is definitely a focus for the Labor government in this second term.

To start with, I'd look at the regulated Labour Hire Arrangement Order regime. Now that's had a lot of activity since it was introduced, and there have been many, many orders made which essentially lift up the labour hire workers to the level of employees of the host employer.

As everyone knows, there’s currently a distinction between service providers and labour hire providers, and what we know is that the unions want to expand that to actually rule out the carve out for service contractors.

That's interesting for a whole range of reasons, not least because of commitments that had been made prior to the last election, that such a distinction would be made (although reasonable minds might differ as to whether or not such a commitment was given).

It's also interesting because we're currently waiting on a decision in the BHP operations services test case which will actually test the limits of that exclusion from the legislation. So, if this change was to come in and become part of the scheme that we see now, it would be a significant expansion of the regime.

Now, the other enhancements around security of employment really go to the safety net. So the safety net now, as we know it, it's the National Employment Standards, which has been expanded over time, and in the lead up to the election, we also heard calls for different types of leave to be introduced. But I think the ones that are interesting for us to focus on here are the preservation of penalty rates. So now we see the preservation of minimum award rates for enterprise agreement covered employees, and there's a push towards also preserving penalty rates.

Now, what that looks like could take a number of forms, and it'll be interesting to get your reflections on that, Jon. But I think here it's really come off the back of various applications that are currently before the Fair Work Commission around junior rates and the abolition of penalty rates, or exemptions from penalty rates if you paid certain amounts. And that's then prompted a call to say, “No, we want to see that preserved for all award covered employees”.

So any thoughts on how that might actually come about?

Jon

Kathy, what we're sensing is the most likely form is rather than an expansion of an NES in respect to penalty rates and possibly casual loadings, it might instead be to build into the award standard as a standard that must be flowed through into any enterprise agreement, and we see provisions in the nature of shift worker definitions.

And of course, as you reflect, minimum rates of pay operate in just that way at the moment. What would the effect of that be? Well, it further restricts the ability for the employer and employees and their representatives at an enterprise level to actually make changes to penalty rate regimes to meet the genuine needs of the enterprise and drive productivity, further entrenching the already fairly inflexible system of penalty rates that we see in the award system, into enterprise bargaining. It probably just takes us backwards.

Kathy

I think it's interesting too, when we think about the role of the Fair Work Commission with all of this and the expanded nature of its jurisdiction, because that's the next thing really coming out of the enhanced safety net and calls for rostering and changes to rosters. So that's an area that's ripe for disputation in any particular workplace.

And the ACTU's policy position around all of this was to actually increase the protections for workers insofar as rosters are concerned. Now, what would that look like? It could look like giving increased notice of a roster change; so up to 28 days for permanent employees, was “the ask”. Also a positive obligation to provide employees with rosters that accommodate caring responsibilities.

Again, we're starting to see more cases come out of the Fair Work Commission dealing with flexible work arrangements. So looking at what sort of interaction that might have if this does come into legislation, is interesting. But then access to the Fair Work Commission arbitration to actually resolve disputes, again, with all roads leading back to the Fair Work Commission for the resolution of disputes about rosters, which is something that employers are dealing with every single day.

Now, Jon, I'll cast back to you for our third bucket: bargaining. One word—lots attached to it. What might come for bargaining?

Jon

Before we get to what might come, let's reflect on what's happened over the last couple of years.

Really, bargaining has been returned to the centre of our workplace relations system, albeit it looks quite different. And it has been returned notwithstanding the evidence that it's done very little, at least in the last decade, to lift productivity or flexibility in Australian workplaces, which was, of course, the policy imperative that saw its introduction in the first place.

The first key change that we saw in 2022 was what I would term “forced bargaining”. It was one of the most significant changes in the first term of the ALP government. And really allowed unions to initiate bargaining without majority support where there is an enterprise agreement in place, and it's nominally expired within the last five years.

The ACTU agenda and the government's own review of the 2022 legislation suggest very strongly that this will now be taken further and that unions will be allowed to unilaterally commence bargaining with an employer, even where there is not a current enterprise agreement.

And taking that even a step further, if that change comes about, a union could initiate bargaining for an agreement covering an expanded scope of employees without the employer. Or perhaps, even more importantly, even the employees supporting such an agreement. And then the employer would be left to rely on applications to the Commission under the good faith bargaining or scope order regimes to perhaps extract itself from bargaining with the broader group.

We think a further expansion of forced bargaining would take us further down the road of enterprise bargaining becoming less useful and becoming, in fact, potentially an impediment to productivity improvement.

The other key change over the last couple of years, and it was introduced you'll recall, Kathy, with some fanfare at the time, was the expansion of multi-employer bargaining. It's fair to say that multi-employer bargaining hasn't been the subject of quite as many applications and even fewer agreements than may have been anticipated. We've seen in certain contexts, particularly in the supported bargaining stream and the care economy in particular, some result in agreements, but otherwise not much progress.

What do we see going forward? Well, we've already heard from various unions that the common interest threshold for multi-enterprise bargaining is overly technical, legalistic and burdensome. What are we anticipating then, efforts or renewed efforts to water down those requirements? That would be against the background where there has never been a public policy case made for the benefits of sitting employers, usually competitors, down at a common bargaining table to bargain for common terms and conditions.

Again, it takes us a step away from enterprises and the employees at those enterprises bargaining for terms and conditions that suit their circumstances and drive productivity and usually wage growth.

Kathy, that brings us to the miscellaneous bucket. What else do we think is likely to be on the agenda for the next three years?

Kathy

All right, well, here are the highlights.

Number one on my wish list? A universal long service leave scheme. I'm just not sure if we'll see it in either of our lifetimes, Jon, but that has reared its head again, and look, there's provision for it sitting there in the National Employment Standards. It just hasn't come about.

But related to that expansion of a portable leave scheme for those in insecure work. So we see this in some sectors now) for long service leave. This is broader. This is a policy position, targeting a portable leave scheme for annual leave, sick leave and long service leave.

You immediately ask yourself, well, “How would it work? How would it be funded? Who would actually be caught by this? Is it targeted for the gig economy? What's meant by insecure work?”

So, it comes back really, to that security of employment theme that we started off with at the beginning.

And I think the third and final one, at least, for today's podcast, is about regulating the use of artificial intelligence. Now this follows a report by the House of Representatives Committee Inquiry where they made a number of recommendations around the use of AI and also about the Fair Work Commission's involvement with arbitration powers in respect of the adoption of the digital technology

And picking up on some of the themes which are really around productivity, security of employment, you can see where some of this has the potential to go. It's definitely an area that we're going to have to watch to see how these reforms—or potential reforms, with respect to AI—actually match what's happening in the workplace with employers and decision-making and restrictions around these.

So, an interesting mixed bag of potential reforms.

Jon

Thank you for listening to this episode of Industrious Conversations on Ashurst Legal Outlook. To hear more Ashurst podcasts and ensure you don't miss any future episodes in our Industrious Conversations series, please subscribe via Apple Podcasts, Spotify, or your favourite podcast platform.

Also, please do reach out to any one of us in our Ashurst Employment team if you'd like to discuss this topic more. It's one that we're following closely, and we're keen to hear your thoughts. We hope you'll join us next time as we continue to explore key workplace developments in Australia, sharing insights from other members of our Employment team here at Ashurst. Until then, thank you for listening, and goodbye for now.