NEW LABOR LAW FULFILLS CAMPAIGN PROMISE

UNCLAS SECTION 01 OF 03 CANBERRA 000305

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PGOV ELAB AS
SUBJECT: NEW LABOR LAW FULFILLS CAMPAIGN PROMISE

REF: A) 08 CANBERRA 182 B) 08 CANBERRA 1222 C)
CANBERRA 285


1. (SBU) SUMMARY: On March 20, the Australian Senate passed
the Rudd Government's new labor law, undoing substantial
sections of the unpopular "WorkChoices" legislation
introduced by former Prime Minister John Howard. While
Deputy Prime Minister and Workplace Relations Minister Julia
Gillard had to accept some minor amendments, the Fair Work
Bill passed by the Parliament was essentially what she had
introduced last November 25. Although the Opposition and
business criticized the provisions that increased union
rights of entry and expanded protections against dismissal,
the Government prevailed because it had campaigned heavily
against WorkChoices and could claim an election mandate. The
unions are generally pleased with the outcome, since it gives
them more access to worksites and the bargaining table. This
law is only one step back toward labor market regulation,
after 20 years of deregulation. Separate from the Fair Work
Bill, the Government's new awards - which are baseline
conditions that cover employees in a particular industry -
could raise employment costs and dampen renewed hiring as
much if not more than the new legislation. END SUMMARY

A MAJOR VICTORY FOR GILLARD AND ALP


2. (U) A major reason Prime Minister Kevin Rudd and the
Australian Labor Party (ALP) won the 2007 federal election
was the public's perception that John Howard's workplace
relations laws, enacted in 2005 and known as "WorkChoices,"
were too pro-business and unfair to workers, particularly
those with little or no bargaining power. The first bill
introduced into Parliament by the Rudd Government in 2008 was
called "Transition to 'Forward with Fairness'." Passed last
March (ref A),it abolished AWAs - Australian Workplace
Agreements, which are individual workplace contracts favored
by WorkChoices that were seen by the unions and the public as
symbols of an unfair law. The Fair Work Bill 2008, which is
the principal piece of legislation, revises the Howard
Government's workplace relations laws. This bill was
introduced last November (ref B).


3. (SBU) Gillard worked hard to craft a bill that would be
broadly accepted. She consulted broadly with business and
labor in drafting the legislation but the drafting was
essentially a political exercise, not an academic one. Two
of the most eminent labor law experts in Australia told us
that they were not consulted. At the end of the process,
however, both the unions and business (albeit less so) were
reasonably satisfied with the result.


4. (U) When the Government introduced the Fair Work Bill,
Opposition Leader Malcolm Turnbull said he accepted that
voters had rejected the Howard Government's industrial
relations laws and declared that WorkChoices was dead. Since
November, however, the worsening economy and the increase in
unemployment have led business groups and some in the media
to question whether this is the best time to reduce labor
market flexibility. Also, Turnbull was pressured by the
Right Wing of his Liberal Party to take a harder line against
the bill. In the end the Liberal-National Party Coalition
opposed the Government by not supporting the bill's
definition of small business for the purpose of unfair
dismissal, but it never in fact voted against the bill as a
whole.


5. (U) Gillard needed the five Green Party senators and the
two independents to pass the law in the Senate. The Greens
Qtwo independents to pass the law in the Senate. The Greens
backed the bill, but the independents held out for a
definition of small business for unfair dismissal purposes
that encompassed more small businesses. Gillard refused to
yield, and in the end, she only accepted an 18 month
transition period before the Government's definition took
effect (ref C). The Greens told us later that the
independent senators could not risk being branded as the
reason the bill ending WorkChoices failed.

THE NEW LAW


6. (U) Fair Work Australia, which will take effect on July 1
2009, is more fully described in ref A and at
www.workplace.gov.au. In general, it will:

- Create "Fair Work Australia", an agency which will absorb
the functions of the independent Industrial Relations
Commission, plus all current government agencies (the
Workplace Authority, the Workplace Ombudsman and Employment
Advocate). This provision was initially criticized for
combining regulatory and judicial authorities under one roof,

CANBERRA 00000305 002 OF 003


however, the idea seems to have gained acceptance.

- Provide ten national employment standards (covering things
like minimum wage and working conditions),which will provide
the basis for a "modern" industry award system.

- Give unfair dismissal protection for all workers. If the
employer has fewer than 15 employees, it has a year before
unfair dismissal protection applies. Where there are more
than 15 employees, unfair dismissal rights accrue after six
months. Until January 1, 2011, small business means 15
full-time employees. Thereafter it will be 15 total
employees.

- Require "good faith bargaining", which includes
requirements that employers hold meetings at reasonable
times, and respond to proposals in a timely manner.

- Allow unions to enter worksites containing no union
members, provided at least one employee approves this.
Business complained that this would be an invasion of
privacy, particularly if there were no union employees. The
Government amended the bill to provide that a union official
(who first must obtain a permit from Fair Work Australia) may
only inspect an employee's records if it does not otherwise
violate privacy laws. The bill will also give Fair Work
Australia the power to prevent union turf wars by picking one
union to attempt to organize a new workplace.

-Allow multi-employer bargaining. As is the case under
WorkChoices, legal industrial action by unions will be
unavailable in this situation.

-Make compulsory arbitration available to low-paid workers
negotiating multi-employer agreements.

WORKCHOICES LITE


7. (SBU) A leading left-wing academic on workplace relations
issues in Australia told us that he thought this law
incorporated many of the changes introduced by WorkChoices in
1996, and that it was, as some critics suggested,
"WorkChoices lite." Industrial action by unions was still
strictly limited, he noted. Business may be complaining
bitterly about increased union right of access to worksites
and employee records but this was a provision with a long
history in Australian labor relations. The regulatory
authorities rely on the unions to uncover potential breaches
of employment conditions. A key change, he pointed out, is
the proposal to combine the industrial relations tribunal
with the regulatory body in order to create "one-stop
shopping" and a more informal dispute resolution mechanism.

NATIONAL "MODERN" AWARDS TO REPLACE STATE SCHEMES


8. (SBU) As part of Labor's election campaign platform, it
promised to modernize and simplify awards, which are baseline
conditions covering an industry. As part of the transitional
bill, the Government directed the Industrial Relations
Commission to create national "modernized" awards, replacing
existing state awards in January 2010. Proposed new awards
have now been announced for the restaurant and retail sectors
and business is warning about a rise in costs. In the
restaurant industry, according to John Hart, the head of
Restaurant and Catering Australia, restaurants in different
states worked under different awards and the process of
creating one nationwide award is raising costs particularly
in states like South Australia which had significantly lower
award rates. Hart noted that one new award provision, for
example, provides that all employees who work after 7pm must
receive a 10% penalty bonus. This effectively raises costs
for the entire industry. Gillard's office told us that the
transitional bill also contains provisions that enable Fair
Qtransitional bill also contains provisions that enable Fair
Work Australia to phase in the new awards over a five-year
period.

WILL SMALL BUSINESS START HIRING AGAIN?


9. (SBU) COMMENT: The ALP consulted business in drafting the
legislation but it's fair to say the unions were the real
winners. The ALP has paid back the unions for their
significant role in bringing down the Howard Government.
Symbolically, Gillard sat with Greg Combet, the former
national secretary of the Australian Council of Trade Unions,
to watch the final Senate vote approving her bill.
Ironically, while the Rudd Government had a clear electoral
mandate to replace WorkChoices, the risk for it now is that
the new law will raise employment costs and discourage
hiring, particularly by small business. The Government sees

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this new industrial relations scheme as national in scope,
replacing the myriad state laws and awards still in place.
Gillard is having trouble, however, persuading some states,
and New South Wales in particular, to adopt Fair Work
Australia.

RICHE