OVERVIEW

1. The damaging costs and risks of doing business under the Fair Work Act: The Experience of the Resources IndustrySCOTT BARKLAMBExecutive Director – Industry Australian Mines and Metals Association HR Nicholls Society XXXIII Conference Melbourne, 8 July 2013

2. OVERVIEW Context • Industry challenges • Focus on 2 challenges: - Productivity - Migration Fair Work Act • Right of Entry • Agreement Content • New Project Agreements • General Observations

3. CONTEXT

4. CRITCIAL INDUSTRY FOR AUSTRALIAN INDUSTRIAL RELATIONS • Very relevant industry to understanding Australia’s IR journey • Crucible of Australian trade unionism • Key battleground for historical strikes (including 1890s strikes) • Central to spread of arbitration / development of C+A power • Led change from the1980s – Robe River, Bell Bay etc • Changed from worst industry culture to one of the best • Dual effort: Used the law + changed hearts and minds / cultures • At forefront of (for example) AWAs, non-union agreements • Now going backwards as IR system goes backwards.

5. THE AUSTRALIAN RESOURCES INDUSTRY • 1.1 m Australians employed • 9.75% of total employment (2012) ( X 2 from mid-2000s) • 18% of Australia's gross value add • Approx $250 billion of the nation's annual output • Industry reaching a peak around 2013/2014 • A further $350 bn in viable but uncommitted projects: • Some cancelled / delayed = need to reverse this. • Need to continue to encourage exploration + new projects.

6. INDUSTRY CHALLENGES • Considerable and mounting challenges: • New competitors = Emerging + OECD countries • Increasingly difficult + expensive place to do business • Falling 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.....)

7. SO, THE GOVERNMENT IS HELPING, RIGHT………..? • …ARE ACTUALLY IN THE MIDST OF A WIDE RANGING POLICY ATTACK ON THE AUSTRALIAN RESOURCES INDUSTRY FAIR WORK ACT MIGRATION CHANGES CARBON TAX MRRT

8. FOCUS ON PRODUCTIVITY

9. PRODUCTIVITY Multifactor productivity: Australia vs. CanadaMining Industry • Resource industry productivity • Declining since 2001. • 45% off its peak. • Don’t buy the 7 +ve quarters argument (from Bill Shorten) • short term only, not trend • Rapid increase in capital investment not efficiency

10. PRODUCTIVITY • Labour policy is critical to our productivity decline / trajectory. • Labour productivity “a disaster” in mining industry – BIS Shrapnel • Australia’s labour market efficiency: • 7th in the OECD in 2009-10 • 18th in the OECD in 2012-13 • Need wide range of reforms to  productivity • Not 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

11. PRODUCTIVITY – SITUATION CRITICAL Most problematic factors for doing business in Australia

12. PRODUCTIVITY – SITUATION CRITICAL Australia’s ‘hit and miss’ rankings on international competitiveness

13. FOCUS ON SKILLED MIGRATION

14. MIGRATION POLICY – 457 VISAS • Recent government changes to the 457 visa system: • Reintroduce labour market testing •  application fees -  inspectors – new hotline • Administrative ‘go slow’ in government. • Resources not a major user of migrant / 457 labour • But, international skills are vital when we require them • Expect delays, costs, over-inspection (Which is what CFMEU and MUA wanted all along!)

15. MIGRATION POLICY – 457 VISAS • Pushed by rich unions • Reversal 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 stage • Politics first, policy justification later (if at all) • Policy by prejudice + supposition – not evidence • Last days of Rome / Russians crossing River Oder into Berlin

16. MIGRATION POLICY – MIGRATION ZONE Crazy Incongruity • Extending our migration zone contrary to international law • At the same time – we are excising the mainland for humanitarian migration. Australia for Humanitarian Migration Australia for Employment Migration

17. MIGRATION POLICY – 457 VISAS • Most concerning.... Flirting with Industrial Xenophobia • Deeply rooted in Aust. union & labour politics • Direct line from White Australia > Current union campaign • White Australia = Supported by arbitration + protectionism • Language of gov and unions = verging on our ugliest past • When 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

18. This isn’t a joke….. Asia and the rest of the world is listening…….

19. BUT THERE IS THE OCCASIONAL LAUGH IN THIS…..

21. MIGRATION POLICY – 457 VISAS “Slavery... Human Trafficking” 3 TWUMedia Advisers 457 Visas John McTiernanMedia Adviser to ex PM Gillard 457 Visa

22. FAIR WORK ACT 2009 COSTS AND RISKS

23. FAIR WORK ACT 2013 – PROBLEMS Myriad problems with Fair Work Act, but 6 specific industry priorities: • Right of Entry • Greenfields / New Project Agreements • Agreement / Strike Matters • Individual Agreement Options • Rules on Industrial Action • Adverse action claims Address first 3

24. RIGHT OF ENTRY • Union 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.

25. RIGHT 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”

26. RIGHT 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 Coalition • ALP 2013 Amendments make bad situation worse • Resource projects / lunchrooms as default meeting places

27. RIGHT 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 / Members • Unions are a service and should market themselves..... • If “clients” are interested – they contact the trade union. • See: New AMMA Paper on our website

28. RIGHT OF ENTRY – The Problems [2013] FWC 2498 Bechtel (WA) Pty Ltd v CFMEU DP McCarthy, 26 APRIL 2013 • Abusive language + Racist language • Ignoring lawful employer instructions + breaching the Act • Inciting / inviting violence • Existing law, but shows the conduct we deal with.

29. BUT IN FAIRNESS TO THEUNIONS…..

30. GREENFIELD / NEW PROJECT AGREEMENTS • Major concern for our industry – New projects > require new staff • Unique situation – needs special arrangements: • No IR benchmark – no legacy of workplace arrangements • No staff to approve an agreement • Need IR arrangements in place for final investment approval + before we start hiring. • Pre FW Act • Could make greenfield agreements for12 months (employer) • Up to 5 years with a union

31. GREENFIELD / 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....

32. GREENFIELD / NEW PROJECT AGREEMENTS • But government wanted to head 180° the wrong direction • 2013 amendments allow unions to initiate arbitration. • Reward unions for not doing business with employers. • Recipe for project delays and investor reticence • Should be extraordinary, but sadly not. Not passed • Coalition policy better: • Must be completed within 3 months • If not employer can have FWC make / approve agreement.

33. GREENFIELD / 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.

34. AGREEMENT / 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 provisions • Capacity to undo / limit flexibility – IFA provisions • Objection is the clauses, but in addition.... • Unions are deliberately “gaming” or “playing” the system through creative use of agree clauses.

35. AGREEMENT / STRIKE MATTERS • Need: • Employment agreements limited to employment matters. • (Plus) Previous WR Act prohibited matters restored • Rigorous + ongoing policing of “objectionable terms” • Continuous regulation making power • Prohibit a list of objectionable clauses (and update the list) • Don’t allow unions to undo leg. intent through bargaining • Recall: System protects employees from themselves on wages. Should similarly protect employers on various issues.

36. GENERAL OBSERVATIONS • Spent last 3 years in Geneva • Worked with labour relations experts / laws in many countries • Have some concluding perspectives coming back into our system • Australia has “unique” labour market regulation • Not in good ways • We have uniquely world’s worst practice in many areas (at least compared to many comparable OECD countries).

37. GENERAL OBSERVATIONS • Vastly 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!

38. GENERAL OBSERVATIONS • Increasingly 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 / endeavour • Other systems either regulate processes or outcomes • We 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.

39. GENERAL OBSERVATIONS • Less capacity for flexibility than 20 years ago • NES less flexible than previous NDT. • Can deliver less in bargaining than in previous EBAs • Bargaining fatigue + Productivity increasingly “off the table” • Our WR system doing nothing to  productivity • Very strong personal property rights in employment • Unfair dismissal, adverse action, now bullying. • We mix regulation of the individual and collective. • Largely unknown in other systems. FWC a hybrid.

40. GENERAL OBSERVATIONS • Compliance and enforcement is completely OTT • Financial 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 Conventions • Our system is still unique, badly unique – but unique • It is not sufficiently taken into account in most ILO standards • Need the US approach of low ratifications • e.g. Recent Minimum age matter.

41. GENERAL OBSERVATIONS • Put 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.

42. GENERAL OBSERVATIONS • Leave 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.

43. PRODUCTIVITY – SITUATION CRITICAL Australia’s ‘hit and miss’ rankings on international competitiveness

44. The damaging costs and risks of doing business under the Fair Work Act: The Experience of the Resources IndustrySCOTT BARKLAMBExecutive Director – Industry Australian Mines and Metals Association HR Nicholls Society XXXIII Conference Melbourne, 8 July 2013