Labor’s favours to the unions are still on the books IT’S easy to think that the Rudd-Gillard Labor government was completely hopeless. But when it came to handing out favours to its union mates, that government was top of the class. In fact, it was so good at it — particularly under Julia Gillard — that it was hard to keep track of the various gifts, good turns and acts of kindness doled out to the unions. And here’s the thing: most of these tokens of appreciation are still sitting on the books. Let me race through the main bequests. There was the Fair Work Act itself and the further amendment, which included easier right-of-entry arrangements for union officials. There was the slew of sympathetic appointments to the Fair Work Commission, almost all former union officials or known union friendlies. Then there were the sector-specific initiatives: the abolition of the Australian Building and Construction Commission, which placated the Construction Forestry Mining and Energy Union; the shipping “reforms”, which were a sop to the Maritime Union of Australia; the Road Transport Remuneration Tribunal, a pacifier to the Transport Workers Union; the support for the changes to the Social and Community Services Award; the wage funds in childcare and aged care; the freezing of access by large companies to self-insurance under Comcare; and the list goes on. The scheme I want to talk about here is the Fair Entitlements Guarantee. (Labor couldn’t get enough of fair this, fair that.) The scheme is the indulged offspring of the General Employee Entitlements and Redundancy Scheme that the Howard government reluctantly introduced in 2001 after the collapse of Ansett and National Textiles and that later just happened to be chaired by the prime minister’s brother, Stan Howard. The idea behind GEERS was that, in the event of a company going into liquidation with insufficient funds to meet workers’ entitlements (wages, leave entitlements, redundancy payments), the government would step pay the workers these entitlements up to certain limits. In due course the government could pursue the company to recover funds during the wind-up phase. At the time, Peter Reith (then defence minister) declared GEERS was “always fraught with moral hazard, right from the start. The government went into it with its eyes open. I was a party to it, but I wouldn’t describe it as my best moment.” The payout for redundancy entitlements was initially set at a maximum of eight weeks, but was increased to 16 weeks in 2006 to reflect the standards set in the 2004 Redundancy Case handed down by the Australian Industrial Relations Commission. But a maximum of 16 weeks was clearly on the low side for the trade unions. What about four weeks per year of service, with no overall cap, as long as this is stipulated in the industrial instrument covering the workers? Industrial instrument means enterprise agreement or written employment contract. In addition, what about workers being entitled to up to 13 weeks’ unpaid wages, all unpaid annual leave, all unpaid long-service leave and up to five weeks’ unpaid wages in lieu of notice? That, in a nutshell, is what is provided for under the Fair Entitlements Guarantee. So what started off as a relatively modest capped scheme morphed under Labor into a virtual free-for-all for workers whose employers happened to go bankrupt, courtesy of the taxpayer. The key is to include the generous redundancy pay provisions in agreements at least six months before the company folding (this is a requirement of the legislation). Struggling companies had few reasons to object since they would not be picking up the tab. Since 2001, the annual cost of the scheme has increased significantly, even though the number of insolvencies has been relatively stable across the period. In the five-year period 2007-08 to 2012-13, for instance, payments increased by 330 per cent; in the year ending 2012-13, the annual increase was more than 30 per cent. Since the first version of GEERS was introduced, more than $1 billion has been doled out to workers of failed businesses to cover unpaid entitlements, with the commonwealth recovering less than one-fifth of this figure overall. Moreover, the proportion of funds recovered by the government has fallen in recent years. In 2012-13, more than 16,000 individuals made claims under the scheme, with total payments amounting to $260 million. At this stage, only $37m has been recovered from the companies. The moral hazard to which Reith referred has played out as expected. It has been estimated, for instance, that the number of companies that owed more than $500,000 in redundancy payments at the time of collapse more than doubled between 2008-09 and 2010-11. The scheme provides a very strong incentive for teetering companies to “value shift” before collapse, in the knowledge the taxpayer will pick up the tab for unpaid workers’ entitlements. And when it comes to the (illegitimate) last-minute shifting of assets by business owners, the Australian Securities & Investments Commission has a poor record at punishing the perpetrators. Then we have the bizarre outcome in which ASIC recently decided to wind up several abandoned companies to assist employees to make claims under FEG. These companies had not proceeded to any form of insolvency, but ASIC appointed liquidators for 19 companies in August last year to enable the workers to gain access to the FEG payments. Not surprisingly, unions have also sought to stitch up enterprise agreements containing excessively generous redundancy provisions with vulnerable companies — the automotive component industry is a case in point. A little noticed announcement in the budget promises to return common sense to this scheme. Instead of workers being entitled to unlimited redundancy payments, the changes will reintroduce the 16-week limit, in line with the National Employment Standards established by the Fair Work Commission. And the maximum weekly wage for which entitlements are paid will be frozen at $2451 until June 30, 2018. It is estimated the changes will save the taxpayer nearly $88m across four years. There is probably a weak case for a government scheme along the original GEERS line in which workers are paid their entitlements up to strictly defined caps, although moral hazard will be part and parcel of the deal. But the trade unions wanted more — they wanted an uncapped arrangement in which workers who lose their jobs are reimbursed for entitlements about which most workers can only dream. Of course, these workers need to have the souped-up redundancy provisions specified in an agreement — read union agreement. The Abbott government has a massive job unwinding the plethora of perverse and unjustified gifts bestowed by the Labor government on the union movement. Trimming the FEG scheme is a good start. Trade union membership makes up less than 20 per cent of the workforce and only 13 per cent of the private-sector workforce. Government policies that favour trade unions and trade unionists at the expense of other workers and taxpayers need to be scrapped as soon as possible. theaustralian.au/opinion/columnists/labors-favours-to-the-unions-are-still-on-the-books/story-fnbkvnk7-1227026030719
Posted on: Sat, 16 Aug 2014 06:48:21 +0000
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