Real agenda behind Tony Burke’s Closing Loopholes bill

It’s got nothing to do with closing loopholes, but it will be payday for union officials and a picnic for lawyers.

The 284-page bill introduced by Tony Burke, with 500 pages of explanatory memorandum, is about imposing costly, complex and legalistic ‘solutions’ to fix problems in the labour market that don’t exist. Picture: NCA NewsWire / Martin Ollman

If truth in advertising were to apply to government statutes, there would be a lot of court cases disputing the accuracy of many titles. An outstanding example is the Inflation Reduction Act in the US, which has nothing to do with reducing inflation and everything to do with handing out government subsidies to climate-related spending.

Another contender for top billing in this category is the Closing Loopholes bill introduced this week into the House of Representatives by Employment and Workplace Relations Minister Tony Burke.

The 284-page bill, with 500 pages of explanatory memorandum, is about imposing costly, complex and legalistic “solutions” to fix problems in the labour market that don’t exist.

The real agenda is to offer up changes demanded by the flailing trade union movement so it can attempt to regain a foothold in various parts of the economy. Without generous legislative props, the union movement looks doomed to follow the path of the dodo.

While it’s worth looking at some of the details, it is also important to understand some of the underlying assumptions built into the misnamed bill. First, there is a view that workers can’t be trusted to know what is in their interests. As a result, it is vital to have a plethora of rules and regulations with third-party oversight by the Fair Work Commission.

Second, the government thinks the law of contract should not govern employment relations. Just because parties have signed a contract, it is the practical reality/real substance/true nature – Orwellian terms used in the legislation – of the employment arrangements that must carry the day. The aim here is to overturn recent High Court rulings that backed the sanctity of contract.

It’s hard to know which parts of the lengthy bill are the worst: it’s a close-run thing between those dealing with casual work, the gig economy and labour hire (same job, same pay). Even the wage theft part is flawed by failing to make a clear distinction between inadvertent and deliberate underpayments.

Other economically damaging features include the extension of ministerial powers to intervene on a case-by-case basis – the antithesis of good regulation; the uncertainty of coverage for many enterprises; the streamlined right of entry for union officials to inspect employment records, including of non-unionists; and the guaranteed privileges for workplace union delegates.

The minister has tried to argue that anyone who is currently happy with their employment arrangements won’t be affected. This is simply not true. The 10-part test will effectively outlaw an employer offering casual workers regular shifts, which often suit workers.

It’s important to note that trade unions dislike casual employment because casuals are less likely to join up. A long-running campaign to establish that casual work has been on the rise has failed because the figures are clear that the proportion of the workforce employed on a casual basis has been steady across many years.

The alternative now is to use the law to make it very difficult (and potentially legally risky) for employers to take on casuals, even though it’s clear the vast majority of casual workers are happy with their status and enjoy the 25 per cent casual loading. We know that only between 5 per cent and 10 per cent of casuals seek to convert to permanent status after 12 months, which is their current right.

As for the gig economy, again this is an area in which union recruitment essentially has failed. The unions are therefore happy to see restrictions imposed on the platforms, which could easily shrink the gig economy. Safety is there as a veil to justify the new rules even though there is no evidence that rates of pay are closely associated with safety outcomes and, in any case, the FWC is not a safety agency. Pay gig workers more and it’s not clear that safety outcomes will improve.

The mind boggles when thinking of the complexity of minimum rates of pay for gig workers, many of whom are operating on different platforms at the same time. There is talk of dollar figures being set by the minute or for five-minute blocks. The compliance costs alone of establishing these new arrangements will be vast; the costs ultimately will be borne by consumers.

But here’s the thing: we already know the rates of pay below which gig worker are not prepared to offer their services. Their willingness to participate in the market is really all we need to know. And given that the vast majority of gig workers have other jobs, it’s clear the substantial flexibility of the gig economy is something that is highly valued by the workers.

It is important to watch this space for anti-competitive deals as some of the big platforms agree to accept the new regulations without complaint knowing full well that some of the smaller and less well-resourced platforms could be driven out of business.

The legislation is a direct threat to labour-hire companies, particularly in mining and aviation. The unions take the view that all workers should be permanent and covered by generous enterprise agreements and there must be strong constraints on companies using labour-hire workers on less generous conditions. There is some grudging acknowledgment that companies need to supplement their workforce from time to time, but this arrangement must be restricted.

The reality on the ground is that many mining companies, for example, use a combination of permanent workers and supplementary labour hire workers (sometimes sourced from within the company) to maximise their output and revenues.

The effect of the legislation is effectively to outlaw these arrangements.

For marginal operations, it’s entirely possible that they will cease entirely and thereby deprive workers of very well-paid jobs in regional areas. As for new developments – in critical minerals, for instance – these new industrial relations impositions may rule out investments as the future costs will look far too high and arrangements far too inflexible.

There is a certain irony that the government is talking up the prospect of investment in critical minerals, including the refining thereof, while potentially thwarting local developments.

Of course, the minister has had to concede that none of these favours to his union brothers and sisters comes free – an extremely tentative figure of $9bn in total across 10 years is mentioned. It is entirely possible that the figure is much higher.

But given that even Burke is unable to eliminate downward-sloping demand curves – the higher the wage, the lower the demand for workers – there will also be a price to pay in terms of job losses and investment opportunities forgone.

Re-regulating the labour market at this juncture is entirely the wrong route to take, particularly given cost-of-living pressures. The end result will be higher costs, lower productivity, more litigation, more delays and greater uncertainty for the many thousands of employers providing jobs.

It’s got nothing to do with closing loopholes. But it will be payday for union officials and a picnic for lawyers.