Coles EBA: when a wage deal is a false bargain

As ever, the cost of living is rising, but now our pay packets are not keeping pace. Let’s be honest; since Paul Keating conned us into ditching centralised wage fixing we’ve paid each other quite a bit, probably too much. Something had to give. Now, the great reckoning is here. It is the end of the enterprise bargaining era. Is this the wages recession we had to have?

There are some exceptions, but as a rule enterprise bargaining has served us poorly. Think about it: employees have to vote on whether to accept a raise the boss wants to give them. Have you ever heard of anything so silly? Bargaining has sent companies broke or offshore, been used as an instrument of corruption and even facilitated widespread wages theft.

Our economics editor, David Uren, recently said that “in the past four years, wage growth has been steadily falling”. This trend has “puzzled economists” but it is no surprise to industrial relations experts. They see companies ditching enterprise bargaining and returning to the award system (centralised wage fixing) en masse. As a result, some wages are falling, sometimes by as much as 60 per cent.

Last month, in a speech to the annual convention of the Industrial Relations Society of NSW, opposition employment and workplace relations spokesman Brendan O’Connor, outlined how companies could ask the Fair Work Commission to terminate their enterprise bargaining agreement as soon as it expired. This allows the employer to put employees back on the award rate of pay. O’Connor said when this occurred workers saw their “take-home pay fall off a cliff”.

Five years ago, terminating an EBA was unheard of, but O’Connor pointed to some staggering data. In 2014, 156 termination applications were made. Last year that number rose to 517; a 331 per cent increase. While many employers are exiting the system, fewer employers are entering it in the first place. During the past five years there has been a sharp reduction (almost 40 per cent) in new EBAs made. The latest figures, in 2016, show that only 36.4 per cent of workers remain in the bargaining system.

Although some companies have paid workers too much, others have paid — via dodgy EBAs — below the legal minimum. Take, for example, Coles and Bi-Lo, owned by Wesfarmers. Penny Vickers, a Coles employee, has applied to the FWC to have her EBA terminated and all 75,000 of her colleagues returned to the award wage. Most companies in this scenario would whoop with joy, but Coles is opposing the application. For Coles, a return to the legal minimum rates of pay won’t shrink the wages bill, it will increase it.

The company’s EBA pays the bulk of its workforce below the award wage, perhaps by $70 million a year.

In October, the full bench of the FWC will hear Vickers’s application. In preliminary hearings, legal obstructions have been thrown at Vickers, but she has continued to roll forward, undeterred. At every appearance, the Coles legal team is ever in retreat, like children waving toy swords before the gun barrel of a steadily advancing Sherman tank.

After the most recent hearing two weeks ago, Fairfax reported the Coles lawyer, Stuart Wood QC, made a stunning concession: he “indicated that much of the Coles workforce — up to 60 per cent — would be better off if they were paid minimum award rates”.

Days later, the full bench handed down a decision. It noted that Vickers’s case was “fundamentally based” on “erroneous approval” of an EBA due to “misleading conduct on the part of Coles”. No company sends an EBA out to the workforce to vote on unless it has been costed and signed off prior. The decision says it is “reasonably arguable” that Coles should have known the EBA would underpay workers.

When companies lodge an EBA with the FWC they have to sign a statutory declaration swearing that every worker will be “better off overall” under the EBA. Coles has been ordered to provide Vickers with all documents that informed its decision to lodge the EBA as well as the documents relating to that declaration. In addition, all documents that led to the “belief as to the truth and accuracy of the statutory declaration” signed by a Coles executive must be produced, “in particular with respect to the answer to question 3.6 Do you think the agreement passes the better off overall test?”.

The Coles EBA will be terminated, that much is a given. What is unknown is how much further this case will go. A conspiracy to defraud the workforce may have occurred. The FWC may have been deliberately misled into giving its approval to an EBA that breached the Fair Work Act. Prosecutions may result.

For Coles, the backpay bill could be anywhere from $0 to $500m but $300m seems a reasonable estimate. To put that figure in context, last year the Wesfarmers group reported a net profit of $407m.

Then there is the impact of the increased wages, as well as the wider impact on the retail and fast-food sectors. According to industry insiders, there are at least 50 more dodgy EBAs, just like the Coles one, and all of these EBAs are in use by large companies. These would be wise to self-identify and terminate or take the risk that one of their employees is inspired by Vickers and applies the blowtorch in a very public way.