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Restructuring: The Industrial Risk

The transitioning economy has resulted in restructuring of the workplace and market adjustments to wage outcomes. This has resulted from lesser demand particularly in the contracting sector and overall tight margins in general industry.

This transition has been against the background of high wage legacies in terms of enterprise agreements and salary arrangements from the resources boom. This has resulted in terminating some provisions and creating market driven outcomes for enterprise agreements and salary arrangements.

The Department of Employment data shows that the Fair Work Commission terminated 416 agreements in the first three quarters of 2016, up from 275 in 2015 and 156 in 2014, with half of the terminated agreements in construction and manufacturing. Interestingly, union agreements accounted for 61% of agreement terminations. The figures also show that about two-thirds of the 847 terminated agreements had been made since 2009 under the Fair Work Act (Cth), rather than Labor's transitional laws, the Coalition's Work Choices or the former Workplace Relations Act.

Where the practice of terminating ‘unsustainable’ enterprise agreements is not pursued or is unavailable due to industrial factors, many employees often look to the substitution of labour. The substitution of an existing workforce with a lesser wage subcontractor or labour hire workforce is a contentious issue. The recent CUB dispute involved the termination of a direct CUB labour hire workforce in Victoria. This dispute involved an industrial campaign of 180 days consisting of pickets, private hearings in the Fair Work Commission and publicity campaigns coordinated by the union movement. In that regard, it has been a public relations and industrial relations disaster for CUB. There are other campaigns that have recently been undertaken by the union movement for similar matters including McCain (food processing), Esso (resources) and AGL (energy).

There is clearly an industrial relations campaign being run by the union movement in respect of this issue. The utilisation of contractors or labour hire providers is likely to result in the dislocation of employees and has the propensity to attract industrial relations attention by unions. This potential action can create ‘brand damage’ and operate to reinforce the current arrangements. Similarly, the initiation of enterprise agreement variations or terminations will attract industrial relations attention by unions. Therefore, a well-considered strategy in implementing such change will need to be developed.

If you have any queries or would like more information regarding restructuring your workforce or industrial arrangements, please contact Drayton's on 07 3831 7099 or

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