IR Reforms To Close Off The ‘Nuclear Option’ Will Protect Wages and Entitlements

by Lily Raynes

New research from the Centre for Future Work quantifies the dramatic risks faced by workers whose employers unilaterally terminate enterprise agreements during the course of renegotiations. This aggressive employer strategy, which became common after a precedent-setting 2015 court decision, would be curtailed by new industrial relations legislation proposed by the Commonwealth Government.

The paper reviews one dramatic example of this termination threat – dubbed the ‘nuclear option’ by labour law experts (because it ‘blows up’ years of collective bargaining embodied in existing enterprise agreements). Earlier this year, Qantas threatened termination of the EA covering its international cabin crew unless they accepted significant contract concessions.

The new report confirms that losses from termination, if it had gone ahead, would have been enormous for the affected workers:

  • Hourly wage cuts between 25% and 70%
  • Annual income losses up to $67,000 for the most senior staff
  • Loss of superannuation contributions and investment income, totalling as much as $130,000 and dramatically reducing retirement incomes
  • Painful retrenchment of many working conditions issues (including rest periods and accommodation)

From the company’s perspective, termination of the EA for just this group of its staff would save $63 million per year, and up to $1 billion over 15 years.

This threat, backed up by an application for termination lodged with the Fair Work Commission, was sufficient to convince cabin crew staff to accept a new EA containing a two-year wage freeze, real wage cuts, and other compensation and conditions reductions. Staff had earlier voted 97% to reject that agreement. This reversal confirms the termination threat is a very powerful bargaining lever for employers.

“The scale of the losses experienced by Qantas staff as a result of termination would have been catastrophic,” said Lily Raynes of the Centre for Future Work, co-author of the report.

“It would undermine their quality of life for the rest of their careers, and indeed right through their retirement,” Ms Raynes said.

“The ability to credibly threaten termination, even as workers are trying to negotiate a replacement EA, provides a powerful advantage to employers,” said Jim Stanford, Director of the Centre for Future Work and the other co-author. 

“It shifts the playing field decisively in employers’ favour and has been a major factor in the rapid erosion of collective agreement coverage over the past decade,” Dr Stanford said.

“Qantas ruthlessly took advantage of this loophole in labour law to threaten cabin crew staff and impose terms and conditions that are blatantly unfair, given this company’s power and profits,” said Teri O’Toole, Federal Secretary of the Flight Attendants’ Association of Australia (one of the unions representing cabin crew at the airline). 

“Qantas, and other greedy companies, will keep doing this unless the legislation is changed,” Ms O’Toole said.

The report recommends reforms to the Fair Work Act to limit employers’ ability to apply for unilateral termination during renegotiations. Current legislation in Parliament (the Secure Jobs, Better Pay Bill) would put new restrictions on employers’ ability to terminate EAs during renegotiation.

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