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Two Bob's Worth
TWO major developments in Australian business in recent week - the crisis in the car manufacturing industry, triggered by supply firm Ajax Fastener's parent company entering into administration; and Amcor's restructuring announcement, with the loss of 200 jobs - have focused attention on the vulnerable position of Australian workers in corporate insolvencies and restructures.
Ajax employees had to occupy the factory to ensure their interests were considered in talks over the company's future between the administrators, major car companies and other businesses in the supply chain. Why did the workers have to take such extreme measures? Because workplace and company laws in Australia provide them with few rights to be informed and heard when companies face insolvency, or restructure their operations through closures, relocations or retrenchments.
Employers have some legal obligations to consult with unions about mass redundancies, but the WorkChoices amendments have significantly narrowed these provisions. Further, the Industrial Relations Commission has been removed as a forum for resolving these types of disputes.
Under the corporate law framework, employees are treated as unsecured creditors with minimal opportunity to influence the outcome of administration processes. The general employee entitlements and redundancy scheme offers limited protection (although the Government's announcement this week of a doubling in the maximum amount of redundancy pay under GEERS to 16 weeks is welcome).
In contrast, the industrial relations systems of many European countries ensure that workers' democratic rights of participation in decision-making do not stop at the factory gate or the office door. In Germany, these rights are reflected in the legal provisions for information, consultation and negotiation over business restructuring issues through "works councils":
· German law requires companies with more than 20 employees to disclose to the works council proposals for "substantial alterations" to the business, such as reduced production, transfers, closures, mergers of business units, changes to technology or production processes, or redundancies - anything that could entail "substantial prejudice" to the employees.
· Management and the works council then have to negotiate a "reconciliation agreement" about the proposals, dealing with the extent and timing of the changes or whether they should occur at all.
· If changes to the business are to proceed, then a "social plan" must be implemented - this could cover financial compensation for affected employees, longer notice periods before dismissal, or retraining programs.
· Where agreements cannot be reached, conciliation procedures apply, or ultimately, the Labour Court can make a ruling.
· In larger German companies (more than 100 employees), employees also have the right to regular provision of financial information about the business through the "finance committee" of the works council - including quarterly progress reports, and an explanation of the annual balance sheet.
The European Community's Information and Consultation Directive also provides employees with information and consultation rights in respect of proposed business restructures, although these are not as extensive as those operating under German law. Most importantly from an Australian perspective, Britain has recently implemented this EC directive.
Like Australia, Britain has not traditionally adopted formalised mechanisms for worker participation in firm decision making. However, business interests, unions and employees alike have embraced the concept of partnership in recent years in Britain - recognising its potential for delivering productivity gains for the enterprise, and job security and other benefits for employees.
The German, EC or British laws do not provide all the answers, and they would need to be modified to suit Australian circumstances. One option might be to adopt something like the German provisions for negotiation of a "social plan" when restructures are proposed, or insolvency threatens the viability of a business. In the latter case, employees could have the right to negotiate with the administrators.
These overseas laws at least provide a starting point for a much-needed debate, in light of WorkChoices' stripping away of the rights of Australian workers, about what a framework for restoring those rights should look like. At the core of that framework should be a recognition of the democratic rights of employees to participate in making decisions that fundamentally affect their interests.
Dr Anthony Forsyth is a senior lecturer and director of the Corporate Law and Accountability Research Group at Monash University's department of business law and taxation, and is an associate of the Australian Institute of Employment Rights.
This article first appeared in the Melbourne Age
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