Symposium: State Systems of Industrial Relations

Why the states matter in industrial relations

Marian Baird, The University of Sydney
Bradon Ellem, The University of Sydney
Chris F. Wright, The University of Sydney


Since the federal election of 2004, and particularly since the Coalition gained outright control of the Senate from July this year, industrial relations policy has been centre stage. The Howard government’s focus on industrial relations is further evidence of some fundamental shifts—and paradoxes—in government in Australia today.

The key shift is the transition of ideology and practice from traditional liberalism—where the competing objectives of employers and employees, manifested through trade unions and other third parties, are both legitimate—to ‘neo-liberalism’—where, in the name of market efficiency, the objectives of management are paramount, with little or no room for other interests. Thus ‘free market’ ideals, such as curtailing the activities of unions and tribunals in regulating wages and conditions, are ascendant. In practice, however, Australian governments ‘talk the talk’ of the free market but are highly activist: the paradox of ‘state intervention in the name of market forces’ (Bell & Head 1994, p. 21).

From 1991 to 1996 most state governments reduced union power and the role of arbitration.

We also face a commonwealth government dominated by the Liberal Party, which seeks to centralise power and to crush the power of the states in industrial relations. The government plans do so not by ‘unifying’ the traditional arbitral laws but by replacing them with something entirely different, based on corporation laws. This turns on its head the history of the Liberal party which, since its inception 60 years ago, has typically been the champion of ‘states’ rights’.

At the same time another historic shift is taking place. The national conciliation and arbitration system enacted in 1904 certainly had its flaws but, overall, it fitted with Australia’s reputation as a progressive ‘social laboratory’, if not quite a ‘workers’ paradise’. Australia is once more a social laboratory—but this time a regressive one, as the Commonwealth seeks to enact laws that reduce workers’ rights in a way that is out of line with standards in comparable countries.


So, why is this Commonwealth government so intent on taking over the states’ industrial powers? The answer of course is in the title of our paper: because the states matter. And they matter because, since 1991, their policies have been different from the policies of the federal government. From 1991 to 1996, with a Commonwealth Labor government in power, most state governments reduced union power and the role of arbitration. Since 1996, with the Coalition in power in the Commonwealth, every state government has, to some extent or another, ‘re-collectivised’ industrial relations law. That is, while the Commonwealth has enabled employers under their jurisdiction to bypass unions to negotiate directly with individual employees and curbed the ability of unions to organise, the states have reaffirmed the collective bargaining process and the role of unions.

So the states have, in the recent past, been different from the Commonwealth. But they have also been fragmented: within both periods (that is, before and after 1996) not all the states, even under the same political party, had like laws. The ‘Liberal-National states’ in the early to mid-1990s varied from each other; so did the ‘Labor states’ after that (for overviews, see Nolan 1998; Deery & Mitchell 1999). And why have the states themselves not sought to ‘harmonise’ their labour laws—in a sense ‘against’ the Commonwealth? There are, of course, many answers in the real world of politics and electoral cycles. But an underlying reason is that economies, power and politics are state-specific.

The states’ assault, 1991–96

At the Commonwealth level, decentralisation of industrial relations (that is, the encouragement of enterprise and individual bargaining and the downplaying of arbitration) and decollectivisation (that is, reducing union rights) began while the Labor government’s policies were being framed by the Prices and Incomes Accord between ALP and the Australian Council of Trade Unions (ACTU) (1983–96). Although the Accord involved a process of ‘managed decentralism’ (with a two-tier wage-fixing system introduced in 1987), arbitration and union rights were retained (McDonald & Rimmer 1989). The Industrial Relations Reform Act, 1993 allowed for non-union collective bargaining through Enterprise Flexibility Agreements but these agreements were little used; nor was the Commonwealth tribunal done away with (Cooper 2005). In short, this period of change decentralised, without decollectivising, the regulation of industrial relations. By contrast, in all the states except one (Queensland), the changes were quite different to this.

Victoria’s break from the collective model was more radical.

New South Wales was the first state to change. The Industrial Relations Act, 1991, which passed into law towards the end of the Liberal-National Coalition’s first term in office, set out to shift industrial regulation to what the Act called an ‘enterprise focus’. It was ‘liberal’ in the sense that the parties themselves would decide about the role of a third party. The key changes were that individual employees could be recognised before the Commission and non-union ‘enterprise-based bargaining units’ could be established for the purposes of collective bargaining (McCallum 1998).

Victoria’s break from the collective model was more radical. Soon after its election in 1992, the Liberal-National Government introduced the Employee Relations Act, which cut off access to tribunals unless both employers and workers or their unions agreed to it. All Victorian awards were abolished. Collective or individual agreements would take their place. However, unions had a way out. If they were able to ‘flee’ the Victorian jurisdiction to the national scale, they could gain a federal award. The Commonwealth Labor Government facilitated this process through the Industrial Relations Reform Act, 1993 (Pittard 1998).

In Tasmania, the legislation sat somewhere between that introduced in New South Wales and Victoria. Among other changes, the main amendments to the Industrial Relations Act made by the newly elected Liberal Government in 1992 were the removal of all provisions for preference to unionists, restriction of union right of entry provisions, and provision for enterprise agreements (Garnham 1998).

In 1993 the Western Australian Liberal-National Party Coalition Government introduced laws which radically curbed the power of unions and the state Industrial Relations Commission. The Workplace Agreements Act allowed for individual agreements to be made outside the jurisdiction of the Commission, replacing the conditions set in collectively negotiated awards. The centrepiece was the individual contract, the Workplace Agreement which, under the Minimum Conditions of Employment Act, 1993, had to satisfy the Commissioner for Workplace Agreements. The powers of the Western Australian Industrial Relations Commission were reduced; typically, individual agreements were very brief (Wallace-Bruce 1998; Ford 1999). The legislation was promptly used by employers in key industries to de-unionise, notably in mining by Hamersley Iron in 1993.

The rolling back of arbitral and union power in the states concluded in South Australia in 1994, under a Liberal government elected in 1993. The Industrial and Employee Relations Act combined elements of conciliation and arbitration with collective, enterprise-based agreement making. While the Act did not provide an opportunity to individualise the employment relationship, the legislation did limit union power to organise and represent workers and widened the scope for non-union bargaining (Reitano 1995; Stewart 1998).

New South Wales was the first to change its laws, just as it had been in the early 1990s.

In 1996, on the eve of the election of the Howard Government at the commonwealth level, a minority National-Liberal Coalition won office in Queensland. The state’s Workplace Relations Act, 1997 was thus the one piece of legislation in line with national policies. It closely followed the Commonwealth Workplace Relations Act. Elsewhere, Labor Governments swam against the tide (De Plevitz & Bamber 1998; Creighton & Stewart 2005).

The states ‘recollectivise’, 1996–2005

Following the election of a Coalition government in March 1996, the Commonwealth’s Workplace Relations Act was the biggest change to the national labour law since the inception of arbitration 92 years earlier. It introduced individual contracts, reduced the role of the Australian Industrial Relations Commission, restricted awards to twenty allowable matters and curbed union access and power, while making it easier to conclude non-union collective agreements. At the same time, the government set out to wind back union influence and egged on employers to do so in many areas—the waterfront, abattoirs, the car industry, construction, and universities.

But what of the states? Their approach was different.

New South Wales was the first to change its laws, just as it had been in the early 1990s. A year after its election win of 1995, the Labor Government introduced the Industrial Relations Act, explicitly recognising the value of collective organisations of employees and employers. This legislation maintained awards as important instruments of regulation and continued to allow for enterprise agreements to be made between employers and the relevant unions or employees directly. But the Act was written to encourage collective bargaining (Shaw 1996, 1997; MacDermott 1997; McCallum 1998).

In Victoria, the key to understanding policy lay, once again, in the relationship between the Commonwealth and the state. On 11 November 1996, after Labor had lost office federally, the Victorian premier announced that the Government would cede its industrial relations to the Commonwealth—there would be no tribunals solely within the state of Victoria. When Labor won office in Victoria in 1999, there was change again, but it was some time in coming and it did not constitute a return to the old framework. Confronted with a hostile upper house during its first term, the Labor Government did not seek to re-establish a Victorian industrial relations jurisdiction. However, in 2003, the Victorian Parliament passed legislation that extended the coverage of Commonwealth awards over Victorian employees (Pittard 1998; Riley 2001; Riley 2004; Creighton & Stewart 2005).

After serving only one term in office, the Queensland National-Liberal Government was defeated at the 1998 election. The new Labor Government soon introduced the Industrial Relations Act, thus restoring some of the collective and union aspects removed by the previous legislation. Awards were no longer restricted to twenty matters; employees could be encouraged to join unions; and individual agreements came under greater scrutiny. The bodies established by the Coalition to oversee individual agreements were abolished and their functions were vested in the Queensland Industrial Relations Commission (Creighton & Stewart, 2005; see also Margaret Lee’s contribution to this Symposium).

Economies, power, and politics are state-specific.

The Tasmanian framework was also altered after the election of a state Labor Government in 1998, again in opposition to national trends. In 2001, the legislation was amended to restore some right of entry to unions and to ensure that awards and union industrial agreements were central to the regime. There was no return to pre-1992 arrangements but there was some winding back of the trend towards non-unionism, in that non-union enterprise agreements were made more difficult to certify than union agreements (Riley 2002; Creighton & Stewart 2005).

Western Australia had been the only state to match the force of Victoria’s attack on arbitration and unionism. It became the site of intense struggle again after the conservatives lost office in 2001. The Labor Government soon introduced the Labour Relations Reform Act, through which it endeavoured to re-introduce a more collective approach to industrial relations and replaced Western Australian Workplace Agreements with Employer-Employee Agreements These individual contracts were made more employee-friendly and could not be made if an industrial agreement was already in place covering the relevant employee, thus limiting the extent of individualisation. But the response from employers was to seek individual agreements under the federal jurisdiction; they ‘fled’ the state (Riley 2003; Todd et al. 2004).

Following the election of a Labor Government in 2002, South Australia reviewed its industrial relations legislation. After much delay, the parliament passed the Industrial Law Reform (Fair Work) Bill in March 2005. This legislation specified that the Industrial Relations Commission establish a minimum wage and review it annually. The Act extends minimum employment standards across the workforce, and the parties to an enterprise agreement are required to bargain in good faith (Creighton & Stewart, 2005; Workplace Express 2005).


Earlier, we said that economies, power, and politics are state-specific. This is perhaps an obvious point, but it is important for understanding the policy developments we have just summarised. Just as commonwealth institutions affect how ‘global’ forces play out (Wailes 2002), so too do state institutions. Differences in industrial relations policy can be explained in terms of the mobilisation of power at the intersection of economy and state, and so attention should be directed to the effectiveness of particular institutions and lobby groups in the states. Institutions act in ways which vary from one state to another, and the relative power of these institutions can have considerable influence over government policy.

This argument may not be revolutionary, however the effects of institutional power are insufficiently analysed at the state scale. Two ‘unalike’ states, New South Wales and Western Australia, effectively illustrate this point. The legislation enacted in these states was very different in the 1990s and early 2000s. They also have very different economies: New South Wales, the most populous state and with the most diverse economy; Western Australia, the quintessential ‘resource state’ and also one with a significant small-business sector and with a relatively small population across its vast space.

In New South Wales, unions, through the peak body Unions NSW (formerly the Labor Council of NSW), have had more impact upon state Labor than, at the commonwealth scale, the ACTU has had on the Labor Party. There are good institutional reasons to think that unions will have less impact at the national scale, given that affiliation to the party is at the state scale. However, unions in New South Wales certainly exert more influence than their colleagues in Western Australia do over Labor governments there, and arguably hold more sway than state labour movements anywhere else in Australia. Turning to employers, it could well be the case that in New South Wales, employer power, reflecting the complex structure of a diverse economy, is more fragmented than either union power or employer power in Western Australia. No one employer group, for instance, speaks with the single voice that Unions NSW does within New South Wales.

There are good reasons to think that unions will have less impact at the national scale.

In Western Australia, some powerful forces are very obviously involved in policy-making. Employers, most notably the mining companies and their employer association, seem to have more power within Western Australia than they do in states with more diverse economies. When Labor introduced change in 2002, the mining companies simply found ways around it. For example, the world’s two biggest resource companies, Rio Tinto and BHP-Billiton, simply refused to use the new state individual contracts, shifting to the Commonwealth to maintain greater managerial prerogative in their employment arrangements (Ellem 2004; Todd et al. 2004). It seems clear that one of the problems of the Western Australian Labor Government in preventing the employers’ exodus to the federal jurisdiction is that Labor has not been sufficiently embedded with the powerful mining sector to gain support for their policies. These differences in state economies and in the organisation of employers and labour explain why Western Australia is different from other states and why the policies of the state’s Coalition and Labor parties were both different from their equivalents in New South Wales.

Industrial relations institutions (unions, employers, employer associations, and governments themselves) therefore have state-specific power, and how they mobilise this power affects industrial relations policy. In other words, industrial relations institutions act in ways which vary from one state to another, and the relative power of these institutions will have different levels and forms of influence over policy-making. This means that close attention should be directed to the effectiveness not only of governments, but also non-state institutions and lobby groups within the states. This is an important area for further research. It is important to try to explain many variations: between employer and union power in one state, between states, and also between all states and the Commonwealth.


State level industrial relations systems have—so far—endured. In 2005, as Australia’s Commonwealth Government prepares to use its parliamentary dominance to sequester virtually all jurisdiction that the states have over industrial relations, all those states (with the possible exception of Victoria) retain their own regulatory regimes. Legislation has varied greatly between the states and there are quite significant differences between the policies produced by the same political party in different states. The significance of the states is underscored by the fact that no Commonwealth government, be it Labor or the Coalition, can claim to be the author of the most comprehensive legislative changes of the recent past. Thus far, this distinction must go to Labor in New South Wales (1996) and to the conservatives in Victoria (1992) and Western Australia (1993). It appears that the state Labor governments are now providing the checks and balances in a federal system, which is curious, because this has been so central to the liberal tradition and was once so antithetical to labourism. This brings us back to where we began: the states still matter and, because they do, the neo-liberals seek to destroy their industrial powers.


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Marian Baird is a senior lecturer in the School of Business at The University of Sydney. She has studied industrial relations for many years and her current research focus is women and work. She is currently undertaking a major study of parental leave and gender equity in Australian organisations.

Bradon Ellem is an Associate Professor in the School of Business at The University of Sydney. His major area of work examines changing geographies of industrial relations. His most recent books are Hard Ground: Unions in the Pilbara and the jointly edited Peak Unions in Australia: Origins, Purpose, Power, Agency.

Chris F. Wright is a research assistant and senior tutor in the School of Business at The University of Sydney. He is particularly interested in the role of the state in industrial relations. Along with a number of other researchers, Chris is currently working on an eight-country study investigating the impact of globalisation on employment relations in the automotive and banking industries.