Symposium: State Systems of Industrial Relations

The encroaching federal industrial relations system

David Chin

On 26 May 2005 the Prime Minister of Australia announced the Federal Government’s intention to use its formal Senate majority to implement what he called ‘an historic modernisation of Australia’s workplace relations system’ (Howard 2005).

Industrial relations has been a source of frenetic legislative activity for the Howard Government.

The trade union movement, business interests and various commentators in the media reacted in a storm of controversy and speculation about the shape and implications of the Government’s industrial relations plan. Is it a radical revolution designed to cut costs and raise profits by undermining employees’ working conditions? Or is it merely an evolutionary step in achieving a simpler, more flexible and productive relationship between employees and employers (Robb 2005)?

Industrial relations has been a source of frenetic legislative activity for the Howard Government since it implemented the Workplace Relations Act (WRA) in 1996. The WRA has been amended significantly at least seventeen times. The Government has tried unsuccessfully to further amend the WRA by introducing at least 25 bills; with an additional seven bills currently before Parliament. In all, since 1996, about 50 separate attempts have been made to change the WRA.

One thing has been clear throughout. The Government’s legislative initiatives have been aimed squarely at excluding trade unions from the workplace, by encouraging employers to impose ‘individualised’ employment agreements instead of collective bargaining and industrial award-making. This approach has been described as ‘the most contagious and virulent industrial relations disease of the late twentieth century in the common law jurisdictions’ (Hendy & Walton 1997). In light of the present reform proposals, it seems that in the early 21st century the state of Australia’s long-standing systems of industrial conciliation and arbitration, in which fair and reasonable work conditions are set by independent industrial tribunals making awards and approving collectively negotiated agreements, may be in terminal decline.

This should arouse alarm, particularly among non-unionised employees and responsible employers. Independent empirical research on individualised workplaces in Britain and Australia (that is, workplaces with minimal union presence and a majority of the non-managerial workforce employed on individual employment contracts) has found that they demonstrate very little evidence of actual negotiation between employer and employee. These workplaces lack both procedural fairness for employees and mechanisms for voicing their concerns, and are marked by very high levels of employee turnover (Deakin 1999; Deery & Walsh 1998; Deery & Walsh 1999; Deery, Walsh & Knox 1999; Mitchell & Fetter 2002). In a recent submission to a Senate inquiry, Professor Andrew Stewart has usefully summarised the results of objective analysis of actual agreements. He concluded that workers on statutory individual employment agreements known as Australian Workplace Agreements (AWAs) are generally paid less than comparable workers on union-negotiated agreements (Stewart 2005, p. 4).

Meanwhile, the number of AWAs approved by the Office of the Employment Advocate (OEA), which was created largely for this purpose, has proceeded apace. From a modest start of 5000 as at December 1997, by July 2005 the number of approved AWAs has grown to 709,000 covering 13,700 employers, and with an annual average growth rate of over 39 per cent (OEA 2005, p. 5).

The Government intends to establish a single set of national laws on industrial relations.

The full impact of the Government’s reforms will not be known until the detail of the legislation is made available later in the year. However, a close look at the Howard Government’s legislative agenda since 1996 serves two purposes. First, it exposes the recent reform proposal as the culmination of a persistent policy objective of marginalising unions by promoting individualised workplaces, and a creeping tendency in recent years to intrude upon State industrial jurisdictions. Second, it provides a reasonable guide as to what can be expected to emerge from the detail of the Government’s imminent industrial reform legislation.

THE PROPOSED UNITARY INDUSTRIAL SYSTEM

The Prime Minister’s announcement in May, and more recent comments by the Chairman of the Government’s Taskforce on Workplace Relations Reform, Andrew Robb, reveal five key elements to the proposed reforms.

First, the Government intends to establish a single set of national laws on industrial relations using the Corporations power in the Australian Constitution. Federal legislation will establish four minimum employment conditions relating to annual leave, personal leave, parental leave and a maximum number of ordinary working hours, to be known as the ‘Australian Fair Pay and Conditions Standard’.

Second, a new body to be named the Australian Fair Pay Commission will periodically set the single adult minimum wage, replacing the present minimum safety net wage adjustment function of the Australian Industrial Relations Commission (AIRC).

Third, the process for making and approving AWAs will be ‘streamlined’ and AWAs will be subject to a new ‘test’, namely, whether they meet the ‘Australian Fair Pay and Conditions Standard’ comprising the four statutory minimum conditions referred to above, as well as the minimum wages set by the Australian Fair Pay Commission. This replaces the current ‘no disadvantage test’ under which AWAs can generally only be approved if they do not reduce the overall terms and conditions of employment of those employees under a relevant federal or state award and any other relevant federal or state law. The term of AWAs will also be extended from three to five years.

Fourth, federal awards made by the AIRC will be further simplified by removing jury service, notice of termination, long service leave and superannuation provisions. The Government will appoint a committee to further review and simplify other award provisions.

Fifth, employers with up to 100 employees will be exempt from the federal ‘unfair dismissal’ regime; but employees of these businesses will still have access to the ‘unlawful termination’ provisions that prohibit termination on specific grounds such as race, gender, and trade union membership.

THE GOVERNMENT’S RECORD

The common description of the Government’s proposed unitary system as a ‘second wave’ of industrial reform is a misnomer. It is, more accurately, a ‘fourth wave’.

Between 1996 and now, consistent threads of policy have emerged.

After implementing the WRA in 1996 (first wave), the then Minister for Workplace Relations Peter Reith introduced an omnibus bill called the Workplace Relations Legislation Amendment (More Jobs, Better Pay) Bill 1999. This bill set out a comprehensive blueprint of the Government’s ambitions for workplace relations reform including further attenuating the content of awards beyond the twenty ‘allowable award matters’ set out in the WRA, promoting AWAs, restricting the right to strike and unions’ right of entry into workplaces, and restricting access to remedies for unfair dismissal.

After the Senate rejected this bill, the Government abandoned the omnibus approach in favour of a piecemeal strategy that involved introducing several pieces of legislation over a number of years, with each bill resurrecting some components of the failed ‘second wave’ reforms. On attaining a formal majority in the Senate this year, the Government has evidently reverted to its ‘big bang’ approach to reform.

Throughout this period, consistent threads of policy have emerged.

Unfair dismissals

The Government has tried and failed to exclude employees of small businesses from accessing remedies for unfair dismissal on at least nine separate occasions.

The first attempt was the enactment of regulations under the WRA in July 1997 which were later disallowed by the Senate. The Government presented additional legislation to same effect in 1997 (twice), 1998 and 2001. These bills sought to exclude new employees of businesses that employed less than fifteen employees from making application for relief on the ground that their termination was harsh, unjust or unreasonable.

The More Jobs Better Pay Bill also attempted to broaden the range of employees who would be denied unfair dismissal rights. For example, an employee can only bring an action for unfair dismissal where their employment is terminated at the initiative of the employer. This includes the well established concept of ‘constructive dismissal’ where an employee may be regarded as having been dismissed when he or she leaves or ‘resigns’ in response to an employer engaging in conduct amounting to a fundamental breach or repudiation of the employment contract, but that is otherwise short of an actual or threatened dismissal (such as by failing to pay the agreed salary). The Government attempted to exclude employees who find themselves ‘constructively dismissed’ in many circumstances. In addition, the Bill sought to exclude employees who are dismissed on any grounds provided that one of those grounds includes the operational requirements of the employer’s business. This proposal would exclude employees who are dismissed for invalid reasons based on their conduct provided that the employer can show that another grounds for dismissal was the operational requirements of the business.

In 2001, the Government sought to exclude employees of businesses that employed up to twenty employees. This exclusion is proposed in a bill that is currently before Parliament.

Other attempts to undermine unfair dismissal rights have signalled the unitary and expansionist intentions of the Federal Government. In 2002 the Government introduced the Workplace Relations Amendment (Termination of Employment) Bill which sought to expand the Federal unfair dismissal regime to all employees of constitutional corporations.

The Government now intends to radically expand the ‘small business’ exemption from unfair dismissal laws.

Similarly, the current Workplace Relations Amendment (Small Business Employment Protection) Bill 2004 seeks to encroach upon the State jurisdictions by reversing a decision of the AIRC that removed an exemption for small businesses from redundancy pay obligations. It proposes exempting all constitutional corporations employing less than fifteen employees from redundancy pay obligations imposed by State laws and awards.

No doubt emboldened by the prospect of controlling of the Senate, the Government now intends to radically expand the ‘small business’ exemption to corporations that employ up to 100 employees.

AWAs, awards, and collective bargaining

Nowhere is the drive for individualisation of employment relations more apparent than in the Government’s treatment of AWAs, awards, and collective agreements.

Collective bargaining is a negotiating process where representatives of workers and employers endeavour to reach an agreement which governs the employment relationship between employers and all the employees covered by that agreement. This can be contrasted to individual bargaining which involves each employee acting alone and concluding an agreement in isolation from their fellow workers.

The central role of trade unions in collective bargaining reflects the inherent imbalance of bargaining power between individual workers and their employers. This imbalance can be attributed to the usual disparity of economic capacity between an employer and an individual employee.

The raison d’etre of the arbitration system in Australia has been to ameliorate the effects of the power imbalance inherent in the individual employment relationship. For most of its history, our arbitration system achieved this primarily by acting as an impartial umpire that sets fair and reasonable wages and conditions of employment through the instrument of comprehensive industrial awards. It has long been recognised that unions and employers in Australia have had collectively bargained agreements made by industrial tribunals as consent awards.

The political compromise which tied AWAs to the ‘no disadvantage test’ might have been regarded as part of an effort to achieve a new, individualised culture in workplace relations rather than as a crude attempt to gain quick profits through cutting labour costs (Mitchell & Fetter 2002, p. 28); although Professor Stewart, among others, has doubted the proper application of this test given the OEA’s ‘evangelical’ approach to the promotion of AWAs (Stewart 2005, pp. 4–5).

AWAs may abolish common award rights such as overtime and weekend penalty rates.

But as we have seen, the Howard Government now intends to allow AWAs to descend below the overall floor of minimum terms and conditions of employment enshrined in awards made by an independent industrial umpire. This means that AWAs may abolish common award rights such as overtime and weekend penalty rates, shift allowances, meal allowances, annual leave loading, casual loadings, redundancy pay, and rights to study leave, to name a few.

Moreover, the Government has signalled that the ascendancy of AWAs will not end there. The proposal to ‘streamline’ AWA approvals invites close attention to the Government’s past reform attempts.

The Government has twice previously attempted to enhance the supremacy of AWAs by making new AWAs prevail over all pre-existing collective agreements. The WRA currently provides that pre-existing collective agreements can prevail over any subsequent AWA where there is any inconsistency.

Consistent with this approach, the Government’s past legislative proposals reveal a strategy of diluting the procedural safeguards for vetting AWAs and collective agreements, such as:

  • introducing a statutory presumption that AWAs meet the no disadvantage test for employees earning more than $68,000 per annum, and placing the onus on such employees to make a written request for the AWA be assessed;

  • investing the OEA (rather than the Commission) with the power to approve AWAs that fail the no disadvantage test if the Employment Advocate is satisfied that the AWA is not contrary to the public interest;

  • removing the requirement for the OEA to refer an AWA to the Commission if the Employment Advocate is concerned that the AWA fails the no disadvantage test;

  • introducing a one-step approval process for AWAs; and

  • dispensing with any requirement for a formal hearing in the Commission for the certification of collective agreements, including non-union agreements for which the onus is placed on individual employees to specifically request such a hearing.

Industrial action and trade union rights

The Government has taken a literal approach to union exclusion.

There has been a steady stream of legislation aimed at curtailing the right to strike and the right of union officials to enter workplaces. Beginning with the More Jobs, Better Pay Bill, through five subsequent bills and ending (so far) with the current Workplace Relations Amendment (Better Bargaining) Bill 2005, the Government has attempted to:

  • make it easier for employers to obtain orders preventing employees from taking and continuing industrial action (even to the extent where further industrial action is merely ‘reasonably possible’);

  • require complex secret ballots of union members as a precondition for taking protected industrial action (which is a limited form of industrial action that may be taken with immunity from common law prosecution);

  • prohibit unions from taking protected industrial action in pursuit of common outcomes across a number of workplaces or so-called ‘pattern bargaining’;

  • ensuring that protected industrial action cannot be taken during the life of a certified agreement; and

  • allowing the suspension of the period during which protected action may be taken after fourteen days have passed since the industrial action began in order to impose a ‘cooling-off’ period during which parties may attempt to settle the matters at issue; thus denying unions the ability to threaten prolonged industrial action.

The Government has also taken a literal approach to union exclusion. It has attempted to introduce a wide range of grounds for refusing to issue a union official with a permit to enter workplaces, such as if the official has not received appropriate training in the rights and obligations of permit holders, and if the official’s union has ever been ordered to pay a civil penalty concerning the official’s conduct. There has also been a proposal to make union entry into a workplace conditional upon a written invitation from a union member, and also upon the employer’s satisfaction that the union has provided adequate particulars of any suspected breach of an industrial instrument.

CONCLUSION

It is impossible to discern any semblance of impartiality in the Howard Government’s legislative record in workplace relations. Its record amply demonstrates a persistent attempt to reduce the power of trade unions. The Government has doggedly pursued this objective with a steady flow of legislation that both directly constrains the actions of unions (such as limiting the scope for industrial action and right of entry into workplaces) and that undermines the essential instruments with which unions are able to exert influence in the workplace (such as collective agreements and awards).

There is good reason to anticipate that the Government will attempt to use its formal majority in the Senate to resurrect many of its legislative initiatives that have so far failed to pass, either as part of its initial reforms or at a later stage. After all, it has done so in recent times even without a majority in the Senate.

The key element is the proposal to abolish the no disadvantage test for AWAs.

Based on this record I highlight some potential, though so far unspoken, elements of the Government’s reform agenda. The supremacy of AWAs is likely to be further enhanced by making new AWAs prevail over all pre-existing collective agreements, and by diluting the procedural safeguards for vetting AWAs and non-union collective agreements. The individualisation of the workplace may be encouraged by further curtailing the right to take industrial action in support of union-negotiated collective agreements. Finally, unfair dismissal rights may ultimately be denied to a broader range of employees irrespective of the size of their employer.

The proposed unitary industrial system represents a dramatic escalation in the process of individualisation and union exclusion. The key element is the proposal to abolish the no disadvantage test for AWAs. Employers and employees have always had the freedom to bargain individually above and beyond minimum award conditions through common law contracts. The introduction of AWAs enabled employers to transcend particular award provisions provided that there was no disadvantage to the employee in their overall terms and conditions of employment. The abolition of the no disadvantage test contributes nothing more than the unprecedented ‘freedom’ of employers to present employees with terms that are wholly inferior to employment benefits that have been protected by awards made in both the State and Federal industrial systems for over 100 years.

As a consistent step in the march of the Howard Government’s legislative agenda, these reforms may be regarded as evolutionary. But the consequences for Australian society are revolutionary because, for the first time, the collective safety net will be breached.

REFERENCES

All legislation cited in this article is available online: http://www.workplace.gov.au/workplace/Category/Legislation/WRAct/.

Deakin, S. 1999, ‘Organisational change, labour flexibility and the contract of employment in Great Britain’, in Employment Relations: Individualisation and Union Exclusion, eds S. Deery & R. Mitchell, Federation Press, Sydney, pp. 130–152.

Deery, S. & Walsh, J. 1999, ‘The character of individualised employment arrangements in Australia: A Model of “Hard” HRM’, in Employment Relations: Individualisation and Union Exclusion, eds S. Deery & R. Mitchell, Federation Press, Sydney, pp. 115–128.

Deery, S. & Walsh, J. 1998, The character of individualised employment arrangements in Australia: Unitarism, Unilateralism and Utilitariansim, Department of Management Working Paper No. 10, The University of Melbourne [Online], Available: http://www.management.unimelb.edu.au/Research/papers/wpdm10.pdf [2005, Aug 23].

Deery, S., Walsh, J. & Knox A. 1999, The non-union workplace in Australia: Bleak House or human resource innovator?, Department of Management Working Paper in Human Resource Management, Employee Relations and Organisational Studies No. 2, The University of Melbourne [Online], Available: http://www.management.unimelb.edu.au/Research/papers/wph2.pdf [2005, Aug 23].

Hendy, J. & Walton, M. 1997, ‘An individual right to union representation in international law’, Industrial Law Journal, vol. 26, no. 3, pp. 205–223.

Howard, J. 2005, Transcript of the Prime Minister the Hon John Howard MP Address to Parliament: Workplace Relations Reform, Parliament House, Canberra [Online], Available: http://www.pm.gov.au/news/speeches/speech1446.html [2005, Aug 30].

Mitchell, R. & Fetter, J. 2002, Human resource management and the individualisation of Australian industrial relations, Centre for Employment and Labour Relations Law Working Paper No. 25, The University of Melbourne [Online], Available: http://www.law.unimelb.edu.au/celrl/assets/Working%20Papers/celrl-wp25.pdf [2005, Aug 23].

OEA, Office of the Employment Advocate 2005, Submission to Senate Employment, Workplace Relations and Education References Committee Inquiry into Workplace Agreements, Sydney, 12 August [Online], Available: http://www.aph.gov.au/Senate/committee/eet_ctte/indust_agreements/submissions/sub019.pdf [2005, Aug 25].

Robb, A. 2005, Workplace Relations Reform—The Federal Government’s Perspective, address by Andrew Robb MP to the ‘Australian Industry Group’ Forum, Sydney, 22 August [Online], Available: http://www.andrewrobb.com.au/news/default.asp?action=article&ID=78 [2005, Aug 31].

Stewart, A. 2005, Submission to Senate Employment, Workplace Relations and Education References Committee Inquiry into Workplace Agreements, Sydney, 8 August [Online], Available: http://www.aph.gov.au/Senate/committee/eet_ctte/indust_agreements/submissions/sub012.pdf [2005, Aug 25].

David Chin is a Sydney Barrister specialising in employment law. This is an edited version of a paper presented at a symposium, The State Systems of Industrial Relations: Past, Present and Future, held by the Business and Labour History Group in the School of Business at The University of Sydney on 26 August 2005.