The Law and the Labour Market

A South Australian View of Nauru House

Mark Schwartz

While I have no statistics with me I believe it is widely accepted that in recent years the proportion of the South Australian work force covered by Federal awards has decreased and the proportion of the South Australian work force covered by State awards has increased.

It has been suggested to me that it follows from this that the influence of the Australian Industrial Relations Commission ("the Australian Commission") over South Australia's industrial relations is also on the wane. The Australian Commission is of course, housed in Nauru House, Melbourne.

With respect, that view is not correct. Indeed, objectively the influence of the Australian Commission in extending its determinations on wages and working conditions well beyond the mere proportion of South Australian employees covered by Federal awards has never been greater.

Why? There are a number of reasons.

First, as a generalisation the influence of the big eastern State based Federal employer organisations and the big eastern State based Federal unions has probably never been greater.

Their big picture policies play a pivotal role in fixing the wages and working conditions for a vast number of industries and enterprises throughout Australia.

At the very least, the small South Australian enterprise and its small Federal award or awards covered work force has little or no input into the formulation of the wages and working conditions most appropriate for that workplace. Indeed, as will be seen, that proposition flows onto the small South Australian enterprise and its small State award covered work force. I do not consider it too large a leap to say the same can be said for larger South Australian enterprises.

Secondly, over recent years there has been much done to ensure what is called a "better fit" between the Australian Commission and various State Industrial Tribunals. Historically, of course, much has been made of the difficult interwoven Australian industrial relations framework. Traditionally it is said the difficulty arises from the Federal Government's limited powers to make laws in the area.

In South Australia the prime piece of industrial relations legislation is the South Australian Industrial Relations Act 1972 ("the State Act"). On the very point I have just mentioned, this legislation was called the South Australian Industrial Conciliation and Arbitration Act until a name change effective from 1 July 1991 brought it into line with the Federal Industrial Relations Act.

But the attempts to make the State Act even more complementary with the Federal Act go beyond this superficial name change.

For example, in the mid 1980's the State Act was amended so that:

• members of the State Commission could confer with their counterparts on the Australian Commission on matters of joint concern in order to secure co-ordination between awards.
• the President of the State Commission could refer matters to the Australian Commission for resolution.

These amendments were subsequently complemented by amendments to the Federal Act, enabling joint sittings to be conducted between the Australian Commission and a number of State Industrial Tribunals, including the State Commission.

Further, with effect from 1 July 1991, the State Act was amended to permit, with the Minister's approval, the holding of concurrent office under both the Federal and State Acts.

The last published report of Judge Brian Stanley, the President of the Industrial Court and Commission of South Australia, is for the year ended 30 June 1990.

In that report Judge Stanley noted that during the preceding year the State Commission had assisted the Australian Commission by hearing disputes referred to the State Commission by the President of the Australian Commission and he had, in turn, referred one matter within the State Commission's jurisdiction to be determined by a member of the Australian Commission, as in his opinion the dispute was best able to be handled by that Tribunal.

To return then to my second point, all of this is designed to overcome apparently uncomfortable consequences arising from the interwoven Australian industrial relations framework. At the same time, it further entrenches the Australian Commission's role at all levels of the industrial relations spectrum.

Thirdly, I turn to the State Commission. It is concerned with arbitral matters such as claims for increases in wages and improved working conditions and also the settlement of industrial disputes. It is trite to say so, but the State Commission regulates these matters by means of awards, industrial agreements and orders.

Section 36 of the State Act enables the full State Commission to flow onto State awards and industrial agreements decisions of the Australian Commission involving wages or remuneration, that is to flow on National Wage Case decisions.

More importantly, in addition Section 146b(1) of the State Act provides:

".. in arriving at a determination affecting remuneration or working conditions the Full Commission must have due regard to, and may apply and give effect to in whole or in part and with or without modification, any principles, guidelines, conditions, practices or procedures enunciated or laid down in, or attached to, any relevant decision or declaration of the Australian Commission."

Moreover under section 146b(2) the Full State Commission may on its own initiative or on the application of the Minister, the United Trades and Labour Council ("UTLC"), the State Chamber of Commerce and Industry or the State Employers Federation make a declaration adopting in whole or in part and with or without modification any principles, guidelines, conditions, practices or procedures referred to in subsection (1).

Section 146b is a 1983 amendment to the State Act intended to provide flexibility by allowing the Full State Commission to exercise its discretion having regard to local South Australian circumstances.

That is, the legislative frame work exists for the Full State Commission to regulate the wages and other working conditions having regard to particular considerations and needs of South Australia.

However, since 1983 the Full State Commission has consistently adopted the principles established in National Wage Cases with only minor modifications or additional principles.

I do want to spend a little time on the most recent example of this approach, that is the Full State Commission's July 1991 "State Wage Case" decision. On 15 May 1991 the State Chamber of Commerce and Industry and the State Employers Federation jointly filed an application in the State Commission seeking, pursuant to Section 146b, a declaration adopting with relatively minor modifications, the principles and guidelines promulgated by the Australian Commission in its April 1991 National Wage Case decision.

The application came on for hearing before the Full State Commission on 30 May 1991 when the UTLC applied for, and was granted, an adjournment of the proceedings to allow all interested parties to confer in relation to the principles to see if an agreed approach for the betterment of industrial relations in South Australia could be put to the State Commission. Discussions ensued and, unsurprisingly, impasse occurred. Hence, on 2 July 1991, the UTLC filed a separate application in the State Commission containing a set of principles which it requested should be adopted in lieu of those laid down by the Australian Commission.

The employer bodies then submitted that the State Commission should follow the policy that had been generally accepted over recent years of adopting the Australian Commission's principles in full with only those minor modifications necessary because of the different legislative framework within which the State Commission operates. They argued:

• that in line with previous State Wage Case decisions in recent years the State Commission should maintain as much consistency as possible between the principles of wage fixation which it establishes and those which operate in the federal arena within South Australia.
• that as approximately fifty percent of all employees in South Australia are bound by Federal awards, the contracts of employment of those particular employees had already had imposed on them that framework of wage principles.
• that to introduce a substantially different system for that part of the work force covered by State awards would cause industrial chaos and turmoil.
• that while they wished to see the Australian Commission's wage fixation principles introduced for the benefit of both employees and employers covered by State awards, they acknowledged that some individual employers or groups of employers and their employees may wish to enter into industrial agreements in the pursuit of structural reform.
• that nevertheless the acceptance of the Australian Commission's principles by the State Commission was most likely to provide industrial stability in South Australia, and be conducive to the betterment of industrial relations.

Counsel for the Minister supported the general flow-on of the principles established by the Australian Commission arguing that such a course was not only consistent with the general purpose and intent of section 146b of the State Act, but provided broad uniformity and consistency between the wage fixation principles which should operate in both Federal and State jurisdictions.

In its decision the Full State Commission acknowledged the current debate about the move from broadly based industry awards to enterprise based agreements or industrial agreements but said the issue had not yet crystallised. In summary, the Full State Commission said:

• that it is inappropriate for it to sit in judgment on the National Wage decision of the Australian Commission.
• that any attempt by it to drastically alter the character of the Australian Commission's National Wage Case decision would be likely to have damaging implications for the centralised system of wage fixation currently operating in Australia.
• that whether or not the centralised system should continue to operate is a matter open to debate, but the applications which were then before it did not provide either the appropriate forum or the opportunity to resolve that matter.
• that in the general interests of the community in South Australia it should not, without very good and adequate reasons, drastically depart from the decision of the Australian Commission in a National Wage Case for to do so would tend to cause industrial havoc due to the fact that approximately half the work force in the State are already bound by the Australian Commission's set of wage fixation principles.
• that equity suggests that all workers in South Australia should, as far as is possible, have their wages and conditions of employment governed by a similar set of rules.

My third point then is that there is no better example of the Australian Commission's determinations on wages and working conditions flowing far beyond those employers and employees covered by Federal awards than the provisions of Section 146b of the State Act and the expressions contained in the judgment I have just summarised.

Bearing in mind the existing Australian industrial relations framework discussed before, the particular objects of the State Act, the submissions made by the employer bodies, the Minister and indeed the UTLC, the Full State Commission's decision is hardly surprising. Indeed within the confines of the existing Australian industrial relations framework a decision not to pass on the Australian Commission's wage and work conditions determinations to State award employees would be to invite considerable industrial disputation and the odium of State employer bodies, the Minister and the UTLC.

Understandable though this decision is within the confines of the existing Australian industrial relations framework, what are the broader considerations for South Australians?

I cannot pretend to be as committed in my views on Australia's industrial relations future as I know so many of you are. Equally though I am a concerned and interested South Australian operating in the Industrial Relations and Employment area and I have, during the course of sixteen years of legal practice in an Adelaide commercial law firm, seen much of our South Australian corporate client base disappear or, more particularly, change dramatically in character as national or multi national concerns acquire local enterprises and management control moves to the eastern States.

Regrettably for all South Australians there has been an insufficient increase in new or expanded South Australian enterprises to fill all of the resultant gaps.

I appreciate that a number of factors bear on this position but surely wage costs are a factor.

Before pursuing this line of thought I give a brief, non historian non economist, view of South Australia. No doubt some with greater expertise in these areas may pick fault with it.

Prior to federation South Australia was to the fore in colony intervention in industrial relations.

So, in 1876 South Australia was the first colony to legislate for the legal recognition of unions.

In 1890 "a bill to facilitate the settlement of industrial disputes" was introduced into the South Australian Parliament and four years later a modified version was enacted setting up boards of conciliation in a restricted number of industries and trades with a view to having employers and employees agree about rates of pay and working conditions.

Post federation South Australia quickly adopted a position designed to mirror wherever possible what occurred at Federal level.

So, in 1912 South Australia established an Industrial Court which, like its Federal counterpart, had authority to make binding awards relating to wages and other working conditions and an ability to adjudicate in strikes and lock outs.

In 1916 this State Industrial Court adopted a living wage for unskilled adult male labour in the metropolitan area closely following the basic wage principles established at Federal level in the Harvester case of 1907.

Thereafter South Australia's living wage was deliberately fixed to a similar level to the Federal basic wage. Lately with the adoption federally of a total wage concept in 1967, State wage case principles continued to track the Federal position.

Stepping backwards a moment, my basic South Australian history tells me that prior to World War II South Australia's economy was rurally based. After the war and in particular until the late 1960's, South Australia's economy grew and changed remarkably. A predominant primary production economy gave way to secondary industry aided and abetted by government assistance with, so I understand, State taxation and costs well below those in the major eastern states. Industry was attracted to South Australia.

A decade later, that is by the late 1970's, economic problems prevailed particularly in the consumer durables and car manufacturing industries which had played such a large part in South Australia's post war industrial transformation. State taxes and costs increased dramatically. The attractiveness of South Australia to industry reduced.

Returning then to my view as an interested South Australian, it seems to me that notwithstanding South Australia's comparatively peaceful industrial relations and disputation history there are now a number of disincentives to enterprises contemplating setting up or expanding operations in this State.

As generalisations establishment costs, small local markets and distribution costs come readily to mind.

Furthermore, the days of lower State Government taxes and costs to attract industry are long gone. Indeed, it appears State imposts increase steadily.

With that in mind a potential incentive must be if South Australia could offer enterprises the opportunity to negotiate different terms on wages and working conditions than is virtually automatically imposed by the Australian Commission via the processes I have mentioned.

On this basis, greater flexibility on wages and working conditions may provide enterprises with the incentives to invest or invest further in South Australia or may allow existing enterprises to compete more successfully in their chosen market places.

Compare this with one of the key Full State Commission findings in the most recent State Wage case, that is that equity dictates all workers in South Australia should as far as is possible have their wages and conditions of employment governed by a similar set of rules. Moreover, as I have said, these rules must fit the same set as the Australian Commission directly or indirectly dictates must uniformly be accepted throughout Australia.

Where the debate on these alternative views, flexibility on the one hand or uniformity on the other, ends up is, I suggest, most important for South Australia's general wellbeing into the 1990's.

Put simply, at the moment, it seems to me the disincentives to investment in South Australia mean we could well do with the kick start that greater flexibility in the fixing of wages or working conditions may provide.

So, this South Australian's view of Nauru House? The Australian Commission increasingly dominates the industrial relations scene in South Australia. I suggest the uniform rules it applies directly or indirectly, to fixing the wages and working conditions of the South Australian work force, need critical examination and evaluation now as South Australia embarks on the 1990's.

I will conclude by canvassing briefly three matters in the State Act of relevance or potential relevance to national enterprises with a presence in South Australia.

First the State Act permits the registration of industrial agreements.

More particularly associations, registered or not, are allowed to make industrial agreements with any other association or any other person as to any industrial matter or in relation thereto. Such industrial agreements have no force or effect unless or until they are approved by the State Commission under Section 108.

The Commission may withhold its approval in certain circumstances. Furthermore, in exercising this discretion the State Commission must consider whether it should consult with the appropriate main State employer or employee associations and must also:

"have regard to the objective of achieving a coherent national framework of employee associations and to any awards or decisions of the Australian Commission directed to achieving that objective (and must give regard to principles on which those awards or decisions are based so far as may be appropriate in the circumstances of the particular case)."

The influence of the Australian Commission in the industrial relations life of South Australia is further entrenched by this provision.

Furthermore, by amendment with effect from 1 July 1991 more stringent conditions on the approval of industrial agreements to which unregistered associations are a party were imposed so that such an agreement must not be approved unless:

"(a) the membership of the association consists wholly or substantially of employees who cannot appropriately and conveniently belong to a registered association of employees; or

(b) the agreement varies an industrial agreement previously approved by the State Commission."

I consider the likelihood of further industrial agreements being approved under this section is dramatically reduced by this amendment. Certainly, I consider it is virtually inevitable that in the future no industrial agreement will be registered without union involvement. The role of the unions in this process is further enshrined and enhanced by this recent amendment.

But to go on Section 108a(3) says that where an agreement, if approved by the State Commission, would affect remuneration or working conditions the State Commission must have due regard to any relevant guidelines laid down by the Australian Commission in accordance with Section 146b.

Again the far reaching effect of the Australian Commission is demonstrated by the provision, particularly when I go on to say that remuneration is defined as including:

• wages or salary;
• amounts payable by way of piece work or contract rates in respect of employment or service in an industry;
• amounts payable by way of penalty rates for shift premiums; amounts payable as compo for lost time;
• amounts payable for overtime and special work; and allowances and working conditions means conditions of employment or service.

Far reaching and again further entrenching the Australian Commission's principles within South Australia.

Secondly, Section 143a, inserted into the State Act by a 1984 amendment, provides that no action in tort lies in respect of an act or omission done or made in contemplation or furtherance of an industrial dispute. Certain exceptions are provided for.

Furthermore, the limitation on bringing an action in tort is lifted when an industrial dispute has been resolved by conciliation or arbitration under the Act and the Full State Commission determines on application under the section that the dispute arose or was prolonged by unreasonable conduct on the part of the person against whom the action is to be brought or where the Full State Commission determines on the application of any person that all means provided by the State Act for resolving a dispute have failed and there is no immediate prospect for the resolution of the dispute.

The section was inserted into the Act to ensure that industrial matters are dealt with and resolved within the system set up for that purpose but if that arbitral system for resolving disputes fails the sanction of a common law action then becomes available provided the Full State Commission first so determines.

Thirdly Section 31 of the State Act allows dismissed employees the right to apply to the State Commission for an order for re-employment to the former position or to another position or more likely for compensation if the dismissal is found to be harsh, unjust or unreasonable.

From 1 July 1991 applications may only be made by employees whose remuneration is governed by a South Australian or Federal award or industrial agreement or whose remuneration is less than $65,000 per annum.

In my experience, national enterprises with a presence in South Australia find this unfair dismissal section the severest of all State jurisdictions. Currently, applications are being filed in record numbers. No doubt many employees, encouraged by what is basically a no cost jurisdiction, flash out applications on the basis that their former employers will take a commercial decision to make a quick further payment to resolve the matter rather than fight it on the merits.

Section 31 applications are a constant source of worry, time and effort to the industrial relations and human resource managers of many of my firm's eastern State corporate clients with a presence in South Australia.

Self servingly I conclude then by saying the work this section provides to me in advising our employer clients goes some way to filling the gaps caused by the trends of the past sixteen years to which I referred earlier.