A Matter of Choice

Back to School Employee Relations and the Individual Employment Contract Model:
A Victorian Lesson

Ken Phillips

In this paper I want to put to you the proposition that the vital employee relations reforms necessary for the future of Australia, will not successfully be implemented if reformists only concentrate on legal and legislative matters. My conclusions are born from direct experience at implementing individual employment agreements in the workplace.

Let me first explain my background. I am a professional unionist. I consult to the third teacher union in Victoria, the Victorian Affiliated Teachers Federation. The VATF has a membership of 2000 and was established 19 years ago when a group of primary and secondary teachers felt the need for an alternate, competitive union force to that of the militant Victorian teacher unions. I am not here as a representative or spokesperson of the VATF although they are fully aware of my attitudes and make use my services.

Unlike most paid union officials I support an individual contractual model as the basis upon which employee relations in Australia should be conducted. I am an advocate of the destruction of the compulsory award and arbitration system on grounds such as worker's rights and union relevance. I have argued this case in newspaper articles and radio interviews and it appears that I am viewed as a rebel by the union movement. I was amused when the union-funded, Melbourne radio station 3CR, called me "armed and dangerous". I hope so!

I suspect that 3CR tagged me so because I argue that Australia is not a mature democracy. We instead exist in a "nanny" state which controls our working lives through the instrument of compulsory arbitration and awards. We have democracy in most areas of our citizenship but we do not have it in the workplace. Mature democracies create social order by allowing citizens to freely relate directly to one another. Freedom, I am happy to note, is a primary theme of the H. R. Nicholls Society. Until we as a country break from the tied strings of compulsory awards and arbitration, we will never find our place in the world as a mature nation and robust democracy.

However, change is happening despite the current award-imposed order. A maturing process is occurring and Australians are rejecting those who seek to oppress us. Like the Berlin Wall the award system will one day collapse under the weight of the demands of the people.

The collapse of the system is not occurring through the rearranging of legislated structures. What is causing our maturing is the change of attitudes by employers and employees to each other. People in the workplace want to change together. There is a positive realisation that what can best be described as workplace class consciousness must be destroyed and replaced by the commonsense reality that the needs of employers and employees are mutually dependent.

There are two prime examples of this to which I wish to refer, namely the efforts of Alcoa at their Portland smelter and the activities of CRA. I want to look at these two companies by way of introduction and comparison with my experiences with reform in the Victorian public service.

In June of 1993, at the Alcoa Portland Aluminium smelter, a ground-breaking enterprise bargaining agreement was signed with the workers. The agreement eliminated the then existing award arrangements. What is of interest is how the agreement came into being.

In discussions I had with people at the Portland plant, I discovered that the agreement had its birth some seven years earlier. Management had concluded that working class consciousness at the site had to be combated. A program of removing management-employee differences began. Time clocks were removed, a common carpark and cafeteria were created, and the hundreds of indicators of class differentials were whittled away. When the company formulated the agreement it wished to put to the smelter workers, it was confident that because of good employee relations, and because employees and management had developed strong working relationships most employees would agree to the proposals. They did so.

The process of seeking Commission approval delayed implementation of the reforms but it was done to ensure compliance with legislative and political requirements. Enterprise bargaining through the award-approved process did not create or assist the agreement. The agreement was a result of commonsense and the determination of the employer to treat the workforce as intelligent, skilled decision makers who would operate in a manner conducive to the best interests of the company. In short, mature democracy in the workplace.

Similar, it appears, are the efforts of CRA to treat their workers as equals. CRA's well publicised offer of staff contracts to employees and its acceptance by between ninety and one hundred percent of employees, has been billed as anti-union by the press and the union movement. This is not the case. Something more significant is happening at CRA. It is the destruction of workplace class consciousness.

This is demonstrated in a presentation made at your May 1993 conference by David Brewer, General Manager New Zealand Aluminium Smelters (a CRA operation) which reveals the CRA philosophy. This quotation from Sir Roderick Carnegie, Chairman of CRA, is illuminating:

We have confirmed the evidence that when employees work with feelings of personal responsibility there are very substantial gains both in individual satisfaction in work and in productivity, in quality of work, in innovativeness and in stewardship concern.

When the Chairman's remarks are coupled with David Brewer's description of the New Zealand smelter where, as David says, they now have:

A single status workforce where the only real difference between the General Manager and an Operator, is the work of the role, the associated remuneration and the Operator does not manage others.

a pattern emerges.

The conclusion is, that the CRA approach has the hallmarks of a company committed to the destruction of workplace class consciousness and the treatment of all employees as management contributors. The legal device CRA chose to step around the restrictive Award system was stunningly simple, and I suspect impossible for a government to legislatively thwart.

My observation is that where successful workplace reform occurs, it appears to be the result of a conscious effort by the employer to breakdown workplace class consciousness.

This sets the environment in which to reveal my experiences with the Victorian Employee Relations Act.

The Victorian Employee Relations Act, of which I have a detailed working knowledge, is the first serious legislative attack mounted in Australia against the conservative status quo of centralised wage and work practices control. Has it, like CRA and Alcoa been successful?

For those of you who are not familiar with the Act, agreements can be collective or individual and must contain certain minimum statutory requirements. These include four weeks annual leave, five sick days leave per year, maternity, paternity, adoption and long service leave. Hourly pay rates cannot be less than that applying under the old, but expired awards. Existing employees and new employees are deemed to be on individual employment agreements, the terms of which are in the old awards. Employees cannot be forced to sign new agreements. Effectively, the legislation froze Victorian employees conditions as of 1 March 1993 unless employees sign new agreements. New agreements cannot breach the minimum statutory pay and leave requirements. Above that, everything is negotiable.

I am aware that even amongst those who reject the award system, there are divergent views on the applicability of the Victorian Act as a contractual model. For example, the criminal sanction provisions included, are criticised within many legal and Coalition party circles.

Certainly the Victorian model is one possible contractual model amongst many alternatives. The CRA approach, which I gather is based on the use of Common Law principles, is another. If common law contracts can work, why reinvent the wheel? Maybe the common law route is the path to follow? I am not sufficiently familiar with the technicalities of the possible alternatives to make a judgement, but have an open mind. I have found however, that the Victorian Employee Relations Act is a workable piece of legislation which deserves serious attention.

The provisions of the Victorian Act have been taken up by some employers and employees in Victoria. One such employer is the Sizzler chain of family restaurants, where in mid-1993, approximately ninety percent of the 1400 employees signed agreements offered to them by the company.

Although the Act is workable and other examples exist, the impact of the legislation on workplaces has not been widespread. Unfortunately it is not possible to accurately gauge, because the State government does not collect the necessary statistics. It appears that only a small percentage of State covered employees have signed agreements that effectively alter the format or content of their old state award.

A major slow uptake is the cause of Federal legislation and union efforts to transfer Victorian workers to Federal awards. The Employee Relations Act was introduced on the assumption that a Liberal government would be in Canberra in 1993 and would introduce complementary legislation to the Victorian model. This of course did not occur and left Victoria with an Act looking for a strategy. It appears that the fallback approach has been to resort to legal battles hoping for a favourable Federal election result in 1995.

More significantly, and in contrast to the success of Alcoa and CRA, has been the apparent inability of the Victorian government to implement its workplace agenda with its own employees. This has been a surprise.

It could have been expected that as the largest single employer in the State, the Victorian Government would have attempted to encourage its own employees onto employment agreements. The government should have been in a position to demonstrate to employees and private sector employers that its reforms could succeed. The state government could have provided a model for the private sector to follow. Success in having large numbers of state employees voluntarily sign employment agreements, would have provided the government with a strategic advantage in its reform battle. This has not occurred.

In claiming this lack of implementation success, I have been criticised by the relevant Minister for not having accurate facts but given the lack of published, verifiable evidence proving that state employees have voluntarily signed new employment agreements, I believe my assertions are valid.

The first indication of implementation problems occurred when the State government introduced contracts for executive officers of the public service and removed the senior public servants from the provisions of the Employee Relations Act. In my opinion the removal of senior public servants from the Employee Relations Act signalled lack of commitment to, and faith in, the Act.

The impact of this was twofold. First, it indicated that the state government and its senior public servants adhered to the concept of different classes of employees, namely management and workers. As I have tried to demonstrate, successful employee relations reform attempts to break down such cultural barriers. The government created and cemented barriers.

The second impact was to eliminate any personal commitment senior public servants may, or could have had, to employment agreements. If the people on whom the state government had to rely to implement the Employee Relations Act, were not covered by the Act, how could effective implementation be expected to occur?

Of great significance, was what occurred when some state employed workers attempted to access employment agreements in 1993; there was a resultant administrative debacle which verged on the farcical. The problems manifested themselves strongly when Victorian Education Department personnel requested employment agreements. It was here that I had my experiences and battled at first hand the policy implementation failure. I act as a bargaining agent for the VATF negotiating agreements on behalf of employees, explaining agreements to interested employees and assisting employees to access the agreements. I have a detailed knowledge and documented record of events which I shall briefly summarise.

The process of constructing the agreements involved reasonably vigorous but amicable negotiations. The Department, with the interested employees and through their bargaining agents, developed standard employment agreements that the Department now uses as its agreement offers to all school staff. The six page, plain English agreements, replace the long, legalistic and convoluted awards. The agreements facilitate significant managerial flexibility in workplace arrangements and retain most if not all entitlements. In some instances entitlements increase.

Given that the Department worked to bring the agreements into existence, it could have been expected that employees wanting to sign, would have been provided every assistance. The opposite proved to be the case. Over a nine month period, a steady pattern of obstructionism unfolded. Employees who asked for agreements waited for up to eight weeks for copies to be sent for signing. Often agreements never arrived.

When agreements did arrive they were frequently wrong, requiring the employee to notify the Department of errors. Corrections would take multiple weeks to be forthcoming. Some errors appeared to embarrass the Department and affected employees were subject to abuse. Confidential agreements were mailed to the wrong employees, exposing those wanting agreements to ridicule and harassment.

Line managers who were supposed to sign on behalf of the government, did not receive briefings on the content or implications of agreements. Some line managers tried to talk employees out of signing and refused to sign when requested to do so by the employee. Employees who were entitled to pay increases under their Agreements, waited for over ten weeks without a pay adjustment. Payment occurred after the employees threatened to invoke dispute settling procedures.

One employee who signed an Agreement and subsequently became subject to intimidation, mysteriously disappeared from the Department's computer employment records and was not paid for many weeks.

On several occasions the Department asserted that the Department was not bound by the Agreements and that internal Department procedures should not be changed because of the Agreements.

All this occurred in an environment in which employees who had faith in employment agreements bore the brunt of opposing Union vilification and attack. Employee bargaining agents willing to assist state employees to access agreements, have become cautious in pursuing requests.

These were indeed strange occurrences and indicate that the Victorian State government has severe problems in implementing its own workplace reform program for its own employees. It appears that the government was not philosophically or administratively prepared for the task of implementing its own employee relations legislation with its own employees. Is it any wonder that the reforms have been slow to be adopted in the private sector?

To assume that my relating of these facts represents criticism of the Act, is to miss the point I wish to make. The Victorian government is a self-assured, reformist government treading where others would not go. Unforseen circumstances must eventuate. We should study events and learn lessons to assure future success.

The view I put, is that should other governments or aspiring governments seek to introduce individual employment contracts, consideration of legislative drafting matters alone is not sufficient. Analysis of human relations strategies adopted by the likes of CRA and Alcoa, and how to apply them to the Public Service, should be part of the planning.

In seeking to create workplace reform, government needs to ensure that a good individual contract model is established at law as one segment of a complete strategy. Government must then use its position as a large, influential employer to apply its stated principles to its own workforce. Government should prove by its actions that contractual approaches benefit the employee as much as they benefit the employer.

Legislated award systems hinder workplace reform and frustrate worker democracy. Conversely, legislative attempts to free Australians from award constraint do not of themselves cause reform. Reformists interested in change cannot expect legislation on its own to cause workplace change. It simply does not happen. The Victorian situation demonstrates the point.