A Matter of Choice

Workplace Focus---Labour Relations: The Way Ahead

The Hon. Graham Kierath

Introduction

First I would like to thank the H.R. Nicholls Society for the invitation to address you today to discuss what I consider to be the most significant changes ever made in labour relations that have occurred in Western Australia.

The development of a competitive, labour relations system holds the key to much of Western Australia's future and certainly the nation's economic future.

It was some years ago that I followed with interest the reaction of the, largely self-interested but vocal, lobby to the views which your Society began expressing in 1986. In particular I recall the self-righteous criticism of your call for the deregulation of the labour market. It was a bit like a shark in a feeding frenzy, swift, brutal and vicious, no holds barred and with a dose of hatred.

I have had exactly the same experience over the past year, except that this time I found that I was on the shark's menu. The extraordinary reaction we saw to Robe River's decision at that time to take back control of its operations from the unaccountable and unrepresentative union delegates was simply amazing to behold. What was seen then, as draconian and harsh actions by the company, are now accepted as right, reasonable and responsible.

For all the odium which has been directed at your Society, you can now reflect on the fact that you were a significant factor in publicly challenging the conservatism and comfort of a grossly outdated and inadequate industrial relations system and in bringing to pass the reforms which are now emerging. Our reforms are focused on the workplace, which goes further than enterprise bargaining, because it allows a number of workplaces within an enterprise. The focus on the workplace for the new stream, I believe, is in stark contrast to the "craft" focus of our existing Industrial Relations system. It is clearly evident that the "craft" focus is the source of around half of our industrial disputes. With a "Workplace Focus" we should at least be able to eliminate this particular form of industrial cancer.

For its part, the Western Australian Government's recent changes in the legislation reflect what we believe will facilitate a more productive, flexible and efficient labour relations system in which all parties will benefit. Towards the end of last year, we enacted three bills, the Workplace Agreements Act, the Minimum Conditions of Employment Act, and the Industrial Relations Amendment Act.

Now these Bills were not drawn up, as some people said, just to demonstrate how a new coalition Government could turn upside down the system which had been in place for most of this century. My colleagues and I began developing the policy for Workplace Agreements three years ago. Our plan was not a one-year plan. It was actually a ten-year plan. It started two years before the last State election and with four year terms this will take us to the period leading up to an election and through two terms of government.

Workplace Agreements simply is the first step, stage one, in our strategy. What we are trying to achieve is real long term benefits for everyone who is concerned in the industrial relations process. I suppose that is one lesson we learnt from Gough Whitlam. He taught us not to try to do too much too soon. It is intriguing, this relationship with Gough Whitlam, because the sole reason I am with the Liberal Party today is that Gough was Prime Minister of this country for three years. So you will see that our Workplace Agreements are moderate, and yet they are extremely progressive. There is nothing ridiculously radical about them but they have significant benefits for the employees.

When developing our policy we bent over backwards to ensure that the worker was protected. We are trying to wean people off the system that they have become addicted to and learn to stand on their own two feet, so there are transitionary stages. I am also convinced that the workforce acceptance of this, the first stage of our reforms, is important to our overall strategy and will make it much easier to go on from here to introduce further reforms. In a few years time, we will have something of value which will enable all parties to prosper. Prosperity is the real ingredient of lasting reform.

It has been only four months since our voluntary workplace agreements came into effect, but a great deal has already been accomplished. I want to give you an insight into why it was necessary to introduce such change, and what the effect has been on this State so far. The existing system, that is to say the traditional system, placed little importance on the individual and, in some cases, nothing. It was largely prescriptive. It was developed on the basis of conflict. Awards and agreements were basically documents between employers and trade unions. There was automatic third party intervention and it was basically out of step with the needs of modern business.

Workplaces no doubt require flexibility. They should be in control of their own labour relations. They need to be more competitive, both nationally and internationally. They need to adapt to changing social and economic circumstances. They are subject to external market forces and it is inevitable that the system should become decentralised. The reforms themselves create the opportunity for meaningful workplace reform. A co-ordinated response to the needs of that workplace and, most importantly from our point of view, a choice between workplace agreements and awards, but a choice that the people in the workplace make and not some third party.

The Workplace Reform Legislation

The aim of our legislation was to do four things :

• to assist the workplace reform process that was already underway in Australia but, in some cases, going along at a painfully slow place;
• to allow direct negotiations between the primary parties, that is the employer and employee; to allow enterprise agreements under the existing system to make the existing system more flexible; and
• to provide a "safety net" for all Western Australian employees through the Minimum Conditions of Employment Act.

The Workplace Agreements Act 1993 allows an agreement to be negotiated between the employer and the employee or a group of employees so that it covers one, some or all of your employees. It promotes direct negotiations between the parties. No third parties are involved unless they are so invited by the primary parties, and there is no power of veto for third parties. No party can be coerced. Each party has the option to appoint a bargaining agent of their choice. Bargaining agents can be used by people who are unsure of their ability to negotiate. There is no restriction on whom they can choose and no compulsion on whom they can use. Each party has to deal with the other person's bargaining agent.

These agreements must also contain dispute settlement procedures. They focus on internal dispute resolution. External arbitration is available only as a last resort. The parties appoint their own arbitrator but they cannot be forced into arbitration by an external tribunal. It is interesting when you look at some of the possibilities with workplace agreements to notice the types of people who have been chosen as arbitrators; they can range from a chemist to a JP, a police sergeant to a Roman Catholic priest, and a publican to a retired Industrial Relations Commissioner.

These agreements prevent the flow on of conditions. They preserve the workplace as a separate entity and you are not forced to comply with conditions which are determined somewhere else.

There is a different role for some of the tribunals. First of all, one thing we have done is perhaps to use the name "Commissioner" in the wrong context, because a Commissioner for Workplace Agreements bears very little resemblance to a Commissioner under the Industrial Relations system. The Commissioner has to ratify agreements and be satisfied that the parties willingly entered the agreement, that they understand it, and that they weren't threatened or coerced into reaching that agreement. He does not get involved in disputes and the agreements themselves, and he is outside the jurisdiction of the Western Australian Industrial Relations Commission.

The Minimum Conditions of Employment Act, 1993, established a minimum set of employment conditions for all workers in the State of Western Australia. It included 100,000 non-award employees who had had few statutory minima prior to the passage of the Act. It provides them with a minimum weekly rate of pay of $275.50 and includes ten days' sick leave, four weeks' annual leave, two days' bereavement leave, ten standard Western Australian public holidays, parental/adoption leave, a requirement that employers notify employees of any changes in the workplace likely to have a significant effect on the employment of the employees, and regulation of junior wages. There is no restriction on employers or employees reaching an agreement that improves, over and above, those basic benefits. The first review of the State minimum wage will be in May of this year.

The Industrial Relations Amendment Act 1993 has been amended to accommodate these changes and allow this new alternative system to exist. It allows more flexibility for dealing with unfair dismissals and it also allows for enterprise agreements under our existing Act. This is basic to allow single employer industrial agreements which are not bound by wage fixing principles and are not required to be consistent with the State award. Industrial agreements will have a lot more similarity to workplace agreements but they will still allow and require automatic third party intervention.

The Freedom of Association Act (Part VIA) was rewritten to try to ensure that discrimination on the basis of membership or non-membership of a union was outlawed and to ensure that such discrimination was a punishable offence. You might have seen something in the press recently where two companies and five unions have been charged over these offences; and the interesting thing is that they have not actually been charged under the new changes but under the old Act, and that is what the former government should have been enforcing.

In sum, the choices that are now available to people in the workplace are these :

• a collective or individual workplace agreement;
• an industrial award;
• an industrial agreement of the type which I have talked about; or
• the common law contract of employment.

Let us now have a look at the attitudes of some of the people who have been involved. First the employers. The scare campaign that was conducted left many employers confused and there are many who want to embrace workplace agreements but simply are not sure of their ground. But despite that there has been significant interest shown by many organisations in workplace agreements. Many progressive employers have been keen to embrace the opportunities. They were well prepared and as soon as the new legislation was brought in, they were away.

The employers most likely to succeed are those who seek to improve consultation and employee involvement rather than cost cutting. With proper consultation and negotiation with their employees, the successful companies will more than adequately replace the unions, which, by their own admission, have not serviced their members satisfactorily in recent years. This only has to be evidenced by the declining union membership when people are actually given a choice.

Let's turn then to the attitude of the unions themselves. Before the last election the unions as well as the Opposition simply attacked our plans every step of the way. They vigorously opposed the provision allowing employers and employees to negotiate directly, which they believed would weaken the unions' vice-like grip previously held on these negotiations.

Our aim, despite some people claiming to the contrary, is not to attack the unions but to provide freedom of choice which, in turn, will lead to greater efficiencies and productivity. And out of that emerged the scare campaign to try to convince the workforce to stay with the union. The same scare tactics were used before the election, during the election, after the election, and they were again used last week. They try to find examples of someone being exploited or threatened and try to exaggerate it out of all proportion.

The Trades & Labor Council executives last week claimed that they had found cases of exploitation and diminishing conditions but yet they did not produce the evidence. They have used the hackneyed slogan "sign or resign" to condemn these agreements. Last week I challenged them to produce the information to show me the people who have been victimised. They say they have got them but they are not prepared to put the information forward. When we do get the information, we often find it has been totally misrepresented. Yet if the unions were progressive, if they were forward thinking, they would have seen that there was a niche in this new system of workplace agreements to act on behalf of the workplace as bargaining agents. They would be turning their attention to playing a positive role instead of the negative destroying role which they are playing at the moment. The unions that provide real service to their members will do well. Unions that rely on closed shops will need to re-examine their methods of operation.

The unions' claim of exploitation, we believe, has basically been proven unfounded. We have had one successful prosecution of an employer who sacked someone for refusing to sign a workplace agreement. We have said that we are prepared to ensure an even bargaining table and we are determined to stand by that claim.

To give you some idea of how successful this has been in the short space of time: as of 31 March 1994, some four months since the legislation was introduced, there have been 2,136 workplace agreements lodged, which cover fifty five different industries and about 3,000 employees. Of those, there have been thirty collective agreements, involving about 630 employees and about 1,900 individual agreements, comprising thirty three employers. This is interesting because we saw a large rush of individuals, and now collective agreements are starting to take priority, also we are getting more and more of them coming through the system.

There are some very good examples, such as those affecting Hamersley Iron and Gull Petroleum. Hamersley Iron wanted to eliminate the costly strikes and industrial disputation that they have had in their operations over a number of years. They saw the workplace agreements as a solution and embraced them wholeheartedly. I know from my discussions with them that they would have considered it a success if they could have had 50% of their workforce on workplace agreements. They ended up with 92% of their workforce.

The features of their agreement are the transfer from thirty eight back to forty hours per week as a base week; the elimination of penalty rates, overtime and other penalties by incorporating an annual salary package which also included an increase in superannuation and, I think, a pay increase of around 10%.

From a staff point of view, they now have a much more stable and consistent income that is actually higher than they would have got under an award. In return, the company hopes to eliminate a long-standing adversarial attitude towards employee relations and to promote a team approach.

Gull Petroleum won praise for their co-operative approach, which involved five tanker drivers in the very militant and highly award structured area of fuel transport. They had a change in the refinery from where they got their fuel and they needed a new basis, so they chose workplace agreements. Negotiations took place over five months and the agreement now enables the company to budget and actively monitor the wages component of its delivery costs. Again, as I understand it, it took an annualised salary approach.

We often hear people criticise the public sector. In eighteen months with enterprise bargaining principles within the system we have had one public sector agreement get up. In less than four months, we have had two public sector agreements get up and two more get under way.

One of them came from the Department of Conservation and Land Management and involved people whom we call Dieback interpreters; they plan and plot the expansion of Dieback in our Jarrah forests. They came up with a most unusual agreement, one called annualised hours. It is basically a bank account, if you like, of nearly 1,900 hours a year, but they can work through peak periods and drag it out through thin periods. They can work up to twelve hours a day six days a week to get their average of only 37½ hours per week. What that means is that effectively they can work long hours during their peak season and in their off season they can virtually have up to three months off and get twenty six equal instalments of salary. It is interesting that this came from the public sector. The other interesting aspect of it was that it was not driven by management, it was actually driven from the employees. What they found was that they could lift their productivity by 33% and, in return, they asked for a 13% pay increase. Yet there were people in the bureaucracy who tried to prevent that happening. This is an outstanding example of what can be achieved when you unleash the thinking power of several ways of doing things.

At Murdoch University, there is a small Animal Resources Centre which has finalised a collective agreement because there is no union involvement on site, and their productivity gains relate to a 5% pay increase within the coming twelve months.

Let's look at the impact of this legislation. It promotes a workplace culture which is based on trust. Initially this is foreign to many employers and many employees but it is worth pursuing. A sense of teamwork is absolutely paramount. The old resolution procedures that relied on outside intervention will not work in the current workplace agreement environment; conflicts need to be resolved from within.

There is a new role for responsible unionism, in some cases, certainly to make them more accountable for their actions, and induce them to reassess the services they deliver.

Let us compare Western Australia to the other States. New South Wales allows direct negotiation between an employer and a union or an employer and 65% of his employees. There is basically no individual negotiations and, some of the procedures have made it too much of a public interest type of test. There is too much exposure, too much of a high profile of the people involved.

In Victoria, all employees were removed from the award system. In other words, it was cancelled. They were forced to change whether they wanted to or not, and they could only return to the award system with mutual agreement between the employer and the employees. The result: a major move to Federal awards. My comment on that is : there is not much point in being King if you are king of nothing.

Under the Federal system, Section 134 of the Industrial Relations Act 1988 allows enterprise agreements but the union must be a party to an agreement and the Act precludes involvement of non-unionised workers. In Western Australia we have less than 30% of our private sector workforce involved with unions, so we say that the vast majority of our workforce is non-unionised.

Under Division 3, Part 6B, the Federal system allows enterprise agreements and allows for non-unionised employee negotiations but maintains the right of comment by appropriate trade unions, which is something we don't think appropriate.

We believe our reforms in Western Australia are the most efficient in Australia and will stand the test of time. It is a view which has been supported by the Business Council of Australia and, in fact, if you look at the Council's ideal approach, you will see that it very closely mirrors the Western Australian system, but we would like to claim that we had it first.

What other reforms have we made on a State level? We have tackled the building industry with a code of practice to try to clean up the rorts and rip-offs that have been occurring. We are introducing legislative reviews. I will very shortly be announcing a major review of the Industrial Relations Act, and we are looking at all the various other Acts associated with it to see if we can either eliminate them or rationalise them, namely the Factories and Shops Act, the Truck Act, the Trade Unions Act, the Master and Servants Act and the Public and Bank Holidays Act. What we are trying to do is to give more streamlining and less regulation in the area of labour relations. We have also had reviews on what we will do following on from the Coles-Myer decision, and we are also looking at the Industrial Magistrates Regulations.

I want to assure you that we are pretty pleased with our first twelve months in office, but our reform agenda has not stopped. We will continue to reform the labour market of Western Australia. This year we are able to begin our second wave of industrial relations reforms. Our strategy was to try to get the workplace agreements up and running now, so that people could be involved with them while we tried to change the existing system as well.

So, in conclusion, I would say to you that 1993 was a watershed year for labour relations in Western Australia. It was the year in which the most significant reforms in almost a century were introduced. These changes will, no doubt, provide us with long lasting benefits. I heard that a group of people had spoken to one of the existing Industrial Relations Commissioners who said that these reforms were the biggest since about 1860. We have only been playing since 1902.

I believe that the reforms of Western Australia are better than those of the other states. A number of notable commentators have supported our changes. One even suggested that, if the Federal Government were serious about reform, it would have adopted our legislation. Of course, the qualifier was that it be serious about reform, which we know it is not, and that is why it would not adopt our legislation.

We believe that our voluntary workplace agreements are far-sighted. We believe they will actually produce better long term results, and that is what we are looking for in the long haul. Our direct negotiations between the only two parties who matter ¾ the employee and the employer ¾ eliminate the subsequent 'flow ons' which are inevitably rammed through the award system. In this way, everyone knows exactly where they stand. We believe that freeing up the workplace is the essential ingredient to make this State and the nation really competitive.

In one form or another workplace reform and bargaining is under way right across Australia, and I think the unions need to realise, particularly in this State, that they passed the point of no return. The workplace agreements have broken out on such a wide front across so many different industries that no-one will be able to turn the clock back. At best or worst, depending on the point of view, if there were a change of government, the very best the Labor movement could hope for would be to try to quarantine the workplace agreements.

The pace of change however, would be slower if employers were to cave in to union demands. We have given employers the tools with which to manage the workplace industrial relations but if they still cave in to the old threats and intimidation, it will make the process of change much slower.

I believe this is the best chance in our history to give the economy a massive push forward, with the employees receiving conditions better than they could get with the unions under the award system.

We now have the potential to attain a new degree of positive, co-operative and productive workplace relations. This is, of course, largely in accord with what your organisation was espousing, and was being vilified for, just seven years ago.

I can identify with what your Society has been through. I can understand it. I think, like most of you here, we reacted the same way. The bigger the threat the more determined we are in our resolve to achieve reform. Because in our view the bigger the threats, the greater the need and desire to change and reform the system. In fact if we didn't get many threats, perhaps we might even go soft on it. So some of the threats have been counter productive; they have actually stirred the Government great resolve our Government to great resolve.

As I have said, in the last twelve months I have identified with what you have been through. I have been through a whole series of death threats, not only against myself but on my family. I have been vilified as a person. I have suffered the most vicious name-calling the State parliament can ever remember. I have been responsible for more Labor members being thrown out of the parliament than anyone else can remember. I have even been blamed for the use of the guillotine which eliminates repetitive debate.

Unfortunately the Federal Government is simply not only content to ignore the desperate need for change, it is actually working in the opposite direction by introducing legislation to try to prevent that change, trying to prevent the States from exercising their constitutional rights over industrial relations in the State arena. We, as a State, will join with the other States in challenging the Federal legislation, which is more noteworthy for its obscene misnomer, the Federal Industrial Relations Reform Act, than for any genuine advancement.

I have tried this afternoon to clarify our objectives in introducing changes to the Western Australian labour relations system. We believe that both employers and employees now have a number of choices available to them and those who are willing to enter into a workplace agreement will have the chance of gaining a number of advantages. Most importantly for the employer would be a competitive edge over his or her competitors. That in itself will force other companies to change. Competitive edge will drive the other companies to change.

The number of agreements made so far simply serves to validate my belief that it is the best system available anywhere in Australia, and we believe that both parties, employers and employees, are willing to embrace this change.

As maturity is often required to opt out of the existing system and into workplace agreements, we have allowed our agreements to go further than those in some of the other States. Employers and employees in Western Australia now have an avenue through which to escape a system that stultifies and constrains them, that makes them captive to unelected and often unqualified "intruders", and that has denied them the ability to take the steps necessary to protect their jobs and their businesses. If our legislation enabled one business and its associated jobs to survive which otherwise would have been lost, then to all involved it will clearly have been a success. Indications so far are that there will be many such successes. This surely is the way ahead.