From Industrial Relations to Personal Relations:
The Coercion of Society

Keynote Address: Worse Might be Better?

Professor Judith Sloan

Thank you very much for the invitation to open proceedings at this conference. I am looking forward to a vigorous discussion at the conclusion of my remarks so that I can learn something from the debate and perhaps even write a column as a result!

I was on an early morning flight last Wednesday and watching the news commentary on the aircraft TV monitor. As I watched this program I began to feel distinctly uneasy and concerned about my mental condition. I even began to admonish myself, "Judith---this is it, your time is up---you have been on too many interstate trips, you have taken on too many activities and you have just dreamt that Warne took all those wickets."

I was therefore very relieved when the plane was coming into land and the air hostess actually apologised for showing us yesterday's news.

The reason why I tell you that story is that it seems to me that in industrial relations, if we do close our eyes and blot out the visual evidence of the reality of the nineties, we find ourselves back in the 1970s. I have always believed that the H R Nicholls Society was looking forward to the day when its vision would be accomplished; that one day public opinion would force the legislative changes necessary to put behind us all the burdens of trade union privilege and debilitating labour market regulation; and that there would come a time when we could all go off and have a really good celebratory drink, and close the Society down.

It seems to me that, unfortunately, that hoped-for celebration is quite a long way off. In fact when I close my eyes and think we are back in the 1970s, in some ways I wish that was true. I believe things today are actually getting worse and not getting better. For example there is a great deal of official rhetoric about moving to enterprise bargaining. But the reality is that we still have a system of compulsory arbitration. Not only do we have the traditional Australian practice of that arbitration system but, in addition, we see a disturbing new development which is really about greater regulatory intrusion into management practice and decision making and indeed into enterprise strategy and policy making at quite a broad level.

So despite the Federal Government's rhetoric about moving away from compulsory arbitration, about "lowering the centre of gravity", about "embracing enterprise bargaining", my interpretation is that these words are hollow, and the reality is, in fact, quite the reverse.

When we look at the Commonwealth Industrial Relations Reform Act 1993, [the Brereton Act] we see the word "reform" as an unfunny joke. I suppose it is reformist in the sense that it is reactionary reform, but if there was ever a misnomer that is one.

The members of this Society no doubt saw that Act as an extraordinarily retrograde piece of law. What 1994 has shown us is that what was, on paper, a considerable worry has in practice been more than a worry. It has turned out in practice to be quite terrifying and so what I will do is go through some of the key developments of 1994, the burgeoning of Australian regulatory intrusion into people's working lives, as the implications of the Brereton Act have unfolded. Despite this melancholy story I will finish---since Christmas will soon be upon us---on a slightly good news note.

I will begin by telling a few jokes. I have a comparative advantage in telling jokes because I can get away with jokes that the blokes no longer dare to tell. One joke which I told to a workshop of union delegates to which I was surprisingly invited is as follows:

Q. "What is the difference between the IRA and the ACTU?"

A. "You can negotiate with the IRA".

Next joke.

Q. "What is the difference between the ACTU and Jurassic Park?"

A. "One is about a group of dinosaurs hanging around waiting to get extinct. The other is a film".

The Commonwealth Industrial Relations Reform Act, 1993, is a very bad piece of legislation. Even the people who would embrace its objectives would nevertheless regard it as an extremely bad bit of drafting. For those of you who are interested in the behind the scenes story of it, it probably was not properly drafted by parliamentary draftsmen. It is believed to have been drafted by Iain Ross during weekends and I think it shows. I know from personal friendships with people in the Industrial Relations Commission---well intentioned people in the Commission---that it is largely an impossible statute for them to work under. So even if one were prepared to embrace the objectives of the Act and I suspect there is no-one here that would be, it is an extremely defective statute.

It is a curious mish mash of essentially a continuation of the Australian compulsory arbitration tradition with selected bits and pieces of provisions out of collective bargaining jurisdictions, the US jurisdiction particularly. So they have taken things such as "bargaining in good faith", the "right to strike", bargaining periods of limited duration, etc, and they have added these selections from US practice to long-standing Australian legislation where compulsory arbitration still remains as the centre piece.

Trying to append bits and pieces from a collective bargaining jurisdiction onto a highly regulated, centralised, compulsory arbitration system can only produce an incoherent and unworkable system.

So my first piece of bad news is the continuation of awards. Enterprise bargaining which---although still collective bargaining in the usual sense of those words---nevertheless was collective bargaining at a level where people could reach decisions about their own working lives in a meaningful and realistic way and was essentially a break from the past. The official rhetoric was that, allowing for some transition mechanisms, we were heading in the direction of genuine enterprise bargaining and awards would fade into the background.

But we don't have that. The centralised award system remains at centre stage. For a while people like me were getting quietly excited because we had the safety net case where the majority of submissions to the Commission were arguing that these awards should be stripped back to their bare minimum conditions and that enterprise bargaining should fill in the rest of the picture. Now admittedly that was going to be the second best outcome but if the awards became minimalist documents setting out some basic minimum conditions, then I think there may have been progress.

If we think about awards, we find we can usually recognise three separate parts within them. The first part is a statement of basic conditions such as hourly rates of pay, working days per week, working weeks per year, shift obligations, for example. These are the sorts of things which will carry over into any contract between employer and employee, whether enterprise based or individually negotiated.

The second part comprises various prescriptive clauses about all sorts of details of daily working life; about starting and finishing times; the time and duration of tea breaks; about ratios with part-timers to full-timers; about the details of shift arrangements; and so on. These are very prescriptive details that one would normally expect to be left to the discretion of management or handled at a very decentralised level of enterprise bargaining.

The third element in the award package is the most insidious of all. It is those clauses which underpin and promote great mistrust amongst employees of management and management systems. Such clauses often, for example, insist on promotion by rigid seniority; require consultative committees and the like. These sorts of clauses, within awards, constitute attempts by the arbitrators, in effect, to impose external management systems via the award system because of their deep distrust of the market economy and the way in which such an economy rewards co-operation in the work-place. It is the old "them and us" fundamentally Marxian framework of class war in contemporary guise.

It is those two latter aspects of award conditions which are extremely destructive and which we were all getting very excited at the possibility of a return to an award system where only the first element, the basic safety net items, were set down by the tribunals. But alas it was not to be. I suspect we might have been subject to some sort of group think mentality where we thought it must happen. Of course when we look back we realise it was never likely to happen. When you have the President of the Industrial Relations Commission saying that she saw the role of her Commission to inject social justice into work places, it was pretty unlikely that she was about to strip back award conditions to their bare bones. Nevertheless one always lives in hope, doesn't one.

One of the most outrageous and extraordinary examples of detailed management control through the award system is the recent decision covering the Victorian Education Department. This department is nominally the responsibility of a Minister of the Crown who is answerable to the Parliament of Victoria for the administration of that department. As far as two distinguished members of the Australian Industrial Relations Commission are concerned, such theories of responsible government are old hat. These arbitrators are Senior Deputy President Joe Riordan, formerly Federal Secretary of the Federated Clerks Union and Minister in the Whitlam Government, and his protege, Commissioner Frawley. Their view is that they should, through their award-making powers, restructure the Victorian Education Department according to their image.

I recommend that any of you who might think I am an alarmist to read Commissioner Frawley's decision on the selection of principals, and of staff by principals, within the Victorian Education Department, because you won't think me an alarmist any more. Included in the award are things such as there must be prior consultation about the proposed round of selection appointments; the establishment of selection panels with union representation and gender balance are prescribed; and it goes on to include the level of detail concerning the reimbursement of accommodation and travel expenses incurred by those persons who serve on the selection panel. So for those of us who thought awards were going to fade away, this decision is, I think, an extraordinarily worrying one. If two appointed Commonwealth arbitrators can prescribe in this degree of detail, how a Department of State, responsible to an elected Minister of the Crown, is to be managed, then the textbooks on constitutional theory and parliamentary practice will have to be rewritten.

In his opening remarks your President raised the recent family care leave decision. I tend to agree with him about that. It was depicted in the press as essentially a victory for the employers because the Commission refrained from granting the ACTU claim for an additional five days paid family care leave. I think if you read the decision carefully and interpret it carefully, we have a development which I think is of considerable concern. One point of concern is that the Commission has chosen to be quite restrictive about this. It said that sick leave now must extend to carer leave and we are going to define carer leave to include this broad definition of the family. That is a very top down kind of decision.

The other sting in the tail in the decision, one that didn't seem to be picked up by the commentators, was that in 12 months time the compassionate leave entitlements, which are in most awards, and which comprises three days paid leave in the event of a death of a relative, will now be rolled into sick leave provisions. So under these new deemed flexible arrangements those additional three days will be available for carer leave as well. I think the view that this was some enormous triumph for the employers is a misreading of that decision. In 12 months time, therefore, we will be going from the normal 10 days paid sick leave to 13 days paid sick leave and with a broader ambit of what sick leave can be taken for.

This decision undoubtedly increases the price of labour for all award employees. I wouldn't seek to minimise the economic costs of that decision in the way that the press seems to have done.

The other point I would make about awards is that this is a "watch this space" area. At the moment there is an uncoupling of what is happening in the agreement field, and what is happening in the award area. Award rates of pay, currently, are only being adjusted at the margin to take into account safety net decisions.

Now the Industrial Relations Reform Act is an extraordinarily pro union document and the unions are not going to put up with this minimal revision of award rates of pay for long. They use the awards as their test for "no disadvantage" in any enterprise bargaining, in which they have a guaranteed place, and so if award rates of pay, and agreement rates significantly diverge over time, then the awards will not form a good basis for judging "no disadvantage". During the next two years, I believe, we will see a major revision of award rates of pay and, again, given the likely state of the business cycle at that time, the economic consequences of that may be quite horrendous.

A retail worker, of course, must earn 92% of a fitter's rate because that is what we determined in the end of the 1980s through the Minimum Rates Adjustment process. So once we have adjustment of some of the major awards, the dominoes will begin to fall and we will get a revision of all the minimum rates established in the awards. So the idea that somehow we have moved away from the good old days of centralised, across-the-board regulation, and we are heading off in the direction of enterprise bargaining is, I think, the kind of rhetoric about which members of this Society are very sceptical. But I worry that out there in the broader community there is some acceptance of it and there tends to be a soothing denial of both the current trends and the future trends. I feel lonely, sometimes, when writing my column.

So it is very bad news on the award scene. I think it is also very bad news on the agreements scene. The bad news is the over regulation of the way in which agreements can be certified. My preferred model would not actually be to have a certification procedure in respect to agreements. You might have some registration arrangements where from time to time there is the sort of audit to make sure that they comply with minimalist regulation. But today we have the most extraordinary degree of over-regulation of the processes by which agreements are made, and that is particularly true for the non-union route of the enterprise flexibility agreement route. There are 21 steps that have to be ticked off in going through that process. So it is not surprising that there have only been 12 such agreements concluded and I am not sure that we are ever going to get near 100 at the rate we are going. There are some really weird arrangements in respect to consultation. If you haven't consulted the women and the migrants and the like, you may get your agreement knocked out. Of course we had the anomalous situation of the Chase Manhattan Bank with its 1,500 employees, but unbeknown to the Bank there was one union member and, because it hadn't notified the union of its intention to negotiate, because of that one union member, it was blocked by the Commission. The agreement had been voted on and agreed to by 95% of the workers. But to no avail.

This situation may lead to unions offering life memberships on a scatter gun principle to a large number of people selected at random. This would compel enterprises to notify the union of their intention to bargain, on the grounds that there was a statistical possibility that a union member might exist within their company.

Some of my colleagues, when the Brereton Bill became law, said to me that the public interest test in the EFA provisions won't matter. But the public interest test in the EFA provisions has proved to be more important than people thought. We had the case recently with the ambulance drivers out at Knox Municipality where IRC Vice President Iain Ross decided that he didn't like the look of those 24 hour shifts on public interest grounds and therefore knocked back their agreement. We had Deputy President Ian Watson several months ago knock back an EFA in respect to the ROH wheel making plant in Adelaide, on public interest grounds, because he didn't like the look of the longer shifts.

Thus I think we should feel very despondent concerning the over-regulation of the processes governing the making of agreements. The Brereton Act seems to have been designed to make reaching enterprise agreements as difficult as possible, particularly in firms where there are no union members.

It is funny how the Commission seems to sit on cases which it obviously regards as hard. It has been sitting for quite a long time on the Bell Bay case. (This decision was brought down on 8 December 1994. Ed.) It is also sitting on a very important case which involves bargaining in good faith. Some of you may know that the AFMEU (the giant metal union) has issued bargaining in good faith orders on non-union workshops in the metal industry---1,300 of them in N.S.W. It is very encouraging to see that the unfortunate small businesses who got pulled into the test case have fought it to the hilt. They have obtained affidavits from their workers saying that the workers did not want the unions to represent them. Commissioner Hodder ruled in the Asahi case that the company did have to negotiate with the union "in good faith", even though there were no union members at the plant, and the workers, openly and explicitly, did not want the union to represent them. (This decision was subsequently overturned by the full bench of the IRC. Ed.)

Nevertheless there is the very real possibility that an order will be placed on those non-union workshops to bargain in good faith with the unions. This matter concerns workers who have chosen not to belong to a union; they are telling the world at large that they do not want the union to act as a bargaining agent for them; yet the Australian Industrial Relations Commission may insist that the union acts as their bargaining agent, and compel these workers, against their strongly held wishes, to accept that decision.

Now if that should happen then I think that is something about which people should really be very, very concerned; to the point where marching in the streets becomes an appropriate response. Again it points to the quite anomalous situation of trying to pick up bits and pieces from collective bargaining jurisdictions and popping it into our legislation. If you take the United States---where there are bargaining in good faith provisions---they have, as the backdrop to such provisions, union certification elections, where the workers actually do have the right to say which union they want to represent them, or indeed if they want to be represented by unions at all. Now with that backdrop, it seems to me bargaining in good faith may have some logic. The US law then says , the workers have thus voted, therefore you, as an employer, must bargain in good faith with the duly nominated bargaining agent.

In the Brereton Act we forgot that precursor. We don't worry about that bit of the story. We just take the idea of bargaining in good faith provisions and try and graft it onto our system, and do so in a way which ensures that workers have no rights at all. It is, I think, really just another example of how pro-union and anti-worker the Brereton legislation is.

Having discussed the US labour market system, I would not want it inferred that I am an advocate for the wholesale transplanting of it to Australia. It has led to extraordinarily litigious outcomes. It is clearly not deeply entrenched in the hearts and minds of American workers. But nevertheless there are democratic safeguards in the US labour market regime which are sadly lacking here.

So we have, still, the award system; we have the regulation and tight control of the bargaining process (wherever that might happen) but even more worrying is the unprecedented intrusion of regulation into the over-award area. Apologists for the system, Deputy-President Keith Hancock for example, would say---"yes we have a highly regulated system; we have a system that imposes minimum standards, but there is flexibility because there is the over-award area which is free of regulation". I suppose there was an element of truth in that argument but what we have seen during the course of 1994 is an ACTU-IRC thrust into the regulation of the over-award area. The CRA case at Bell Bay is a case in point. Essentially the ACTU argument is that the company has no right to be offering what are, in effect, over-award contracts with their workers. The ACTU holds that the Act requires the Commission to become involved, and to require that the Union become a respondent to this matter. We still haven't had a decision on that case. (The decision was handed down on 8 December 1994 and upheld in totality, the ACTU's claims. Ed)

We have also had another example of regulation of the over-award area with the safety net decision; the $8 plus $8, the second and third adjustments. Now traditionally in Australian arbitration systems that kind of National Wage increase would be allowed to be absorbed by employers into over-award payments. So if the over-award payments were over $8, then that $8 could be absorbed. It seems that the Commission is not happy with that and not withstanding some ambiguity in their decision, it looks as though they are wanting to now increase the safety net in both award and agreement areas. So they are not prepared to countenance absorption. I think that places some employers in a very difficult and uncertain position.

We should note also that the Act was drawn up to rely not just on the Conciliation and Arbitration heads of powers in the constitution, but also the External Affairs and the Corporations Power. I think a lot of people saw that, and quite rightly so, as an attempt to gut the States' industrial relations jurisdictions and, of course, to be more specific, to stomp hard on Victoria's December 1992 IR Reform Act. There is no doubt, in my mind, that that is true but I think that an even more worrying implication of using those two additional constitutional heads of power is that the power of the Commonwealth IR Commission is now no longer confined to matters concerned with conciliation and arbitration. They can do a lot of things directly because of these other heads of power. They can, for example, regulate the over-award area using those powers. Their anti-discrimination provisions are another area which rely on these additional heads of power.

Several months ago I heard a speech by Sue Walpole who is, I think, somebody important in the Sex Discrimination Commission. She was bragging about her increased role in the industrial relations arena and how she had every intention to use her powers to ensure that anti-discrimination prevailed in the work place. She made the point, for example, that the Federal Sex Discrimination Act, which relies on the External Affairs Power, has hitherto been confined to regulating work place outcomes only at the point of recruitment and at the point of termination. So she was very excited about the Industrial Relations Reform Act 1993 because, if she read it correctly, then her powers will now extend right through the employment contract. They will not be confined to the beginning and the end of an employment contract.

She referred, for example, to the various aspects of promotion procedures, the specifying of qualifications for jobs, merit pay, different treatment of part-time and full-time workers and over-award pay differences, which she saw as all subject to remedy under the Industrial Relations Reform Act because they do not comply with its Anti-Discrimination Provisions.

After she had discussed these matters I then, perhaps stupidly, tried to engage her in a debate about over-award pay differences. It is true that males earn higher over-award pay than females but if you go off and do the careful research, the answer is something like this. Males are much more likely to be employed in industries and occupations where over-award pay exists, partly because of the predominance of females in the public sector, and partly because over-award payments are quasi-service payments. Employers will use over-award payments to reward service and because females have lower tenure than males on average then there is a higher incidence of over-award payments amongst male workers. I thought I was being rather smart about that. She didn't because she doesn't care about the research. She only cares about what are the gross differences and she will use her power under the Act to try to remove those gross differences. I came away feeling extremely depressed and I think 1995, unfortunately, will see quite a lot of action in that anti-discrimination area.

At the beginning of this year there was a hospital in Canberra which tried to change the shift arrangements. However, a number of the women put up their hands and said that this was discriminatory because they had organised their child care arrangements in respect to previous roster arrangements and therefore to change the roster arrangements was discriminatory. Commissioner Smith agreed with them and found in their favour.

Now in one sense it is easy to see the employee's point of view. But you can also see where that ends. I know from my friends in the resource industries that they are very interested in the efficiency gains associated with 12 hour shifts, for example. Will they be barred from pressing on with 12 hour shifts because they will be held to be discriminatory against women. I understand from the resources industry that many workers like 12 hour shifts because it effectively gives them four days off a week.

The penultimate piece of bad news I wish to discuss is one that was much discussed when the Bill was first proclaimed and which soon forced the minister to bring in amending legislation. These were the provisions relating to unfair dismissal. Certainly the amendments to the Act brought an end to the media stories of actions seeking hundreds of thousands of dollars as compensation for unfair dismissal. However, I don't see this as being an area where the story is concluded---at all. There is still an enormously large number of claims flowing to the Federal Tribunal particularly from Victoria. I think there is a view that "oh well---you know the compensation being considered is $30-$60,000".

If you run a small business $30-$60,000 is enough to put you out on the street and that, of course, doesn't take into account the legal costs, so I think the idea that unfair dismissals is something we can forget about is wide of the mark. As I understand it, most of these cases are not being settled by conciliation---they are actually having to go to the Court. There is an enormous backlog, and the cost associated with that, and I think that really does remain a very bad part of the overall story.

The final piece of bad news is the loss of Sections 45D & E of the Trade Practices Act. This change is important in a way that people never realised. There were only ever a handful of cases that reached the courts but these were the provisions that employers used all the time as a credible response to trade union intimidation. It was really good law. After all if you can threaten to use a law and people then immediately desist from the lawlessness proscribed by the law, then we have really good law.

The unions knew it was real law, administered by real courts. There was immediate injunctive relief and the damages were real. With the loss of that weapon against lawlessness the damage to the employers' position in the labour market has been immeasurable. It is a very important aspect of the story in respect to the Transport Workers' Union's current claim. There is no doubt in my mind that Sections 45D & E would be being used now if they were still available. The Transport Workers' Union gets into secondary boycotts all the time and the big transport companies would be threatening them with 45D & E injunctions at this moment. But of course those laws have been repealed and there is no recourse to them. I think the loss of those sections cannot be under-estimated and the biggest story is that unless you have real laws with real teeth to back it up, then nothing else matters. That was the importance of 45D & E. I know that industrial relations club supporters don't like that story. However, I have lots of contacts with real business people and I know that they feel that loss very sorely.

This speech has been a litany of gloom. Let me therefore finish on a positive note. I think we can compare the Industrial Relations Reform Act 1993 to Surfers Paradise. It is so bad it's good. I am trying to make a serious point with this analogy. If the legislation had been only half bad, I think it would have seduced enough companies, enough employers to try to work along with it. But because there are many companies, some big companies, particularly, who are looking at this legislation and saying "this Act offers us nothing---absolutely nothing. Every bit of this legislation is negative from our point of view". So these companies are now asking themselves "what can our strategy be? We must pull away from this system."

So if the Act had not been so bad they might have taken a different view, and sought an accommodation within it. They no longer see that as a realistic option.

So we see continuing attempts to shift to individual contracts. Comalco may lose at Bell Bay. But such a defeat will be seen as a lost battle in an on-going drawn-out war. In all events, companies like CRA will press on with developing close relations with their workers, with creating a high-trust environment in the work-place. The ACTU has sought to portray CRA as the bogey-man. But CRA is not the only one. We have seen Woodside Petroleum get up individual contracts. Robe River, of course, was the first.

Some companies are beginning to look a bit flat-footed as their competitors move forward in this direction. But, as always, market forces and competitive pressures will spur the laggards into doing likewise. This is the real fear for the union movement.

There are of course, still plenty of wimpy employers and wimpy employer associations. But there is a sufficient number of companies who have reached the end of the road with the "system" and have committed themselves to reaching individual agreements with their employees, to driving wedges between the unions and the rank and file they purport to represent, to ensure that the union's role in the work place becomes peripheral, if not irrelevant.

Because the present regime, as defined by the Brereton Act, is so perverse, things must change. To quote from the well known shampoo advertisement featuring Rachel Hunter:

"It won't happen overnight...but it will happen".