The Law and the Labour Market

The Industrial Relations Future: The CAI Perspective

Ian Spicer, AM

I guess I owe my invitation to present this paper to you today to a previous presentation to the Society by Des Moore, a Senior Fellow at the Institute of Public Affairs.

Some of you may recall his presentation of a paper entitled "The Role of CAI in the Regulation of Australia's Labour Market". It was a paper which provided a critical analysis of the past policies and actions of CAI, and one to which I requested the right of response.

I understand that the Society is providing this as the opportunity for me to present that response. However, since that paper was essentially looking back and raising criticism and views with the benefit of hindsight, and because CAI has undertaken substantial restructure culminating in my appointment as Chief Executive just twenty months ago, and because this year CAI reviewed its position and has now adopted a quite dramatic and radical agenda for industrial relations reform, I believe it would be time better spent looking forward, rather than responding to past issues.

I will, therefore, resist the temptation of a detailed response and restrict my comments to the issue of where we believe we should go in the future.

It is abundantly clear that significant change is taking place right throughout Australia, and indeed the world in almost every area of activity. These new events required a new approach from organisations such as CAI.

Nowhere was change more needed than in our industrial relations systems and practice.

No matter how much some might wish otherwise, it became clear to us that the system must change if we are to build an appropriate structure, which is relevant to the 21st century.

The need for Australia to change its direction in industrial relations should be realised for two principal, and fundamental, reasons Ä let me explore those reasons with you.

Firstly, it is both impossible and unrealistic to maintain a compulsory and centralised arbitration system if two of the three parties who make up that system, refuse to accept its decisions and outcomes. And that is what we have effectively faced following the April National Wage Case decision.

You will all be aware, that following that decision, both the ACTU and the Federal Government turned their backs on the Commission because they got a decision they did not like.

They didn't like the decision evidently, simply because it didn't deliver up to them the totality of the Accord Mark VI Agreement. Now, that Accord, which in reality is nothing more than a secret deal reached between the ACTU and the ALP in February of last year, was by this very action clothed with an authority which it could never wear. The Accord Agreement, it now appeared, was so important that it overrode the legislation of the Parliament of Australia.

I draw that conclusion because it was clearly the view of the ACTU, and the Government, that the Industrial Relations Commission was expected to abandon its statutory responsibilities to make decisions in the public interest and instead, to simply rubber stamp this Agreement called an Accord.

As we know, when this did not occur, and the Commission resolved that an alternate outcome was more appropriate in the national interest, both the ACTU and the Federal Government rejected the decision. Indeed, the ACTU, or perhaps one particular official, launched into an attack on the Commission and on the decision, the like of which we had never experienced before. The vehemence and vitriol which made up the attack was reinforced by the fact that at no time did any Government official, to my knowledge, move to defend the tribunal, or the decision.

Given that situation, never again could anyone enter into a National Wage Case with any sort of confidence that its decisions would be observed.

These actions, by those two major parties, clearly showed that the required commitment to the system had gone and that things could never be the same again. In a fit of petulance, the system of industrial relations, as we have known it for almost a century, had been severely weakened and undermined.

Now, even though the most recent ACTU wages policy resolution appears to try and redress that situation somewhat, we still have a position where the ACTU, and its affiliates, seek the freedom to reject decisions which they do not like.

The second reason for reform has its origins in the need to make Australian industry more efficient and competitive and, therefore, more able to maintain and secure a higher standard of living for all Australians.

For the first eighty years or so since Federation, our industrial relations system had, in large part, nothing whatsoever to do with the productivity or the efficiency of either individual enterprise, or the nation. That was not its concern.

The principal concern of our industrial relations system, during those years, it appears to me, was to achieve social objectives Ä such as to ensure that the national wealth was shared more equitably. Egalitarianism was central to our thinking and through the practice of comparative wage justice, if wage increases were granted to one, they flowed to all.

We got paid under that system essentially for turning up for work, rather than what we did while we were at work. But then, I guess, we could afford to follow such a policy in those days as we had a growing economy and the rest of the world had an insatiable appetite for the produce of our farms and mines.

As a consequence, we established conditions of employment which were the envy of the world, but which became quite unsustainable when the lucky country bubble burst. And burst it did.

We now find that our standard of living can only be maintained if we are as efficient and competitive as other countries.

Our industrial relations policies, therefore, must turn from the social objective of the distribution of wealth and start to play their part in the creation of a productive and efficient economy.

Accordingly, where we must go from here, is to create a system which enables individual enterprises to become more efficient; a focus on the enterprise where industrial relations is not an end in itself, but a means through which change at the enterprise can occur. That is the only course of action open to Australia.

In our view, in order to achieve this aim a totally new system must be adopted. The establishment of that system demands change in five key areas.

The first requirement is for the rationalisation of the present State and Federal system. Without establishing one system throughout Australia, significant and comprehensive reform is not achievable. Piecemeal attempts at change in one system at the moment are limited in their effect and can be cancelled out by the availability of an alternate jurisdiction.

Creating one system throughout Australia is, therefore, essential to this process of change.

Already some steps have been taken to bring about greater cooperation and co-ordination between the seven existing systems. Planning should now commence for these moves to proceed to this logical conclusion. This will require joint Federal/State legislation so as to bring about a rationalised system which preserves the rights of the States, but provides one set of legislative obligations, and one tribunal with State divisions.

The present operational balance, in which local issues are dealt with at the local level should, in our view, be maintained and strengthened.

This radical change will require a demonstration of political will and statesmanship, which should emanate from the processes of Special Premiers' Conferences.

The second essential element in the CAI policy is to remove compulsory conciliation and arbitration from the system, except in certain defined and limited circumstances. The present thrust of change must be towards voluntary arrangements, rather than arrangements imposed on unwilling parties.

Accordingly, in our view, conciliation and arbitration should, in future, only be available to parties if they so agree, and if at the same time they also agree to accept the subsequent outcomes.

The only exception should be in the case of essential services, personal grievances, or where a Full Bench issues a certificate that arbitration of a particular dispute is necessary in the public interest.

The third requirement is that there should be no more National Wage Cases, or general test cases. However, the Commission should be given the task of fixing:

  • a minimum hourly wage;
  • minimum annual leave entitlements.

Under the new system, then, a far greater emphasis should be placed on the reaching of voluntary agreements between employers and employees.

Agreements should be able to be filed with the Commission and given the force of law, provided they meet the minimum wage and annual leave criteria and they contain a grievance procedure for the resolution of disputes.

The fourth essential requirement concerns the basis of award and agreement making.

There should be no more common rule awards; instead all awards and agreements should bind only identified employers and their employees. These agreements should have a fixed period of operation, but parties could agree to their continuation, either in whole or part.

The fifth essential requirement is to open up the field of employee representation.

Employees should be able to choose their own representatives without being constrained by legislation which gives monopoly rights of representation to particular trade unions, often on a totally inappropriate craft or occupational basis.

The Commission should determine representation rights where these are contested, but the overriding criteria should be the wishes of employees involved, and a need to reduce the number of representative units within an enterprise.

Similar provisions will also have to operate for employers.

There will be a number of other important requirements including protection of employees who do not wish to join a union or association, removal of preference provision, and provisions for sanctions and penalties against those who do not comply with their obligations under awards or agreements or with the requirements of the new system.

With respect to sanctions, let me expand on this just a little further.

The reform programme which I have proposed suggests that industrial action would be prohibited during the life of an award or agreement. In the negotiation of that agreement the process could be prescribed regarding how the next agreement should be finalised. It may also be prescribed by legislation.

It may perhaps suggest a further period of time which is free of industrial pressure during which further negotiations would proceed, perhaps through voluntary arbitration.

If after that time, settlement was still not accomplished, then industrial action would be available, but within carefully defined limits prescribed by law.

The overriding importance of this new system is, nevertheless, the freedom of choice for both employers and employees in developing their own solutions to the issues which confront them, with particular emphasis on the enterprise level.

Change in these five key areas I have outlined is required to provide a framework which will facilitate, and not frustrate, an environment in which enterprise based negotiations can take place.

However, we do not believe this shift in focus can afford, or indeed, needs to wait, until that desired framework is in place.

Accordingly, in our current submissions to the National Wage Case review proceedings we have indicated that the Commission can now, even within the limits of its existing powers, put in place key elements of an enterprise based industrial relations approach.

Key elements which we seek the Commission to adopt in this regard are:

  • Determination of wage rates through processes at the enterprise level, rather than at the industry or national level.
  • Removal of structural impediments which now exist in the system, whether they be the result of existing award and union structures and coverage or the result of prescriptive provisions in existing awards.
  • The establishment of a formal review of union and award coverage to address elements of the current nature of that coverage which may hinder or frustrate the operation of truly enterprise based negotiations and processes. For example, it is important that the establishment of single enterprise based bargaining units or the requirement to limit, as far as possible, flow on of outcomes reached elsewhere, is not inhibited by the existence of multi-industry award structures or occupational based union structures.

Therefore, we believe the Commission should now facilitate the process of transition to an enterprise basis, but that this should occur in the context of formal principles or guidelines which promote movement towards that objective.

We have set out in specific terms in our submissions to the Full Bench what those guidelines for enterprise negotiations should be. I will not specify them in full detail but can indicate that they include requirements that:

  • Enterprise negotiations should focus on implementation of structural efficiency measures in the enterprise. Wage increases arising from those negotiations should not take effect until those requirements are satisfied.
  • Claims or outcomes should not be based on the flow-on of agreements reached elsewhere.
  • There should be no double counting with past structural efficiency exercises.
  • Outcomes should be consistent with the need to restrain aggregate wages growth.
  • Agreements should be for a defined period of not less than 12 months and further claims should not be permitted during that period.
  • Ceilings or operative dates upon which increases may become available should not be included in minimum rates awards.
  • The outcomes of enterprise negotiations may be recorded in either:
    • Section 115 Agreements;
    • enterprise specific paid rates awards;
    • minimum rates awards as an appendix, provided that the wage rate clause in the award is not varied and the amount of any increase or the actual rate of pay does not appear in the award or the appendix.

In summary, we recognise that the totality of our proposals represent radical reforms which will place some stress on labour management practices.

The implications for employers, employees and trade unions will be significant, as what I have outlined is not the traditional way of doing things. Indeed, the Industrial Relations Commission, in its April decision, raised this very question when it referred to the "maturity" of the parties. Its conclusion at that time was that the parties may not be ready for the change to enterprise negotiation.

Now, in some respects the Commission may be right, but the simple question is that we cannot delay these reforms while we acquire that sense of maturity. We must, if we are to be competitive, put in place the changes as soon as possible, and if that means developing the appropriate level of maturity on the run, then so be it. What it does mean is that employers, and employer organisations, will have to devote time and money in the training of first line supervisors, and senior managers in how to negotiate, how to communicate and consult, and especially how to set common objectives in conjunction with their employees and then build a process which works towards its achievement.

What I have set out in this paper are the legislative, structural and other reforms we believe necessary to achieve a goal of increased flexibility based at the enterprise level. In large part, implementation of those changes will be the easy part.

The real challenge within those frameworks will be to then change the corporate culture and build those skills in an enterprise which is capable of making that system work.

Indeed, if I have any concerns about our policy direction, it's not that the policy may be flawed, but that management may not have put in place that changed corporate culture, or created the environment in which enterprise negotiations can take place. Consequently, negotiations may take place, but prove to be unsuccessful, with the result that both employers and employees, having had a bad experience, try to retreat back into the known safety of a centralised and controlled system.

We believe our polices set the direction of change, and the framework which is necessary to facilitate that change. That clearly is not going to happen overnight. It will take time to achieve and to build the confidence necessary for the first steps to be taken.

What we do, as employers, in the next few months will smooth the process of change for us, and our employees.

So while we have a series of tasks before us which will lead to this new system, each of them must be addressed. If we are fair dinkum about creating a world competitive Australia we must approach these tasks with a greater degree of urgency, and the sooner we commence that process and those reforms, the better.