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
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
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
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
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
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
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
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
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
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
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
- 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
- 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
- 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
- The outcomes of enterprise negotiations may be recorded
- 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
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
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.