A Matter of Choice

The Brereton Industrial Relations Act

Christopher Peters

The Printing and Allied Trades Employers' Federation of Australia (PATEFA) represents the companies in the Australian printing, packaging, paper and publishing industry. These industries are arguably the only industries to date to benefit from the Brereton Industrial Relations changes.

How? The new legislation has almost doubled the size of the existing Industrial Relations Act which must be reprinted and published by someone, and that is about as much benefit as we are likely to receive in the near future.

Our industry, in terms of its contribution to the economy as measured by the number of establishments, employment, wages and salaries, turnover and gross product, is the third largest of the twelve manufacturing industry sectors and second largest in certain important indices such as value adding.

It employs more than 110,000 people through more than 4,000 establishments with a combined annual turnover of some $14 billion.

The industry produces a wide range of paper, packaging and printed products and is an important consumer of locally made and imported materials. It is at the forefront of technological change in Australia and utilises the most sophisticated equipment available here and overseas.

Like most industries, we have come through a period of severe recession during which rationalisation and downÄsizing was the order of the day.

Some 82 per cent of our industry comprises establishments that employ under twenty people and only 4 per cent employ 100 or more. We are in a true sense the embodiment of small business in Australia.

Small business, as the economists, politicians and others keep telling us, is the backbone for our nation's economic revival.

If this is true why then is small business, the economic battler, bearing the brunt of new industrial relations legislation which is destined to put power into the hands of a few by:

  • tying-up business in unprecedented amounts of paperwork;
  • taking away the employers' right to run a business as they see fit;
  • creating a climate of enterprise and conflict rather than co-operation;
  • giving unions greater powers; and
  • generally penalising the most crucial employment sector of our economy for the sake of the inept, the lazy, and the trade union movement.

While this is an over-simplification of the situation, the answers are best found by looking back through the confusion, instability and rhetoric that have dogged Australia's industrial relations system in recent years.

The seeds for the Brereton bible on industrial relations were firmly grounded in the fertile soil of rhetoric that became known as the Australia Reconstructed Report published following the ACTU/Trade Development Council (TDC) mission to Europe in 1986.

The main recommendations of that Report focussed on:

  • Macro economics policy
  • wages, prices and incomes policy
  • trade and industry policy
  • labour market and training policy
  • employee participation and industrial democracy
  • union policies, structure, research and education

If you think that a number of the recommendations have a familiar ring, you are right; they have emerged as part of the new legislation.

While the Australia Reconstructed Report provided the platform, the various Government/ACTU Wage Accord Agreements were the pointers along the route to Brereton's bible, the Industrial Relations Reform Act 1993.

There exists an enduring Union myth that all employers are out to screw their employees. That myth, having been transformed to doctrine, logically needed detailed and prescriptive rules drawn up to protect employees from the so called perfidious acts of the bosses.

So great has been this paranoia that for the first time in the history of industrial relations in this country a Federal Government, at the behest of the Union movement, has seen fit to rely on the Corporations and External Affairs powers as a constitutional base to enlarge the reach of Federal industrial legislation.

Irrespective of Australia Reconstructed and the Wage Accord Agreements, it is still pertinent to pose a rhetorical question. How did this centralistic, complex and in many ways stultifying piece of legislation get up? We'll come back to that in a moment.

Australia and its place in the world have undergone a significant change over the last decade or so. No longer can we rely on our geography and great natural resources to get by. We must compete with the global economy to survive. Hence some important aspects of our economy have had to change to meet this challenge.

During the middle to late 1980s, it became apparent that the traditional centralised wage fixing system was a severe impediment to achieving necessary workplace reform. Mechanisms for the delivery of a more deregulated wages system were needed.

With the election of a conservative government in New South Wales, some workplace reforms were initiated, although the traditional Award system was also retained.

The election of the Kennett Government Victoria saw the first genuine attempts to deregulate the wage fixing industry and bring about labour market reform. Not surprisingly, the Union movement opposed these reforms, orchestrating the movement of employees from the State System into the Federal System.

While genuine reforms were being introduced in some States, the ACTU and the Federal Government, at least in principle, were advocating the benefits of workplace reform and encouraging moves towards enterprise-based agreements.

As part of the rhetoric in a speech delivered in early 1993, Prime Minister Keating knowingly or unknowingly, gave the impression that direct employer---employee bargaining, particularly in the majority non-union section of the workplace, was to be made available through the Government's proposed industrial relations legislation.

Additionally, extensive consultation with employers and unions on the content of the proposed legislation was promised. It was foreshadowed that enterprise agreements would govern day to day work arrangements and that, over time, the Award based centralised system would become less and less important.

At this point, it is appropriate to seek to answer our previously posed rhetorical question: How did this centralistic, complex and in many ways stultifying piece of legislation get up? We answer with the further question: Who Pays the Ferryman?, and we reply: 'The Government.' The Industrial Relations Reform Act represents the Union movement's reward for helping the Government to win the unwinnable election.

Overall the new Act is unbalanced. It entrenches union power at a time when record numbers of Australian workers are opting out of unions. It changes the law to the detriment of employers through imposition of de facto unionism by allowing unions the right to inspect non-union agreements and, if they wish, oppose them in the IRC regardless of what the majority of employees in a workplace may want.

It retains the centralised award system as the floor and then attempts to build on this through an enterprise bargaining system which includes a legal right to strike while supposedly bargaining in good faith!

Brereton's bible fails to encourage the enterprise forums needed to stimulate co-operative employee relations which can create more productive workplaces, increased competition and innovation which are necessary ingredients to encourage business confidence and expansion through greater employment.

As an amalgam of the old and new testaments, it retains the worst features of both, with little of the benefits. Consequently labour relations, one of the remaining major areas of the Australian economy in need of reform, basically remains unchanged by the new legislation.

This view is supported by the OECD which only a week before said there was a need for more labour market reform in Australia.

The OECD warned that if costs, in terms of workplace inflexibility, poor productivity and higher structural unemployment were to be avoided "bargaining structures and the role of the award system will need to evolve in such a way as to facilitate the spread of enterprise bargaining."

Is such evolution possible? Not if union comments are to be taken as gospel. John Sutton, National Secretary of the Construction, Forestry, Mining and Energy Union, is reported as saying in the Union's recent journal that the Union had achieved 280 enterprise agreements in eighteen months. He said they had achieved "high wages and conditions standards . . . with a minimum of flexibilities or concessions to employers."

Iain Ross, who, as Assistant Secretary of the ACTU, helped design the new system and, prior to his appointment as an IRC Vice President, said, in an unpublished but on-the-record interview with The Australian newspaper in November last year, that he saw little incentive for non-unionised employers to use the new system. "We (the unions) don't expect it to be used (much) not because it is difficult but because of the award underpinning it," he said.

He said the IRC would be more vigorous and have a "broader role" in testing a non-union Enterprise Flexibility Agreement than a deal involving a union, because of the lack of a union as a party to protect the interests of workers.

How did we let ourselves get into this situation? There are several answers. It is fair to say that despite assurances to the contrary virtually no real consultation between the Government and employers took place. Employers were presented with a fait accompli, the majority of concerns being later dismissed as scare mongering or met by the rejoinder that after all "we won the election".

Ultimately and unfortunately, business groups did not present a sufficiently unified opposition to the legislation and allowed the Government off the hook.

Opposition politicians also lost their way through a preoccupation with internal and related issues that time and time again have been used by the government to its advantage. Shadow Minister for Industrial Relations, John Howard, said on 29 March that "the task of genuine industrial relations reform belongs to the next coalition government." For companies trying to decide what to do next and for those of the 10.5 per cent unemployed looking for work, this Lazarus style prediction will be far, far too late.

Does Brereton's bible of industrial relations light the way for all of us to follow? Not quite, unless you are of a particular trade union creed. Let's briefly look at some of the provisions:

The Awards---status quo of comprehensive, highly presumptive awards is locked in. The "no disadvantage test" is an impediment to more flexible working arrangements. There is a real possibility of award rates of pay increasing with movements in over award payments.

Family Responsibilities---A social minefield. There is an obligation on the Commission to take account of these matters. This has already caused problems after the IRC gave a group of nurses at a Canberra hospital the right to reject a change of shift if it interfered with their child care arrangements.

Termination---Many more burdens are placed on employers. There is a de facto onus of proof on employers to provide a valid reason, instead of on employees, to prove harshness. Small business in particular will be hit hard by the need to ensure all aspects of their employees' work is fully documented to ensure compliance.

The unfair dismissal procedures are also extended to managerial positions. There are no caps on amounts of compensation that may be awarded. Already claims have been lodged, one of the first by a Melbourne manager seeking $798,882 compensation from his former laundry service employer. In its first day of sitting, the Industrial Relations Court heard seventeen cases.

Equal Pay---There is a possibility of a revival of the discredited, comparable worth approach. If so, extreme costs and disruption to industrial relations.

Certified Agreements---About ten new tests for certification of agreements are added, to a total of about eighteen. The link with awards is strengthened. Provisions are unreadably complex. Union involvement is essential.

Right to Strike---Unions have a right to strike in support of a claim for a certified agreement. Employers have no remedy but lock out. The ordinary contract of employment management rights to dismiss or stand aside for industrial action is removed.

Bargaining in Good Faith---Employers may be forced to disclose information. No one knows what this means. The United States experience is that it is a legal minefield.

Secondary Boycotts---The former statutory prohibition on secondary boycotts (Sections 45 D&E of the Trade Practices Act) has been repealed and new, much more elastic, constraints were inserted into the Industrial Relations Act. "Industrial" boycotts are now legal. An employer hit by a secondary boycott or other tortious acts cannot seek redress until 72 hours have expired Ä unless the boycott causes "substantial injustice".

Common Law---Common Law remedies cannot be sought until 72 hours have expired, unless substantial injustice can be proved.

Industrial Relations Court---A specialist court has been set up, for no convincing reason which has emerged. There is a possibility of a lessening of the discipline of the general law.

Having got this far without being struck down by a Keatingism as my reward for Brereton bible bashing, it is only fair to look at some areas of possible benefit to industry.

Enterprise Flexibility Agreements---These are of some benefit to industry, offering a right to bargain which previously did not exist. Tests for approval are far too complex and the right of trade unions to be involved (at the request of a union member at the particular enterprise) are of real concern.

Doubt exists as to whether employers of non-union or substantially non-union workers will be prepared to risk the attention of trade unions by seeking Commission approval for Enterprise Flexibility Agreements.

Limitation on Arbitration---This is of some benefit, but compulsory arbitration remains available when under the Award stream. Arbitrated safety net increases across the economy are still available and almost certainly will be sought by the ACTU.

These are the new costs of employing.

How will all of this impact on employment prospects? Regrettably I fear there will be a devastating impact, whether it be through actual circumstances or the confusion and lack of adequate explanation and education that is the hallmark of Brereton's bible.

Companies are more likely to put up with non-performing employees for fear of being involved in lengthy and costly action before the IRC.

This will cause a decline in the companies' productivity and morale and eventually lead to lower profits and reduced job opportunities.

Those companies that cannot bear the cost of poor performance by some employees and elect to dismiss them may face enormous payouts, particularly at management level, to avoid being dragged through lengthy and costly proceedings. Eventually this too will affect employment.

Perhaps the most serious consequence is that companies will be reluctant to employ additional staff for fear of the consequences if things don't work out satisfactorily. This will work against the long term unemployed even if accompanied by various subsidies and grants that the government may offer. It is also likely to encourage business to invest its increasing profits in capital rather than employee resources. The tragedy is that all the recovery indicators are flashing green and we should be entering a period of growth and expansion with a very positive and continuing effect on unemployment.

Next week the PATEFA quarterly survey will be released, and it is expected to show a continuing increase in actual employment growth as well as in projected increases. During the December 1993 quarter, 21.1 per cent of those businesses surveyed reported an employment increase compared to a decline of employment of 4.7 per cent for the December 1992 quarter. Employment in the March quarter is expected to continue this trend, with the level of employment exceeding projections. How the Industrial Relations changes impact on this trend is still to be seen.

It is well worth noting that the United Kingdom, which has had lower unemployment than Australia for the past three years, has gone the opposite way to Australia by deregulation and removal of bureaucratic obstacles to starting new businesses and managing existing companies. The result has been almost unprecedented employment growth, with economists forecasting that unemployment could fall to 3 or 4 per cent by the turn of the century, a prospect that could not be seen as remotely possible here.

Of course there is a price for this and it is mirrored in the quality of jobs and the lower wages paid. How can such a thing be possible in the home of the trade union movement, the very model used for Australia's employment structure?

Britain's Tory government restricted employer's rights to protection against unfair dismissal and payments for people laid off until they had been on the job for two years. Wage fixing mechanisms which set minimum wages were abolished and unemployment and related benefits were cut to make the dole less attractive. Job hunting requirements for the unemployed were increased.

Britain in now the envy of Europe and is attracting considerable business investment which in turn is creating new jobs. The change has not been painless but it has been in synchronous with the economic climate. The Australian solution to creating new jobs appears to be to attack the problem by further penalising, through innovative taxation, those who should be encouraged and assisted to develop business.

Perhaps one of the best summaries of our predicament with the IR Act comes from an editorial in the 28 March issue of the Sydney Daily Mirror Telegraph, which prides itself on being the newspaper of the workers and has a high circulation in the densely populated and industrially developed areas of Sydney. The editorial said:

From Wednesday, industry and the Australian workforce will be stricken by new rigidities in their capacity to adapt boldly to the economic demands of the world.
Employees and employers will be locked into a system in which trade unions dominate, in which minimum standards are imposed and in which jobs are discouraged.
. . .These impositions amount to yet another penalty on employment in the area of business where hundreds of thousands of jobs could be created.
. . .The Government should not be allowed to believe the industrial relations reform task has come to a happy conclusion, and now it can rest.
The job has not been half done, and worse, it has been botched in a manner which will be a blight on business and employment for years to come.

Perhaps the most appropriate closing comment is the words of wisdom from Henry Ford II, who in 1952 said: "You cannot do today's job with yesterday's methods and be in business tomorrow."

Why HR Nicholls?

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