Lining up the Bills: Preparing for a Double Dissolution

WA: The Impact of Recent Changes in State Labour Laws

Bruce Williams

The title of this presentation is "WA---The Impact of Recent Changes in State Labour Laws". I would argue strongly that WA has gone from having the best industrial relations system in Australia to having the worst. Rather than going forward it is the clear view of employers in WA that the changes take us backwards, perhaps to the late 70's or early 80's---back to the old them and us, one size fits all system dominated by adversarial relationships and with the involvement of third parties unconnected to the workplace.

However, employers have no option but to operate within the laws of the land and how they are responding I will look at in detail later. At the same time we do not accept that the debate over industrial relations reform is over. We will continue to argue the case for genuine reform that puts the focus on cooperative relationships at the workplace with the flexibility to respond to the needs of individual businesses. The State's ability to deliver higher living standards and lower unemployment in the end depends on how productive we are and productivity improvement will not come from a rigid, inflexible, adversarial industrial relations system that is isolated from the workplace.

Western Australia provides an interesting case study in industrial relations reform. WA experienced significant change at the end of 1993 and it is instructive to look at the impact of those reforms and the community attitude to those reforms. It is also instructive to look at the reasons for the current reversal of those reforms in order to assess both their likely impact and the chances of them being effectively implemented. In the next half hour I will look at these issues and then conclude by looking at the implications of WA's experience for further reform as well as make some brief comments on what those reforms could include.

 

Background to the Western Australian Reforms of 1993

At the end of 1993, the so-called Kierath reforms were passed by the Western Australian parliament. They provided for a dual system---employers and employees could opt out of the existing system and remove themselves from the influence of the Industrial Relations Commission through the use of individual or collective WA Workplace Agreements, which were underpinned not by an award but by legislated minimums. This approach differed from the opt-in approach by the Kennett Government in Victoria making it both politically more saleable (no change unless you agreed) and also more difficult to shift to the Federal system. Employers saw WA Workplace Agreements as providing much greater flexibility and certainty and therefore the opportunity to increase productivity and to be more competitive.

Employers would argue that these changes produced considerable benefits for Western Australia, and in the vast majority of cases a win/win outcome for employees and employers. The economic benefits, both in terms of productivity and competitiveness, but also in terms of the State's reputation, were considerable. Industrial relations as an issue disappeared---both in existing employer discussions and as the first question asked by businesses considering investing in the State. Although the overall level of workplace agreements was relatively low (less than 10% but widely used in some major WA industries, for example mining) the existence of the alternative system also had a modifying effect on the behaviour of both the unions and the Commission in the traditional system---they were both conscious that employers and their employees had alternatives.

These views of employers would come as no surprise to this audience, however what is interesting is the WA community's attitude to these changes.

 

Community Attitudes to Industrial Relations Reforms In Western Australia

In November 2000, the Chamber of Commerce and Industry in WA (CCI) and the Chamber of Minerals and Energy, WA commissioned Market Equity to undertake a community attitudes survey of industrial relations in Western Australia. In January 2002, CCI again commissioned Market Equity to repeat the survey. The methodology was unchanged. Both surveys were random stratified telephone surveys of individuals aged 18 and over who were permanent residents covering both metropolitan and country WA---all major WA regions were included in the survey. The results of the survey were then weighted to reflect the WA population. The first survey consisted of 651 interviews and the second, 408.

The purpose of the first survey was to establish the degree of support for the then Opposition (Labor) party's proposals to abolish workplace agreements. The survey was conducted in November prior to the State election in February 2001. The second survey was conducted to further test community attitudes just prior to the new Government's legislation being introduced into Parliament in February 2002.

The results were unexpected and yet the two surveys were consistent with each other. They show a surprising degree of support for the then legislation and certainly show there was no widespread support for its repeal. The results are shown in the attachments---the results are for the second survey but the results for Nov. 2000 are shown in bold.

Looking firstly at the political question---Support for withdrawal of Workplace Agreements Legislation. (Image 1) 57 per cent did not support the withdrawal compared to only 26 per cent who did. The change since 2000 was a decline in support for withdrawal (down from 35 per cent), and an increase in Don't know (up from 10 per cent). That the opposition to any repeal could be twice the support for repeal in a climate where the Kierath legislation was almost demonised (the then Secretary of the TLC likened Kierath to Pol Pot and WA to the killing fields of Cambodia), was surprising and suggested that the benefits of reform were more widely understood and felt than was then thought to be the case. This is confirmed in other responses.

Respondents were asked whether different arrangements give workers the chance to earn more. The responses are shown in Image 2. The results speak for themselves. 50 per cent thought an individual agreement provided them with an opportunity to earn more compared with only 13 per cent who thought the award did so.

Respondents were asked whether different arrangements give workers greater flexibility in working life. (Image 3). Again the results are positive for those who support reform. 52 per cent thought individual workplace agreements could give you greater flexibility compared to only 13 percent who thought that of awards and only 17 per cent who thought that of union negotiated agreements.

The results were more mixed when respondents were asked whether different arrangements could be considered fair for all concerned. (Image 4). What is interesting is that in all cases there are a greater number who think the arrangement concerned is not fair than it is fair. It seems all arrangements are viewed negatively. However it has to be said that in this case awards are viewed as fair by a greater percentage (33 per cent) than individual workplace agreements (25 per cent). On reflection this is perhaps not surprising. There has been a strong perception built up about the fairness of awards and there were strong public cases being argued about the unfairness of individual agreements. It is interesting to compare this with the next set of responses.

Respondents were asked what type of arrangement they personally would prefer to be on. (Image 5.) While there may be a perception that individual agreements are unfair, they are overwhelmingly the most preferred arrangement---50 percent favour an individual agreement compared to only 14 per cent the award. It appears that individuals favour an individual agreement for themselves but, for whatever reason, fear that others may be exploited and therefore individual agreements don't rate highly on the fair scale. In particular, older people were concerned about young people and yet young people were those strongly favouring individual agreements. As an aside it appears that those most resistant to change are males over 45---probably a significant majority of this audience.

A positive view of choice is emphasised in responses to whether or not there were any arrangements that should not be offered. (Image 6.) A large majority (70 per cent) indicated that all options should be available. No arrangement had more than 10 per cent of respondents saying it shouldn't be available. It appears people like choice, and therefore are unlikely to favour having that choice removed.

Finally, a more generic question was asked about people's attitude to the regulation of pay and conditions. (Image 7.) Advocates for further reform take heart. A large majority (75 per cent) said that arrangements should be less regulated---47 per cent who want details set at the workplace by employer/employees and 28 per cent who want details set at the workplace by union/staff groups. Only 21 per cent argue that pay and conditions should be strongly regulated by industrial courts. It is interesting to note in several of these responses the desire to avoid the interference by third parties be they industrial commissioners or unions.

What these results suggest is that the community is not opposed to change and welcomes choice. It is particularly interesting to note that those who have experienced a more deregulated environment are not keen to go back to the old highly regulated and centralised system. There is fertile ground here for the reform minded as well as lessons to be learnt by the union movement and perhaps warnings (at least let's hope so) for industrial commissions. There is one very clear message---there was no widespread community support for the industrial relations law changes introduced by the Gallop Government in Western Australia. That begs the question---why is the Gallop Government so determined to turn back the clock?

 

Union Membership

While there was no widespread community demand for change to WA's industrial laws, there was certainly a demand, loudly expressed, by the trade union movement. While they couched their arguments in terms of protection of their members, there is another more obvious driver---declining union membership.

Image 8 shows union membership as a percentage of the workforce for both Australia and Western Australia over the last nine years. While union membership has declined significantly for both Australia and Western Australia (from 39.6 per cent to 24.5 per cent in Australia and from 37.0 per cent to 19.5 per cent in WA), it is interesting to note that the decline in WA from Aug 1992 to Aug 1996 was much steeper in WA---a decline of 33.4 per cent for WA compared to 21.5 per cent for Australia.

Many reasons have been advanced for the decline in union membership over time---changes in the composition of the workforce, increased part time work, greater female participation, relevance of union services and so on---however, these are unlikely to provide sufficient explanation for such a significantly faster decline in W.A.

There were significant changes in the Kierath legislation that could have contributed to this. Workplace agreements both individual and collective themselves made union involvement less relevant for many employees. For the first time non-union agreements were allowed. (While it is true that the Federal system had EFA's courtesy of Keating/Brereton reforms, the State collective and individual agreements were regarded as administratively easier and user-friendlier. The take-up of EFA's was very slow.) Both individual and collective workplace agreements provided an opportunity for employers and employees to enter into their own arrangements without interference by third parties. Without a changed approach by the union movement to better market their services this was likely to lead to a loss of membership.

Strategically Unions also appear to have made the mistake of shunning any members who signed Workplace Agreements effectively rendering the value of their membership nil.

The total numbers of individual Workplace Agreements registered reached well over 300,000 in Western Australia. Because of privacy provisions measurement is imprecise but it is accepted that penetration of these Agreements overall was to something like 10% of the Western Australian workforce.

It is useful to recognise that in practice the target market for Workplace Agreements were employees covered by Awards rather than the workforce as a whole. This means the 10% figure significantly underestimates the industrial impact and explains why the Union reaction to these has been so fierce in opposition.

One of the big users of workplace agreements was the mining industry, which in the early nineties was highly unionised. In an environment where workplace agreements were likely to lead to improved conditions for employees by direct negotiation with their employer, many employees were likely to question the value of their union membership. This appears to be what happened. Membership in the mining industry fell rapidly in the one to two years following the introduction of workplace agreements. There is some evidence to suggest that membership may have recovered somewhat but nowhere near their previous levels. Similar experience occurred in other industries but mining was the most dramatic.

Union membership in the nine years to August 2001 in Western Australia fell from 37 per cent of the workforce to 19.5 per cent---a decline of 47.3%. Little wonder that what was happening in W.A. caused concern not just to WA trade union leaders but also nationally. No wonder there was so much pressure on the Beazley Opposition prior to the last Federal election to rule out individual agreements.

A loss of nearly half your members in nine years is a great motivator to argue the case for turning back the clock. There is no need to look further for what is behind the Gallop Government proposals. This is legislation designed to put the unions back on centre stage of the industrial relations arena. This is not legislation by a Government that has the interests of the entire community at heart. Even if the union did speak for all their membership it would still only be for less than one in five employees. What the earlier survey results suggest is that this is not legislation that was wanted, nor will it be welcomed, by the broader community.

 

Unions and the Gallop Reforms

There is not time to look at all aspects of the new WA legislation. However, there are some changes which confirm what this paper argues is the real objective of the legislation---to facilitate the union's role in industrial relations.

This is not to question the legitimate right of unions to exist and look after their members' interests. Rather it is to question the right of unions to have a privileged position within the system that guarantees them a role rather than having to earn that role. This is no mere academic interest. The incentive to behave responsibly is likely to be related at least in part to the penalty that attaches to irresponsible behaviour. If there is no penalty, because a party has a legislated right or role, then behaviour is likely to be more extreme and irresponsible.

One of the interesting results found in community research over the last ten years is that the percentage of the population that think unions have too much power has declined. One possible explanation is that community support for unions has grown in tandem with more responsible behaviour---working days lost due to industrial disputes are at an all time low. This paper would argue that the dual system that has operated in W.A. for the last eight years has played a part in modifying the behaviour of unions because there was an alternative for both employees and employers that did not necessarily involve union representation.

Employers' concern about irresponsible behaviour by the union movement started to arise soon after the election of the Gallop Government early in 2001 and well before the new legislation was introduced into parliament. Perhaps the first indication was the government's response (at best ambiguous and inconsistent) to the reappearance of "no ticket, no start" signs on Perth building sites.

Another early warning was also related to the building industry. One of the first actions taken by the Government early last year was to disband the Building Industry Taskforce that was established in 1993 by Minister Kierath. The taskforce was viewed as having had a constraining effect on extreme behaviour in the industry. This was endorsed by the Conclusions of the Cole Royal Commission which said : "The WA BITF demonstrated a determination to effect change to an industrial culture that had developed in Western Australia and to enforce the rule of law".[1]

The new Minister Mr Kobelke replaced the Taskforce with the Building Industry and Special Projects Inspectorate which amongst other changes would no longer be able to prosecute criminal matters.

The Royal Commission concluded that: "There can also be no doubt that the perception in the industry is that without the power to investigate and prosecute matters, such as criminal trespass, extortion and demanding benefit by menace, BISPI is seen as being unable to deliver. In this environment, it is to be expected that contractors, subcontractors and employers will not expose their commercial enterprises to the risk of ongoing industrial action and intimidation which may follow as a means of retribution for making a complaint to an organisation such as BISPI, where their perception is that BISPI will not be able to make good the complaint and prosecute those responsible".[2]

In short, a working enforcement body was deliberately replaced with one that was ineffective.

Given that start it was no surprise that the W.A. legislation goes much further than is necessary to protect any workers likely to be suffering exploitation under Workplace Agreements---while CCI in Western Australia would have opposed it, a no disadvantage test similar to the Federal system, applied to the previous legislation would have satisfied that perceived need.

The current Gallop legislation seeks to enhance the union role to a very considerable extent and beyond what would provide the union movement the fair opportunity to market itself to its members and prospective members. For example:

  • Right of Entry. There is for practical purposes unlimited right of entry at any time and to discuss any matter including the right to look at non-member records. (All that is necessary is that the workplace has a member or potential member.) There are already examples of these new right of entry laws being abused. In one instance 23 representatives of the Miscellaneous Workers Union simultaneously sought entry at one workplace---both their sheer numbers and their behaviour demonstrated their action was not about any genuine issue but rather an attempt to intimidate and disrupt the business.
  • Expanding the role of the Industrial Commission. The Commission now has the power to issue interim awards with the onus of proof now on employers to show cause as to why the award shouldn't issue. This will make it easier for union applications to bring award free occupations into the award system and under the influence of the Commission and unions.
  • Unfair Dismissals. Interim reinstatement before the case was heard was proposed originally (assumption---the employer must be guilty). Fortunately this was removed. Unless you have your case handled by the Union---in which case interim reinstatement is still available, there is a 28-day time limit for lodging unfair dismissal proceedings (can be extended in exceptional circumstances) unless the union is handling it for you in which case there is no time limit.
  • Safety. Safety is now included in the definition of an industrial matter. The Commission now has jurisdiction even though safety is dealt with in separate legislation and by an independent safety magistrate. This creates double jeopardy for employers and an increased likelihood of safety being used for industrial relations purposes.
  • Good Faith Bargaining. The legislation allows the same claims to be made against multiple employers, that is, it encourages pattern bargaining. Further it obliges employers to negotiate as a collective unless an individual employer is granted the right to negotiate alone by the Commission. What does this say about flexibility, certainty and the ability to respond in a way which suits the particular needs of the organization?
  • No practical individual Agreements. The unions argued hard for no individual agreements. The Gallop Government is making much of the fact that it has provided a form of statutory individual Agreement, an Employer/Employee Agreement or "EEA". The reality is the Unions have achieved what they wanted because EEAs are not practical and are unlikely to be used. Industry is already voting with its feet. Figures released by the Office of Employment Advocate show that the rate of registrations of Australian Workplace Agreements sought by WA employers and employees has skyrocketed. Problems with EEAs include that they are tied to the award reducing flexibility and certainty, a new employee must be given the choice of the award or the EEA even though the EEA has satisfied the award no disadvantage test and even though the business' operations may be structured around the EEA, and finally, where there is a collective (union) agreement there can be no EEA.

Finally EEAs are registered by the Industrial Commission---a body that has rarely demonstrated an understanding of the need for flexibility in workplaces. The Commission has issued guidelines explaining how the EEA Award No Disadvantage Test will be judged. Among other provisions the guidelines say the EEA shall not derogate from the rights of "third parties"---that is, unions---something that is a totally inappropriate consideration especially when less than 15 per cent of private sector employees are union members. In addition when considering award benefits that have been offset by some other improved benefit the consideration will include not just the relative benefit to the employee but also the "costs of those benefits, entitlements and protections to the employer"---( my underlining ) again an irrelevant consideration. These problems are not theoretical---in the first six months we understand around 300 EEAs have been filed but no more than 12 have been registered. What little demand there is for EEA's has been frustrated by the unsympathetic culture of the tribunal.

Whilst EEAs are failing in practice the fact that the principle of a statutory individual Agreement has been accepted by a Labor Government is a potentially significant beachhead for future reform.

 

  • No Non-Union Collective Agreement. Even Laurie Brereton thought this was a bit hard to justify. The Minister's explanation for not allowing non union collective agreements is that he is not opposed in principle but there wasn't time to include it ! This legislation was in preparation for 12 months. Perhaps more relevant are the earlier comments about the impact on union membership. For small, unincorporated businesses this means no choice---they cannot go to the Federal system and use AWA's , EEAs don't work---so they either have a union collective agreement or the award.

So it can be seen that the WA Government's Labour Relations Reform Act 2002 represents a cumulative package of measures that goes well beyond the election commitments of the then State Opposition and does everything it can to ensure that workplace relations in Western Australia return to the centralised, bureaucratic, once size fits all system which employers hoped we had seen the last of---but not just employers according to the community research. What is surprising is the extent to which attitudes have changed in Western Australia.

The response to the Labour Relations Reform Act has predictably been a rapid shift by employers to Australian Workplace Agreements. Image 9 demonstrates how rapid this increase has been. It is worth pointing out notable dates on this timeline. Februaury 2001 was the date when the ALP came into Government in Western Australia then a year later, February 2002, when the Government's Labour Relations Reform Bill was tabled in Parliament and the public debate began.

The figures speak for themselves. Shortly after the Government came to power there was a doubling then a tripling of the proportion of AWAs attributable to Western Australian employers. In the first three months of this year, the figures per month are running at between 4,000 & 5,000 per month; ten times pre Labor Government figures.

This demonstrates a very strong commitment by Western Australian employers to a regime of individual Agreements, even when the benefits of AWAs are less than the original option of Western Australian Workplace Agreements.

WA Managers will not be denied the flexibility and benefits they have previously experienced even when considerable effort is required of them to again secure these under a different legislative format.

These figures confirm in practice the findings of the earlier research that the community and employees accept individual Agreements.

One case study of how well entrenched and widely supported individual Agreements are in Western Australia is the example of Rio Tinto. Rio Tinto and its predecessor, Hamersley Iron, were of course at the forefront of introducing all staff work arrangements, ultimately enshrining these with individual Workplace Agreements in 1994. In the lead up to the Gallop Government's legislation to abolish Workplace Agreements becoming law, Rio, in Western Australian offered a s.170LK Non Union Certified Agreement and put this to a ballot of its workforce. The employees however voted this down in all but one of its sites to the cheering of Unions throughout WA who had campaigned against accepting the Company's preferred non Union Collective Agreement.

In the wake of this rejection of the Company's approach, Rio considered its options and some time later rolled out an offer of individual Australian Workplace Agreements.

As Chris Renwick from Hamersley Iron explained at a recent address, now more than 90% of Hamersley Iron employees having signed on to these Australian Workplace Agreements.[3]

Clearly Union claims the initial rejection was a boost for unionised collective bargaining and a vote of confidence in the Gallop governments Reform Bill where wrong.

 

The Tribunal Re-asserts Itself

At the same time that we have the legislative rollback by the State Government the W.A. Industrial Relations Commission has sought to re-assert its influence by undermining employers who have sought to use Workplace Agreements, both State and Federal.

Sidelined for nine years by the most significant development in W.A.'s IR history, the rise of Workplace Agreements, the W.A. Commission is finding new ways to interfere.

The approach adopted by the W.A. Commission is to support Union claims to flow on the wage increases and benefits enjoyed by employees who have accepted individual agreements to employees who have opted to remain on an Award or Union Agreement.

The first instance of this involved BHP Iron Ore[4] and this approach was later repeated by the Commission in the Burswood Resort Casino case.[5] In both cases the Commission agreed to make a new Award with wage increases aligned with the Workplace Agreements and then in the Burswood case to add insult to injury ordered four months retrospectivity.

 

Implications for Industrial Relations Reform in Australia

There will always be opposition to change. However, those who believe that further reform of industrial relations legislation is needed in order to ensure a prosperous future for all Australians need to continue to make the case as objectively and as openly as we can. The Western Australian experience since 1993 suggests that employers and employees are mature enough to accept responsibility for their own affairs and not rely on the intervention of third parties. Reform advocates should be encouraged by this experience.

There is also a warning both for unions and for Governments (like the W.A. Government) who want to try and wind back the clock. My view is that there is the potential for a backlash from the community to the current W.A. proposals given the community's experience with greater choice and increased flexibility. The backlash will be even greater if there is a diminution of job opportunities and/or a return to the bad old days of the late 70's and early 80's when strikes were common and the State's reputation as a reliable supplier was questioned. Clearly the W.A Government hopes the negatives of their policies will be masked by positive economic growth---time will tell.

There should also be encouragement for the current Federal Government in the Western Australian experience. Reform is about forcing employers to accept responsibility for their own industrial relations and not regard it as something that is for the various industrial commissions to resolve, as has too often been the case in the past. Given the right tools, and a competitive product market, employers in W.A. in many cases have shown that they are up to the challenge and can deliver win/win outcomes. The 'right tools' does mean further legislative change and if the case is articulated vigorously and clearly then a constituency for change can be built despite the Senate. After all it would be a pity, at least from the perspective of the proponents of reform, if in 2004, after three terms of a government with a stated commitment to industrial relations reform, all we were left with was the compromised, but useful, reforms of 1996.

What might those further fundamental reforms be? That is a topic for a much longer paper but perhaps two thought starters. The Western Australian experience is instructive and appeared to be growing in acceptance by the community. A dual, opt-out system where the alternative was not based on awards would be a significant reform for Australia.

Alternatively, or even at the same time, steps could be taken to separate the adjustment of the 'safety net' from adversarial industrial relations, recognizing that the tribunals traditionally have had a dual role of setting minimums and resolving actual conflicts.

Splitting these roles could allow the establishment of a separate administrative body with the limited role of setting true universal minimum conditions, without the capacity to make general wage increases and without a court room environment thus avoiding the cycle and theatre of grandstanding claims, whilst retaining the Australian Industrial Relations Commission to provide voluntary arbitration for those parties who because of a lack of maturity, or other more justifiable reasons, need third party intervention.

That there is a need for further reform to ensure that industrial relations is dealt with at the workplace where the needs of the business (shareholders and employees) can be dealt with in a way that suits the needs of the particular enterprise is a view strongly held by CCI. This means more fundamental change that reduces the role played by third parties and takes away constraints on the ability of enterprises to respond quickly to ever changing circumstances. CCI will continue to argue the case for change in the interests of all Australia.



Endnotes

[1]. Final Report of the Royal Commission into the Building and Construction Idustry, Volume 21 Page 136 Paragraph 79.

[2]. Final Report of the Royal Commission into the Building and Construction Industry, Volume 21 Page 137.

[3]. Chamber of Commerce & Industry address by Chris Rnewick 2 April 2003 "Seizing Opportunities---Growth for Western Australia".

[4]. Western Australian Industrial Relations Commission AFMEPKIU & Ors v. BHP Iron Ore Limited 2001 WAIRC 02082 @ Volume 82 WAIG Page 2033

[5]. ALHMWU (WA Branch) v. Burswood Resort (Management) Ltd---Commission-in-Court Session 2001, WAIRC 07077

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