Light on the Hill: Industrial Relations Reform in Australia
Voluntary Agreements Between Employers and Employees in Queensland
In April this year, the Queensland Government introduced
enlightened and progressive amendments to the Queensland
Industrial Conciliation and Arbitration Act. Voluntary
employment agreements will become possible in the State,
enabling us to catch up with practices that have increased
productivity in most of the Western world over the
past 40 years.
By the early 1970s, Australia's economic performance
was deteriorating and our standard of living compared
with the rest of the world had been falling for 20
years. The structure of the economy was clearly not
appropriate for the next stage of development even
though it may have been for the major developments
taking place in the 1950s. Certainly by the 1960s the
structure was rigid, inefficient, uncompetitive and
outdated in all sectors of the economy.
The economy was not, on any view, a free enterprise
economy. Each major sector of the economy was rigid
- there was insufficient competition in the industrial/commercial
sector due to the growth of restrictive trade practices;
- there was insufficient competition and over-regulation
in the finance sector stemming from the policies of
the Labor Government of the 1940s; and
- there was gross rigidity in the labour market, that
particular market in Australia having traditionally
been constrained by principles of centralised wage
By moves originally initiated by Sir Garfield Barwick,
some deregulation and measures to ensure freedom of
enterprise in the commercial industrial sector were
implemented. Whilst bank nationalisation, and thus
strict control of the financial sector, had been defeated
by legal action in the Privy Council, the Liberal/Country
Party Government did little to dismantle the various
restrictive financial legacies left from the Chifley
During this period, no steps had been taken to improve
the flexibility of the labour market. Indeed, with
the effective demise of sanctions for breach of orders
of industrial tribunals following upon the O'Shea case,
industrial relations increasingly followed union prescriptions
which have not, in Australia, favoured flexibility.
With the electorate perceiving future economic turmoil
and sensing a dissatisfaction with present structures,
Australia still had a significant chance to arrest
the rot in the 1970s.
Two oil crises were to hit the world which should
have benefited Australia as a net exporter of energy.
Had all sectors of the economy been competitive and
efficient, Australia would have climbed back to its
rightful place in the world.
However, after a Labor Government, a Liberal/National
Coalition, and then another Labor Government, it is
clear that this is not happening. Australia is on a
backward slide that could shortly see it not much better
than a ramshackle kind of Argentina of the South Pacific.
Whilst, of course, there is no single cause of any
problem, the central and consistent reason given by
many commentators and businessmen here and overseas
for the weakness of our dollar and the economy is the
structure and nature of the labour market.
In late 1985, the Australian Productivity Council
published a commissioned work called 'Structural Chaos'.
A chart from that publication, indicating the productivity
gap between Australian industries and the average US
and West German productivities for those industries,
is reproduced below.
The Productivity Gap
|Food, beverages, tobacco
|Motor cars etc
|Rubber & plastic
Productivity of Australian Industries as a percentage
of the average of
US and West German productivities.
From available figures, labour productivity in Australia
between 1960 and 1982 was one of the lowest of 10 observed
OECD countries, as the figures below reveal.
Average Annual Productivity Growth, 1960 to 1982
Moreover, during the 1970s, labour productivity growth
in the Australian manufacturing sector compared unfavourably
with growth in labour costs over the same period. Increases
in labour costs were not matched by output gains, leading
to a decline in international competitiveness illustrated
in the following table comparing labour costs relative
to the United States.
Labour Costs Relative to the United States
The problem of relatively low productivity growth
in Australia is also reflected in the high number of
working days lost in comparison with other OECD countries;
again I refer to the statistics.
Working Days Lost in Industry, Annual Average 1973
||Days lost per '000 employees
In the final analysis a flexible labour market will
facilitate the establishment of wages and conditions
appropriate to Australia regaining its rightful position
in the world. The worker realises now that to restore
Australia's position, productivity must improve. Flexibility
in the markets will then enable flexible policies to
develop between employer and employee organisations.
To increase productivity, a 'top down' approach cannot
succeed. Every industrial sector is different; differences
also reflect geographical and climatic influences.
Appropriate policies and conditions cannot be determined
by a central out-of-touch bureaucracy in Canberra or
by the Arbitration Commission. In Queensland, it cannot
even be determined in Brisbane for the whole of the
State. The method of organisation and conditions sought
by a small group in Cairns could well be different
to those sought in Brisbane. In a flexible system,
the most appropriate wages and conditions to apply
in each instance, be it company or town, will lead
to increased worker satisfaction and increased productivity.
In saying this, however, it is important that this
flexibility should not be abused to drive down living
standards. The future of Australia lies not in a low-wage
society, but a high-wage one financed by high labour
productivity. This is the lesson of the successful
economies to our north and even from arrangements such
as those adopted by the Mudginberri proprietor and
The introduction of flexibility into the labour market
in a manner which satisfies the foregoing requirements
is a matter of great national importance. When introducing
the Queensland legislation in Parliament on 9 April
1987, the Minister for Employment, Small Business and
Industrial Affairs, the Honourable Vince Lester, said:
'the need for more flexibility in the labour market
had received considerable discussion in recent years
and yet only the Queensland Government had actually
got around to doing something about it. The rigidity
of the Australian Conciliation and Arbitration Systems
had not adequately catered for individual firms, particularly
those in small business, where there was a definite
need for flexibility in the use of their limited human
material and resources. These impediments were particularly
onerous for companies in the start-up stage or those
in new fields. This Bill is firm evidence of the Queensland
Government's willingness to take innovative action
to create a work place environment that has the potential
to bring across the board benefits to all parties'.
'this is not a revolutionary step intended to demolish
the award system; instead, it allows an evolutionary
process whereby consenting employers and employees
can vary award conditions while preserving certain
basic award provisions as to ordinary pay and paid
leave. Resulting from this would be the opportunity
for the more productive use of labour, development
of mutually acceptable work patterns, increased productivity,
increased job opportunities, greater scope for the
introduction of profit sharing schemes and increased
services for the consumer'
What then, does the legislation provide? Two varieties
of voluntary agreements are possible.
- A voluntary agreement between an employer and at
least 60 per cent of employees in a calling covered
by an award or agreement or in a business establishment
or undertaking, which I will hereinafter refer to as
'an establishment agreement'. The expression, 'calling'
was already defined in the Act as 'any calling, vocation,
craft, business or other occupation or any section
of any calling'
- Agreements between unions of employees or employee
associations and unions of employers or any employer,
which I will hereinafter refer to as union agreements'.
Until the union movement fully supports the legislation,
it is expected that most agreements will be establishment
agreements. When there is only one employee in a particular
calling, an establishment agreement may also be entered
Section 94B sets out requirements to ensure the validity
of the agreements. These are required to be in writing,
signed by all parties and witnessed by a Justice of
the Peace. The employer must make available, upon request,
a copy of a voluntary employment agreement to every
person employed or who becomes a party to that agreement.
The agreement is to be lodged with the Industrial Commission
for registration and will take effect not upon registration
but from the date it was made. To protect minors, their
agreement will need to be consented to in writing by
a parent or guardian.
A voluntary employment agreement may vary the effect
of an award industrial agreement or voluntary employment
agreement in whole or in part, except for provisions
in respect of Christmas Day, Good Friday and Anzac
Section 94C provides that certain Act provisions may
be varied, e.g. restriction on hours worked, overtime,
rest pauses, mixed functions payment and payments for
public holidays, but alternative arrangements can be
negotiated. For public holidays other than Christmas
Day, Good Friday and Anzac Day, provision is made that
these will be regarded as a day's paid leave when not
worked, but when work is performed, at least a day's
ordinary time paid or equivalent must be provided.
Section 94D ensures that the current standard provisions
for four weeks' annual leave, eight days sick leave
and long-service leave will remain. Further, where
there is a current entitlement to five weeks' annual
leave for continuous shift workers, this entitlement
is preserved. However, the agreement can contain 'a
cash in lieu' clause for the benefits. An example of
such a package arrangement would be, say, two weeks'
pay and two weeks' annual leave, or one week's pay
and three weeks' annual leave.
Section 94F provides that a registered voluntary employment
agreement is enforceable as if it were an award. The
agreement is binding upon the parties to the agreement,
1) every member for the time-being of an industrial
union of employers that is a party to the agreement
and to whom the agreement relates; and
2) every employee, whether or not a signatory to the
agreement, who at any time whilst the agreement is
a) in the case of a union agreement, is employed by
the employer upon whom the agreement is binding, and
b) in the case of an enterprise agreement, is employed
in the calling to which the agreement relates.
Significantly, under Section 94F(3) the voluntary
employment agreement shall not deprive an employee
of any right or benefit received by him or any right
accrued to him on account of annual leave, sick leave
and long-service leave, or any payment in respect of
that leave, before the date when the agreement takes
Further, provision is also made to protect the worker
against discrimination from an employer on the grounds
of refusal to enter into a voluntary employment agreement.
An interesting provision is Section 94G which provides
that if there is an inconsistency between a union voluntary
employment agreement and an enterprise voluntary employment
agreement, the enterprise voluntary employment provision
Additional parties can be joined to voluntary employment
agreements by filing with the Commission a notice,
and an employer who is a party to a voluntary employment
agreement shall give a person about to commence employment
notice in a prescribed manner and form. The agreements
are for a term of not less than twelve months and continue
after formal expiration until terminated in accordance
with Section 94K. To terminate, not less than one month's
notice in writing is required in the case of a union
agreement by any party to the agreement or, in the
case of an enterprise agreement, by the employer or
more than 40 per cent of the employees bound by the
agreement. A copy of notice of termination must be
given to the Commission.
Unless the voluntary employment agreement so provides,
the Commission does not have power to vary the provisions
of a registered voluntary employment agreement, but
the Commission shall exercise all of its jurisdiction
in relation to a voluntary employment agreement as
if it were an award. Copies can only be issued to
parties, the Minister or an industrial inspector, but
to no other person. Accordingly, the role of the Commission
in dispute settlement is preserved. There is a minimum
hourly remuneration that can be paid under these agreements
and this is the average hourly rate for ordinary time
applicable to the relevant award. Conditions of part-time
workers and the loading of 19 per cent payable to casuals
are fully protected.
When introducing the legislation, the Minister described
it as 'a pioneering initiative allowing a new direction
for employment arrangements in Queensland and in fact,
Australia. While creating many opportunities, this
puts us into unchartered legislative territory'. He
went on to say that the 'concept is introduced permanently,
but it is possible that it might be necessary to fine
tune the legislation after say, twelve months' experience,
when the mechanics will be reviewed. It is to be hoped
that the union movement realises very early, the benefits
in such pioneering legislation'.
One can only hope that Australian unions adopt the
approach currently being followed by US unions, making
substantial concessions when they believe productivity
is improved. As stated in a recent article in the 'Harvard
Business Review' (September-October 1986):
'Today's dramatic increase in global competition requires
management and labour in America's basic industries
to rethink the wage benefits and work rule patterns
that have become entrenched over the years. Pay cuts,
two tier work plans and narrower application of seniority
have become commonplace in the auto, steel and farm
equipment industries. Industry bi-partisan compensation
agreements are fading from the scene. A new accommodation
is needed to make older companies in established industries,
more competitive, otherwise newly emerging nations
will wipe out established companies that have operated
under rigid labour management arrangements'
These comments apply even more to Australia. Similarly,
in China, the principles of voluntary employment agreements
have been operating for some years as the present leadership
of China is very anxious for the bonus system to work
as a genuine incentive system, both for enterprises
and individual workers. Leaders want to implement the
principle of 'for each according to his ability and
to each according to his work'. In the words of Premier
Zhiau Yeng in his speech to the 6th National People's
Congress in mid-May 1984: 'At present the central task
in the structural reform of the whole economy is to
eliminate the practice of making no distinction between
employees who do more work and those who do less'.
It cannot be long before the rest of Australia adopts
Queensland's lead in following the rest of the world.