Back to Basics

Industrial Relations in the Hospital and Medical Services Industry (I)

Neville Hughes


Some four years ago, in a discussion with a member of the Victorian State Industrial Relations Commission, I was advised that it was inevitable that the health industry would be in for a traumatic time until it properly understood and accepted what he called the reality of industrial relations. The extent of the trauma to be gone through was compared to that which had occurred in the metals industries.

The opinion which was expressed to me was a prophetic one. The health industry, more particularly the hospital industry, is suffering from excessive industrial stress. The reality for the private health sector is that it has to tag along with the agenda set in the public health sector.

Regrettably, I believe the term 'might is right' is an apt interpretation of the term 'industrial reality' as it is practised in the health industry in Victoria. I shall endeavour to illustrate this point, more particularly as it applies to the private health industry in Victoria.

I shall refer to certain key events which have occurred during the past few years, to illustrate the influences at work, the developments which are occurring, and the direction in which I believe they are heading.

My comments are the views of someone who is deeply involved in day-to-day operations. They are not an esoteric exercise. I am a player.

4 Per Cent Second Tier---The Public Health Sector

Industrial relations negotiations are essentially a highly centralised procedure in the public health sector in Victoria. This is so despite recent attempts to introduce industrial officers into public hospitals. The excesses of the centralised procedures have meant that the executive managements of the public hospitals have played little part in the outcome of the industrial negotiations. They 'cop' what is arranged for them between the Department and the unions.

My perception is that an irreconcilable chasm of mistrust exists between the executive management of public hospitals and the central bureaucracy.

The experience of the 4 per cent Second Tier issue illustrates this point.

Following the handing down of the decision of the Australian Conciliation and Arbitration Commission and State Industrial Relations Commission in March/April 1987 in regard to the 4 per cent Second Tier issue, the public sector began assessing how to find a basis for reaching agreement with the unions in order to satisfy the requirements of the decision.

Invitations from the central bureaucracy of the Health Department brought no response from the executive management of the public hospitals on the issue of offsets. There are 165 of them.

In order to find a basis for a solution, the central bureaucracy chose a sample of 17 public hospitals. The lack of co-operation was such that this was eventually reduced to 8. These were used to carry out sampling of pilot proposals.

The State Government through its Treasurer, Mr Jolly, and Minister of Labour and Industry, Mr Crabb, announced that the 4 per cent increases had to be 'cost neutral'.

After some four months of constant consultation, a deal was struck on what I would describe as an 'ethereal basis' and was manoeuvred through the State Industrial Relations Commission. A 4 per cent increase was granted to all employees in the public health sector, from 20 October 1987, at a cost of approximately $56m. The decision was one of the first in productivity bargaining on wages. An experienced advocate with whom I discussed the decision suggested to me that the outcome must be understood in the light of the Commission's moderate expectations. Whilst representing CAI in the National Wage Case, Mr Colin Polites expressed another view when he referred to the 4 per cent agreement in these terms:

    'Examples of an agreement by an industrial tribunal that causes even more concern, and that really amounts to an agreement which may be agreed in the future, is that in the Victorian public sector health industry Awards.

    That agreement related to 9 health industry Awards and was ratified by the Industrial Relations Commission in Victoria in full session on the 20th of October 1987. Components of the agreement appeared to us to be firstly increased throughout resulting from changes in admissions and discharge procedures. Secondly an application of what is known as the Royal Womens Hospital model which is an establishment review procedure agreed by the management of the Royal Womens Hospital and the Hospital Employees Federation No 1. Branch, and thirdly a proposal to review a more effective approach to the management of sickness and accidents injury absence in public hospitals.

    The full bench decision states that the government estimates that the cost of the increases will be at least fully offset by productivity increases cost savings which will be achieved progressively between now and the financial year 1988/1989.

    The Victorian Health Department has been prepared to agree to a 4% increase based on illusory offsets which may or may not materialise. It is for this reason that the national wage bench itself in March inserted the second condition, and also, we respectfully put, inserted in the second tier principle (d) which provides for no retrospectivity.

    Surely to award 4% prior to any restructuring and efficiency agreement being achieved and on the basis of an agreement to agree, is in fact retrospectivity.

    One other major concern in relation to this decision is the consequences for the private health sector industry in Victoria.'

I shall comment on this last point later.

In its October 1987 Report, the Victorian Hospitals Association, which represents the public hospitals, stated its views as follows:

    'The negotiated trade-offs for the 4% Second Tier wage increase are likely to be met with sarcasm and derision by hospitals and community health centres given the bitter experiences with the 38-hour week and non-nursing duties negotiations and their outcome.

    The real losers in the experiment may well be the employers. Just how well the unions and employees will adhere to the trade-off agreements once they receive the salary increases remain a matter for conjecture.

    The understandable fear of hospitals and community health centres is that they will again end up the losers with the employees receiving the 4% pay increase and the Government requiring that the major proportion of the 4% be found from savings resulting from changes in work practice and revenue initiatives even if proven unachievable.

    Of some comfort is the fact acknowledged by Government that hospitals are not currently in a position to withstand further effective cuts in funding and that this would only result in reduced services.

    Of particular significance to those with direct responsibility for hospital financial management is the recognition by the Minister and Health Department that even if the trade-offs are to be obtained, they will take some time to achieve. The willingness to provide interim funding indicates welcome increased willingness to try to understand the problems that hospitals face.'

These comments reflect the attitudes of public hospitals executive management.

My understanding is that the 4 per cent increase in the public sector costs approximately $56m in its first year. The question for the State Government was how to fund this cash flow. Whilst its policy was that all 4 per cent payments had to come out of productivity improvements, the 'industrial reality' would hardly allow that to happen. The deal was that the Government would fund the first few months, but thereafter public hospitals would have to find the additional money. The extra cash flow is to be obtained by increasing the charge for the privately insured patients in the public hospitals, thus extracting more cash from the private health insurance funds. This mechanism is now in operation and is expected to raise an additional $19m in the first year.

You will recall from the Colin Polites quotation that one of the components of the 4 per cent agreement was increased throughput resulting from changes in admission and discharge policies.

This reflects the control over throughput which the health unions have in public hospitals. They are seeking to extend this power into and over private hospitals. Worker participation is one thing but union control is quite another.

I emphasise in passing that there are 25,000 people on the public hospital waiting-list. They are the indigent, the pensioners and the non-levy-paying members of our community. The waiting-list is a sensitive political issue.

Having got the 4 per cent public health sector decision, the unions then concentrated on the private health sector.

In Victoria, the majority of private hospitals have little union membership amongst their employees. However, some of the larger private hospitals might have in excess of 30 per cent of employees belonging to a union. In certain key areas of some of these hospitals, such as the kitchen and operating theatres, some very militant union members are to be found. It is in these hospitals that frequent threats of industrial action are made and implemented. This is an industrial reality. Executive management of private hospitals are in an invidious situation because many are on the knife-edge of viability. The pressure is on them to concede to excessive union demands, which become intolerable for some. Their position is made more difficult when they are responsible to Boards, members of whom see their philosophical and humanitarian responsibilities for caring for the sick as being of higher priority than conceding to excessive union demands.

Inevitably the public health sector agreement has flowed through to the private health sector, albeit with some modifications.

I stated to the Joint Hearing of the Boards which ratified the 4 per cent private health sector agreement which became operative from 1 December 1987 that productivity offsets to cover the 4 per cent increase could be achieved by 1988-89 if the attitudes of the unions expressed at the hearing were applied in practice. The smirk on the faces of the union representatives was barely controlled.

Award Superannuation (3 Per Cent)

The Association I represent decided to create a superannuation fund, the Private Hospital Employees Superannuation Fund, and to make it available to its members. It has since become a national Fund and has been adopted by the Private Hospitals Associations in other States and the Australian Private Hospitals Association. A key feature is that employee members of the Fund elect their representatives. They are not union appointed.

In Victoria, private hospitals commenced offering this scheme to their employees last September/October on the basis that they would pay 112 per cent with effect from November 1987 and a further l12 per cent in November 1988. At about the same time, the Victorian Trades Hall Council, on behalf of health unions in Victoria, made a claim to the State Industrial Relations Commission for an immediate payment of 3 per cent into two approved Funds: the Hospital Employees Superannuation Trust (a Fund organised by the ACTU and a number of health unions, including the Federal RANF) and the RANF (Vic. Branch) Scheme, which is named Future Care.

Conferences were held directly between the parties and under the chairmanship of the Commissioner appointed for the task. The unions are adamant that they will not allow any Fund other than their own. We have argued that each employee should have the right of choice between the employer-sponsored Fund and the union Fund. This is not acceptable to the unions, yet PHAV members as a whole have less than 2 per cent of employees who are union members. In the negotiations, the ACTU has been strongly represented. The matter is heading for an arbitration by the Commissioner concerned. We delayed the commencement of the flow of funds into the Private Hospitals Employees Superannuation Fund when we started the negotiations before the State Industrial Relations Commission because we were concerned that the Commission might make an arbitration duplicating contributions being made by employers to the Fund. The unions were making loud noises in this regard.

One might speculate on the motives of the unions concerned and particularly those of the ACTU as they endeavour to influence the Commission before an arbitration is made.

My perception is that the establishment of a national union-sponsored Superannuation Fund will act as a catalyst for the creation of a national union of health workers, which conveniently fits into the ACTU strategy of reducing the number of unions. This would also be a helpful prerequisite for launching the proposals outlined in 'Australia Reconstructed' and also be the mechanism for unionising the entire health sector workforce.

One can therefore understand why the ACTU is paying so much attention to this case.

One of the more incredible aspects of Award Superannuation is what the Victorian State Government is doing, and perhaps even more incredible is the lack of response from Opposition politicians and employer groups.

In the public health sector, approximately 70,000 employees are to be taken into the Victorian State Government Hospital Superannuation Fund. The Government is offering this arrangement to take effect from the beginning of 1988. Where an employee makes no personal contribution, the Government will contribute 3 per cent; where the employee contributes 6 per cent, the employer will contribute 13 per cent, i.e. 10 per cent above the 3 per cent.

The State Government is actively promoting and encouraging every employee to contribute the 6 per cent. My experience of the Victorian health unions is that they will ensure that the additional 10 per cent contribution from the Government is made. A 10 per cent increase in public health sector labour costs is equivalent to employing an additional 7,000 employees. Even on the basis of average weekly earnings as at June 1987, a further $220m will be added to the wages bill. My concern is related to the effects such a trend in cost increases will have on health policy and on flow-on into the private health sector and into private industry.

One further incredible aspect of this is that the State Government does not propose to fund the scheme. At this stage the liability is to be met out of future taxes. This is a part of the Government's strategy of postponing liabilities incurred, leaving it for our children to foot the bill in the future. Is this not totally counter to the concept of Award Superannuation?

Employees working in the Victorian public sector, which account for one-fifth of the State workforce, are to receive an employer contribution 10 per cent above that decreed by the Australian Conciliation and Arbitration Commission. The funds to meet this contribution must come mainly from the private sector, which cannot afford to pay that same rate to its own employees.

I find it quite astonishing that having alerted a wide cross-section of the political, business, media and industrial worlds to this tactic, I have received no acknowledgements, but, metaphorically speaking, many blank stares. Yet the flow-on created by this Victorian Government action must surely have significant repercussions throughout all industry and for future Victorian taxpayers.

What does this lack of response mean? Why are we so paralysed with inertia? Why are we not explaining the position to the wider community?


The important role of the nurse in the delivery of health care, particularly within a hospital, is self-evident.

This importance is reflected in the allocations of hospital operating costs. Labour costs approximate 70 per cent of total operating costs, with nursing labour costs accounting for some 60 per cent of labour costs.

In Victoria, the long-running Nurses Career issue was supposed to have been settled in the so called Nurses Case No 1, which commenced in early October 1985 and concluded with a decision on 20 June 1986 awarding substantial pay increases except for student and first-year nurses.

However, on 22 July 1986 a decision in New South Wales by Mr Senior Conciliation Commission Wells resulted in NSW nurses getting higher wage levels than their Victorian counterparts. The result was industrial havoc in Victoria, leading to the Nurses Case No 2 decision handed down on 23 January 1987, which supposedly achieved parity again.

Nurses working in hospitals in Victoria and doing the same job are earning between 20 and 40 per cent above what they were receiving before 20 June 1986---even before the 4 per cent Second Tier is considered.

Later in 1987 in New South Wales, the RANF made an application to an Anomalies Conference for a finding as to 'agreeable case' with respect to professional salary rates for nurses, this being prompted by the imminent graduation of nurses from CAEs. Their training contrasts with the pre-existing pattern of nurse training which was largely hospital based.

The decision of the President of the NSW Commission decision was handed down on 10 December 1987. The decision indicated that the approach of Ms Staunton (RANF's NSW Branch Secretary) was again based upon 'the major upgrading of basic nurse education in the public hospital system that has taken place over the last six years'.

The RANF's NSW claim was for parity for college and hospital-trained nurses with other health professionals (Occupational Therapists, Speech Pathologists, Medical Technologists and Scientific Officers).

The President decided that 'the case cannot be run again to produce a further round of larger increases in salaries. The Nurses Association cannot have cake in 1986 and eat it again in 1987'.

More specifically his decision was:

  • to decline to refer the general matter of a new salary scale involving increases in salaries in the 6-25 per cent range, as set out in para. 2 of the Schedule to the Notice of Motion filed, to an Anomalies Bench, on the basis that no arguable case could be found of any limited or exceptional situation which might prove to be anomalous;
  • to refer to an Anomalies Bench the general question as to salary rate and incremental scale of the CAE graduate entrant registered nurses on the basis that an arguable case did exist of a limited or exceptional situation to the effect that the presently prescribed rate of an incremental scale of salary might prove to be anomalous.

The NSW Branch of RANF is appealing this decision. The Branch made strong threats of industrial action and in January 1988 the NSW Government issued a media release which confirmed that it supports the principle of professional rates of pay for registered nurses and the same pay for doing the same job whether hospital-trained or CAE trained.

This averted the threatened industrial action in New South Wales, which may be thought of as convenient given that an announcement of a State election is imminent.

In Victoria the RANF, with the support of the ACTU, has built up a significant expectancy for elevating the wage rates to what is termed 'professional rates'.

A case to review the RANF claim for professional rates commenced before the full bench of the Victorian Industrial Relations Commission in October 1987. It was adjourned in November pending the outcome of the anomalies hearing in the NSW Commission.

When the NSW Commission's determination became known, the Health Department of Victoria in essence submitted that the claim for professional rates should be rejected, but conceded that it could be arguable that tertiary trained nurses may have a case for some higher increment. It should be noted that the number of tertiary-trained nurses in hospitals in Victoria is probably less than 3 per cent. On the threat of industrial action by the RANF (Vic. Branch), the State Industrial Relations Commission agreed that the Victorian case should continue. With the political opportunism of the NSW Labor Government announcement, the Victorian Branch claim is now in effect for all the hospital-trained and tertiary-trained nurses to be elevated to wage levels comparable with hospital scientists. I am advised that this is to be granted; it will add a further $102m to the public sector wage bill (i.e. about the equivalent of Nurses Case No 1 and No 2 combined).

This case is currently adjourned in Victoria and is to continue at a date to be determined. The situation has been reached where neither hospitals nor the community can afford these exorbitant wage increases. It reflects back on the capacity of health insurance funds to pay benefit levels which do not result in excessive out-of-pocket costs for the patient and the capacity of consumers to pay the contribution rates for health insurance. The rapid escalation of wage costs has blown this system totally out of balance over the past two years.

This situation, coupled with the effects of decisions made by both the Federal and Victorian Governments, has reached the stage where the future of the private hospital sector is in jeopardy. All Australians, and all medical practitioners in particular, should think carefully about a health industry in which there are only public hospitals. These same cost increases are being incurred in public hospitals where cost controls and work practices are determined by the unions with the acquiescence of Government.

Anti-doctor paranoia dominates the thinking of unions.

Jim Simmonds of HEP has put his views as follows:

    'On top of all this, there is also all this talk about restraint with equity. From our side, our people see a group of the most greedy people (doctors)---driving around in flash cars and enjoying a great lifestyle. It makes the call for restraint with equity a big joke'.

A direct consequence of the over-pricing of registered nurses' labour is that SENs will seek to elevate their qualifications and to take over the more traditional bedside role of the Registered Nurse. SENs in general are members of the Hospital Employees Federation in Victoria rather than the RANF. A major demarcation confrontation seems to be inevitable and both the HEF and the RANF are endeavouring to organise themselves in this struggle.

It also seems inevitable that hospitals and surgeons will increasingly rely on Theatre Technicians for operating theatre work rather than more costly Registered Nurses.

I believe that unionists will cause major divisions within the nursing profession. They will probably be assisted in their cause as the number of CAE-trained nurses increases. Their course curriculum contains a significant social/behavioural science component. It might help if all social/behavioural science lecturers were to spend a year trying to make an enterprise function before undertaking their work. The unionists are preaching that all other roles in health care are subservient to theirs. I quote from a statement made by Ms L Grigg (RANF's Victorian Branch Assistant Secretary):

    'It is up to nurses---we have been the advocate for patients; we have been the ones implementing the health policy. It is time this was turned around. We know what is necessary, and nurses should be working together to ensure that we in fact determine health policy'.

The role and input of nurses is obviously crucial but this blinkered view surely needs an injection of maturity and balance.

Right of Access

Each of the key Awards has a right of access provision for union representatives.

For example, the H & B H Award states:

    'Employees of any establishment subject to this Award may, with the consent of the person in charge of such establishment (which consent shall not be reasonably withheld) be interviewed by the Secretary or other accredited representative of the Hospital Employees Federation of Australia, or have their Union contributions collected by the steward of the said organisation'.

Generally, access procedures work well. However, the major unions are consistently and persistently trying to expand their right of entry facility to enable them to enter hospitals without warning at any time and to enter any part of the hospital. The issue is not that of gaining access but the purpose of seeking unrestricted access. Experience shows that the unions want to be the de facto controllers. There have been many unpleasant incidents over the past few years resulting from these union activities. The attitude we have taken in private hospitals is to use the law of trespass to remove the militant union officers.

I refer to some recent incidents which occurred at the Diamond Valley Community Hospital.

In October last year, two RANF organisers attempted to call a mass meeting of nurses within the hospital at a crucial time of the day. They had refused to confer with management on the issues they wished to address. Management of the hospital called the police and the two union organisers, who made a forced entry into the hospital, were arrested and charged by the local police after being duly warned. Police responded quickly and effectively to the call by the hospital. An attempt to disrupt the operation of the hospital was aborted.

Three days later the RANF (Vic. Branch) Secretary, Ms Bolger, repeated the process, forced access into the hospital and spoke to a number of nurses who had heeded a call for a stop-work meeting. Surprisingly on this occasion, police were delayed in attending to their duties and turned up only when Ms Bolger had completed her meeting. A senior officer from the Central Office of the Victorian Police arrived and endeavoured to explain away the situation. I believe that State Government interference had occurred and the police had been warned off to prevent making Bolger a martyr. The effects on the hospital and the precedent it was creating for private hospitals appeared to be of no consequence to the State Government.

Some 31 nurses out of a total of 100 employed by Diamond Valley Community Hospital went on strike, but the hospital was able to continue to operate. In the course of the conciliation processes, the following incident took place.

On Monday, 26 October 1987, the Executive Officer of the hospital returned to the hospital from a business meeting just prior to 3 pm to be told that the Registrar of the State Industrial Relations Commission had telephoned, requiring the Chairman of the Hospital Board, Director of Nursing and himself to attend a compulsory conference at 3 pm that day. This was not possible and the Commission was advised. At 4.10 pm the same day, the Chairman of the Hospital Board, Executive Officer and the DOW were summoned under the State Industrial Act (Section 31(3)) to attend a compulsory conference at 6.30 pm that evening. They complied with the order. No resolution resulted from the compulsory conference which was adjourned until 4.30 pm the following day.

The conference reconvened and the Commissioner's attitude to the hearing was that the employers would need to reach a resolution that night or he would arbitrate that evening. The RANF were under no pressure. The situation was that the representatives from the Diamond Valley Community Hospital had to remain, under penalty of $1,000 fine each.

Again no satisfactory solution was reached at this meeting, as the RANF would not accept the proposals of the hospital representatives and indicated that they would consider their position overnight. The Commissioner accepted this approach from the RANF and adjourned the compulsory conference until 9.30 am on 29 October.

I mention this to illustrate the defensive position of the employer which seems to be their constant lot in the Victorian Industrial State System.

Industrial Relations System

With few exceptions, every decision made in the Victorian Industrial Relations Commission in regard to private hospitals over the past four years or so has given some additional strength to the union side of industrial activity.

I personally attended most of the hearing before the full State Industrial Relations Commission of the Nurses Case No 1 and No 2. In my view inordinate latitude was granted to the RANF as opposed to the employer group. While I understand that the applicant has the carriage of the case, in my view the issues should have been resolved within four to five months of their commencement in October 1985.

Although the case started in October 1985, it was not until March 1986, after approximately 30 days of sitting, that the RANF finally presented a tangible claim.

It is of interest that prior to and during this case, we in the private sector formed a nursing committee made up of 12 nurses representing a wide cross-section of that profession within the private hospital industry. The issues were presented to that committee over a number of meetings and the case presented by my Association was based on the advice we received from those nurses.

In the case of the public sector, the representations made by the Health Department were predicated on results of consultations between industrial relations advocates and the unions, in conjunction with the Victorian Trades Hall Council. The State Industrial Relations Commission, it seems, totally ignored our arguments and evidence on the subjectivity of their deals.

Given the amount of time that was granted to the RANF in presenting its case, it was very frustrating for the private health sector to be granted only an occasional overnight adjournment in order to consider developments which had occurred through deals being struck between the union and the State Government.

The RANF undoubtedly wielded enormous influence over the actions of the Commission through the threat of further industrial action---and it continues to do so. Whilst I acknowledge that the Commission has responsibility for protecting the wider community, I submit that appeasement is an excessive concession and not in the interests of the wider community.

The Commission has the power of discretion. Prime facie the outcome of a case is a question of advocacy and the calibre of the Commissioners. The reality is that the cumulative effect of all the myriad of decisions which are made each and every day constitute opportunities for increasing the subjugation of the enterprises by unions.

The result is that unions are participating in more and more consultative committees, more monitoring committees, more reporting back to industrial tribunals. It is becoming an industry in itself. These committees are interposed in the decision-making processes between the legally responsible management and the workers. Those who sit on industrial tribunals appear to believe that union representatives are blessed with abilities and community spirit not available to those who run, operate and work the enterprises.

Perhaps worst of all, this atrophying process is creating a ballooning expectancy among an increasing number of workers that additional benefits are an automatic right. No regard is paid to balancing income and expenditure and the influences which affect that balance.

I raised this with Ms Bolger in September 1986. She indicated that the bankruptcy of private hospitals was not her concern and the fewer private hospitals there were the easier it would be for the union. However, she is fully entitled to her view and I would defend to the end her freedom to express it.

My comments are based on the experience of the past few years. The position is deteriorating in my view. For instance, do you realise that an individual overseas nurse who seeks to migrate here and describes his/her occupation as nurse has to get union approval to secure a visa?

Vying with this atrophying process is the awful feeling of frustration of employers and managers apropos these developments.

The concern about being picked off is a deeply entrenched disease.

The method of keeping at arms' length through employer group representation has obvious protective benefits but is over-used.I believe.

It seems to me that the advocates of employer groups are so enveloped in the system as it is that they become absorbed by it. It is the only system---therefore it must be right.

The system is cloying. It is creating a growing sameness.

In my view proprietors and managers must develop dialogue with their workers to the point where the confidence of the worker in the enterprise is stronger than the influence of the unions.

To assist employers in this task, a countervailing power is urgently needed to create a more positive industrial environment. The will and wit to create this must come from employers, with the understanding of their employees.

Employers and employees do need to get back to basics in developing the industrial environment which suits their enterprise and its people.

Employer groups must be single-minded in supporting this cause.

Above all, there must be the laws and regulations which allow this to happen.