Public Interest or Vested Interest
Enterprise Agreements---Myths vs Reality in Queensland
From 1949 to 1972 our capital stock per unit of labour
in Australia grew at an annual rate of 3%. However,
since 1972; there has been a drastic decline in that
growth and productivity measure to 1.2%---a more than
50% reduction. And I will stay with that low figure
fully aware of the curious spate of OECD and BIE figures
on the eve of an election---not unlike a manager about
to be terminated producing a substantial profit for
the first time in years. I have been involved in industry
for some 40 years---quite long enough to make an assessment
The other important thing to note is the nature of
the economic advice given to Ministers by bureaucrats
and to other leaders by their advisors. It is essentially
Keynesian or Galbraithian (the same thing) and it theorises
that high levels of government spending, high levels
of welfare programs and high levels of regulation of
the private sector, especially in the labour market,
are good for the people and essential to an economy.
Well, that is a myth as we now well know from
our dismal national economic performance. In fact,
it seems to me that the mythology of contemporary industrial
relations policies is made of mythematics, mythinformation,
and mything ingredients.
Voluntary Employment Agreements
The realities are that as far as the labour
market is concerned, the best outcome is achieved for
all when those in the enterprise, labour and management,
arrive at a deal for mutual success with very little
government intervention. Our Queensland experience,
limited as it is, has clearly shown those realities,
as I will show.
The enterprise agreements which firmed up the labour-management
bargain were also in the public interest. Nothing is
more in the public interest than thriving competitive
and profitable enterprises, with contented employees,
in an economy where most production is from thousands
of private sector enterprises.
However, there are huge forces of vested interest,
which are not concerned at all about the public interest,
which have moved to ensure that enterprise agreements
do not become established in the Queensland economy.
After all, a huge industry of industrial officers,
industry associations, advocates and administrators
has complete career dependence on industrial discontent.
I will demonstrate that too in the cases that I will
now deal with in detail.
The Government has never released the figures, but
it is estimated that up to 70 voluntary employment
agreements were finalised between labour and management
and lodged for registration. About 40 were actually
registered: Graeme Haycroft's consultancy VEAQ lodged
35 of which only 12 were registered. The Industrial
Register obligingly slowed down the processing before
the State Election in December and has since been contacting
companies with agreements awaiting registration with
a 'do you really want to proceed' type of inquiry 'in
view of the imminent legislation to rescind the Voluntary
This is what the Queensland Minister for Industrial
Relations actually said.
'.... I and my Government believe they are against
the public interest .... What they have also done
in some cases, particularly where there is a high labour
content when companies are tendering---they are now
discovering that VEA's make the playing field very
.... It's become unfair competition where one company
has VEA's and one doesn't. It makes it possible for
one company to tender lower because they have an unfair
advantage in terms of labour costs'
What he was really saying was that it is against the
public interest for labour and management to agree
on work restructuring in their enterprise for higher
productivity, higher take home pay, higher profits,
and lower prices for the products and services to customers
---including his own government, one of the State's
Now, turning to history.
Just after the 1985 SEQEB dispute, the Queensland
Government set up a committee to draft new legislation
to allow voluntary employment agreements. By August
1985 it was circulated in draft form. As a result of
various pressures and criticisms it went into the 'too
hard' basket and did not surface again until 1987.
The legislation proposed voluntary employment agreements
based on an award varied by mutual agreement between
management and labour. If a secret ballot of employees
was in favour then the agreement was simply to be registered.
No approval of the Arbitration Commission was necessary.
Now that really stirred the Industrial Relations Club.
Careers were in jeopardy, career paths were disappearing---after all industrial relations has provided careers
in quasi-judicial appointments and even a path to Prime
The employer associations led by the Queensland Confederation
of Industry grouped quickly and convinced the Minister
for Industrial Relations that certain minimum conditions
should apply in respect of:
i. The award wage.
ii. Sick pay provisions.
iii. Annual Leave provisions (although 50% could be
iv. Redundancy and termination provisions.
v. Penalty rates on public holidays.
vi. Long Service Leave provisions.
vii. Loadings for casuals (19%).
Thus leaving for variation only overtime rates, working
hours and working days.
However, the real master-stroke of the Queensland
Confederation of Industry was to convince the Minister
that each VEA should be 'run by the Arbitration Commission,
sort of a formality' before registration, with a provision
for the Commission to veto the agreement if it was
not in the 'public interest' (which was undefined).
That was passed into law and thus the Industrial Relations
Club was still in business with a matter for endless
contest and debate.
Enter the Mini-Movers episode. Mini-Movers are a small
taxi-truck firm specialising in furniture removals.
Mini-Movers decided to step away from the then conventional
way of using sub-contract truck drivers by buying their
own trucks, employing drivers and giving them specialised
training. They operated for several years by using
drivers paying on an hourly basis about 30% above the
award. With VEA legislation available, Mini-Movers'
management and employees sat down with a local industrial
advocate and drafted a VEA which was 'run by the Commission'
with all parties present. To the astonishment of all,
the Commission rejected it as 'being against the public
So it was modified, submitted again and rejected and
eventually emasculated to only one variation of an
award condition. The variation made the VEA provision
almost identical to the corresponding Federal awards
so this time the Commissioner had no grounds for rejection
and VEA 2/88 was approved to the chagrin and extreme
annoyance of the vested interests in unions and Industrial
The Trades and Labour Council under the leadership
of one Dempsey, the failed architect of the SEQEB dispute,
formed an anti-VEA committee which embarked on a savage
media campaign against Mini-Movers to bring them under
a Federal award (which has a provision for casual drivers
almost identical with the VEA). These moves failed.
Meanwhile, the Metway and Power Brewery VEA's had
Metway Bank is the result of the transformation of
one of Queensland's most successful building societies
(The Metropolitan Building Society) into a Bank.
The management of the building society had long worked
quite amicably with the Federated Clerks Union under
a State award operating branches in shopping centres
including opening during late night and Saturday trading.
With the imminent grant of the bank licence, the Australian
Bank Employees Union moved in to collect dues and began
negotiation on an interim award. No one asked the employees
about who they wanted to represent them in the future
Just hours before the Metway Bank came into being
the ABEU reneged on its agreements for interim awards,
and the staff approached management with a proposal
to conduct their own industrial affairs in future,
dealing directly with the management. It was mutually
agreed that a VEA would be set up.
The VEA was prepared by two QC's, one representing
management and one representing employees, and duly
voted upon in a secret ballot conducted by firm Peat
Marwick and passed with a majority over 70%. (The TLC
of course publicly announced that the ballot was rigged).
The Metway VEA included:
- provisions for a 38 hour week;
- up to a 9.5 hour day for late night opening;
- superannuation (12 months ahead of its time);
- time off in lieu of overtime;
- a part-time employment provision;
- increase in the casual loading to 20%;
- a new salary structure based on job worth and individual
performance away from age and years of service.
Under the legislation of the day the VEA still had
to be approved by the Arbitration Commission. By this
time, the Commission had lost some image on its 'public
interest' stances and declared the Metway VEA too hard
for them. They referred it to the President of the
Commission on a technicality about eligibility of who
could put a view opposing a VEA. After a delay of a
month or so the President handed down his decision
disbarring unions from the VEA approval process and
the VEA was approved.
Harassment of Metway has continued with the Union
taking various actions in the State Industrial Commission
and Court, the Federal Industrial Relations Commission
and the High Court. The ABEU were unable to recruit
more than 15 out of 800 employees.
Meanwhile Metway prospers. It now has over 120 branches
and is regarded locally as having one of the most successful
customer service quality management programs, all no
doubt a result of contented and committed staff and
Before the advent of Power, there were two
major brewers, Castlemaine XXXX and Carlton United
Breweries. Employees worked under provisions of the
Brewery Workers Award with, most interestingly, their
special work conditions including a 35 hour week provided
under two unregistered agreements---Castlemaine
Perkins Reduced Hours Agreement 1982 and the Customs
and Practices Agreement 1986. An unregistered agreement
continuity of these conditions was not assured.
Power Brewing decided to work from scratch and formed
a consultative committee of employees to see if a new
work arrangement could be drafted emphasising skill
and productivity and to achieve Power's desire to get
the most out of their high-tech plant.
The outcome was a flat management structure and six
levels of worker promotion, and all employees multi-skilled
---rather different from the strict demarcations
in the relevant award classification system. 97% of
the employees indicated in a secret ballot that they
would also like a 4 day 40 hour week.
Initially, the plan was to have been an industrial
agreement but this had to be abandoned when it became
clear that the Federated Liquor Trades Union wasn't
interested in anything different from Castlemaine and
Carlton, so the VEA path was taken.
The reaction of the FLTU was to threaten employees
with being sent to Coventry, and management with boycott
on the transport of malt to the plant. Also, despite
the fact that the VEA was employee-driven, the Federated
Clerks Union moved quickly in an attempt to get a Federal
award cover for the clerks in Power Brewing to invalidate
the VEA for this segment of the workforce and disrupt
the cohesive nature of the enterprise bargain. The
unions in concert also attempted to disrupt the marketing
campaign for Power Brewing.
Union moves all backfired and public sympathy went
out to Power Brewing. Union disruption campaigns,
and boycotts on retail selling of the product were
A worker in Power Brewing now earns $6,839 per annum
more than his counterpart at Castlemaine and does it
on a 4 day week.
Power Brewing's commercial result in their first year
is legendary. I quote from Brian Hale, an economist,
a respected financial journalist and a director of
Jarden Morgan Sharebrokers and Financial Planners.
In the Sun on 5th March he wrote under the heading
'Powerful Example of Financial Excellence' as follows:
'What a sparkling result from Power Brewing .... The
ability to put together a good team, a brilliant product,
sound marketing and an efficient factory.
Who dares, wins. Last week's $4.3 million half-year
net profit from Powers is the proof.
In a year and a half the company has come from nowhere
to be a solid company employing 230 Queenslanders and
indirectly creating work for many more, as well as
performing well for its shareholders.'
Back to the drawing board
Although the Metway and Power examples had demonstrated
the popularity of agreement at the enterprise levels,
there were in fact only a few other minor VEA's drawn
up and submitted.
It was apparent that the VEA initiative was faltering
badly. The Commission was putting every impediment
in the way 'in the public interest', putting employers
to considerable expense and delay, and the unions created
a major bun-fight each time. Not at all the environment
intended and immensely discouraging to managements
In view of the relevance and importance of VEA's to
the Queensland economy, and the potential in the tourism
industry, we initiated a review of the legislation
in April 1989 as a result of which amendments were
legislated which provided that:
1. The Arbitration Commission would no longer approve
VEA's in advance. Its role would be limited to handling
disputes. Provided that VEA's complied with guidelines
registration would be automatic.
2. A VEA could be voided by the Commission, after the
fact, on the application of an employee on the production
of proof that it was in fact harsh and unconscionable
or against the public interest. Hypothetical submissions
3. If the VEA was successfully challenged it would
be voided from the date of the Commission's ruling,
not retrospectively as was formerly law.
4. VEA's would require the assent of 65% of employees
---increased from 60% in former law.
5. Minors would require parent or guardian consent
to be a party. (A provision which turned out later
to be a useful impediment to the Industrial Club members
in the government administration who construed 21 not
18 to be the age of consent as minor was undefined
in the law.)
6. Occupational superannuation could be provided by
any one of a number of approved funds in addition to
those with union participation.
It was July 1989 before the departmental processes
were in place for registering VEA's. Then it was not
uncommon for VEA's to be resubmitted two and three
times with minor variations to satisfy the Industrial
This latest legislation was hard-won over determined
moves by the Industrial Relations Club to emasculate
it. The usual spectre raised was the prospect of the
enterprise being successfully moved to coverage by
a Federal award. It was obvious that the loss of the
opportunity to debate the 'public interest' aspect
on a hypothetical basis before the fact, was perceived
as a threat to careers of industry association executives,
corporate industrial relation officers and some industrial
There was extensive lobbying of Ministers and Parliamentarians
which was all effectively check-mated and the new legislation
was enacted and a concerted drive to introduce VEA's
What happened next is instructive---the industrial
relations experts found potential profits in VEA's.
A VEA prepared by the Queensland Confederation of Industry's
industrial relations advisor is a typical product of
the industrial relations 'expert'. It is 18 pages in
length, written in tormented prose and legalese, and
by custom and practice virtually incomprehensible to
the average worker or executive. However, experience
of the company VEAQ showed that a standard form of
VEA could be produced for almost universal use. It
was 4 to 6 pages in length and readable.
There are 28 studies in Graeme Haycroft's historical
record set down for the H R Nicholls Society. Of those,
20 were unanimously approved by employees in secret
ballot. In the others, the employee approval in ballot
ranges from 70% to 90%. They included automotive repairers,
cafes, sawmills, auto wreckers, general engineering,
waterbed manufacturers, earthmoving contractors, fruit
and vegetable ripeners, stockfeed manufacturers, retailers,
discos and nightclubs, furniture manufacturers. They
range in size from 1 to 100 staff and provide a good
cross-section of private enterprise of the small to
medium size. In some cases the VEA's simply legalised
what had been the custom and practice for years.
One of the interesting and most significant aspects
of our VEA experience was the superannuation provision.
It is quite possible to get a good occupational superannuation
scheme going managed by one of a number of the major
established insurance corporations.
Under the awards, superannuation funds with major
union influence are practically automatic in application.
An examination of the financial and economic implications
of this is instructive. For example, in a typical
union involved scheme, the employers' 3% contribution
is about $10 per week per employee. Generally a life
insurance cover around $25,000 is included at a cost
of $1 per week. An administration charge of $1 per
week is also charged. Thus $8 per week goes into the
fund to accumulate and accrue interest.
Typical costs from a private enterprise scheme manager
are 50c per week for the life cover and 35c per week
for the administration (those are NML charges). Clearly
$1.15 per week per employee is being syphoned off by
unions and others. Further, the important economic
questions arise about the placing of investments of
funds and the leverage that this gives unions on the
economy. It is also possible for the funds managers
to act as investment agents paying say 13% on funds
to employees and retaining 2%, from investments earning
The point is that the amount of money and financial
power available especially with creative accounting
and abuse, is enormous. There are 5 million workers
to be covered by occupational superannuation. This
could earn 'profits' of $50 million per annum even
at $10 per annum per employee profit.
With an accumulation of investable funds of $2.5 billion
in year one, $5 billion the next, $7.5 billion the
next, one might consider also who can gain what if
even a fraction of a percent is legitimately taken
off by a managing union. It can't happen here you say?
Read the case of the Teamsters Union Pension Fund
in America. It will happen here.
The Queensland experience with enterprise agreements
demonstrated quite conclusively that significant productivity
gains are possible at the enterprise level by work
restructuring on a basis of mutual agreement between
management and labour. This showed significant variation
possible in work structures from industry to industry,
from location to location and between enterprises of
Fine tuning of the work structure was beneficial to
all. Such fine tuning has not occurred with the highly
regulated labour market and it will not be possible
for it to occur in Australia until radical changes
are legislated which facilitate enterprise agreements.
Vested interests in union bureaucracy, public administration
and the Industrial Relations Club will vigorously attempt
to retard changes in the status quo.
So, we desperately need changes in the mechanisms
of the labour market if we are to improve our international
competitiveness and increase exports and generate more
self-financing of investment with the best possible
access to the markets of the Pacific Rim---South
East Asian economic region which is expected in 10
years to equal the EEC in economic size.
We need to compete against others without the dead
hand of excessive government regulation and vested
interests retarding the exploitation of new
production technologies, new materials and new management
In Sydney I gather that there is a leading politician
who would be king, who collects antique clocks. In
Brisbane we have a newly appointed political king who
collects antique union officials and makes them Ministers.
These ignorant relics of the past are now in the process
of legislating for the removal of enterprise agreements
from the industrial scene and thus suffocating soon
after birth one of the most needed and beneficial changes
in the labour sector of the Australian economy, and
their statements to the press say that they are doing
it in the public interest.
I will complete my quotation from Brian Hale in the
Sunday Sun article on Powers.
'Given the constant debate about industry restructuring,
Australia's chronic balance of payments problems etc.,
Bernie Power had some interesting comments on the results
and the company.
He sees it as an ideal role model for much of what
the ACTU has advocated in its Australia Reconstructed
If we allow any dispute over voluntary agreements
to jeopardise what has been achieved here, we are not
worth our beer.
We might as well sell the whole country to foreigners
and be done with it.'