Bills Digest No. 2 2001-02
Workplace Relations Amendment (Prohibition of Compulsory Union
Fees) Bill 2001
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Workplace Relations Amendment
(Prohibition of Compulsory Union Fees) Bill 2001
Date Introduced: 23 May 2001
House: House of Representatives
Portfolio: Employment, Workplace Relations and Small
Business
Commencement: Twenty eight days after the Bill
receives the Royal Assent
To prohibit the inclusion in enterprise
agreements of a clause allowing industrial organisations to charge
a fee for service in respect of enterprise bargaining
negotiations.
The Workplace Relations Act 1996 (WRA)
regulates the employment of those covered by Federal jurisdiction
and provides for three principal methods of determining conditions
of employment:
- Australian Workplace Agreements (AWA) - basically individual
agreements between the employer and employee. AWAs are subject to
minimum entitlements but have mostly been restricted to higher paid
employees.
- Certified Agreements (CAs) - there are two principal forms of
CAs, with employers being able to enter agreements with unions
which have at least one member in the business (section 170LJ
agreements) or with the employees of the business (section 170LK
agreements). (There are also section 170LL agreements for
Greenfield sites but these are relatively rare.)(1)
- Awards - where neither of the above two apply (these are
usually lower paid employees, such as those covered by recent
'Living Wage' cases).
This Bill is concerned with section 170LJ
agreements (LJ agreements), which cover a substantial majority of
employees covered by the WRA.
In June 2000 the ACTU Congress endorsed a policy
that member unions may seek to insert a 'fee for service' clause in
new certified agreements, under which a negotiating fee would be
levied on those for whom the union had negotiated a LJ agreement.
The argument behind such a fee was that it would prevent people
'free riding' on what others had paid to achieve. The free rider
argument is an economic concept which applies to those who receive
a benefit as part of a group while they had not contributed to
achieving the benefit while others had. In the case of an LJ
agreement (or award increases) this applies to situations where
union members contribute towards the cost of negotiating improved
pay and conditions but all employees, including those who have not
contributed to the cost of the negotiations (the 'free riders),
benefit from the outcome. Under the ACTU Congress decision
individual unions were to determine if a fee for service condition
in an LJ agreement was to be sought.
The fee for service concept has been opposed
both by the Government and employer organisations as being
effectively a 'back door' method of attracting new members and
implementing compulsory unionism which is prohibited by the freedom
of association rules contained in WRA. This argument is
strengthened when the fee for service to be levied is greater than
the union dues payable, providing a financial incentive for
employees to seek the lower cost union membership. (There are
doubts about the ability of the relevant union to actually enforce
payment, see below).
Legal Position
The fee for service issue came to prominence
following the Communications, Electrical, Electronic, Energy,
Information, Postal, Plumbing and Allied Services Union of
Australia (ETU) reaching agreement with a large number of
principally small employers to have such a clause inserted in new
LJ agreements. The relevant clauses generally provided that an
annual fee of 1% of annual income, or $500, was payable to the ETU
by new employees. The inclusion of such a provision in the CAs
means that the employer and majority of the employees covered by
the CA have agreed to its inclusion. The Employment Advocate took
action in the Australian Industrial Relations Commission (AIRC) to
have the clauses removed from the agreements on the grounds that
they breached section 298Z of WRA as they contained 'objectionable
material'. The case was heard in December 2000 and January 2001,
with the decision handed down in February 2001.
In this case the fee for service clause was
alleged to be objectionable as it breached section 298K of WRA by
requiring or permitting injury or prejudice to an employee on the
grounds that they are not a member of a union or propose to become
a member. To breach section 298K there is also a requirement that
injury or prejudice be for a 'prohibited reason'.
The Vice-President of the AIRC hearing the case
found that there was objectionable material as the relevant clause
promoted union membership and so breached the freedom of
association rules. The Vice -President stated:
I agree, as submitted by the applicant, that
[the relevant clause of the CA] should be looked at in a realistic
and practical way. In my opinion, it is there to persuade new
employees into joining the ETU. The minimum fee of $500 per annum
is substantially more than the ETU membership fee. Further there is
little doubt, I think, that the ETU would waive the fee in respect
of persons who are or become members.(2)
The Vice-President then considered whether the
relevant fee for service clause existed for a prohibited reason.
Prohibited reasons are listed in section 298L of WRA with the
Employee Advocate relying on the reason being that the fee for
service clause would prejudice an employee as they are not, or do
not propose to become, a member of a registered association (ie a
union). In determining this matter the Vice-President had regard to
the consequences of a failure to pay the fee for service, and
concluded that this would result in a breach of their conditions of
service with the employer, which the employer may then act upon or
not. Any action by the employer against the employee would
therefore be for a breach of the employment agreement rather than
for failure to be a member of, or join, a union.(3)
This decision is the subject of an appeal.
The decision of the AIRC also raises the issue
of whether a union could legally enforce a fee for service
provision. As the agreement, while collective, is between the
employer and employee and not between the union and the employee it
is very unlikely it could be enforced without the employer
initiating enforcement action.
Reaction to the Decision
The response from the various industrial
relations groups and the government have been very much as could be
expected. A number of unions have adopted the policy of the ETU and
sought to have fee for service terms included in certified
agreements or have requested non-union members in the industry to
voluntarily pay the fee. Again, it is very doubtful that such
requests could be enforced by the union. The Minister for
Employment, Workplace Relations and Small Business stated:
Bargaining agent's fees are 'back door'
compulsory unionism and contrary to the principles of freedom of
association and workers' right to choose whether or not to belong
to a union.(4)
In a newspaper article the Chief Executive of
the Australian Chamber of Commerce and Industry stated:
The ruling may yet be appealed [as has occurred]
and it is possible such an appeal may come to a different view on
the law. Alternatively, it is possible that the legislation
requires an overhaul to clear up any confusion.
Either way something must be done to end unfair
pressure on ordinary working men and women.(5)
In a Media Release dated 13 February 2001 the
Australian Democrats spokesperson for Workplace Relations, Senator
Andrew Murray, 'welcomed' the AIRC decision, stating:
Unlike Minister Abbott, I don't regard it as
blackmail or a breach of freedom of association laws. I would
regard it as a fee rendered for a service that increases the take
home pay of both union and non-union workers alike.
....
The fee can only be charged if the majority of
employees in the workplace vote it into the enterprise agreement
itself.
That is appropriate as the workers in a
workplace who are paying union fees should not be carrying those
who do not.(6)
Items 1 and 2 of Schedule 1 of the Bill will
insert two new definitions into section 298B of WRA:
- 'Bargaining services': services provided by, or on behalf of,
an industrial organisation in relation to a certified
agreement.
- 'Non-compulsory fee': a fee or levy that is wholly or partly
for the provision of bargaining services if it is payable to an
industrial organisation or someone else on behalf of the
organisation and the person who is liable to pay the fee or levy
agrees in writing before the services are provided, to pay the fee
or levy.
Item 3 will insert additional
'prohibited reasons' in section 298L of WRA. The additional
prohibited reasons provide that an employer must not discriminate
against an employee or independent contractor if:
- the employee or independent contractor has agreed to pay a
non-compulsory fee, or
- has not paid or agreed to pay any fee or levy wholly or partly
for the provision of bargaining services (this includes fees or
levies extending beyond the definition of a non-compulsory
fee).
Section 298Q of WRA prohibits industrial
organisations from under-taking certain action. Item
4 will add to this that an officer of an industrial
organisation must not take, threaten to take, or encourage a third
party to, prejudice a person as the person has undertaken the
actions described in item 3.
Proposed section 298QA will
prohibit an industrial organisation, or an officer or member of
such an organisation, from demanding that a person pay a fee or
levy, other than a non-compulsory fee, for the provision of
bargaining services. This provision may prevent a union from even
requesting or suggesting that a non-member pay such a fee or levy.
The term demand is defined as purporting to demand, having the
effect of demanding or purporting to have the effect of demanding.
The distinction between demanding (which suggests an obligation)
and requesting is not dealt with (item 5).
Section 298S of WRA, which prohibits certain
conduct by industrial organisations against independent
contractors, will also be amended to prohibit action being taken
against an independent contractor on the basis that they undertaken
either of the actions for a prohibited reason as described in
item 3 (item 6).
Item 8 provides that the AIRC
may have consideration of the above matters when determining
whether to certify an agreement after the commencement of the
Bill.
Item 10 provides that the
amendments do not apply to any payments received before
commencement.
The free rider argument regarding non-union
members benefiting from union negotiated gains in employment
conditions has been around for a considerable period. However,
unions have recognised that if improvements in employment
conditions, eg wages, do not also apply to non-union members then
there will be two classes of employees, with employers able to
select the lower paid non-union workers. As a result, there has
always been an incentive for unions to seek to have equivalent
conditions for members and non-members. While the fee for service
is a way of addressing the free rider problem, there are also
alternatives, which could address some of the compulsory unionism
arguments.
For example, a non-union employee could elect to
pay the fee to a registered charity rather than the union (this
would address the issue of conscientious, or other, objection to
joining a union and also boost contributions to charity, although
there may need to some adjustment to the rate of payment or the
taxation laws to reflect the deduction which would be allowed for
such a donation). The appropriate charities could be agreed at an
individual or workplace level.
The decision in this case to legislate before
the appeal is determined may be contrasted with the decision in
regard to certain tax minimisation schemes (such as controlling
interest superannuation) where the government has determined that
court cases should be completed before a legislative response is
considered.
- The Department of Employment, Workplace Relations and Small
Business publication Trends in Enterprise Bargaining, September
quarter 2000 found that of 21 818 agreements certified between
1.1.97 and 30.9.2000 2 276 were 170LK agreements covering 8% of
employees covered by certified agreements.
- Australian Industrial Relations Commission, PR900919, p.
5.
- Ibid., p. 13.
- Media Release, 27 February 2001.
- The Age, 15 February 2001.
- Australian Democrats, Media Release, 13 February
2001.
Chris Field
17 July 2001
Bills Digest Service
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ISSN 1328-8091
© Commonwealth of Australia 2000
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