CHAPTER 4

Consideration of the Workplace Relations and Other Legislation Amendment Bill 1996
Table of Contents

CHAPTER 4

Changes To The System And Its Institutions

A. THE AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION AND THE AWARD SYSTEM

INTRODUCTION

4.1 The issue of relative bargaining power between employees and employers is central to any discussion about changes to the industrial relations system and its institutions. Many witnesses touched on this issue. It was a central thrust of submissions by union groups, who argued that the fundamentally unequal bargaining power of employer and employee was the reason for labour market regulation and collective action by employees as accepted in many countries. This issue has several aspects.

4.2 Firstly, there is a recognition that, in general, employers have stronger bargaining power than employees. Except in the most exceptional circumstances, the competition for vacancies will generally be higher than competition for applicants; the individual needs the job more than the employer needs that particular individual. In addition, employers are likely to have more experience of negotiation than employees and greater resources to commit to it. The inequality of bargaining power is shown clearly by situations where a contract is offered on a 'take it or leave it' basis, without any intention on the employer's part of entering genuine negotiation:

4.3 Secondly, unequal bargaining power tends to affect different groups differently, with important consequences for equity of wage outcomes. Relative disadvantage will be greater in country areas where the labour market is small and there is little mobility, so the consequences of losing one's job are more serious:

4.4 Women, young people, part-time and casual employees, disabled people and people of non-English speaking background may be particularly susceptible to the consequences of this inequality. Here, the employee is also hampered by being less confident in negotiation, less aware of their rights, more likely to be in low skilled occupations and less unionised workplaces, and therefore more open to exploitation:

4.5 In relation to the bargaining position of women, the Australian Council of Social Services was particularly concerned about possible pressure on women from employers to trade away 'family-friendly' conditions. The principal Object of the Bill includes 'assisting employees to balance their work and family responsibilities effectively through the development of mutually beneficial work practices with employers'. The concern is how much the details of the Bill, in the implementation, will achieve this object.

4.6 Young people would be particularly liable to exploitation because of high youth unemployment.

4.7 The problems of public sector employees were also particularly mentioned in the course of the inquiry. One aspect of this is the hierarchical nature and the general bureaucratic inflexibility of government, ill-fitting it for genuine individual 'negotiations'. As well, 'productivity' bargaining is problematic in many public service areas where there is no market involved and productivity may be hard to measure.

4.8 A further concern of workers in social service areas is that they have codes of ethics that may conflict with their rights in bargaining effectively. Nurses, for example, feared that individual bargaining would bring the two into more open conflict:

4.9 There was particular concern about the difficulty of employees in essential services in using legal industrial action [7] as part of their bargaining:

4.10 The Committee heard evidence from employees in Victoria and Western Australia who said that their wages or conditions had been reduced because of the recent changes to industrial relations law in those states. [9] This was said to apply particularly once conditions other than base pay rates are taken into account. For example:

4.11 The Committee was also told that there has been increasing wage inequality in New Zealand since the deregulation of the labour market under the Employment Contracts Act 1991. [11] A recent study commissioned by the Australian Council of Trade Unions and the Australian Council of Social Service supports this claim:

4.12 On this the Department of Industrial Relations commented -

4.13 The ACTU/ACOSS study gives various evidence that women have been relatively disadvantaged under the deregulated New Zealand system. [14]

Conclusions

4.14 The Committee accepts that generally the employment relationship may be characterised by a bargaining power imbalance, employers having stronger bargaining power than employees. If this is accepted, the industrial relations system and its institutions must be recognised as vitally important, for it is they that can have an important role in redressing the imbalance and ensure that employers do not take unfair advantage of the imbalance.

4.15 The view of the majority of the Committee is that this has become a recurring theme; that is, the Bill makes changes which may undermine the capacity of the system and its institutions to play this important role. This is a central concern of the Committee. At this point the Committee is content to simply note this concern, however it will become apparent that the concern influences many of the specific conclusions that are recorded subsequently.

4.16 Government members of the Committee disagreed with the above conclusion.

1. THE AWARD SYSTEM AND ITS PROTECTIONS

4.17 The provisions of the Bill affect two fundamental aspects of the existing Federal award system:

Access to Awards

4.18 Access to the Federal award system is affected by the Bill in two ways:

Difficulty of Obtaining a Federal Award

4.19 A number of provisions of the Bill limit the capacity of organisations to access the Federal system and thereby obtain a Federal award on behalf of employees. This is done as follows.

4.20 The present Act provides a prima facie right to a Federal award for constitutionally eligible employees who do not have access to compulsory arbitration under State law (as in Victoria). The bill removes this.

4.21 In other cases the Commission may refrain from dealing with a case if satisfied that proceedings are not in the public interest. [15] The Bill repeals this arrangement and provides instead that the Federal Commission may not make a Federal award in respect of State award employees unless satisfied that refraining would not be in the public interest. In effect this reverses the onus of proof.

4.22 In determining the 'public interest', the Commission must give primary consideration to the views of the employer(s) and employees concerned and the history of the regulation of their employment relationship. [16]

4.23 As well, the repeal of section 111(1D) removes the Commission's power to make an interim award to provide quick access to the Federal system where the alternative State system is inadequate.

4.24 These proposals are justified by the Government as one aspect of its move to simplify Federal-State industrial relations.

4.25 The proposals were supported by most employer groups. They believe that the increasing trend towards centralisation through the replacement of State awards with Federal awards, often against the wishes of employers, has caused problems in Federal/State relations. Thus they believe these provisions in the Bill will allow greater harmonisation between Federal and State systems. The submission from the South Australian Government also expressed this view.

4.26 In the opinion of some employer groups, the industrial awards system in Australia is highly complex. This complexity stems both from the dual system of state and federal arrangements, which at times overlap and conflict, and the intricacies that have evolved for the protection of employment conditions for a very wide range of industry sectors and types of employment. There are literally thousands of awards and many people, both employers and employees, find the system of awards extremely difficult to understand. [17]

4.27 Some witnesses felt that this would deny many employees the benefits of Federal award coverage. [18] The Victorian Trades Hall Council commented that this increases the prospects that core public servants 'will continue to be trapped within the State jurisdiction. [19] The Shop, Distributive and Allied Employees Association felt that the new provision was designed to make it as hard as possible to get Federal coverage:

Conclusion

4.28 The majority of the Committee believes that the disadvantages inherent in the proposal to make access to Federal awards more difficult outweigh any perceived benefits, and recommends that this amendment not proceed. The reasons for this recommendation are set out below.

4.29 First, the majority of the Committee believes that the Australian Industrial Relations Commission is best placed to make a judgement about whether a Federal award should or should not be made. It is not appropriate for the Federal Parliament to seek to restrain the exercise of the Commission's powers in this regard, especially given that the range of circumstances that would be relevant to whether a Federal award should be granted are many and varied.

4.30 Second, given the history of proceedings related to these issues, it has been strongly argued that the imposition of these restrictions will place a higher evidential and procedural burden on those that seek Federal awards. In turn this will mean more lengthy and complex litigation with the focus being less on the appropriateness of wages and conditions and more on legal technicality and form. No reasons have been advanced to justify this direction.

4.31 Third, there is no justification for putting barriers in the way of Federal award coverage where the alternate State jurisdiction is clearly and unambiguously deficient. The ability of the Commission to make interim awards has been used to restore the status quo when an employer has unilaterally changed working conditions. The loss of this function from the Commission will also result in loss of protection for workers. The majority of the Committee concludes that the existing provisions of the Act (section 111(1A)) which allow for easier access to Federal awards in the absence of a State compulsory arbitration system is entirely justified and should be retained.

4.32 Government members of the Committee disagree with the above conclusions and oppose the recommendation.

State Agreements to Override Federal Awards

4.33 Section 152(2) of the Bill also has an important affect on access by employees to Federal awards. This provides that a State enterprise agreement overrides a Federal award, whether the agreement is made before or after the award.

4.34 The rationale for this is to provide employers and employees with the choice of regulating their employment relationship by a Federal award or an enterprise agreement under a State Act.

4.35 This provision was supported by various employer groups who stated that it was beneficial to both employer and employee to permit them to choose an appropriate jurisdiction, and an appropriate legal arrangement for their employment relationship.

4.36 Concern was expressed about this proposal, not only by the union movement but also by some employer groups, community groups and academic commentators, such as the Tasmanian Chamber of Commerce and Industry and the Victorian Employers' Chamber of Commerce and Industry (see below).

4.37 Union groups feared that employees could be pressured into moving to State agreements which could have conditions worse than those of their present Federal awards, or even worse conditions than the Bill's minimum conditions for Federal agreements (depending on the details of minimum conditions for agreements in State law). For example:

4.38 Mr Edwards of the Tasmanian Chamber of Commerce and Industry accepted that an employee should not be disadvantaged against the current Federal award provision, and therefore said he '… would not be unhappy if the Committee recommended to the Senate that they include a provision in the Bill to the effect that employees not be disadvantaged by the implementation of State workplace agreements'. [22] Of course, inherent in this comment was a recognition that this could indeed occur under the Bill without such an amendment.

4.39 Similarly, Mr John of the Victorian Employers' Chamber of Commerce and Industry expressed the view that unless the Victorian Government transferred its industrial relations jurisdiction to the Federal government a worker under a Victorian State agreement that overrode a Federal award or agreement could be worse off. When asked if the Prime Minister had breached his rock solid guarantee that no worker would be worse off under this legislation Mr John answered 'not if the situation that the Victorian government appears to be considering, and considering actively [that is, the transfer of industrial relations power to the Commonwealth], in conjunction with the Commonwealth comes about'. [23]

4.40 The following exchange between Senator Sherry and Professor Sloan is also instructive:

4.41 Indeed, even the Department of Industrial Relations accepted that the conditions under a Victorian enterprise agreement could be less that those in the applicable Federal award, and that 'it is possible for [employees] to agree to something which is inferior to the award'. [25]

Conclusion

4.42 The majority of the Committee believes the concession made by the Department of Industrial Relations was a proper one for it to make. It is all too obvious that an employee can enter into an enterprise agreement under the laws of Victoria, Western Australia and Tasmania which contains inferior wages and conditions than the otherwise applicable Federal award. The relevant statutory minima in each of these States (see Appendix 5) clearly set minimum standards which are below many award standards, or indeed do not set any minimum standard at all.

4.43 Where the majority of the Committee disagrees with the Department in its suggestion that this result only occurs as a result of mutual agreement. We believe this suggestion fails to appreciate the true nature of the employment relationship, particularly that unequal bargaining power which many employees have relative to their employer.

4.44 For new employees, section 152 of the Bill thus permits an employer to offer as a condition of employment a State enterprise agreement with inferior wages and conditions than those which would otherwise be applicable under the relevant Federal award.

4.45 For existing employees, there is always the possibility of an employer using 'persuasion' to convince an employee to opt into a State enterprise agreement.

4.46 The majority of the Committee therefore sees the proposed section 152 as an obvious means by which the wages and conditions of large numbers of Australians can be reduced. This is totally unacceptable particularly given the Prime Minister's rock solid guarantee referred to above.

4.47 The majority of the Committee, therefore, does not support any proposal that permits State agreements to undermine existing provisions that protect Federal award wages and conditions. We also cannot support any proposal to require State agreements to only comply only with the minimum conditions for Federal agreements as outlined in proposed Schedule 13. While an improvement on existing provisions, the majority of the Committee (as will be seen later) believes that the Federal minimum conditions are profoundly inadequate protect the wages and conditions of employees.

4.48 The majority of the Committee recommends that proposed section 152, which allows State employment agreements to override Federal awards, should not be enacted.

4.49 The Australian Democrats member of the Committee agrees with much of this analysis but has additional comments which are set out in his Supplementary Report.

4.50 Government members of the Committee disagree with the above conclusions and oppose the recommendation.

The Content of Awards

4.51 The content of awards is affected in a number of ways by the provisions of the Bill. In particular the following matters require examination:

  1. the introduction of 'allowable award matters';
  2. the restriction of awards to minimum entitlements only; and
  3. abolition of paid rates awards.

Allowable Award Matters - section 89A

4.52 The effect of section 89A of the Bill is to confine the scope of industrial disputes, and therefore the Commission's award-making power, to 18 'allowable matters'. This will mean that enforceable award conditions outside the 18 'allowable matters' will (after 18 months) be removed from existing awards and will not be able to be granted in the future by the Commission. [26]

4.53 The rationale for this proposal is that awards have become excessively complicated, and that compliance with them has become a burden for employers.

4.54 This was supported by a number of employer groups. To them, a most significant achievement of the legislation is the reduction of all awards to a minimum 'safety net' of 18 core matters. As argued by the Australian Chamber of Commerce and Industry (ACCI), this is a positive step towards simplifying the system for employers while ensuring that the basic needs of employees are met. [27] While other entitlements, including over-award conditions, will become the subject of negotiation, they will not be removed altogether. More significantly, however, ACCI argued that confining the scope of the basic award would actually increase the scope for varying entitlements in agreements. [28] The MTIA expressed the view that where award provisions are removed in accordance of the Act, employers would make the decision about whether they were necessary and if deemed unnecessary they would be removed.

4.55 Many submissions, including from individuals, community groups and the union movement, fundamentally oppose this change on the basis that once those extra entitlements or conditions outside the 18 matters have been removed from awards, many employees will in practice have great difficulty in bargaining for their reinstatement in enterprise agreements.

4.56 They argued that many of these provisions for award conditions provide essential protections for workers and that these workers could only be worse off under the proposal.

4.57 Thus, for instance, the Shop, Distributive and Allied Employees Association (SDA) stated that in the retail and food industries rostering is a crucial issue. [29] Many submissions argued that rostering is particularly important to women with child care responsibilities. The SDA also outlined the capriciousness of limiting awards to allowable matters when in some cases they reflect the result of enterprise bargaining agreements processed under the current National Wage Principles as consent awards.

4.58 The Construction, Forestry, Mining and Energy Union (CFMEU) claimed that in the construction industry, shift work, severance pay, accident pay, meal breaks, transport, and protective clothing were all important aspects of the award. Similarly, in highly hazardous industries such as coal mining, awards have evolved to recognise the importance and necessity of occupational health and safety provisions. [30]

4.59 A number of submissions also noted that for many years the Australian Industrial Relations Commission has played an important societal role through the examination of industrial issues that have a broad public dimension to them. Many of these will fall outside the 18 allowable award matters of section 89A of the Bill, and thus could not be pursued.

4.60 Thus, as noted by the Victorian Trades Hall Council:

44.61 Some submissions also suggested that this proposal could produce confusion, particularly as the nexus between High Court decisions on significant industrial relations matters and the ability of the Australian Industrial Relations Commission to include that matter within its jurisdiction will be broken. As argued by the Victorian Trades Hall Council:

4.62 Interestingly, a number of employer groups picked up on these same concerns. Mr Carter of the Australian Road Transport Industrial Organisation succinctly stated:

4.63 Mr Carter later added that if employers wished to continue using the award system, they should be free 'to use it in an unfettered way'. [34]

4.64 Mr Muir of the Queensland Chamber of Commerce and Industry also acknowledged the possibility of detriment to employees under the proposal, in the following exchange:

Conclusion

4.65 The majority of the Committee believes that reducing awards to 18 allowable matters is fundamentally flawed. This is another aspect of denial of freedom of choice.

4.66 This is based firstly on the fact that the proposal would place many existing entitlements outside awards and thus ensure that, without renegotiation, the conditions of employees may be unequivocally reduced. The extent of employee disadvantage cannot be understated, especially given the list of existing conditions that will be stripped from awards as a result. These include:

4.67 Given the Prime Minister's commitment that no Australian would be worse off under these proposals, the majority of the Committee views this consequence with considerable concern.

4.68 The majority of the Committee finds that the proposed process of so-called award simplification is arbitrary and deficient. In effect the legislature purports to declare that the matters outside the 18 allowable matters are in some way less important or less worthy of award protection than those matters in the enumerated list. Not only does this defy logic, but also experience. The implicit suggestion in the proposal that items such as occupational health and safety, superannuation, accident make-up pay are somehow unimportant or mere detail defies explanation.

4.69 In our view, it is far better for the Commission to be left with a broad power to make awards provision concerning all matters that might arise in the employment relationship. There is no rationale for a legislative prohibition on the making of such awards in those circumstances.

4.70 Accordingly, the majority of the Committee recommends that proposed section 89A should not be enacted.

4.71 The Australian Democrats member of the Committee agrees but makes additional comments in his Supplementary Report.

4.72 Government members of the Committee disagree with the above conclusions and oppose the recommendation.

Superannuation

4.73 As noted above, superannuation is not one of the 18 allowable award matters. The Government has taken this position because it believes that superannuation is adequately provided for through the Superannuation Guarantee Charge Act 1992 and associated Superannuation Guarantee (Administration) Act 1992 and, as noted by the Australian Chamber of Commerce and Industry, there are some aspects of award-based superannuation provisions which are inconsistent with the statutory scheme such that employers currently face the potential for double jeopardy. [36] In addition, it is Government policy to promote greater freedom of individual choice of superannuation funds for employees.

4.74 However, several submissions to the Committee argued that this was not necessarily the case and that further legislative provisions would be needed to ensure that superannuation was adequately provided for. The major submission in this regard came from the Association of Superannuation Funds of Australia Limited (ASFA). [37] This submission noted that, rather than promote a uniform national approach, the Workplace Relations Bill, in combination with separate provisions under State industrial relations legislatures, would actually result in further fragmentation. The Association recommended that the Federal Government work towards devising a unified approach to superannuation. [38]

4.75 The second major issue addressed by ASFA was that of employee choice. It noted that it was not sufficient to amend individual awards to remove existing specifications of the funds that must be used. Rather the Government would need to take further positive legislative steps to ensure that employee choice is available. [39]

4.76 The ACTU's submission noted that the potential for casualisation of the work-force, which would be a consequence of the reduced status of permanent part-time work, would have an impact on superannuation contributions because the threshold for contributions was income of $450 per month. This would particularly disadvantage women, a matter for some concern as it would counter the trend towards improved access to superannuation achieved over the last decade. [40]

Conclusion

4.77 The majority of the Committee concludes that the removal of superannuation as an award matter will substantially disadvantage a large number of employees, particularly those on lower incomes. Accordingly, the majority of the Committee recommends that superannuation should not be removed as an award matter.

4.78 The whole Committee considers that this matter is of crucial importance. The Committee had insufficient time and evidence to consider it fully. The majority of the Committee recommends that the Government should look further at the implications of the proposed changes for superannuation.

4.79 The Australian Democrats member of the Committee makes further recommendations on this matter in his Supplementary Report.

4.80 Government members of the Committee disagree with the above conclusion and oppose the recommendation.

Removal of the 'Secure, Relevant and Consistent' Requirement for Awards

4.81 The second proposal relates to amendments to those provisions of the Act that relate to the setting of award wages and conditions. Principally the inclusion of proposed sections 88A and 88B will have the effect of removing the Commission's obligation to ensure that award wages are relevant, consistent and secure. These concepts are broader than mere "fairness", or the general requirement that the Commission exercise its powers in equity, good conscience and the substantial merits of the case (S. 110). In addition, the tenor of proposed section 88B is that the Commission's discretion is to be confined to the matters listed in that provision. This contrasts with the existing provisions which set these matters as guidelines and not prescriptions.

4.82 Proposed section 88B provides:

4.83 The rationale for this proposition is that awards should only provide a minimum level of wages prescribed by the Commission so that there is a positive incentive to bargain. It was made clear that these proposals were clearly aimed at reducing the extent to which wage increases are available through the Commission's processes. In other words, this provision calls on the Commission to make lower adjustments to award rates and conditions than would otherwise be the case under the existing legislation.

4.84 Certainly the proposal was supported in these terms by a number of employer groups. For example, the Australian Chamber of Commerce and Industry commented:

4.85 However, concern was expressed by organisations representing employees with little or no bargaining power, such as young people, women and employees from non-English speaking backgrounds (these groups will also be dealt with in much greater detail below). For example:

4.86 Others expressed concern for the possible economic ramifications of the proposal. For example, the Australian Road Transport Industrial Organisation expressed the view that maintaining a system such that the awards will be minimum from which one will negotiate above-award wage rates on an individual basis, will in the long run harm the national economy and cause inflationary pressures:

4.87 This dynamic could cause increased industrial disputation:

4.88 Some witnesses felt that the Bill's encouragement to employers to cut wages and conditions as a means of cutting unit labour costs would be counterproductive in the longer term, since it would distract attention from other matters which, they said, are the engine-room of real productivity growth and international competitive advantage. For example:

4.89 More comment on the broader economic effects of the Bill is in Chapter 9.

Conclusion

4.90 The majority of the Committee believes that the proposal to replace existing sections 88A and 90AA with proposed sections 88A and B should be rejected for a number of reasons.

4.91 Firstly, regardless of what the legal import of the criteria proposed is, it would seem that the Commission is being directed to ensure that its award wages and conditions are lower than what they would otherwise be under the existing system. This relates both to the review of existing awards to ensure that they comply with proposed section 88B (See items 43, 44 and 45 in the transitional provisions) and any increases that the Commission may award as a result of reviewing the 'safety net'. The fact that the Government fails to legislate for secure, relevant and consistent wages and conditions, appears to suggest that wage and condition outcomes resulting from arbitral decisions would be less than is presently the case.

4.92 Secondly, the change of the status of existing section 88A criteria from objects (as is presently the case) to prescriptions (as is proposed in section 88B) means that rather than providing a guidance for the Commission in the exercise of its powers, proposed section 88B will restrict the Commission's power to deal with matters beyond its criteria. This proposition is supported by the recent decision of a Full Bench of the Australian Industrial Relations Commission in Comalco Weipa where it was argued that the Commission lacked the jurisdiction to make the award sought because it went beyond the existing criteria in section 90AA(2). In rejecting this submission, the Commission said:

4.93 Clearly this proposition would be substantially altered as a result of the changes proposed.

4.94 In short, the majority of the Committee believes that it is unnecessary to remove the requirement for award wages and conditions to be relevant, consistent and secure. This appears to be an attempt to continue awards but to make them less comprehensive and relevant. The majority of the Committee cannot condone this and rejects the proposal.

4.95 The majority of the Committee therefore recommends that the proposal to replace existing Sections 88A and 90AA with proposed Sections 88A and B should not be implemented.

4.96 The Australian Democrats member of the Committee agrees with the analysis of this part but has qualified his view in his Supplementary Report.

4.97 The Government members of the Committee disagree with the conclusion and oppose the recommendation.

Abolition of Paid Rates Awards

4.98 Under the Bill the Commission will no longer be empowered to make paid rates awards. Further, in the case of existing paid rates awards, the Commission, either after 18 months or on application, will have to consider whether an existing paid rates award should be varied in light of the requirements of the Act.

4.99 The introduction of this proposal is said by the Government to be consistent with its proposition (referred to more generally above) that awards should only provide a safety net of minimum wages. In such a system there is no room for awards which prescribe the actual rate of pay to be received by an employee (as is the nature of a paid rates award). The Government also says that in many cases paid rates awards are not in any case performing this function because enterprise or workplace bargaining has taken place which is providing wage rates above those prescribed in the applicable paid rates award.

4.100 This proposal was supported most employer groups. They argued that as a practical matter paid rates were no longer playing their intended role and therefore should be removed from the system.

4.101 A significant number of organisations and individuals, however, opposed this proposal.

4.102 Mr Muir of the Queensland Chamber of Commerce frankly stated that he '… did not necessarily advocate [paid rates awards] abandonment … I am not entirely certain as to why this particular issue is being pushed'. [48]

4.103 A number of unions whose members will be most affected by the removal of paid rates awards made their concerns about this change central to their submissions.

4.104 The Australian Nurses Federation and the Australian Education Union expressed a fear on behalf of their members that this proposal could mean reducing the conditions in the award, and that this will result in substantial real wage reductions for many workers. [49] The reasons for this were argued as follows:

4.105 Abolition of paid rates awards will also have the effect of lowering the safety net for the purpose of determining the minimum conditions underpinning enterprise agreements in a number of industries, including the private sector.

4.106 Paid rates awards are particularly important for employees in the public sector. The ACTU believes that those most disadvantaged by the abolition of paid rates awards are government employees, such as nurses, teachers, community workers and emergency service workers who, because their employers are dependent on government funding, are not necessarily in a position to achieve increases through enterprise bargaining. [50] Because many are in public service industries which do not make a profit they cannot increase the cost of their service.

4.107 As well, in many areas of public service 'productivity' bargaining is problematic because there is no market and hence the criteria of productivity may be hard to define.

Conclusion

4.108 The majority of the Committee considers that the evidence of those opposing the repeal of paid rates awards was compelling.

4.109 The proposal fails to appreciate that many benefits are afforded to employees (particularly public sector employees such as nurses and teachers) as a result of paid rates coverage.

4.110 Firstly, where a paid rates award continues to provide the actual wage to be received by an employee the paid rates award ensures that those wages are relevant, consistent and secure, that they are enforceable and that they will be adjusted over time. This contrasts with the plight of employees who nominally have the right to negotiate changes to agreements, where in fact the employer refuses to negotiate. For example, the State Public Services Federation of Victoria described the problems of Victorian public sector employees on contracts when the Victorian Government refused to honour a clause in the contract that both parties would agree to negotiate changes to the contract. The Court found that under contract law such a clause is unenforceable, which left the employees with no remedy. [51]

4.111 Secondly, where there has been bargaining over and above the paid rates award (that is, where opposition to bargaining is not apparent), there appears to be great value in having paid rates awards providing a comprehensive benchmark for negotiations.

4.112 Lastly, the abolition of paid rates awards is at odds with the Government's claims that their changes will provide greater freedom of choice about the type of industrial instrument which best suits employees and employers. Where both parties agree that a paid rates award is best suited to the particular enterprise or occupation, why shouldn't they have the right to have one?

4.113 The majority of the Committee believes that without these benefits which paid rates awards provide employees such as nurses, teachers and other public sector workers will be worse off. The majority of the Committee views with considerable concern this potential breach of the Prime Minister's 'rock solid guarantee' that no worker will be worse off.

4.114 For these reasons the majority of the Committee recommends that the Commission should continue to have the power to make and administer a paid rates award consistent with the existing provisions.

4.115 Government members of the Committee disagree with the above conclusions and oppose the recommendation.

2. THE PREVENTION AND SETTLEMENT OF INDUSTRIAL DISPUTES

4.116 The Commission's capacity to prevent and settle industrial disputes is affected by the Bill in three principle ways:

Limitation of Arbitration to Allowable Award Matters (section 89A)

4.117 Section 89A of the Bill, in confining the powers of the Australian Industrial Relations Commission to 18 'allowable matters', also has the effect of removing the capacity of Commission to prevent and settle industrial disputes by arbitration in relation to non-allowable award matters.

4.118 Whilst this does not appear to be the rationale for the introduction of section 89A (discussed above), the Government must be aware that it is a necessary consequence.

4.199 There was concern expressed about this consequence. A number of employer groups appeared to accept that one outcome could be greater industrial disputation. For example, Mr Boland of the Metal Trades Industry Association accepted that in the short term a consequence could be ongoing disputation because there is no third party to take the matter to. [52] Similarly, Mr Geronimos, speaking on behalf of the Western Australian Council of Retailers, suggested that if there is a desire by both employer and employee to refer any matter in dispute to the Commission that option should be available to them. [53]

4.120 The Victorian Trades Hall Council noted in its submission that similar provisions in Victoria have led to a number of undesirable effects, the two most significant of which were the prolonging of serious industrial disputes and the inability of employees who were in dispute with their employer to have access to an independent and impartial arbitrator. [54]

4.121 The ACTU believes that it is in the public interest for the Commission to be able to prevent and settle industrial disputes quickly and in a manner that is cost effective. [55]

4.122 The ACTU argued in its submission that proposed restrictions on 'the Commission's ability to arbitrate in most circumstances [that is, on matters outside the 18 allowable award matters] will mean that there will be few, if any, means available of resolving industrial disputes'. [56] Restricting the Commission's jurisdiction to only the 18 allowable award matters means that the Commission will not be able to deal with any dispute outside those areas. Such disputes can and do happen, as was evidenced by the Weipa dispute which involved discrimination against workers who sought to engage in collective bargaining. [57] Indeed, since awards are made in settlement of industrial disputes, the very fact that most awards include conditions outside the 18 matters arguably shows the likelihood that disputation on these other matters will occur.

4.123 The submission from Maurice Blackburn & Company Industrial Law section noted that the Commission 'has traditionally had a highly successful role of preventing and settling disputes' and that 'matters which have traditionally been regarded as beyond the proper scope of the Commission to deal with have nevertheless eventually been dealt with by the Commission because of the need to resolve industrial disputation'. [58]

Conclusion

4.124 The majority of the Committee is extremely concerned that this proposal does not sufficiently consider the impact of not speedily and adequately settling industrial disputes regardless of their subject matter. This involves considerable detriment to the community as a whole in addition to the specific parties to an industrial dispute.

4.125 While the proponents of this proposal emphasise the availability of a voluntary arbitration power, this ignores the importance of an enforceable arbitral function. Every conciliation takes place in the shadow of arbitration, which has the effect of focussing the minds of the parties to come to an amicable settlement in conciliation.

4.126 On balance, the majority of the Committee accepts that this is another reason for rejecting the restriction of the Commission's compulsory arbitral functions to just 18 allowable matters.

4.127 The Labor members of the Committee therefore recommend that, for this reason also, proposed section 89A should not be enacted.

4.128 The Australian Democrats member of the Committee agrees with this analysis but has additional comments in his Supplementary Report.

4.129 The Government members of the Committee disagree with the conclusion and oppose the recommendation.

Industrial Disputes and Paid Rates Awards

4.130 The Government's proposals to abolish paid rates awards also has another affect - it precludes the Commission from preventing and settling industrial disputes by creating a paid rates award.

4.131 Whilst this does not appear to be the rationale for the abolition of paid rates awards (discussed above), the Government must be aware that it is a necessary consequence.

4.132 A number of organisations and individuals expressed concern about this reduction in Commission power.

4.133 The ACTU argued that the removal of the Commission's power to make paid rates awards would ultimately result in an increase in industrial unrest. [59] The Australian Nursing Federation and the Australian Education Union were other groups, representing important sectors of employment reliant on paid rates awards, who were particularly concerned about abolishing them. [60] For example -

These proposed changes to the industrial landscape completely misunderstand the purpose and structure of nursing awards and the health system. As a result there is no recognition of the impact on the provision of quality nursing care because it is seen a factory floor not as human service provision. In the health sector the ramifications of these changes will be profound... The consequences will inevitably lead to prolonged and bitter industrial disputes. [61]

Conclusion

4.134 The majority of the Committee believes the proposal to abolish paid rates awards fails to recognise the reason why paid rates awards were created and have been maintained over the past 20 years.

4.135 It is no accident that paid rates awards cover areas sensitive to public interest considerations (such as nursing, teaching, emergency services, public service) or where market conditions mean that bargaining can be destructive rather than constructive (for instance in high capital intensive industries such as oil or airlines). The effect of the existing provisions is to allow the Commission to intervene in industrial disputes of this nature and provide an ordered and socially responsible resolution of potential or existing disputes.

4.136 The majority of the Committee regards this function as vital in the public interest and the parties immediately concerned, and cannot support the removal of this function from the Commission.

4.137 The majority of the Committee therefore recommends that for these reasons also the Commission should continue to have the power to make and administer paid rates awards consistent with the existing provisions.

4.138 The Government members of the Committee disagree with the conclusion and oppose the recommendation.

Arbitration to Become a 'Last Resort'

4.139 Section 89 of the Act sets out the general functions of the Australian Industrial Relations Commission as 'to prevent and settle industrial disputes so far as possible by conciliation and, where necessary, by arbitration.' The Bill changes this to 'to prevent and settle industrial disputes so far as possible by conciliation and, as a last resort and within the limits specified by this Act, by arbitration.' The effect of this amendment is to ensure that the Commission cannot arbitrate in relation to allowable matters unless as a last resort.

4.140 The Government sees benefits in this proposal on the basis that reduction in emphasis on arbitration (and on the capacity for parties to access arbitration) will encourage the parties to engage in enterprise bargaining. The Government says this will have benefits that have been previously discussed.

4.141 This proposal was supported by employer groups who share the Government's view about the desirability of enterprise bargaining.

4.142 However, the proposal was opposed in a number of submissions. Concern was expressed that the reduction in the Commission's role to one of 'last resort' will remove its capacity to intervene early in a dispute. For example, the ACTU argues that this will mean disputes that might otherwise have been resolved through well-established Commission procedures will escalate into a 'trial of strength between the parties'. [62] The Ethnic Communities Council of Victoria feared that the need to wait till the 'last resort' was proved could lead to delays:

Conclusion

4.143 The existing system presently allows for arbitral functions only to be exercised where there is no likelihood of a conciliated result (section 100(1)). The Australian Industrial Relations Commission, in the Third Safety Net Adjustment and section 150A Review (October 1995) decision, reinforced this point where it said:

4.144 No evidence was put to the Committee which indicated that the Commission exercised its arbitral powers in a way which is inconsistent with the promotion of agreements and bargaining. There seems to be no need for this proposal.

4.145 Further, it is likely that the need to demonstrate 'last resort' in order to access the Commission's arbitral powers will increase the cost and time involved with such proceedings, given that this criterion is more than likely to lead to significant argument about whether the 'last resort' has been reached.

4.146 The Labor members of the Committee therefore recommend that this proposal (especially the amendment of paragraph 89(a)(ii)) should not be implemented.

4.147 The Australian Democrat member of the Committee agrees with the analysis but has additional comments in his Supplementary Report.

4.148 The Government members of the Committee disagree with the conclusion and oppose the recommendation.

4.149 A further Government proposal restricts access to arbitration after a protected bargaining period has been terminated by the Commission because it is posing a threat to public safety or heath or to the economy. The proposal prevents the Commission from immediately arbitrating and requires conciliation to occur first.

4.150 The Committee believes this is an impractical proposal. In the serious circumstances in which a protected bargaining period will have been terminated, and with the lack of likelihood of resolution by any other means, the Committee believes the Commission must not be prevented from arbitrating to protect the public interest.

4.151 The majority of the Committee therefore recommends that this proposal (proposed Section 170MX) should not be implemented.

4.152 The Government members of the Committee disagree with the conclusion and oppose the recommendation.

Footnotes

[1] Submission No. 199, pp. 391, D. Radford.

[2] Evidence, p. E 536, Kenneth Carr (Sunraysia Trades & Labour Council).

[3] Submission No. 62, p. 142, R. Groves.

[4] Evidence, p. E 281, B. Ridgeway (Working Women's Centre Tasmania).

[5] Submission No. 114, p. 238, D. O'Callaghan.

[6] Submission No. 138, p. 268, T. Cluning.

[7] Industrial action during a bargaining period is allowed both by the present Act and by the Bill, with some limitations for essential services. Act s170PGff, Bill s170MLff.

[8] Submission No. 121, p. 246, M. Navin.

[9] Employee Relations Act 1992 (Vic), Minimum Conditions of Employment Act 1993 (WA), Workplace Agreements Act 1993 (WA)

[10] Submission No. 107, p. 227, J. Kilcullen.

[11] For example, Evidence p. 627, Dr R. Green.

[12] Australian Council of Trade Unions and Australian Council of Social Service, Report of the Study Program on Structural Adjustment and Social Change: Stage 1: New Zealand, 1996, p17.

[13] Submission No. 1016, p. 109, Department of Industrial Relations, quoting an OECD economic survey of New Zealand, June 1996.

[14] R. Harbridge and M. Street, New Zealand Journal of Industrial Relations 20(1)24, quoted in Australian Council of Trade Unions and Australian Council of Social Service, Report of the Study Program on Structural Adjustment and Social Change: Stage 1: New Zealand, 1996, Appendix 9.

[15] Industrial Relations Act 1988, sections 111(1)(g), 111(1A), 111(1G).

[16] Bill, schedule 5, item 20, section 111AAA.

[17] For example, Evidence p. E 1369ff, B. McCarthy (Chamber of Commerce and Industry of Western Australia).

[18] Submission No. 1017, p. 92, Australian Council of Trade Unions.

[19] Submission No. 1018, p. 36, Victorian trades Hall Council.

[20] Submission No. 367, pp. 64-65, Shop, Distributive and Allied Employees Association.

[21] Submission No. 1018, p. 43, Victorian Trades Hall Council.

[22] Evidence, p. E 311, T. Edwards (Tasmanian Chamber of Commerce & Industry).

[23] Evidence, p. E 2018, G. John (Victorian Employers' Chamber of Commerce and Industry).

[24] Evidence, p. E 1774, Professor J. Sloan.

[25] Evidence, p. E 31, R. Stewart-Crompton (Department of Industrial Relations).

[26] An exception is the situation where the Commission terminates a bargaining period (meaning that industrial action is no longer protected) for reasons of public safety etc. In this case the Commission can arbitrate on all disputed matters without limitation to the 18 allowable award matters, and the Commission's resulting order has effect as though it was an award. Bill, Schedule 9, section s 170MX,170MY.

[27] Submission No. 905, p. 31-32, Australian Chamber of Commerce and Industry.

[28] Submission No. 905, p. 27, Australian Chamber of Commerce and Industry.

[29] Submission No. 367, p. 71, Shop, Distributive and Allied Employees Association.

[30] For example, Submission No's 437,529,575,774,1001,1249,1251,1290.

[31] Submission No. 1018, p.38, Victorian Trades Hall Council.

[32] ibid.

[33] Evidence, p. E 773, M. Carter (Australian Road Transport Industrial Organization).

[34] Evidence, p. E 776, M. Carter (Australian Road Transport Industrial Organization).

[35] Evidence, p. E 1022, G. Muir (Queensland Chamber of Commerce and Industry).

[36] Submission No. 905, pp.33-34, Australian Chamber of Commerce and Industry.

[37] Submission No. 1291, ASFA; Evidence pp. 959-971.

[38] Submission No. 1291, p.3, ASFA.

[39] ibid.

[40] Submission No. 1017, p. 56, Australian Council of Trade Unions.

[41] Submission No. 905, p. 32-33, Australian Chamber of Commerce and Industry.

[42] Evidence, p. E 281, B. Ridgeway (Working Women's Centre, Tasmania).

[43] Evidence, p. 1718, G Walsh (Community and Public Sector Union, PSA, South Australian Branch).

[44] Evidence, p. E 774, M. Carter (Australian Road Transport Industrial Organization).

[45] Green R., 'Productivity: Current Trends and Prospects', ACIRRT working paper no. 40, University of Sydney, April 1996, p29.

[46] Evidence, p. E 633, Dr R. Green.

[47] Australian Manufacturing Workers' Union v Alcoa of Australia Ltd & others, Australian Industrial Relations Commission decision M8600, 23/1/1996; Australian Industrial Law Review (AILR) 3-252,253.

[48] Evidence, p. E 1022, G. Muir.

[49] Submission No. 342, p. 6, Australian Nursing Federation; Submission No. 568, p. 9, Australian Education Union.

[50] Submission No. 1017, p. 11, Australian Council of Trade Unions.

[51] Evidence, p. E 208, K. Batt (State Public Services Federation, Victoria).

[52] Evidence, p. E 796, R. Boland (Metal Trades Industry Association).

[53] Evidence, p. E 1396, N. Geronimos (WA Council of Retail Associations).

[54] Submission No. 1018, p. 37, Victorian Trades Hall Council.

[55] Submission No. 1017, p. 3, Australian Council of Trade Unions.

[56] Submission No. 1017, overview p. 2, Australian Council of Trade Unions.

[57] Submission No. 1017, p. 4, Australian Council of Trade Unions.

[58] Submission No. 1188, p. 5, Maurice Blackburn & Company.

[59] Submission No. 1017, p. 12, Australian Council of Trade Unions.

[60] Submission No. 342, p. 4-5, Australian Nursing Federation; Submission No. 568, p. 8-9, Australian Education Union.

[61] Submission No. 342, p. 4-5, Australian Nursing Federation.

[62] Evidence, p. E 42, T. Pallas (Australian Council of Trade Unions).

[63] Evidence p. E 233, V. Borg (Ethnic Communities Council of Victoria).

[64] Australian Industrial Law Review (AILR) 3-195