Employment Relations System in Australia

Australia evolved from a major white settler colony of the British Empire into industrial capitalist, self-governing federal state with parliamentary political systems within the British Commonwealth. Comparing Australia with another old British colony which has an quite similar development in history, Canada you will see that one significant key for the development of the Australian employment relation system was the existence of a labor party, which achieved office at the state and federal level while all labor parties in the Canadian history failed. The Australian Labor Party was influenced by ideas of new liberalism or progressivism in last decades of the 19th century and the early decades of the 20th century. While there variations in the meanings and manifestations of new liberalism, there was a common thread that rejected the traditional liberal view that the role of the state should be restricted to maximize the freedom of the individual. This essay is about the industrial relations system of Australia with an outlook of the collective bargaining system and development since the 1980s.

After a short description of the key facts of Australia, the first part of the essay summarizes and describes the core characteristics of the employment relations system in the last decades in Australia. The next part describes the existing systems of collective bargaining and unions and discusses their development since the 1980s. The last part of this essay outlines major recent trends initialized by the 2007 Rudd Government and analyzes the Fair Work Bill 2008 more in detail.

Australia is an independent nation in the Commonwealth of Nations with Queen Elizabeth II as its head of state, represented by Governor General Quentin Bryce. Kevin Rudd, the Australian Labor Party (ALP) leader, has been the prime minister since December 2007. For several years, the country has tried to break away from its colonial ties with the UK, but the 1999 referendum seeking to replace Queen Elizabeth as head of state failed. However, with the rising influence of republicans in Australia, the independent mindset of country looks set to increase (Mitchell and Fetter, 2003). The economy was growing steadily until the global crisis began in 2008. Although the country is better placed than other advanced nations in terms of economic growth, it faces challenges such as adverse terms of trade and rising external debt.

Benjamin Mehran, Comparative Human Resource Management, IUBH 2010 3

Moreover, the large-scale government expenditure programs will also adversely affect the financial health of the state, with a widening budget deficit (OECD Report, 2009).

Labor Force

According to the OECD Report of 2009 the labor force participation rate measures the proportion of the working age population that is economically active. The rate for Australia increased from 74.05% in 2002 to 75% in 2009. The increase had been marginal over the period of five years, leaving a scope for improvement and catching up with other advanced nations. The size of the Australian labor force is around 10 million at present. It increased from 7.6 million to 10 million during 1990�2009, growing at an average annual rate of 1.5%. With a labor force participation rate of 75%, the Australian economy is dominated by its services sector; 75% of its workforce is employed in this sector, particularly in the finance, property and business services. The proportion of employment in the agricultural, fishing, mining and industry sectors has been declining, which is consistent with the trends of their shares in total output. The secondary sector employs 21% of the total labor force, while the primary sector employs 4%.

During 2000�07, the employment growth rate stayed consistently above 1.5%. However, labor conditions have deteriorated since 2007, resulting in lower number of jobs added. The unemployment rate stood at 5.4% in April 2009, up from around 4% in early 2008. The majority of the contraction in employment came from the full-time component, which has been coming down since August 2009. According to Reserve Bank of Australia estimates, full�time employment has contracted by over 1% since mid-2009, while part-time employment has continued to move upward. This reflects the shift of full-time workers to part-time, as employers attempt to rein in labor costs while avoiding lay-offs (OECD Report, 2009)

Labor Law

In Australia, the employment system is a mixture of legislation, common law, legally binding awards and agreements. A syndicate of federal and state laws addresses various issues, including maximum working hours, working conditions such as occupational health and safety, annual leave, workers compensation and industrial action. According to state legislation, working hours are restricted to 38 hours per week. There is also a weekly cap that employers must set in the case of extra work, forcing employers to compensate employees for extra

Benjamin Mehran, Comparative Human Resource Management, IUBH 2010 4

hours of work accordingly (Mackinnon, 2009). Overtime compensation is generally one and a half times normal pay for the first two to three hours and double thereafter. The Australian Fair Pay Commission sets and reviews the federal minimum wage. The minimum wage in Australia is A$13.47 per hour (Watts, 2010). As a part of the termination process, the employer must give notice or the equivalent pay. The Workplace Relations Act provides for minimum notice of one to five weeks (Issac, 2007)

The Conciliation and Arbitration Act of 1904

The Australian states were separate colonies until 1901, when they federated to become an independent country within the British Empire, but these states still exercise considerable power over many issues, especially employment relation (Patmore, 2009). Under the former Australian Constitution, the federal government had only limited employment relation powers, and was able to make laws only on �conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one state� (Lansbury and Wailes, 2004). The Conciliation and Arbitration Act of 1904 regulated over 80 years the Australian employment relations. Reforms implemented in the 1990s have challenged this traditional interpretation of the powers of the federal government, with the aim of increasing government influence on employment relations (Patmore, 2009). Before the Industrial Relations Reform of 1993 and the Workplace Relations and Other Amendments Act of 1996 the Industrial Relations Act of 1988 was the leading paradigm (Dabscheck, 2000).The reforms of 1993 and 1996 will be discussed more detailed later.

The Conciliation and Arbitration Act 1904 encouraged employers to recognize unions registered under the Act, and empowered these unions to make claims on behalf of all employees within their coverage (Patmore, 2009). The 1904 Act, ensure, that unions are able to call employers to the Conciliation and Arbitration Court (later a commission) even if they act against their wishes not want to negotiate. Once the court had made a decision, its provisions were legally enforceable (Dabscheck, 2009). The initially aversion of the employers against the federal Conciliation and Arbitration Court established under the act changed as they recognize the advantages they can use for their own affairs. From this point the employers started to support the court (Patmore, 2009).

Australia, in contrast to Britain, has a long tradition of a high degree of state intervention in

the labor market. Bamber and Davis characterized it �as having a voluntary approach and

relatively high state intervention.� The introduction of the arbitration and conciliation system

Benjamin Mehran, Comparative Human Resource Management, IUBH 2010 5

was the first step away from the old British traditions which ruled Australia before the 1890s. Afterwards the foundation of Australia�s twentieth century employment relation system was constituted. On the whole the 1904 Act and its provision for compulsory arbitration was a key element of Australia�s initial �social contract� (Bamber and Davis, 2000).

Australian Protectionism

A second element, which characterized the special characteristics of Australian laborism at this time, was the restriction of the entrance of immigrants by law. The �white Australian� policy limited the immigration to protect the labor market. They aimed to keep out Asians because they �were seen as threatening union strength and union members� living standards.� (Bamber and Davis, 2000). Historically, Australia had always a high level of protectionism of business and the labor market (Jackson, 2002).

The last element was the tariffs made by the government to protect the domestic products from cheap imports (Stewart and Horneman-Wren, 2006). Actually, the tariff policy should ensure employment for the expanding population, but all political parties stick to this method up until 1945. One of the advantages provide by the protection was that wages could be determined more on social and equity grounds than on productivity and market forces (Kornfeld, 1993). The Whitlam Labor government (1972-75) was the first government which tried to reduce these tariffs because of the lack of competition forces on the protected industries (Stewart and Horneman-Wren, 2006). This move was highly criticized by employers and unions. The unions forecasted high degree of unemployment if the government reduces the tariffs by 25 % as announced. But the government adheres to their plans and the 100 % domestic oriented industries were hit by unemployment. Between 1981 and 1996 manufacturing employment declined from 23 % of total employment to below 14 %. The proportion of employees in agriculture fell from 7.6 % to 5 % (Bamber and Davis, 2000).

Industrial Relations Act 1988

In 1988 the Hawke Labor government enacted the Industrial Relations Act 1988 which replaced the Conciliation and Arbitration Act 1904. According to Bamber and Davis the act was quite similar to the old one. New were that the federal unions now have to register with the Industrial Registrar to gain access to arbitration and to enjoy full legal status. This amendment should help to reduce the disputes between the unions and simultaneously it should help to

Benjamin Mehran, Comparative Human Resource Management, IUBH 2010 6

inhibit the development of new unions. The old commission, the Commonwealth Conciliation and Arbitration Commission, was now replaced through the Australian Industrial Relations Commission (AIRC), but with no significant changes in function (Lansbury and Wailes, 2004). Due to the similarity of the both acts great changes were made with the reforms in 1993 and 1996 as mentioned before.

Collective Bargaining

The Australian federal and compulsory conciliation and arbitration system in 1904 gave legal protection to collective bargaining but requires trade union and employer associations to submit disputed contracts in terms to a state tribunal for conciliation and, if necessary, binding arbitration (Carrell and Heavrin, 2007). Until the mid-1980s the Australian labor regulation has been characterized by a centralized wage and working conditions determination system and a high rate of unionization (Strachan and Burgess, 2000). As mentioned before the industrial relations system was based on permanent industrial tribunals at state and federal level. Due to the economical difficulties of the 1980s both labor and employers insisted on a new system (Carrell and Heavrin, 2007). Since then the system changed towards decentralized collective agreements bargained at individual enterprises or workplaces (Wooden and Hawke, 1997). The unions and employer expected to enhance economic competitiveness (Landsbury and Westcott, 2000). Due to Strachan and Burgess at this time an increasing percentage of workers are being employed on a casual basis similar to temporary workers in Europe. Landsbury and Westcott mentioned that as bargaining have become more decentralized unemployment and underemployment rates increased. The Australian labor market was dominated by part-time, casual and contract employment (Watts and Burgess, 2000). During the 1980s after the Labor government was elected the Australian policy was to link collective bargaining to employment creation on national level. During the 1990s the policy shifted more towards collective bargaining on the enterprise level to enhance more economic competitiveness (Watts and Burgess, 2000). While the Labor government emphasis union support and employment protection the Liberal National Coalition government elected in 1996 set new focuses and switched the public policy direction towards pursuing employment creation through influencing competitiveness rather than directly through job creation like the Labor government (Landsbury and Westcott, 2000). The main differences between the two governments in policy were that the Coalition altered the collective bargaining system to restrict wage growth without support of the trade union movement. The Coalition government

Benjamin Mehran, Comparative Human Resource Management, IUBH 2010 7

enacted the Workplace Relations Act 1997 (WRA). The WRA included a streamlined award system and emphasized more on enterprise bargaining. Further the act lowered the union power and set restrictions on labor strikes. The WRA limited the power of the AIRC because the commission is only responsible for the ratification or resolution of differences of the collective bargaining awards (Hunter, 1997). Bamber and Davis have the opinion that the act signaled a more radical deregulation of industrial relations although it still provided parties with a choice between remaining in the award system or opting for a workplace agreement. The intention behind the act was to move the system away from collectivist approach, in which there was a strong role for unions and commissions to a more �fragmented system of individual bargaining� between employees and employers (Hunter, 1997). Consequently, the strategy of the unions had to change from restructuring and amalgamations to organizing during the Coalition government. They were forced to build workplace activism and alliances with the broader community and develop capacities for strategic campaigns. Landsbury and Wailes describe the objective of unions at this time as redefining themselves as more autonomous and less dependent on the state.

Unions

Bamber and Davis pointed out that the establishment of the legally based federal arbitration system in the early twentieth century encouraged the rapid growth of unions. Up to 1983 the Australian union landscape was stamped by 319 unions recorded by the Australian Bureau of Statistics. Most of the unions had less than 500 members which count less than 1 % of total memberships in Australia and nine unions had more than 80.000 members which count over 34 % of total memberships. In 1960 union membership represented around 55% of the work force (Mansfield, 2000). In 1987 the Australian Council of Trade Unions (ACTU), formed in 1927, intensified their efforts to seek mergers and amalgamations to streamline union operations. The intentions behind their efforts were that the ACTU had the opinion that a smaller number of larger unions would be more effective and would deliver higher quality services to his members. The ACTU was supported by the Labor government introducing legislations that further encouraged and facilitated union mergers. In 1993 ACTU announced that 98 % of union members were covered by twenty unions. Today the ACTU covers around 95 % of all unionists after its merger with two other confederations, the Australian Council of Salaried and Professional Associations (ACSPA) joining in 1979 and the Council of Australian Government Employee Organisations (CAGEO) following in 1981 (Landsbury and Wailes, 2004).

Benjamin Mehran, Comparative Human Resource Management, IUBH 2010 8

After the reforms of the Labor government in the 1990s to �reengineer� the Australian economy on the international world market led the unions to change their approaches (Mansfield, 2000). As mentioned before the major initiatives were the amalgamation of the unions, the workplace reforms, changing of the wage determination system and the restriction of strikes and disputes had great impact on the work of unions. Mansfield described this decade as �critical for unions in Australia�. The first significant consequence was the decrease of the membership of the unions. Unions started to react and initiated a few initiatives to stop the trend. Several initiatives like the cooperation of the ACTU and a range of affiliate unions to establish a recruitment institute �Organising Works� were introduced in the 1990s (Mansfield, 2000). �Organising Works� should train young union officials as workplace organizers. Mansfield mentioned that these recruits, since 1994 over 250 trainees, have attracted tens of thousands of new members to their unions.

Due to the decentralized collective agreements bargained at enterprise level unions needed to restructure themselves �to deliver services to members effectively, with an emphasis on having an effective presence at the enterprise level� (Mansfield, 2000). One issue was to rebuild the enterprise-based structures of local representatives with relevant, good quality assistance to enable them to represent the interests of their members at enterprise level. Therefore Mansfield describes that it is important to create an acceptance of the authority to negotiate with the employer being delegated to members at the workplace rather than held tightly by central councils of elected officials.

One major trend which characterized the 1990s was the wage improvement for union members. In 1997, 5.090 collective agreements covering 732.000 workers were certified covering 602.700 employees (Mansfield, 2000). In 1997/98 wages increased by 4.1% according to the year before. Despite the increase of the wages the difficult was still that union negotiator has been underestimated now they are on enterprise level and not on industry level as before. 1998 unions made 5.460 agreements at the federal level, which all have to be re�negotiated every two years, and thousands more at the state level. Although the numbers of agreements are much smaller than the numbers of companies, 800.000, 75 % of all employees are covered by the agreements under federal awards.

Workplace Relations Act 1996 and the Australian Workplace Agreements

Benjamin Mehran, Comparative Human Resource Management, IUBH 2010 9

In 1996 the Australian government pursued a neoliberal industrial relations agenda with the aim to break with the collective bargaining system and especially with trade unions. Cooper and Ellem (2007) mentioned that in the name of choice and deregulation the new policy involved unique levels of state intervention and prescription and anti-unionism. As mentioned before the Howard Government (1996 � 2007) changed the employment relation system in the most significant way in the Australian history. Under the proposition of neoliberalism which could be characterized in that times as business interested and anti-collective bargaining the state saw his position as an important regulator (Cooper and Ellem, 2007). The laws introduced in 1996 and rounded out in 2005 signaled the end of a collective system of labor regulation. Significant influence on these developments had the Workplace Relations Act 1996. The Howard government was the opinion that collective bargaining and arbitration were artifacts of the early twentieth century (Cooper and Ellem, 2007). The WRA, passed in 1996, titled the scales very heavily against union-based collective bargaining. Cooper and Ellem mentioned further that the act �undermined collective bargaining and the award system, stripped unions of their traditional armoury as bargaining agents, and reduced their capacity to recruit, access and effectively represent members.� One characteristic of the act was that for the first time individual contracts, the so-called Australian Workplace Agreements (AWA) was introduced. With these new agreements unions could be excluded and undermined. So AWA�s allow employees to bypass unions and for the conditions in awards and other collective agreements to be overridden (Cooper and Ellem, 2007). More specifically written, AWA�s threatened collectively bargained and determined rights, conditions and wages. But not only were the unions restrained by the act also the AIRC. As mentioned before the AIRC could only arbitrate on �allowable matters�, the scope of arbitral system itself, and with it employee protections, was correspondingly reduced (Cooper and Ellem, 2007). In other words the AIRC felt into oblivion in this period. The Howard government focused themselves more on an alternative for union bargaining and supported more non-union collective agreements so that employers were no longer required to notify the relevant union of their intention to make non-union agreements (Cooper and Ellem, 2007).

Work Choice 2005

In 2005 after introducing a bench of other legislations to make it much harder for unions to

establish and maintain collective agreements and more difficult for them to use traditional

bargaining tools without exposing members to fines and legal action, the Howard government

Benjamin Mehran, Comparative Human Resource Management, IUBH 2010 10

introduced the Work Choice 2005. Cooper and Ellem described it as �over 1.700 pages of legislation and accompanying regulations � so much for simplifications of the neoliberal state.� Furthermore they specified it as an assault on conditions, rights, collective bargaining and unions revealed. With the new act new institutions were implemented. For instance, the Australian Fair Pay Commission, which is responsible for the minimum wage rates and working hours. All other terms and conditions of employment were negotiable between employers and employee (Stewart, 2008). Under the Work Choice the decline in union density accelerated. By 2007, when Kevin Rudd taken over the government, union density had fallen to 18.9 % (Oliver, 2008).

�Forward with Fairness� � The Rudd Government in 2007

The 2007 election was a fight �Your Rights at Work� against the Work Choice. In November 2007 the ALP won the federal election and Kevin Rudd became Prime Minister of Australia and in 2008 he introduced Labor�s new regime for industrial relations, �Forward with Fairness� (Mackinnon, 2009). The major issue of the new regime was that the Rudd Government started immediately to dismantle Work Choices by introducing two major pieces of legislation. The first, the Workplace Relations Amendment Act 2008 (the �Transition Act�) was introduced on 28th March 2008 (Baird and Williamson, 2009). The main issues of this act were the removal of the option of making AWA�s and second, the introduction of a new �no disadvantage test� against which agreements would be judged (Cooper, 2009). As Sutherland (2009) recognized the new government moved swiftly to implement transitional measures to address those aspects of Work Choices that it regarded as the most detrimental to employees, and to commence the award modernization process. This act is one of the major pre-election promises made by the Labor Party to underline their predication that there will be �no place for statutory individual contracts� in the Labor�s workplace laws (Sutherland, 2009). From this time on no more AWA�s under their nominal terms were negotiated.

Under the Rudd Administration several new elements characterize the industrial relation system of Australia.

Fair Work Bill 2008

The new government promised after the election to pass the necessary legislation in two

phases. First of all, in the early 2008, as mentioned before the AWA should be replaced by the

Benjamin Mehran, Comparative Human Resource Management, IUBH 2010 11

Transition Act. The second part of the new legislative regime was the Fair Work Bill. This act should wholly replace previous legislation (Cooper, 2009).

The Fair Work Bill was tabled in Parliament on 25th November 2008. Since the Industrial Relations Act 1988 the Government has formulated new workplace relations legislation. The Bill is regarded to be �user-friendly� with a guide and a dictionary at the beginning and readable provisions throughout (Martin, 2009). The Fair Work concept is primarily the counterpart of the Work Choices. The Rudd Government took care that the features of its new workplace relation system shift the balance in favor of fairness. By and by, lots of institutions were named additionally �Fair Work� (Martin, 2009). For example, Fair Work Divisions of the Federal Court and Federal Magistrates Court, Fair Work Australia or the Office of the Fair Work Ombudsma (Sutherland, 2008). The Fair Work Bill is a product an intensive 10-day meeting of the National Workplace Relations Consultative Council�s Committee on Industrial Legislation (COIL), union and business lawyers (Bridgen, 2009). Due to the participation and the former attacks by the Coalition the unions were confident with the new bill. In the following part some of the key elements of the Fair Work Bill will be listed and explained.

A National Industrial Relations System

The states are requested to refer their industrial relations power to the Commonwealth. Hall

(2008) stated that then the national system would be applied to all private sector employees

and employers with state and local government continuing to be covered by the state systems.

Ten National Employment Standards

The next recent change was that the legislated minima. It should cover all employees and include several standards: 38 hours of work for full-time employees, parental, annual or personal leave standards, public holidays, the right to request flexible work arrangements for employees with pre-school age children, rights to information on workplace employment conditions and minimum termination and redundancy provisions (Baird and Williamson, 2009).

Award Simplification to 10 Minimum Conditions

The next alteration restricted the awards by following matters: minimum wages, specification of type of the work to be performed and form of employment, working patterns including hours, rosters and breaks, overtime rates, penalty rates, provision for annualized salaries, allowances, leave including loadings, superannuation, employee voice and grievance

Benjamin Mehran, Comparative Human Resource Management, IUBH 2010 12

procedures. It is the task of the AIRC to modernize and simplify the 4.300 existing awards (Martin, 2009).

Flexibility Pro visions for Awards and Collective Agreements

Every awards and every collective agreement contain flexibility clause that can provide flexible arrangements on matters such as hour of work, benefits or family arrangements. Once again the AIRC is empowered with responsibility to draft a model flexibility clause for awards that will be subject to industry variation (Hall, 2008):

Restriction on Union Action

Industrial action will be protected only where it arrives during a bargaining period and is recommended by a majority of employees in a secret ballot. Industrial action taken in support of an industry agreement like pattern bargaining or outside of �good faith bargaining� will not be protected. Furthermore, employers are allowed to go without an AIRC certificate immediately to court if subjected to unprotected industrial action (Hall, 2008).

Unions Rights of Entry

As mentioned before the unions were highly restricted under the Coalitions Government. One of the restrictions on the ability of unions to enter workplaces has been retained by the Labor Government. Union officials now has a right of entry and this restricts them to investigating breaches of agreements, awards, arrangements and occupational health and safety regulations and holding discussions with union members or potential union members (Hall, 2008).

Rights to Protection from Unfair Dismissal

On 1th July 2009 a new �fair dismissal� system started, which set out the steps that an employer should go through before dismiss an employee:

�It is fair for an employer to dismiss an employee without notice or warning when the employer believes on reasonable grounds that the employee�s conduct is sufficiently serious to justify immediate dismissal. Serious misconduct includes theft, fraud, violence and serious breaches of occupational health and safety procedures.� (ACTU, 2009)

If an employees worked for 6 months for an employer with 15 or more employees will be protected from unfair dismissal. Or an employee worked for more than 12 month for an employer with more than 15 employees or, additionally, they earn less than 98,200 AUSD.

Benjamin Mehran, Comparative Human Resource Management, IUBH 2010 13

Collective Agreements

Under the Fair Work Bill all collective agreements, union collective agreements, non-union collective agreements, and union collective Greenfield agreements were tested and rated. Existing agreements will continue in force until their expiry (Hall, 2008).

Better-off-overall Test

The re-introduction of the former �no disadvantage test�, originally introduced in Division 5A of the Workplace Relations Act 1996, was the reaction on the inadequacies of the previous Government�s �fairness test� (Sutherland, 2009). Fair Work Australia will check each agreement to ensure that it makes the workers who are party to it ‘better off overall’ than their award. So, all new agreements must be tested if they are �better off overall� compared to the national employment standards and the award minima (Hall, 2008).

Good Faith Bargaining

Those involved in the bargaining process, including bargaining representatives, are required to bargain in good faith. The following are the good faith bargaining requirements that a bargaining representative for a proposed enterprise agreement must meet: attending, and participating in meetings at reasonable times, disclosing relevant information (other than confidential or commercially sensitive information) in a timely manner, responding to proposals made by other bargaining representatives for the agreement in a timely manner, giving genuine consideration to the proposals of other bargaining representatives for the agreement, and giving reasons for the bargaining representative’s responses to those proposals, refraining from capricious or unfair conduct that undermines freedom of association or collective bargaining, recognizing and bargaining with the other bargaining representatives for the agreement (Fair Work Act, 2009).

Results of the new Legislation

Definitely the new Rudd Administration changed the industrial relations in Australia. Further important is the question: �How important were the Transaction Act and the Fair Work Bill for the Australian labor market?�

Benjamin Mehran, Comparative Human Resource Management, IUBH 2010 14

The ACTU appreciated the new legislation and named it as �a turning of tide� in industrial relations and for workers rights (Cooper, 2009). Especially came to the fore the �good faith� bargaining which was identified by the President of the ACTU, Sharan Burrow, as one of the important changes in the regulation of collective bargaining and that it will ensure that employees would be compelled to engage in �fair dinkum� bargaining with employees and unions over pay and conditions (Burrow, 2009). Although the majority of the population was very confident according the new amendments of the industrial relation systems not all unionists �held the line� in supporting it (Cooper, 2009). Victorian officials had the opinion that the Government could go much more far to dis