A system of conciliation and arbitration

Industrial tribunals established at both a Federal and State level are empowered to conciliate or arbitrate industrial disputes between employers and employees or their representatives; that is, trade unions and employer associations. The system of industrial relations in Australia is commonly referred to as a system of conciliation and arbitration.

Conciliation, as the name suggests, requires discussion, negotiation and, if successful, agreement between the parties about the settlement of the dispute. Arbitration requires the industrial tribunal to make a decision or order settling the dispute, which is then reflected in an industrial instrument (award or agreement).

The main functions of industrial tribunals are to:¹⁴

prevent and settle industrial disputes, as far as possible by conciliation, and where appropriate, by arbitration;

ensure that a safety net of fair minimum wages and conditions of employment is established and maintained;

facilitate equal remuneration for work of equal value;

facilitate agreements between employers and employees or organisations of employers and employees about wages and conditions of employment; and

determine whether a termination of employment is harsh, unjust or unreasonable.

Industrial awards

Since the introduction of the Federal conciliation and arbitration system in Australia in 1904, part of the wages received by employees has been determined against a standard of what constitutes a fair or living wage. Wage levels have also been set on the basis of comparability between occupations according to the principle of fair relativity. Adjustments to wages were not based on the employers’ capacity to pay, nor were they based on productivity outcomes achieved by different industry sectors.¹⁵

Awards of the AIRC are decisions or determinations establishing the wages and conditions of workers employed by the particular employer or employers named in the award. The making of an award usually follows the serving of a log of claims or demands by a trade union on an employer. If the log of claims, either in part or in whole, is rejected by the employer(s), the AIRC exercises its conciliation and arbitration powers to settle the dispute and make the award. In some instances when the dispute comes before the AIRC for conciliation, the parties, with the assistance and guidance of the AIRC, will agree on the terms of the award. Where there is such agreement, the award is referred to as a consent award. Where there is no agreement from conciliation, the AIRC will arbitrate the outcome.

Awards are periodically reviewed and amended subject to the AIRC’s powers at that particular time. For example, the award-making power of the AIRC under the Workplace Relations Act 1996 (the Act) is far more restrictive than was the case under previous legislation. The AIRC’s power in relation to awards is outlined in section 89A of the Act.¹⁶ All the decisions of industrial tribunals, at both Federal and State level, can be appealed to a higher court, such as the Federal Court or the High Court of Australia. This includes the making or amending of an award.

The system of awards established and maintained by the AIRC allowed the majority of employees in a particular industry to enjoy standard employment conditions. For example, in nursing, the award(s) provided standard employment benefits for nurses, such as four weeks annual leave, payment of annual leave loading, and shift or overtime penalties, regardless of the employment setting in which the nurse is employed, e.g. public or private sector, community health or aged care. In nursing, awards also sought to provide consistency in wages across sectors based on educational qualifications, skill levels, and length of service, rather than on a particular employer’s capacity or willingness to meet industry standards. This promoted commonality of conditions for nurses between the public, private and non-government sectors, enhancing employment mobility between sectors.

For an occupation such as nursing, industrial arrangements are broader than remuneration and working conditions. The classifications reflect the nursing career path, with remuneration linked to experience and qualifications, with clauses on such things as occupational health and safety, workloads, and access to education and training. Awards have been a very important mechanism in maintaining the professional status of nursing. To some extent, the introduction of enterprise agreements fragmented nursing industrial outcomes; however, nursing unions in Australia have been reasonably successful in achieving and maintaining common conditions in agreements across sectors and in flowing on many of the benefits of agreements made in the public sector to other sectors where nurses work.

One criticism of the award system is that over-award bargaining outcomes by some workers in an industry were flowed on to all workers in that industry, and to secondary awards, as a result of the AIRC using the award-setting standards of comparative wage justice and fair relativities. This pattern of award determination produced a compressed wage structure where increases in wages for one group of workers inevitably translated into increases in wages for the majority of workers.¹⁷

The introduction of enterprise bargaining

The process of change in Australia’s industrial relations environment began with a series of agreements, known as the Prices and Incomes Accords, negotiated between the Australian Labor Party (ALP) and the Australian Council of Trade Unions (ACTU), following the election of a Federal Labor Government in 1983.¹⁸ Under the Federal Labor Government, industrial relations became a tripartite process between government, unions and employers. A broad social agenda was adopted, which saw the introduction of worker entitlements such as maternity leave, occupational superannuation, family leave; and a major focus placed on industry education and training.¹⁹ These entitlements, together with the employee’s wages, were commonly referred to as the Living Wage, a doctrine originally developed by the Australian Conciliation and Arbitration Commission in a 1907 decision, which defined a living wage in terms of the needs of a family.²⁰

The first Prices and Incomes Accord (Accord Mark I 1983–85) used a centralised wage fixing system based on awards as the primary industrial instrument for delivering wage increases.²¹ Accord Mark II (1985–86) continued the centralised wage fixing principle and the wage restraint objective, and included trading a percentage of wage increases for tax cuts and increases in occupational superannuation.²² In Accord Mark III (1987–88), the ALP and the ACTU abandoned a centralised wage fixing strategy and began the move towards productivity bargaining at the enterprise level. All wage increases above National Wage Case increases (first tier living wage increases) were tied to productivity offsets at the workplace level (second tier fair relativity increases), such as addressing restrictive work and management practices, multi-skilling, broad banding, removing demarcation barriers and streamlining award classifications.²³

This approach was reinforced in Accord Mark IV (1988–89), when wage increases and tax cuts were linked to further restructuring, greater productivity offsets and efficiency gains at industry and enterprise level, such as adjustments to award relativities, flexible employment practices, and the establishment of minimum award rates of pay consistent across workers with similar skills and experience. Accord Mark IV also sought to establish workplace or enterprise agreements as the principal vehicle for wage movements, with awards providing a ‘safety net’ of minimum wages and conditions.²⁴

The Commission initially opposed the introduction of enterprise agreements as it was concerned that changes to the orderly system of awards supported by National Wage Case decisions would result, not in a flexible labour market or industrial harmony, but a distorted wage structure, inequity in the labour market and industrial chaos.²⁵ The Industrial Relations Act 1988 facilitated the introduction of enterprise agreements, and established the Australian Industrial Relations Commission (AIRC) to replace the Australian Conciliation and Arbitration Commission. In this process, the power of the AIRC was reduced.²⁶ Accord Mark V (1989–90) incorporated the structural efficiency principle, which had been introduced in the 1988 National Wage Case. The fundamental purpose of the structural efficiency principle was to modernise awards. Wage increases and tax cuts were linked to award simplification and restructuring.²⁷

In 1993, with the passage of the Industrial Relations Reform Act 1993, an industrial relations system was created which had distinct award and enterprise bargaining streams. This was a significant change to the industrial relations system in Australia. The bargaining stream provided for two types of enterprise agreements: certified agreements which required union involvement and were subject to a ‘no disadvantage’ test in relation to the relevant award; and enterprise agreements which did not require union involvement and were subject to a more stringent ‘public interest’ test. The award stream provided ‘safety net’ increases for those employees who did not have access to enterprise agreements. Accords Mark VI (1990–92) and Mark VII (1993–95) maintained this approach, linking wage increases to productivity gains, and inserting mechanisms to protect the ‘safety net’ function of awards.²⁸

The 1994 ALP Working Nation White Paper outlined further structural industrial relations changes, such as restricting AIRC scrutiny of agreements to an assessment against the ‘no disadvantage test’, limiting awards to a ‘safety net’ of core conditions, and confirming enterprise agreements as the principal industrial relations instrument.²⁹ However, Accord Mark VIII (1996–99), incorporating the ideas of Working Nation, was abandoned when the ALP lost government at the 1996 Federal elections.³⁰

Australia’s international industrial relations obligations

The International Labor Organisation (ILO) has criticised Australia’s 1993 and 1996 industrial relations legislation for breaching ILO conventions. The Australian legislation restricts the right to strike, limits redress and compensation in cases of unfair dismissal and, according to the ILO, constitutes a clear contravention of Convention No.98.³¹ Of the eight conventions considered ‘fundamental’ by the ILO, Australia has ratified only six—those relating to forced labour, freedom of association, and discrimination. Australia has not ratified the two conventions relating to child labour, nor have they ratified the most recent maternity protection convention.³²

The first wave industrial reforms of the Liberal Coalition Government

In 1996, a Federal Liberal Coalition Government was elected. One of their first priorities was the introduction of further change to the industrial relations system of the country. The Workplace Relations Act 1996 was proclaimed on 1 December 1996 and was the vehicle for delivering the Federal Government’s industrial relations agenda. The Act aims to ensure that ‘the primary responsibility for determining matters affecting the relationship between employers and employees rests with the employer and employees at the workplace’.³³ The motive of the new government was as much ideological as it was a desire to reduce perceived inefficiency, with a move away from reliance on third parties and towards workplace agreements negotiated directly between employers and employees.³⁴

The changes actively promoted enterprise-based agreements as the primary mechanism for delivering wage increases, reduced the role of the AIRC by introducing individual agreements that were put outside AIRC jurisdiction with the establishment of the Office of the Employment Advocate, limited awards to 20 specified, allowable matters while maintaining awards as ‘a safety net of fair minimum wages and conditions of employment’, and restricted the capacity for unions to represent employees in the collective bargaining process.³⁵ Under the Act, the status of unions was altered from ‘interest representation’ to ‘agency representation’, which requires unions to demonstrate that a ‘valid majority’ of workers want the union to bargain on their behalf prior to negotiation and that a ‘valid majority’ accepts the outcome of the bargaining.³⁶

The Act allows industrial parties to negotiate agreements between industrial organisations or directly between employer and employees. The Act also allows individual employers to negotiate agreements directly with individual employees. These agreements are referred to as Australian Workplace Agreements (AWAs).³⁷

Collective agreements (both union and non-union) can cover a single employer, a geographically distinct part of an employer’s operation—e.g. an operating theatre—or be made with respect to a number of employers.³⁸ The AIRC is required to certify collective agreements negotiated between employers and employees, whether or not a union is party to the agreement. Multi-employer agreements are subject to a ‘public interest test’ conducted by a Full Bench of the Commission. Single employer enterprise agreements are subject to a ‘no disadvantage test’ conducted by a single Commissioner.³⁹

As a result of the changes introduced under the Act, awards have been streamlined so that they only cover specified allowable matters and act as a safety net of minimum wages and conditions of employment. The Act, in fact, stipulates that awards must not include details or processes that would be more appropriately dealt with by agreement at the workplace or enterprise level.⁴⁰

The second wave industrial changes of the Liberal Coalition Government

In 1999, the Liberal Coalition Government introduced the Workplace Relations Legislation Amendment (More Jobs, Better Pay) Bill. The Bill had 18 parts which sought to further reduce the scope of awards, introduce another round of award simplification, limit access to the AIRC’s arbitral powers, reduce the vetting of enterprise agreements by the AIRC, restrict access to industrial action, and limit the ability of unions to organise, recruit and represent members.⁴¹

The Government withdrew the legislation when the ALP and the Australian Democrats announced their intention to vote against the Bill in the Senate. The November 1999 Australian Democrats Supplementary Report on the Bill outlines the Democrats’ objections in detail. Although agreeing that the changes introduced in the Workplace Relations Act 1996 had been successful in delivering better economic outcomes evidenced by higher real wages, employment and productivity, the Democrats considered that ‘a strong or compelling case’⁴² had not been made on the need for further major reform, that the changes introduced by the Act had not had a chance to bed down, and that many important provisions of the new Act had not yet been tested in the courts or by a Full Bench of the Commission. The report describes the Bill as ‘too harsh, too regressive and too unfair’.⁴³

The third wave industrial changes of the Liberal Coalition Government

Following the re-election of the Liberal Coalition Government in 1999, the Workplace Relations Legislation Amendment (More Jobs, Better Pay) Bill was withdrawn and its provisions were broken up into a number of smaller Bills. Eleven Bills were introduced into the Parliament; however, none passed into law due to the opposition of the ALP and the Australian Democrats. Among these Bills were the:

Workplace Relations Amendment (Prohibition of Compulsory Union Fees) Bill 2001;

Workplace Relations Amendment (Secret Ballots for Protected Action) Bill 2001;

Workplace Relations Amendment (Termination of Employment) Bill 2001;

Workplace Relations Amendment (Transmission of Business) Bill 2001; and

Workplace Relations Amendment (Registered Organisations) Bill 2001.⁴⁴

The Liberal Coalition Government was re-elected in 2001. The industrial relations Bills were resubmitted to Parliament. Essentially, these Bills are identical to those previously submitted, such as:

Workplace Relations Amendment (Fair Dismissal) Bill 2002;

Workplace Relations Amendment (Fair Dismissal) Bill 2002 No: 2;

Workplace Relations Amendment (Fair Termination) Bill 2002;

Workplace Relations Amendment (Genuine Bargaining) Bill 2002;

Workplace Relations Amendment (Prohibition of Compulsory Union Fees) Bill 2002;

Workplace Relations Amendment (Secret Ballots for Protected Action) Bill 2002;

Workplace Relations Amendment (Improved Remedies for Unprotected Action) Bill 2002; and the

Workplace Relations Amendment (Simplifying Agreement Making) Bill 2002.⁴⁵

Very few of the Bills have passed into legislation, the Workplace Relations Amendment (Registration and Accountability of Organisations) Bill 2002 and the Workplace Relations Amendment (Prohibition of Compulsory Union Fees) Bill 2002 being two exceptions. Bills amended by the Senate, where the amendments are not acceptable to the Government, are generally withdrawn by the Government and resubmitted at a later date.

Agreement-making

The focus of the Workplace Relations Act 1996 is on facilitating the making and certifying of workplace or enterprise agreements.⁴⁶ Employees whose conditions of employment are governed by the Federal jurisdiction may have these conditions regulated by one or more of three ways—awards of the AIRC, certified agreements of the AIRC, or Australian Workplace Agreements (AWAs) which are overseen by the Office of the Employment Advocate (OEA).⁴⁷ The Act requires that the parties seeking to make an agreement comply with a number of steps in order to obtain the protections provided by the Act.

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