Submission 167 Australian Council of Trade Unions Workplace Relations Framework Public inquiry

Restrictions on the content of agreements

We are firmly of the view that there is no place in our Industrial Relations laws for restrictions on the content of collective agreements. If proper effect is to be given the objects and purposes of such laws as identified in the introductory chapter, there is simply no role for the State to use those laws as a device to impose a limitation or ideological judgement on the merits of that which workers might seek to pursue to protect and advance their interests. Any legitimate limitations must come from elsewhere, such as income tax laws or laws prohibiting discrimination.

Voluntary negotiation

Imposing restrictions on the content of collective agreements is not consistent with our international obligations and in particular article 4 of the Right to Organise and Collective Bargaining Convention and article 3 of the Freedom of Association and Protection of the Right to Organise Convention. The supervisory mechanisms of the ILO have had much to say about this matter, both generally and specifically in relation the limitations in Australian industrial relations laws. Some of this commentary suggests that, if the PC is to uphold its duty to have regard to the need for Australia to meet its international obligations, it must recommend that all restrictions on agreement content be lifted. For example, the Committee on Freedom of Association has said:

“Where intervention by the public authorities is essentially for the purpose of ensuring that the negotiating parties subordinate their interests to the national economic policy pursued by the government, irrespective of whether they agree with that policy or not, this is not compatible with the generally accepted principles that workers’ and employers’ organizations should enjoy the right freely to organize their activities and to formulate their programmes, that the public authorities should refrain from any interference which would restrict this right or impede the lawful exercise thereof, and that the law of the land should not be such as to impair or be so applied as to impair the enjoyment of such right.”³⁶⁹

In giving specific consideration to Australian laws, the Committee of Experts on the Application of Standards and Recommendations has recently said, in uncharacteristically direct language:
“The Committee had also noted that while section 172(1) of the FW Act provided that an agreement may be made on matters pertaining to the employment relationship, deductions from wages, and the operation of the agreement, the exact scope of the term “matters pertaining to the employment relationship” was elusive and sections 186(4) and 194, as well as sections 353 and 470–475, exclude from collective bargaining as “unlawful terms” any terms relating to the extension of unfair dismissal benefits to workers not yet employed for the statutory period, the provision of strike pay, the payment of bargaining fees to a trade union, and the creation of a union’s right to entry for compliance purposes more extensive than under the provisions of the FW Act. It had therefore requested the Government to review the abovementioned sections in consultation with the social partners so as to broaden the scope of collective bargaining.
The Committee notes the Government’s indication that the review panel considered that the prohibition on clauses requiring the payment of bargaining services fees was not a general matter of concern. Furthermore, the panel observed that current rules about matters that can be included in an enterprise agreement “accord a fair balance between the prerogative of management to manage and the reasonable desire of employees to jointly govern their terms and conditions of employment” and that any further refinement of the matters should be left to the Fair Work Commission (FWC).
The Committee notes that the Australian Council of Trade Unions (ACTU) in its communication dated 30 August 2013 regrets that the Government has not reviewed the relevant sections of the FW Act in consultation with the social partners, with a view to broadening the scope of collective bargaining.
The Committee recalls that legislation or measures taken unilaterally by the authorities to restrict the scope of negotiable issues are often incompatible with the Convention. It further recalls that tripartite discussions for the preparation, on a voluntary basis, of guidelines for collective bargaining are a particularly appropriate method of resolving these difficulties. The Committee once again requests the Government to review the abovementioned sections in consultation with the social partners so as to broaden the scope of collective bargaining and asks the Government to provide information on the measures taken or envisaged in this regard.”³⁷⁰ (emphasis in original).

“Permitted matters”

As noted in our introductory chapter, the Australian industrial relations system was built upon paragraph 51(xxxv) of the Constitution which provides:

The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to:

…

(xxxv) conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one State;

(Conciliation and Arbitration Power)

This power provided the parliament with a limited ability to create machinery to prevent and settle disputes that crossed state borders. It did not permit the parliament to do deal with employment conditions at large.

The Conciliation and Arbitration Power remained the foundation upon which the system operated until the 1990s. While other heads of power could have been used, the federal government was loath to ‘step on the toes’ of the States. The Territories Power, set out in section 122 of the Constitution, has been used to govern the jurisdictions of the ACT and NT. Likewise the Constitution provides the power for the federal government to regulate commonwealth places, for example ports and airports, under paragraph 51(i), the Trade and Commerce Power.

The Industrial Relations Reform Act 1993 (Cth) and the WR Act, both utlised other heads of power. For example, reliance was placed upon paragraph 51(xx) (Corporations Power) which provides Parliament with the power to make laws with respect to:

foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth;

Both pieces of legislation also relied on paragraph 51(xxix) (External Affairs Power) which provides Parliament with the power to make laws with respect to external affairs, which in reality means the ability to enact laws to ensure we comply with international treaty obligations, such as those relating to unlawful termination.

Use of the Corporations Power dramatically expanded the reach of the federal government in the industrial relations system. The Corporations Power is broader and allows the federal government to deal with employment conditions in a significantly more expansive way than the Conciliation and Arbitration Power.

Recently most of the States, apart from WA, have now referred their powers to the Commonwealth under paragraph 51(xxxvii).

Despite having originated at the time reliance was wholly placed on the Conciliation and Arbitration Power, the concept of ‘matters pertaining to the employment relationship’ does not have origins in the Constitution. There is no constitutional impediment to workplace relations legislation dealing with matters that fall outside of the scope of the employment relationship. The impediment arises from the definitions contained in the legislation.

This was confirmed in Re Alcan Australia Limited; ex parte Federation of Industrial, Manufacturing and Engineering Employees³⁷¹ (Alcan). Alcan was a case about whether the deduction of union dues was capable of being defined as an industrial dispute. At paragraph 14 of the High Court said:

…the expression ‘industrial disputes’ … must be given its clear meaning. Even if there were no material on the subject, the popular meaning would, in our view, extend to a dispute as to the deduction of union dues from the wages of employees who authorise that course.

…

The material… confirms that a dispute with respect to that matter is an industrial dispute within the popular meaning of that expression and, hence, an industrial dispute for the purposes of s 51(xxxv) of the Constitution.

…

Even though a dispute as to the deduction of unions dues falls within s 51(xxxv) of the Constitution…, it will not be an industrial dispute within the jurisdiction of the Commission unless it is also a dispute as defined by the Act.

The concept of matters pertaining arose because of the various definitions of ‘industrial dispute’ which were used in the various iterations of the legislation. It is a construct of the legislation rather than the Constitution. While it is a concept which has persisted since the commencement of the system it has no other reason for being than that the drafters of the original legislation used it as a way to define what an industrial dispute was. Subsequent pieces of legislation have taken up the definition and it has continually been used over time.

The C&A Act relevantly provided in section 4 that an ‘industrial dispute’ was one in relation to industrial matters arising between an employer or an organisation of employers on the one part and an organisation of employees on the other part which extended beyond the limits of any one state. The C&A Act also relevantly provided that ‘industrial matters’ included all matters “pertaining to the relations of employer and employees”. This formulation is hardly surprising in its period given that employee-employer relationships were the dominant form of engagement. It would be quite implausible to suggest that the definition at the time was seen as or designed to be a limitation – it merely reflected a link between the rise of protective labour law regulation and the model of work organisation that predominated where large scale manufacturing and other industries were structured through vertically integrated firms providing employment for life.³⁷²

In R v Kelly; Ex parte State of Victoria [1950] HCA 7 the High Court held that "the relations of employers and employees" refers to the industrial relationship, and not to matters having an indirect, consequential and remote effect on that relationship. The case was about whether a clause in an agreement was about an industrial matter for the purposes of the C&A Act. The High Court said:

The question of the validity of clause 16A depends primarily on the question whether it deals with an "industrial matter" within the meaning of the Commonwealth Conciliation and Arbitration Act. The term "industrial matters" is defined by s. 4 as meaning "all matters pertaining to the relations of employers and employees"... The words "pertaining to" mean "belonging to" or "within the sphere of," and the expression "the relations of employers and employees" must refer to the relation of an employer as employer with an employee as employee.
By 1968 the Court had become acutely aware of limitations inherent to tying the nature of the “employment relationship” in statutory labour law to common law concepts of employment:

“..we shall commence our examination of the validity of the clause bearing in mind that the prohibition contained in par. (a) extends to the performance of any work of the description contained in cl. 5 of the award whether performed by a servant or by a person who is, in truth, - as appears to have been the case in this instance - an independent contractor.

This is of considerable importance in view of the pronouncement by a majority of the members of the Court in Reg. v. Foster; Ex parte Commonwealth Life (Amalgamated) Assurances Ltd. [1952] HCA 10; (1952) 85 CLR 138 . In that case the Court had occasion to consider the content of the definition of "industrial matters" contained in s. 4 of the Act as it then stood - "all matters pertaining to the relations of employers and employees and, without limiting the generality of the foregoing includes" a great many of the incidents of such a relationship and of the work to be done pursuant to such a relationship - and after examining the provisions of the definition and its history, the decision in Amalgamated Society of Carpenters and Joiners v. Haberfield Pty. Ltd. [1907] HCA 37; (1907) 5 CLR 33 , and other authorities dealing with State industrial legislation in pari materia, expressed the view "that the kind of relationship to which the definition in s. 4 of 'industrial matters' refers by the expressions 'employer' and 'employee' is, under another name, in substance the relation called at common law master and servant". This, of course, means that there never could be an industrial dispute simply as to whether it should or should not be permissible for an employer in any particular industry to employ independent contractors in performing relevant work outside the employer's factory or workshop and that a dispute as to any such question would not be an industrial dispute as defined. It is as well to remember that it is not every dispute between employers and employees in an industry which constitutes an industrial dispute within the meaning of the Act; it must be a dispute as to an industrial matter or industrial matters as defined and the subject matter of a dispute will not become an industrial matter simply because employers and employees are sufficiently interested in it to dispute about it. Disputes may, of course, arise between employers and employees with respect to any practice in an industry but the Act does not commit to the Commission authority to regulate generally the manner in which industry shall be carried on; its authority is limited to regulating the relationship of master and servant in the industry and matters which are truly incidental to that relationship. Accordingly, matters specifically designated in the definition such as (a), "all matters or things affecting or relating to work done or to be done", must be understood as a reference to work done or to be done pursuant to contracts of service and such as (e), "the question whether piece-work or contract work or any other system of payment by results shall be allowed, forbidden or exclusively prescribed", must be understood as limited to authorizing the prescription of a particular system of payment in the case of persons engaged under contracts of service.”³⁷³

In the IR Act, ‘industrial dispute’ was relevantly defined to include the limitation in section 4 as follows:
(a) an industrial dispute (including a threatened, impending or probable

industrial dispute):
(i) extending beyond the limits of any one State; and
(ii) that is about matters pertaining to the relationship between

employers and employees; or
Section 4 of the WR Act relevantly provided that an industrial dispute “extend[s] beyond the limits of any one state” and “is about matters pertaining to the relationship between employer and employees”. Under the WR Act, s170LI agreements were those made with corporations and the Commonwealth (Division 2 agreements) and s 170LO agreements were those made to resolve industrial disputes or situations (Division 3 agreements). It is clear that Division 3 agreements were based on the Conciliation and Arbitration Power and Division 2 agreements were based on the Corporations Power. It is interesting to note that while there were two types of agreements which could be made, only one of which relied on the Conciliation and Arbitration Power, yet both still had restrictions based around matters pertaining. The legislature could have chosen to remove the requirement from Division 2 agreements.

Under section 353 of WorkChoices workplace agreements had to contain dispute settlement procedures to settle disputes about matters arising under the agreement between an employer and the employees whose employment would be subject to the agreement. Section 356 provided that a workplace agreement could not include prohibited content and referred to the regulations for the definition thereof. Regulation 8.7 broadly provided that matters that do not pertain to the employment relationship are prohibited content. Broadly speaking, a matter pertained to the employment relationship if it pertained to the relationship between and employer and persons employed by the employer.

Under the FW Act the scope of matters on which agreement can be reached has been somewhat expanded. Section 172(1) relevantly provides:

172  Making an enterprise agreement

Enterprise agreements may be made about permitted matters

             (1)  An agreement (an enterprise agreement) that is about one or more of the following matters (the permitted matters) may be made in accordance with this Part:

                     (a)  matters pertaining to the relationship between an employer that will be covered by the agreement and that employer’s employees who will be covered by the agreement;

                     (b)  matters pertaining to the relationship between the employer or employers, and the employee organisation or employee organisations, that will be covered by the agreement;

                     …

The restriction that an agreement be about matters pertaining to the relationship between an employer and its employees which existed in the predecessor legislation has been expanded and now the relationship between an employer and a union(s) is a matter which can be contained in an agreement. However, this expansion does not compensate for the defects inherent within the “matters pertaining” test which serves limit the scope of bargaining to antiquated notions derived from an employment contract construct. This limitation directly frustrates the capacity of industrial relations law to serve its central objectives. This is particularly the case concerning the social cohesion and social citizenship outputs of the protective purpose of the law and more generally concerning the distributional purpose. That this is so is evident from even a few examples of the types of matters that the limitation rules to be outside the scope of legitimate bargaining:

• 
  A claim that an employer will ensure Visa workers are employed only in accordance with work entitlements of their Visas³⁷⁴;
  
• 
  A claim that an employer will pay premiums for income protection insurance³⁷⁵;
  
• 
  A claim that an employer will pay accruing employee entitlements into a trust fund³⁷⁶; and
  
• 
  A claim that contractors will not be used by the employer to reduce the number of directly engaged employees³⁷⁷
  

The matters pertaining rule is archaic and restrictive. There is no good reason to retain it and it is an impediment to ensuring that the industrial relations system is relevant, responsive and fair.