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

Unlawful terms

Slightly different considerations arise when considering the types of provisions that the FW Act describes as “unlawful terms”.³⁷⁸ We regard it as entirely necessary that collective agreement not be permitted to contain terms that would undermine the protections provided in the FW Act with respect to Freedom of Association and the prevention of discrimination. We also accept the necessity of ensuring that collective agreements do not permit default superannuation contributions being made to funds that do not comply with relevant prudential and financial regulation. However, restricting agreement content so as to prevent workers and employers from freely agreeing to improve upon the statutory schemes for unfair dismissal and entry by union representatives are of an entirely different character. Furthermore, such prohibitions run directly contrary to the general thrust of agreement making which permits – and in fact requires – that the existing safety net be improved upon.

Reform is required

The link between the need to remove the restrictions on agreement content and the objects and purposes of industrial relations laws is clear. Even the often ambiguous stated objects within the FW Act include the statement that:
“The object of this Act is to provide a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians by:

(f)  achieving productivity and fairness through an emphasis on enterpriselevel collective bargaining underpinned by simple good faith bargaining obligations and clear rules governing industrial action; and

…”³⁷⁹
If parties should be able to engage in co-operative and productive relationships that promote social inclusion and national prosperity and do this by conducting enterprise level collective bargaining, they should not be constrained by archaic definitions that impinge on their ability to foster the type of relationships encouraged by the FW Act. From a civil society perspective Enterprise Bargaining offers workers the capacity to influence arrangements relating to their employment and the employment of others that can have wider impacts for the benefit of society as a whole. Allowing parties to an agreement to determine the terms on which they will agree free of interference by outdated definitions will help to accommodate the differences in the needs and circumstances of different types of businesses, workers, communities and different regions in Australia.
The current regulatory requirements are arbitrary and are difficult to understand. An experienced practitioner can spend a great deal of time attempting to work out whether a matter will be permitted and whether it relates to the necessary relationships which exist in the workplace. Removing the “matters pertaining aspect” of the FW Act will mean that parties can be certain that what they want to agree about is something they can include in an agreement without fear of running afoul of the FW Act. The restrictions are also unnecessary as parties know what they want to agree on and should not be constrained in this regard.
In addition, the restrictions do nothing to curb any abuse of power which could add to social and economic costs where enterprise bargaining is conducted fairly under the auspices of the FW Act and employees are truly able to exercise their right to withhold labour in support of their claims.

A compelling argument to remove the restriction is obvious when one considers what the High Court said about the popular meaning of industrial dispute in Alcan. The popular and commonly understood meaning of an industrial dispute is broad. It is only a legislative construct which constrains it. The constraint is a deliberate and misguided policy choice misrepresented as a legal or constitutional necessity.

A less restricted scope to bargaining content would make the system far loss complex and would continue the path of reform toward more meaningful multi employer bargaining, including supply chain bargaining which at least indirectly covered labour hire workers who are economically dependant servants and agents of an entity with which they have no “employment relationship” for any “matter” to “pertain to”. Many of the proponents of continuance of the “matters pertaining” hold that position precisely because of the insulation it provides in relation to labour supply chains. It is because of those proponents that policy makers have, through inaction, made a choice about what communities of interest are legitimate and which are not.
Finally, if one accepts that bargaining for a collective agreement should occur within the machinery structures of the Fair Work framework, it is difficult to support the current limitations on bargaining and agreement content. The machinery structures have been established to allow workers to participate on a more even footing with employers and to make sure that the inherent power imbalance which exists is somewhat equalised. In restricting the matters which parties can agree on, they are forced out of the established system to the extent that claims are made for matters which are not able to be accommodated and enforced within it. In the current system, parties feel that they are forced to make agreements which are not contemplated within the Fair Work frame work – such as memorandums of understanding, deeds or common law agreements – either formal or informal instruments – in order to have their individual needs met. This can result in parties having to rely on the good will of the other in order to continue to enjoy their agreement on the matters which are outside of the Fair Work framework. This does not provide certainty for employers or workers and comes with risks and potential costs. For example, it would be costly and inefficient to enforce a common law deed, and it brings with it great uncertainty as to outcome³⁸⁰.

Good Faith Bargaining

The ACTU welcomed the enactment of the good faith bargaining (‘GFB’) provisions of the FW Act. Since their introduction, the GFB provisions have generally had a positive impact on industrial behaviour³⁸¹ and have the potential – when properly understood and applied – to promote the take up of collective agreements across the Australian economy consistent with the objects of ss3(f) and s171 of the FW Act.

However, the operation of the GFB provisions of the FW Act has not been uniformly positive, particularly in the area of first agreement negotiations involving workers with limited bargaining power. Some high profile cases have pointed to a lacunae in the FW Act in circumstances where a determined employer simply refuses to accept a negotiated collective agreement as an acceptable outcome of the existing workplace relations system. The ‘surface bargaining’ case studies discussed below deal with this particular weakness in the Australian GFB framework.

The GFB provisions of the FW Act are found in Division 8, Part 2-4. Bukarica and Dallas have argued that there appears to be a degree of similarity between some of the central concerns of the GFB provisions of the FW Act, and the focus of existing law and practice in countries with more established GFB systems, such as Canada and New Zealand.³⁸² As a consequence there is a valid basis for cross-jurisdictional comparisons, provided that appropriate caution is exercised.³⁸³

Drawing on relevant international comparisons, Bukarica and Dallas have identified eight distinct issues or “lessons” that are fundamental to the effective operation of a GFB-based collective bargaining system.³⁸⁴

The identified matters include the central importance of the legal “agent” status accorded to bargaining representatives and the concomitant need for simple and quick recognition processes; the need to place limits on employer direct dealing during collective bargaining; the need for clear rules of conduct for parties during the bargaining process and the desirability of the active involvement of industrial tribunals where bargaining is at an impasse; the need for restorative and effective legal remedies against bad faith conduct; recognition of the particular challenges attending ‘first agreement’ bargaining contexts; and finally and perhaps most significantly – the promotion of a normal expectation that bargaining parties should reach an agreement unless there are genuine reasons based on reasonable grounds not to do so.

Whilst the ACTU believes each of the issues identified requires serious consideration, the continued healthy functioning of a GFB based collective bargaining system relies on the protection and enhancement of three primary objects.

First, the statutory good faith bargaining obligations should be seen as constituting substantive and not merely procedural obligations.³⁸⁵ The underlying principle that should permeate the GFB framework is that the parties to collective bargaining must come to the table with the intention of attaining a mutually satisfactory enterprise agreement. Or to put the same proposition by way of the negative – a party cannot be acting consistently with the GFB obligations if the intention is to simply avoid the making of a collective agreement, regardless of its terms. Whilst the Australian jurisprudence in this area is still developing, there are signs that the substantive character of the GFB obligations is being more widely accepted and applied.³⁸⁶

Second, the articulation of clear rules of conduct is essential to the proper operation of a GFB system. Whilst the matters adumbrated in s228 of the FW Act are crucially important (and provide a good starting point), consideration should also be given to a more detailed or expository statement of desirable bargaining conduct. In New Zealand, the Government has by regulation promulgated a “Code of Good Faith Bargaining” - which has been a feature of New Zealand labour law for some years.³⁸⁷ In Canada, relevant industrial tribunals have sought to flesh out in substantial detail, key GFB issues such as the appropriate degree and type of employer ‘direct communications’ during bargaining and the distinction between legally permitted ‘hard bargaining’ versus the prohibited practice of ‘surface bargaining’. ³⁸⁸ Either approach – that is, the issuing of a Code via the regulation making power in the FW Act, or via more expository decision making by the FW Commission - is available in the Australian context in any consideration of how to improve the implementation of GFB practices.

Third, the involvement of the FW Commission in bargaining disputes should be both pro-active and facilitative of the parties reaching agreement on ‘interest’ issues. The expertise and corporate knowledge contained within the FW Commission make it ideally placed to play a positive role in facilitating enterprise agreements being made.³⁸⁹ This requires the FW Commission to adopt an expansive view of its powers in a conciliation context and to not accept a “hands-off”, neutral umpire approach to bargaining disputes. In appropriate cases the FW Commission should be empowered to initiate a form of supervised negotiation process where parties are assessed to be on a trajectory towards an intractable dispute. Internationally, the active involvement of mediators and conciliators in a collective bargaining system operating within a GFB paradigm is nothing new and is not seen as inconsistent with the ‘voluntarist’ ethos of decentralised collective bargaining.³⁹⁰

However, the apparent systemic failure in the operation of the GFB framework in Australia does not, perhaps with one exception, relate to the content of the GFB obligations - so far as they go - but are exposed at their outer limits when employers simply refuse to countenance entering into a collective agreement. It is at this point, that the operation of the GFB obligations is impeded by the inadequacy of existing mechanisms providing for an arbitration of interest disputes in enterprise bargaining. In other words, the exceedingly remote prospect that an unreasonable and intransigent employer will be subject to third party intervention to impose an arbitrated outcome does nothing to promote the type of behaviour that FW Act objects so clearly aspire to.

The question of a more sensible framework governing access to arbitration of bargaining disputes is dealt with separately later in this paper chapter. However, for present purposes, Dave Noonan, the National Secretary of the CFMEU Construction & General Division captured the essential point we advance when he contrasted the radically different responses to access to arbitration in the disputes involving the 2011 Qantas shutdown and the long-standing fight by employees of bionic ear manufacturer Cochlear to obtain a collective agreement:

“If you are big and ugly enough to engineer a hit on the Australian economy, airline passengers and your own shareholders, then arbitration is an almost certainty.

It's a bit different if you are a Cochlear worker, an AMWU member, a woman of non-English speaking background and you don’t have the industrial muscle to force your employer to bargain in good faith.”³⁹¹

The exception alluded to above, relating to the content of the good faith bargaining requirements, concerns to the requirement to disclose “relevant information (other than confidential or commercially sensitive information) in a timely manner”.³⁹² The breadth of the exemption is considerable and has permitted some rather brazen conduct including failing to disclose job automation and consequent mass redundancies during negotiations and failing to disclose changes to remuneration policy. If one accepts that workers have a material interest in such matters that would affect their decision making in negotiating their conditions, it can hardly be considered “good faith bargaining” to condone non-disclosure. Shareholders of listed companies benefit from an obligation on the company to disclose information that would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of them³⁹³ and there is force in the suggestion that workers’ and their representatives would be more appropriately informed by a materiality test adapted to their circumstances that was not so easily avoided.