The Last Frontier: Workplace relations and the Trade Practices Act
I thank the Institute for Pubic Affairs for the opportunity to speak at today's seminar.
It is not like Ken Phillips to come up with a provocative and challenging topic! "The Last Frontier---Making Industrial Relations Subject to the Trade Practices act' is indeed that.
Provocative and challenging it may be. But it is also an important and appropriate debate to bring to the attention of the public and public policy makers, and of the industrial relations community.
None of us who have responsibility for leadership in the business community on policy should shy away from these debates. The more that we are prepared to openly and objectively discuss and debate ideas and values, the healthier our process of public policy making will be. From good ideas flow good policy, and as Prime Minster Keating once said, good policy is good politics.
That is the underlying rationale that led ACCI and our members last November to release Modern Workplace: Modern Future 2002-2010---our industry initiated policy blueprint for the Australian workplace relations system. It is not that any of us have a monopoly on wisdom, but rather that the industrial relations community has tended to be too defensive, too reactionary and too negative to new policy ideas. The way that during the 1990's the system had to be dragged kicking and screaming to accept a more flexible bargaining structure even after domestic economic, industry and monetary policy was opened is illustrative of this point.
Of course, this does not mean that all new ideas are right, or that all past or existing policy is wrong. Each issue should be examined on its merits. And as I mentioned to the Industrial Relations Society of New South Wales last weekend, these issues are too important just to leave all of the debate to governments and the politicians. As stakeholders we must participate.
So then, what of today's provocative and challenging topic? I have been specifically asked to speak to you on the implications beyond the building industry of the proposed Australian Building and Construction Commission (ABCC), as recommended by the Cole Royal Commission. As a by-line to my presentation, I am asked to comment on what would happen (quote) 'if the line between legal labour price fixing negotiations and other illegal price fixing activities were to become blurred, and should business need the protection of industrial relations law to conduct human resources management'.
Answering these questions in the context of today's seminar raises the important question, should industrial relations be subject to the Trade Practices Act (TPA)? Where do they intersect, where should they intersect and why?
I propose to structure my remarks this way:
I will comment on the current relationship between industrial relations law and trade practices law. I will express some views on whether that relationship should remain as it is. I will then comment on the ABCC and the Cole Royal Commission recommendations. Finally I will comment on any broader implications they have for industry.
Industrial Law and Trade Practices Law
What is the relationship between industrial law and trade practices law? To use a family law analogy, they are neither married, nor divorced. To me, they cohabite sometimes under the same roof but for most of the time they tend to live separately and apart.
The suggestion in the topic of this seminar that industrial law and human resource management needs to be brought into trade practices law implies that this is not already the case.
That is only in part correct. Under current law, for some purposes industrial and employment matters already fall within the framework of the TPA. For other purposes they do not. The question that should be posed really is, should the TPA apply more extensively to industrial and employment matters, and if so where should the line be drawn?
The critical provision of the TPA raised in this debate is the exemption provided for in s51(2)(a).
This is not an exemption for all industrial matters from the whole of the TPA. It is only an exemption from part IV prohibiting restrictive trade practices, and even then it is not an exemption from sections 45D, DA, DB, E, EA or 48. This is crucial---it is not an exemption from the secondary boycott laws, nor from laws prohibiting anti-competitive conduct in the supply or acquisition of goods or services, nor from laws relating to resale price maintenance. Nor is it an exemption from part IVA dealing with unconscionable conduct. Nor is it an exemption from the consumer protection provisions in part V.
This means that on the face of it there is already much that the TPA can do which impacts on industrial matters.
Over many years ACCI has been one of the leading proponents in the community arguing that secondary boycott laws must remain in the TPA. The Modern Workplace: Modern Future 2002-2010 Blueprint makes our position clear: "Secondary action should be prohibited through the TPA ... the restoration of these secondary boycott remedies has been a very effective contribution to historically low levels of industrial disputation since the commencement of the Workplace Relations Act 1996" (Blueprint 6.3)
By and large, our campaign has succeeded. They were inserted there by the Fraser government. For the life of the Hawke government they remained in the TPA. The Keating government took them out between 1993-1996 as one of the payoffs to the union movement for the introduction of workplace bargaining. They were rightly reinstated in 1996. The current federal government intends to keep them there. The federal Opposition took a policy to the last two elections to take them out, and put them into industrial law---thereby weakening their effect.
The framework for this debate is very broad. Rather than just debate whether industrial law should be more exposed to trade practices law as we are today, we need to address the prospect of policy being moved back the other way and secondary boycott disputes being regulated solely through the industrial system and the more benign processes of conciliation and arbitration. This would be a retrograde step to say the least.
Would it succeed? So far the Senate has displayed a worrying double standard. It is happy for the Australian Competition and Consumer Commission (ACCC) to be given powers to take class actions on behalf of small business against larger businesses for breaches of part IV, but is refusing legislation (twice in fact, now a double dissolution trigger) which gives small business access to the same enforcement rights of the ACCC when taking actions against large unions under part IV. Small business should not be any more vulnerable to unlawful conduct by big unions than it is to unlawful conduct by larger competitors.
ACCI supports the pro small business legislation that has been rejected by the Senate and urges its reconsideration in the interests of those businesses exposed to secondary union boycotts and which need the resources of the ACCC to act on their behalf as a group.
The difficulty in getting this Bill through the Senate illustrates the magnitude of the task for those who argue that the TPA should extend further into industrial matters. If the Senate wont allow parallel enforcement rights in areas where there is already an overlap between industrial and trade practices policy, then how will the Senate be persuaded to allow additional rights?
When it comes to the Cole recommendations, the Senate will have a particular challenge. By all means it should discharge its responsibilities as a house of review. Above all though it must not choose the low road of political expediency and obstructionism over good practical public policy. The fact that some industrial legislation has passed with amendments in the last couple of years does give us some cause for optimism. The 'just say no' approach on industrial matters seems to be receding in favour of a more intelligent examination of issues on their merits.
Secondary boycott laws protect innocent small businesses from strikes involving third parties. But other aspects of the TPA which already impact on the employment relationship are not as benign to employers. Some of them open up new causes of action against employers. In the hands of adventurous and litigious lawyers and activist judges, the consumer protection provisions of the TPA could be used to add to the regulation of employment. Already we have seen the Federal Court apply the false and misleading conduct provisions of the Act in such a way as to bind employers to promises or claims made to prospective employees during employment interviews, even where they are made by a temporary agent of the employer such as a recruitment agency.
And as one of the persons involved with the unconscionable conduct provisions of part 4A when I worked in government, it is also possible that these provisions could over time be interpreted or extended into aspects of industrial law---including contractor/employer or contractor/union dealings.
The terms of the exemption in 51(2)(a) also qualifies its application. The more qualified its application, the more that industrial matters can already be governed by the competition provisions of the Act.
Based on court decisions s51(2)(a) does not (and I quote) "remove altogether from the TPA any acts done or any contract, agreement or arrangement that may in any way relate to an employment contract. Rather the statutory protection is directed at agreements or arrangements or acts done in relation to them but only to the extent that those agreements or arrangements or provisions in them relate to employee conditions" (Hill J, 1991 Adamson's Case). And on appeal, "if one thing about the paragraph is clear, it is that the exclusion from the operation of s45 which it confers is limited to conduct relating to remuneration, conditions of employment and hours of work or working conditions of employees." (Wilcox J, 1991).
As a consequence, it is quite possible that even now any conduct or agreement which is not relating to remuneration, conditions of employment, hours of work or working conditions---or which is collateral to them---is already capable of being put under the trade practices microscope to see if it breaches prohibitions on anti competitive conduct.
This is significant---because we know that many agreements in the industrial world---both those that are certified and those that are not certified and not intended to be certified---contain some provisions that go beyond these exempted subject matters. For example some agreements do specify that employers and employees shall use goods made by union labour, or goods supplied by one supplier, or that union membership shall be compelled or encouraged, or that payments will be made to particular third parties and the like.
It will be very interesting to see how the High Court as currently constituted deals with this question of the limits of the existing 51(2)(a), if it gets to adjudicate on the matter. Heydon J, the most recently appointed High Court justice, is an expert in the field of trade practices law, and his addition to the bench will give the High Court additional expertise on these matters.
Having made the point then that the TPA does already include quite considerable scope for entry into some industrial matters (some good for employers, some not so good), why then don't we already see more activity and enforcement?
In part I think that the industrial relations culture has in itself deterred non industrial and non industrial authorities from getting involved in industrial matters even where they have a legal basis for doing so. Slowly this is changing. Some employers, some contractors and some employer associations are now asking their lawyers, their advisers and ultimately the ACCC and the courts if some of the demands that unions are making on them or if conduct by some union officials or competitors is in breach of existing provisions of the TPA.
Only by taking initiatives like these will we get a clearer view of just how far the exclusion in 51(2)(a) goes. One ACCI member, the National Electrical Contractors Association, is at the forefront of some of these matters and I am very keen to hear Gerard Boyce's remarks this morning. And the ACCC itself does take some action---last week the ACCC indicated that action was continuing under the secondary boycott provisions of the TPA against the AMWU, AWU and CEPU with respect to alleged secondary boycott action involving the Patricia Baleen gas plant in Gippsland Victoria last year.
And perhaps, in addition to an industrial audience today we should have some representatives from the AFL, ACB or the NRL here. Because, when you hear it said that salary cap arrangements and player payment caps are all vulnerable to the TPA then this is why---51(2)(a) is not as broad as some people may think. Maybe it will take a professional sportsman to put a cat amongst the pigeons by one day challenging the rules under which sporting leagues operate in a way that forces the industrial relations community and the parliament to grapple with the issue once and for all. Frankly, the strongest opponent of bringing trade practices law into all aspects of employment and remuneration arrangements may turn out to be bodies like the AFL rather than the traditional industrial relations community.
Altering the relationship between trade practices law and industrial relations
What then are the consequences of altering the balance of 51(2)(a) as it currently applies?
It is argued by some that the existing s51(2)(a) allows a wide range of anti competitive conduct (including fixing the price of labour) to be engaged in under the cover of an employment or industrial matter, thereby insulating the industrial system and the labour market from competition laws that apply to all other forms of commercial relationship.
On the other hand, it is argued that the exclusion is necessary because employment and labour services are not simply another commodity, and that an industrial system that separately regulates wages and employment standards and confers rights to collectively organise necessarily conflicts with commercial competition law unless the exemption exists.
As with so much of our industrial debate, generalisations and sloganeering on both sides does it a disservice.
There is merit in elements of both of these arguments, but the policy absolutes which both poles of the debate advocate cannot be sustained.
In this debate, the public interest lies somewhere in the middle.
It is true that s51(2)(a) has not been amended for many years, despite the industrial relations system changing and enterprise bargaining in individual companies increasingly regulating wages and employment conditions. But it is also true that we still have a very active compulsory conciliation and arbitration system imposing standards of wages and conditions collectively across industries and employers. Given this, it could be argued that there is a role for the TPA and anti competition law in industrial matters, perhaps a clearer role, but the role should still be within defined boundaries whilst the industrial system remains as it is.
It should not be the case that an industrial exclusion for the legitimate policy purpose of allowing for an orderly system of minimum standards and collective bargaining to exist, should be misused by allowing the inclusion in agreements (particularly unregistered agreements) anti competitive provisions that undermine the public interest, or economic efficiency or even the interests of parties affected by the agreement.
Equally, the exclusion should not be so limited that legitimate collective bargaining and legitimate membership of collective organisations and discussions and representation through collective organisations on industrial matters is undermined.
Of course, I declare an interest. ACCI is a collective organisation, the peak council of employer bodies. Our member employer bodies are themselves collective organisations. But let me not be defensive about that interest---rather I say that this interest is absolutely valid and to the public good.
The complete removal of the exclusion in 51(2)(a) may prevent what is wholly justified and indeed necessary---the capacity of employers to meet together and determine policy, strategy and representation over employment matters that have impacts across industry and across employers or that are imposed by governments, parliaments, unions or industrial tribunals across industry or across employers. And the same applies to unions.
The right to freedom of association, or non-association, is a basic right, and is consistent with Australia's international obligations. It extends to employers and not simply employees. The right to associate can only be effective if it carries with it the right to discuss and determine policy and implement that policy. And the right to collectively associate also carries with it the right to collectively bargain---but not to abuse bargaining rights.
There is a sign up on the scoreboard at my much loved football club in Adelaide---'No Clubs: No Football'. It is a sign of the times because my club, the North Adelaide Football Club is in a battle for survival---a battle I do not want it to lose. Whilst that sign 'No Clubs No Football' is there as a rallying call for survival, it is instructive about the nature of the league. An effective league is not just made up of players. Your need teams and clubs, not just players. Teams are collectives, not just individuals. More broadly, our society is a collective, not just made up of individuals.
The individual freedom we all have and cherish, in an ordered society is necessarily qualified by its relationship to the collective.
The industrial system should be no different. An industrial system that is all about collectives and not about individual rights is deficient, and vice versa. The high water mark of wiping out the exemption in 51(2)(a) would mean wiping out collectives, and is therefore not an appropriate response in the name of competition. Collectives---whether unions or employer bodies---should be judged on what they do and say and achieve, not what they are.
Next Monday ACCI goes down to the Australian Industrial Relations Commission and argues on behalf of employer bodies and employers generally that ACTU redundancy claims in a national test case should not be granted. As employers we have met, we have discussed, we have developed a strategy, we have made our own applications to the Commission, we have mobilised our forces. Does anyone seriously say that this type of collective representation by employers in not valid, is not in the interests of industry, is not in the public interest? Of course it is.
Whilst we have a system in Australia that allows unions, governments, parliaments or industrial tribunals to impose employment obligations on employers collectively, then there must be a right to collective action by employers. If governments or arms of the state or third parties elect to lawfully regulate the price of labour in this way then the freedom to compete for labour is qualified and hence the prohibitions on anti competitive conduct in the TPA must also be qualified.
These are not novel propositions. The National Competition Council, a body which embraces the principle of extending competition more broadly across the economy, examined these issues in 1999. It decided, on balance, that no case had been made at that time for the removal or variation to the exemption in s51(2)(a). It concluded that the public interest did warrant its continuation, for reasons similar to those which I have outlined. Remember it was the National Competition Commission saying this---a body without a vested interest in the industrial relations system, not the Australian Industrial Relations Commission.
And it is not just employment matters where appropriate qualifications are justified in the pubic interest from some of the competition principles of the TPA. The TPA already has a range of qualifications which recognise and permit collective conduct in the public interest or for the public benefit.
Just recently a major inquiry was conducted into aspects of the TPA as it relates to conduct between businesses---the Dawson Review---headed by former High Court justice Sir Daryl Dawson. One of the recommendations of that review was that small businesses should have the right to bargain collectively on commercial matters of less than $3 million in value, and in doing so not be in breach of the competition provisions of the TPA. This is a good recommendation and one that ACCI supports. It is relevant to our thinking today. We cannot on the one hand say that collective arrangements on industrial matters offend the competition principles of the Act and should be subject to all of the prohibitions of the Act, whilst at the same time supporting a seriously developed recommendation that rights to collective bargaining on other commercial matters should be extended and the operation of the competition provisions of the Act thereby narrowed.
Rather, the appropriate response is to properly define the boundaries of 51(2)(a). The Cole Royal Commission, and the discussion papers that accompanied it do raise proper, legitimate and timely matters for consideration---not about the use of the industrial exemption to avoid competition but about the misuse of the exemption to avoid competition. If the government and the parliament examined the appropriate limits of 51(2)(a), the focus should be on removing scope for abuses and unintended manipulation of the exemption that have no public benefit---not remove it per se. Throughout this debate policy makers must be careful not to overplay one principle in support of competition at the expense of the other equally valid principle in support of collective association.
Cole Royal Commission
Where then does that leave us with the Cole Royal Commission recommendations and the ABCC?
ACCI supports the Royal Commission and the proposed ABCC.
In the six weeks following the release of the Royal Commissioner's report we spent many hours examining the report and have already developed a full submission in response to each of the 212 recommendations.
Our response supports or supports with modifications 194 of the 212 recommendations. I have copies with me of the ACCI response and will leave some of those copies here for attendees to take with them.
The Royal Commission did not recommend the removal of the 51(2)(a) generally, or even for the building industry. However, a discussion paper it issued examined these matters and is a very useful resource.
Rather, the Royal Commission recommended the creation of the ABCC, and a specific Act of parliament to accompany many proposed new industry specific legal obligations.
At the end of the day the ABCC, as it is proposed, will not be a full substitute for the ACCC even with respect to the building and construction industry. The ABCC will sit alongside and between both the ACCC and the AIRC. Getting the right relationship---both at law and in practice---between these three bodies is one of the challenges when implementing the recommendations for the government, the parliament and ultimately the industry. Unless clear rights and responsibilities are spelt out---and the recommendations go a long way to making that happen---then the tension between the industrial system and the trade practices system could frustrate workplace reform in the sector.
The findings of the Royal Commission seem to justify a more rigorous and tighter boundary around 51(2)(a) in the building and construction industry. As I said earlier, it is abuses and misuses of the industrial exemption that should be the focus of any review of s51(2)(a). The findings of the Royal Commission concerning pattern bargaining, concerning collusive dealing, concerning coercion in agreement making, concerning union agreements mandated through tendering, concerning coercion of sub contractors, concerning exclusion of contractors from certain sites, concerning the control over the supply of labour---all of these point to the conclusion that in the context of the building and construction industry the exclusion of all industrial matters from trade practices law has been misused in a way that may not properly serve the public interest. But again, that is no basis for undermining the legitimate and lawful activities of collective bodies even in that sector.
It is on this basis that ACCI has supported, with some qualifications, the recommendations the Royal Commission on secondary boycotts, trade practices, pattern bargaining and industrial action.
Finally then, are there broader implications for industry from these trade practices recommendations of the Cole Royal Commission?
For industries, employers or unions that engage in conduct similar to parts of the building industry, yes; but generally speaking, no. The trade practices recommendations of the Royal Commission flow from and are a logical response to the findings of fact about the building and construction industry---or parts of it, to be more precise. They should be examined by the parliament and the government on that basis. The more general debate about 51(2)(a) and the relationship between competition law in the TPA and industrial relations activity in their industries---as important and valid as it is---should be separately conducted.
One issue that must be grappled with is that even if it is desirable for the trade practices system to move more directly into the employment arena, what does this mean for the litigious nature of employment? Many employers already believe that the law is too complex, that exercising rights are too expensive and difficult and that legal process can use technicalities to override common sense. All of these concerns would need to be addressed by policy makers if the purpose of such a change is not to be rendered counterproductive.
ACCI is happy to participate in that debate and in conjunction with our members to develop policy in relation to these issues. From an ACCI point of view, the views I have expressed today are preliminary. The Institute has contributed to that debate and to our own consideration of the issues by having the foresight to convene this seminar, and I congratulate the organisers on that.