Publications
The Last Frontier: Trade Practices Limitations
OCCASIONAL PAPER
Introduction
John Trew has already spoken to you about his perceptions of the interface between trade practices law and industrial relations law.
I have been asked to talk about the limitations in the Trade Practices Act which often make other remedies more effective for employers than Trade Practices Act remedies. I have also been asked to talk about possible amendments which might make the Trade Practices Act more effective.
I thought I would start by identifying limitations in the Trade Practices Act, which also inherently involves looking at the overlaps between the Trade Practices Act and industrial relations law which John Trew has already referred to. However, I do have my own perceptions on these issues and will try not to repeat too much of what John Trew has said.
Philosophical underpinnings
One always needs to begin an analysis of the interaction between trade practices law and industrial relations law with the observation that most industrial relations laws are basically anti-competitive. Unions are inherently operate in restraint of trade (see UK cases of Walsby v Anley (1861) and Hornby v Close (1867)). They seek to create monopolies of labour and aim to prevent competition in labour markets.
Historically, unions have sought and achieved agreements or legislative regimes which support essentially uniform rates and conditions amongst comparable employees working in an industry.
Labour laws which protect unions from the common law restraint of trade doctrines (such as the Trade Union Acts and the registration provisions in the Workplace Relations Act) are inherently anti-competitive.[1] This is because they give unions the springboard to achieve, by the lawful exertion of collective pressure, industrial settlements such as industrial awards which provide a level playing field in labour markets and between competing firms.
The principal labour laws which go the other way and which promote a degree of competition in labour markets are the Trade Practices Act itself and of course enterprise bargaining laws. I have always been an advocate of the use of enterprise bargaining by firms to gain competitive advantage over other firms. I have, for instance, always been of the belief that industrial relations advisers such as the Clayton Utz Industrial Relations Team should not act for more than one significant player in an industry. So, for instance, for years we acted for Ansett but would not act for Qantas. We now act for Virgin but wont act for Qantas. We act for Woolworths but will not act for Coles in the industrial relations arena. Companies that are not using enterprise bargaining to maximise competitive advantage are, I believe, selling their shareholders short.
However, as I shall show, even the enterprise bargaining laws contain some elements which enhance anti-competitiveness. At least in terms of conferring protection from some of the provisions of the Trade Practices Act.
Limitations in trade practices laws which limit labour market competition
Having made those introductory remarks, I turn now to examine some of the limitations in trade practices laws which reduce labour market competition or which may make alternate remedies in relation to industrial action by unions more attractive than Trade Practices Act remedies.
Defences to section 45D of the Trade Practices Act
I will start with the lynchpin in the Trade Practices Act which is section 45D. The elements of section 45D are well known. They prohibit boycott conduct, a good example of which is noted in volume 2 of the Cole Royal Commission Report.
If a union organiser (the first person in section 45D), in concert with employees (the second persons in section 45D) of a sub-contractor (who is the third person in section 45D) working on a particular building site engage in conduct action such as a strike or ban that hinders or prevents the sub-contractor from supplying services to the head contractor (who is the fourth person in section 45D) with intent to and in a way likely to cause substantial damage to the head contractor, then the union organiser and the employees will contravene section 45D. (Refer page 93 of volume 2.)
Also, under section 45DC of the Trade Practices Act, if two or more persons (who we call the participants), each of whom is a member or officer of the same union, engage in conduct in concert with one another, then unless the union proves otherwise, the union is taken for the purposes of section 45D to engage in that conduct in concert with the participants and to have engaged in that conduct for the purposes for which the participants engaged in it. It is a kind of deeming provision or rebuttable presumption that if 2 union officials do something then the union did it too.
But the problem with section 45D is that it contains a defence which, although stated narrowly, is open to somewhat wide interpretations.
The Defence
The defence is contained in section 45DD. This section says that assuming section 45D otherwise applies, if the dominant purpose of engaging in the relevant conduct for instance a work ban was substantially related to remuneration, conditions of employment, hours of work or employment conditions of the person who engaged in the conduct or of another person employed by an employer of that person, then there is no breach of section 45D.
A good example is if employees of a labour hire company who work at the site of a host company take strike action in support of enterprise bargaining claims against their employer and decide to picket their workplace, which is the premises of the host company. No doubt the dominant purpose of the employees who picket the gate is to cause substantial loss and damage to the business of the host company (by dissuading deliveries to the premises or shipment of goods out of the premises) to put pressure on the host company so that it puts pressure on the Labour Hire company. But section 45DD seems to suggest that because the employees engaged in the picket are doing so in relation to their own terms and conditions of employment, that is to support their enterprise bargaining demands, then they have a defence. Under section 45DD(2), even if organisers or other union officials join the picket, the defence still applies.
The scope of section 45D in an industrial context is also made somewhat uncertain by competing and inconsistent decisions of Federal Court judges. This is "helped" by the use of language such as "dominant purpose". Remember, the defence applies if the dominant purpose is to achieve better wages and conditions for themselves. So for instance in Wribass Pty Ltd v Swallow & AMIEU (1979), Justice Smithers said that the dominant purpose for the purposes of section 45D means essentially the immediate purpose rather than the wider and ultimate purpose. In that case, he said the immediate purpose of the ban (a ban on supply of packaged meat) was to prevent the cessation of Saturday morning trading in fresh meat by the plaintiff even though the wider and ultimate purpose was to maintain work-free Saturday mornings. In contrast, Justice Gray in Epitoma Pty Ltd v AMIEU (1984) took the view that the wider or ultimate purpose would be the dominant purpose in most industrial situations. So in our situation the immediate purpose is to interfere with our hosts business, but the wider purpose is to get better enterprise bargaining outcomes from our employer, the Labour Hire company---which is arguably within the defence.
So uncertainty about the scope of section 45D and the breadth of the defence have lead most industrial practitioners in Australia in recent years to favour the use of what are called the industrial torts. These are predominantly the torts of interference with contractual relations, conspiracy to injure and intimidation. The industrial torts go back a long way under common law but obtained greatest early prominence in Australia in the Dollar Sweets case which you will recall is the case in which Peter Costello was junior to Alan Goldberg (now Mr Justice Goldberg) and successfully obtained an injunction against a union, relying on the tort of interference with contractual relations.
As Creighton and Stewart rightly point out in their leading text on Labour Law in Australia, section 45D consists of little more than a statutory re-enactment of pre-existing tort liability. In particular, the indirect form of the tort of interference with contractual relations. A typical example of the tort of interference with contractual relations is where a union official induces an interference with contractual relations between an employer and its customers by unlawful means. The unlawful means being the inducement of the employees to breach their contracts of employment. There are very few circumstances in which a breach of section 45D of the Trade Practices Act will not also amount to the commission of one of the industrial torts and this without the uncertainties of the statutory defences to section 45D.
The main limitation of the use of the industrial torts is section 166A of the Workplace Relations Act which requires the employer to obtain a certificate from the Australian Industrial Relations Commission prior to proceeding for damages. But in cases which I am proud to have pioneered (Ansett against the Flight Attendants Association), an employer can, in many cases, proceed directly to court for an injunction relying on the industrial torts without the need for a Section 166A Certificate. It needs also to be remembered that the Commission must grant a Section 166A Certificate within 72 hours of application. In many industries, this is not a problem. Exceptions are, for instance in the airline industry (where the airline stops immediately).
Employers have also tendered to use injunctive remedies under the Workplace Relations Act (often in conjunction with the industrial torts by using the accrued jurisdiction of the Federal Court). These remedies include section 170NC and section 170MN of the Workplace Relations Act. Section 170NC is the no coercion provision and section 170MN is the provision that says that whilst an agreement is in force (ie: prior to its nominal expiry date) a union is not able to take protected industrial action. Of course the Federal Court in the Emwest case has taken a different view and that case is now on appeal. But at least up until the Emwest decision section 170MN operated as a strong brake on union industrial action prior to the nominal expiry date of certified agreements.
One reason why employers have tendered to use section 170NC is that it is extremely simple in its drafting and operation and the Courts have shown a preparedness to grant injunctions to enforce it.
On the other hand one of the advantages that section 45D of the Trade Practices Act has over the common law torts is that there is potential for substantial penalties. Remembering that under the Workplace Relations Act penalties are generally limited to $10,000 for each union breach. In the most recent edition of Workforce (16 May 2003), it has been reported that an ACCC investigation into breaches of the Trade Practices Act involving the AMWU, AWU and ETU at the Patricia Balleen gas plant in Gippsland has resulted in agreement by the unions to pay $300,000 to OMV (which is the parent of Patricia Balleen). Assuming that this report is correct, I can only assume that it was on the basis that the picket established by the unions outside the OMV plant would not have attracted the defences under s.45D. This is because ostensibly the picket was for the purpose of putting pressure on OMV to require its contractor, Upstream Petroleum, to enter into a certified agreement with the unions, rather than use the Australian Workplace Agreements which its workforce had been engaged on.
Contracts arrangements or understandings that restrict dealings or affect competition
I will move now to the restrictive trade practices provisions.
Section 45(2) of the Trade Practices Act prohibits a corporation from making a contract or arrangement or arriving at an understanding if the proposed contract arrangement or understanding contains an exclusionary provision or has the purpose or would be likely to have the effect of substantially lessening competition. This provision has, I think, been under-utilised in industrial relations circumstances, but has reasonably wide applications. If we look at a hypothetical example of a Port Authority which wants to ensure that stevedoring contractors it engages essentially apply the same terms and conditions throughout the Port. Suppose the Port Authority attaches a condition to a licence to operate within the Port that the stevedoring company must enter into a multi-employer certified agreement under the Workplace Relations Act with other stevedoring companies who may operate at the Port. The ostensible purpose of the requirement is to minimise industrial disputation and therefore to minimise disruption of services within the Port. In other words, the ostensible purpose is not to substantially lessen competition.
However, it is arguable that such a licence condition would have the effect of substantially lessening competition because by imposing the licence restriction, stevedores who have their own certified agreement arrangements may not be able to comply with the condition. This would lessen competition.
But the fact that the issue is uncertain suggests that provisions such as the multi-employer agreement provisions of the Workplace Relations Act may be able to be used to lessen the effect of the Trade Practices Act.
The employment terms and conditions exception to the restrictive trade practices provisions
Nearly all of the restrictive trade practices provisions of the Trade Practices Act, apart from section 45D, do not apply where the exemption in section 51(2) applies. Under this exemption, any act done by employers or employees in relation to the making of a contract or arrangement or understanding to the extent that the contract arrangement or understanding relates to the remuneration, conditions of employment, hours of work or working conditions of employees, is exempt.
So for instance if employers get together and come to an understanding that they will not pay their employees more than a certain amount or concede to union demands for a particular condition, then they are exempt from the restrictive trade practices provisions, including section 45.
It is interesting to note the submissions made to the Cole Royal Commission in relation to this provision. For instance at paragraph 26, page 108 of volume 17, the Air Conditioning and Mechanical Contractors Association of Victoria Limited said:
"Our view is that if it were deemed to be anti-competitive for employers to co-operate to either determine a negotiation position or negotiate collectively, then greater power will be transmitted to the unions. Under this scenario, employers would be unable to talk to each other on these matters, but the union on the other hand would be involved in every negotiation. This would significantly shift the bargaining position in favour of the union."
The National Competition Council has supported the retention of section 51(2) which it describes as fulfilling the objective of excising the labour market from goods and services markets for the purposes of applying competition law.
The NCC says that by exempting both employers and employees from the application of Part 4 of the Trade Practices Act, the section allows employers and employees to collectively bargain on employment agreements as recognised by Australia's industrial relations framework.
It may be observed though, that the defence essentially permits forms of pattern bargaining by employers and if one takes the view that pattern bargaining should not be allowed, then perhaps the defence should be removed or at least aligned with pattern bargaining provisions in the Workplace Relations Act.
Using certified agreements to defeat the Trade Practices Act
One issue which is essentially unresolved, at least though court decisions, is the extent to which certified agreements can be used to defeat provisions such as section 45 of the Trade Practices Act. By way of example, suppose a head contractor reaches agreement with a union on terms for a proposed certified agreement which requires each sub-contractor to enter into an agreement made under the Workplace Relations Act in terms substantially the same as the head agreement (which we might call the "project agreement"). Assume for present purposes that the project agreement has been certified by the Australian Industrial Relations Commission and does not specify that the sub-contractors "mirror" agreement must be either a union certified agreement, a non-union certified agreement or an Australian workplace agreement. It merely prescribes the content. So there is no breach of the Workplace Relations Act freedom of association laws.
The effect of the project agreement would be that every employer wishing to operate on the site must have a federal agreement in the same terms as the project agreement. No doubt this will lead to more stable industrial relations on the project and may prevent the taking of protected industrial action during the nominal life of the relevant agreements.
But do the parties to the project agreement operate in breach of section 45 of the Trade Practices Act by substantially lessening competition?
Although this kind of arrangement, which was applied at Federation Square in Melbourne, came under intense scrutiny in the Cole Royal Commission, it seems to have escaped substantive criticism, on the basis that it is not unlawful. Possibly because of the operation of section 51(2) of the Trade Practices Act operates as a defence.
The use of certified agreements in this context is a hot topic at the moment. For instance, what if a certified agreement incorporates the terms of the VBIA which then requires the payment of fixed site allowances. And suppose that this is in the context of pattern bargaining so that all contractors on the job are therefore required to comply with the terms of the VBIA through their certified agreement. Although this may substantially reduce competition, a certified agreement, once it has been made by the Commission, ceases to amount to a contract, arrangement or understanding and so section 45 of the Trade Practices Act ceases to apply. There is, in effect, statutory protection in the form of certification, for the arrangement. During the agreement making phase section 51(2) may also operate as a defence.
Again, in the most recent issue of Workforce, there is an article which suggests that the ACCC is trying to prevent the certification of hundreds of Victorian electrical industry agreements which impose a requirement that Australian-made and manufactured electrical electronic and communications equipment be used by an employer party to the certified agreement. Following on from the Electrolux case (which has now gone to the High Court) it would seem that such provisions are valid certified agreement provisions.
The use of the award system
If one turns then to the award system, it is clear that employers have, ever since the award system began, used the award to reduce competition. Some years ago I was told that it was a practise of some employer associations to quietly advise the unions when employers resigned from Employer Association, so that the union could rope the resigning employers into the relevant award. I am not suggesting that this practice continues today. But the fact that it might have occurred shows how the award system has been used to reduce competition in labour markets.
I mentioned earlier multi-employer certified agreements. These also can be used to reduce competition in labour markets and I find it difficult to justify them in the context of the enterprise bargaining system.
Transmission of business
If I conclude by making some observations about the vexed issue of transmission of business.
In the context of certified agreements in particular, I think that the transmission of business legislation is a considerable barrier to competition.
Some of you may not be familiar with the concept of transmission of business and so I will briefly tell you what it is all about.
Under the Workplace Relations Act if an employer carries on a business and is bound by an award or is party to a certified agreement, and the business of the employer or part of the business is the subject of a "succession, transmission or assignment" to another employer, then the subsequent employer becomes bound by the award or certified agreement of the seller.
Unfortunately, because of some recent court decisions the concept of succession, transmission or assignment has become so stretched that an employer can be found to be a successor to a business even though it has no commercial relationship whatsoever with the first business. The apparent idea behind the provisions is to protect employees rights under the relevant award or certified agreement when ownership of a business changes. One of the problems is that apparently transmission of business can occur even though none of the employees transfer across.
It is the ultimate protection against competition in labour markets. Take for example an employer which has, through a judicious and strategic approach to enterprise bargaining, negotiated a highly competitive certified agreement. But one which has satisfied the Commission's requirements in relation to fairness and the no disadvantage test. The employer then tries to expand and acquires a business from a competitor which has been slothful in its enterprise bargaining negotiations and has a basket case enterprise agreement. Assume the slothful employer as part of the transaction retrenches all of its employees and pays them generous redundancy payments and none of those employees become employers of our competitive and strategic employer.
And yet, the astounding result of the Workplace Relations Act is that our enterprising employer becomes bound by all of the provisions in the seller's certified agreement. Indeed, employees can cherry pick the best of both agreements.
You might say, why would the enterprising employer even consider the transaction. The answer is many walk away once they realise what could happen to them.
So if I could conclude by making one loud call for legislative reform. That is to amend the Workplace Relations Act so that a certified agreement will not transmit from one employer to another employer which already has its own certified agreement in place and which is capable of covering the work being transmitted. This would open up competition in the labour market more effectively than any amendment to the Trade Practices Act that I can think of.
1. Section 4 of the Trades Union Act 1958 (Vic) says "the purpose of any trade union shall not by reason merely that they are in restraint of trade be unlawful so as to render void or voidable any agreement or trust".