Review of the operation of the Fair Work Act 2009: Submission of the CFMEU Mining & Energy Division 17 February 2012 1. General comments: 1.1 No institution, group, association or individual making a submission to this Review can claim to impartially represent the “national interest”. It will be the case that any party making a submission to the Review will invariably motivated by some degree of self-interest, even if not overtly articulated. This is because of the inherent nature of labour law, which seeks to mediate, if somewhat imperfectly, the competing interests of employers and employees. The Fair Work Act 2009 (‘FW Act’) is just such a law. It regulates both individual rights and interests, as well the conduct of relationships built on collective bargaining. 1.2 This statutory review of the FW Act occurs against the background of what we submit is a contrived and overblown media campaign designed to undermine confidence in the operation of the Act. The campaign has largely manifested in the extensive media coverage given to the issue in the national newspapers The Australian and the Australian Financial Review. This campaign has as its central motif an alleged direct linkage between operation of the FW Act and Australia’s relatively poor recent performance on productivity.1 The articles and commentary See for example, Maher, Sid and Creighton, Adam “Business urges tax and industrial relations reform” The Australian 11 February 2012; Sloan, Judith “Fix Fair Work and still be fair” The Australian 6 July 2012; Kerr, Christian ‘Fair Work hurting productivity” The Australian 29 August 2011; Kerr, Christian “”IR regime sees bosses struggling to ‘hold the line’ on productivity” 26 September 2011; The Australian 1 1 on the issue are mostly clothed in the rhetoric of the “national interest”, but upon close analysis are in reality special interest pleadings that seek a fundamental shift in the balance contained in the FW Act towards big business. 1.3 In making this submission to the Review, we happily state our self-interest: we are a union whose fundamental character has been formed around the pursuit of collective agreements. Our principal objectives are to secure the best possible outcomes for our members in the areas of safety, remuneration and job security through collective negotiations with our employers. Our position is naturally one of seeking to preserve, and where possible enhance, those provisions of the FW Act concerned with the facilitation of collective bargaining. 1.4 Accordingly, our submission will concentrate on three areas relevant to this priority: (i) The good faith bargaining provisions of the FW Act (Part 2-4). (ii) The provisions of the FW Act dealing with industrial action (Part 3-3). Knott, Stephen “Back to the bad old union days” The Australian 17 February 2012; Editorial “Nation cannot compete with this IR system” AFR 2 February 2012; Ludeke, Paul “Union power in Fair Work Act unequal” AFR 14 February 2012; Bassanese, David “IR legislation blunting competitiveness” AFR 15 February 2012; Hanke, Ian “Fair work unfair for employers” AFR 19 January 2012; “Skulley, Mark “Reduce power of the unions, urges IPA” AFR 16 February 2012; Nickless, Rachel “Partners criticise Fair Work Act” AFR 17 February 2012. However, the asserted linkage between productivity and the FW Act has been rejected or downplayed by the Commonwealth Government and economic and media commentators. See for example, Gillard, Julia. "Building a New Australian Economy Together": Speech to the Australia-Israel Chamber of Commerce Lunch, Melbourne 1 February 2012; Committee for Economic Development in Australia “ACTU and Peter Reith debate IR impact on productivity” CEDA News http://ceda.com.au/news-articles/2011/12/01/vic_productivity; Gittins, R, ‘Productivity level weak, but that’s not all bad” The Sydney Morning Herald 5 September 2011; Peetz D, “Workplace ‘reform’ won’t cure our ailing productivity” The Conversation 8 September 2011, http://theconversation.edu.au/workplace-reform-wont-cure-our-ailing-productivity-3093; Tingle, Laura, Daley, Gemma and Dodson, Louise “ALP Blames ideological attack” AFR 15 February 2012 Hancock, Keith “IR offers no panacea for productivity” AFR 16 February 2012. 2 (iii) The provisions of the FW Act dealing with dispute resolution, particularly, the place of arbitration in both a bargaining and post-bargaining context (Part 2-5 and Part 6-2). 2. The good faith bargaining provisions of the FW Act. 2.1 The CFMEU Mining & Energy Division welcomes the promulgation of the good faith bargaining (‘GFB’) provisions of the FW Act. We believe that the GFB provisions have generally had a positive impact on industrial behaviour and have the potential – if 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. 2.2 The good faith bargaining provisions of the FW Act are found in Division 8, Part 2-4. In 2011, the CFMEU Mining & Energy Division published a book entitled Promoting Good Faith Bargaining under Australia’s Fair Work Act 2009. The book analysed the GFB provisions contained in the FW Act, their intended purpose, similarity to provisions appearing in New Zealand and Canadian labour law and application in practice by Fair Work Australia. An electronic copy of the book is annexed to this submission for the use of the Review Panel in its deliberations.2 2.3 This submission will not repeat the central arguments and findings in Promoting Good Faith Bargaining, which we invite the Review Panel to read. However, we wish to bring to the attention of the Review Panel the following key findings or recommendations: The book Promoting Good Faith Bargaining under Australia’s Fair Work Act 2009 by Alex Bukarica and Andrew Dallas is the copyright of the CFMEU Mining & Energy Division. We consent to the Fair Work Review Panel referring to, or reproducing parts of the book for the purposes of its report, but we do not consent to the entire book being made available on the Review Website. A second edition of Promoting Good Faith Bargaining is being published by Federation Press and will be publicly available in April or May 2012. 2 3 o The obligation to bargain in good faith is a substantive and not merely procedural obligation.3 The parties to collective bargaining must come to the table with the intention of attaining a mutually satisfactory enterprise agreement. Whilst the jurisprudence of Fair Work Australia in this area is still developing, there are signs that this concept is being more widely accepted and applied.4 o 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, Government should also give consideration to promulgating by regulation, a “Code of Good Faith Bargaining” - which has been a feature of New Zealand labour law for some years.5 o The involvement of Fair Work Australia in bargaining disputes should be more pro-active and ‘muscular’. The expertise and corporate knowledge contained within the Tribunal make it ideally placed to play a positive role in facilitating enterprise agreements being made.6 Government should support and encourage Fair Work Australia to perform a more active role in bargaining, including by facilitating the creation of a dedicated “bargaining panel” in the Tribunal. 2.4 The effect of the CFMEU Mining & Energy Division submissions on the GFB framework of the FW Act can be summarised shortly: the legal framework is sound, but its implementation by Fair Work Australia is less than optimal. There 3 Promoting Good Faith Bargaining at pp 11, 29-34, 55-60, 75-78, 88-90. 4 See in particular, Association of Professional Engineers, Scientists and Managers, Australia, The Collieries’ Staff Division v Endeavour Coal Pty Limited [2012] FWA 13. 5 Promoting Good Faith Bargaining at pp 58-60, 82-85. 6 Ibid at pp 98-100. 4 remains significant room for improvement in the area of GFB. Moreover, these improvements can be facilitated with minimal legislative amendments to the Fair Work Act. Rather, what is required is that the GFB obligations contained in the FW Act are understood and applied in accordance with their intended purpose. 3. Industrial action provisions of the FW Act 3.1 Access to legally protected industrial action in pursuit of collective agreements has been a central feature of Australian labour law since 1993. 7 A right to ‘protected action’, in defined circumstances, would be regarded by most mainstream commentators as a necessary corollary of a decentralised industrial relations system based on enterprise level collective bargaining. In other words, it is recognised that without realistic access to the ultimate economic sanction of industrial action, most employees would not be in a position to bargain with their employers on anything like an equal footing. 3.2 That is not to say that protected industrial action is at large. Since its introduction in 1993, there have been a number of legislative constraints or restrictions on the ability of employers and employees to undertake protected industrial action. These restraints reached a legislative high-water mark in the 2006 “Work Choices” amendments, which unfortunately, have been fundamentally retained in Part 3-3 of the FW Act. 3.3 The CFMEU Mining & Energy Division has considerable experience in successfully navigating and operating under both the “Work Choices” and FW Act provisions relating to protected industrial action. This however, does not mean that those provisions operate fairly or rationally. 7 Industrial Relations Reform Act 1993 (Cth), section 170PG. 5 3.4 In this submission we identify a number of shortcomings with the system of protected industrial action provided for in Part 3-3 of the Act, having regard to international norms and the democratic character of our union. We identify those issues as: o The unnecessary requirement that unions be required to seek approval for a ballot of employees, before “approval” is given for industrial action. o The ability for employers to interpose their views and interests (via Fair Work Australia proceedings in relation to a protected action ballot) in what is essentially a matter of internal union democracy. o The ban on protected action being used in respect of “pattern agreements”. o The lack of any requirement for proportionality in respect to the length or severity of employer lock-outs – which are, after all - intended to be “response” action to employee industrial action. o A possible deficit in the powers of Fair Work Australia to direct employers to assist an Authorised Ballot Agent to conduct a protected action ballot on the employer’s premises. 3.5 Protected action ballots are unnecessary, at least in the form envisaged in the FW Act: 3.6 The conceptual justification behind the protected action ballot provisions of the FW Act (or the antecedent Workplace Relations Act 1996) seems to be based on a concern with ensuring “transparency”8 and a “fair, simple and democratic 8 WR Act, s449(1). 6 process”.9 However, the framework of Part 3-3 seems to operate on the presumption that these qualities are not the norm in most unions seeking to utilise protected industrial action. The provisions of Part 3-3 are therefore imbued with the deeply conservative prejudice that most rank and file unionists are naïve and are easily led by manipulative union officials into unnecessary and damaging industrial action. 3.7 We are fundamentally at odds with such a view and submit that it is contrary to all the available evidence concerning employee behaviour and voting patterns for protected action ballots. It is clear for example, that the ballot results published on the Fair Work Australia website generally show a very high endorsement level amongst voters in protected action ballots, often in excess of 80 or 90% voting “yes”.10 This speaks of an elemental truth: unions do not pursue industrial action unless they are very certain of membership support for such a step. To do otherwise risks a very significant strategic misstep– that is, demonstrating to the employer that the union does not have the necessary capacity to exercise economic leverage on the employer during bargaining. 3.8 In the case of the CFMEU Mining & Energy Division, the requirement to seek permission for a protected action ballot,11 is very odd given the union’s internal democratic processes12 and its exemption under s186 of the Fair Work (Registered Organisations) Act 2009 (‘FW RO Act’) to conduct its own internal elections. That is, there appears to be a contradiction in the fact that CFMEU Mining and Energy Division is able to conduct its own internal elections for officers (which are a combination of attendance ballots and postal ballots) free from the direct control or supervision of Fair Work Australia or the Australian 9 FW Act s436. 10 http://www.fwa.gov.au/index.cfm?pagename=industrialballotsresult 11 FW Act s437. Which includes membership endorsement by direct plebiscite of all decisions of the Division’s governing body. See rule 8(iv) of the registered rules of the CFMEU Mining and Energy Division. 12 7 Electoral Commission, but is required to comply with the provisions of Part 3-3 in respect of protected action ballots. 3.9 In our submission, protected action ballots are not necessary to ensure transparent and democratic decision-making and are instead, merely a device to frustrate or delay the taking of industrial action by employees. Arguably, they are also contrary to Australia’s international labour standard obligations in that “…the manner in which the ballot requirement has been constructed under the FW Act has the effect of unduly impeding the right to strike in contravention of the principles of freedom of association”.13 However, if protected action ballots are to remain a feature of the FW Act, then at least there should be provision in the FW RO Act that would have the effect of extending any exemption under s186 to allow a union to conduct its own protected action ballots without the need to seek permission from Fair Work Australia under Part 3-3 of the FW Act (as to this last point, see also below). 3.10 Employers have no legitimate role in proceedings concerning protected action ballots: 3.11 The Workplace Relations Act 1996 automatically provided that employers had standing to appear in protected action ballot applications. The FW Act has no equivalent provision, but as a result of the Full Bench decision in Australian Postal Corporation v CEPU,14 it now appears settled that employers will generally be given the right to appear in proceedings concerning whether a protected action ballot should be granted. As McCrystal has observed, the tests introduced for ascertaining whether permission for a protected ballot should granted (which in substance remain the same as the WR Act provisions) have 13 14 McCrystal, Shae The Right to Strike in Australia Federation Press at p 261. [2009] FWAB 599. 8 “…proved to be fertile ground for employers wishing to oppose ballot applications by trade unions”.15 3.12 But why should this be so? Is not the question of whether industrial action should be taken one solely for affected employees? Why should employers have the ability to delay or even prevent a protected action ballot from occurring? These rhetorical questions highlight the apparent inconsistency between the purported purpose of the protected action ballot requirement and its actual effect. 3.13 The interests and role of the employer in bargaining are amply protected by the GFB provisions and the extensive provisions dealing with the means by which an employer (and in certain circumstances, another affected person) can apply to have a bargaining dispute conciliated by Fair Work Australia; or alternatively, industrial action suspended and terminated.16 There is no justifiable basis to allow a further level of objection from employers that in effect amounts to interference in the right of employees to democratically decide whether or not to support protected industrial action. 3.14 The ban on protected action being available for industry or sector level bargaining (“pattern bargaining”) is inconsistent with Australia’s international treaty obligations: 3.15 A further hangover of the WR Act era preoccupation with constraining the ability of employees to take protected industrial action is the restriction of its use in respect of what is defined as “pattern bargaining”. It is an international norm that workers and employers are free to choose the level of bargaining that is appropriate for them in the circumstances, free from the interference of State actors. As Creighton and Stewart have observed: 15 McCrystal, at p 162. 16 FW Act, ss 240, 423 and 424 9 The denial of the right to take industrial action in support of industry level bargaining is, rightly, treated as de facto denial of the right to choose the level at which bargaining is to take place. This is not, of course, to suggest that conformity with ILO standards requires that parties must actually bargain at industry level: the point is that one side should be able to take industrial action to persuade the other to negotiate at that level if they so choose.17 3.16 The effective prohibition on “pattern bargaining” under the FW Act should be removed. There is no sensible economic basis for the assertion that confining collective bargaining to the enterprise level necessarily results in optimum productivity or efficiency outcomes. International comparisons between countries with high levels of bargaining and union density on the one hand and those with very decentralised wage bargaining and low union density on the other, have shown no conclusive link between macro-economic performance and the level of wage bargaining, with either model capable of delivering very good or poor economic performance.18 In reality, the most appropriate level of wage bargaining for an industry or sector will depend upon a number of factors, primarily related to the characteristics of the industry in question. The FW Act should not proceed on the basis of a “one-size fits all” approach to the level of wage bargaining in Australia. 3.17 The lack of a requirement for ‘proportionality’ in employer lock-outs is a serious problem with the operation of the FW Act: 3.18 The dramatic events surrounding the grounding of the entire Qantas fleet on 29 October 2011 allegedly in preparation for a general lock-out of employees, highlights the very significant deficiency in the FW Act in relation to employer response action. That is, the Qantas lock-out, whilst technically in response to relatively low-level union protected action, was massively disproportionate to the employee protected industrial action. The ability of employers to respond in a 17 Creighton, Breen and Stewart, Andrew Labour Law (5th Edition) The Federation Press at p.777. Calmfors, Lars Centralisation of Wage Bargaining and Macroeconomic Performance – A Survey OECD Economic Studies No 21 Winter 1993. 18 10 disproportionate way to employee protected action is not conducive to good faith bargaining and the promotion of mutually satisfactory enterprise agreements. In fact, one can scarcely imagine a form of response more calculated to create hostility, fracture long-standing employment relationships and destroy postbargaining cooperation than a large scale employer lock-out. The Review needs to consider an amendment to Subdivision B of Part 3-3 of the FW Act to require that any employer response action is directly proportionate to the employee action it is responsive to. 3.19 There may be a lacunae in the FW Act in respect to the power of Fair Work Australia to issue orders in respect of the conduct of attendance ballots on the employer’s premises: 3.20 In the course of seeking a protected action ballot order to apply to employees of the BHP-Biliton-Mitsubishi Alliance (‘BMA’) in the coal mining industry in Queensland in late 2011, there emerged a further issue relating to the conduct of protected action ballots under the FW Act. In opposing the granting of orders, counsel for BMA made a submission concerning a deficit in powers on the part of Fair Work Australia, to the effect that the Tribunal did not have the power to issue orders that would require the employer to assist in providing facilities for the conduct of an attendance ballot on its premises. 3.21 Attendance ballots are a common feature under the FW Act and normally occur with little demurrer from employers in relation to the use of facilities on site. Indeed, in the case of the CFMEU Mining & Energy Division, attendance ballots are the principal form of democratic decision making within the organisation for the election of officers of the union and industrial decisions, such as protected action ballots. The submissions of counsel for the BMA (whilst not conceded by the CFMEU) caused the union in that case (in an abundance of caution) to hold its attendance ballots in tents immediately adjacent to the entry of the BMA coal mines. Whilst the outcome of the ballots was not affected by this argument about 11 the scope of powers in Subdivision 8 of Part 3-3, it did lead to unnecessary expense on the part of the union – not to mention the disrespectful treatment of employees by the world’s largest mining company. 3.22 Regulations 3.13(7) and (8) of the Fair Work Regulations 2009, provide that the authorised ballot agent is to have access to the workplace for the purposes of notifying employees of the protected action ballot, preparing for the protected action ballot and conducting the protected action ballot. It would appear that the intention of the drafters of the FW Act is that an authorised ballot agent should be free to conduct an attendance ballot on an employer’s work site, if so ordered by Fair Work Australia. We would say that a necessary implication to be drawn from this purpose is that the employer is render the necessary practical assistance to ensure that the attendance ballot occurs. However, given that the submissions of BMA referred to earlier cast some doubt on this interpretation, any lacunae could be easily remedied by a further amendment to the Regulations to make explicit the implication referred to above. 4. Dispute resolution in pre and post bargaining context 4.1 The role and powers of Fair Work Australia in respect to the resolution of industrial disputes between parties to collective bargaining, remains a crucial question, notwithstanding the legislative emphasis upon the parties directly involved in resolving their own issues. 4.2 There are two aspects to this question. The first concerns the proper role of the tribunal in respect to bargaining disputes, during which the ‘interests’ of the parties are still in play. The second aspect concerns the ongoing role (if any) of Fair Work Australia in dealing with disputes which emerge in respect to the application, interpretation or non-compliance with the matters dealt with in a concluded enterprise agreement. Both aspects have been the subject of 12 controversy during the operation of the FW Act and are a point of serious disagreement between particular employer interests and the union movement. 4.3 The position advanced by the CFMEU Mining & Energy Division is that the framework of dispute resolution in the context of a system of collective bargaining must primarily be guided by pragmatism and common sense, and not by an attachment to ideological shibboleths. In particular, it is important that the power of Fair Work Australia to arbitrate in respect of both ‘interest’ disputes and in circumstances where a dispute exists over a bargain that has already been struck, is approached from the perspective of how to make the system work better, rather than some pre-determined position that denigrates any expanded role for Fair Work Australia in dispute resolution. 4.4 Arguably, the pendulum on the role of arbitration in dispute settlement has swung too far in the direction of non-intervention. This is manifested in two features of the legal architecture of the FW Act: (i) ‘Interest’ arbitration19 of collective bargaining disputes is practically unattainable, unless one party (as in the case of Qantas) is able to inflict massive damage on the economy, or part of it; and (ii) The question of whether Fair Work Australia is able to arbitrate on a dispute arising from an enterprise agreement is a matter for bargaining itself, leading in practice, to major corporations imposing an effective veto on access to arbitration during the term of agreements. 4.5 As to the first issue, it is clear that the capacity to obtain access to interest arbitration of industrial disputes (in all bar the most exceptional cases) is unattainable due to the very high threshold established under ss423 and 424 of the Forsyth, Anthony “Why Australian needs interest arbitration” Workplace Law and Corporate Law Research Group, Monash University. 19 13 FW Act. This is clearly the intended effect, but is it the most appropriate setting for an Australian system of collective bargaining? As the Qantas dispute has demonstrated, there is a strong residual respect in the Australian community for the role of an “independent umpire” in industrial disputes20 and (one can surmise) a corresponding distaste for bitter and protracted industrial disputation. 4.6 The position we advocate is not one of ready recourse to the arbitration of collective bargaining disputes, but a recalibration of the tests contained in the FW Act to provide more flexibility for the Fair Work Australia to interpose itself in the bargaining environment in appropriate situations. In other words, the legislative framework needs to shift the emphasis from damage to the economy per se, to other important criteria such as: o The maturity of the bargaining relationship and in particular, whether the bargaining involves an actual or virtual first agreement context. o The extent to which the parties have conducted themselves in accordance with their good faith obligations, and in particular, whether the claims or issues advanced are consistent with reasonable responses, given the relevant industrial context. o The damage that continuing industrial dispute is causing, or likely to cause, to the long term relationships of the protagonists. o Whether there is any reasonable expectation that the dispute will be solved by further negotiation. 4.7 Within this framework, compulsory arbitration of the matters dividing the industrial parties will remain a last resort, but would not be so unattainable as to See for example, ‘Qantas divides voters, Fair Work Australia the only winner’, Crikey, 7 November 2011 available at: www.crikey.com.au/2011/11/07/essential-qantas-divides-voters-fair-work-australia-the-onlywinner/. 20 14 not exert a moderating influence on the negotiating parties.21 Indeed, there is also a need for Fair Work Australia to more actively use and explore its conciliation powers, which unfortunately, s240 of the FW Act prevents unless a party to the industrial dispute makes such an application. 4.8 Conciliation and arbitration under the FW Act should not be construed as radically different forms of intervention, but as part of one continuum. That is, active conciliation and mediation of collective bargaining disputes should always precede any recourse to arbitration and in turn, a realistic prospect of arbitration imposing a result on the bargaining parties should always be an influence on the parties to conciliation. 4.9 In relation to issue of the place of arbitration in settled agreements, we would strongly submit that every enterprise agreement should be statutorily required to contain an arbitration clause, and if not, the model clause dispute resolution clause in the FW Act should be deemed to apply. 4.10 The CFMEU Mining and Energy Division appeared as an intervener in the Woolworths22 Full Bench matter where the operation of s186(6) was under consideration. Whilst we supported the initial interpretation of the provision by Commissioner Smith, it appears that the law as it currently stands holds that the provision does not require an arbitration clause in enterprise agreements, but only permits such a clause. 4.11 The effect of the Woolworths interpretation in the coal mining industry has been dramatic and costly in terms of industrial action. In particular, the determination of multinational mining companies Xstrata and Rio Tinto to avoid agreeing to an arbitration provision in any of their enterprise agreements (apparently at all costs) has See for example, Lansbury, Russell “Back to the future with arbitration?” University of Sydney Business School, 24 November 2011. 21 22 [2010] FWAFB 1464. 15 meant that industrial disputes in the coal mining industry have been more prolonged and bitter than might otherwise be the case. In particular, the circumstances relating to the industrial dispute at the Tahmoor colliery in Southern New South Wales is indicative of the real consequences of a failure to require arbitration as a mandatory clause in enterprise agreements. The dispute at the Tahmoor colliery spanned over two years, cost employees hundreds of hours of lost wages and an involved an estimated $100 million of lost production for the employer. Throughout this dispute, the employer’s refusal to countenance an arbitration clause in any enterprise agreement, was one of three key issues in the industrial dispute. 4.12 The issue of a compulsory arbitration clause in enterprise agreements is essential to the proper functioning of collective bargaining, because it allows for employee grievances over the application of the agreement to be dealt with relatively quickly, cheaply and by persons who have an understanding of industrial issues. The refusal of certain employers to accept arbitration as a mandatory clause in enterprise agreements is almost entirely ideological in nature. It is concerned with upholding somewhat mythical ‘managerial prerogative’, which amounts to no more than the proposition of ‘do as we say, not what you think the agreement means’. It is a remarkable position, given that recourse to arbitration of employee grievances is not regarded as antithetical the voluntarist basis of ‘free collective bargaining’ in Canada or the United States.23 CFMEU Mining & Energy Division 17 February 2012 23 Promoting Good Faith Bargaining under Australia’s Fair Work Act 2009 at p.45 16