Labour disputes and its possible solutions:The new Australian Workplace Agreement (AWA)

Introduction
This essay discusses about labour disputes and the possible solutions, in conjunction with the new Australian Workplace Agreement (AWA) (1996). The Australian industrial relationship practice is very different from other developed countries in the way of arbitration instead of bargaining. The Australian Industrial Relations Commission (AIRC) has played an important role in the industrial relations of Australia. However, the Howard’s government has made a critical change to the situation. The Government initiated a reformation of the Australian industrial relationship system including the exemption of small business from the federal 'unfair dismissal' laws since 1996. The by-product is the Australian Fair Pay Commission (AFPC). This essay makes an assessment of the role of AFPC. It examines the history of Australian industrial relations and why the AIRC and AFPC were formed. It also discusses about the setting of minimum wages for employees employed under federal awards.

Employment Relations System
Regarding the definition of “industrial relations”, Macdonald, Campbell and Burgess (2001) find researchers failed to explain its meaning precisely except echoing policy-makers words. Sutcliffe and Callus (1994) perform a review across industrial relations glossaries, and they report the term often left blurred and empty of content. They find that most Australian researchers identify enterprise bargaining as a stream rather than a complete system. Deery et al. (2001) states that “industrial relations practices are shaped in the interactions of environmental forces and the strategic choices of the parties” (p.32).

Adopted Theory: Strategic Choice
Kochan, Katz and McKersie (1986) propose the framework for industrial relations analysis since the 1970s, after they find flaws in Dunlop’s (1958) systems model, which is the prevailing method of analysis in industrial relation at the time. They build the strategic choice theory (SCT) model with the view that “the industrial relations system as a self-contained, analogical subsystem of the wider society” (Deery et al. 2001, p.25). The theory is established in response to limitations in Dunlop’s (1958) model, which contends that an industrial relations system comprised “certain actors, certain contexts, an ideology which binds the ... system together, and a body of rules to govern the actors at the place of work and work community” (p.7).

The theory considers that both environment forces and the variables are important for better understanding for labour-management practices. They create conflicts amongst actors in industrial relations. The latter helps to explain their responsive behaviours. Dunlop (1958) counts employers group (EG) including managers and their representatives in supervision, unions group (UG) including workers and their representatives, and specialized third party agencies group (TG) such as governmental organizations as the three groups of actors. Kochan, Katz and McKersie (1986) segment the activity in industrial relations into three levels, namely workplace and individual/organisation relationships, collective bargaining and personnel policy, and long-term strategy and policy making (p.17). By combining the three levels and the three actors, activities of industrial relations can be segmented into total nine typical segments.

Kochan et al. (1986) argued developments were result of changes in managerial values and strategies. They propose the “Three-tier framework”, which recognises inter-relationships within the organisation at three main levels of industrial relations activity, namely strategic, policy, and workplace levels.

Federal Awards
To understand the background, this essay performs a brief review on the history of industrial relations in Australia. To understand in determining minimum wages for employees employed under federal awards, this essay now reviews the historical role of the Australian Industrial Relations Commission (AIRC). A fundamental change occurred in 1904 when the AIRC was established. This was enacted by Section 51 of the Constitution and provided a system of arbitration rather than negotiation for industrial relations (Wheeler 2003). Although each state in Australia had conciliation and arbitration tribunals in existence, the AIRC was the first federal tribunal. This is significant in the context of the industrial history of other liberal democracies where the style was more adversarial (Teicher, Lambert & O'Rourke 2006). Through the AIRC, wages and conditions could be set through arbitration of a peak body. All that was needed was that the matter be across state boundaries and the registration of the union with the AIRC. Any favourable decisions made by the AIRC could be applied to all workers who fell under their jurisdiction. According to Bray et al. (2005), this allowed those workers without unions or from weaker unions to force employers to negotiate in front of the tribunal and obtain wages and conditions similar to the stronger unions through precedent and flow-on. Under this system, there was an incentive for workers to join a union which was registered with the AIRC so that AIRC decisions could apply to them. This gave the unions a lot of strength and support. It made them more stable and predictable. There was less need for industrial action as more workers fell under the AIRC jurisdiction. Any AIRC decisions were legally enforceable which made them more powerful and more so as more workers unionised to gain access to this system.

Pressures for Changes
Australian employees had been enjoying the unique Aussie Arbitration maintained by the philanthropic federal government up to the mid 1990s. Nevertheless, even the Keating Labor government (the last philanthropic federal government) had effectively acknowledged the effect of globalisation on industrial relations. For example, the government passed the industrial relation Reform Act 1993 strengthening individual legal rights at the expense of the collective bargaining power and representative rights of trade unions (Arup et al. 2006). Callus and Lansbury (2002) report that the national industrial relations systems have been eroded by the increased importance of international product and capital markets since the early 1980s. Alexander and Lewer (2004) explain that was the timing when the Internet was made available for public access even at the preliminary level. Those ER experts are gaining more opportunities on either challenge to modify existing theory or develop new theory. Bamber et al. (2004) explain that the globalisation had been initiated by modern transportation and telecommunication technologies but significantly boosted by the new media (namely the Internet). In term, the globalisation increases the mobility of capital, promotes ‘race to the bottom’, and allows workers across nations in competition (Teicher, Holland & Gough 2006).

The Critical Change
There has been a critical change in Australian ER, following the change of government from the philanthropic government to the Liberal National Party in 1996. The Howard government enacted the Workplace Relations Act (WRA) 1996 which further reduced union power. Applying Kochan et al.’s (1986) SCT, the WRA (1996) would equivalent to a policy for implementing the “Three-tier framework” at workplace level. As it inheriting the root of the SCT, which is about overstating the importance of managerial strategies, the WRA (1996) can be considered as anti-union in its intent and result. For example, the WRA (1996) encouraged those workers to bargain at an individual level through Australian Workplace Agreements (AWAs) (Stewart 2005).

Those AWAs were synonymous with a reduction of union power as they promoted individualization against the need for union representation (Gollan 2004). They limited the scope of the centralized award-bargaining processes to a narrow range of core areas, through 20 allowable provisions. Other ‘non-allowable’ matters were bargained with individually (Sadler & Fagan 2004). Furthermore, AWAs were no longer under the jurisdiction of the AIRC. AWAs however remain a minority and were mainly adopted by those at a managerial level. It attracted these workers with a more flexible salary package such as access to a performance based pay component (Stewart 2005). What these AWAs did allow for was the reduction in the need for centralized bargaining and arbitration by the AIRC.

The WRA (1996) alterations to the institutional landscape for regulation of wages and other minimum standards, including a diminishing of the role of the AIRC and further promotion of enterprise bargaining, represent a major regulatory shift and are likely to have a significant impact on working conditions and trade unions.

The exclusion of businesses with 100 employees or less from the federal unfair dismissal regime will mean that statutory regulation of termination of employment is substantially reduced (Sadler & Fagan 2004). The Government also planned for a national industrial relations system is the most radical restructuring of federal labour regulation in almost a century. The changes include partial replacement of the collective system with institutionalised individualism, with key institutions of the conciliation and arbitration system remaining in place.

The Workplace Relations Act 1996 would have been harsher in their treatment of unions however it had to be toned down to be passed through the Senate. It was not until 2005 when the Howard government won a majority in both houses of parliament resulting in unimpeded power. By 2005, the Workplace Relations Act had become bloated, convoluted, and unintelligible (Stewart 2005). There was difficulty in understanding this Act by both workers and employers such that it became expensive and unwieldy to use.

In 2005, the Howard government introduced the Work Choices Act 2005 which can be seen as the Workplace Relations Act wish list that never made it. They claimed that one of the major reasons for such a change was the streamlining of all the various legislation that had been built up over the years (Prime Minister 2006).

The Work Choices policy as detailed in the Work Choices (2006) website make eight main claims. These are that it will provide a better process for setting minimum wages and conditions; it will guarantee minimum conditions in legislation; it will provide the Australian Fair Pay and Conditions Standard; it will make agreements simpler; it will provide modern award protection; there will be an ongoing role of the Australian Industrial Relations Commission; provide a better balance the unfair dismissal laws; and create a national workplace relations system.

AIRC to AFPC
The Howard Government has incorporated five minimum conditions of employment into law, including parental leave, maximum ordinary hours of work, annual and carer’s leave, and wages provisions. These minimum conditions, together with the minimum wages set by the Australian Fair Pay Commission (AFPC), forms the Australian Fair Pay and Conditions Standard. Importantly, this standard replaces the ‘no disadvantage test’ as the standard which collective agreements and Australian Workplace Agreements are to meet. In other words, agreements will only be registered if they provide wages and conditions of employment the same as or superior to the new standard (Work Choices 2006).

The AFPC is charged with setting and adjusting adult minimum wages and non-adult minimum wages (such as the training wage), in addition to minimum wages for award classification levels and casual loadings. The establishment of this new body effectively took over the responsibility for determining minimum wages from the Australian Industrial Relations Commission (AIRC) (Work Choices 2006).

While the AIRC will still be able to play its key responsibility which is dispute resolution, the new Work Choice policy exempts businesses with under 100 employees from the unfair dismissal laws within the field of dispute resolution. This means that the AIRC will only look after those larger unfair dismissal cases. Along with the AWAs being outside of the AIRC’s jurisdiction, there is a strong shift in power away from the AIRC which had traditionally supported unions (Work Choices 2006).

Effectiveness of AFPC
One key mission of AFPC is to implement the minimum wage system according to the WRA. Firstly, the AFPC takes over the role of setting the minimum wage from the Australian Industrial Relations Commission (AFPC 2006). The reason is that forcing the AFPC append wage rates to an award structure that remains largely within control of the AIRC appears a cumbersome regulatory outcome (Howe el al. 2005). Besides, the maintenance of a structure of award terms and conditions which, apart from pay rates, will have no bearing on the new AFPC Standard. The AIRC is now having its focus on creating a framework of cooperative workplace relation which promotes the economic welfare of the Australian people. This is an administrative approach for the Howard Government to change the decision power from the authority that is traditionally less cooperative with the Coalition to a newly established authority that is appointed by the Government.

Secondly, the Commission is now responsible to set all minimum wage rates, starting at the lowest of $484.40-a-week or $12.75 an hour for an unskilled employee (AFPC 2006). It is responsible for minimum wage rates in all job classifications, up to the trade's level of $1200-a-week (AFPC 2006). This mission is consistent with the Government’s argument about safety-net wage adjustments representing an inappropriate instrument for alleviating household poverty or hardship, as most low paid workers do not live in poor households, and most poor households do not contain low wage workers. It would clearly be consistent with government policy for the minimum wage to fall below a level sufficient to protect full-time workers against poverty, allowing household poverty to be addressed through targeted welfare payments (Howe el al. 2005). Such an outcome would also be consistent with the approach embodied in Britain's Low Pay Commission (LPC), often invoked as the preferred institutional model by the Coalition Government, which oversees a single national minimum wage rather than a structure of pay rates that underpins collective bargaining (Howe el al. 2005). Established in 1997 as a tripartite body, the LPC advises the secretary of State for Trade and Industry on setting and implementing a national minimum wage (NMW) (Howe el al. 2005).

Thirdly, the AFPC performs annual rulings with first after September 2006 (AFPC 2006). It’s annual wage hearings based on union claims abolished. AFPC may consult widely but deliberate in private. While there is a principle that the minimum wage cannot fall below present level, following the Prime Minister’s suggestion that rates set by the AFPC will not fall below the money rates set in place by the 2005 Safety Net Review (AIRC 2005). Peetz (1998) explains that the current practice of awarding flat rate safety net increases, rather than percentage increases, works to undermine such relativities and the position of those workers above the lowest unskilled rate but still reliant on awards.

Nevertheless, the AFPC may easily get around the restriction by granting no increase (Howe el al. 2005). The mission is reasonably achievable thus this portion of the decision can be considered as useful.

Finally, the AFPC has its prime responsibility to consider the unemployed (AFPC 2006). This mission is consistent with the Government’s assumption that a large proportion of the jobless in Australia are frictional, structural and long term unemployed. It implements supply side labour market programs to attempt to reduce the natural rate of unemployment in Australia. The mission is reasonably achievable thus this portion of the decision can be considered as useful.

Conclusion
In conclusion, this essay finds that in broadest sense, ER is the study of the behaviour and interaction of people at work. It is multi-disciplinary. Therefore, scholars have developed several theories on analysing ER. While the recent theoretical developments such as SCT have expanded the scope of the area, the balance between co-operation and conflict in the workplace remains the central issue in ER. In Australia, its ER system used to rely on the arbitration model. Due to the significant impacts from the globalisation, the unique model has now given way to the enterprise bargaining model which is commonplace in modern market economies. Even the Keating Labor government had effectively acknowledged the effect of globalisation on industrial relations. It passed the industrial relation Reform Act 1993 strengthening individual legal rights at the expense of the collective bargaining power and representative rights of trade unions. Therefore, the decline of unions seems like an inevitable conclusion as workers and employers realize that they are able to deal maturely with each other without the interference of unions. Government policy over the last decade has supported this view with a decentralized industrial relations system being promoted. The Howard government enacted the Workplace Relations Act (WRA) 1996 which further reduced union power. The newly introduced Australian Workplace Agreements (AWAs) are equivalent to a policy for implementing the “Three-tier framework” at workplace level. As a by-product of this movement, the Australian Fair Pay Commission carries the mission of reducing the number of award classifications. One of its key missions is to implement the minimum wage system according to the WRA. This essay finds that the Commission is likely to fulfill this mission with the government’s strong support.



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