‘A NATIONAL WORKPLACE’

SPEECH TO THE AUSTRALIAN FOOD AND GROCERY COUNCIL Answering the most basic workplace question: “what is a business obliged to pay a particular employee?” means establishing, in turn, a precise job description, the employer’s membership of any organisation which is party to an award, and whether the employer has ever been “roped in” (wittingly or not) to a federal industrial award – and this will only establish whether the employer’s obligations are primarily covered by state or federal law. It’s hardly surprising that a recent analysis showed that 60 per cent of callers to the federal government’s workplace relations help-line did not know whether they were covered by state or federal awards even though these are still the foundation documents for about 90 per cent of Australian employment. Since 1996, the Howard Government has been committed to building a simpler and fairer workplace relations system with workers and managers free to make their own arrangements above a concise set of minimum standards. Although the 1996 Act was a watershed, workplace relations remain a reform half-done. This term, rather than easy-to-reject-on-suspicion omnibus legislation, the Government has introduced into the parliament a series of comparatively easy-to-justify single-issue bills. In addition, the Government is trying to build a better workplace relations culture in ways which don’t depend on new legislation, through more thorough “policing” of sanctions before courts and commissions and through establishing the Cole enquiry into the construction industry. Another way to advance workplace relations reform is to address those issues which transcend the partisan strait-jacket which usually makes change so difficult. Historically, Labor’s light on the hill included the aspiration to a national system of workplace regulation. A more unified system of workplace regulation will not solve all or even most of the problems which still make Australia one of the world’s most regulated labour markets. Even so, it would mean that national companies only have to deal with one complex system rather than six (it used to be seven – until Victoria referred its workplace powers). At the time of federation, each state had its own army, navy and customs service. There was no unified currency, no common immigration system, not even a common rail gauge. Each state saw itself as a substantially self-contained economy trading as much with Britain as with the other parts of Australia. Although the founders had big ambitions for the new nation and remarkable foresight about its future national development, it’s hardly surprising that the constitution they drafted could not explicitly anticipate all the desirable features of a modern economy. In state economies, state-based workplace regulation made sense, hence the federal government’s power under the constitution to make laws with respect to “conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one state”. In the century since federation, federal industrial awards made in response to inter-state disputes (some real, most notional) and later federal agreements (mostly made on the basis of the corporations power) have come to regulate the employment conditions of over 50 per cent of the workforce. But the federal jurisdiction has supplemented, not supplanted the old state jurisdictions (except in Victoria) which means that national companies often operate under six different sets of rules as well as the different awards, agreements and contracts envisaged by each jurisdiction. It’s not inconceivable that the same categories of workers in the same company could operate under six different awards or a bewildering array of certified agreements based on awards depending upon where they happen to be employed. The broad similarities between state and federal awards and the essentially fortuitous nature of many of the differences means that multiple jurisdictions generate complexity rather than choice. Just maintaining state workplace relations departments, commissions, courts and registries costs over $100 million a year. Navigating Australia’s 4500 state and federal awards (that’s one award for every 1500 workers) absorbs a small army of industrial relations experts and consumes millions of hours in management time. On its own, moving towards a more unified national system would improve rather than eliminate this complexity and expense. Even so, it offers a significant new way to improve the system by changing the terms of the debate. The economic benefits of a single workplace relations system are all-but-impossible to calculate but it’s no accident that Jeff Kennett’s decision to abolish Victoria’s separate system has coincided with its economic revival. At present, businesses can try to avoid the problem of multiple jurisdictions by seeking to bring themselves under the federal system. They can join a registered organisation which is party to an applicable federal award. If incorporated, they can seek to make federally registered collective or individual agreements with their workers. Even so, as the law currently stands, it is difficult to be sure that state law has been quarantined. For one thing, awards have to be negotiated with the cooperation of unions. For another, federal workplace law and the instruments made under it don’t usually “cover the field”. This gives activist judges plenty of scope to import state regulations and awards into matters not specifically regulated by a federal agreement. Finally, federally-registered Australian Workplace Agreements (which most effectively displace other instruments) require the consent of each and every worker in an enterprise if relevant awards are to be entirely displaced. As Professor Andrew Stewart said in a recent paper, for “neutral observers”, the desirability of a unitary system of industrial regulation “is almost a given, so obvious are the advantages in terms of cost savings and policy coherence”. As early as 1910, Billy Hughes said that “industrial matters are not provincial or state concerns but of national importance”. In 1926, Prime Minister Stanley Melbourne Bruce said that the need for greater federal workplace powers was “obvious to every thinking man”. In 1984, Simon Crean said “there is a substantial view within the ACTU” to support “a national industrial relations system”. In 1993, Paul Keating said that the then government was already creating a “national system of workplace bargaining”. In February, AWU boss Bill Shorten said that our workplace relations framework is “over-complicated”. Last month, the Liberal Party federal council (once a bastion of “states rights”) called for a “simplified and unified national industrial relations system”. Two weeks ago, Industrial Relations Commission President Geoff Guidice called for a move towards “rationalisation of jurisdictions” and “uniformity of laws”. Significantly, Democrat spokesman Senator Andrew Murray has repeatedly called for a single industrial relations system and just two days ago said we should be “straining every sinew” to get rid of the state systems. Despite this, it’s cautionary to recall the failure of no fewer than six constitutional referenda to give the federal government more extensive workplace relations powers. These days, different state industrial systems make as much sense as different state rail gauges and deserve to go the way of customs houses on either side of the Murray and changing trains at Albury. A national economy should regulate workplace relations on a national basis just as it regulates interest rates, tax and corporate law on a national basis. This is not a question of centralism versus states rights. There is a strong argument (in principle and in practice) for providing services (as opposed to setting up regulatory regimes) at a state or local level. Within a national set of standards and guidelines, there’s every reason why, for instance, health and educational services should be funded and organised by the states (although there’s also no reason why the states should prefer state-wide public sector quasi-monopolies). In workplace relations, there’s no reason why particular arrangements can’t be made at every workplace under a regulatory system which is the same right around the country. Separate industrial systems are not a problem for businesses which conduct their operations within one state but, as separate currencies, tax laws or corporate regulation would be, they are a serious complication for nation-wide businesses. Although there is a philosophical case founded on the subsidiarity principle for devolving responsibility to the smallest feasible decision-making unit, this actually points to enterprise level decision-making (along the lines of the federal system) rather than separate highly prescriptive state regimes. In modern democracies, public controversy tends to gravitate to the most senior official to whom the media has regular access. When problems are amenable to solution or improvement, governments are expected to find ways to fix them not excuses for leaving them alone. For democratic politicians confronting public concern, “not my responsibility” is a very unsatisfactory response. The “buck” has to stop somewhere – and inevitably, the end of the line is the federal government. A kind of “pragmatic federalism” has supplanted older models of “co-operative” or “competitive” federalism under which every level of government strives to find a way to be relevant to the problems of the day. Under pragmatic federalism, some local councils feel moved to declare nuclear-free zones while successive federal governments have gradually taken on the supervision of local childcare centres. As premiers’ conferences and councils of Australian government have long demonstrated, the states have often chosen to be glorified lobbyists. As political responsibility gravitates to the federal government, pragmatic politicians inevitably reach for the powers they need – especially when the states seem more interested in striking poses than solving problems. The furore over the protection of worker entitlements exemplifies this steady “withering away of the states” (to adapt a notorious phrase). There is no constitutional reason why state governments cannot protect entitlements. The states could have done so, notwithstanding their incorrigible tendency to “cry poor”, by adopting federal Labor policy and imposing a payroll levy on employers. Instead, responsibility for solving the problem found its way to the highest level of government with the capacity to make a difference. People accepted that the premiers could do more than just “blame the feds” for workers’ lost entitlements but still seemed to think that it was up to Canberra to fix the problem. In 1999, Peter Reith committed the Federal Government to promoting a new national debate on a more unified national system and flagged using the corporations power (as well as the federal government’s other constitutional powers) to bring some 85 per cent of workers within the federal jurisdiction. In late 2000, he released three discussion papers canvassing the legal, administrative and political issues involved. Now that the Government has been returned for a further term, it’s time to start putting these ideas into practice. Two main arguments have been used against the Reith proposals: first, that using the corporations power to extend the reach of the federal workplace jurisdiction breaches undertakings given to the states; and second, that extending the federal jurisdiction, while fine in theory, is wrong in practice because the state regimes better protect workers’ rights. To preserve the uniform national scheme for the incorporation and regulation of companies (in the wake of an adverse High Court decision), the states agreed last year to make a reference of power. This new reference was stated to exclude any additional power to make laws governing workplace relations and, in any event, the Reith proposal was to use the federal government’s pre-existing corporations power – the power as it stood prior to last year’s further reference. Once the West Australian Government rolls back laws providing for workplace agreements, the federal jurisdiction will be the least regulated in the country. Judged by results, the federal system must be doing something right. Since 1996, under a less hide-bound federal system, Australians have enjoyed more jobs, higher pay and fewer strikes. The OECD says that Australia’s “natural” or structural rate of unemployment has fallen from over 8 per cent to about 6 per cent. Far from eroding workers’ rights, federal law ensures that individual agreements must pass a “no disadvantage” test (against the relevant award) in the same way as certified agreements. Thanks to the no disadvantage test, workers’ rights cannot be eroded because any agreement must satisfy the Employment Advocate or the Industrial Relations Commission (or both) that it does not leave workers worse off. The federal Workplace Relations Act was negotiated line-by-line with Cheryl Kernot who subsequently became a senior Labor frontbencher. Under the Act, basic award earnings have risen by nearly 5 per cent in real terms since 1996 and average weekly earnings have risen by over 12 per cent in real terms over the life of the Howard Government. By contrast, between 1983 and 1996 (under federal law that was then more akin to that of the states), basic award earnings actually fell by 5 per cent in real terms. What’s more, workers under Australian Workplace Agreements earn $895 a week on average (compared to $711 a week on average under federal certified agreements and considerably less again under awards and award-based common law contracts made under state law). The ALP’s real problem with the federal system is not that it fails to protect workers’ rights but that it fails to preserve union privileges. Australian Workplace Agreements displace awards (provided they pass the no disadvantage test) and deprive unions of their long-standing right to intervene in negotiations unless they are specifically invited to act as a bargaining agent by one of the parties to a proposed agreement. Right now, the ALP seems more interested in protecting unions’ institutional clout than in giving businesses access to a uniform set of workplace laws despite the potential to end the deadweight costs of having six systems rather than one. The Democrats, by contrast, are the co-authors of the current federal Act and have always supported a single workplace relations system. There are essentially two aspects to workplace regulation: the set of rules governing the conduct of all workers and businesses within the relevant jurisdiction and the particular arrangements negotiated between the parties to govern individual workplaces – in other words, matters subject to government regulation and matters subject to parties’ agreement. Under the Reith proposal, there would be one set of regulations governing the “external” conduct of all incorporated entities in the workplace. But the federal system could encompass the sorts of agreements currently possible under the different state regimes insofar as they dealt with the “internal” dealings of people in a particular workplace. Under this proposal, there would be federal rules governing matters such as unfair dismissal, right of entry and the management of disputes. At a workplace level, however, parties could choose whether their dealings would be governed by state or federal instruments and could elect to be covered by the same instruments throughout Australia. Under this proposal, businesses with (say) NSW awards and agreements could continue to operate under them and even elect to have their interstate operations covered by them. Over time, within a national framework, businesses would gain the freedom to choose the “best fit” from a range of state and federal possibilities and operate nationally under those arrangements. Operating under federal agreements or NSW agreements (or those of any other state) would become a matter of choice rather than geography. The Reith proposal is actually “federalist” rather than “centralist” because it breaks down the walls between the states and gives national relevance to the best state and federal models. Without a reference of powers (which is unlikely) or a referendum (which is unnecessary), the federal government cannot put a unified national system into place – it can only move towards a more unified system by seeking to bring more workplaces under federal law. Given the history of the state systems and the disruptions inherent even in beneficial institutional change, it is best to proceed by evolutionary steps – and given the obvious need for change, it’s best to start now. For instance, only businesses which are covered by federal awards and agreements are subject to federal unfair dismissal laws. Without extending federal coverage, improvements to federal unfair dismissal laws would only benefit about 30 per cent of small businesses. If new federal laws were expressed to “cover the field” using the corporations power, at least 60 per cent of small businesses (as well as almost every large business) could benefit. This would not go as far as Bill Shorten, who has recommended a uniform national standard for dealing with unfair dismissals, but would exemplify the conservative incrementalism which has become a hallmark of the Howard Government. Even the most risk-averse Australians will eventually tire of living (to some extent) in a museum of industrial archaeology. Even so, leadership will be needed to overcome the inertia of institutions and vested interests so I hope everyone who supports the concept of a more unified national system will now contemplate some practical and purposeful steps towards this important goal.