A return to the IR dark ages?

Last year, Peter Anderson from the Australian Chamber of Commerce and Industry warned about ‘a return to industrial chaos in the workplace'. Just a few months ago, Tony Shepherd from Transfield said Australia was becoming a ‘high cost, low productivity nation'. And only a few weeks ago, BHP chairman Jacques Nasser said the new industrial relations framework ‘pitted labour against capital'.

Based on these sentiments, one could be forgiven for thinking industrial relations in Australia is in the throes of a crisis taking the country back to the pre-reform days of low productivity, inflexible work practices, and high levels of disputes.

But does the sentiment match the facts? An analysis of the broad changes to labour markets that began in the early 1990s suggests there are some ominous signs for our industrial relations system.

Unfair dismissal coverage has broadened and claims have gone up significantly. In the three years since the introduction of the Fair Work Act, claims to Fair Work Australia have more than doubled, from 8,000 to roughly 17,000. Some of this remarkable surge can be attributed to the increased coverage of the Act, since the legislation now covers all workers in the private sector, except for WA. But much of the rise can be attributed to claims on small businesses – claims that would be ineligible under WorkChoices because of the exemption for businesses with 100 employees or less.

Most of the damage caused by unfair dismissal occurs at conciliation – a casual meeting where the employer, employee and an officer from Fair Work Australia negotiate an agreement. These meetings are not like a court appearance where you give evidence, argue your point, and get scrutinised. They are meetings where neither party's claims are challenged, where no evidence is presented, and where pressure is applied on the employer to pay go-away money to prevent the claim proceeding to trial.

The process is essentially a game of bluff and blackmail, a charade that has trapped many employers who have attended conciliation without legal advice.

But issues with the Fair Work Act extend beyond unfair dismissal. New good faith bargaining obligations have altered the balance of power between employers and unions, and have increased the scope for state intervention in the workplace.

The new rules and obligations create a new level of formality and regulation to the bargaining process. The new system is incredibly complex and contains within it a long list of actions that the employer must make sure they adhere to, or refrain from. Of particular significance are provisions allowing unions to apply to Fair Work Australia for a Majority Support Determination. This order forces the employer to recognise and bargain with a union if a majority of employees support bargaining, even if the employer has elected not to bargain. Even if employers wish to negotiate on a one-on-one basis with employees, they may be forced to do otherwise.

This is intervention on a large scale and a significant departure from freedom of contract. Previous legislation contained no obligation to bargain in good faith. It was understood that business ought to have the freedom to set the conditions and relationships for their own workforce. This is particularly important for the behaviour of unions, because it means their place at the bargaining table is not guaranteed, and therefore they cannot throw their weight around.

These are two significant problems within the act, but the story of industrial reform is not all doom and gloom. Australia's industrial system is markedly different from what it was just two decades ago. The old centralised, adversarial system of wage setting has been successfully decentralised. This has meant increased productivity, better wages, and improved workplace flexibility.

In addition, industrial disputes have dropped significantly in the past 20 years, despite the claims of many in the business community. Recent disputes have generated some overheated statements about the degree of workplace dislocation. In reality, industrial disputes are at a historic low.

So there are very real issues with the Fair Work Act, and policymakers need to pay much attention and effort to rectify the problems, but claims about a return to the bad old days of the industrial relations club are quite misplaced.

Alexander Philipatos is a Policy Analyst at The Centre for Independent Studies.