CHAPTER 12INDUSTRIAL RELATIONS

1. INTRODUCTION

The internationalization of business and advances in technology mean that organisations are now less restricted in their use of workers. Employment-related costs and issues are being taken into account when companies make investment decisions. Trade unions in this environment are also experiencing the scrutiny of the global business community.

BHP Billiton’s relationship with its unions, is now contingent on the unions ‘adding value’ and delivering workplace reforms. In contrast, the company’s old industrial relations (IR) culture was the product of a comfortable protectionist environment where management could conciliate the unions whenever they raised demands.

International competition, means that many workers are priced out of the market (especially those with low skills and with only their time to sell). A criticism of Australia’s regulated labour market is that it makes it difficult for unskilled workers to get work, protects incompetent employees, increases employers’ costs and builds rigidity into the workplace.

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Employment laws and regulations, in addition, place a high cost on business and management time. Excessive regulations, high costs and a lack of labour flexibility mean that people are no longer viewed as an organisation’s greatest asset but its greatest liability. Management, as a result, is forced to outsource employees or use professional employee organisations to reduce costs, gain flexibility and avoid bureaucratic red tape.

Globalization, trade liberalization, competitive pressures, automation, the internet and the emergence of the knowledge worker have sparked a change in employment relationships. Individual arrangements, rather than collective arrangements.

1.1 The Fair Work system

Fair Work Australia (FWA) ‘Independent’ umpire that oversees the entire workplace relations system and has replaced the Australian Industrial Relations Commission (the former federal industrial tribunal charged with preventing and settling industrial disputes). Fair Work Ombudsman, Provides advice and training to employers and employees. Its workplace inspectors ensure compliance with the Act. FWA and FWO gives much greater emphasis to collective arrangements and to the role of unions and industrial tribunals.

FWA has seen the pendulum swing in favor of a collectivistic approach. Individual workplace agreements have been phased out New unfair dismissal laws and a new IR regulator have been introduced Minimum employment standards have been set A collective bargaining framework has been established There is greater scope for trade unions.

COMPETITIVE ENVIRONMENT - DOMESTIC INDUSTRYDomestic industry

protected by tariffs and subsidiesDomestic industry

subject to international competitionDominant ideology - Competing interests between employers

and employees- Trade union and industrial tribunal intervention necessary

- Mutual cooperation- Individual treatment- Sharing of common objectives- Third-party intervention unnecessary

Approach to pay and conditions determination

Collectivist Individualist

Participants in pay and conditions determination

Trade unionsEmployer associations

EmployersEmployees

Focus Industry Individual workplaceCharacteristics - Rigid, narrowly defined jobs

- No recognition of individual- HRM influence minimal

- Jobs broadly defined- Recognition of individual performance- HRM influence strong

Worker location Workers concentrated in factories or offices internet removes the constraints of time and distance

Employment status Emphasis on permanent full-time become independent contractors

Union membership High Low

Role of unions Traditional emphasis on wages and conditions of employment

New role as a resource centre providing services (contract advice)Focus on Customers

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2. HRM AND INDUSTRIAL RELATIONS

The emphasis on the strategic integration of high-performance HR policies and practices, underpinned by a philosophy of employees as assets, has promoted HRM as business-oriented, optimistic and liberating. In contrast, traditional industrial relations seems narrow, pessimistic and static. Moreover, with its focus on cooperation based on the mutuality of employee and organisational objectives, HRM presents a direct challenge to traditional industrial relations, government intervention and employee representation through trade unions.

The past — industrial relations The future — HRM

Belief that employees are an unavoidable cost of doing business

Belief that conflict is inevitable Little trust between managers and workers Poor communications Centralized control Reliance on external bodies Rigid work practices Emphasis on uniformity in pay and conditions

Belief that employees are an organisation’s most valuable asset

Emphasis on mutual interests and common goals Emphasis on teamwork and employee engagement Increased trust between managers and workers Open communications — direct employee voice Decreased role for Fair Work Australia, employer

associations and the legal profession Flexible work practices

2.1 Theory, HRM and IR

If HRM is to be a respected area of academic study, it must develop theory. The growth in HRM and its theoretical development has brought about the creation of new academic positions in HRM, the ‘industrial relations to HRM’. Tensions have arisen from claims that the old industrial relations’ emphasis on trade unions and conflict is out-of-date and that its continuing relevance as an area of study is questionable. IR academics transferred into business schools to implant HRM have been faced with the dilemma of what to teach.

IR academic responses range from calls to study political economy, industrial sociology, gender matters, social justice and an understanding of the class structure, to integrating industrial relations and HRM and presenting it as the ‘emperor in new clothes’ in the form of employment relations or employee relations.

IR academics may criticise HRM for being theoretically weak, but they cannot dismiss it because it constitutes a teaching threat. HRM contributes in three areas where industrial relations has been traditionally weak;

Theory and research on management as an initiator of change in the IR system (rather than unions, tribunals and governments)

Frameworks for understanding enterprise-level relations (rather than centralised award making) Frameworks for understanding direct and informal management (rather than indirect, formal ones) — that

is, employee relations.

Theory explains why events happen. It provides explanations based on logic that are reasonable and empirically defensible. Theory enables the HR manager to provide line managers with compelling explanations, interpretations and insights into the organisation’s external and internal environments. It explains how and why specific HR policies and practices lead to a particular outcome.

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3. APPROACHES TO INDUSTRIAL RELATIONS

Industrial relations involves employees and their unions, employers and their associations, and governments and the industrial tribunals that make regulations governing the employment relationship. Some perceive industrial relations in terms of class conflict, others in terms of mutual cooperation and others still in terms of groups with competing interests. HR managers need to understand these varying approaches because they provide the ideological underpinnings (Foundation) for much of the debate about IR reform and the role of HRM.

3.1 The Unitarist Approach

Under the unitarist approach, industrial relations is grounded in mutual cooperation, individual treatment, teamwork and the sharing of common objectives.

Workplace conflict is seen as a temporary aberration, resulting from poor management, employees who do not fit with the organisation’s culture or trade union activity.

Trade unions are regarded as competitors for the employee’s commitment and cooperation. Management’s right to manage is accepted because there is no ‘them and us’. Focus on common interests and promote harmony, so, strikes is regarded as unnecessary and destructive Legitimizes management authority and control, blames conflict on employees rather than management HRM is seen as a management tool for seducing (persuade)employees away from unionism and socialism

3.2 The Pluralist Approach

Regards conflict as inevitable because employers and employees have conflicting interests. Trade unions are seen as a legitimate counter to management authority.

Organisations as coalitions of competing interests, where management’s role is to mediate among the different interest groups

Trade unions as legitimate representatives of employee interests Stability in industrial relations as the product of concessions and compromises between management and

unions.Employees join unions to promote their interests and influence management decision making. Unions thus balance the power between management and employees. In the pluralist approach, a strong union movement is therefore not only desirable, but a necessity. Society’s interests are protected by state intervention through legislation and tribunals, which provide processes for the regulation and resolution of conflict

The approach is seen as more pragmatic (logical), more practical, more ethical and less simplistic than unitarism and underpins much Australian academic work in industrial relations.

3.3 The Radical or Marxist Approach

Marxists, like the pluralists, regard conflict between management and employees as inevitable. However, where pluralists see conflict as inherent in all organisations, Marxists see it as a product of a capitalist society. Adversarial relations in the workplace are simply one aspect of class conflict.

Focuses on the type of society in which an organisation exists. Conflict arises because of ‘the division within society between those who own the means of production and

those who have only their labour to sell’. seen as being synonymous with political and social conflict Unions thus act as ‘instruments for challenging the capitalist system of class domination Their main concerns are issues of control, power and ownership and concerns with pay rates and

conditions of work are secondary See the state intervention (legislation, industrial tribunals) as being supportive of management’s interests

rather than ensuring a balance of power between competing interests

4. PARTIES IN INDUSTRIAL RELATIONS

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Arbitration The submission of a dispute to a third party for a binding decision. Requires the grouping of employers and employees into registered organisations fostered the growth of trade unions and affected employer approaches to industrial relations.

4.1 Government and Industrial TribunalsThe approach of government to industrial relations is influenced by the political philosophy of the party in power. Industrial tribunals often reflect the urgings of federal governments about what they should do or replicate ‘sweetheart deals’ (An agreement between an employer and a trade union that benefits both parties but ignores the interests of other parties such as, consumers, competitors), made between powerful companies and unions. As a result, industrial tribunals have been blamed for making decisions which are not in the national interest.

4.2 Employer AssociationsEmployer associations represent employer interests before industrial tribunals and provide a range of services covering training, award interpretation, legislation updates, HRM issues, dispute handling and how to counter union activity.Associations agree that a highly centralized IR system is now outmoded and they also face the challenge of defining their roles in an ever-changing IR world.

4.3 Trade UnionsTrade unions Formal organisations that represent individuals employed in an organisation, throughout an industry or in an occupation. Union concerns have traditionally focused on pay rates, conditions of work and job security. unions are moving away from these ‘bread and butter’ issues and adopting an approach of strategic unionism that includes industrial democracy, social welfare, training, industrial policy and taxation.

4.4 Union membership

Factors contributed to this decline in membership; Open and competitive economies The need for flexible labour markets The decrease in manufacturing and the public sector The growth of service industries The increase in women and part-timers in the workforce The loss of union ‘closed shops’ and changing social

attitudes towards unions gen Y employees are not interested in trade union intervention in the workplace

Reasons for joining a union Health & Safety: Unions are active in improving the condition in the work place Protection: Incompetent management pushes the employees to join a union as a form of protection Social Pressure: Pressure from fellow workers Pay and Condition: dissatisfaction in low payment and poor working condition Voice: Union make a communication link to the management Tradition: A tradition in the employee family

The survival and long-term viability of unions is being challenged by the current economic environment. To survive in the long run, unions must change and become more innovative.

The provision of increased services to members Reduced membership fees and lower costs for services via increased economies of scale The development of alliances with other community groups Greater use of technology * Improved public relations Aggressive recruitment of new members * Member empowerment

5. INDUSTRIAL RELATIONS PROCESSES5 | P a g e

The processes of industrial relations deal with the mechanisms for handling industrial disputes. They include;

Collective bargaining (the process of negotiating between management and groups of employees or their unions)

Conciliation (the process of a third party assisting management and unions to reach an agreed settlement) Arbitration (the process of a third party such as FWA making a judgement).

Decisions of the AIRC relating to wages and conditions were called arbitrated awards. Arbitrated awards, Outline minimum pay rates and conditions as determined by an industrial tribunal decision.Consent awards, these occur when the parties to an industrial dispute reach agreement without third-party involvement, and the agreement is then ratified by an industrial tribunal. A consent award is binding on the parties in the same way as an arbitrated award.

5.1 The Choice of IR process

The way industrial disputes are settled depends on many factors. Generally, it is recognized that the earlier and the lower the level at which conflict is resolved, the better it is for employees, unions and management. Inevitably, the longer a dispute continues, the greater the probability that positions will become more rooted. The original cause of the dispute to become submerged by a range of other agenda items as other parties with their own vested interests become involved.

Tribunal-level grievances

6. IR LEGISLATION

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Governments most directly influence industrial relations via legislation. The ‘rules of the IR game’ (bargaining between the parties and what type of conflict is allowed) and the ‘rules of the parties’ (employers, trade unions and industrial tribunals) are established by legislation.

6.1 The Workplace Relations Act 1996Reflected the federal Coalition government’s aim of encouraging ‘a more direct relationship between employers and employees. A much reduced role for third-party intervention and greater labour market flexibility.

Enterprise agreements A written determination negotiated between an employer and an employee (or union) that sets out the parties’ rights and obligations, overriding the award where the same employment conditions are covered. As an alternative to awards for regulating wages and conditions.

One of the primary objectives of the Act was to give employers and employees the primary responsibility for industrial relations and negotiating workplace agreements. A choice was given to the parties between Australian Workplace Agreements and Certified Agreements.

Australian Workplace Agreements Individual, written agreements negotiated between an employer and his/her employee, within federal legislation, containing the terms and conditions of employment. AWAs were individual agreements between an employer and their employees.

Under the Act, Certified Agreements (CAs) (which were collective agreements) could also be negotiated directly by corporations with employees, but interested unions could participate in the negotiations and become parties to an agreement only when requested to by a union member.

6.2 Workplace Relations Legislation Amendment (More Jobs, Better Pay) Bill 1999In 1999, the Howard Coalition government proposed a ‘second wave’ of changes to workplace relations including:

The accreditation of private mediators The introduction of compulsory secret ballots before strike action Restrictions on unions’ right of entry to workplaces Additional exclusions from unfair dismissal laws Further award simplification

The proposed amendments were defeated, but remained on the legislative agenda of the Coalition parties.

6.3 The Fair Work Act 2009The election of the Labor government in 2007 saw the end of the Howard government’s workplace relations reforms and the introduction of the Fair Work Act 2009.

This brought changes to; Unfair dismissal provisions Basic employment standards The collective bargaining framework Union workplace entry rights

Criticisms Act has created confusion Inconsistencies and complexity Acts as a disincentive to employment Has added to costs Given a major impetus to union power.

Key Elements of The Act

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Creation of Fair Work Australia (FWA)FWA now oversees the entire IR system. FWA assumes the responsibilities of the Australian Industrial Relations Commission (AIRC), the Australian Fair Pay Commission (AFPC), the Workplace Authority (formerly the office of the Employment Advocate), the Workplace Ombudsman (formerly the office of Workplace Services) and the Office of the Australian Building and Construction Commissioner.

Establishment of the National Employment Standards (NES)Ten minimum standards, known as the National Employment Standards (NES), provide a safety net that underpins employment conditions and the collective bargaining system. The minimum standards include:- Weekly hours of work — maximum of 38 hours per week for full-time employees- Flexible work arrangements — right to request in place (parent’s right to request work arrangements)- Parental leave - Annual leave - Community service leave — employees are able to take unpaid leave to undertake an eligible

community service - Public holidays - Fair Work Information Statement — must be given to all new employees

Placement of collective bargaining at the heart of workplace relationsUnder FWA employers and employees have an obligation to bargain in good faith. This means that all parties must:- Be willing to meet and participate in negotiations- Disclose all relevant information in a timely fashion - Respond to proposals made by a party in a reasonable time- Give genuine consideration to the needs of the other parties and provide reasons for responses

Award modernizationA system of new awards has been designed to reduce the number (and complexity) of awards applying to the workforce and to provide an added safety net above the NES. This reform has been subject to employer and trade union criticism, because it has the dual (and incompatible) requirements that any changes made to existing awards must not increase costs to employers and must not disadvantage workers. The ambiguous requirements of the modern award system have caused problems for employers regarding pay calculations and award interpretation.

Transmission of businessUnder WorkChoices (which has now been replaced by the Fair Work system), if a company sold or separated a part of its business, the existing wages and conditions had to be maintained for 12 months. Under FWA, existing pay and conditions must be continued until a new agreement is reached.Critics This provision is too complex, it slows restructuring, is making mergers and acquisitions more difficult, and costs jobs.

Union right of entry and representationUnions have greater rights to access and represent their members under the new legislation. However, the changes as still too restrictive on worker rights to bargain collectively and be represented by a trade union.Employers, in contrast argue the changes give unions an automatic seat at the bargaining table and access to sensitive commercial records.

Extension of unfair dismissal rightsProtected from unfair dismissal upon the completion of a six-month probationary period. Unfair dismissal legislation is described as a costly compliance and bureaucratic for employers.

Content of workplace agreements

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FWA excludes the ‘prohibited content’ requirement present in WorkChoices. Matters such as the role of unions in the workplace, provision of union noticeboards and access to employees are now subject to negotiation.Enterprise agreements must focus on matters relating to the employer–employee relationship. Matters outside the control of management or not related to the employment relationships are excluded from negotiation (targets to reduce greenhouse gas emissions and donations to community groups).

Industrial actionThe requirements for taking employee industrial action under the Fair Work Act remain unchanged from WorkChoices. Industrial action is protected only during a bargaining period, and must be approved by a secret ballot of employees (this process has been streamlined). Pattern bargaining is not protected.

The minimum wage and wage negotiationsThe Minimum Wage Panel (a part of FWA) reviews the minimum wage once a year and may or may not make an adjustment.

6.4 Fair Work Act review 2012Employer criticism of FWA and its failure to address the growing competitive needs of the Australian economy saw the Labor government initiate a limited review in 2012. FWA review panel key recommendations

Individual flexibility agreements to include a minimum model flexibility template Number of public holidays that attract penalty rates to be limited to 11 Decline in productivity has not been caused by FWA Name of FWA to be changed Unfair dismissal laws to remain unchanged Union rights of entry to remain unchanged ‘Strike first, bargain later’ option removed

7. OTHER CURRENT IR ISSUES

7.1 Skill and pay inequalitiesUnskilled laborers are sellers of time, not skills. As such, they have no competitive advantage. Their lack of marketable skills means that they have little bargaining power and this has a negative effect on their earnings. Proponents of liberalization claimed that the minimum ‘safety net’ pay and conditions protected such workers and increased their chances of finding work. Unskilled workers;

Suffer from a decline of union protection Are more likely to be in unstable employment Suffer from the ‘internationalisation’ of pay rates Face reduced demand for unskilled labour because of costs Have no education loading Have less job mobility both domestically and internationally

Rapid Casualisation of the workforce contributed to the marginalization of unions. Increasing wage differences between workers, the creation of an underclass of unskilled contract workers having little or no bargaining power, no ‘safety net’ terms and conditions, and no trade union or tribunal protection.

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Contract Work

7.2 Minimum wage requirements

Under WorkChoices, the legal minimum wage was determined by the Australian Fair Pay Commission (AFPC). The AFPC: Was charged with promoting economic prosperity Took a broader, more proactive and consultative approach to wage determination than the AIRC Set minimum and award classification wages, minimum wages for juniors, trainees, apprentices and employees

with disabilities, and minimum wages for piece workers, as well as casual loadings.

The AFPC particularly sought a balance between local market prices and wage rates so that low-skilled workers were not priced out of jobs. Although the AFPC’s 2006 decision to increase the national minimum wage from $12.75 to $13.47 per hour (an increase of 5.6 per cent).

7.3 Penalty Rates

Penalty rates Special payments listed in an award for work performance

outside normal working hours (overtime, work, shift work, and work on a weekend or public holiday). Penalty rates also include special allowances paid for work performed in disadvantageous circumstances (dirty conditions, remote locations etc.). Payments may be calculated as a percentage of base pay (double time) or as a fixed amount ($20 per day).

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Penalty rates have now become a major issue in industries such as retail and tourism. Employers argue that in a 24/7 service economy penalty rates are no longer appropriate for work performed on weekends or public holidays.

Small business owners, in particular, claim that penalty rates make it prohibitively expensive to open on public holidays and Sundays.

7.4 Guest workers

Another change has seen governments and organisations recruiting employees from outside their domestic labour markets. The NSW Labor government, targeted China, Canada, Ireland, India, the United Kingdom and the United States for employees in the finance, pharmaceutical, information technology and biotechnology industries.

Australian universities too are increasingly looking overseas to fill senior academic positions. The National Farmers Federation has called for a guest worker scheme to overcome labour shortages.

Trade unions however, are concerned that labour importation attacks Australian workers’ pay and conditions and are pushing the federal government to increase the safeguards surrounding its temporary skilled migration program.

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