Address to the Industrial Relations Society of Victoria (IRSV)
Melbourne, 14 October 2011
The theme of this conference is “Dispute Resolution: Respecting the Umpire”. As one of the invited speakers the Society‟s President,
“tasked [us] with the challenging job of dissecting and discussing dispute resolution issues, challenges and opportunities to make the best of what can often be a debilitating situation for a workplace.”
Both the issue of “dispute resolution” and “respecting the umpire” are important issues in workplace relations and in the time allowed to me I want to deal with both.
In speaking on this topic I make it clear that, as a statutory office holder, the views I express today are my own and do not necessarily reflect Government policy.
Further, many of you will be aware that Senator, the Hon. Chris Evans, the Minister for Tertiary Education, Skills, Jobs and Workplace Relations, has this week announced the Government‟s intention to introduce into the Parliament the Building and Construction Industry Improvement Amendment (Transition to Fair Work) Bill 2011.
I will not be saying anything about that announcement.
My role is to implement the legislation enacted by the Parliament; which is presently the Building and Construction Industry Improvement Act 2005. It is a role that I discharge with great purpose.
However, matters of policy are entirely matters for the parliament. It is not my role to be a commentator on or player in the parliamentary process or to engage in public comment on matters of policy. On matters legislative, the parliament is the umpire and I will respect their decision.
Dispute resolution
The most recent ABS industrial disputations data shows a significant spike in „days lost‟ to industrial action.
In the June 2011 quarter there were 44.7 days lost per 1000 employees in the sector. This was driven by high disputation levels on Queensland Government-funded jobs and at Victoria‟s desalination plant where the ABCC is already involved in litigation.
Disputation levels this high are unacceptable. Every productive work day lost to industrial disputes is one day too many.
However, it must be recognised that it is a product of our workplace laws (enacted by each of the Keating, Howard and Rudd governments) that, “the rude and barbarous process of strike and lockout” (as Justice Higgins described them) can occur lawfully.
Unless anyone is seriously calling for a ban on the lawful right to strike that has existed for nearly 20 years, the focus of the concern must be on unlawful industrial action.
In this regard, in the 3 years before my appointment as ABC Commissioner in October last year, on average the ABCC investigated 211 matters per annum involving unlawful industrial action. In the past year we have investigated 223 matters (a 7% increase on the average). Unlawful industrial action matters account for 25% of all of our investigations.
These figures tell me that the parties need to try harder when it comes to lawful dispute resolution.
One of the most frustrating aspects of this part of our regulatory work is that, all too often, when the underlying dispute arises that result in unlawful industrial action, there is no evidence that attempts were made to use the dispute resolution procedures agreed by the parties and contained in enterprise agreements. Universally, they are ignored (by all parties).
The Fair Work system is designed to deal with inevitable disputes. All workplace agreements contain procedures for workplace dispute to be resolved fairly. My simple message on the issue of dispute resolution procedures therefore, is - use them.
Refusing to observe or abide by to an agreed dispute resolution clause is a breach of the agreement and a breach of the Fair Work Act 20093. It is a serious issue and because of our concern at the ABCC to protect the integrity of agreement making, where these breaches occur we will investigate them and, where it is in the public interest to do so, commence legal proceedings and seek the imposition of civil penalties.
My preference though is that unlawful industrial action is prevented by the sensible use of dispute resolution procedures.
Workplace relations systems and productivity
In recent times we have seen raging debate about whether, and how, and when, workplace relations regulatory regimes influence national productivity.
Last week the chief umpire, namely the President of Fair Work Australia, Justice Geoffrey Guidice,
examined data on Australia's recent multifactor productivity performance in the market sector, charting it on a timeline dotted with the changes in IR regimes implemented in 1996, 2005 and 2009/10, and concluded that "it would be difficult on this evidence to establish any direct link between the type of industrial regulation and productivity growth".
He said in the decade from the introduction of the Workplace Relations Act in 1996 when the legislation remained “virtually unchanged”, productivity grew for the first five to six years, then began a rapid decline.
"The advent of Work Choices [in 2006] does not seem to have had any direct effect and it is assumed that other influences have been more important”, he said.
However, he said data on labour productivity was "more encouraging".
"For the most part" labour productivity had increased for the past two decades, although the growth had been variable since about 2002 and had stagnated for the past two years.
He said there had been a "very significant but short-lived" reduction in labour productivity in the two years to mid-1995, "but it would be difficult to find any causal connection between that drop and the 1993 legislative changes".
"Equally it would be difficult to argue that there was a connection between the implementation of Work Choices in 2006 and the drop in labour productivity in 2008”.
Justice Giudice said he wasn't suggesting the nature of the IR system was irrelevant to productivity performance.
"But the point which should not be lost sight of is that there are many things going on in the economy which influence productivity performance overall".
"Changes in legislation are capable of affecting particular parts of the economy quite significantly, but measuring these effects requires great care and even then it may not be possible to quantify them properly".
Coincidentally, on the same day that his Honour made his comments, I reflected, albeit less eloquently, on the same point in a speech I gave on the other side of the country,
In recent times much has been written about the apparent link between workplace relations/industrial relations frameworks and productivity. It is an important discourse to be had. However, to my mind, any explanation which seeks to draw a causal link between macro-economic economy-wide performance measures (which contain, in particular, the distorting affect of productivity figures in the mining and utilities sectors) and the operation of specific sections in the Fair Work Act 2009 is unpersuasive.
More recently as today, the ACTU has added to the debate,
The nation‟s productivity performance since the enactment of the Fair Work Act has been no worse than in the period before the Act took effect.
Reports of poor productivity performance under the Fair Work Act are either referring to the general slowdown in productivity growth, which long predates the Act and therefore cannot be blamed on it, or to the fall in productivity recorded in early 2011. In the first half of 2011, as a result of the Queensland floods and other natural disasters, Australia‟s economic output fell, while the number of hours worked in the economy continued to grow. As a result, measured productivity fell. This is a short term aberration that will be corrected as the economy recovers from the disasters. To blame the industrial relations legislation for a temporary, weather-induced economic shock is disingenuous and opportunistic.
Notwithstanding the lack of evidence of a direct casual link between workplace relations systems and labour productivity, there continue to be calls for legislative change to drive an improvement in productivity.
Bargaining for productivity
According to Treasury‟s Intergenerational Report productivity growth is projected to be the major contributor to increases in living standards over the next 40 years.
If annual productivity growth were lifted to 2 percent over that period, living standards
would be around 15 percent higher in 2050.
The issue of productivity is important to me and my agency. The main object of the act that I am charged with implementing is to,
'ensure building work is carried out fairly, efficiently and productively for the benefit of the industry and the benefit of the Australian economy as a whole.‟
Productivity in the building and construction sector will not be improved by working longer hours, cutting corners or compromising on safety.
The Fair Work legislation allows employers to promote productivity through wage negotiations.
But the legislation itself only provides a framework. Employers and workers must speak up for their own needs if they want to realise the full potential of increased flexibility. All parties must commit the attention that is required to lead the reform on bargaining for efficiency gains and productivity.
It is the people who roll up their sleeves at the bargaining table who are the ones that need to take carriage of turning bargaining into an opportunity to enact long term performance improvements.
Investment in the endeavour now will secure good living standards for all Australians in the future.
To be more productive we need to see a move to High Performing Workplaces (HPW).
We need to see the results of research into how to be a HPW being built into enterprise agreements so that there is a focus, at the enterprise level, on:
- responsiveness to changes in stakeholder and customer networks;
- employee participation in decision making processes;
- behavioural and skills flexibility in employees;
- the use and quality of information, communication and technology; and
- attracting and retaining high quality people.
Sadly, however, this past year we have seen the negotiation of pattern agreements struck in the building and construction industry that do not meet the challenge of the productivity agenda.
The examples set by major stakeholders through the deals they have signed-off on - (notably the MBAV/CFMEU and NECA/ETU pattern agreement deals in Victoria) - are worth discussing.
By definition pattern agreements are not negotiated at the enterprise level. As such they are not tailored to the needs of the enterprise and to its particular employees.
Recent examples not only contain no effective productivity improvements; they actually contain terms that will provide for diminished productivity in coming years.
I wasn't at the bargaining table during NECA‟s negotiation with the ETU. I do not know what was traded for or what was brought to the table.
But careful analysis of the agreement shows productivity is only substantially dealt with in clause 4.5, and then, only in terms which can only be described a “parent-hood” statement:
4.5 Flexibility and Productivity
All persons covered by this Agreement agree that this Agreement commits every Employee of the Employer to exercise the necessary flexibility, productivity improvements and broadness of approach as contained in this Agreement so that the Employer can remain competitive in the market place.
The Employer and Employees may develop a consultative committee for the purposes of considering flexibility and productivity improvements.
With inflation running at 3.6% one wonders, what was the productivity trade off for the 5% p.a. wage increase allowed for in the Pattern EA and the increase in overtime rates in the construction version of the Patter EA?
It is difficult to see it in the NECA/ETU pattern agreements.
Notwithstanding NECA stood by the ADJ Agreement (although made only bare submissions at first instance in Fair Work Australia when the agreement came before the tribunal for approval and didn‟t even bother to turn up and defend their member‟s agreement before the Full Bench).
Rather NECA left it to another peak industry body, the Ai Group, to lead the charge against the approval of the ADJ agreement in Fair Work Australia). We know from yesterday‟s Full Bench decision that the Ai Group challenge (with the ABCC was a part of at first instance) failed. The umpire has spoken.
While the legal challenges to the ADJ Agreement focussed on particular clauses and their likely operation in the real world; in a broader context the real problem with the NECA agreement is that it does not seriously consider the issue of productivity. The failure of the NECA pattern deal to genuinely address productivity is in my view a far more substantial abrogation of the parties‟ bargaining responsibilities.
My real concern is that this is pattern deal – going out across a very important industry. The industry body that negotiates the agreement should be championing productivity opportunities. The role that industry associations should be playing, in assisting their members (many of who are subbies without the time or resources to negotiate on such matters) is in championing the opportunities that exist for productivity enhancement through bargaining, at the enterprise level.
This is because productivity enhancement, by its very nature, must happen at an enterprise level.
It is not the role of the judiciary, the umpire or the regulators. It is a responsibility of the enterprise-level parties.
The MBA in Victoria also negotiated an enterprise agreement with the CFMEU this year. Again, I was not at the bargaining table and do not know what the ins and outs of the negotiations were.
The deal incorporates wage increases of 20 percent over the life of the agreement, with net accumulated increases (including allowances) of approximately 27 percent.
All overtime will be paid at double-time, a greater spread of RDOs so that effectively the industry has two less productive working days than they did under the previous agreement. The agreement contains no explicit provision that would facilitate productivity increases.
In light these examples of pattern agreements which do not advance the productivity agenda in one of the most significant industries in the country it is interesting to note that another of the social partners, AMMA, has called for legislative change that would require,
“All parties to enterprise agreements ... to identify the proposed productivity improvements that arise from the agreement as part of the certification process before Fair Work Australia, or alternatively, agree that no productivity measures are available.”
The umpire and productivity
What is further interesting about the AMMA proposal is that it has a ring of „back to the future‟ about it.
If my memory of history is correct, before he was appointed to the (then) Commission, Commissioner Greg Smith AM, then the deputy director of the then Confederation of Australian Industry, put forward a set of wage fixing principles to the CAI council for consideration.
Those principles had as their foundation, the promotion of productivity and efficiency.
The proposal was that there would be a minimum wage movement and then a 2nd tier wage increase which was only available if issues of productivity and efficiency were addressed and resolved at the enterprise level.
The proposal was that there would also be a cost cap on this exercise so that employers and employees could address all the troublesome productivity issues within a known cost outcome.
A factor often forgotten is that CAI made the application to the Conciliation and Arbitration Commission for new wage fixing principles, which had at their heart improvements in productivity and efficiency at the enterprise level. In the resulting case before the umpire in 1987 the wage fixing principles that the employers proposed were adopted. There was a general increase and employers and employees at the enterprise could bargain within a cost cap of 4%.
In December 1987 the National Wage decision recorded:
The Metal Trades Industry Association of Australia indicated that the principle had been “applied with considerable success” in the metals industry and has produced “ staggering results” in that industry.
With the focus on Productivity and Efficiency at the enterprise level, there were those who didn‟t want to run the gauntlet of having the Commission scrutinise whether or not the bargaining at the enterprise had produced productivity and efficiency and so certified agreements started to gain some popularity.
It was generally believed that agreements would be certified and that its contents were strictly a matter for the parties. The Commission still had the power to refuse to certify an agreement if it believed that the contents of the agreement were contrary to the public interest.
As is now, nothing prevented an employer reaching an agreement with an employee or employees and coming nowhere near the institution.
There are of course many sound reasons for having agreements approved.
However at the time, and to maintain the focus on productivity and efficiency, which met the broader objectives for the economy, the Commission decided to put some constraints on the certification of agreements so that they were not used to undermine the national stated objective.
In the February 1989 review the Commission expressed some caution about some parties treating the national goal as simply a negative cost cutting exercise without considering all of the factors, which are relevant to the improvements in productivity and efficiency.
The Commission, following the submission of the parties, varied the principle aimed at promoting flexibility and productivity to ensure that bargaining took into account:
- The contract of employment;
- The arrangement of working hours;
- Consultation at the enterprise level as opposed to policies being imposed from the national level; and
- Access to arbitration on matters over which agreement could not be reached as to whether or not change was directed to improving productivity and efficiency.
After considerable publicity and comment by the parties about productivity (which included criticism of the Commission), in October 1991 the Commission focused more strongly on the obligation of the parties to demonstrate changes to productivity and efficiency if agreements were to be approved.
The principle never operated, as employers, unions and government did not support such testing. On 9 July 1992 the Industrial Relations Amendment Act [109 of 1992] came into operation.
The public interest test was removed and the Commission was required to approve agreements if they met a set of statutory tests, none of which related to productivity or efficiency.
No doubt the members of the October 1991 Full Bench would have been surprised by this development given what was being publicly urged by all parties at the time in the context of improving the Australian economy.
Of course now the responsibility for promoting productivity and efficiency rest entirely with the parties at the enterprise and the umpire has no role in advising or encouraging these economic goals.
Maybe if we had respected the umpire in October 1991 things would be different in terms of productivity and enterprise bargaining now. It‟s difficult to see how the NECA and MBAV pattern agreements would have got through.
Conclusion
Australia‟s aging population, global competition and ongoing technology-based industrial transformation means the responsibility for ensuring productivity gains must be worn, not just by government or regulators, but by all players; especially in labour intensive industries like construction.
In the construction industry we must shift the productivity discourse toward real, tangible opportunities for productivity enhancement. Ignoring the opportunities presented by incorporating productivity into the standard bargaining and IR lexicon will ultimately put Australia‟s construction industry at a disadvantage.
Maximising productive working days, ensuring projects have harmonious workplace relations settings and that projects are being delivered efficiently, will be crucial to Australia‟s capacity to harness the productivity dividends that will flow from major national infrastructure construction.
Legislation alone cannot establish constructive workplace relations. It is industry members and stakeholders that operationalise the laws. In the construction sector, real productivity gain will be contingent on trade unions, employer organisations, companies and employees finding new ways to do business together. The ABCC will be ready to respond – with advice, support, information and where required, regulatory intervention.
If we can create a stable and harmonious building and construction industry where, for example, dispute resolution procedures are followed and there is a reduction in unlawful industrial action; the benefits will flow on to all Australians, not just construction workers.
And so, I call on all industrial relations practitioners, advisers, bargaining representatives and building and construction industry participants to focus on productivity and to use the existing workplace relations framework as a springboard for excellence.