The Institute’s eighth Ron McCallum Debate was another great success and we were thrilled to be joined by John Hendy QC, Chair of our sister organisation, the British Institute of Employment Rights. Our panel engaged in robust discussion about the failings of Australia’s current enterprise bargaining system, and how collective bargaining might be reformed into the future. Former FWC and AIRC President, the Hon. Geoff Giudice AO chaired the debate, with the following speakers offering their perspectives on the topic:

• Emeritus Professor Ron McCallum AO
• Professor Anthony Forsyth, RMIT University
• John Hendy QC, British Institute of Employment Rights
• Kate Minter, Unions NSW
• Kim Parish, House with No Steps
• Alison Pennington, Centre for Future Work
• Stephen Smith, AiGroup

Watch the Debate or download the AIER Discussion Paper highlighting the failings of the Australian enterprise bargaining experiment.

This year the debate was structured around the question:

Can collective bargaining still deliver for employees, employers and the public interest?

If so, what should be the scope, level and mode of bargaining?

If not, what alternatives are appropriate for determining conditions of work?

Each speaker addressed each question in turn.

Professor Anthony Forsyth opened the debate noting that whilst the Fair Work Act proports to support collective bargaining its failure to do so is evident in the declining coverage of collective agreements; the unequal power is afforded employers through the use of the agreement termination provisions; and the inadequacies of the ‘good faith’ bargaining provisions in addressing surface bargaining tactics.

Professor Forsyth argued that enterprise bargaining is no longer suited to the Australian economy in light of the changing structure of work, where the concept of the employer has been transformed by the proliferation of new business models. In response, a bolder and more innovative form of unionism was called for. Professor Forsyth spoke of organizing through community or social movement unionism, highlighting examples of innovative organization from the Transport Workers Union, United Voice, the Young Workers Centre, the National Union of Workers and Unions NSW. Professor Forsyth closed calling for the union movement to be imaginative, arguing that unionism and collective bargaining need to take new forms in the era of ‘platform capitalism’.

John Hendy QC stated the importance of collective bargaining to workplace democracy, describing the process as the only way employees can have a voice at work. John went on to differentiate statutory minimum conditions from bargained outcomes. The role of collective bargaining in addressing and rectifying the power imbalance between workers and their employers was described as essential.

John argued that increase wages resulting from collective bargaining reduced inequality of wealth and served to increase tax revenue, feed consumer demand and stimulate economic growth; delivering in the public interest. John described bargaining at the sectoral or industry level was important in setting the rate for the job, ensuring that ‘bad employers can’t undercut good employers and worse employers can’t undercut bad’.

In conclusion, John framed collective bargaining as required by international law, referring to ILO conventions and in the case of Britain, Human Rights Charters and Treaties.

Kate Minter noted that collective bargaining seeks to restore the power imbalance inherent in the employment relationship, but to do so it must keep pace with the changing nature of work. Kate argued that automation and new technology was resulting in an increasing share of profits falling to shareholders, managers and business owners. Kate noted that insecure employment was growing, with only three in five Australian workers permanently employed and enjoying full rights such as sick leave, holidays and job security. Kate proposed collective bargaining as a potential solution if it allows the workforce to regain bargaining clout at the industry and economy wide level, rather than just at the enterprise.

Four key priority areas for bargaining were identified as the growth of the gig economy, the termination of agreements, the role of government in bargaining and union representation. Kate cited the Unions NSW agreements with Air Tasker as one way that conditions might be extended in the gig economy. The termination of agreements was described as concerning; giving undue negotiating power to employers and undermining enterprise bargaining principles. The role of government was highlighted in terms of both a direct employer and funding body, Kate argued that the 2.5% wage cap for NSW public sector employees shut down genuine bargaining. For collective bargaining to function effectively and deliver outcomes across the board, the role of unions must be recognised, Kate called for an end to the ideological war against trade union membership.

In closing Kate stated that collective bargaining needs to be available to all workers, be protected from unilateral cancellation by employers and be supported by strong unions; with governments leading by example and ensuring they provide opportunities to bargain.

Kim Parish spoke about her experience working under the FWC New Approaches jurisdiction. Kim outlined the long and courageous process of building trust between the organisation and their partner unions, and the role in that process of information sharing, communication and collaboration in managing change. Kim detailed how a common agenda had been built around supporting NDIS and the necessity of a professional and permanent workforce in the sector.

Kim outlined 10 elements that underpin a truly collaborative arrangement:

1. Genuine bilateral Senior leadership commitment;
2. Collective memory of bitter dispute (happily not a necessary condition. But there must be a desire to avoid disputes, nor an acceptance that they are an inevitable element of workplace relations);
3. Separation of the day to day matters from continuous strategic conversation;
4. Neutral but frank facilitation from the Commission;
5. Capability building in the organization;
6. Multiple engagement and discussion in a drive to generate more areas of common interest, not less);
7. Explicit rules of engagement that establish what is management prerogative, and an agreed approach for what to do if it goes wrong;
8. Time and resource – allowing sufficient time to explore problems and to develop solutions and for management to resist the temptation to make decisions too early;
9. Holding each party to account (being honest about how its working where there are issues and reinforcing the good, providing positive feedback);
10. Growing different mindsets and behaviours: respect, courage, restraint, humility, honesty, forgiveness, humour and especially trust.

Alison Pennington presented that Australian workers last year received a record post-war low share of national income, just 47% of GDP with 90% of what labour has lost reflected in an increase in corporate profit share. Alison reported that number of current enterprise agreements in the private sector has almost halved since 2013, with the number of employees covered declining by 40%; with only 14% of private sector employees covered by enterprise agreements today. Alison reported the most dramatic decline in bargaining was present in the retail trade and accommodation and food services industries, accounting for half the coverage decline since 2013; firm size was also significant, with small firms employing less than 20 employees accounting for around two third of the decline.

Alison outlined the consequences of the failing system of bargaining to include an increased reliance on award safety net conditions and wage stagnation. A contributing factor of which is the high number of expired agreements rolling over without wage increases. Alison spoke about the role of agreement termination, noting that since the Aurizon decision in 2015, the Fair Work Commission has approved around 1,450 terminations.

In response to the current failings, Alison called for the scope of bargaining to be expanded to include sector and industry wide bargaining; the prohibition on terminating enterprise agreements during bargaining for a new agreement; increased strike power for workers; increased union presence in workplaces; a more effective ‘umpire’ for the enforcement of agreements and a more sustainable method of financing collective bargaining.

Alison concluded stating that collective bargaining is a pre-condition for inclusive growth and prosperity for all and calling on urgent change to address the erosion of Australia’s collective bargaining regime.

Stephen Smith described the union movement’s call for industry bargaining as self-serving and not in the community’s interests. Stephen went on to argue that industry bargaining is inconsistent with the Australian modern award system and that industry wide industrial action would be damaging to the community. Stephen argued that with 9% coverage in the private sector unions had no legitimate mandate for bargaining at an industry level and would use industry agreements to deliver financial reward to themselves.

Stephen refuted that slow wage growth resulted from reduced union power, arguing instead the trend was the result of weak productivity growth, spare labour capacity and weak inflation.

To ‘refresh’ the enterprise bargaining system Stephen proposed an amended Better Off Overall Test to remove the requirement for it to be applied to all employees; giving the FWC discretion overlook minor procedural and technical non-compliance; amending the Fair Work Act so as to ensure the FWC gives increased weight to respecting negotiated terms. Stephen noted that 75% of agreements are now approved with undertakings or rejected but maintained this was not the result of deficiently drafted agreements.

Emeritus Professor Ron McCallum AO referred to the recent work of Emeritus Professor Joe Isaac and noting that wage stagnation meant workers were not receiving their fair share of economic gains. Professor McCallum went on to warn that increased inequalities are contributing to alienation and community distrust in our institutions, be they parliaments, banks and financial institutions, churches; and the less than optimal outcomes flowing from our economic system.

Professor McCallum remarked on the tradition of fairness and sharing productivity increases between labour and capital in the Australian system and recommended an expansion of the definition of ‘employee’ to include ‘gig’ workers, recommending the Superannuation Guarantee Act 1992 (Cth) as appropriate. Ron went on to support compulsory conciliation powers for the FWC following a period of intractable bargaining; and power for the FWC President to issue a certificate enabling lengthy intractable disputes to be settle by a form of arbitration. Finally, Professor McCallum argued for the extension of key collective agreements across industries to ensure conditions of employment flow on to small business employees.

This part of the debate was followed by questions from the audience. The AIER thanks all the participants for an excellent discussion on key issues of workplace relations.

Watch the video of the event or download the AIER Discussion Paper.