In this article Sean Reidy, a workplace law barrister and member of AIER’s Executive Committee, argues that the recent move by the NSW Government to cap wages of public sector employees by policy strips employees of their rights to bargain collectively and in good faith, as outlined by the Australian Charter of Employment Rights.
State governments in South Australia, Tasmania, Victoria, Queensland and New South Wales have policies to cap public sector wage increases at 2.5%. In June, the New South Wales Government legislated to require that the NSW Industrial Relations Commission give effect to the capping policy in decisions to approve enterprise agreements. The notion of capping wages of public sector employees by policy does not comply with the Australian Charter of Employment Rights.
Governments are in a unique position of power in the bargaining relationship. As a bargaining party they have, among other advantages, the superior advantage of significant resources and of being able to legislate their bargaining position. Other employers do not have this advantage.
Developed in 2005 by the Australian Institute of Employment Rights (AIER), The Australian Charter of Employment Rights is a simply expressed document that unravels the complexity of the regulation of workplace relations by defining and clearly articulating the rights of employers and workers in modern workplaces. The collaborative effort of seventeen of Australia’s leading industrial relations practitioners, lawyers and economists, the Charter draws upon international as well as uniquely Australian sources to identify the ten fundamental principles on which fair and balanced workplace laws and workplace relationships should be based, and to create a set of rights and obligations which all workplaces are encouraged to adopt and observe.
The Charter obliges parties to perform their obligations in good faith (Charter Right 1). The Charter also obliges parties to conduct bargaining in good faith (Charter Right 9). These rights are founded on the idea of a ’fair go all around‘. Governments should set out to be model bargaining parties. A ’fair go all round‘ requires that governments do not tilt the negotiating balance in their favour.
The use of the superior advantage to achieve a policy position risks not only being unfair to the employees on the other side of the bargaining table, but also unfair to private sector employers who do not enjoy the same advantages. The policy of capping and its corollary, the ‘one size fits all‘ approach, is inconsistent with the Charter obligation to bargain in good faith. It means in practice that no matter what merit the other bargaining party can demonstrate, this will not be properly recognised. If this is accompanied by fettering the ability of the independent tribunal to determine an outcome through conciliation or arbitration, the right to access effective dispute resolution procedures (Charter Right 10) is also restricted.
There has been a tendency to announce these policies in budget papers and statements. Finding the content of the policy is made difficult. New South Wales has been the exception. Its policy is set out in a policy document. Governments should be open about these policies, articulate the terms clearly and provide the other bargaining parties with all information relevant to the policy and its terms. Anything less is a failure to bargain in good faith according to the Charter standard.
Even though not often clearly stated, there is generally provision under the policy to “increase employee related costs by more than 2.5%… only if sufficient employee related costs savings have been achieved to fully offset the employee related costs”, to adopt the language of the New South Wales policy.
This type of approach has been applied in the negotiation of the Health Practitioners’ (Queensland Health) Certified Agreement (No. 2) 2011 that is currently under ballot. The government offered a further .5% on a “cost neutral”basis plus a “one-off contingent payment of $500” payable at the end of the agreement provided that certain productivity savings are achieved. The .5% is “cost neutral” because the agreement will give the government savings that are “at least equal” to the .5%.
This sort of limited proviso does not ameliorate the problems of capping. The proviso is itself a form of capping. It restricts the agenda items to those determined by the government party. There is no room left to engage in the dialogue of enterprise bargaining, such as a dialogue about a CPI increase of 3.6% in the year to June 2011 or interest rate rises of 0.75% since March 2010 (as at 3 May 2011, according to RBA figures).
The Full Bench of the Queensland Industrial Relations Commission’s observations in Queensland Police Service v. Queensland Police Union of Employees and Queensland Police Commissioned Officers’ Union of Employees CA/2010/12, 11 August 2011, align with the Charter’s approach to collective bargaining. The Full Bench expressed concern about the ’one size fits all‘ government offer to public sector employees. The Full Bench said at  – :
“We are curious as to how a fixed offer can be made by the Government to its workforce without any apparent and obvious consideration being given to the type of industry under consideration… We are unsure of what consideration has been given to the fact that, within the public sector, employees often engage in a range of diverse activities. Further, in offering a fixed wage offer, there appears to be little consideration given to the fact that each bargaining party may have, and usually do have, a different set of claims to be considered … It is up to the parties negotiating with the State Government as to whether they agree to accept a fixed wages offer. However, if an enterprise bargaining negotiation has not been resolved between parties and a s.149 application is made, the requirement is that the Commission adhere to the requirements of the Act and particularly the statutory direction to act with equity, good conscience and the substantial merits of the case.”
This passage neatly summarises why a government-capped wages policy is contrary to the Charter. The language of equity and good conscience is the language of a ‘fair go all round’. The right to bargain collectively must be an effective right. The Charter sets out a scheme that seeks to make that right effective.
The right to bargain collectively cannot be effective when one party bargains by reference to a policy. It negates the opportunity for a “meeting of the minds” or “mutual enlightenment” that is central to the process of true bargaining (see Howe, J 2009, Australian Standard of Employment Rights, Hardie Grant Books, Melbourne p. 102 and Isaac, JE 1958, ‘The Prospects for Collective Bargaining in Australia‘, The Economic Record, vol. 34 (69)).
When the scheme envisaged by the Charter is altered, the balance that the Charter Right seeks to achieve is detrimentally impacted and the right loses its utility.
Charter Right 9 provides that the parties will have access to an independent conciliation and arbitration system to resolve roadblocks in reaching agreement. Charter Right 10 re-inforces the importance of the independent tribunal in the resolution of disputes in the industrial sphere. The recourse to an independent system to assist the parties to arrive at an outcome, or arbitrate a result if all else fails, makes the right effective for both parties to the negotiation. Legislating to fetter the ability of the independent system except according to applying one side’s policy reduces the efficacy of these Charter Rights.
As the full bench notes, employees and employers (the bargaining parties) negotiate in a particular environment on each occasion, seeking to advance the relevant claims of each against the background of a diversity of occupations and business activities. Restricting the capacity of one party or the other to effectively operate in that environment restricts the right to bargain collectively. Assessed against the Charter, capped wage increase policies are inconsistent with being a model bargaining party.
Sean Reidy is a barrister in private practice and a member of the AIER Executive Committee. He appeared for the Queensland Police Commissioned Officers’ Union of Employees in the Queensland Police Service case. The views expressed are those of the author and have not been endorsed by AIER.