Change pushes industry fear

RECOGNITION disputes, likely to be driven by the unions’ reaquired right of entry, loom as one of the sleeper issues of WA’s newborn industrial relations system.

A group of industrial relations experts drawn together by WA Business News agreed these disputes, which can become the most heated of industrial relations fights, are likely to flourish as unions exercise their right of entry.

University of WA Graduate School of Management associate director Ray Fells said these disputes were far worse than any wage dispute.

Unions WA secretary Stephanie Mayman agreed they were a real, and likely problem, as both unions and employers try to make sense of the new industrial relations framework.

Others present were: Chamber of Commerce and Industry director employee relations Bruce Williams; Freehills national IR practice leader Russell Allen; Motor Trades Association CEO Peter Fitzpatrick; Beilby Corportion WA general manager Rick Dunn; Workplace Professionals director Tony Thompson; AJ Durack Management director Tony Durack; Master Builders Association of WA executive director Michael McLean; and Employment Services and Solutions Australia director Graham Lilleyman.

While all present agree the awards system needed to be modernised, there is concern that unions and employers will differ on what is meant by modernisation. There is also a fear that WA’s industrial relations system will become a hollow shell as businesses that can afford to do so seek asylum under the Federal system.

It is deemed likely larger businesses will operate in the Federal system while small and micro businesses will stay in the State system, creating split jurisdictions likely to create problems for employers and unions alike.

Whether this remains the norm for long is uncertain. There is a belief that unions, through enterprise orders, will force wage rates up close to those being offered in the Federal system – without offering the same flexibility – and undermine the leveraging aspect Australian Workplace Agreements offer.

WABN:WA's industrial relations framework has changed dramatically. WA Business News asks what effect these changes will have on business, after the previous Government's workplace agreements system.

Tony Thompson: From my perspective and the perspective of the small businesses we represent, the change from the workplace agreements system has been very detrimental because it has taken their eye off the main game, which is making money and providing jobs. Most of our clients are not unionised or members of employer groups. The whole legislative framework has reimposed onto small business third parties, and fourth parties for that matter, that they have not had to deal with for the past nine years under workplace agreements. They come back into a centralised system where awards are irrelevant. They don’t recognise the realities of business practices. And really, it’s forcing them into the Federal legislative regime. EEAs, as a business, we will not promote them to small business as a viable alternative.

Graham Lilleyman: We have a lot of small business clients. The problem we have is that the workplace agreements system is a very flexible system, whereas the awards system is very regimented and has had very little change over the past 20 years, especially in the past 10 years, and now we have businesses operating who have never operated under that system. The world’s changed since those laws were created. Double-time on Sundays and things like that. It’s just not something that was relevant to the awards system 10 years ago because hardly anyone used to operate on Sundays. It is absolutely critical that the award modernisation process the industrial relations commission has been involved in has a good outcome and a sensible outcome.

Stephanie Mayman: Unions don’t agree with EEAs either. I acknowledge that awards, as they come, are outdated and are, in many cases, inflexible and the challenge for unions and employers is to ensure flexibility either through amendments to awards or through other bargaining arrangements. In terms of the other amendments can I say, with respect to workplace agreements, that there was only a 10 per cent take up rate in WA so to that extent it was not a panacea and I don’t ever believe we can rely on workplace agreements as having been a panacea. The legislation will take a while to have an effect, in my view. The biggest emphasis for us, the trade union movement, is clearly right of entry. We are now back into workplaces and we will take the opportunity for that to promote and encourage unionism. I do not accept, when I get constant phone calls to the office, that I work in a non-unionised workplace because that’s what my employer tells me. That is not a right of an employer. It is the right of the employee to choose.

Rick Dunn: Beilby’s role, I think, here is that we represent employers and employees. It is effectively trying to facilitate effective working arrangements bet-ween employers and employees. The change, as far as that’s concerned, doesn’t affect us. The things that are of interest to us is that the past 12 to 18 months have been one of the more uncertain periods of time for anyone thinking about em-ployment. It’s been showing up in the number of job vacancies, which have dropped sign-ificantly. The past year was the worst for the past 10 years. We had two elections occurring last year. Those sort of events, along with the change happening, all they do is create more caution and uncertainty and makes employers say ‘maybe I won’t, maybe I won’t, maybe I won’t’. Whilst it’s changed a little recently and it’s improved, we’re still seeing a marketplace that the employers are saying, ‘unless they’re a superstar, we’re not going to put them on’. I think all of those roll up into the same package that is saying there is uncertainty out there at the moment.

Peter Fitzpatrick: I think the real issue here is all about balance. If you tip the balance too far one way then unfairness and controversy follows. I think that’s what’s happening. You have small business proprietors who have no ability to negotiate collectively under the Trade Practices Act and are now individually, on a one-on-one basis, finding them-selves in conflict with their workers, and that’s starting to bite. We’ve already had the AWU [Australian Workers Union] distributing leaflets at service stations telling workers they’re being ripped off by their employer. Handing out brochures that show archaic award structures. I think there are seven different types of penalty shift rates by three different levels culminating in somebody who probably earns $15 an hour now – with hours worked well above the minimum wage – they’re saying should be on $30 an hour. I’ve had, particularly in the service station area, a lot of correspondence from people saying that in the end this is where the balance is tipped against everybody. It works against the employee because those in the after-hours service stations will say, ‘well I’ll shut the place or put the employee off and work the business them-selves’. And the community is going to be worse off because there will be no service stations open. So the community, the employee and the business all suffer. I don’t know what gain there is going to be in all of that other than the odd unionist here and there that gets a salary out of it. I think we should be looking for some minimum arrangement where this is what a fair wage is based on what the business has the capacity to pay and go for some neg-otiated outcomes. But to have these antiquated systems of awards that were never designed to work 24-7 and to impose those on small businesses that have no capacity to arrange negotiated outcomes is just going to cause a lot of trouble and will put WA backwards.

Ray Fells: Just to take up what Peter was saying about balance. I suspect some others would say the previous system was pretty unbalanced too and if you look at the employment profile in Australia, in regards to part-time and casual work and the pres-sure of very long hours is another area that people would say it is a system that is work-ing in the employ-ment market but not in the social envir-onment. I’m not arguing against the point you’ve made but there is another group of people. If you look at the system we’ve got, as you know, the builders are doing their own thing, you’ve got the mining group where they say that’s a different environment, you’ve got contract cleaners and so on. Maybe the problem is we’re trying to have a one-size-fits-all system. In terms of balance everyone’s got a different view about what balance is.

Without going into my life history, I used to deal with recognition disputes, which haven’t surfaced yet. There’ll be non-union workplaces where the unions want to get back in and I’ll tell you you’ve never seen a dispute like them. That to me is the sleeper that is waiting in the system. Union re-entry, not necessarily into a small business, but a medium-sized business. And I don’t think the legislation or the mindsets on either side of this have addressed this issue. The disputes are awful. Wage disputes are nothing compared to recognition disputes. I’m sorry that’s a negative but I think that is a bit of a hole in the way the system is moving.

Tony Durack: I think the disappointing thing with the demise of the workplace agreements is that the employers that were very good that achieved something for both the employee and the company achieved one heck of a lot with it. I know there were some that were perhaps exploiting the whole situation but some people got very creative and some businesses progressed dramatically by having that flexibility within the system, which is now gone. I agree with what Peter says. Another area, for example in the restaurant area, it is going to impact dramatically on employment. A restaurant I’ve been with this morning are saying their costs are going to go up in the area of $120,000 per year. And I think the other thing, the sad thing about us going to the centralised system, is that enterprise bargaining was brought in in the first place because it was thought it would be better than the collective bargaining-type arr-angement. We’re reverting to a collective arrangement. Enterprise bargaining was brought in in the first place because productivity in this country was pretty low and had to be improved and now it’s going back to the former system. That could hurt our productivity.

Michael McLean: I agree with Stephanie’s comments that we won’t see changes in the industrial relations climate overnight, that they will come over time. But it will certainly change the framework of the way we do business and change the culture of industrial relations. It’s going to be very interesting to see, when the review takes place, what this legislation provides for in two years’ time. Unfortunately, my prognosis is fairly pessimistic, but I deal with the CFMEU at the top-end of the industry. But ironically, I think this will bring rifts between the haves and the have-nots because the union, through its muscle, will foist a 36-hour week on the top-end of the building industry and that will make that end of the building industry less competitive. I think the collectives are going to create counter-productive benefits for those that enter into those arrangements.

I foreshadow a more adversarial system. I expect IR will be on the front pages of the newspapers. It will put huge responsibility on the industrial relations commission to deliver. Whereas before the situation was more deregulated and allowed outcomes to be determined by the parties themselves, this particular system puts the IR system on a huge pedestal to deal with such issues as whether a union official has acted improperly. My prognosis is pretty negative, which is a shame because I think WA’s economy is heading in the right direction.

Bruce Williams: At the end of the day, whatever concerns we had about workplace agreements, it never warranted their removal. The concerns could have been dealt with through some minor changes. They’ve been replaced by a pale comparison that will fail. There is strong support among individual workers for workplace agreements. The [IR] Reform Act has a raft of concerns. Most involve the central role for the WAIRC and the regulation of enterprise bargaining. Enterprise bargaining becomes a legal battlefield. This may benefit some but will undermine the ultimate value of enterprise bargaining. This also has the potential to promote pattern bar-gaining. The only thing that stands between us and all of those negatives is the industrial relations commission. Employers are re-lying on third par-ties for the safety of their business. This is why many are going to the Federal system. What we are going to see is negative consequences for a whole lot of businesses. The Government is banking on positive economic growth to mask those negatives.

Russell Allen: There has been some agreement around the table. Stephanie has agreed that the awards need modification. I tend to accept the previous system was unbalanced. The first wave of changes was alright but I’m not too sure about anything that happened after that. With the pendulum swinging back the other way we will see the demise of a very good institution. I think WA’s IR system has served the State well. It is sad that those who advise companies are saying they can’t work under the system. We had a great system but we might be seeing its demise. I don’t like advising people to use Australian Workplace Agreements but I have no option. The change has come far too soon and has not been thought through. Award modification should have happened first. The real problem is with those [old] awards applying and no workplace agreements; we are going to see a loss of jobs that have been created by the flexibility of the workplace agreements system. These were not low paying jobs. These were quite attractive positions and quite flexible. All those flexibilities are being cut away. The Government got its reform in the wrong order. We need to change the award system first. It will take time for it to bite. This is going to be a time for unions to be responsible both with awards and right of entry. I respect the right of unions but there needs to be respect in the way those rights are used. It will be a major test for the WAIRC in how it uses its new discretionary powers. The system allows the commission to use its discretion and it can do the unions’ jobs for them. It can be a system that promotes lazy unionism. I think this is a time when we will see some changes.

WABN: We’ve heard these recognition disputes are likely to be a looming problem. Just how bad can we expect them to be?

Stephanie Mayman: Recognition disputes are very difficult. The biggest issue out there is not wages – it is security of employment. That issue alone is driving fear. If a union official goes up to talk to a worker it’s ‘whoa, I’m not allowed to talk to you’. If a union exercises its right of entry and an employer pinpoints a worker for that right of entry then the blue is on. Recognition disputes are very difficult. The quicker they are resolved the better. Trying to change culture in a workplace is very diffi-cult.

Michael McLean: The right to join a union needs to be acknowledged. The right to not join a union also needs to be recognised. In my experience if people want a dispute resolved, it will be. If people are not going to take their responsibilities seriously you will have an imbalance. One example is the inclusion of anti-coercive powers in EEAs. Why are there not similar powers put into EBAs.

Tony Thompson: One issue not being raised is good faith bargaining. Once a union lodges effectively a pattern agreement on a small business the business is either distracted by arguing against it and faces an enterprise order or caves in. They won’t have any choice to effect the agreement to their benefit.

Ray Fells: It should be noted that pattern bargaining was actually an employer invention. Employer groups predate trade unions. Whether it is a good thing or a bad thing depends on the state of the labour market.

WABN: Everybody here seems to agree that the new system will force a new way of doing business and have effects on all types of businesses. But which industries will be impacted on the most?

Peter Fitzpatrick: A lot of factors affect our industry – globalisation, ineffective competition policy and so. There is a lot of fear in our industry. Four to five businesses are closing their doors every week. A car dealer with tens of thousands tied up in his business is on three to four months’ notice from manufacturers. The last thing small businesses want is a fight with their workers. A lot of them are very loyal to their workers. You have business owners laying awake at night wondering how they are going to pay the bills. I’ve found, in the North West, that a lot of business owners were paying themselves less than their employees. It’s hard to get skilled people up there so a panel beater can be on $80,000 while the husband and wife that run the business may take only $50,000 out of it. There is a new working poor and it is the small business owner. The last thing they want is a whole new regime imposed on them that they have no control over.

Graham Lilleyman: People are talking about the casualisation of the workforce. It costs more to employ someone than it does to take on casuals. Hospitality has been hard-hit due to a range of factors, such as increasing superannuation and insurance costs, plus it is facing a downturn as well. The award system at the moment does not allow businesses to operate effectively in that industry. Hospitality makes most of its money on the weekends but time-and-a-half penalty rates makes that too expensive.

Russell Allen: Early problems in jobs will be in the retail and hospitality sectors and the businesses that support them. It’s not just the retail and hospitality businesses. Add to those some areas in the service industries.

Stephanie Mayman: People keep on talking about the flexibility of workplace agreements. The evidence shows that they were a way to reduce wages and conditions. They gave employers a pecuniary advantage over nine years through flat rates, no overtime or penalty rates. Yes, the wheel has turned. Yes, there will be adjustments to a fairer system. It’s all about the framework – not about the outcome. The situation at the Federal level under AWAs is that they have to meet the relevant award.

Russell Allen: The real issue was flexibility and penalty rates, not so much rates of pay. I think the previous Government’s system would have been better if it had been underpinned by the relevant award rate of pay. What worries me in the way the legislation has been framed is that there is a risk the union movement will be blamed for the worst outcomes.

There are certainly difficult times ahead for business. Can any changes be made to the industrial relations legislation to help those sectors that will be hardest hit?

Tony Thompson: John Kobelke had opportunities to talk to people and he ignored them. My answer to that would be no. Everybody around this table would have had a meeting or two with Kobelke or at least his policy advisers.

Peter Fitzpatrick: We’ve looked at the awards and several graduations of it. We looked at what was a reasonably successful service station. We’ve found it would lose money if it opened over the weekend paying its staff on award rates. We’ve had meetings with Stephanie Mayman, the minister and his advisers and all of the union representatives and we keep on getting back to the award. Where the rubber hits the road, we have people trying to run a business, and they can’t. Steph, we came and saw you and with the proposal you offered us, some of our members said they would be worse off than they would be under the award.

Stephanie Mayman: We can continue to talk. My door is always open.

Peter Fitzpatrick: I have a meeting with the SDA (Shop Distributive and Allied Workers Association) this afternoon. The meetings go on. I just had a letter from one of my members saying he was still worse off under the SDA proposal than he would have been under the award.

WABN: There has been an argument raised that employers received a pecuniary advantage under the workplace agreement regime? Is this correct and if so, how was this so?

Stephanie Mayman: One of the problems you’ve got under the work-place agreements regime is that while there is an enforcement mechanism, it is hard for the employee to trigger it. The previous Government felt it had an educative rather than an enforcement role. It is easy for employers to pay the wrong rate of pay.

Russell Allen: I agree there should be legal enforcement easily accessible to employees. The argument isn’t helped. It gets down to implementation problems. In Peter’s case it shows the unions are not showing a flexible enough approach. Leadership needs to be shown and it’s good to see you are taking it Stephanie. Awards are going to kill business and jobs before remedial work is done.

WABN: Just to change the subject slightly, we’ve heard a lot about employers going into the Federal industrial relations system. What are the implications of that for business and for the WA IR system?

Bruce Williams: I think one of the risks of going into the Federal system is that the State system will become a hollow shell. Many larger employers are already moving across. Some medium-sized and small businesses are too. We’re going to have a significant shift across. What we will wind up with, in one to two to three years’ time, is a split system – larger businesses in the Federal system and small to micro businesses in the State system. At the end of the day we will have a whole framework being built around a non-existent constituent. Employers are being driven out. The tragedy of all of this is we have gone from having the best system to having one of the worst. This is the result of a dot-point checklist of election promises. The result of that serves nobody’s needs.

Peter Fitzpatrick: There are certainly a lot of people going to AWAs. The AWAs are becoming a cottage industry over here.

Graham Lilley-man: You can’t see the end of the queue for the number of people trying to transfer across.

Tony Thompson: The Feds are moving to set up their own [building industry] task force. It illustrates again the Federal Government’s willingness to override the State system.

Michael McLean: There is a real fear of reprisals, with the strength of the CFMEU, if builders move to risk manage by going into the Federal system – particularly in the public works sector.

WABN: You all seem to be painting a bleak picture of the way ahead. What advice can you give to businesses to make the most of their industrial relations opportunities.

Russell Allen: There are no good options under the State system so we have to look at Federal ones – that’s why AWAs are becoming so popular. There will be catch-ups to AWAs by people using enterprise orders to undermine the leverage of AWAs. We will have the commission awarding wages at the same level as the AWAs without the same flexibility. I believe AWAs will be a band aid solution. A number of employees preferred the system they were working under.

Stephanie Mayman: Workers didn’t want workplace agreements. I don’t think leaning to the Federal system is the panacea. In 1993 the unions fled to the Federal system. They kept their State provisions though and now some are starting to come back. It may be the employers looking at AWAs will come back.

Russell Allen: I don’t think the Federal system is the best thing for the State. I think we are also going to see occasions where the Federal system can’t work as promptly or with the same quality as the State system.

Stephanie Mayman: I do think the award modification process is vital. Many awards are off the face of the earth.

Bruce Williams: I have a sneaking suspicion that how unions view modernisation and how employers see it will be different. I don’t think we will see a cooperative approach to award modifications, sadly. Penalty rates, I don’t think, are something the unions are prepared to put on the table. I don’t think award modification will be the solution.

Peter Fitzpatrick: At the end of the day it comes down to getting an agreement between consenting adults. The problem is there is no recognition that small businesses don’t have the capacity to work under the terms and conditions of awards.

Russell Allen: If you’re going to get an effective outcome you must move awards to a level where you have a balance between protection of rights and business viability. I’d like to see a regime where an employer can negotiate with workers. Workplace agreements created quite well-paid jobs. I admit there were some that misused them, and that hurt everyone.

Tony Thompson: While there is all this talk about awards and award nomination there are a number of employers that are not members of unions or employer groups that don’t get involved in the changing of awards. They don’t even get told when their obligations change. So while people are talking about awards and that, small businesses are not involved. Small business needs the ability to strike an agreement with its workers.

Tony Durack: We’re realistically kidding ourselves if we expect good employer-employee negotiations with the system we have now.

Russell Allen: Employer groups need to put the case to the unions about what the workplace agreement regime offered employees. They need to put the case that they need far greater flexibility. If they can get that sort of debate it will be good otherwise we will always be at loggerheads. A personal contract environment is a big ask but it will be the best way forward, along with modernised awards.

Tony Durack: Stephanie, do you think unions will accept personal, above-award contracts?

Stephanie Mayman: There is a provision in the legislation that allows the kind of things talked about today. I’ve approached one major industry in WA regarding modernising its award. I’ve not had one industry group come to me. Seems to me that the way it will work is that the most strategic award will be determined first. But what is the most strategic award?

Bruce Williams: The idea that one award determines what suits all business is wrong. The immediate reaction for business is to return itself to balance before the workplace agreements disappear and that means many are moving to AWAs. In the medium-term there will be employers looking at award modification. At the end of the day the focus on awards will come about because our system is forcing us back to them. We can even debate whether the award wage rates are correct. The award rate is just a historical accumulation of discussions, arbitrations and consent deals. The market set wage rates when workplace agreements came in.