Ideas@TheCentre
Resurrecting the fossils of arbitration
The poor public reception to the Coalition’s Work Choices reforms allowed the ALP to take the high ground on labour market reform and ‘fairness’ in the workplace. The ghosts of Work Choices have made it difficult for the Coalition to effectively oppose changes to the Fair Work Act that make employment arrangements more restrictive.
The latest case in point is Labor’s proposed amendment to allow arbitration in long-running industrial disputes – a move that reintroduces elements of the adversarial industrial relations system of the ‘bad old days.’
Australia’s industrial relations system used to be built on compulsory arbitration. If employers and unions didn’t agree on the terms and conditions of employment, then the Industrial Relations Commission (now the Fair Work Commission) would decide for them.
While that may sound sensible to some, unions would often make outrageous claims for wages and conditions to force rejection from the employer and trigger arbitration. The idea was for the union to extract more generous wages and conditions than they could otherwise obtain through regular bargaining, and higher than the employer was willing to agree to.
The last three decades of microeconomic reform have sought to improve this system. Reforms have sought to leave employers and employees/unions free to sort out their own affairs, in the interests of the business and the needs of the workers.
If an employer and the union cannot come to an agreement, then it is logical that negotiations should cease. Employers and unions should not be compelled to come to an agreement. Nor should a tribunal decide what is in the interests of each party.
In the words of Kenneth Handley, Justice of the NSW Court of Appeal, in Coal Cliff Collieries Pty Ltd v. Sijehama Pty Ltd:
Negotiations are conducted at the discretion of the parties. They may withdraw or continue; accept, counteroffer or reject; compromise or refuse, trade-off concessions on one matter for gains on another and be as unwilling, willing or anxious and as fast or slow as they think fit.
Labor’s proposed amendments will create an incentive for unions to draw out negotiations long enough to force arbitration. Protracted disputes will force up costs on business, and create even greater tension and ill will between the employer and the employees.
Alexander Philipatos is a Policy Analyst at The Centre for Independent Studies.
