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"The Limits of Industrial Action" speech to Labour Management Studies Foundation conference on overturning conflict in industrial relations

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WEDNESDAY, 2 3 MARCH 1 9 8 8






This seminar is on overturning conflict and developing co-operation - both of which are vital to our economic future.

The Australian workforce has seen living standards decline over recent years. Reversing that is of fundamental interest to all of us, not least to trade unions and their members. This segment

of the Conference on "The Limits of Industrial Action" raises an important factor in ensuring we have a more productive system - having rules which are set, understood and followed in the workplaces of Australia.

It is worth mentioning that it is but one factor. In the great range of circumstances which exist, good employer/employee relations are affected by many things. Enlightened management, with a positive attitude to the workforce, good communications,

and attitudes in the local community from which the workforce is drawn are among the other influences which can be important. But the fact that in the right circumstances with the right people, deficiencies in the design of the system can be overcome, does not make the design of the system unimportant.

I don't wish to spend much time giving my views on what constitutes responsible unionism even though it is one of the particular points raised. It is more productive to address the very good reasons why there should be limits on industrial action. Once it is established that it is in everyone's

interests that there be limits then, clearly, responsible unionism involves staying within those limits.

As for the relationship between law and order which I am also asked to address, suffice to say that laws which cannot be enforced are soon - and rightly regarded with contempt. They do not produce order in industrial relations. And in my view without order you do not progress.

One of the fundamental reasons why there have to be limits on industrial action should not have to be spelled out. It relates to the preservation of individual freedom and the rule of law. That it does have to be spelled out is demonstrated by the extraordinary paragraph in the Hancock Report, para 10.293, which reads as follows:

"If we ask why litigants and sportsmen usually accept the adjudicators' decisions, we find part of the answer in the ethics accepted by the disputants; but part, too, lies in their relative weakness. The two factors are inter-related: the ethic of accepting decisions gains strength from the difficulty of doing otherwise. By contrast, trade unions

are, to varying degrees, centres of power: they replace the

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powerlessness of individual workers with collective strength. It is a mistaken view of the pluralistic society to assume that every "subject" is equally dominated by the might of the state and its areas of enforcement. Some may wish that things were different: but vain hopes are no basis for effective policy."

I totally repudiate that statement. It is true unions are powerful. So is BHP. Yet to make that statement about BHP would cause scandal - as it should.

In the same way as the corporations of capital and even governments can be, and must be, subject to the law, so must the trade unions. If they are not, they are instruments of despotism.

The myth which para 10.293 seeks to perpetuate has been exposed as a myth over recent years. It has been shown to be wrong on fact as well as principle.

The sort of behaviour exposed in the court in the Dollar Sweets litigation, the sort of behaviour which led Labor governments and trade unions to pursue the de-registration of the BLF, does not need recounting here. It should not be a matter of disagreement

that extremes of conduct which are breaches of the legal rights of others raise fundamental questions of civil liberties, they are not just economic issues. Nor can it be argued that such conduct advances industrial relations, that is, the relationships

between employers and employees and the production of the increased wealth which is required to advance living standards. The destruction of the employer's profits and fellow employees' jobs are a by-product of such flagrantly destructive behaviour.

In one sense tht^se extreme examples are easy to dispose of. However, some do argue that there should be immunity from suit for illegal acts undertaken to advance the interests of one s ^ e of an industrial dispute. I regard it as beyond argument that there should be rules and that for both the protection of civil

liberties and the advancement of the economic interests of the parties, there should be rules which are kept and which, if not kept voluntarily, are effectively enforced.

This is not an academic matter. The present system has lots of rules, they are often not obeyed and when not obeyed there is too often little prospect of effective enforcement.

This problem has been acknowledged by the current government. Mr Willis, in introducing his ill-fated Industrial Relations Bill on 14 May 1987, stated that:

"An essential element of any industrial relations system which provides benefits and protections to registered organisations and their members is that there should be an effective means of ensuring adherence to the principles on which the system is founded and compliance with the decisions

of its institutions."


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He also admitted that the current compliance provisions had, in his words, "long since fallen into disrepute and are now substantially moribund". Yet it now appears extremely doubtful that the Government will do anything about introducing effective compliance provisions into the arbitration system.

If we forget the issue of civil liberties (which I don't suggest we should) and focus on economic effects, does the lack of effective compliance provisions matter?

I would have thought that common sense alone requires a 'yes' answer to that. Efficient production requires predictability, and if one party can trample over the other with impunity, high productivity seems unlikely.

But perhaps more convincing than common sense is an examination of the industrial relations of other countries, not least those which the ACTU sees in Australia Reconstructed as potential models for Australia, namely West Germany, Sweden and Austria.

These have industrial relations systems which seem to be widely admired by the trade union movement in Australia.

In all of these countries there are fairly strict and well accepted restrictions on industrial action. Look first at West Germany. It, like each of these countries, has a system based on collective agreements. In West Germany the contracting parties

are bound by what is called the peace obligation. That is, for the duration of the collective agreement, neither of the parties is permitted to initiate industrial action against the other party with the intent of altering working conditions laid, down in

the agreement. This restriction is understood to be a necessary and inherent element of the collective agreement. Even if the parties abrogate the peace obligation it would remain. Such an, abrogation would be null and void.

Where a union is responsible for an illegal strike it can be made liable for damages.

There is in addition to the peace obligation a range of other legal restrictions that have largely been developed by the courts.

Where strikes are permitted, strike action can only be taken after a secret ballot of union members. Even then the courts require that they can only be used as a last resort. That requires that all means of negotiation must be exhausted and mediation must be attempted before a strike can be called. In

addition, political strikes, and wildcat, unofficial strikes are illegal.

Moreover, a recent court ruling has found that sympathy strikes (or what we call "secondary boycotts") by employees not directly involved in a dispute are unlawful. Employees have no right to take strike action against employers not involved in a dispute.

In fact, in practice, unions in West Germany generally behave consistently with the lines drawn by the legal rules. What that shows is that the law has achieved its purpose - its purpose is not to punish but to bring about civil and responsible behaviour.



Let us now turn to Sweden: the ACTU model - par excellence. In Sweden, like West Germany, all collective agreements contain a peace obligation. Industrial action designed to bring about an alteration in a collective agreement, or to exert pressure in a dispute over an agreement's interpretation is prohibited. Breaches of these prohibitions makes a union liable for damages. Moreover, to enforce a duty under an agreement, the Labour Court may issue an order combined with a conditional penalty. If the

order is not complied with, the penalty may be imposed in a new court action.

There are other restrictions on industrial action. Most notably, unions must, on pain of fine, give seven days notice before they take such action.

The unions and employers have also reached agreement to protect essential services, though there have been occasions when ad hoc legislation has been prepared to settle conflicts when essential services have been endangered.

Austria has similar restrictions. The obligation to refrain from industrial action is a normal part of a collective agreement. If there is no explicit reference to the peace obligation in the agreement it is taken as implicitly agreed that all industrial action is prohibited in relation to all matters regulated by the collective agreement.

Political strikes are illegal, as are strikes that endanger health or safety.

Illegal strikes can be dealt with by the use of injunctions and damages, though in practice such remedies are not used, because of the extremely low level of disputation.

The question can be asked whether this combination of rule acceptance and enforceability is a positive feature of the respective systems.

The OECD certainly seems to think so. The 1987 Report on Adjustment and Economic Performance saw the absence of legal controls over collective bargaining as one of the distinguishing features of those European countries with the worst record in

industrial relations.

The report dealt with the whole issue of economic performance and structural adjustment. It was presented to the OECD Ministerial Council last year. In discussing the labour market and industrial relations it noted that those countries with the worst industrial relations records over the last two decades have been those with the weakest framework of labour law - the UK, France and Italy. It noted that the situation in these countries has improved in recent years; however it went on;

"It can be argued that the continued exemption in each of these countries of a broad range of industrial disputes from liability for civil damages not only increases strike frequency but also reduces the value of collective agreements to both workers and employers."


The report notes in particular that the legal protection granted in the UK to strike action taken while existing collective agreements are in force has made it virtually impossible for collective agreements to provide a stable context for corporate planning.

It appears that restrictions on industrial action are the norm, precisely in those countries which the ACTU eulogises and wants us to learn from. Moreover, an authority as eminent as the OECD Secretary-General sees the existence of effective legal restrictions on industrial action as a major factor distinguishing those countries with relatively successful

industrial relations records.

While one cannot simply transfer approaches taken in other countries to Australia, we can (and must) develop principles appropriate to our own society and industrial relations system. I would like now to propose four criteria which I believe are perfectly reasonable and should be accepted by all sides.

Before outlining these criteria however, it might be appropriate briefly to summarise our basic approach to the role of ' arbitration vis a vis direct bargaining. We propose giving employers and employees much greater choice in deciding how they will regulate their industrial relationship. In particular, we will enable those employers and employees who so wish to opt out

of the jurisdiction of the arbitration commission and determine wages and conditions by direct agreement. While we would expect over time a growing number of enterprises to take this avenue, we also acknowledge that at least for the foreseeable future, many

employers and employees will choose to remain within the " jurisdiction of the Arbitration Commission.

The fundamental objective of our industrial relations policy is to achieve an harmonious and constructive relationship between employers and employees. We recognise, however, that all the co-operative behaviour in the world can still be destroyed by the unreasonable behaviour of a few. What has been going on in the

last few weeks in the ACT building industry is a good example of this, prompting Commissioner Baird to describe one major building site as being in a state of anarchy. A feature of many such disputes is that often they involve renegade elements of the union movement, which are in conflict with the broader trade

union movement, as well as the Government and the Commission.

What is currently lacking is an effective mechanism within the arbitration system which enables such renegade elements to be made subject to the system of which they are so ready to take advantage.

Thus the first criterion I would like to enunciate is that unions - as well as employers - who operate within the jurisdiction of the Arbitration Commission, must comply with its decisions and orders. The existing arbitration system is in effect totally

lop-sided. For example, when the Commission arbitrates for an increase in award wage rates the employer is legally obliged to pay. Moreover, there is an effective system of legal remedies to


ensure that he or she does so. Yet when unions disagree with the outcome of arbitration they are, in practice, free to indulge in industrial action to impose their claims with virtual impunity.

As I have already pointed out, this problem has been acknowledged by Mr Willis on behalf of the present government. We have a proposal before the Senate to provide an enforcement mechanism through the Federal Court. Current matters before the Commission

leave little doubt that is required.

The second general criterion concerning limits on industrial action concerns voluntary agreements. As I mentioned previously, the Liberal and National Parties envisage a greatly increased role for direct agreement between employers and employees.

We are not going to move to the British system where there is legal protection given to strike action taken while agreements are in force. As the OECD Report I referred to earlier notes, such a situation not only increases strike frequency, it also devalues agreements for both employers and employees. Under our policy, voluntary agreements will be legally enforceable.

The third criterion is one that I believe is gradually coming to be accepted. That is that secondary boycotts are totally unacceptable and should not be permitted in any industrial system, whether characterised by compulsory arbitration, or direct bargaining. Secondary boycotts are an iniquitous and unjustifiable practice as they involve a deliberate attempt by persons not in an employment relationship with a business to damage that business.

This is, of course, why we are so concerned to maintain Section 45D of the Trade Practices Act, in the face of repeated attempts by the Hawke Government to repeal or emasculate it. To quote retired Federal Court judge, Sir Reginald Smithers

"To engage in a secondary boycott is to inject a pernicious element into industrial affairs. A union which had no quarrel with a particular employer might threaten that employer to exert pressure on a target employer or "we will deal with you and you will suffer". It is that aspect that bothers m e ."

My final criterion has something in common with my objections to secondary boycotts. It is one thing for employees to put industrial pressure on their own employer, when for example renegotiating an agreement. It is quite another for workers to take action that threatens public health or safety, or causes serious damage to the general community. That is why we also advocate Federal essential services legislation. There is nothing draconian about such legislation. It is simply a recognition that industrial action should not be directed against the community as a way of putting pressure on an employer, or for some essentially political end.


To repeat, then, I think there should be a reasonable consensus that: industrial action should not be permitted:

(a) in defiance of arbitration decisions (b) in defiance of a voluntary agreement (c) in the form of secondary boycotts (d) when it threatens essential services.

I believe that this position would have widespread support in the community. Nor do I think they would be objectionable to most trade unionists.

The union movement unfortunately has always opposed legal restrictions on industrial action. I believe this is a head in the sand approach. It ignores international experience which clearly shows that responsible unionism is not incompatible with such restrictions.

It is unfortunate that in Australia we have tended to use the expression "penal sanctions". The aim is not to penalise anyone. The aim is to bring about responsible and civil behaviour. Voluntary self-restraint is clearly the best approach. Yet it is

clear in Australia that we cannot rely on such self-discipline without the existence of legal remedies.

The position I have outlined represents the minimum criteria,, I think, for making the system work, for making it more reliable and accountable.

There is no doubt, however, that the most desirable way to ensure that there are limits on industrial action is to increase by every means available the desire of the parties to work in . harmony.

t ' There is however no escaping the need for limits which can be imposed because in this area of human activity, as in others, there will always be some who will seek to break the most reasonable rules. The approach to encouraging direct agreements between employers and employees, and our encouragement of employee share ownership is designed to ensure that employees are inherently less likely to indulge in irresponsible behaviour and to listen to irresponsible voices seeking to disrupt the enterprise. There is a heavy responsibility on management as far as possible to produce an environment which avoids conflict and legalism, which are far too often features of the status quo of industrial relations in Australia.The views put are not views in favour of legalism, but I have suggested there is a minimum set of requirements to make the present system viable. But if we want a permanent system which promotes responsible employee behaviour which itself establishes a tradition of limits to action, I believe we must establish - even if it takes a generation - a genuinely contractual ethos in Australian industrial relations.