ll, medium and large businesses. The committee believes that certain
provisions must be available to protect all employees in the industry and that
will need to be included in all agreements. Under the proposed bill such
provisions may be invalid because they arise from what may be considered a pattern agreement, even though only part of the
agreement results from this process.
5.17
The CEPU
believes that there are some provisions such as those related to skill based
career paths and occupational health and safety that by definition must apply
across an industry. It is impractical for workers sit down with each individual
employer to renegotiate industry standards designed to protect employees in the
industry.[216]
The CEPU submission continues:
Pattern agreements
have been singularly responsible for ensuring employees have access to
redundancy and income protection entitlements via the use of industry
funds. Industry funds pay entitlements
to employees even where employers go out of business. In the absence of the pattern agreement
provision it is likely the employee would have lost all his or her
entitlements. Enterprise agreements containing some pattern clauses should not invalidated or
refused certification. Pattern agreements should be certifiable as they
facilitate a level playing field.[217]
5.18
The
committee received evidence that pattern bargaining was fast and efficient
because it is well understood by both employers and employees. The committee
majority is concerned that the bill will disadvantage some small businesses
which may lack the skills and resources in industrial relations to negotiate a unique
EBA for every site or project. Businesses would be forced to find the
resources or to develop expertise to negotiate a series of separate agreements with the same employees for different wages
and conditions as they move between different sites and projects. The result
would be inexpert industrial relations practices rife in industry,
creating uncertainty about wages and conditions, curtailing core building
activities and increasing costs, resulting in reduced productivity across the
industry.[218]
5.19
Oral
evidence from the CEPU set out the dilemmas facing contractors in the
electrical industry. It was noted that companies with flat management structures
will have problems negotiating the hurdles of implementation. Employers say
they want consistency and uniformity but they do not want pattern bargaining. Many
electrical contractors are quite comfortable with the provisions as they work
now, because they are simple. They can sit down and negotiate flexibilities in
relation to hours of work and work arrangements which are built into core EBAs.
But under the new arrangement they will not know how to treat their employees
who are off site.
When there is a
loss of time in relation to a health and safety issue in a residential area,
are they required to report that to the federal safety commissioner? If there
is an issue in relation to a stoppage, or there is a claim made by the union in
relation to the maintenance service area, are they required to report that to
the ABCC? These are the provisions that they are going to have to deal with.
For a very small business with a very flat management, our view is that it will
create the chaos which I referred to in my initial submission.[219]
5.20
The
committee notes this warning about the difficulties to be faced, mostly by
small business contractors, with the introduction of requirements that they
make individual agreements. It is aware from other inquiries about the trauma
of legislative changes to small business as a result of GST compliance.
Compliance with industrial relations changes are far more onerous because it
involves more than learning about a procedure. It involves higher level
personnel management and negotiating skills, which many small business people
do not possess. If the lack of skill forces people out of an industry already
short of trade skills the result will not be a happy one for the industry.
Who controls this industry?
5.21
The problems which seem to occur with pattern
bargaining, and therefore the reason for prohibiting them, relate to
perceptions of relative power in the negotiation process, and particularly the
use of industrial action by unions to support their negotiating
position.[220]
Coercion in agreement making is at the heart of the standover
tactics in the industry that gives rise to unlawful industrial action, anti
competitive practices, agreements that barely reflect a mutuality of interests
and militant and unlawful union power over contractors or labour supply.[221]
5.22
A belief in the unfairness of the relative balance of
power in establishing agreements between employers and employees in the
construction industry underpins both the Cole
royal commission and the Governments' response to the commission's findings.
The Government wishes to negate the relative power imbalances that it sees in
the industry by providing additional power to contractors and subcontractors in
the making of agreements. The Government perceived that unions have power to
apply pressure to contractors and subcontractors to establish agreements that
do not suit their businesses. This
power is based on the risk of substantial liquidated damages for breach of
contract facing employers, whereas only minor financial penalties face
employees if industrial action takes place to establish an agreement.[222]
What is proposed is
a new system that empowers employers and employees to accommodate proper
bargaining....It establishes clear boundaries around lawful industrial action
and other processes for revising outmoded work rules....The way that pattern
bargaining in the building and construction industry currently operates is one-sided,
inflexible and anti-democratic.[223]
5.23
While some
groups within the industry and government are concerned that the practice of
pattern bargaining gives excessive negotiating power to employees, overall the
practice is seen as providing benefits to all stakeholders in the industry. The
committee majority is concerned that, in seeking to address the relative
balance of power between the different stakeholders in the industry, the bill
does not fairly balance the legitimate role of both unions and employers to
reach a genuine agreement.[224]
5.24
For
instance, the matters set out in section 62 do not provide the power to compel
both parties to negotiate fairly, with the proposed sanctions removing the
negotiating power of only one of the parties. Employees cannot use the
termination of a bargaining period to promote genuine bargaining because while
this supports this bargaining position of the employer it negates the
bargaining power of the employees.[225]
5.25
Employer organisations support the prohibition on
pattern bargaining in the belief that contractors are targeted on the basis of
their commercial vulnerability to unspecified threats. It is claimed that
resulting peer pressure will compel other contractors to fall in line with
standard agreements:
There is a lot of
authority in the hands of union officials if they know full well that there are
massive commercial implications for a particular developer or contractor if
projects are not constructed on time. And that conveys an enormous amount of
power, as well as responsibility, to union leaders. If the findings of the
royal commission that there is a failure to adhere to or respect the authority
of law and the proper processes of dispute resolution and the like are then
superimposed on that construct then that power is capable of being misused and
is misused and damages the industry.[226]
5.26
Union leaders privately dismiss any idea that they
wield power in the way that is claimed by their critics. They see themselves
and their unions as just as vulnerable as proprietors. The committee believes
that power is diffuse on both sides of the industrial divide, a reflection of
the diversity in business and industrial activity. Industrial relations are
local: they are not (except in unusual circumstances) centrally ordered. Union
leadership at a state level may not be aware of many industrial disputes. As
evidence to the Brisbane
hearings clearly indicated, industrial harmony depends very much on the degree
of trust which is developed, and the appreciation of shared interests between
managers and proprietors on the one hand and local and state branch level union
leaders on the other. Personal relationships play an important role in sorting
out industrial relations in this industry, as in any other.
5.27
Building firms allegedly targeted by unions are indeed
more likely to be the most vulnerable, as some submissions have suggested, but
the nature of this vulnerability needs closer examination. It more often than
not relates to their level of solvency, to the degree to which they comply with
regulations, and to the general managerial competence which their proprietors
demonstrate. Marginal operators in the industry are mostly responsible for
underpayment of employees, tax evasion and failure to pay superannuation
entitlements. They are most likely to go into liquidation, leaving their
employees and sub-contractors with unpaid entitlements. The committee majority
does not believe that the industry should be re-regulated by the BCII Bill for
the purposes of protecting this class of business.
5.28
The committee notes also that employers are advocating
that their attempts to enforce the rule against pattern bargaining be supported
by the taxpayer. Presumably they would argue for this on the grounds of public
benefit. It is argued that:
The principal means
of enforcing the prohibition against this illegitimate use of pattern
bargaining is by way of injunction. This
mechanism would be unduly expensive for a small business to instigate, both
financially and in terms of the coercive force that may, as a consequence, be
directed towards the particular small business.
MBA believes it is essential that the ABCC stand in the shoes of the
affected party. We believe that the Recommendation should be strengthened by
permitting a relevant small business to make a complaint to the ABCC, which it
must investigate, where an allegation of pattern bargaining arises and by
providing that ABCC is able to initiate the injunctive proceedings.[227]
5.29
The
committee notes that no union has put forward a similar claim to finance
injunctions on the basis that disciplining the small business sector is a
matter for the public good. The committee majority makes only the obvious point
that parties are equal before the law in countries which are governed by the
rule of law. The MBA's assumption is that ABCC will always be standing in the
shoes of small business. This proposition is probably unconstitutional. Courts
either determine what is in the public good, according to law, or where they
cannot do so they draw this to the attention of legislators. But it is beyond
the role of Parliament to make legislation on the basis that a free association
of citizens will be presumed to operate on the margins of the law or beyond.
The right to negotiate
5.30
Several
witnesses provided evidence that pattern bargaining is legitimate within
national and international industrial relations practices in both union and
non-union bargaining contexts.[228]
The purpose of
pattern bargaining may be to try and improve industrial conditions across an
industry or industry sector. There is nothing fundamentally objectionable with
that approach to collective bargaining. That approach is entirely in keeping
with international labour standards and with what is a guaranteed international
human right.[229]
5.31
The capacity of both employers and employee
organisations to establish common wages and conditions for workers who are
carrying out similar activities and providing reduced transactional costs for
members is both legitimate and necessary for the industry. The industry has established democratic
and representative processes within both employer and employee representative
groups who are able to reflect the policy views of their members. Both groups
are therefore able to legitimately represent these interests in the process of
establishing industrial agreements on behalf of their members.[230]
Unions are
representative of classes of employees, and may have an interest in ensuring
that employees (whether or not members of the union) in an industry or part of
it provide certain minimum conditions. By seeking a certain uniformity of conditions
unions are exercising a proper and long-recognised role.[231]
5.32
Government provides advice to employers by providing common
or template AWAs that are developed by the Office of the Employee Advocate. A number of submissions have
pointed out that this practice could be prohibited under clause 8(1) of the
BCII Bill as a result of the ban on pattern bargaining. The Ai Group has
recommended to the Government that the relevant clauses be amended to restrict
the prohibition on pattern bargaining to conduct which might occur during the
negotiation of certified agreements. [232] The
committee majority speculates that this provision is an oversight, and agrees
with one submission that noted that
the Government is not opposed to pattern bargaining when it works to the
benefit of employers, including active promotion by the Office of Employment
Advocate of template style AWAs for different industries. The Government only
has a problem with pattern bargaining when it is used as an effective vehicle
to provide good wages and conditions to workers.[233]
5.33
This point
was made strongly by the Western Australian Government:
the WA Government
submits that, whilst the Bill
seeks to outlaw pattern bargaining in the context of collective agreements, no
provision is made with respect to pattern Australian Workplace Agreements
(AWAs). It is common practice for AWAs
to not only be made a condition of employment, but to also be made in identical
terms across workplaces. It is submitted
that such practices constitute the worst elements of pattern bargaining and
represent an inherent contradiction in the Commonwealths legislative
approach. The failure of the
Commonwealth to address such issues is further evidence of the imbalance
associated with the Bill.[234]
5.34
The committee noted authoritative evidence from Dr John
Buchanan of ACIRRT who observed that the proposed
restrictions on pattern bargaining were not in accordance with the practice of
common law or industrial relations practice and would therefore not contribute
to an effective labour market for the building and construction industry:
what strikes me is that, if one reflects on how labour markets
function, they operate pretty much like the common law. The core of the common
law is that you treat like cases alike; you follow precedent. It seems to me
that, when you are dealing with the concept of wages and employment
conditions... people are saying: lets treat like cases alike. There are
actually deep jurisprudential grounds for pattern bargaining. It is not simply
some ideological concept dreamed up by the CFMEU to stifle initiative and
fairness: it has deep roots in labour market practice and in jurisprudence.[235]
Negotiating on a level playing
field
5.35
A critical
element to the achievement of efficiencies in the construction industry is the
establishment of common employment conditions that provide predictability and
stability in labour relations. This is important in reducing the risks of
industrial strife and giving confidence to investors. Stakeholders in the
industry are happy for this to be achieved either through pattern agreements,
project agreements or an award system.
The Queensland Council of Unions claims that project agreements are
necessary for the industry as they provide stable employment conditions for new
projects. This is supported by employer groups as well as unions.[236] The CEPU
claims that pattern bargaining is
not an evil to be stamped out by legislation because many employers actually
prefer pattern bargaining as it creates a level playing field, and a
disincentive to employers undercutting each other.[237] Confirmation
of these views comes from the Queensland MBA:
One of the
strongest arguments in support of an industrial regime that supports the
formation of genuine project agreements is the cost transparency for
contractors who know what is required and the ability of head contractors to
contractually ensure wages and conditions are honoured on the project. This form of inferred and stable contracting
would go along way in securing first class industrial conditions within an
environment of trust and cooperation.
Building unions would be able to secure compliance through the Project
agreement which would become legally enforceable and contractually obligated.[238]
5.36
Experience
on large projects, such as the Sydney Olympic Games site, shows that project
agreements characterised by standard pay-rates across classifications and
provisions to ensure appropriate wages for sub-contactors can be highly
successful business arrangements. As the committee was told:
The simple fact is
that if you have different rates of pay at a workplace for people with the same
skill, it will lead to questions, unrest and, I believe, industrial anarchy.
The beauty of the Olympic experience was that every electrical contractor who
walked onto that site knew the rate of pay that would apply to that class of
individual. That led to industrial harmony on the site, and that is why it was
so good. It was such an easy experience for the trade union movement because we
did not have to be there every other day, worrying about those core industrial
issues that we find on most building sites.[239]
5.37
One of the
factors leading to relative stability for the industry has been the
establishment of similar wages and conditions between workers who are doing
similar tasks on construction sites. The committee majority is concerned that
the BCII Bill will affect the availability of standardised agreements which
will inevitably lead to more disputes over differences in wages and conditions.
Current practice also ensures that skilled staff are not poached by competing
companies, when competition for skilled labour is becoming more intense.
Poaching has provided the competitive edge for contractors and subcontractors
within and between project sites.[240]
5.38
An
interesting perspective was given by former AIRC member Mr J J O'Connor in his
submission which described the idea of having employees on the same site
performing the same work for different rates of pay, as 'a recipe for disaster'.
It would interest the Government to know that the reason for the former
commissioner's view is that the inevitable industrial strife that would follow would
result from unions being unable to be control the conflict. Another result would
be conflict between contractors due to poaching of employees in a skilled
workforce that is increasingly harder to attract.[241] The
committee majority sees the likelihood of much more 'wildcat' action if
differential rates of pay and different conditions apply across a building
site, or even a number of building sites in a city. Local union organisers
could not prevent this, and participants in the actions are likely to include
non-unionists as well, who would be beyond the reach of any regulatory agency.
5.39
Opposition
to what is proposed in the BCII Bill extends to non-union contractors and
employers, as evidence from one proprietor confirms:
Pattern Agreements provide industry with a common set of
standards of employment thereby ensuring that as an employer in a very
competitive industry the means of setting one of the main components of our
fixed costs is the same across the industry. This ensures that we are
competitive... If pattern bargaining is removed as an employer I will have to
deal with employees bartering their services around the industry as they will
be able to obtain a higher wage from another employer for their services. This
will create instability and force the cost of employment up. I cannot see any benefit to our company in
the removal of Pattern Bargaining.[242]
5.40
Thus, the committee majority notes that while umbrella
organisations like the MBA and ACCI may support the Government's campaign
against pattern bargaining, and therefore the relevant provisions in this bill,
there appears to be little rank and file support for this policy among MBA
members. The Cole royal commission found that
subcontractors provided between 90 per cent and 95 per cent of labour for
construction work. Subcontractors have provided evidence that they are happy
with pattern bargaining arrangements; that they provide a 'level playing field'
to fair tendering for work on the basis of agreed costs for employees across the industry. These small business
owners find pattern bargaining convenient, providing certainty in one of their
cost components.[243]
5.41
The
evidence provided to the committee indicates that restrictions on pattern
bargaining would not achieve stable industrial relations, with each individual
employer facing protected industrial action as individual agreements are
established, risking disruptions throughout the life of the project.[244]
5.42
The committee is also concerned that the bill will
result in increased pressure to reduce employment conditions, with employers
forced to compete on the basis of lower cost structures including reductions in
workers compensation and superannuation, transferring the risks and costs for
support of employees to the public purse.[245]
The other critical
factor is for the employing parties to have some certainty regarding the labour
cost structure prior to tendering for work.
This issue is problematic as the major contractors want to engage
subcontractors who are covered by the pattern bargain but are unable to insist
on their subcontractors being a party to the industry pattern agreement. Less scrupulous contractors may also want to
deliberately choose a subcontractor who is not covered by the pattern agreement
in the hope of getting a cheaper price.
With the EBA rates currently in excess of $200 per week above the award,
the incentive to accept the lowest price must be high.[246]
5.43
Evidence
was provided to the committee that less reputable companies were bargaining
with employees for reduced awards and conditions in order bid for tenders at
lower rates, in many cases successfully winning contracts unfairly in
competition with companies who did pay industry standard rates and fulfil all
regulatory requirements. Disreputable companies often avoided providing
employees with information about the actual awards and conditions that would be
paid for the work. The committee heard of a particular dispute at Nambour in Queensland referred to at the Cole royal commission. In that instance, employers
defended the legitimacy of an agreement which bound all of the current and
future employees to non-union awards and conditions: an agreement that was
signed by two senior managers and two apprentices. The unions provided evidence
that this agreement was invalid, because the two managers were not employees
within the incidence provisions of the EBA, and the State Contracting Award
does not cover their work. The committee was advised:
Our members, who
were electricians engaged to perform the electrical work at Nambour, were
unhappy because they were under the impression that [the subcontractor] had
tendered on the basis of the site allowance and redundancy. Our members only discovered they were not to
be paid these entitlements when they got their first pay packets. The members did not know about the changed
tender arrangements whereby a non union EBA was used as the basis of the tender.The
purpose of this non union certified agreement entered into by the company was
to avoid paying EBA rates. Getting
apprentices and managers to sign the agreement rather than real workers to be
covered by the EBA is further evidence of the intention behind the
agreement. It was a sham. [247]
5.44
This
industrial dispute was cited during the Cole royal commission as an instance of unwarranted
exercise of union power. The committee majority finds it hard to understand how
this interpretation of events could be arrived at by any impartial
investigator. It represents a typical example of a union protecting its members
from a companies acting to take unfair advantage of them during
contract negotiations.[248]
Moving between sectors
5.45
There is a perception that pattern bargaining results in
increased costs for employers, with both employers and employee organisations
acknowledging that union members receive higher pay and conditions then
employees covered by non-union agreements. For instance, the difference in costs to employers between employing under the award
and employing under the current EBA was quoted as 62.5 per cent in the electrical industry in Queensland.[249]
5.46
The
Queensland Electrical Contractors Association argued that this difference in
costs restricted the capacity of subcontractors to move between the housing and
construction sectors because of the very large pay differences. It is claimed
that having signed a pattern EBA on a major construction site, which may only
happen three times each year, contractors are locked out of general electrical
work because they are uncompetitive in their traditional market.[250] It was also
claimed that these cost differentials encouraged illegal behaviour in the
industry, with subcontractors avoiding rates set in legally registered EBAs to
move back to the housing sector.[251]
5.47
The committee majority accepts that the costs for
employees can be higher in the construction sector in comparison to the housing
sector. This, however, does not mean that there are problems associated with
union participation in the establishment of standard industry agreements.
Instead, the committee accepts that the higher wages and conditions reflect the
current process for establishing enterprise agreements. As the CEPU submission
explains in response to the claim of Commissioner Cole
that pattern agreements have resulted in considerable cost increases:
Cole states: There was evidence before me
that the wage structure of a typical construction worker was about 22 per cent
greater than the award. This is hardly
surprising. As we argue elsewhere the
industry awards have become increasingly irrelevant as EBAs are replaced and
renewed. This is the aim of the
bargaining system. Awards contain only
outdated minimum rates as a safety net.
The only way to increase those rates is via AIRC safety net
increases. The amount and frequency of
those increases is such that over time the difference between the safety net
and the market rate is widening.[252]
5.48
The
committee majority accepts this explanation. It makes the point that current
arrangements have provided wage stability and high profits with very little
industrial disruption in the commercial sector, in contrast with other sectors
which have shown increases in labour costs. As the CFMEU Queensland submission
stated:
This can be
demonstrated by contractor support for pattern bargaining in the commercial
sector which has delivered to contractors their greatest boom on record and
wage stability with total wage costs constrained to approximately 6 per cent
per annum, whereas in the informal sector of the market (ie. housing) labour
costs have increased by 87 per cent over the last 18 months, thereby
compressing profits. In effect, for many
builders in the housing sector, it is a green drought.[253]
Genuine bargaining
5.49
The
cumbersome and prescriptive nature of industrial relations legislation
introduced by the Government over past years has been much remarked on in
industrial legal circles. It has the purpose of fettering the discretion, as
far as possible, of the Australian Industrial Relations Commission and the
Federal Court. Clause 62 of the bill sets out indicators of what is to be
regarded as genuine attempts to reach agreement. Neither the AIRC nor the
Federal Court can be relied on to make this judgement without assistance. The
DEWR submission describes how the relevant clauses will operate:
The ABCC, or any
person affected by pattern bargaining, will be able to seek an injunction to
stop or prevent pattern bargaining conduct occurring. Injunctions will be available whether the
conduct occurs under the federal or a State system or relates to bargaining for
an informal agreement. The BCII Bill
also makes it clear that pattern bargaining is not genuine bargaining and
that the AIRC can suspend or terminate a bargaining period where a party
engages in pattern bargaining. The Bill contains a list of indicators of
genuine bargaining.[254]
5.50
The
committee majority agrees with the submission from Slater and Gordon that provisions set out in clause 62
are unrealistic given the thousands of individual employers who would need to
participate in the bargaining process.[255] Currently,
as provided by section 67 of the WR Act, the AIRC has recognised that as long
as unions have made a genuine effort to have each employer concede the benefit
sought from the agreement, a legitimate agreement can be established.[256]
The breadth of s 67
is likely to render the making common claims, of itself, a sufficient basis for attracting injunctive
relief on the basis that it either constitutes or is at least indicative of a
person proposing to engage in pattern bargaining. For all practical purposes
the actual manner in which such common claims might in fact be pursued by a
negotiating union would be thus rendered otiose.[257]
5.51
The
committee is concerned that union participation in negotiating employment
conditions at an enterprise level is not seen as a legitimate indicator of a
genuine attempt to reach an agreement. It notes the CFMEU view in this regard:
The view embodied
in the Bill that the individual enterprise is the
only legitimate (and lawful) level at which bargaining occur, demonstrates a
failure to understand or accept the representative nature of registered
organisations under the Workplace Relations Act. Unions consist of members who
combine to pursue their common interests. They democratically elect their
leadership to pursue those interests as they determine appropriate. They should
not be constrained by law to negotiations at the workplace level.[258]
5.52
The CFMEU
submission surmised that seeking common wages or conditions beyond a single
business is not to be regarded as 'pattern bargaining' unless the person
seeking the wages and conditions is 'genuinely trying to reach agreement' on
the matters in question. Genuineness is equated with bargaining at the level of
the enterprise. Thus it appears that it is not so much common claims that are
proscribed, but the means by which, or the level at which, such claims are
advanced and pursued. The CFMEU argues that there is nothing inherently more 'genuine'
about claims advanced at an enterprise level.[259] The
committee majority anticipates that this issue will be one for litigation in
the unlikely event of the passage of the bill.
Flexibility
5.53
It can be
argued that while pattern bargaining does provide for common wages and
conditions, resulting in clearly defined costs for industry, flexibility can
still be achieved within the agreements by defining flexibility in hours of
work and other conditions to be established by individual employers and
employees aiming at significant improvements in productivity. This could include skill development, client
focus and innovative human resource management practices.[260]
5.54
While the Cole royal commission found pattern
bargaining impeded productivity, research presented by ACIRRT contradicts this.
ACIRRT has identified 23 different types of pattern bargains, and the
Department of Employment and Workplace Relations has identified 45. Professor Braham Dabschek, an industrial relations specialist from UNSW, told the committee that
the existence of so many pattern indicates how flexible and adaptable they are.
It also demonstrates that they are not necessarily indicative of control from
some centralised position of union power. Nor does the 'one size fits all'
notion sit easily with the royal commissions finding that many agreements
included complex sets of allowances and special rates.[261]
5.55
The issue
of flexibility has been subject to some academic analysis by those who question
the OECD-IMF orthodoxy, the inspiration for Government rhetoric. One research
piece states:
The international
data for the end of the 1990s, as well as the data for Britain in the 1980s and
1990s, consistently demonstrate that marginal workers in the flexible United
States and United Kingdom fare no better, and frequently far worse, than their
counterparts in most of the rest of the OECD. ... At a minimum, the data
suggest that flexibility is neither a necessary nor a sufficient condition
for improving the labor-market opportunities for marginal workers, and that
different economic systems as practiced in other countries seem perfectly
capable of producing the same, if not better labor market outcomes.[262]
5.56
The
committee majority, noting the tone of Government rhetoric over the past
several years concerning industrial relations 'reform', has identified the word
'flexibility' as the most overused buzz-word in the Government's WR lexicon.
Flexibility has come to mean the extent to which employees are either given, or
take up, the 'opportunities' to meet the terms and conditions of labour which
are determined by employers. A flexible employment policy is one in which
employees can be persuaded to accept workshifts and routines which suit the
operational needs of firms at the price employers are willing to pay. The
committee majority does not believe that this attitude to the building and
construction workforce is widely shared by developers and builders, which is
just as well for the industry.
Project agreements
5.57
The
committee heard persuasive evidence of the desirability of making project
agreements standard practice across the industry. While the evidence appears to
be overwhelming, it flies in the face of the Government's determination to
avoid any practise which is likely to be 'contaminated' by association with
pattern bargaining. Project agreements are banned to the extent that they are
unenforceable under clause 68 of the bill. As the Government has stated,
project agreements usually provide standard employment conditions for workers
employed in a number of different businesses on a particular building site and
provide a means of securing 'pattern' outcomes. This is contrary to the focus
of the WR Act on enterprise or workplace bargaining.[263]
5.58
But as
some influential submissions pointed out, the difficulties which commonly arise
with pattern bargaining are largely eliminated by the implementation of project
agreements. The committee is much more attracted to pragmatic solutions to
problems than the Government appears to be, and it believes it is at one with
most industry stakeholders in taking this position. Risk management strategies
are regarded by investors as vitally important. The implication, as the
committee sees it, is that the Government's opposition to project agreements is
an impediment to investment, and therefore to growth in the industry.
5.59
The position
of the Ai Group is a case in point, as was made clear in its response to the
draft bill. While supporting a prohibition on industrial action taken in
support of pattern bargaining and the committee notes this careful wording of
this position the Ai Group states its belief that the prohibition would be
reasonable so long as the provisions were carefully drafted, which they are
not. There needs to be a mechanism to enable the certification of genuine
project agreements for major projects, thereby obviating the need for the use
of common enterprise agreements (which could be regarded as pattern agreements)
so that the significant risks associated with major projects could be properly
managed.[264]
The point was re-enforced by the Ai Group in evidence to the committee at its
first Canberra hearings:
Can I say first and foremost that we strongly believe that major
projects need a project agreement to allow them to be delivered. We have argued
this right from day one, because you have to get your mind around the concept
that a major project is itself an enterpriseit is an enterprise that brings
together a lot of different employers in different trades and sub-trade groups.
Those activities are organised to produce a result.
We find it a difficult concept that you can find all those
activities coming together on a site with myriad different industrial
arrangements and without any sort of responsibility for how that outcome would
be delivered if you do not have some sort of agreement to deliver those
results. Fundamentally, we think that the legislation ought to have some
workable provision for project agreements. The royal commissioner, I might add,
did not dismiss project agreements. I do not think his proposals were workable,
but he did not dismiss them. In the national code of practice there is a
recognition of the role of project agreements.
The issue we try to wrestle with in pattern bargaining is that
an organisationwhich might be an electrical contractor, saywhich already has
an EBA ought to be able to enter a major project as an electrical contractor,
work under the umbrella of the agreement that might be in place for that
project and be able to exit that project back to his enterprise and not have
the baggage of what may be involved in a project agreement following him
around. One of the issues that consistently came up through the hearings was
small contractors tendering for work on a major project and finding that they
were not able to work on it unless they signed up to a pattern agreement. The
pattern agreement might then last for three years. If you move into another
market or another area of work of whatever then that pattern agreement follows
you around.[265]
5.60
Reference has been made to the committee receiving
evidence of the success of project agreements associated with the construction
of the Sydney Olympic Games facilities. The committee heard details of the
memorandum of understanding between the Olympic Coordination Authority and
trade unions:
It started off as a negotiation, with a memorandum of understanding
between the Olympic Coordination Authority and the trade union movement. That
set out a framework for negotiations on each of the projects. It was not
binding in what would or would not be in project awards for each of the
projects constructed during the Olympics construction program. Those
negotiations were undertaken with each of the successful builders.
specifically dealing with things like superannuation, occupational health and
safety, safety inductions, dispute settlement procedures that dealt with
whole-of-project matters and dispute settlement procedures that dealt with
specific subcontractor matters. So there were negotiations on two separate
dispute settlement procedures.
The project agreements or awards in place were not identical, and
there were variations to suit the specific needs of a particular project. Many
of them included a requirement to meet key milestone dates as part of the
project allowances paid. So the allowances were paid in good faith on the
assumption that there would be compliance and that the dates would be met. They
contained procedures under which, if the dates were not met, the issue went
before a committee put in place to deal with the reasons why.
I can tell you that, in one instance, milestones were not met
and payments were reduced to those workers on the project. If you look at the
Olympics experience it shows that, where there is a good industrial relations
environment in place and there is trust and cooperation, you can initiate some
fairly innovative processes on a construction site that will deliver better
outcomes for everybody. The history is that, without doubt, it was a huge
success from a construction point of view. Frankly, the model has continued to
be applied in New South Wales and
continues to deliver.[266]
5.61
When asked how prescriptive were the dispute settlement
procedures, the Trades and Labor Council explained that no industrial action
could be brought while the agreement was in force. They were not so prescriptive
as to undermine people's rights. They established a framework for the speedy
resolution of disputes, if necessary with the assistance of external mediators.[267]
5.62
The Government concedes that there is employer pressure
to institute project agreements. It argues that it would only occur in very
limited circumstances where efficiencies would be gained through multi-employer
or project agreements. The committee has been unable to find out the basis for
the Government's reasoning in this regard and assumes this to be a rhetorical
statement. The DEWR submission also points out that while multiple employer
agreements are not inconsistent with the WR Act, problems occur if this
constrains choice and competition.[268] There is an
implication that this would more than likely be the result.
5.63
While the BCII Bill may allow project agreements to be
made as part of the multiple business agreement provisions in the WR Act, the
committee finds that the distinction between pattern bargaining and bargaining
to establish a project agreement is not clear in the proposed legislation. Were
the bill to be subject to wide-ranging amendments in a different legislative
climate, the definition of 'pattern bargaining' in clause 8 and the relationship
with clause 68 would be amended to enable genuine project agreements to be established
in accordance with the current multiparty and 'pre-start' provisions of the WR
Act.
5.64
A proposal to regularise pattern bargaining so as to
meet the concerns of sub-contractors was put forward by Gadens, a Perth
law firm, in its submission to the inquiry. The submission proposed that
pattern bargaining provisions need to ensure that multiple-business agreements
under Section 170LC of WRA (and in certain circumstances greenfields agreements
under Section 170LC of WRA) are exempt from what is proposed in the bill.
The submission continues:
The provisions for multiple-business agreements (and in certain
circumstances greenfields agreements) need to be enhanced to accommodate
project agreements.
Subcontractors on any particular project should be able to become
a party to the multiple-business project agreement.
If any subcontractor chooses not to become a party to the
multiple-business project agreement the subcontractor should be free to enter
into a certified agreement as long as the terms and conditions of that
certified agreement do not go above the terms and conditions contained in the
multiple-business project agreement.
In circumstances where the head builder chooses to have a
section 170LK agreement or Australian Workplace Agreements with its employees
as opposed to a multiple-business project agreement then the subcontractors
will be free to negotiate a separate certified agreement and/or Australian
Workplace Agreement with the relevant unions and/or their employees as the case
may be without limitation.
I believe there would then be a great incentive for head
builders to look to entering into multiple-business project agreements.
Such enhanced multiple-business project agreements should be
capable of being registered by single Commissioners of the AIRC in the
interests of speed and efficiency.[269]
5.65
The committee assumes that this advice would be
unpalatable to the Government, for whom the solution to a problem through the
accommodation of competing interests by way of compromise would be heresy. The
value of the outcome appears to depend on the means to achieving it, and the
challenge the Government has set itself is to make the practice fit the theory.
5.66
The
resource sector is also concerned about negative flow-on effects of the bill
for major resource projects, which rely heavily on s170LL 'pre-start'
agreements.[270]
Evidence from a former member of the AIRC, Mr J J O 'Connor, points out that the unenforceability of project agreements
under clause 68 will have severe consequences for the future of mining projects
in Western
Australia. All of them employ common project agreements. The point is made that
these have been very successful in minimising industrial disputes.[271]
5.67
The
industry is concerned that the bill places too much emphasis on registering
a project agreement as a multi-business agreement (WRA s170LC) which would
result in delays in registering and concluding agreements before the
commencement of a project. The establishment of pre-start agreements provides
for certainty in industrial
relations, and contains and helps to resolve industrial disputes for the life
of the project.[272]
This is in line with practice in the United States, which institutes project labour
agreements (PLAs) for major public infrastructure works.
A PLA is an
agreement that defines wages and work rules for a project, and is approved by
labor and the awarding public body before the project begins. It eliminates the
need to negotiate a separate labor agreement with each contractor and each
building trade, and sets up a process of conflict resolution to deal with the
occasional job dispute.[273]
5.68
The committee noted on its visit to the LNG project
site in Darwin the
familiarity with and preference of a large American construction firm, Bechtel,
for enterprise agreements based on the project model.
5.69
The QMBA also favoured the idea of registered project
agreements which are commonly used on large civil and engineering projects. The
strongest argument for their use is cost transparency for contractors. Both
unions and employers can contractually ensure that wages and conditions
agreements are honoured. Project agreements ensure industrial harmony because
compliance can be legally enforced.[274] The
committee majority notes that clause 67 of the BCII Bill is a specific
provision that makes project agreements unenforceable. This indicates the
extraordinary lengths to which the government will go to ensure the purity of
its doctrine, regardless of the practical consequences. Even the bill's least
critical supporter, ACCI, has raised in its submission the possibility of a
'genuine project agreement', taking the form of 170LJ, 170LK or 170 LL
agreements, and has sought assurances that such agreements would be
enforceable.[275]
5.70
The committee majority sees no connection between a ban
on pattern bargaining and project agreements and the Government's objective of
encouraging culture change in the construction industry. What is proposed will
not serve that objective because it makes no business sense. It will impose
considerable strain on labour-employer relations and drain reservoirs of
goodwill. As stated previously it will
raise questions about whose interests this legislation is intended to serve. It
looks ominously as though the Government is putting its ideological concerns
before the practical needs of industry. If that is the case, the legislation
will fail.