Working around Work Choices: collective bargaining and the common law.

• Jurisdiction: Australia
• Author: Stewart, Andrew
• Date: 01 December 2007

[Since the early 1990s, the parties to collective workplace agreements have been encouraged to give their bargains statutory effect by registering them under industrial legislation. Yet in the wake of the High Court's Electrolux Home Products Pty Ltd v Australian Workers Union ruling in 2004, and the introduction of 'prohibited content' rules as part of the Work Choices reforms, there has been a resurgence in the use of unregistered agreements that depend on the common law for legal effect. This article examines the use of such agreements and various barriers to their enforceability. It also looks at options for resolving disputes outside the courts--in particular whether parties can ask members of Australia's publicly funded industrial tribunals to provide private dispute resolution services.

CONTENTS I Introduction II The Use of Unregistered Agreements III 'Matters Pertaining' and 'Prohibited Content'. IV Current Strategies V Does the WRA Present an Insuperable Obstacle? VI Protected Action and Unregistered Agreements VII The General Law of Contract: Some Limitations VIII Overcoming the Privity Problem IX Enforcing Unregistered Agreements X Alternative Dispute Resolution A Private Arbitration and the AIRC B Private Arbitration in the State Tribunals under 'Referral Agreements' C The Commercial Arbitration Acts XI Looking Ahead I INTRODUCTION

The Howard government's 'Work Choices' reforms (1) have generated a great deal of academic comment, (2) not to mention public debate. They also played a significant part in the government's defeat at the 2007 election. The changes, paradoxically made in the name of deregulation of the labour market, have significantly increased both the quantity and complexity of the federal legislation that governs employment conditions and industrial relations. (3) In so doing, they have confirmed that labour law is now primarily a field grounded in statutory regulation.

Nonetheless, an interesting by-product of the reform process has been to focus attention on the potential of the common law to provide an alternative to the statutory scheme embodied in the Workplace Relations Act 1996 (Cth) ('WRA') and the Workplace Relations Regulations 2006 (Cth) ('WR Regulations'). (4) Given the continuing role of the common law in both defining and regulating individual employment relationships, (5) it is unsurprising that much of the initial commentary has concentrated on that area. With so many of the Work Choices reforms enhancing managerial power at the expense of workers, it has become important to consider how that power might be moderated or constrained by recourse to established principles of equity or the evolving concept of fair dealing in contractual relations. (6) The removal of statutory unfair dismissal rights, in particular, has prompted writers to consider whether dismissed employees might be able to look to the courts for relief from 'bad faith' terminations. (7)

A further area for debate has emerged from the plan of the newly elected Australian Labor Party ('ALP') government to abolish individual Australian Workplace Agreements ('AWAs'). The AIP has repeatedly suggested that common law contracts--that is, terms expressly accepted as part of a worker's employment contract--are capable of delivering flexible and efficient outcomes for businesses, without impairing the integrity of the safety net set by legislation, awards and/or collective agreements. (8) This claim has been challenged by employer groups, notably in the mining industry. (9) But the ALP has nonetheless promised that all awards will contain 'flexibility clauses' that give employers and individual employees the freedom to vary the effect of the award in certain ways, provided always that the employees are not disadvantaged. Furthermore, awards will have no application to employees with guaranteed annual earnings of at least $100 000. (10)

In this article, however, our focus is on collective rather than individual relations. The Work Choices reforms have imposed stringent and intrusive controls on collective bargaining (11)--at least where employment conditions are involved. (12) Employers and trade unions in the federal system, who would prefer to operate on a pre-reform 'business as usual' basis, have been using common law agreements to sidestep the Work Choices constraints and maintain mutual commitments to former practices. The Rudd government has undertaken to remove most of the current restrictions on the content of workplace agreements. (13) But they remain in force at the time of writing, and full details of the proposed changes are yet to emerge. Furthermore, without a majority in the Senate the new government is not assured of having its proposals accepted by Parliament. Accordingly, we will examine the use of unregistered agreements and potential obstacles to making enforceable collective agreements between management and labour, by reference to the law as it stands at the beginning of 2008.

Even if the existing restrictions are ultimately removed, it is still worth considering the shape that a system of collective bargaining might take if truly based on the concept of freedom of contract and regulated by principles of general commercial law. Whether the common law might be marshalled to support an entire system of such bargaining, rather than merely as a device to escape the inconveniences currently associated with registering a workplace agreement, is an issue to which we hope to return in the future.

II THE USE OF UNREGISTERED AGREEMENTS

There is nothing new about the practice of employers and unions negotiating terms that have legal effect through the common law of contract. For the greater part of the 20th century, it was common to find parties making agreements that were neither registered under an industrial statute nor presented to a tribunal for adoption as a consent award. These agreements most often dealt with matters that were specific to a particular workplace, involved over-award commitments, or set a framework for industry or sector-wide conditions. (14) Their legality was rarely, if ever, tested. If a dispute arose over their effect, it was usually resolved either 'on the ground' or with the (often informal) assistance of an industrial tribunal.

From the early 1990s onwards, however, legislative changes in all jurisdictions not only promoted enterprise-level bargaining as the primary method of determining wages and employment conditions, but sought to encourage parties to formalise and register their agreements. (15) Within a few years, around 40 per cent of employees were covered by registered collective agreements. (16) These instruments did not necessarily supplant other forms of regulation: for instance, many of them operated alongside or even incorporated award provisions, rather than supplanting them. The same was often true of unregistered agreements or understandings previously made between the parties. It was common to find clauses in registered agreements that acknowledged the existence of informal commitments, or indeed preserved their effect. (17) Nonetheless, for at least a decade it became the norm for employers and unions to think in terms of expressing their bargains in a registered instrument. (18)

The interest in unregistered agreements was effectively revived by a technicality that emerged in the federal system of agreement making under what was then Part VIB of the WRA. Even before the Work Choices reforms sought to emasculate collective bargaining under the WRA, unions and their legal advisers were investigating ways of making effective agreements under the common law to secure commitments to workplace management practices that might not concern 'matters pertaining' (19) to the employment relationships in question.

III 'MATTERS PERTAINING' AND 'PROHIBITED CONTENT'

The 'matters pertaining' requirement has a long and unhappy history in Australian labour law. It was originally part of the definition of the term 'industrial matters' in s 4 of the Conciliation and Arbitration Act 1904 (Cth). The Commonwealth Court of Conciliation and Arbitration (and later the Commonwealth/Australian Conciliation and Arbitration Commission) could only deal with a dispute--and hence make an award--regarding such matters. This led to frequent litigation as to whether the Court/Commission was empowered to regulate a given matter, on the basis that it might or might not have the necessary connection to the employment relationships covered by the dispute. The result was a series of High Court decisions that sought to distinguish between matters that 'directly' pertained to employment, and those that lacked a sufficient connection. It did not help that many of these decisions could not be readily reconciled with one another, that form often seemed to matter more than substance, and that some of the reasoning bordered on the arcane. (20)

For a time, after the shift to formalised bargaining in the 1990s, parties seemed to forget about the requirement that agreements must deal with matters pertaining to the employment relationship. However, it was still there in the legislation, a point highlighted in the litigation that culminated in the High Court's 2004 decision in Electrolux Home Products' Pty Ltd v Australian Workers Union ('Electrolux'). (21) Here the Court interpreted the WRA to mean that every substantive provision in a certified agreement must directly pertain to employment for the agreement to be registrable. (22) Furthermore, industrial action could not be 'protected' (that is, lawful) under what was then s 170ML of the WRA if taken in support of a proposed agreement that contained a single 'non-pertaining' clause--in that case, a provision for a bargaining agent's fee to be paid by employees, whether union members or not. (23)

Given the number of agreements with potentially suspect clauses, the Electrolux ruling caused consternation for parties. The prospect of an...