Benefits to Management in WorkChoices - Case Study Example

Type the document title] [Type the document subtitle] BenK [Pick the date] Introduction The unpopular program of industrial relations laws and agencies known as WorkChoices was only born in 2006, but it seems sure to have a short life. Described by the Labor Party as “political poison” and “an extreme industrial relations policy,” (O’Connor, 2007) WorkChoices will have major reforms and changes in the next two years to become instead what the Labor Party calls “Forward with Fairness.” The plan was a key part of Labor’s platform in its successful election campaign, and some parts of it have already begun to take shape. But will it really provide “fairness” to all the parties in industrial relations? When Labor MP Brendan O’Connor, who is now the Minister for Employment Participation, makes a statement like, “...WorkChoices was never about increasing economic activity. It was always about realigning Australian industrial relations to favour employers, regardless of the impact on employees” (O’ Connor, speech 22 June 2007), one of the parties in Australia’s industrial relations, Management, may have good reason to worry about the Labor Party’s intentions. In this essay, the benefits to Management under WorkChoices will be described. The likely or intended changes to those benefits which are proposed by the Labor government will next be discussed. Finally, the challenges faced by Management, either in saving some of the advantages that employers have with WorkChoices, or adapting management styles to try to benefit from the coming reforms, will be offered as possible solutions. Benefits to Management in WorkChoices There are four parts of the WorkChoices program that greatly benefit Management. The most important part is the use of Australian Workplace Agreements (AWAs). An AWA is an agreement between an employer and an employee that sets the terms and conditions of employment. (ALIA, 2007) Under WorkChoices, an AWA supersedes any collective agreement. There are two kinds of collective agreements. Employee collective agreements are between an employer and a group of employees, usually in one workplace or company, which are made without any third party involved. Union collective agreements are between an employer and a union representing employees. (Ibid.) If there is no AWA covering employees, then a collective agreement can be used, but the preference in WorkChoices is that AWAs be made. One reason an AWA benefits Management is because a single employee does not have much power to negotiate with an employer. Management also has more options in making terms of employment to fit certain jobs or certain people, rather than being forced to apply the same terms to many people who may be doing slightly different kinds of work in the same company. By preferring AWAs, WorkChoices follows a trend being used more in other countries like the UK, where it is called ‘individualism.’ (Bacon & Storey, 2000) For example, if in a company of 1,000 people a single employee is unhappy about his pay, working hours, benefits, or the kind of work he is expected to do, he does not have much chance to change things, because the company still has 999 other employees. If the one unhappy employee quits his job, he will not have much effect on the business of the company. If all 1,000 employees are covered by a collective agreement, however, the management would be more likely to meet their demands. Individual agreements like AWAs also benefit management because they increase productivity. According to Peter Waring, “...individual contracts encourage maximisation of individual effort because they do not permit the individual’s contributions to be obscured by the collective.” (1999:295) That means that in an individual agreement, any terms that relate to the quality of the work apply only to one person. In a collective agreement, the same terms apply to the whole group, so that any one employee has less of chance of affecting the desired result by not working as hard. If every employee is covered by an AWA that requires the best performance, then the idea is that the whole company is maximising its productivity. More importantly, AWAs take away the ability for any other organisation, such as a union, to set any of the terms of job performance. (Waring, 1999 and Bacon & Storey, 2000) So in summary, AWAs give the advantage to management because they remove the power of groups of employees, which is one of the reasons Minister O’Connor criticised WorkChoices as “favouring employers.” One part of the rules covering AWAs that benefits management in some important ways is the “prohibited content,” things that are not allowed to be part of an AWA. Several items that are “prohibited” directly reduce the influence of unions, such as: (ALIA, 2007) Payroll deductions for union dues or membership fees. An employee who wants to join a union is responsible for paying dues from his own pocket. When unions do not have the automatic payment of dues through deductions, dues payments begin to lapse and union membership goes down, as was claimed in court by Transport Workers’ Union in New York after it was penalised for a transit strike in the city. (Lueck, 2006) Union training leave and paid leave to attend union meetings. An employee cannot ask for pay for time away from work to attend union activities. People who cannot afford to miss work hours would think twice about joining a union for this reason. Rights of a union (or employer organisation) to participate in or represent an employee/employer in a dispute settling procedure unless that union/employer organisation is the representative of the employee's/employer's choice. A union does not have the right to take a part in settling a dispute, unless it is requested. And then, under the rules of WorkChoices, both parties (employer and employee) have to agree to it. (Forsyth, 2006) Terms encouraging or discouraging union membership. An employer cannot discourage an employee from joining a union, and union membership cannot be required. This seems like another way to make unions less important, because they are not even discussed in work agreements. Terms allowing a person bound by a workplace agreement to engage in or organise industrial action. Unions often use strikes to force employers to recognise them. But this cannot work if the employees are covered by workplace agreements, which actually make strikes and similar activities unlawful by not including terms that allow employees to participate. There are also other “prohibited content” that benefit management, such as: Restrictions on independent contractors/casual workers. The terms of an AWA cannot limit the kinds of employees an employer hires. Confers a remedy for unfair dismissal. Since the Industrial Relations Reform Act of 1993, the trend has been to limit the number and application of unfair dismissal claims in Australia, (Wailes & Lansbury, 2000) which obviously favours management. Prohibiting terms in an AWA that offer another remedy apart from the ones that already exist is part of the trend. Also, “...the regulations specifically state that a workplace agreement can provide 'a process for managing an employee's performance or conduct'.” (ALIA, 2007) In a way, that makes an AWA one-sided in favour of management. An AWA can tell an employee how to behave and do his job properly, but cannot tell an employee what to do if the employer does not behave or does not do his job properly, beyond what is already allowed by the law. One part of WorkChoices that was harshly criticised by the Labor Party and others was the elimination of the “No Disadvantage Test”. As it was defined in Waring & Lewer (2001:66), the No Disadvantage Test “sought to ensure that no worker would be worse off under enterprise bargaining.” In WorkChoices, the NDT was eliminated for Certified Agreements and AWAs, and replaced with five “Australian Fair Pay and Conditions Standards” to be administered by the Workplace Authority. The WA, which was formerly called the Office of the Employment Advocate, was not required to scrutinise agreements as carefully as they had been when that task was the responsibility of the Australian Industrial Relations Commission. (Forsyth, 2006:5) According to author Colin Fenwick, “The abolition of the no-disadvantage test, combined with the introduction of the Australian Fair Pay and Commission (AFPC), has opened up space for employers to bargain working conditions down by significant margins.” (2006:85, and quoted by O’Connor, 2007) This part of WorkChoices has already been changed, with a new law that went into effect 28 March 2008. There is now a new No Disadvantage Test, which will apply to any agreements lodged with the Workplace Authority from that date. (Workplace Authority, 2008) Reviving the NDT seems to be a victory for Labor, but the WA’s own explanation of the new NDT shows at least two points that are still seem to benefit management. The new rules allow for passage of an agreement if it fails the NDT “in exceptional circumstances not detrimental to the public interest.” (Ibid.) That means that if an employer can show that no other terms of an agreement are possible, and that the agreement in question is in some way unusual, and would not be used as an example for other agreements, it should be allowed. The rules also allow for passage of an agreement if there is no “reference instrument.” A reference instrument is a similar agreement to which a new agreement could be compared to see if the new agreement is fair. If there is no similar agreement, then the new one would be acceptable. (Ibid.) The ‘new’ No Disadvantage Test is very similar to the NDT that came from the 1996 Workplace Relations Act. That NDT was a “global” test, meaning that the agreements were to be judged in general instead of by each specific condition in them. An agreement could actually be unfair in a number of details, but if that unfairness was balanced by other benefits for workers, the agreement was considered generally fair. Some critics complained that it was actually unfair to workers, because management now had the opportunity to compromise, bargaining away important benefits for workers in exchange for different benefits that were not as costly for employers. (Waring & Lewer, 2001) It seems that management will still have that ability to compromise to its advantage under the new rules that are replacing WorkChoices. The Effect of Reforms on Management and How They Can Try to Benefit from Them In August 2007 the Labor Party published a policy statement describing their “Forward With Fairness” program. The statement, since it was made prior to the election, lacks many details of Labor’s ideas but at least gives a clear picture of what they intend to do, if not exactly how. As described above, some of the changes are already taking place. Taken at face value, there are some benefits to everyone, management and employees alike, under the new program. The program greatly simplifies the rules and processes of industrial relations in Australia, which is sure to be appreciated by everyone. The policy statement itself is only 25 pages long, fewer than half of the 67 pages it took to give the same sort of description of WorkChoices in October 2005. (Bray et al., 2006) The plan also allows for a transition period of about two years, until January 2010, to allow everyone to become familiar with the new program. And the new program also offers many opportunities for employers and employees to address individual situations, rather than being trapped by strict rules in every situation (the policy statement uses the words ‘flexible’ and ‘flexibility’ at least 57 times, as a matter of fact). The return of the NDT is one area of the new reforms that has possible benefits for management, are there others? One action that has already been taken might provide some small, temporary benefit to some employers. In December 2007 the Australian Fair Pay Commission stopped reviewing junior and training wages, and its creation of new Pay and Classification Scales, since this work duplicates the work being done in the creation of the new award system. (AFPC, 2008) Minimum wages will continue to be reviewed, but other wage rules will remain as they are until the new program is finished and presented in 2010. One benefit that the Labor Party stresses is that the new award system will not apply to employees making over $100,000 per year. Those employees will have the ‘flexibility’ to negotiate with their employers on an individual basis, because “Labor has concluded that minimum award terms have less relevance to those employees whose salary exceeds $100,000.” (Rudd & Gillard, 2007:9) The policy goes on to state that artificial arrangements of overtime hours to take employees over the threshold will not be permitted. (Ibid.) Even though the Labor Party gives that warning, what they are really doing is giving management a good idea. The policy on the new awards is to simplify the award system; nothing is said about expanding it or making large increases in minimum pay rates. (Ibid.) Most workers who earn over $100,000 are working under common-law agreements and not award terms, according to the Labor Party. For employees who are making close to but not quite $100,000, management can give them a choice: either accept some adjustment to compensation or work hours and make a little more money, or stick to the letter of the law and negotiate again based on the new award system and the collective enterprise agreements the new program promotes and take a chance on maybe making a little less money. Being guaranteed to earn a little more is something almost everyone would choose. For management, the balance of the costs of paying a little more in wages against the costs of additional time and money in administrative tasks probably favours the latter. This is one part of the new program that benefits some employers, and is probably not what the Labor Party had in mind. The one part of the ‘Forward with Fairness’ program that seems most unfair to management is the promotion of collective agreements, and this is the area where management will have to make the most changes to the way they do things in order to remain productive. The intentions of the Labor Party are very clear: “Collective enterprise bargaining will be at the centre of Labor’s modern industrial relations system....In many workplaces employees work as a team and they would prefer to work together as a team to agree their terms and conditions of employment with their employer. This is fair to the employees involved and there is plenty of evidence that collective enterprise agreements are drivers of productivity growth.” (Rudd & Jillard, 2007:13) Whether they like it or not, management will have to address the issue of collective agreements under the new program. But the claim of Labor that collective agreements “are drivers of productivity growth” has some validity. Since the 1990's, a trend in the US toward what is called “best practice” management has led to increased productivity in companies that follow it. (Purcell, 1999). This involves management consulting with employees on quality matters in the work or production process, as opposed to using a separate quality assurance unit or procedure. (Ibid.) In the UK the idea is called “high commitment management” and is part of the trend toward “partnership” in industrial relations, where instead of management and employees taking roles as opponents in bargaining, they work together to manage the entire system of a company collectively. (Bacon & Storey, 2000) This idea has several benefits for management and employees alike. The high commitment management model implies greater job security for employees, because they are considered a more important company asset. (Purcell, 1999) And the model also can help management marginalise the influence of unions, by involving employee teams in negotiation matters such as wages. (Baird, 2002) One very good example of how adopting a high commitment management strategy to sidestep the union can be found in the US, in the case of three different trade unions (the Teamsters, the Machinists, and the Specialty Painters) against three automotive dealerships in San Francisco. (329 NLRB 71, 1999) The National Labor Relations Board found that the dealerships had unfairly shut the unions out of their businesses when the unions attempted to represent the employees, and after a six-year long case, handed a heavy fine to the dealerships and required them to permit union entry. In the meantime, however, one dealership, German Motors, adopted an intensive “best practices” HRM policy, initiating employee quality and advisory teams and offering a package of performance-based incentive pay. When the unions met with employees in 2000 to encourage them to join, the employees declined to do so. (personal communication, Henry Schmitt [President, German Motors], 2008) Conclusion Management enjoyed some definite advantages under WorkChoices, but that program is no more, replaced by one that the Labor Party says “... is about getting the balance right. The Howard Government’s Work Choices laws went too far in tilting all the rules in favour of one side.” (Rudd & Gilland, 2007:2) That may sound worrying to management, but it does not mean all the advantages are lost. Even though much uncertainty remains about how Labor’s “Forward With Fairness” program will go from policy to actual practice, and even though management will have to make definite adjustments to get along with the new program, there are still some ways that management can benefit. Labor’s fondness for ‘flexibility’ in their program leaves loopholes that employers can use to their advantage. The new No Disadvantage Test allows for the acceptance of agreements that are unique and cannot be easily judged against existing ones. The simplicity of the new program when compared the WorkChoices means that management will be better able to study and understand the new requirements, and find ways to work with them to their advantage. Exemptions for highly-paid employees allow employers to keep their most valued and expensive employees away from possibly troublesome regulations at a relatively small cost. But even with these promising opportunities, management may still have to re-evaluate the way it approaches industrial relations and human resource management. Collective workplace agreements will be an important part of the new program. The experience of employers in other countries suggest that making a partnership with employees not only increases productivity and stability within the company, but also can be used to remove the influence of outsiders like unions. As the old saying goes, “If you can’t beat them, join them.” Under the new scheme of industrial relations planned by the Labor government, that might be the best advice for management. Works Cited Anderson Enterprises, German Motors Corporation, and San Francisco Honda v Teamsters Automotive Employees Local 66, et al. [NLRB] (1993) 329 NLRB No. 71. Australian Fair Pay Commission. (2008) fairpay.gov.au [Internet]. Australian Fair Pay Commission. Available from: [Accessed 18 April 2008] Bacon, Nicolas and Storey, John. (2000) ‘New Employee Relations Strategies in Britain: Towards Individualism or Partnership?’ British Journal of Industrial Relations, 38(3): 407-427. Baird, Marian. (2002) ‘Changes, Dangers, Choice, and Voice: Understanding What High Commitment Management Means for Employees and Unions’. The Journal of Industrial Relations, 44(3): 359-375. Bray, Mark, et al. (2006) ‘Analysing the Workplace Relations Amendment(Work Choices) Act 2005 (Cth) No. 153 and its likely consequences’. (supplement) In: Industrial Relations, 3rd ed. New York: McGraw-Hill Education. Fenwick, Colin. (2006) ‘How low can you go? Minimum working conditions under Australia's new labour laws’. The Economic and Labour Relations Review, 16(2): 85. Forsyth, Anthony. (2006) Arbitration extinguished: the impact of the Work Choices legislation on the Australian Industrial Relations Commission *. Australian Bulletin of Labour [Internet], 1 March 2006. Reprinted on AllBusiness. Available from: < http://www.allbusiness.com/human-resources/1184523-1.html> [Accessed 19 April 2008] Lueck, Thomas J. (2006) City to Drop Lawsuit Against Transit Strikers. The New York Times, 17 May 2006. O’Connor, Brendan. (2007) Why Workchoices Is Bad For Employees And The Economy: Labor's Commitment To Restore The Balance And Secure Australia's Future (Speech to 2nd Annual Case Studies) [Internet]. 22 June 2007. Australian Labor Party. Available from: [Accessed 14 April 2008] Purcell, John. (1999) ‘Best practices and best fit: chimera or cul-de-sac?’ Human Resource Management Journal, 9(3): 26-41. Rudd, Kevin and Gillard, Julia. (2007) Forward With Fairness Policy Implementation Plan [Internet/PDF document]. August 2007. Australian Labor Party, Available from: [Accessed 20 April 2008] Sheldon, Peter and Thornthwaite, Louise. (1999) In: Employer associations and industrial relations change: catalysts or captives? Australia: Allen & Unwin, 47-69. Wailes, Rick and Lansbury, Russell D. (2000) Collective Bargaining and flexibility: Australia [Internet], Updated 1 August 2000. New York, International Labor Organization. Available from: [Accessed 17 April 2008] Waring, Peter. (1999) ‘The rise of individualism in Australian industrial relations’. New Zealand Journal of Industrial Relations, 24(3): 294-318. Waring, Peter and Lewer, John. (2001) ‘The No Disadvantage Test: Failing Workers’. Labour & Industry, 12(1): 65-86. WorkChoices update. (2007) Australian Library and Information Association [Internet]. ALIA . Available from: [Accessed 11 April 2008] Workplace Authority. (2008) Workplace Authority [Internet]. Australian Government. Available from: [Accessed 18 April 2008] Read More