Will demarcation disputes and comparative wage justice claims return to the union agenda? Also, a tick for enterprise agreement 'opt out' provisions.

Many years ago employers used to be troubled by some serious demarcation disputes between unions over membership at a workplace. Unions would battle it out on the shop floor while an employer would patiently seek some form of resolution to the fighting over the hearts and minds of its employees through the (then) Australian Industrial Relations Commission. The outcomes were extremely important because productive relationships between management, its employees and a particular union could be lost through the forceful intrusion of a militant union into the workplace.

In those days, the (then) Commission and the ACTU played a vital role in ensuring some form of industrial harmony (or non-poaching agreements) existed between competing unions that would settle long running disputes over coverage, an example being the national demarcation fast food agreement between the SDA and the (then) LHMU which was put together in the early nineties.

A recent Fair Work Australia case¹, again involving the SDA, means, however, that employers could be facing a return to the often disruptive and competing union strategies of keeping and maintaining members or trying to increase membership by poaching new members from another union’s established workplace turf.

As we have stated in previous updates, the Fair Work Act 2009 encourages employees to make decisions about representation during negotiations for an enterprise agreement. Employees can choose a union, a friend, bargaining agent or nominate him or herself as the bargaining representative for negotiations. Other employees in that workplace might also support that person or entity representing them during the negotiations. A union, however, must be able to represent the employee’s interests under its rules to be a recognised bargaining representative, unless a union official is acting in a personal representative rather than official capacity during the proposed negotiations. This means that the enterprise agreement might ultimately be made between the employee and its employees without any official union involvement.

In the SDA case, Fair Work Australia has decided that irrespective of historical connections with an employer’s business, previous agreements and an old ruling from the peak union body (the ACTU) which endowed rights of representation to the SDA, another union (the NUW) could continue in an official capacity to represent the interests of employees and seek new members during enterprise bargaining negotiations. The employees did not necessarily have to join the union but could nominate it as the bargaining representative during the negotiations.

The evidence showed that there was a competition between the SDA and NUW for members at the particular Woolworths Brisbane site which engaged 1,178 employees. The SDA had a historical connection with the site and it was only recently that the NUW’s rules allowed it to be able to represent the warehouse employees.

The facts established that the SDA and Woolworths were going to put an enterprise agreement to employees. The NUW did not support the agreement. The SDA sought an order from Fair Work Australia that it be the only union allowed to represent the industrial interests of employees. Fair Work Australia stated: “If an order is not issued the SDA is likely to face ongoing competition from the NUW with respect to recruiting and retaining members. In those circumstances the SDA would need to devote more attention to the site and could also suffer further membership losses to the NUW”.

As for competition for membership and efforts by both unions to recruit, the SDA submitted that this would “amount to disharmony at the workplace” whilst the NUW submitted that the matter is about the “application of freedom of association consistent with the objects of the legislation”.

Fair Work Australia stated that “the ability of an employee to appoint any person to be a bargaining representative in enterprise bargaining negotiations is a significant part of [the] legislative context” and further “the critical question is whether one union should be granted exclusive rights of representation or whether the option of NUW representation should continue to be available. We have reached the conclusion that it is not appropriate to make an order in this case” (our emphasis).

This case has confirmed our thinking about the Fair Work Act that the rights of employees to choose representation during enterprise negotiations outweighs the rights of unions to represent members generally in workplace matters. In other words, an employee could be a paid up member of, say, either the SDA, United Voice, TWU, CFMEU, ETU or HSU but decide that he or she would be better represented by another union such as the MUA. As long as that other union could show an entitlement to represent, that is, its rules allowed coverage of the employee’s occupation, workplace or employer’s industry, that anointed union could represent the rights of that employee for the sole purpose of bargaining for an enterprise agreement.

Alternatively, as we set out in our update of October 2011, the employee may wish to appoint, in place of his or her union representative, an official of the NUW, MUA or TWU to represent him or her in an unofficial capacity if the union rules prevented it from representing the employee in an official capacity.

Another interesting development in the bargaining space for employers is the ability of employees to “opt-out” of enterprise agreements in certain circumstances². Fair Work Australia has qualified the right of an employee to choose whether to stay covered by an agreement or opt out of it by stating that the opt out option cannot be a condition of employment for prospective employees and employers must still establish that any common law contract satisfies the BOOT test.

This decision means that employers can ask employees to enter individual contracts with minimum regulation under a modern award (if applicable) and/or the National Employment Standards rather than stay covered by an agreement. The employer and employee could also agree on a guaranteed earnings agreement (which will displace any modern award application) if the employee earns more than $118,100 (as at 1 February 2012).

This strategy would be useful for many employers who have agreements which have traditionally not focused on management levels but have, over time, been allowed to creep into those income scales.

Some of our clients will also remember the comparative wage justice arguments when skills in an industry were measured against the Metal Industry Award “C10” classification. Some of the successful arguments by unions resulted in substantial award wage increases ‘across the board’ without productivity gains at the enterprise level. In those days, there was no material connection between the wage increase and the actual needs of individual workplaces.

The Equal Remuneration Case 2012³ has, in our opinion, potentially breathed fresh life into those historical, comparative wage justice arguments. The increase to the modern award rates in the 2012 case was largely based on the argument that there was not equal remuneration for work of equal or comparable value for workers in the community services industry by comparison with workers in State government. These increases will range, over eight years, from 18% to 41%.

The potential consequences flowing from a resurrection of comparative wage justice arguments was recognised by the only dissenting member of the Full Bench being Vice President Watson. His Honour stated: “This case is unprecedented by reference to international equal pay cases. It does not seek equal pay for men and women in a single business, or in an industry. Rather it seeks to establish a large minimum overaward payment for all men and women in the entire [social community and disability services] industry to a level approaching public sector wages. It has more in common with a case based on comparative wage justice than equal pay. In my view the applicants have failed to establish key ingredients of their claim”.

The ACTU has already hinted that its affiliated unions will be looking at other industry sectors to pursue similar claims. The claims will cover whole industries. This means that employers in an industry will pay the additional wage increase above modern award minimum rates. This is very different to enterprise bargaining in an industry between an employer and its employees when increases are discussed in the context of productivity trade-offs at a particular workplace.

This could mean, for example, that industry sectors such as aged care, hospitality (say, housekeepers), child care and the like which have a high proportion of female workers, could face wage claims that will not be funded through productivity trade-offs. His Honour VP Watson also recognised that a precedent could be set if the claim was granted without a careful and rigorous approach when he stated: “Despite submission from the ACTU to the contrary, it is also obvious that the ultimate result will be an important element of the precedent established by the case, especially if, as proposed by the majority, the original claim is granted in full”.

In His Honour’s view the union’s case (supported by the federal government) was not made out. He concluded that the current rates of pay for the workers was not entirely the result of significant numbers being female but market and funding arrangements which could not be equated with "gender undervaluation”.

Whilst each case will turn on its own facts, the new principle developed by FWA to justify granting the union’s claim in the equal remuneration case will assist other unions when thinking about whether to launch a claim based on gender inequality rather than pursuing a case under the low paid bargaining provisions of the Fair Work Act 2009.

We are all in for an interesting 2012.

More information If you are interested in more information about the developments discussed in this e-bulletin, please contact:

Brad Swebeck, Partner, Workplace Relations Phone +61 2 9293 5450 Fax +61 2 9293 5250 Mobile +61 (0) 411 234 063 Email This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Sarah Jones, Partner, Workplace Relations Phone +61 2 9293 5450 Fax +61 2 9293 5250 Mobile +61 (0) 421 051 299 Email This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Justine Matthews, Partner, Workplace Relations Phone +61 2 9293 5450 Fax +61 2 9293 5250 Mobile +61 (0) 434 476 320 Email This e-mail address is being protected from spambots. You need JavaScript enabled to view it       1 Shop Distributive and Allied Employees Association v National Union of Workers [2012] FWAFB 461 2 Newlands Coal Surface Operations Agreement 2010 [2012] FWAFB 721 3 [2012] FWAFB 100 This publication represents a brief summary of teh law relating to the issues raised and should not be relied on as a substitute for professional advice. Specific legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred as a result of reliance on this document by those relying soley on this document. SYDNEY Level 32, 2 Park Street Sydney NSW 2000 Australia DX 309 Sydney T: +61 2 9293 5311 f: +61 2 9293 5333 NEWCASTLE Level 1, 31 Darby Street Newcastle NSW 2300 Australia DX 7809 Newcastle t: +61 2 4907 5600 f: +61 2 4907 5633 CANBERRA Level 11, St George Centre 60 Marcus Clarke Street Canberra ACT 2601 Australia t: +61 2 6243 3644 f: +61 2 6243 5143 ABN 58 215 418 381 www.hicksons.com.au Liability limited by a scheme approved under Professional Standards Legislation © Hicksons 2011