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AIRC's Holy Grail undermines a free labour market

By Des Moore - posted Monday, 30 May 2005

Dan Brown's much-read book The Da Vinci Code has a character who explains why the Holy Grail is being sought - because, he says, it is "simply a grand idea, a glorious unattainable treasure that somehow, even in today's world of chaos, inspires us".

Believers in grand ideas are certainly not in short supply among members of the Australian Industrial Relations Commission (AIRC) or the Federal Court. Driven by what Chief Justice Gleeson identified in a 1995 article (Individualised Justice -The Holy Grail), their subjective decision-making in workplace relations cases has undermined attempts by governments of both political persuasions to develop a labour market in which employers and employees are left generally free to negotiate employment conditions with minimal judicial interference.

My examination of recent decisions, published in the latest Australian Bulletin of Labour, establishes that these decision-makers have all too frequently interposed themselves unnecessarily in employer-employee relationships - but have failed to do so when they should have.


Decision-making failures include an apparent inability to deal with intimidatory union action against employers, an unwarranted widening in the definition of industrial action so as to give themselves more power to arbitrate, an unjustified extension of the circumstances in which unions have the right to strike and to enter business premises, an astonishing widening of the safety net beyond its legislated objective, an apparently less favourable treatment of non-union agreements and an increasing attempt to restrict employers' use of non-union labour.

Behind such decision-making lie fallacious assumptions and beliefs, including that tribunals and courts have social policy responsibilities independently of parliament, that there is an imbalance of bargaining power between employers and employees, and that courts have the capacity to make informed judgements about the workability of employment contracts.

In reality, nowadays we have an economy in which the participants generally operate under competitive conditions, individuals are expected to make their own economic decisions and are much more capable of doing so, and governments accept responsibility for helping those who are less able to cope. Judicial decision-makers do not have social policy responsibilities that require them, rather than parliament, to determine social rights and to read those rights into the law.

But my reading of many judgments and public pronouncements by such decision-makers provides just such a conclusion. Little wonder that the Federal Minister for Workplace Relations Kevin Andrews has now written to the AIRC President, Justice Geoffrey Guidice, complaining about opinions expressed by some commissioners regarding the consistency of workplace agreements with the government's national construction code.

Take also the "imbalance of bargaining power" argument. There are more than 1.1 million Australian businesses with virtually no scope to exercise monopsony powers. They compete for the services of a workforce of 10 million, which has as a backstop generous social security. No valid argument can be mounted that, without prescriptive regulations, employers as a group would force wages down or impose unfair conditions on their employees.

When working conditions are unacceptable to either party, each has alternatives that prevent businesses as a group from being imposers and workers as a group from being slackers. Surveys show that Australia's labour force exhibits a high degree of job satisfaction and its members are in most cases able to change jobs without penalty.


Nor is there is any need to continue having judicial outsiders passing judgments on whether employment contracts are working. The satisfactory operation of such contracts depends primarily on relationships that can only be assessed within a business.

Given that unemployment is now down to only 5 per cent has this judicial interventionism been harmful?

Australian Bureau of Statistics data shows that, on top of the 540,000 formally unemployed, there is an additional 800,000 or so not actively looking for work but say they would be available to start work within four weeks if jobs became available. Taking account also of part-timers who want more work, Professor John Freebairn has pointed out that "as many as 2 million people, or 20 per cent of the numbers now employed, would like employment or an increase in their hours of work", indicating that the size of the underutilised workforce suggests there are considerable opportunities to expand employment.

The Federal Government is soon to announce its policy on extensive workplace relations reform. A major objective should be to eliminate the quasi-monopolistic practices of the AIRC and the Federal Court that force employers and employees to accept their version of the Holy Grail. To this end new legislation should give employers and employees the right to determine the terms of employment agreements.

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First published in The Age on May 22, 2005.

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About the Author

Des Moore is Director, Institute for Private Enterprise and a former Deputy Secretary, Treasury. He authored Schooling Victorians, 1992, Institute of Public Affairs as part of the Project Victoria series which contributed to the educational and other reforms instituted by the Kennett Government. The views are his own.

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