ACTU Submission to the Senate

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Workplace Relations Amendment (Prohibition Of Compulsory Union Fees) Bill 2002

Introduction

  1. The ACTU is strongly opposed to the passage of the Workplace Relations Amendment (Prohibition of Compulsory Union Fees) Bill 2002 (“the 2002 Bill”). Although the 2002 Bill is expressed somewhat more simply than its 2001 predecessor, its effect would be the same.
  2. The 2002 Bill’s title is misleading, presumably intentionally so. Prohibition of bargaining or service fees has nothing to do with compulsory union fees, which are, and will remain, unlawful. In addition, although it purports to further freedom of association, this is not the case.
  3. The 2002 Bill represents a further initiative by the Coalition Government to inhibit the operation of the collective bargaining system. By enacting section 89A of the Act the Government substantially restricted the scope of matters which the Commission could include in awards.
  4. The 2002 Bill continues on the same track, in that it operates to prevent employers and unions and/or employees reaching agreement about a matter which is clearly related to the bargaining process.
  5. In his minority report resulting from the Committee’s inquiry into the 2001 Bill, Senator Murray stated:

“It is hard to see how provisions for bargaining fees should be against the spirit of the WRA and its object of facilitating agreement making. Agreement making is desirable, and if fee-for-service contributes to that, it is to the good. There is also the issue of ‘free riders’, by employers on the back of employer organisations, and employees on the backs of unions.

“We consider it fair that those who benefit from agreement making should make a contribution towards its costs, whether employers or employees. This strikes us as a fair principle.

“The bargaining fee may represent only a small portion of the real cost of completing an agreement, for instance where that agreement involves union members’ foregone earnings through taking protected action.

“We see a clear distinction between the notion of compulsory unionism (which we oppose) and a contribution to the costs of bargaining, where the person paying is a direct beneficiary of that bargaining. Such payees are not joining a union, but clearly the fee should not be a substitute for a normal union fee. “They are paying for a service. They are not contributing to other activities of the union, or electing to play any role in the activities, policies or other conduct of the organisation, or getting any of the other benefits of a union. They are not union members.

“Coercive attempts to force union membership are clearly illegal under the WRA and should remain so.” (p21)

  1. The ACTU submits that there is no difference between the 2002 Bill and the earlier Bill, in relation to which these comments of Senator Murray were addressed, to make them any less relevant or persuasive.

The Provisions Of The 2002 Bill

  1. The 2002 Bill has two key elements:

  1. The ACTU submits that the issue of the validity of bargaining fee provisions in agreements should be left to the Court to decide at this point in time.
  2. In the event that the Court finds that such provisions are not found to be capable of being validly included in agreements, the ACTU submits that legislation should be introduced permitting the inclusion of bargaining fee clauses in agreements, and providing for their enforcement.
  3. The provisions of the 2002 Bill dealing with discrimination and coercion are completely unnecessary.
  4. No evidence has been produced of any coercion or discrimination resulting from non-payment of a bargaining fee. The ideological nature of the Bill can be seen in this focus on a non-existent problem.
  5. As Senator Murray has pointed out, if the 2002 Bill is intended to deal with compulsory unionism, this is already comprehensively prohibited under the Act.

Background To The Bill

  1. The impetus for the original version of the 2001 Bill was the decision by McIntyre VP in relation to an application by the Employment Advocate to remove bargaining fee clauses from a number of certified agreements in the electrical contracting industry on the grounds that they breach the freedom of association provisions in Part XA of the Act. (Print PR900919, 9 February 2001)
  2. The clause in question requires the employer to advise all employees prior to commencing work for the company that a “Bargaining Agent’s Fee” of 1% of gross income or $500 per annum, whichever is the greater, is payable to the ETU each year. The clause then requires the employee to pay the fee to the union.
  3. The Commission found that the clause did not breach Part XA because it would not lead to conduct by the employer which would discriminate against employees because they are not, or do not propose to become, a member of an industrial association, the relevant “prohibited reason” in subsection 298L(1)(b).
  4. At the time when the 2001 Bill was considered by this Committee, an appeal had been lodged against the decision of McIntyre VP, but had not yet been determined.
  5. The decision of the Full Bench of the Commission, dismissing the appeal, was handed down on 12 October 2001. (Print PR910205) In that decision, the Commission held that the clause in the agreement did not discriminate between unionists and non-unionists in its terms, as the fee applied to all employees. The Commission concluded by distinguishing the clause from any discriminatory conduct which might arise in its enforcement, and which would be unlawful

“It is true that if the CEPU were to enforce the bargaining agent's fee only against persons who did not join the union, such conduct would, if carried out by an employer, be in breach of Part XA. But to conclude therefore that clause 14.3 requires or permits etc such conduct by an employer would we think be an error. The position is analogous to one that might arise if an employer terminated the employment of a union delegate, pursuant to a general provision for termination of employment in a certified agreement, because of the delegate's union affiliation. Although in such a case the adverse activity would be permitted by the provision in the agreement, it could not be said that the provision required or permitted, etc. conduct in breach of Part XA.” (para 36)

  1. The Commission did not deal with the issue of whether or not the bargaining fee clause was a matter which pertains to the relations between an employer and its employees, although the Full Bench had raised this as a threshold issue in earlier proceedings, in which it had asked parties to make submissions on the issue. (Print PR905312) In the event, all parties submitted that the clause should be treated as valid for the purposes of the appeal.
  2. Subsequent to that decision, the issue of a similar bargaining fee clause was considered by the Federal Court in Electrolux Home Products Pty Ltd v Australian Workers’ Union. [2001] FCA 1600 (14 November 2001) In that case, Merkel J considered whether or not industrial action taken in support of a claim for a certified agreement containing, inter alia, a bargaining fee, was protected.
  3. Merkel J held that the bargaining fee claim did not pertain to the employer-employee relationship on the basis that it required the employer to act as the union’s agent in requiring non-union members to employ the union as their bargaining agent, and concluded:

“The agency so created is for the benefit of the union, rather than for the benefit of the employee upon whom the contractual liability is to be involuntarily imposed. The resulting involuntary ‘bargaining’ agency is, as a matter of substance, if not form, a ‘no free ride for non-unionists’ claim, rather than one by which the union is undertaking its traditional role of representing the interests of union members in respect of the terms of employment of employees.(para 41)

  1. The Court also ruled against the validity of the part of the claim requiring the employer to provide a direct debit facility to employees for payment of the fee, following the principles established by the High Court in relation to payroll deduction of union dues.
  2. Although unnecessary to the question the Court was required to determine, Merkel J also held that an agreement containing a “substantive, discrete and significant matter that does not pertain to the employment relationship” cannot be certified and, if certified, means that the certified agreement in its entirety is invalid.
  3. In addition to this determination, Merkel J expressed some doubt as to whether the bargaining fee was lawful under the freedom of association provisions of the Act.
  4. An appeal has been lodged against the decision in Electrolux to the Full Court of the Federal Court. Meanwhile, a number of decisions in the Commission have raised relevant issues in relation to whether provisions which do not pertain to the employment relationship can be included in agreements.
  5. In Re Atlas Steels Metals Distribution Certified Agreement 2001-2003, Ives DP held that he was bound by Electrolux not to certify an agreement which contained a provision for the deduction of union dues. (Print PR914084, 7 February 2002) That decision is under appeal to a Full Bench.
  6. In Re Knox City Council Enterprise Agreement (No. 4), 2001, Kaufman SDP held that he was not bound by Electrolux in relation to whether or not an agreement could be certified if it contained a provision that did not pertain to the employment relationship, as Merkel J’s findings on that issue did not form part of the ratio of the decision. Kaufman SDP held that an agreement could be certified in those circumstances.
  7. These two decisions are relevant, because their final determination will resolve whether or not, under the current law, an agreement containing a bargaining fee clause (assuming it does not pertain to the employment relationship) can be certified.
  8. However, the issue of whether or not the bargaining fee does pertain to the employment relationship is also not finally determined, both as a result of the appeal in Electrolux, and a decision of Munro J in Webforge - and - Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union, (Print PR914378, 18 February 2002) in which he held that a clause of a proposed agreement providing for payroll deductions, including of union fees, did pertain to the employment relationship. This decision is also relevant to the question of the validity of bargaining fee provisions in agreements.
  9. The ACTU submits that there are a number of very important legal issues before the Commission and the Court. While these are relevant to the validity and enforceability of bargaining fee provisions, they are not confined to that issue. For example, should it be finally determined that provision for payroll deduction of union fees can be validly included in a certified agreement, will the Government introduce legislation to overturn that decision? For this reason, the 2002 Bill should be not proceeded with, at least until the final results of the litigation is known.

Bargaining Fees In An International Context

  1. Bargaining fees paid by employees covered by collective agreements who are not union members are provided for in the law of a number of countries, including the United States, Canada, Switzerland, Israel and South Africa.
  2. The principle in these countries is that where a union is recognised by the employer for the purposes of collective bargaining and negotiates an agreement covering all employees, fairness demands that non-members, or “free riders”, be required to pay a fee to the union, either at the same level as union dues or at a lower rate set to approximate the real costs to the union for representing the employees as part of the collective.
  3. In the US, Canada and South Africa, a union must have majority membership amongst employees in order to gain employer recognition for the purposes of collective bargaining.
  4. In each of these countries, freedom of association, including the right to join or not to join a union, is strongly valued. Bargaining fees are not seen as contrary to that principle, but as serving to maintain another principle, that of “fair share” or avoiding of free-loading.
  5. In the US, for instance, the standard clause adopted by the Federal Court of Appeals states:

No employee shall be required to become or remain a member of the union as a condition of employment.

Each employee shall have the right to freely join or decline to join the union.

Each union member shall have the right to freely retain or discontinue his membership.

Employees who decline to join the union may be required to pay a reduced service fee equivalent to his or her proportionate share of union expenditures that are necessary to support solely representational activities in dealing with the employer on labor-management issues. [G Orr Agency Shops in Australia? Compulsory Bargaining Fees, Union (In)Security and the Rights of Free-Riders (2001) 14 AJLL 1, 15]

  1. In South Africa, unions can charge an agency fee which must be no more than normal union dues and must be paid into a special account and not used for political purposes or any purpose that “does not advance or protect the socio-economic interests of employees”. (Orr, p8)
  2. In Switzerland, collective agreements are permitted to require the payment of “solidarity contributions” by non-union employees. (Freedom of Association and Collective Bargaining: General Survey of the reports on the Freedom of Association and the Right to Organize Convention (No. 87), 1948 and the Right to Organize and Collective Bargaining Convention (No. 98), 1949 ILO, Geneva, 1994 , p46, n103)
  3. In Israel, the fee charged is less than that paid by union members. [AV Jose (ed) Organised Labour in the 21st Century International Institute for Labour Studies, Geneva, 2002. p183]
  4. In Canada, the “Rand formula” (named after Justice Rand who developed it in a 1946 decision for the Canadian public service) provides that the compulsory bargaining fee is presumptively that of the usual union dues. (General Survey p7)

Collective Bargaining Principles

  1. The ILO views bargaining fees as a valid issue for collective bargaining, with its Freedom of Association Committee holding:

“When legislation admits trade union security clauses such as the withholding of trade union dues from the wages of non-members benefiting from the conclusion of a collective agreement, those clauses should only take effect through collective agreements.” [Freedom of Association: Digest of decisions and principles of the Freedom of Association Committee of the Governing Body of the ILO Fourth (revised) edition, Geneva 1996, para 325]

  1. The ILO’s General Survey explicitly states that bargaining fee provisions, when negotiated between unions and employers, are consistent with freedom of association principles:

(Clauses in collective agreements) may also require all workers, whether or not they are members of trade unions, to pay union dues, or contributions, without making union membership a condition of employment (agency shop) or oblige the employer, in accordance with the principle of preferential treatment, to give preference to unionized workers in respect of recruitment and other matters. These clauses are compatible with the Convention provided, however, that they are the result of free negotiation between workers’ organizations and employers.”

  1. The ILO has held that:

“In keeping with the principles of freedom of association, it should be possible for collective agreements to provide for a system for the collection of union dues, without interference by the authorities.” (Digest para 808)

  1. The Canadian Supreme Court has held, in a case concerning a non-union member’s challenge to an agency fee requirement in his collective agreement, that the “Rand formula” does not breach the Canadian Charter of Rights and Freedoms, which guarantees freedom of association. While the Court differed on whether this right included a right not to associate, the principle of payment of agency fees was upheld unanimously. La Forest J accepted the existence of a right not to associate, but held that this cannot be absolute:

    “Given the complexity and expansive mandate of modern government, it seems clear that some degree of involuntary association beyond the very basic foundation of the nation state will be constitutionally acceptable, where such association is generated by the workings of society in pursuit of the common good.” [Lavigne v Ontario Public Service Employees Union (1991) 81 DLR (4th) 545, 626]
  2. In distinguishing between payment for bargaining services received and financing the general “political” activities of the union, La Forest J held:

“To bring the discussion down to earth somewhat, I would suggest that a worker like Lavigne, would have no chance of succeeding if his objection to his association with the union was the extent to which it addresses itself to the matters, the terms and conditions of employment for members of his bargaining unit, with respect to which he is ‘naturally’ associated with his fellow employees. Few would think he should not be required to pay for the services the union renders him in this context. Significantly, he does not object to these matters. With respect to these, the union is simply viewed as a reasonable vehicle by which the necessary interconnectedness of Livigne and his fellow workers is expressed.

“When, however, the union purports to express itself in respect to matters reflecting aspects of Livigne’s identity and membership in the community that go beyond his bargaining unit, and its immediate concerns, his claim to the protection of the Charter cannot as easily be dismissed.”

  1. The US Supreme Court adopted similar reasoning in a case concerning a claim by teachers subject to an agency shop agreement that it violated their constitutional right to freedom of expression. [Abood v Detroit Board of Education 431 US 209 (1977)]
  2. A Conservative Government, in the context of attempting to abolish closed shops or compulsory unionism, introduced a provision for agency shops in UK legislation in 1971 which could apply where members of a registered union voted for this to apply. Subsection 6(1) of the Industrial Relations Act provided:

When an agency shop agreement is for the time being in force, a worker to whom the agreement applies shall not have the right, as between himself and the employer to whom the agreement applies, to refuse to be a member of the trade union with which the agreement was made unless he agrees to pay appropriate contributions to the trade union in lieu of membership of it.

  1. The provision was used very little, as it applied only to registered unions, and the Trades Union Congress opposed the attempt by the legislation to make registration compulsory. The agency shop provision was repealed by the incoming Labour Government in 1974, which legislated to, once again, permit closed shops. [C Hanson et al The Closed Shop: A Comparative Study in Public Policy and Trade Union Security in Britain, the USA and West Germany Gower, Aldershot, 1982 pp32-33]
  2. The current requirement in the Act that certified agreements include only matters “pertaining to the relationship between employers and employees” is inconsistent with the principle of free collective bargaining. It should be noted that the High Court has held that deduction of union dues is not a matter pertaining to the employment relationship, and so cannot be validly included in an award or an agreement. The Court also expressed the view that such deductions could be considered “industrial” for the purposes of the constitutional conciliation and arbitration power; the jurisdictional restriction results from the limitation imposed by the Act, not the Constitution. [Re Alcan; ex parte FIMEE (1994) 181 CLR 96]
  3. Internationally, it is accepted that bargaining fee provisions in collective agreements are not inconsistent with principles of freedom of association.

A Fair Share

  1. The Minister argues that employees should not be liable to pay a fee that they have not, individually, agreed to prior to the service being provided.
  2. This might carry some weight if employees were in a position to reject the service, with the consequence of being excluded from the benefits of a collective agreement negotiated by a union. However, this is not the case.
  3. It should be noted that around 90% of agreements certified under the Act are made with unions. [Agreement making in Australia under the Workplace Relations Act DEWRSB, 2000, p25]
  4. The link between unions and working conditions is made clearly by the Australian Taxation Office which, in its ruling on the deductibility of union dues, states:

Therefore, where the principal activities of the association are negotiating and administering employment agreements, and/or providing professional development services, the subscription is an allowable deduction, provided that the member is earning assessable income from the relevant trade, business or profession.” [Income tax: subscriptions, joining fees, levies and contributions paid to associations by individuals [Taxation Ruling TR 2000/7 para 6]

“Most trade unions and associations of employees have as their principal objective the gaining of higher salaries and improved working conditions for members. As such, there is the required connection with the derivation of assessable income where the subscription is relevant to the member's current employment, unless the employment results in the receipt of exempt income.” (para 29)

  1. The Act prohibits employers from, inter alia, injuring an employee in his or her employment or altering the position of an employee to the employee’s prejudice for reasons including that the employee is not, or does not propose to become, a member of an industrial association. [ss298K(1)(b), 298K(1)(c), 298L(1)(b)]
  2. In addition, section 170MDA of the Act provides that one or more employees whose employment is not subject to a certified agreement may request their employer to vary the agreement so that their employment is subject to the agreement and to seek Commission approval for the variation. The employer must agree to the request if their employment would have been subject to the agreement if they were or were not members of a particular organisation of employees.
  3. Apart from the specific prohibitions in section 298K, and the penalties attached to a breach, the effect of section 170MDA is that it is not possible in practice for a union to make an agreement with an employer only on behalf of its own members, as non-members would be able to obtain an extension of the agreement to cover their employment.
  4. In the US, unions have a duty of “fair representation” to non-members in workplaces where it is recognised for the purpose of collective bargaining. The concept of agency shops as an answer to the problem of “free-riders” was adopted in the US as a result of the duty to non-members, an analogous situation to Australia where unions must also represent all workers in collective bargaining where they are involved as a party. [Hanson, p116]
  5. This issue is one which has attracted comment from academics:

“An argument very frequently used to support the closed shop is the ‘free-rider’ argument; that is, that non-unionists should not be allowed to benefit from union activities without contributing to the financial and organizational burden. McCarthy referred to this as the ‘common obligation argument’, and Kahn-Freund explained it in biblical terms as meaning that ‘he who does not sow, neither shall he reap’. The significance of this argument is perhaps underlined by some research findings which suggest that persons who would normally combine in association to pursue common goals will not necessarily do so if non-members are allowed to share the fruits of the association’s efforts without the burden of subscription. A solution to this might be to allow workers to ‘buy’ their non-membership, or to put it another way, to pay for the union services from which they benefit without actually making them join.” [F Prondzynski Freedom of Association and Industrial Relations Mansell, London, 1987 p121]

  1. The Minister has made it clear that he expects unions to represent non-members, as in his criticism of unions for failing to insert a redundancy pay provision into the award covering One.Tel employees.
  2. Enterprise bargaining is very resource intensive for unions. The Australian Manufacturing Workers’ Union, for example, is party to 1600 certified agreements expiring between 1 April 2000 and 31 August 2001 and which required re-negotiation. The Construction, Forestry, Mining and Energy Union estimates that in the 15 months to March 2001 approximately 3800 agreements had been concluded.
  3. In each case, the union must provide personnel to attend the workplace, often on many occasions, in order to assist employees in negotiations, as well as in the drawing up of the agreement and its processing through the certification process in the Commission.
  4. The obligation which unions have to provide these services to members means that non-members employed in workplaces alongside members also benefit. Stresses can be caused at workplaces because of the perceived injustice of non-union members benefiting from the contributions and endeavours of unions and their members.
  5. Unions have been genuinely surprised at the strength of members’ positive reaction to the decision of McIntyre VP in relation to the electrical contracting agreements, and the enthusiasm at which the concept of bargaining fees has been embraced at the workplace as an issue for collective bargaining.
  6. With a Government strongly wedded to the principle of user-pays and individual responsibility, union members can see no reason why they should be forced to subsidise benefits for non-unionists.
  7. Fairness requires that employees who benefit from a service which cannot be denied to them by a union should pay their fair share, rather than be subsidised by fellow employees who are members of the union.

Interference In Collective Bargaining

  1. The Government has repeatedly committed itself to the principle that employment issues should be negotiated and agreed between employers, their employees and the latter’s representatives at the enterprise level.

  1. This principle is reflected in paragraph (b) of the principal Object of the Act:

ensuring that the primary responsibility for determining matters affecting the relationship between employers and employees rests with the employer and employees at the workplace or enterprise level;

  1. In each case where a collective agreement requires payment of a bargaining fee, this is subject to a vote of a valid majority of all employees, union members and non-members, whose employment will be subject to the agreement. This means that it is impossible for a bargaining fee provision to be included in an agreement unless a majority of employees, whether union members or not, support it, making the process not dissimilar to that in North America where unions require majority support in order to negotiate a collective agreement.
  2. The fact that a majority of employees support the certification of an agreement does not mean, necessarily, that all relevant employees support the agreement. Provisions for increased workplace flexibility, particularly in relation to extended or increased hours of work, can be very controversial and attract significant opposition. However, the Act provides that if a majority of the employees accept the agreement, subject to the no-disadvantage test and the other requirements, it must be certified.
  3. There is no justification for the Government to interfere in the content of agreements which are negotiated and agreed by the employer and a majority of the employees concerned.

Conclusion

  1. For the reasons stated above, the ACTU submits that the Committee should recommend that the Bill not be passed by the Senate.
  2. In his minority report on the 2001 Bill, Senator Murray concluded by saying:

“The Democrats will consider the Bill further, if it is resurrected following the forthcoming Federal election. We remain open to the possibility that bargaining fees or fee-for-service provisions become part of workplace law, within the principles of freedom of association.” (p22)

  1. The ACTU supports this position, and would welcome discussion of legislation specifically providing for the inclusion of bargaining fee provisions in collective agreements; that is, subject to the agreement of the employer and a majority if the employees (including non-unionists) whose employment would be covered by the agreement.

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