ACTU Submission to the Senate |
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Workplace Relations
Amendment (Prohibition Of Compulsory Union Fees) Bill 2002
Introduction
- 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.
- 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.
- 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.
- 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.
- 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)
- 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
- The 2002 Bill has two key elements:
- it voids bargaining fees provisions in agreements and requires them to be
removed; and
- it prohibits associations from demanding a fee, as well as discrimination
based on non-payment of a fee and coercion of a person to pay a
fee.
- 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.
- 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.
- The provisions of the 2002 Bill dealing with discrimination and coercion are
completely unnecessary.
- 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.
- 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
- 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)
- 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.
- 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).
- 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.
- 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)
- 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.
- 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.
- 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)
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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
- 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.
- 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.
- 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.
- 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.
- 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]
- 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)
- 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)
- 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]
- 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
- 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]
- 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.”
- 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)
- 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]
- 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.”
- 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)]
- 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.
- 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]
- 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]
- Internationally, it is accepted that bargaining fee provisions in collective
agreements are not inconsistent with principles of freedom of
association.
A Fair Share
- 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.
- 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.
- 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]
- 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)
- 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)]
- 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.
- 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.
- 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]
- 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]
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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
- 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.
- 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;
- 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.
- 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.
- 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
- For the reasons stated above, the ACTU submits that the Committee should
recommend that the Bill not be passed by the Senate.
- 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)
- 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.