Manajemen | Fakultas Ekonomi Universitas Maritim Raja Ali Haji 2004 26
ARBITRATION AND RELATIONS BETWEEN
THE PARTIES
BRAHAM DABSCHECK∗
A
ustralia has developed a system, or systems of collective bargaining combining interactions between the parties, industrial tribunals, and political and legal processes.
Arbitration has been one mechanism through which the parties have conducted their
relationships. The nexus between arbitration and the parties is nuanced and fluid. It
is not a simple command—obey relationship as characterised by Howard (1977) and
Scherer (1985). Unions are not dependent on arbitration and tribunals have not been
captured by union principles. Employer associations, in contradiction to Plowman (1988),
have been proactive in pursuing the interests of employers. Following Mark Perlman
(1954a,b), the successes of arbitration have been due to arbitrators being flexible and
adaptable in fulfilling the diverse and changing needs of the parties. The inability of the
federal tribunal to respond to the parties’ desire to adopt enterprise bargaining in the
early 1990s, has resulted in a reduction in its role and influence.
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In their seminal work, Industrial Democracy, Sidney and Beatrice Webb (1911),
examine various methods used to determine wages and employment conditions.
One of these is the method of collective bargaining. The most interesting part of
their discussion, especially for an Australian audience, is that it mainly involves
an examination of how conciliation and arbitration, or umpires, can aid unions
and employers in negotiating and reaching agreements. This work by the Webbs
has a separate chapter entitled ‘Arbitration’, which is subsumed as an important
aspect of collective bargaining. Arbitration is not viewed as an alternative to collective bargaining (Webb & Webb 1911, pp. 173–246). In commenting on the
literature available to them the Webbs said, ‘Much of what is called Arbitration or
Conciliation . . . amounts to nothing more than organised collective bargaining’
(Webb & Webb 1911, n. 223).
Moreover, ‘The Introduction to the 1902 Edition’ contains a celebratory account of the burgeoning development of industrial tribunals and wages boards in
the various Australian colonies/states and New Zealand (Webb & Webb 1911,
pp. xxxvi-li; also see Webb 1965). The creation of state sponsored industrial tribunals in Australia in the period 1890 to 1914 (see Macintyre & Mitchell 1989),
brought about a new, or different, form of collective determination of wages and
employment conditions. The various tribunals brought into being were statutory creations. The functions they were to perform were defined for them in
∗ School
of Industrial Relations and Organisational Behaviour, University of New South Wales,
Sydney, NSW 2052, Australia. Email: b.dabscheck@unsw.edu.au Thanks are expressed to my colleague Peter Sheldon for his help in the planning and execution of this paper.
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legislation. If the parties, either individually or collectively, were ‘unhappy’ with
their operation, behaviour, personnel and decisions, besides coming to their own
arrangements outside the orbit of the offending tribunal, if they were so able,
could apply political pressure on the government of the day to alter the legislation governing the tribunal, or challenge its decisions before a superior court.
Australia’s various systems of industrial tribunals then, were not institutions which
the parties simply, or meekly, obeyed. Rather, the various tribunals and the parties
bargained with each other, with the playing out of such relationships involving
the interaction of other arms of the state, such as governments and courts.
Sykes (1980, p. 303) has said that ‘the Australian award is a product of threesided bargaining between management, unions and the [tribunal] carried through
the conciliation and arbitration stages’. There is more, however, to Australian industrial relations, or if we follow the Webbs, its system(s) of collective bargaining,
than this. Substantive and procedural rules are the product of bargaining between
management/employers, unions and workers, tribunals, governments and superior courts and other individuals and organisations, which become involved in the
world of work, conducted in a federal system, combining decisions made at the
national, state, industry, enterprise and workplace level (Dabscheck 1994a; 1995;
2002). Industrial tribunals have been, until recently at least (Dabscheck 2001), the
key to understanding the operation of Australian collective bargaining. They have
been at the centre of the major struggles and events associated with Australian
industrial relations. Industrial tribunals have been enabled to make decisions, in
the famous words of Henry Bournes Higgins (1915, p. 13), to create ‘A New
Province for Law and Order’. The parties, in turn, have not been shy in trying
to shape what it is that tribunals can do, or to challenge ‘unacceptable’ decisions
politically, legally and industrially (Dabscheck 1981; 1983). These processes have
enmeshed the parties into the political and legal processes of Australia.
An example will be provided to illustrate such enmeshment; of how arbitration, or industrial tribunals, have such an impact on the parties. The federal
tribunal convenes test cases on matters of system level importance, such as minimum, national or living wage cases. Submissions are presented and coordinated
by representatives on behalf of unions and employers. In addition, the major piece
of commonwealth legislation governing industrial relations is forever being revised and changed and/or there are proposals for change. Many of these changes
are concerned with the operation and functions to be performed by the federal
tribunal. The stance and position of unions and employers concerning such legislative changes are coordinated by representative organisations. The need to
coordinate and provide submissions in both orbits provides the said representative organisations, which perform these functions, with a role which is different
from that of similar representative bodies in an industrial relations system which
does not have state sponsored industrial tribunals.1
The present paper is concerned with providing an analysis and discussion of
arbitration and its impact on, and relations between, the parties. Arbitration, or the
approach adopted by the personnel of industrial tribunals, will oscillate between
active and less active phases. Its focus will move backwards and forwards between
the micro and macro. With the former, the tribunal tailors its decisions to the
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problems and needs of the parties that appear before it; ignoring or discounting
possible external effects on other parties which are subject to its jurisdiction. With
the latter, the tribunal is concerned with the ‘overall’ needs of its jurisdiction; being
most conscious of externalities and spill-over effects.
The demands and needs of what the parties ‘want’ from arbitration may be
the same, or will conflict. A party which is strong and resourceful, which is able
to realise its goals and objectives from other sources—whether they be the market, political, legal or other processes, including favourable decisions from other
tribunals—will have a low attachment or need for arbitration. However, if a party
finds it difficult to obtain concessions from other sources, it will increasingly turn
to arbitration and seek to avail itself of the services provided by the tribunal.
Employers encountering strong, well resourced and militant unions, especially
in buoyant economic times, when labour is in short supply, will turn to arbitration for protection and support. Contrariwise, unions in tough economic times,
when employers cry poor mouth, will turn to arbitration in attempting to defend
established conditions or gain concessions.
To the extent that desired support from a tribunal is not forthcoming, or the
tribunal hands down decisions which are antipathetic to the needs of the parties,
either individually or collectively, the tribunal will be attacked. Political and legal
moves will be initiated against the tribunal in an effort to ensure its decisions more
closely reflect the desires of a party, or parties. For the parties, arbitration can be
a vehicle—one of many—for changes in wages and working conditions, a shield
to be used to deflect force and pressure from other parties, and something to be
criticised, attacked and reformed when things go wrong. The playing out of this
dialectic, in terms of both its minutiae and all its grandeur, will be a function of
the goals and objects of the parties, the stance and attitude of the tribunal, and
the particular circumstances of the environment they all inhabit at various points
in time.
Higgins (1920, p. 110) likened Australian unions to ‘a bee taking all that it can
get from one flower, pass[ing] on to the next’. In doing so, he highlighted the
instrumental, calculative and strategic nature of unions; of how they combined a
variety of methods in pursuit of their goals. Similar sentiments could be expressed
concerning the behaviour of Australian employers. They combine market, arbitral, political and legal methods in their dealings with workers and unions. More
specifically, weapons in their arsenal include union avoidance, non-union collective deals, contracting out, relocating work domestically and/or internationally,
individual contracts, independent contractors, Australian workplace agreements,
company restructuring and bankruptcy.
A number of, what might be called, orthodox or mainstream commentators
have interpreted the relationship between arbitration and the parties in a simple
uni-dimensional way. They are Howard (1977), with his view that unions are dependent on arbitration, Scherer’s (1985) state syndicalism notion that unions have
captured arbitration, and Plowman’s (1988; 1989) employer association reactivity thesis. Howard and Scherer portray the arbitration—parties’ relationship in
command—obey terms; their only difference being who in fact commands whom!
A critical examination of all three authors will be provided.
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According to Howard, Australian unions in the nineteenth century developed
on what he regarded as conventional, or collective bargaining, lines. They were
routed in the strikes of the 1890s. Howard maintains that, as a result of their
demonstrated inability to act as collective bargaining agents, unions turned to
politics, and through politics to the erection of arbitration tribunals which would
provide unions with benefits and concessions. Howard sees unions as being dependent on industrial tribunals for their existence and operation. He maintains
The Australian trade union can be regarded in general as an institution called into
existence by a bureaucratic mechanism (the arbitration system) to enhance the functioning of that mechanism. Unions generally have not succeeded in carving out for
themselves an industrial role that is independent of the arbitral system. (Howard
1977, p. 255)
He has also said that ‘perhaps the Australian labour movement of the 20th century . . . is a labour movement in form and intention, rather than in tactic and
achievement’. Howard maintains that ‘where they have developed to meet a bureaucratic need, as the Australian experience seems to be, perhaps unions themselves, in general, are industrial cosmetics’ (Howard 1977, pp. 269–70).
Howard’s dependency theory can be criticised on both theoretical and empirical
grounds. His views concerning the ‘proper’ behaviour of unions are based on the
work of Selig Perlman (1949). Perlman developed a model of business unionism
where unions engage in struggles against employers, in defending and advancing
the rights and interests of members. For Howard, if unions are not behaving in
this manner they are ‘industrial cosmetics’. Perlman has a very strong sense of
unions being the masters and mistresses of their own destiny. Unions, and their
home-grown leaders, know how best to improve the lot of members. Much of
Perlman’s work, and this has escaped the attention of Howard, is how unions find
themselves involved in struggles with ‘intellectuals’. For Perlman, ‘intellectuals’ is
a term of abuse. ‘Intellectuals’ are ‘outsiders’, persons outside and apart from the
orbit of unions; persons who seek to control and redirect their activities. Perlman
(1949, p. 5) says that a union not only struggles against employers, but also ‘against
the intellectual who would frame its programmes and shape its policies’.
Perlman’s treatment of ‘intellectuals’ is damning and sarcastic. He sees them
as being overcome by ‘social mysticism’, unable to alter their thinking on unions,
despite ‘labour’s repeated refusal to reach out for its appointed destiny’. When
unions do not behave as they ‘should’, rather than admit any error in their judgement, ‘intellectuals’ maintain ‘that what has occurred is merely a temporary
“delay” . . . [and] will account for that delay by calling attention to the rise of a
reactionary trade union bureaucracy’ (Perlman 1949, p. 282). Howard dismisses
Australian unions as ‘industrial cosmetics’ because they do not behave in the
way that he believes they should. He has misinterpreted and incorrectly applied
Perlman to the Australian case.
Comments will also be offered concerning Howard’s statement of the nexus
between industrial tribunals and the ‘tactics and achievements’ of unions.
Tribunals are one of the methods, not the only method, available to
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unions—and for that matter employers!—to pursue their goals. The use of an
additional method, in this case industrial tribunals, increases the range of methods
that can be potentially utilised by unions. An extra or additional methods—given
that tribunals operate at both the federal and state level—increases the range of
options, or tactics, available to unions. Extra ‘avenues of attack’ enhance tactical
options rather than reduce them. It is difficult to follow Howard’s reasoning on
this point.
Howard equates unions making use2 of arbitration with lack of ‘achievement’.
For Howard, it is only by struggling against employers in collective bargaining negotiations that unions can be considered to have obtained ‘achievements’.
Howard’s notion of ‘achievement’ is defined in terms of input—the method used
by unions—rather than output—the concessions they actually obtain, or result,
from their intervention. Both inputs and outputs or more correctly a cost-benefit
analysis of arbitration and collective bargaining needs to be conducted in making
a ‘rational’ decision as to which method is the most effective. Howard doesn’t
do this. He simply asserts that because unions make use of arbitration they are
lacking in ‘achievement’; they are industrially impotent.
It is conceivable, however, that the ratios involved in a cost-benefit analysis
of these two methods will favour arbitration. If we can ignore Howard for the
moment, and if we note that Australian unions have historically made use of arbitration, such decisions may have flowed from a ‘rational’ calculation, or strategic
analysis, of the costs and benefits of different options/methods available at different
moments in time. For example, unions have historically made use of arbitration in
basic, minimum, national and living wages to increase the wages of minimum, or
low wage, workers, whether they be unionised or not, since the famous Harvester
case of 1907 (2 CAR 1). It is unlikely that such wage increases would have been
forthcoming from direct negotiations with employers.3 However, and this constitutes a major weakness of Howard’s work, it is not as if union activity is confined
to arbitral proceedings before industrial tribunals. They combine arbitration with
collective bargaining and other methods.
One of the examples used by Howard to develop his dependency theory is
the deregistration and re-registration of the Amalgamated Engineering Union
(AEU). The AEU was a strong union which favoured direct negotiations with
employers. It was deregistered when it collected strike pay for members involved in
a campaign for over-award pay. Howard (1977, pp. 268–69) claims ‘its decision to
return to the arbitral fold is indicative of the lack of optimism and self-confidence
that is characteristic of Australian unions in general’.
This episode has been examined in some detail by Mark Perlman (1954a,
pp. 105–10) and Sheridan (1975, pp. 134–43). Their analysis is somewhat different from that of Howard. For both Perlman and Sheridan the AEU defeated the
arbitration tribunal over the exercise of authority within the metal trades industry. The AEU was too strong and resourceful ‘to be left out in the cold’. Perlman
(1954a, p. 110) concluded ‘that the Union had flexed its “muscles” and . . . the
Court, unsuccessful in its choice of adequate disciplinary action had retreated . . . .
The Court was no longer in the dominant role in the metal trades industry, and in
effect had lost its position as the administrator of labour relations’. For Sheridan
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(1975, p. 141) ‘the determined action of the deregistered AEU had forced the
employer, the federal government and the court to accept its terms’.
For Howard’s dependency theory to have relevance, unions have to be precluded from having other methods available to them to obtain concessions. If
other methods are available, it tautologically follows that they are not dependent
on arbitration. The above example demonstrates that the AEU did have avenues,
such as collective bargaining, available to it.
Empirical work has challenged the veracity of Howard’s dependency thesis.
Sheldon (1989a,b; 1993a,b; 1995; 1998; 2002) in a number of studies has found
that the rapid growth in unionism, that occurred in the early years of the twentieth
century, had little to do with, or was marginally connected to, the emergence of
industrial tribunals. For example, in examining developments in the maritime
industry, between 1900 and 1912, he found the ‘experience of the early years of
compulsory arbitration was of negligible benefit for three out of the four unions
in terms of award making’ (Sheldon 1998, p. 439). Gahan examined the operation
of four unions in specifically testing Howard’s thesis. He found that the unions
combined the use of arbitration with a variety of other methods. Gahan (1996,
p. 693) concluded
Each union possessed a different bundle of industrial and political resources which
made the potential costs and benefits of pursuing specific action very different. To
the extent that any of these unions was dependent on arbitration for the supply of
resources critical to its functions, this dependency was at most partial; they were
found to be dependent on a variety of organizational and institutional mechanisms
for the supply of critical resources. Rather, part of a union’s strategic interplay with
arbitration was concerned with shaping it to its own interests through the industrial
and political resources available.
Unions do make use of arbitration and industrial tribunals. It is one of many
methods available to them in attempting to achieve their organisational goals. The
actual method, or more correctly mix of methods, they will employ, at different
points in time, will be determined by strategic considerations. A similar statement
could be made concerning the behaviour of employers.
Howard sees unions as being dependent on industrial tribunals. Scherer (1985)
turns this relationship on its head. He portrays unions as being the dominant,
or dominating, partner in the tribunal–union relationship. He maintains ‘It is no
great revelation to observe that union principles have “captured” the arbitration
tribunals’. He also says
the arbitral tribunal and the accompanying system for regulating trade unions can
be described as the executive committee of the labour movement—or at least of that
privileged part of the labour movement in secure jobs which Marx dubbed the “labour
aristocracy” . . . an attenuated form of syndicalism lives on in one of the most bureaucratically regulated trade union movements in the Western world. Australia . . . has
evolved a . . . [system of] State Syndicalism. (Scherer 1985, p. 94)
The notion that union principles have ‘captured’ tribunals translates into the
proposition that tribunals do the bidding of unions, that unions do not experience
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defeats and/or employers do not have victories. More generally Scherer, like
Howard, does not have a role for employers in Australian industrial relations.
Scherer’s ‘capture’ theory could be rejected by trawling through the reports of
various tribunals and finding examples of union defeats and/or employer victories.
Examples of where tribunals have turned down an application of a union, or
upheld a submission of an employer, admonished a union because of its attitude or
behaviour, fined it and/or its leaders and members, suspended an award, ‘lowered’
an award condition, deregistered a union, or jailed officials or members would
provide empirical refutation of Scherer’s thesis.
Some examples might help to illustrate problems associated with Scherer’s
suppositions. In the early years of the operation of the Commonwealth Court
of Conciliation and Arbitration, some unions sought to avail themselves of the
arbitral services of the tribunal when they were engaged in strikes. Higgins rejected
this ‘union principle’. He said,
The arbitration system is devised to provide a substitute for strikes and stoppages, to
secure the reign of justice as against violence, of right as against might . . . . The men
know well that they cannot get arbitration if at the same time they try to enforce their
demands by stoppage of work. They cannot have arbitration and strike too. (Higgins
1919, p. 205)
He also said, ‘As a child who finds that the more he cries the more he gets his
way, will cry the more; so with men who strike’ (Higgins 1920, p. 135). What
are we to make of employer victories before the federal tribunal such as the 10
per cent cut in the basic wage in 1931 (30 CAR 2), the abolition of automatic
quarterly cost of living adjustments in 1953 (77 CAR 477), and the introduction
of the total wage in 1967 (118 CAR 655)?4 More generally, in national wage case
decisions, since the 1931 case, the federal tribunal has adopted the employers’
principle of capacity to pay, rejecting the needs principle of unions. In the early
1990s we had the spectacle of the Australian Council of Trade Union’s secretary,
Bill Kelty, vehemently criticising and bemoaning the federal tribunal because of
its decision to defer the introduction of enterprise bargaining (Dabscheck 1995,
pp. 64–72).
A further problem for Scherer is that industrial tribunals have endorsed or
been ‘captured’ by (?), the ‘management principle’ of not interfering with managerial prerogatives. This is something which Scherer himself acknowledges—
‘[the] policy [of tribunals] is to uphold managerial prerogatives’ (Scherer 1985,
p. 89)—but fails to think through its implications for his unions capturing tribunals
thesis.
Higgins, the champion of industrial tribunals and ‘A New Province for Law
and Order’, who has been seen as a bete noir of employers (see Evans 1985; H.R.
Nicholls Society 1986), was not prepared to interfere with managerial prerogatives. He said, ‘It is well known that the Court is very chary about dictating to
those that have to direct the work as to the mode of carrying it out, and that it will
not dictate conditions unless it is clearly shown that the mode adopted involves
undue pressure on human life’ (Higgins 1919, p. 196).
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The work of both Quinlan (1986) and Wright (1995) demonstrate how industrial tribunals have aided management and enhanced the protection of managerial
prerogatives. Quinlan (1986, p. 45), for example, maintains
In Australia, state intervention through compulsory arbitration has not only established a pervasive framework of industry—and occupation—wide bargaining but also
a mechanism for ensuring employee discipline at the workplace . . . . Centralised arbitration was seen as a more stable and effective means of preserving managerial
prerogative and minimising the risk of control based demands emanating from individual workplaces.
Wright conducted extensive research into the behaviour and operation of
Australian employers from the 1870s to the early 1990s. His overall finding was
that ‘management has in fact played a central—and in many cases dominant—role
in the evolution of Australian industrial relations’ (Wright 1995, p. 3). Moreover,
in the context of the long boom Australia enjoyed after World War II to the mid1970s, he found that industrial tribunals acted as a shield for employers against
the demands of unions. Wright (1995, p. 113) maintains
Australian employers proved relatively successful in containing the demands of organised labour during the post-war decades. While economic conditions provided an
environment favourable to labour, employers were also able to take advantage of a
number of contextual factors. These included major ideological divisions within the
labour movement, government policy aimed at wage restraint5 and the bulwark of
arbitration in protecting managerial prerogative from challenge.
Industrial tribunals do not see themselves as being the ‘captive’ of (either of)
the parties.6 In the Basic Wage and Standard Hours Inquiry 1952–1953 the Commonwealth Court of Conciliation and Arbitration pointed out (77 CAR 477, at
p. 507)
applications before the Court must be determined in accordance with . . . principles.
They must thus be determined regardless of the dissatisfaction of an unsuccessful
party. It is really impossible to settle a dispute in a way that satisfies all the parties; it
is frequently impossible to arrive at a just settlement which satisfies even one of the
parties to the dispute.
The most recent example of the federal tribunal dissatisfying the parties was its
decision in the April 1991 National Wage Case (Dec 300/91 M Print J7400) where
it delayed the introduction of enterprise bargaining (Dabscheck 1995, pp. 61–72;
2001).
Scherer claims that industrial tribunals have been of benefit to the ‘labour
aristocracy’. This implies that tribunals enhance skilled workers, at the expense
of the unskilled. The above comments concerning the federal tribunal’s decisions
in minimum wage cases casts a long shadow over Scherer’s claims. In addition,
the approach of the tribunal in dealing with the wages of skilled workers has
been, generally speaking7 to leave space for the parties to come to their own
arrangements. For example, Higgins (1915, p. 16) has said ‘the safest course, for
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an arbitrator not initiated into the mysteries of the several crafts, [is] to follow the
distinctions in grade between employers as expressed in wages for many years’.
In 1989 Plowman published Holding the Line: Compulsory arbitration and national employer co-ordination in Australia. In it he documents various activities and
functions provided by employer associations in providing an employer voice at
the national level from 1890 to the end of the 1980s. It is a thoroughly researched,
descriptive account of peak level employer association activity. Holding the Line
contains information on various initiatives performed by such bodies, over the
years, on behalf of employers. In the initial years of the federal tribunal’s operation, such bodies combined political and legal tactics in trying to restrict the
scope and actions of an institution which was perceived to be ‘bad’, or opposed to
the best interests of employers. Beginning in the 1930s, national level employer
associations developed a more favourable disposition to, and became a supporter
of the federal tribunal, when its ‘conservative’ decisions were regarded as being
consistent with and aiding the interests of employers. Representative employer
bodies have been successful in various major test cases before the federal tribunal
(see above) and in pursuing desired legislative and other changes (Plowman, 1989).
My reading of Holding the Line, and this may be a source of controversy, is that
it documents various initiatives pursued by peak level employer associations on
behalf of employers. This, however, is not Plowman’s reading.
In an article published in 1988 Plowman considered ‘theoretical’ issues associated with employer association behaviour and developed his ‘reactivity thesis’.
The opening sentence of this article states, ‘There is general consensus that employer associations are essentially reactive organisations’ (Plowman 1988, p. 287).
In making this statement, Plowman seems to be following the findings of overseas scholars. It is as if he is saying, if this is the view of overseas authorities, ipso
facto, such findings must be equally ‘true’ for Australia. The criticism that will be
offered here is that he has not used it as a working hypothesis with which to test
Australian experience.
Plowman (1988, p. 288) defines reactivity as
activity in response to some stimulus; for example, unions seeking a wage increase,
employers react by opposing such a wage increase. The term connotes not merely
the fact that employer association activities may be responsive to external stimuli, but
also that the response is passive and negatively defensive.
Note Plowman’s use of the term ‘passive’. The Macquarie Dictionary defines passive
as ‘not acting, or not attended with or manifested in open or positive action:
passive resistance, inactive, quiescent or inert’. If nothing else, Holding the Line
demonstrates that peak level employer associations have not been passive. It is not
as if they have not acted, or been quiescent or inert. They have not ‘given up the
ghost’, packed, up, gone home and simply left the running to others, especially
unions. There has always been representative organisations present in ‘fighting
the good fight’ on behalf of employers in tribunals, in the courts and politically.
If employer associations had, in fact, been passive he would not have been able to
research and publish Holding the Line.
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Plowman experiences problems in unpacking the meaning of ‘reactivity’. For
example, he has a notion of ‘reactive activity’ (Plowman 1988, p. 288). Even
though he sees employer associations reacting to external stimuli he visits similar
behavioural traits onto unions. He says, ‘It is possible, indeed, often probable,
that both sets of institutions act in a reactive fashion’ (Plowman 1988, p. 289). He
also wrote
it is contended that . . . Australian employer associations, having been forced to recognize unions did not wrest the initiative and become the principal architects of the
bargaining structures. They have been responsive, and reactive, rather proactive in
shaping the bargaining structures within which employment conditions are determined (Plowman 1988, p. 290).
‘Reactive activity’, both unions and employer associations being reactive when
Plowman has defined employer association reactivity in terms of responding to
unions, and the notion of ‘responsive, and reactive, rather proactive’ serve to cloud
rather than explicate an understanding of employer association behaviour.
Thornthwaite and Sheldon (1996; also see Sheldon & Thornthwaite 1999;
Barry 1995) have offered three modifications of Plowman’s work in attempting to
overcome these problems. First, employer association decisions may stem from internal rather than external stimuli. Creative minds will develop strategies and policies in pursuing the goals and objectives of employers. This modification enables,
or is consistent with, employers taking the initiative and being proactive. Second,
Plowman has conflated employer association ‘activity’ with failure. Thornthwaite
and Sheldon point out that whether or not initiatives will be successful is an empirical question. Everyone who participates in a race, or competition, is proactive;
however, there is only one winner. As has been demonstrated above, and in my
view, is also demonstrated in Holding the Line, employer associations have had
their victories, and their losses; which has also been the fate of unions. Third, a
distinction needs to be made between old and new issues. Employer associations,
like unions, can be proactive in pursuing the interests of those that they represent
in old, or continuing, issues such as wages or the mode of industrial relations regulation or bargaining structure. They can also be proactive on new issues, issues
that haven’t previously been the subject of bargaining. While it is easier to observe
them taking initiatives on new issues, they, like unions, can be equally proactive
on old, or continuing issues.
Sheldon and Thornthwaite (1999) published a book of readings on the activities of two national and five industry level employer associations. It provides an
empirical refutation of Plowman’s reactivity thesis. Sheldon and Thornthwaite
(1999, p. 192), in drawing these studies together, said
For a variety of reasons, since their early acceptance or accommodation, employer
associations have consistently taken the initiative both at economy-wide level and in
terms of their respective industries. In doing so, they have achieved a startling degree
of success in fundamentally reshaping the economy-wide bargaining structure as well
as remaking processes and outcomes in certain industries.
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Another way to approach the issue of arbitration and its impact on relations
between the parties is through the lens of industrial tribunals. In the mid-1950s
Mark Perlman (1954a,b) published work on the operation of the federal tribunal.
He was interested in how it and/or its personnel approached the task of regulating
different industries; industries where the parties experienced variable and different
types of problems. Despite the federal tribunal being a court at the time of his
research—the Commonwealth Court of Conciliation and Arbitration—and its
attendant judicial trappings, Perlman (1954b, p. 207) maintained that the key to
its success and operation resulted from it ‘fulfilling the demands of the parties’.
He also said, ‘The “independent variable” is what the parties need and want; the
judge’s reaction in the specific instance, his use of judicial notice, is the visible
result’ (Perlman 1954a, p. 39).
Perlman distinguished two modes or styles of arbitration. The first is administrative arbitration. It is based on an analysis of the pastoral industry (Perlman
1954a, pp. 55–94). Both employers and unions desire order and predictability to
avoid cut-throat competition in a spatially diverse industry with a largely itinerant
workforce. In the 1930s, unions accepted a ‘harsh’ decision on wages following a
calculation that they would be unable to obtain higher wages via other methods.
Perlman (1954b, p. 208) says that with administrative arbitration there
has developed . . . a belief that judges and commissioners should administer industry,
that they must for reasons of social efficiency assume a legislative mantle . . . . It predicates parties needing judges with figuratively strong hands and keenly imaginative
eyes.
The second approach is autonomous arbitration. It is based on an analysis
of the metal trades industry (Perlman 1954a, pp. 95–126). Both employers and
unions were well organised, resourceful, powerful and able to solve their own
problems. We have already noted how the AEU was able to defy the federal
tribunal and assume a position of ascendancy in the latter part of the 1930s (see
above). According to Perlman (1954a, p. 35), with autonomous arbitration ‘the
Court is . . . reluctan[t] to supplant the union and the employers’ association as
the dynamic forces in industrial relations’. The episode at the end of the 1930s,
however, demonstrated that such ‘reluctance’ may be something that is learnt the
‘hard way’, after a failed attempt of activism.
Dabscheck (1981; 1983) has developed a third variant of tribunal behaviour, a
theory of activist arbitration. The theory is derived from an examination of the
career of Sir William Raymond Kelly, President of the South Australian Industrial Court from 1930 to 1941, and a member of the Commonwealth Court of
Conciliation and Arbitration from 1941 to 1956, being appointed Chief Judge in
1949. Kelly was not a passive industrial relations regulator; he was not an arbitrator who sat back and waited for the lead, or instructions, from the parties. Kelly,
throughout his career, developed solutions to industrial relations problems. He
sought to convince the parties that they should follow his lead, rather than vice
versa. Activist arbitration does not postulate that the relationship between the
arbitrator and the parties is one of command and obey, per Howard and Scherer.
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‘Regulation is a process in which the competing parties and the regulatory agency
are involved in a bargaining relationship. The regulator and the different interest
groups involved in regulation seek to convince each other of the correctness, wisdom and legitimacy of their respective views concerning the issues associated with
regulation. Each of the parties seeks to capture the regulator, and the regulator
seeks to capture the parties’ (Dabscheck 1983, p. 156).8 Everyone is proactive! The
theory also says that if a tribunal, in the give and take of performing its functions of
regulation, is ‘out of step’ with the parties, they, either individually or collectively
will take action to circumvent and/or downgrade its role and influence.
Perlman (1954a, p. 181) explains the success of the federal tribunal in terms
of ‘the parties’ need for the arbitration system . . . the Court has responded to the
unique problems and demands of the specific industry to which it ministers’. He
also said ‘the parties must want the same kind of arbitration if arbitration is to
succeed’ (Perlman 1954a, p. 159). If this latter statement is correct it would follow
that if one party wanted arbitration, and others did not, it would be even harder
for arbitration to succeed. And, if an increasing number, if not all, parties did not
want arbitration it would, to state the obvious, experience and encounter more
than minor problems.
The notion of activist arbitration and the observations of Perlman, in the above
paragraph, will be used to provide an understanding of contemporary developments in the arbitration and relations between the parties dialectic. Following the
introduction of the total wage in 1967 (118 CAR 655) the federal tribunal sought
to operate and maintain a consistent and coordinated approach to wage determination and industrial relations regulation (Dabscheck 1994b). In the buoyant
economic times of the late 1960s and early 1970s it failed in this quest. The parties, with the exception of national wage cases, essentially negotiated their own
deals on wages and working conditions. With the advent of economic decline
and problems in the mid-1970s, continuing into and through the 1980s, the federal tribunal was able to develop and maintain different variants of a coordinated
system. The first was wage indexation from 1975 to 1981 and the Accords from
1983 to 1991. In the mid-1980s employers and employer associations became
increasingly dissatisfied with the coordinated, centralised system in operation
(Dabscheck 1989; 1995). Employer associations, especially the Business Council
of Australia, proactively pushed for the development of a new system of industrial
relations regulation known as enterprise bargaining (Sheldon & Thornthwaite
1999, pp. 47–69; Matthews 1994). In time, the Federal Labor party government
and the Australian Council of Trade Unions boarded the enterprise bargaining
bandwagon.
In 1991 a national wage case was held where the parties asked the federal tribunal to develop an enterprise bargaining industrial relations system. It was as if
they ‘needed judges with figuratively strong hands and keenly imaginative eyes’
(Perlman, 1954b, p. 208). The tribunal failed this test. It informed the parties that
it saw too many problems with enterprise bargaining before it could countenance
its introduction (Dec 200/91 M Print J7400). It was not able to be ‘adaptable’
and develop an approach, or approaches, with which to respond ‘to the unique
problems and demands’ of specific industries. A vacuum had been created. Both
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the Labor and Coalition governments introduced legislation to enhance the development of enterprise bargaining; bypassing and downgrading the role of the
federal tribunal (Dabscheck 2001).
Australia has developed a system, or systems, of collective bargaining combining interactions between the parties, arbitration/industrial tribunals, political and
legal processes. Arbitration has helped to enmesh the parties into Australia’s political and legal processes. Arbitration has been one mechanism through which
the parties have conducted their relationships. The nexus between arbitration and
the parties is nuanced and fluid. It is not a simple command—obey relationship as
characterised by Howard and Scherer. Unions are not dependent on arbitration
and tribunals have not been ‘captured’ by union principles. Employer associations, in contradiction to Plowman, have been proactive in pursuing the interests
of employers. Following Mark Perlman, the successes of arbitration have been
due to arbitrators being flexible and adaptable in fulfilling the diverse and changing needs of the parties. The inability of the federal tribunal to respond to the
parties desire to adopt enterprise bargaining, in the early 1990s, has resulted in a
reduction in its role and influence.
NOTES
1. See Metin (1977) and Childe (1964) for commentaries which have alternatively praised and been
highly critical of unions over their enmeshment into Australian legal and political affairs.
2. He actually sees them being dependent on arbitration tribunals.
3. For example, the employer H. V. McKay, was most unhappy with the decision in the Harvester
case. See Macarthy (1969).
4. In 1925 President Powers of the Commonwealth Court of Conciliation and Arbitration wrote
to the government requesting a knighthood on the grounds of resisting the wage demands of
unions. See McQueen (1983, p. 159).
5. See Sheridan (1999).
6. In saying this note four should not be ignored.
7. The major qualifications being the wage indexation experiment, 1975 to 1981, and the Accord
years from 1983 to 1991.
8. See Isaac (1989) for a muted, or tamer, version of the relationship between arbitration and the
parties being characterised by bargaining.
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Sykes EI (1980) Labour arbitr
THE PARTIES
BRAHAM DABSCHECK∗
A
ustralia has developed a system, or systems of collective bargaining combining interactions between the parties, industrial tribunals, and political and legal processes.
Arbitration has been one mechanism through which the parties have conducted their
relationships. The nexus between arbitration and the parties is nuanced and fluid. It
is not a simple command—obey relationship as characterised by Howard (1977) and
Scherer (1985). Unions are not dependent on arbitration and tribunals have not been
captured by union principles. Employer associations, in contradiction to Plowman (1988),
have been proactive in pursuing the interests of employers. Following Mark Perlman
(1954a,b), the successes of arbitration have been due to arbitrators being flexible and
adaptable in fulfilling the diverse and changing needs of the parties. The inability of the
federal tribunal to respond to the parties’ desire to adopt enterprise bargaining in the
early 1990s, has resulted in a reduction in its role and influence.
ARBITRATION AND RELATIONS BETWEEN THE PARTIES
In their seminal work, Industrial Democracy, Sidney and Beatrice Webb (1911),
examine various methods used to determine wages and employment conditions.
One of these is the method of collective bargaining. The most interesting part of
their discussion, especially for an Australian audience, is that it mainly involves
an examination of how conciliation and arbitration, or umpires, can aid unions
and employers in negotiating and reaching agreements. This work by the Webbs
has a separate chapter entitled ‘Arbitration’, which is subsumed as an important
aspect of collective bargaining. Arbitration is not viewed as an alternative to collective bargaining (Webb & Webb 1911, pp. 173–246). In commenting on the
literature available to them the Webbs said, ‘Much of what is called Arbitration or
Conciliation . . . amounts to nothing more than organised collective bargaining’
(Webb & Webb 1911, n. 223).
Moreover, ‘The Introduction to the 1902 Edition’ contains a celebratory account of the burgeoning development of industrial tribunals and wages boards in
the various Australian colonies/states and New Zealand (Webb & Webb 1911,
pp. xxxvi-li; also see Webb 1965). The creation of state sponsored industrial tribunals in Australia in the period 1890 to 1914 (see Macintyre & Mitchell 1989),
brought about a new, or different, form of collective determination of wages and
employment conditions. The various tribunals brought into being were statutory creations. The functions they were to perform were defined for them in
∗ School
of Industrial Relations and Organisational Behaviour, University of New South Wales,
Sydney, NSW 2052, Australia. Email: b.dabscheck@unsw.edu.au Thanks are expressed to my colleague Peter Sheldon for his help in the planning and execution of this paper.
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legislation. If the parties, either individually or collectively, were ‘unhappy’ with
their operation, behaviour, personnel and decisions, besides coming to their own
arrangements outside the orbit of the offending tribunal, if they were so able,
could apply political pressure on the government of the day to alter the legislation governing the tribunal, or challenge its decisions before a superior court.
Australia’s various systems of industrial tribunals then, were not institutions which
the parties simply, or meekly, obeyed. Rather, the various tribunals and the parties
bargained with each other, with the playing out of such relationships involving
the interaction of other arms of the state, such as governments and courts.
Sykes (1980, p. 303) has said that ‘the Australian award is a product of threesided bargaining between management, unions and the [tribunal] carried through
the conciliation and arbitration stages’. There is more, however, to Australian industrial relations, or if we follow the Webbs, its system(s) of collective bargaining,
than this. Substantive and procedural rules are the product of bargaining between
management/employers, unions and workers, tribunals, governments and superior courts and other individuals and organisations, which become involved in the
world of work, conducted in a federal system, combining decisions made at the
national, state, industry, enterprise and workplace level (Dabscheck 1994a; 1995;
2002). Industrial tribunals have been, until recently at least (Dabscheck 2001), the
key to understanding the operation of Australian collective bargaining. They have
been at the centre of the major struggles and events associated with Australian
industrial relations. Industrial tribunals have been enabled to make decisions, in
the famous words of Henry Bournes Higgins (1915, p. 13), to create ‘A New
Province for Law and Order’. The parties, in turn, have not been shy in trying
to shape what it is that tribunals can do, or to challenge ‘unacceptable’ decisions
politically, legally and industrially (Dabscheck 1981; 1983). These processes have
enmeshed the parties into the political and legal processes of Australia.
An example will be provided to illustrate such enmeshment; of how arbitration, or industrial tribunals, have such an impact on the parties. The federal
tribunal convenes test cases on matters of system level importance, such as minimum, national or living wage cases. Submissions are presented and coordinated
by representatives on behalf of unions and employers. In addition, the major piece
of commonwealth legislation governing industrial relations is forever being revised and changed and/or there are proposals for change. Many of these changes
are concerned with the operation and functions to be performed by the federal
tribunal. The stance and position of unions and employers concerning such legislative changes are coordinated by representative organisations. The need to
coordinate and provide submissions in both orbits provides the said representative organisations, which perform these functions, with a role which is different
from that of similar representative bodies in an industrial relations system which
does not have state sponsored industrial tribunals.1
The present paper is concerned with providing an analysis and discussion of
arbitration and its impact on, and relations between, the parties. Arbitration, or the
approach adopted by the personnel of industrial tribunals, will oscillate between
active and less active phases. Its focus will move backwards and forwards between
the micro and macro. With the former, the tribunal tailors its decisions to the
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problems and needs of the parties that appear before it; ignoring or discounting
possible external effects on other parties which are subject to its jurisdiction. With
the latter, the tribunal is concerned with the ‘overall’ needs of its jurisdiction; being
most conscious of externalities and spill-over effects.
The demands and needs of what the parties ‘want’ from arbitration may be
the same, or will conflict. A party which is strong and resourceful, which is able
to realise its goals and objectives from other sources—whether they be the market, political, legal or other processes, including favourable decisions from other
tribunals—will have a low attachment or need for arbitration. However, if a party
finds it difficult to obtain concessions from other sources, it will increasingly turn
to arbitration and seek to avail itself of the services provided by the tribunal.
Employers encountering strong, well resourced and militant unions, especially
in buoyant economic times, when labour is in short supply, will turn to arbitration for protection and support. Contrariwise, unions in tough economic times,
when employers cry poor mouth, will turn to arbitration in attempting to defend
established conditions or gain concessions.
To the extent that desired support from a tribunal is not forthcoming, or the
tribunal hands down decisions which are antipathetic to the needs of the parties,
either individually or collectively, the tribunal will be attacked. Political and legal
moves will be initiated against the tribunal in an effort to ensure its decisions more
closely reflect the desires of a party, or parties. For the parties, arbitration can be
a vehicle—one of many—for changes in wages and working conditions, a shield
to be used to deflect force and pressure from other parties, and something to be
criticised, attacked and reformed when things go wrong. The playing out of this
dialectic, in terms of both its minutiae and all its grandeur, will be a function of
the goals and objects of the parties, the stance and attitude of the tribunal, and
the particular circumstances of the environment they all inhabit at various points
in time.
Higgins (1920, p. 110) likened Australian unions to ‘a bee taking all that it can
get from one flower, pass[ing] on to the next’. In doing so, he highlighted the
instrumental, calculative and strategic nature of unions; of how they combined a
variety of methods in pursuit of their goals. Similar sentiments could be expressed
concerning the behaviour of Australian employers. They combine market, arbitral, political and legal methods in their dealings with workers and unions. More
specifically, weapons in their arsenal include union avoidance, non-union collective deals, contracting out, relocating work domestically and/or internationally,
individual contracts, independent contractors, Australian workplace agreements,
company restructuring and bankruptcy.
A number of, what might be called, orthodox or mainstream commentators
have interpreted the relationship between arbitration and the parties in a simple
uni-dimensional way. They are Howard (1977), with his view that unions are dependent on arbitration, Scherer’s (1985) state syndicalism notion that unions have
captured arbitration, and Plowman’s (1988; 1989) employer association reactivity thesis. Howard and Scherer portray the arbitration—parties’ relationship in
command—obey terms; their only difference being who in fact commands whom!
A critical examination of all three authors will be provided.
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According to Howard, Australian unions in the nineteenth century developed
on what he regarded as conventional, or collective bargaining, lines. They were
routed in the strikes of the 1890s. Howard maintains that, as a result of their
demonstrated inability to act as collective bargaining agents, unions turned to
politics, and through politics to the erection of arbitration tribunals which would
provide unions with benefits and concessions. Howard sees unions as being dependent on industrial tribunals for their existence and operation. He maintains
The Australian trade union can be regarded in general as an institution called into
existence by a bureaucratic mechanism (the arbitration system) to enhance the functioning of that mechanism. Unions generally have not succeeded in carving out for
themselves an industrial role that is independent of the arbitral system. (Howard
1977, p. 255)
He has also said that ‘perhaps the Australian labour movement of the 20th century . . . is a labour movement in form and intention, rather than in tactic and
achievement’. Howard maintains that ‘where they have developed to meet a bureaucratic need, as the Australian experience seems to be, perhaps unions themselves, in general, are industrial cosmetics’ (Howard 1977, pp. 269–70).
Howard’s dependency theory can be criticised on both theoretical and empirical
grounds. His views concerning the ‘proper’ behaviour of unions are based on the
work of Selig Perlman (1949). Perlman developed a model of business unionism
where unions engage in struggles against employers, in defending and advancing
the rights and interests of members. For Howard, if unions are not behaving in
this manner they are ‘industrial cosmetics’. Perlman has a very strong sense of
unions being the masters and mistresses of their own destiny. Unions, and their
home-grown leaders, know how best to improve the lot of members. Much of
Perlman’s work, and this has escaped the attention of Howard, is how unions find
themselves involved in struggles with ‘intellectuals’. For Perlman, ‘intellectuals’ is
a term of abuse. ‘Intellectuals’ are ‘outsiders’, persons outside and apart from the
orbit of unions; persons who seek to control and redirect their activities. Perlman
(1949, p. 5) says that a union not only struggles against employers, but also ‘against
the intellectual who would frame its programmes and shape its policies’.
Perlman’s treatment of ‘intellectuals’ is damning and sarcastic. He sees them
as being overcome by ‘social mysticism’, unable to alter their thinking on unions,
despite ‘labour’s repeated refusal to reach out for its appointed destiny’. When
unions do not behave as they ‘should’, rather than admit any error in their judgement, ‘intellectuals’ maintain ‘that what has occurred is merely a temporary
“delay” . . . [and] will account for that delay by calling attention to the rise of a
reactionary trade union bureaucracy’ (Perlman 1949, p. 282). Howard dismisses
Australian unions as ‘industrial cosmetics’ because they do not behave in the
way that he believes they should. He has misinterpreted and incorrectly applied
Perlman to the Australian case.
Comments will also be offered concerning Howard’s statement of the nexus
between industrial tribunals and the ‘tactics and achievements’ of unions.
Tribunals are one of the methods, not the only method, available to
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unions—and for that matter employers!—to pursue their goals. The use of an
additional method, in this case industrial tribunals, increases the range of methods
that can be potentially utilised by unions. An extra or additional methods—given
that tribunals operate at both the federal and state level—increases the range of
options, or tactics, available to unions. Extra ‘avenues of attack’ enhance tactical
options rather than reduce them. It is difficult to follow Howard’s reasoning on
this point.
Howard equates unions making use2 of arbitration with lack of ‘achievement’.
For Howard, it is only by struggling against employers in collective bargaining negotiations that unions can be considered to have obtained ‘achievements’.
Howard’s notion of ‘achievement’ is defined in terms of input—the method used
by unions—rather than output—the concessions they actually obtain, or result,
from their intervention. Both inputs and outputs or more correctly a cost-benefit
analysis of arbitration and collective bargaining needs to be conducted in making
a ‘rational’ decision as to which method is the most effective. Howard doesn’t
do this. He simply asserts that because unions make use of arbitration they are
lacking in ‘achievement’; they are industrially impotent.
It is conceivable, however, that the ratios involved in a cost-benefit analysis
of these two methods will favour arbitration. If we can ignore Howard for the
moment, and if we note that Australian unions have historically made use of arbitration, such decisions may have flowed from a ‘rational’ calculation, or strategic
analysis, of the costs and benefits of different options/methods available at different
moments in time. For example, unions have historically made use of arbitration in
basic, minimum, national and living wages to increase the wages of minimum, or
low wage, workers, whether they be unionised or not, since the famous Harvester
case of 1907 (2 CAR 1). It is unlikely that such wage increases would have been
forthcoming from direct negotiations with employers.3 However, and this constitutes a major weakness of Howard’s work, it is not as if union activity is confined
to arbitral proceedings before industrial tribunals. They combine arbitration with
collective bargaining and other methods.
One of the examples used by Howard to develop his dependency theory is
the deregistration and re-registration of the Amalgamated Engineering Union
(AEU). The AEU was a strong union which favoured direct negotiations with
employers. It was deregistered when it collected strike pay for members involved in
a campaign for over-award pay. Howard (1977, pp. 268–69) claims ‘its decision to
return to the arbitral fold is indicative of the lack of optimism and self-confidence
that is characteristic of Australian unions in general’.
This episode has been examined in some detail by Mark Perlman (1954a,
pp. 105–10) and Sheridan (1975, pp. 134–43). Their analysis is somewhat different from that of Howard. For both Perlman and Sheridan the AEU defeated the
arbitration tribunal over the exercise of authority within the metal trades industry. The AEU was too strong and resourceful ‘to be left out in the cold’. Perlman
(1954a, p. 110) concluded ‘that the Union had flexed its “muscles” and . . . the
Court, unsuccessful in its choice of adequate disciplinary action had retreated . . . .
The Court was no longer in the dominant role in the metal trades industry, and in
effect had lost its position as the administrator of labour relations’. For Sheridan
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(1975, p. 141) ‘the determined action of the deregistered AEU had forced the
employer, the federal government and the court to accept its terms’.
For Howard’s dependency theory to have relevance, unions have to be precluded from having other methods available to them to obtain concessions. If
other methods are available, it tautologically follows that they are not dependent
on arbitration. The above example demonstrates that the AEU did have avenues,
such as collective bargaining, available to it.
Empirical work has challenged the veracity of Howard’s dependency thesis.
Sheldon (1989a,b; 1993a,b; 1995; 1998; 2002) in a number of studies has found
that the rapid growth in unionism, that occurred in the early years of the twentieth
century, had little to do with, or was marginally connected to, the emergence of
industrial tribunals. For example, in examining developments in the maritime
industry, between 1900 and 1912, he found the ‘experience of the early years of
compulsory arbitration was of negligible benefit for three out of the four unions
in terms of award making’ (Sheldon 1998, p. 439). Gahan examined the operation
of four unions in specifically testing Howard’s thesis. He found that the unions
combined the use of arbitration with a variety of other methods. Gahan (1996,
p. 693) concluded
Each union possessed a different bundle of industrial and political resources which
made the potential costs and benefits of pursuing specific action very different. To
the extent that any of these unions was dependent on arbitration for the supply of
resources critical to its functions, this dependency was at most partial; they were
found to be dependent on a variety of organizational and institutional mechanisms
for the supply of critical resources. Rather, part of a union’s strategic interplay with
arbitration was concerned with shaping it to its own interests through the industrial
and political resources available.
Unions do make use of arbitration and industrial tribunals. It is one of many
methods available to them in attempting to achieve their organisational goals. The
actual method, or more correctly mix of methods, they will employ, at different
points in time, will be determined by strategic considerations. A similar statement
could be made concerning the behaviour of employers.
Howard sees unions as being dependent on industrial tribunals. Scherer (1985)
turns this relationship on its head. He portrays unions as being the dominant,
or dominating, partner in the tribunal–union relationship. He maintains ‘It is no
great revelation to observe that union principles have “captured” the arbitration
tribunals’. He also says
the arbitral tribunal and the accompanying system for regulating trade unions can
be described as the executive committee of the labour movement—or at least of that
privileged part of the labour movement in secure jobs which Marx dubbed the “labour
aristocracy” . . . an attenuated form of syndicalism lives on in one of the most bureaucratically regulated trade union movements in the Western world. Australia . . . has
evolved a . . . [system of] State Syndicalism. (Scherer 1985, p. 94)
The notion that union principles have ‘captured’ tribunals translates into the
proposition that tribunals do the bidding of unions, that unions do not experience
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defeats and/or employers do not have victories. More generally Scherer, like
Howard, does not have a role for employers in Australian industrial relations.
Scherer’s ‘capture’ theory could be rejected by trawling through the reports of
various tribunals and finding examples of union defeats and/or employer victories.
Examples of where tribunals have turned down an application of a union, or
upheld a submission of an employer, admonished a union because of its attitude or
behaviour, fined it and/or its leaders and members, suspended an award, ‘lowered’
an award condition, deregistered a union, or jailed officials or members would
provide empirical refutation of Scherer’s thesis.
Some examples might help to illustrate problems associated with Scherer’s
suppositions. In the early years of the operation of the Commonwealth Court
of Conciliation and Arbitration, some unions sought to avail themselves of the
arbitral services of the tribunal when they were engaged in strikes. Higgins rejected
this ‘union principle’. He said,
The arbitration system is devised to provide a substitute for strikes and stoppages, to
secure the reign of justice as against violence, of right as against might . . . . The men
know well that they cannot get arbitration if at the same time they try to enforce their
demands by stoppage of work. They cannot have arbitration and strike too. (Higgins
1919, p. 205)
He also said, ‘As a child who finds that the more he cries the more he gets his
way, will cry the more; so with men who strike’ (Higgins 1920, p. 135). What
are we to make of employer victories before the federal tribunal such as the 10
per cent cut in the basic wage in 1931 (30 CAR 2), the abolition of automatic
quarterly cost of living adjustments in 1953 (77 CAR 477), and the introduction
of the total wage in 1967 (118 CAR 655)?4 More generally, in national wage case
decisions, since the 1931 case, the federal tribunal has adopted the employers’
principle of capacity to pay, rejecting the needs principle of unions. In the early
1990s we had the spectacle of the Australian Council of Trade Union’s secretary,
Bill Kelty, vehemently criticising and bemoaning the federal tribunal because of
its decision to defer the introduction of enterprise bargaining (Dabscheck 1995,
pp. 64–72).
A further problem for Scherer is that industrial tribunals have endorsed or
been ‘captured’ by (?), the ‘management principle’ of not interfering with managerial prerogatives. This is something which Scherer himself acknowledges—
‘[the] policy [of tribunals] is to uphold managerial prerogatives’ (Scherer 1985,
p. 89)—but fails to think through its implications for his unions capturing tribunals
thesis.
Higgins, the champion of industrial tribunals and ‘A New Province for Law
and Order’, who has been seen as a bete noir of employers (see Evans 1985; H.R.
Nicholls Society 1986), was not prepared to interfere with managerial prerogatives. He said, ‘It is well known that the Court is very chary about dictating to
those that have to direct the work as to the mode of carrying it out, and that it will
not dictate conditions unless it is clearly shown that the mode adopted involves
undue pressure on human life’ (Higgins 1919, p. 196).
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The work of both Quinlan (1986) and Wright (1995) demonstrate how industrial tribunals have aided management and enhanced the protection of managerial
prerogatives. Quinlan (1986, p. 45), for example, maintains
In Australia, state intervention through compulsory arbitration has not only established a pervasive framework of industry—and occupation—wide bargaining but also
a mechanism for ensuring employee discipline at the workplace . . . . Centralised arbitration was seen as a more stable and effective means of preserving managerial
prerogative and minimising the risk of control based demands emanating from individual workplaces.
Wright conducted extensive research into the behaviour and operation of
Australian employers from the 1870s to the early 1990s. His overall finding was
that ‘management has in fact played a central—and in many cases dominant—role
in the evolution of Australian industrial relations’ (Wright 1995, p. 3). Moreover,
in the context of the long boom Australia enjoyed after World War II to the mid1970s, he found that industrial tribunals acted as a shield for employers against
the demands of unions. Wright (1995, p. 113) maintains
Australian employers proved relatively successful in containing the demands of organised labour during the post-war decades. While economic conditions provided an
environment favourable to labour, employers were also able to take advantage of a
number of contextual factors. These included major ideological divisions within the
labour movement, government policy aimed at wage restraint5 and the bulwark of
arbitration in protecting managerial prerogative from challenge.
Industrial tribunals do not see themselves as being the ‘captive’ of (either of)
the parties.6 In the Basic Wage and Standard Hours Inquiry 1952–1953 the Commonwealth Court of Conciliation and Arbitration pointed out (77 CAR 477, at
p. 507)
applications before the Court must be determined in accordance with . . . principles.
They must thus be determined regardless of the dissatisfaction of an unsuccessful
party. It is really impossible to settle a dispute in a way that satisfies all the parties; it
is frequently impossible to arrive at a just settlement which satisfies even one of the
parties to the dispute.
The most recent example of the federal tribunal dissatisfying the parties was its
decision in the April 1991 National Wage Case (Dec 300/91 M Print J7400) where
it delayed the introduction of enterprise bargaining (Dabscheck 1995, pp. 61–72;
2001).
Scherer claims that industrial tribunals have been of benefit to the ‘labour
aristocracy’. This implies that tribunals enhance skilled workers, at the expense
of the unskilled. The above comments concerning the federal tribunal’s decisions
in minimum wage cases casts a long shadow over Scherer’s claims. In addition,
the approach of the tribunal in dealing with the wages of skilled workers has
been, generally speaking7 to leave space for the parties to come to their own
arrangements. For example, Higgins (1915, p. 16) has said ‘the safest course, for
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an arbitrator not initiated into the mysteries of the several crafts, [is] to follow the
distinctions in grade between employers as expressed in wages for many years’.
In 1989 Plowman published Holding the Line: Compulsory arbitration and national employer co-ordination in Australia. In it he documents various activities and
functions provided by employer associations in providing an employer voice at
the national level from 1890 to the end of the 1980s. It is a thoroughly researched,
descriptive account of peak level employer association activity. Holding the Line
contains information on various initiatives performed by such bodies, over the
years, on behalf of employers. In the initial years of the federal tribunal’s operation, such bodies combined political and legal tactics in trying to restrict the
scope and actions of an institution which was perceived to be ‘bad’, or opposed to
the best interests of employers. Beginning in the 1930s, national level employer
associations developed a more favourable disposition to, and became a supporter
of the federal tribunal, when its ‘conservative’ decisions were regarded as being
consistent with and aiding the interests of employers. Representative employer
bodies have been successful in various major test cases before the federal tribunal
(see above) and in pursuing desired legislative and other changes (Plowman, 1989).
My reading of Holding the Line, and this may be a source of controversy, is that
it documents various initiatives pursued by peak level employer associations on
behalf of employers. This, however, is not Plowman’s reading.
In an article published in 1988 Plowman considered ‘theoretical’ issues associated with employer association behaviour and developed his ‘reactivity thesis’.
The opening sentence of this article states, ‘There is general consensus that employer associations are essentially reactive organisations’ (Plowman 1988, p. 287).
In making this statement, Plowman seems to be following the findings of overseas scholars. It is as if he is saying, if this is the view of overseas authorities, ipso
facto, such findings must be equally ‘true’ for Australia. The criticism that will be
offered here is that he has not used it as a working hypothesis with which to test
Australian experience.
Plowman (1988, p. 288) defines reactivity as
activity in response to some stimulus; for example, unions seeking a wage increase,
employers react by opposing such a wage increase. The term connotes not merely
the fact that employer association activities may be responsive to external stimuli, but
also that the response is passive and negatively defensive.
Note Plowman’s use of the term ‘passive’. The Macquarie Dictionary defines passive
as ‘not acting, or not attended with or manifested in open or positive action:
passive resistance, inactive, quiescent or inert’. If nothing else, Holding the Line
demonstrates that peak level employer associations have not been passive. It is not
as if they have not acted, or been quiescent or inert. They have not ‘given up the
ghost’, packed, up, gone home and simply left the running to others, especially
unions. There has always been representative organisations present in ‘fighting
the good fight’ on behalf of employers in tribunals, in the courts and politically.
If employer associations had, in fact, been passive he would not have been able to
research and publish Holding the Line.
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Plowman experiences problems in unpacking the meaning of ‘reactivity’. For
example, he has a notion of ‘reactive activity’ (Plowman 1988, p. 288). Even
though he sees employer associations reacting to external stimuli he visits similar
behavioural traits onto unions. He says, ‘It is possible, indeed, often probable,
that both sets of institutions act in a reactive fashion’ (Plowman 1988, p. 289). He
also wrote
it is contended that . . . Australian employer associations, having been forced to recognize unions did not wrest the initiative and become the principal architects of the
bargaining structures. They have been responsive, and reactive, rather proactive in
shaping the bargaining structures within which employment conditions are determined (Plowman 1988, p. 290).
‘Reactive activity’, both unions and employer associations being reactive when
Plowman has defined employer association reactivity in terms of responding to
unions, and the notion of ‘responsive, and reactive, rather proactive’ serve to cloud
rather than explicate an understanding of employer association behaviour.
Thornthwaite and Sheldon (1996; also see Sheldon & Thornthwaite 1999;
Barry 1995) have offered three modifications of Plowman’s work in attempting to
overcome these problems. First, employer association decisions may stem from internal rather than external stimuli. Creative minds will develop strategies and policies in pursuing the goals and objectives of employers. This modification enables,
or is consistent with, employers taking the initiative and being proactive. Second,
Plowman has conflated employer association ‘activity’ with failure. Thornthwaite
and Sheldon point out that whether or not initiatives will be successful is an empirical question. Everyone who participates in a race, or competition, is proactive;
however, there is only one winner. As has been demonstrated above, and in my
view, is also demonstrated in Holding the Line, employer associations have had
their victories, and their losses; which has also been the fate of unions. Third, a
distinction needs to be made between old and new issues. Employer associations,
like unions, can be proactive in pursuing the interests of those that they represent
in old, or continuing, issues such as wages or the mode of industrial relations regulation or bargaining structure. They can also be proactive on new issues, issues
that haven’t previously been the subject of bargaining. While it is easier to observe
them taking initiatives on new issues, they, like unions, can be equally proactive
on old, or continuing issues.
Sheldon and Thornthwaite (1999) published a book of readings on the activities of two national and five industry level employer associations. It provides an
empirical refutation of Plowman’s reactivity thesis. Sheldon and Thornthwaite
(1999, p. 192), in drawing these studies together, said
For a variety of reasons, since their early acceptance or accommodation, employer
associations have consistently taken the initiative both at economy-wide level and in
terms of their respective industries. In doing so, they have achieved a startling degree
of success in fundamentally reshaping the economy-wide bargaining structure as well
as remaking processes and outcomes in certain industries.
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Another way to approach the issue of arbitration and its impact on relations
between the parties is through the lens of industrial tribunals. In the mid-1950s
Mark Perlman (1954a,b) published work on the operation of the federal tribunal.
He was interested in how it and/or its personnel approached the task of regulating
different industries; industries where the parties experienced variable and different
types of problems. Despite the federal tribunal being a court at the time of his
research—the Commonwealth Court of Conciliation and Arbitration—and its
attendant judicial trappings, Perlman (1954b, p. 207) maintained that the key to
its success and operation resulted from it ‘fulfilling the demands of the parties’.
He also said, ‘The “independent variable” is what the parties need and want; the
judge’s reaction in the specific instance, his use of judicial notice, is the visible
result’ (Perlman 1954a, p. 39).
Perlman distinguished two modes or styles of arbitration. The first is administrative arbitration. It is based on an analysis of the pastoral industry (Perlman
1954a, pp. 55–94). Both employers and unions desire order and predictability to
avoid cut-throat competition in a spatially diverse industry with a largely itinerant
workforce. In the 1930s, unions accepted a ‘harsh’ decision on wages following a
calculation that they would be unable to obtain higher wages via other methods.
Perlman (1954b, p. 208) says that with administrative arbitration there
has developed . . . a belief that judges and commissioners should administer industry,
that they must for reasons of social efficiency assume a legislative mantle . . . . It predicates parties needing judges with figuratively strong hands and keenly imaginative
eyes.
The second approach is autonomous arbitration. It is based on an analysis
of the metal trades industry (Perlman 1954a, pp. 95–126). Both employers and
unions were well organised, resourceful, powerful and able to solve their own
problems. We have already noted how the AEU was able to defy the federal
tribunal and assume a position of ascendancy in the latter part of the 1930s (see
above). According to Perlman (1954a, p. 35), with autonomous arbitration ‘the
Court is . . . reluctan[t] to supplant the union and the employers’ association as
the dynamic forces in industrial relations’. The episode at the end of the 1930s,
however, demonstrated that such ‘reluctance’ may be something that is learnt the
‘hard way’, after a failed attempt of activism.
Dabscheck (1981; 1983) has developed a third variant of tribunal behaviour, a
theory of activist arbitration. The theory is derived from an examination of the
career of Sir William Raymond Kelly, President of the South Australian Industrial Court from 1930 to 1941, and a member of the Commonwealth Court of
Conciliation and Arbitration from 1941 to 1956, being appointed Chief Judge in
1949. Kelly was not a passive industrial relations regulator; he was not an arbitrator who sat back and waited for the lead, or instructions, from the parties. Kelly,
throughout his career, developed solutions to industrial relations problems. He
sought to convince the parties that they should follow his lead, rather than vice
versa. Activist arbitration does not postulate that the relationship between the
arbitrator and the parties is one of command and obey, per Howard and Scherer.
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‘Regulation is a process in which the competing parties and the regulatory agency
are involved in a bargaining relationship. The regulator and the different interest
groups involved in regulation seek to convince each other of the correctness, wisdom and legitimacy of their respective views concerning the issues associated with
regulation. Each of the parties seeks to capture the regulator, and the regulator
seeks to capture the parties’ (Dabscheck 1983, p. 156).8 Everyone is proactive! The
theory also says that if a tribunal, in the give and take of performing its functions of
regulation, is ‘out of step’ with the parties, they, either individually or collectively
will take action to circumvent and/or downgrade its role and influence.
Perlman (1954a, p. 181) explains the success of the federal tribunal in terms
of ‘the parties’ need for the arbitration system . . . the Court has responded to the
unique problems and demands of the specific industry to which it ministers’. He
also said ‘the parties must want the same kind of arbitration if arbitration is to
succeed’ (Perlman 1954a, p. 159). If this latter statement is correct it would follow
that if one party wanted arbitration, and others did not, it would be even harder
for arbitration to succeed. And, if an increasing number, if not all, parties did not
want arbitration it would, to state the obvious, experience and encounter more
than minor problems.
The notion of activist arbitration and the observations of Perlman, in the above
paragraph, will be used to provide an understanding of contemporary developments in the arbitration and relations between the parties dialectic. Following the
introduction of the total wage in 1967 (118 CAR 655) the federal tribunal sought
to operate and maintain a consistent and coordinated approach to wage determination and industrial relations regulation (Dabscheck 1994b). In the buoyant
economic times of the late 1960s and early 1970s it failed in this quest. The parties, with the exception of national wage cases, essentially negotiated their own
deals on wages and working conditions. With the advent of economic decline
and problems in the mid-1970s, continuing into and through the 1980s, the federal tribunal was able to develop and maintain different variants of a coordinated
system. The first was wage indexation from 1975 to 1981 and the Accords from
1983 to 1991. In the mid-1980s employers and employer associations became
increasingly dissatisfied with the coordinated, centralised system in operation
(Dabscheck 1989; 1995). Employer associations, especially the Business Council
of Australia, proactively pushed for the development of a new system of industrial
relations regulation known as enterprise bargaining (Sheldon & Thornthwaite
1999, pp. 47–69; Matthews 1994). In time, the Federal Labor party government
and the Australian Council of Trade Unions boarded the enterprise bargaining
bandwagon.
In 1991 a national wage case was held where the parties asked the federal tribunal to develop an enterprise bargaining industrial relations system. It was as if
they ‘needed judges with figuratively strong hands and keenly imaginative eyes’
(Perlman, 1954b, p. 208). The tribunal failed this test. It informed the parties that
it saw too many problems with enterprise bargaining before it could countenance
its introduction (Dec 200/91 M Print J7400). It was not able to be ‘adaptable’
and develop an approach, or approaches, with which to respond ‘to the unique
problems and demands’ of specific industries. A vacuum had been created. Both
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the Labor and Coalition governments introduced legislation to enhance the development of enterprise bargaining; bypassing and downgrading the role of the
federal tribunal (Dabscheck 2001).
Australia has developed a system, or systems, of collective bargaining combining interactions between the parties, arbitration/industrial tribunals, political and
legal processes. Arbitration has helped to enmesh the parties into Australia’s political and legal processes. Arbitration has been one mechanism through which
the parties have conducted their relationships. The nexus between arbitration and
the parties is nuanced and fluid. It is not a simple command—obey relationship as
characterised by Howard and Scherer. Unions are not dependent on arbitration
and tribunals have not been ‘captured’ by union principles. Employer associations, in contradiction to Plowman, have been proactive in pursuing the interests
of employers. Following Mark Perlman, the successes of arbitration have been
due to arbitrators being flexible and adaptable in fulfilling the diverse and changing needs of the parties. The inability of the federal tribunal to respond to the
parties desire to adopt enterprise bargaining, in the early 1990s, has resulted in a
reduction in its role and influence.
NOTES
1. See Metin (1977) and Childe (1964) for commentaries which have alternatively praised and been
highly critical of unions over their enmeshment into Australian legal and political affairs.
2. He actually sees them being dependent on arbitration tribunals.
3. For example, the employer H. V. McKay, was most unhappy with the decision in the Harvester
case. See Macarthy (1969).
4. In 1925 President Powers of the Commonwealth Court of Conciliation and Arbitration wrote
to the government requesting a knighthood on the grounds of resisting the wage demands of
unions. See McQueen (1983, p. 159).
5. See Sheridan (1999).
6. In saying this note four should not be ignored.
7. The major qualifications being the wage indexation experiment, 1975 to 1981, and the Accord
years from 1983 to 1991.
8. See Isaac (1989) for a muted, or tamer, version of the relationship between arbitration and the
parties being characterised by bargaining.
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