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John Howard's roll-back

Josh Bornstein

The Howard government's industrial relations reforms are an attempt to resuscitate a myth that was discredited more than a century ago: the myth of freedom of contract.

The new laws will shift employees away from collective agreements and awards and onto individual employment contracts. In trying to rationalise such a move, John Howard's rhetoric echoes the case for the war in Iraq. Addressing the Menzies Research Centre in April, he said: "The goal is to free the individual" by "liberating workplaces from Colac to Cooktown".

The changes that will be introduced will make it easier for employers to require employees to sign individual contracts (the government's preferred contract is known as an Australian Workplace Agreement, or AWA).

The new laws will also introduce extreme restrictions on the capacity of trade unions to function, recruit employees as members and enter into collective contracts (enterprise bargaining agreements, or EBAs).

"The Howard agenda is not radical reform but a reactionary roll-back to an era when unions did not exist."

The notion of freedom of contract that Howard appeals to is rooted in the laissez-faire philosophy of the 19th century. Such philosophy posited that individuals were free to decide what was best for them without outside intervention. It followed that a factory owner and a worker should be left to decide the terms of a contract of employment.

However, close scrutiny revealed the flaw in this theory: the parties' capacity to negotiate was determined by their bargaining power. Invariably, a factory owner had greater bargaining power than his workers.

The acceptance of an inequality of bargaining power between employer and employee underpinned Australia's industrial relations system from 1904 until the election of the Howard government in 1996.

Since 1996, laws that reflect the government's preference for individual contracts have been introduced. For example, an employer can require an employee to sign an AWA as a condition of getting a job. An employee who prefers a collective contract can quite lawfully be shown the door.

An increasing number of employers, who perceive this to be a great opportunity to deunionise, are signing up their new employees on AWAs. For evidence, look no further than BHP, the Commonwealth Bank or Federal government departments. The new laws will accelerate this process.

No industrial relations system should be frozen in time, but a fundamental question arises: have circumstances changed such that we can now say that employers and employees can freely contract with one another with equal bargaining power?

From the perspective of an experienced employment lawyer, that question is easily answered: other than in exceptional cases, the parties do not have equal bargaining power in negotiating a contract of employment. In very few cases employees actually bargain over their contract of employment, because in very few cases do they have real bargaining power.

This proposition can be tested in a simple fashion. If you were to examine each and every term of an employment contract and track how it came to be agreed, you would discern an overwhelmingly similar pattern. The employer would invariably have had an expensive law firm draft the contract to suit its needs and the employee would simply have signed it. In many workplaces, this inequality of bargaining power is illustrated by the existence of identical contracts of employment signed by employees. Sceptics are invited to ask Telstra for copies of the AWAs it has with its call centre employees.

The fundamental problem with these contracts is that they are pro-forma "agreements" created by the employer and unilaterally imposed on its employees.

If a similar approach is applied to EBAs, a very different picture emerges. Ordinarily, claims are exchanged by unions and employers or their associations. Negotiations actually occur and, from time to time, either or both parties engage in industrial action in support of their proposed agreement.

The evidence that genuine negotiations have occurred can be gleaned from the concluded agreement itself. In most cases, there has been compromise. Even agreements reached through pattern bargaining are usually negotiated by unions and employer associations.

Whether it be the war in Iraq or the children overboard affair, the government has too often had a tendency to "sell" its policies by forcefully propagating lies or misinformation. Its advertising campaign is no different. The idea of employees as free agents actually negotiating over their contracts of employment is nonsense in all but exceptional cases.

The Howard agenda is not radical reform but a reactionary roll-back to an era when unions did not exist. It forces us to revisit the lessons of history. As English judge Lord Henley observed in 1762: "Necessitous men are not, truly speaking, free men, but, to answer a present exigency, will submit to any terms that the crafty may impose upon them."


Josh Bornstein, a principal with law firm Maurice Blackburn Cashman, managing its employment and industrial relations department, represents trade unions and employees. This article was first published as "A most unequal contest" in the Age on 27 July 2005, and is reproduced with the kind permission of the author.


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