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The rise of managerial prerogative under the Howard government *.


The industrial relations policies of the Howard government during its first three terms have produced a major change in the way decisions, especially over non-wage issues, are made in Australian workplaces: they have significantly increased the exercise of managerial prerogative. This has been achieved by reducing the scope and importance of awards, encouraging decentralized enterprise bargaining while at the same time greatly restricting the power of unions, and promoting individual contracts, the effects of which are both to directly increase management power and to further undermine the power of unions. This conclusion will be massively extended with the legislative proposals anticipated for the fourth Howard government and announced in late May 2005. Amongst other things, the further decline of awards, the elimination of unfair dismissal provisions for enterprises with less than 100 employees, the end of the "no disadvantage test' for collective and individual agreements, the continued attacks on unions and the promotion of individual contracting will serve even further to enhance managerial prerogative.


The major legislative initiative of the Howard government during its first three terms was the Workplace Relations Act 1996 (cth)(WRA). Early commentaries on this law--both academic and practitioner--mostly interpreted it as a relatively modest reform, at least compared to the Coalition's larger ambitions. On the one hand, this was considered to be the result of the compromise forced on the Coalition by the electoral advantages of pragmatism (as opposed to dogmatism) in the 1996 election campaign and by the necessity for the government to negotiate the terms of the legislation with the Democrats, who held the balance of power in the Senate at the time. On the other hand, the WRA was seen to represent continuity with, rather than radical departure from, the earlier industrial relations reforms of the ALP government, especially under the leadership of Prime Minister Keating.

Hindsight, however, reveals that the WRA facilitated deeper changes to Australian industrial relations than initially anticipated. The focus of this article is largely on the determination of non-wage issues at a workplace level. We make a theoretical assumption that there are four main processes by which decisions about employment conditions (or processes by which the rules that regulate the employment relationship) are made (for more detail, see Bray et al., 2005, chapter 8):

* state regulation (which includes legislation and awards),

* collective bargaining,

* individual bargaining and

* the exercise of managerial prerogative.

The distinction between these decision-making processes centres mostly on who is making the decisions, which is vitally important in two ways. First, the decision-making process both reflects and reinforces the balance of power between the parties to employment regulation. To make a broad generalization, collective forms of regulation, such as collective bargaining and some forms of state regulation, indicate relatively strong organization amongst employees (both industrial and political) and the establishment of procedures that, if effectively maintained, will reproduce that power into the future.

Second, the decision-making processes are likely to affect the substantive outcomes of those decisions. To offer another sweeping statement, collective forms of regulation are likely to bring greater equity and equality to wages and working conditions; that is, less difference between the wages and working conditions of individual employees. Rather more controversially, it could also be suggested that collective forms of regulation also bring higher wages and better working conditions for the bulk of employees, although individualized forms of regulation may advantage some employees, according to their individual bargaining power in the market.

The aim of this article is to use this modest theoretical schema to explore trends in Australian labour regulation since the Howard government came into power. We present few original empirical data. Rather, we seek to synthesise recent secondary material along with some statistical data, mostly from the Australian Bureau of Statistics, to analyse and evaluate the contemporary Australian scene. Given our interpretative ambitions, we consider this approach justified. However, our survey of existing studies also reveals some significant research gaps that suggest a worthy agenda for future research.

Another caveat is that we focus mostly on the federal jurisdiction, neglecting developments at a state level. Such an approach lacks comprehensiveness, but the state-level regimes vary considerably, they have changed over time and they have often been contradictory in their effects, sometimes reinforcing and sometimes negating the federal trends. We believe that a federal preoccupation is also justified in the current policy context.

The argument that emerges in the first three sections of the article is that there has been a heavy impact of the WRA on the role of awards, enterprise agreements and the power of trade unions. The result of these changes has consistently been the withdrawal of both state regulation of employment conditions and the legal supports that encouraged private collective regulation (ie. collective bargaining).

In the context of this decline of state regulation and collective bargaining, a stated objective of the Howard government was a new regime at work based on direct bargaining between employees and employers, an aim well illustrated by the (then) Minister, Peter Reith, when introducing the WR Bill in 1996:
 The bill rejects the highly paternalistic presumption that has
 underpinned the industrial relations system in this country for too
 long--that employees are not only incapable of protecting their own
 interests, but even of understanding them, without the compulsory
 involvement of unions and industrial tribunals. (Hansard, 23 May

In the fourth section of the paper, we show that this preferred policy regime is illusory because such bargaining, especially 'individual bargaining', is largely a fiction. The available evidence suggests that little 'bargaining' between employees and employers takes place; indeed, there is little 'consultation' let alone 'bargaining'. Rather, decisions are mostly made unilaterally by employers. The 'choice' confronting employees is usually to accept the decisions of their employers or find another job.

The inescapable conclusion is that the Howard Government's agenda of labour market 'reform' during the first three terms of government, while still falling far short of its radical ambitions, has already delivered a major fillip to managerial prerogative.

The Howard Government's announced intentions for further 'reform' in its fourth term will, if carried into effect, more thoroughly achieve its larger goals. The final section of the article briefly examines the proposals announced in May 2005. Amongst other things, the further decline of awards, the elimination of unfair dismissal provisions for enterprises with less than 100 employees, the end of the 'no disadvantage' test for collective and individual agreements, the continued attacks on unions and the promotion of individual contracting will serve to enhance managerial prerogative even further.

Awards: Declining Coverage, Scope and Importance

Before the 1990s, awards were a central and distinguishing feature of labour regulation in Australia. While they were technically a form of state regulation determined by the decision of a third-party arbitrator appointed by the government (ie. the Australian Industrial Relations Commission)in resolving disputes between registered organizations, awards were in reality the result of a complex web of joint decision-making in which employees, unions, employers, employers' associations, governments and tribunals contributed to the regulation of employment conditions. The effect of awards was to establish legally-binding minimum standards for most employees in Australia, although it must be acknowledged that in some sectors awards were 'paid rates' and thereby determined actual wages rather than minimum wages. Wage rates were the single most important issue regulated by awards, but they also regulated a plethora of non-wage issues including working hours, physical working conditions, leave entitlements, periods of notice, rules on the use of part-time and/or contract labour, disputes procedures and facilities to be provided for the unions that represented employees.

During the 1990s, the role of awards began to change. Under the Keating ALP Government, for example, awards became 'safety nets' rather than the effective determinant of employment conditions for most employees (Peetz 1998). The intention of the 1993 Industrial Relations Reform Act, for example, was to make enterprise bargaining (ie. a form of collective bargaining) the main process for determining wages and other conditions of employment. For a significant proportion of the workforce, enterprise agreements produced new wage rates and some new non-wage rules at an enterprise level that replaced award provisions. The 'scope' of awards (ie. the range of issues included), however, remained largely unchanged, and they provided the 'fall-back' position when enterprise bargaining failed or was never initiated. In this way, awards continued to provide effective regulation for employees not enjoying the benefits of enterprise bargaining, even if award wages rose only slowly and fell well behind wage increases in enterprise agreements.

After 1996, the impact of the WRA on the role and content of awards was twofold. First, it continued the 'safety net' approach introduced by the Keating government. The result has been that, in terms of directly determining wages, awards have become less relevant to many Australian workers, although they have continued to play an important indirect role as the benchmark under the 'no disadvantage' test. The latest data suggest that only 19.9 per cent of employees rely only on awards to determine their pay (ABS 2004). The rest have award wages supplemented by individual bargaining or by increases granted through managerial prerogative, or their pay is determined by enterprise-level collective bargaining. The role of awards in determining non-wage issues is less clear and is related to the second point below.

Second, and most significant for this article, the WRA sought to reduce the range of non-wage issues contained in awards through 'award simplification'. Under section 89A of the Act, awards were to be limited to 20 basic employment conditions; ie. 'allowable matters'. Additionally, the AIRC had an overarching responsibility to ensure that simplified awards (within a caveat of having regard to fairness) did not prescribe work practices or procedures that would have the effect of restricting the efficient performance of work or hindering productivity. The implementation of 'award simplification' began with the Hospitality Award Test Case, which was decided in December 1997, and rapidly spread. In its 2003-2004 annual report, the AIRC recorded that 98 per cent of the 3,222 federal awards had been through the award simplification process (AIRC 2004, p.19).

The issues that appear to have been most affected by award simplification (ie. deleted from awards as a result of simplification) are those that gave some support to union representation at a workplace level and those that gave employees and their union representatives some say in 'managerial' decisions. For example, few awards now appear to contain constraints on the use of casual, part-time and temporary employees as a result of award simplification. Similarly, award-based restrictions on the use of contractors have been rendered nugatory. The potential for unions to intervene at the workplace was also reduced with the removal of union facilitation clauses such as union meeting time, union education and so on. This was the case in the coal industry, where Waring and Barry (2001) found that important award provisions that facilitated union involvement were eliminated from the award.

If these matters have now been deleted from awards, how are they now being determined? Have they been taken up in enterprise bargaining and inserted into enterprise agreements? Have they been negotiated individually between employees and employers? Are they now subject to managerial prerogative? Two leading labour lawyers certainly expected that award restructuring would enhance managerial prerogative:
 The paring down of awards further pushes more matters into
 the realm of negotiation. It also increases the scope for stronger
 managerial prerogatives. This, of course, depends on the relative
 bargaining strength of employer on the one hand and employees or
 union on the other. It is inescapable, however, that the reduced
 core of standard conditions will significantly affect weaker groups
 and that they are likely to be the ones to bear the burden of the
 reforms. (Pittard and McCallum 1999, p. 419)

Similarly, Creighton & Stewart (2005, p. 176) write:
 The range of matters that are currently 'allowable' ... [excludes]
 matters which bear upon the organisation of work or managerial
 decision-making. So, for example, it is no longer possible to have
 award provisions relating to consultation on issues such as the
 introduction of workplace change. It is also impossible to have
 award provisions relating to unfair dismissal or occupational
 health and safety. In a sense, therefore, s89A can be seen as a
 legislative reaffirmation of managerial prerogative, and as an
 explicit repudiation of any notion that the award system could
 provide a vehicle for the democratisation of work ...

There has been remarkably little empirical research that explores in any depth whether or how these provisions have been implemented in awards or operationalised at the workplace level. What research does exist will be discussed below. All that can be said at this stage is that the effect of award simplification has probably varied across industries and between enterprises and, if relatively strong unions such as those in mining have not been able to prevent the deletion from awards of supportive provisions, then it is doubtful that other industries have seen the retention of such provisions.

Enterprise Agreements: Limited Impact and Declining Scope

Since the early 1990s, enterprise agreements have taken over from awards as the primary form of collective employment regulation. Indeed, this was the main thrust of the two main legislative reforms at federal level, the one in 1993 by the Keating Labor Government and the other in 1996 by the Howard Coalition Government. Apart from the new legal status and practical importance this gave to collective bargaining between unions and employers, these reforms also introduced for the first time the possibility of non-union collective bargaining (see Coulthard 1996; DEWR 2004).

On the wages front, there is little doubt that enterprise bargaining has not adversely affected those groups of employees who are strongly unionized, even if these groups have represented an increasingly small part of the workforce. Average wage increases under enterprise bargaining continue to surge ahead of increases under awards and individual contracts (ACIRRT 1999a, pp. 77-80; DEWR 2004).

What, however, of non-wage issues? Has enterprise bargaining picked up the issues deleted from awards? To what extent has enterprise bargaining widened the bargaining agenda, expanded the range of issues that are collectively regulated and, correspondingly, reduced managerial prerogatives?

Some 'research' by employers and conservative think tanks suggests that the answer to such questions is that enterprise bargaining has significantly restricted management. In December 2002, for example, the Institute of Public Affairs launched what it called its 'Capacity to Manage Index'. The index implied a natural assumption that managers should be allowed to manage: 'How people are managed in a business is critical to its success. If managers do not have a capacity to manage, either through poor performance or externally imposed restrictions, the businesses they attempt to manage are at risk of underperformance.' The stated aim behind the index was to 'flesh out and measure how firms' formal labour relations agreements impact on performance'. The methodology of the index was to examine the Enterprise Agreements to which the enterprise was a party and to divide the clauses of the agreements into two types: 'those that relate entirely to employee remuneration and those that relate to managerial issues'. The latter were then assessed as to whether they had a negative or positive influence on the capacity to manage. By adding the positives and negatives, a total score (ie. the index) showed whether the agreement enhanced the right to manage or a reduced capacity.

Unsurprisingly, in view of the assumptions behind the index and its methodology, some of the Institute's conclusions from the early data included (IPA 2002):

* 'EBAs are ostensibly about improvement of employee incomes ... There is, however, little evidence in the EBAs we studied of enhanced operational responsiveness to market demands'.

* 'The bulk of the clauses relating to managerial issues reduced the capacity of managers to manage.'

* 'Non-union EBAs appear to result in a higher capacity to manage than do union EBAs.'

The index was used (apparently with some success) to lobby the federal government about the negative impact that enterprise agreements were having on the capacity to manage. The Minister for Workplace Relations, Mr Abbott, actually launched the Capacity to Manage Index, using the occasion to exhort Australian managers to take on unions. He also observed:
 ... enterprise bargaining agreements often establish consultative
 committees which management does not control with authority over
 safety procedures, production and delivery schedules, training,
 overtime, and staff selection. EBAs frequently deal with the use
 of casual and contract employment, manning levels, changes
 to work and production routines, and dispute settlement. Under
 these circumstances, managers don't necessarily make decisions
 themselves but have to lobby other people to make the decisions
 which properly belong to management. (Abbott 2002)

The IPA's conclusions, however, fail to grasp the reality of enterprise bargaining or the impact that EBAs have on decision-making at the workplace. To suggest, as the methodology of the Index does, that any restriction on management is a matter of concern is ridiculous, while there is no analysis in the IPA's 'research' of whether the restrictions on management have increased over time or whether the restrictions on management in enterprise agreements are greater compared to previous awards.

Unfortunately, there is little empirical research that provides any more direct or systematic answer to the questions. There are, however, several points that can be made. First, for the 19.9 per cent of Australian employees who rely solely on awards for pay determination, the answer is relatively simple: since they are not covered by collective agreements or individual contracts, any deletions from awards will become issues determined by management. Employees in industries such as hospitality, cafes and restaurants, retail and community services are especially heavily represented here. Second, employees in industries with high incidences of individual contracts (such as wholesale, property and business services, cultural and recreational services, mining and manufacturing) are unlikely to see issues deleted from awards being negotiated into individual agreements; again managerial prerogative will dominate. Third, and finally, even in industries or industry segments where collective bargaining over pay and strong unions are prevalent, few non-wage issues previously included in awards have found their way into enterprise agreements. Waring and Barry (2001) show this in the black coal mining industry, while Ostenfeld and Lewer (2003, pp. 56-60) mount a persuasive case that a similar outcome can be observed in the federal public sector.

Even if more research had been undertaken on these issues, however, they have been overtaken by more recent and more important events. The High Court's decision in the Electrolux Case in September 2004 has profound implications for the scope of enterprise agreements. In that decision, the Court held that certified collective agreements cannot contain substantive terms that do not 'pertain to the relationship between employers and employees' and that 'protected industrial action' can only be taken by unions in support of claims that were matters 'pertaining to the relationship between employers and employees'. The matter specifically decided involved a clause about 'bargaining agents fees', but the decision indicates that a wide range of matters previously held as acceptable in certified agreements can no longer able be included. There is some conjecture about the type of matters no longer tolerated in certified agreements, but it almost certainly includes union facilitative clauses, such as union meeting time and deduction of union dues, and potentially many other matters expunged as a result of award simplification.

At the very least, the decision in the Electrolux Case creates great uncertainty about the scope of future collective agreements, since the full range of 'matters not pertaining to the employment relationship' will have to be determined by the Australian Industrial Relations Commission and perhaps the courts (see Catanzariti and Shariff 2005, p191).

Unions were appalled by the Electrolux Case, while many employers and the Howard Government approved. The government passed legislation (Workplace Relations Amendment [Agreement Validation] Act 2004) to clarify the position of agreements that had previously been certified, by deeming invalid only those clauses in breach of the 'pertaining to' principle rather than the whole agreement. But the legislation does not seek in any way to restore a wider interpretation of 'matters pertaining to the relationship between employer and employee' or to specify more clearly what these matters might be.

The effect of the Electrolux Case, while still subject to competing interpretations, has been and will be to reduce the scope of (ie. narrow the issues covered in) certified collective agreements. This means that the issues excluded from registered collective agreements must either be resolved by unregistered collective agreements between unions and employers, and thereby not be given legal enforceability (Pittard 2005), or be left to individual bargaining and/or managerial prerogative.

Unions: Declining Membership and Power

The Howard Government undoubtedly intended that the WRA would reduce the power of trade unions in Australia (Lee and Peetz 1998, Coulthard 1999), and this intention has largely been achieved. The provisions of the Act that contributed to this objective were many, but they included:

* 'freedom of association' provisions, which ostensibly protect the rights of individuals to join or not join a union, but more fundamentally undermine the membership and power that unions derived from informal compulsory unionism arrangements and previously-allowed formal award provisions for preference to union members (Lee and Peetz 1998, pp. 8-11; Creighton and Stewart 2005, pp. 523-526);

* greater opportunities for competition between unions for members (Lee and Peetz 1998, pp. 11-13);

* reduced 'rights of entry' by union officials on to the premises of employers in order to enforce awards and to access union members (Pyman 2004; Creighton and Stewart 2005, pp. 530-532);

* reduced opportunities for unions to take 'protected' industrial action in furtherance of disputes and strengthened injunctions and penalties against 'unprotected' industrial action (Lee and Peetz 1998, p. 15-19; Creighton and Stewart 2005, pp. 537-548);

* weakened capacity of the AIRC to intervene in disputes and arbitrate (Lee and Peetz 1998, pp. 15-16); and

* new provisions for individual agreements (in the form of AWAs), which employers often used to undermine union power (Peetz 2002).

These provisions contributed to, but did not wholly cause, a significant decline in the membership and collective power of Australian unions. Aggregate union density had been declining in earlier years--for example, from 39 per cent in 1986 to 31 per cent in 1996--but it subsequently fell further to 22 per cent by 2002, a level sustained in 2003 and 2004 (ABS 2005; see also Peetz 1998). At a more disaggregated level, the decline was savage even in industries that were traditionally highly unionised (Cooper 2005), while private sector union density was down to 17 per cent in 2004 (ABS 2005). These numbers reflect a narrowing of union power, which is confirmed by evidence of union exclusion from public policy formation, decreased industrial disputation and increased employer aggression. As Cooper (forthcoming) concludes: 'It is undeniable that union power has declined significantly during the past fifteen years'.

The importance of these trends for this paper is that reduced union power makes it harder for them to undertake action to impede managerial prerogative, whether through formal award making and enterprise bargaining or through more informal forms of collective bargaining.

Individual 'Bargaining': The Reality is Managerial Prerogative!

There are two forms of individual contracting in Australia: the common law contract of employment and statutory individual contracts. The former has always been a part of the Australian system in that every employee is deemed by the common law to have consummated such a contract. The opportunity for individual employees to bargain 'freely' with employers over the terms of common law contracts, however, was long circumscribed by various statutes and by the operation of the award system. Legislation such as the Annual Holidays Acts and the Long Service Leave Acts imposed minimum standards below which individual agreements could not legally go. Similarly, individual employees could not 'contract out' of the minima imposed by awards.

This limitation meant that individual 'bargaining' would determine the terms of a contract of employment only if they were in excess of awards or if the employee in question was not covered by an award. How many employees in Australia are not covered by an award? Until the early 1990s, the Australian Bureau of Statistics produced survey data that answered this question: the number had been increasing over the 1970s and 1980s to reach 20 per cent of the workforce in 1990 (see Bray et al. 2005, p. 292). No comparable data have been gathered since then. At best, it can be assumed that something more than 20 per cent of the workforce is covered by common law contracts of employment. The question then becomes whether those employees genuinely 'bargain' with employers over their terms and conditions of employment. This question will be discussed below.

It was only during the 1990s, with the emergence of the second category of individual contract, that some of the limitations on individual bargaining were withdrawn. 'Statutory individual contracts' were first introduced under state legislation, such as the 1992 Act in Victoria, and it was not until the WRA of 1996 that they entered the federal jurisdiction in the form of Australian Workplace Agreements (AWAs). From 1997 onwards, individual employees could negotiate statutory individual contracts with their employers. The real significance of AWAs lies not with the fact that they permit individual contracting (this could already be done under the common law) but that they prevail over awards and, in some circumstances, enterprise agreements, and can thereby reduce conditions contained in those collective forms of regulation. The only qualification was that the AWA, in order to be certified, had to pass the 'no disadvantage test'; that is, the Employment Advocate had to certify that, 'as a package', the individual agreement did not disadvantage the employee compared to the relevant award.

The Howard Government placed great importance on AWAs. It believed that individual bargaining through AWAs would improve economic efficiency at both enterprise and national levels and that the individual bargaining process would produce a closer and more trusting relationship between employees and employers.

Both these claims can and have been contested (Roan et al. 2001; van Barneveld and Waring 2003; Mitchell and Fetter 2003). But this is not the task of this article. Rather, this article focuses on whether the existence of individual contracts (whether common law contracts or AWAs) is an indication of joint decision making at the workplace level between employers and individual employees. In particular, does genuine 'bargaining' take place over the content of individual contracts; or is the decision-making process really one of management unilaterally making an offer to employees and employees accepting or rejecting that offer?

Again, there is only limited empirical research that deals directly with this question. Under the WRA, the contents of AWAs are secret. Researchers must gain the explicit consent of the parties in order to gain access to this information; and few companies have been prepared to offer such access. There are also significant gaps in the quantitative data kept by the Office of the Employment Advocate, such as the absence of data on the number of bargaining agents appointed by employees, which is a key indicator of bargaining.

Nonetheless, most of the research conducted on AWAs points to a lack of employee input into the drafting of AWAs. For instance, Waring (2000) found in three case studies in the coal mining industry that AWAs were not bargained, but were unilaterally offered by management and either accepted or rejected by employees. Wider incidence of this approach was also supported by early survey evidence in 1998, which suggested that approximately 92 per cent of employees covered by AWAs did not appoint a bargaining agent to negotiate on their behalves (see Waring 1999). While this could be taken to imply that employees negotiated AWAs themselves, without the assistance of agents, a more plausible explanation--which is supported by the New Zealand experience (see McAndrew and Ballard 1995)--iss that AWAs are rarely bargained over. Evidence presented to the Federal Court in duress cases also indicates that AWAs are often offered on a "take-it-or-leave' basis (van Barneveld 2000).

In contrast to these findings, Gollan's survey of 500 Australian organisations with registered AWAs found that the majority of employers (65 per cent) held discussions with their employees before commencing the drafting of their AWAs (Gollan 2000, p. 34). In 59 per cent of all cases, changes to the proposed AWAs followed these discussions, leading Gollan to argue that the evidence demonstrates a degree of employee consultation and influence when AWAs were drafted. It is hard to accept this claim. Gollan's survey says little about the quality of the consultation or the extent of influence exerted by individual employees. Moreover, the evidence does not support a causal relationship between reported employee consultation and subsequent changes made to AWAs, which might have indicated that actual bargaining had taken place. It is also important to acknowledge that Gollan's findings are the result of a survey of managers who, understandably, may have an interest in overstating the extent of discussions held with employees over AWAs. Finally, an alternative construction of the survey results is that 35 per cent of AWAs involved no input at all from employees and 41 per cent saw no change in the AWAs after the first presentation by management! This does not suggest effective employee representation or genuine bargaining.

An important and consistent finding in the research on AWAs is that there is little variation in wages and working arrangements between AWAs within the same enterprise. In other words, there is no significant evidence of individual employees successfully negotiating individualised pay deals. Rather, AWAs within the same organisation tend to contain standardised terms and conditions.

The use of standardised, or pattern, AWAs is illustrated by a number of case studies conducted for the OEA. According to the Telstra case study, the driver for introducing AWAs was 'the simplicity of having one agreement (in the form of an AWA) and the speed with which it can be implemented' (WCP 1999a, p. 10). The case study of a privatised ambulance service in Victoria also confirms the use of pattern agreements, with one employee reporting that 'all the agreements are the same. You cannot negotiate' (Smart Strategic Services 1999, p. 31). The same was found in case studies conducted by ACIRRT (1999b), and Bickley et al (1999). At D&S Concreting, the only point of differentiation between individual AWAs was in the percentage 'concreters' allowance' paid to employees (ACIRRT 1999b, p. 13) and, at Pharmacia and Upjohn, only salary was the point of difference (Bickley et al 1999). Furthermore, Leonard's (2001) analysis of 196 AWAs in the banking sector also revealed an absence of differentiation between agreements.

Waring's (2000) case studies found that AWAs were identical, leading him to conclude that management was using AWAs to extend managerial prerogative whilst reaping the administrative benefits that arise from contractual standardisation. More recent case study evidence collected in the hospitality industry by van Barneveld (2004) confirms that not much is 'individual' about 'individual contracts', with three of four organisations studied revealing exactly the same terms and conditions for similar grades of employees. This consistent finding supports the view that AWAs are rarely bargained but instead are unilaterally determined by management. If individual employees really had choice and the ability to bargain with their employers, the contents of AWAs could be expected to be highly differentiated. That they are not signals the larely illusory character of choice and the power to bargain in AWAs.

While individual employees with scarce skills or other sources of strong bargaining power may well be able to negotiate good individual contracts, the conclusion that emerges from the available research is that most employees do not actually bargain over the content of statutory individual contracts such as AWAs. Rather, the operation of AWAs usually indicates a decision-making process that is akin to the exercise of managerial prerogative. Consequently, an increase in the incidence of AWAs amounts to an increase in managerial decision making within the workplace.

Finally, there is another important role played by AWAs and other forms of individual contracting: they are often used by employers to undermine unions and the collective strength of an enterprise's workforce. Using aggregate data, Peetz (2002) has discovered that AWAs are more likely to be used in industries with previously high levels of union density and that density tends to fall with increasing AWA penetration. Peetz (2002, p. 44) argues that this indicates that individual contracts, such as AWAs, are 'not being used simply to vacate the space left by union absence, but are performing an active function in creating that space'.

The incidence of companies, even large corporations with a previous history of bargaining with unions, either rejecting collective negotiations or using the threat of individual contracts to influence union behaviour in the negotiations for collective agreements is widespread: the more spectacular examples were Rio Tinto and Patricks, but other prominent examples include Telstra, BHP, the Commonwealth Bank and the ANZ Bank (Sheldon and Thornthwaite 2001). These many examples demonstrate that not only is individual contracting a sign in itself of managerial unilateralism, but it is used to undermine the capacity of employees collectively to challenge management in the workplace.

Still More Managerial Prerogative: The Latest Reforms Proposals

The Howard government's proposals for further industrial relations reforms during its fourth term of office (Andrews 2005) represent a continuation, if not a major escalation, of the trend towards managerial prerogative described in this paper. The most significant impact will come from the plan to exempt businesses with up to 100 employees from unfair dismissal laws. This will have both a direct and indirect effect. With respect to the former, previous federal law gave employees the right to claim a review of dismissals on the basis of procedural and substantive fairness, with potential remedies of compensation and/or reinstatement. The proposal withdraws this tribunal oversight, eliminating any effective fetter on management's right in such businesses to dismiss employees at will. With respect to the latter, the previous laws encouraged the managers of businesses to modify their behaviour by developing professional human resource management policies, including disciplinary procedures, that would minimise the likelihood of dismissed employees making claims. Without the laws, this incentive is lost. Finally, the impact of the proposals is even greater because they will end most of the state jurisdictions in unfair dismissal, some of which have a longer history and deeper operation than their federal counterpart.

A second feature of the proposals is the plan to eliminate the 'no disadvantage' test that was previously applied before certified collective agreements or AWAs could be registered and replace it with a far weaker test. This gives management a great deal of opportunity to eliminate conditions previously embodied in awards without paying a corresponding 'offset price'. If, as this article has argued, genuine 'bargaining' does not take place, then this will significantly expand managerial prerogative. Even if concessions to managerial prerogative are agreed to voluntarily by employees, then the expansion of managerial prerogative may still continue. Again, the impact of this proposal will be even greater where state awards are replaced by federal awards. Furthermore, the elimination of the 'no disadvantage' test, combined with reforms to simplify the process of making of AWAs, will ensure that AWAs take on the procedural features of common law employment contracts but retain their distinct legal advantage of overriding collective agreements and awards.

Thirdly, there are plans to reduce further the number of 'allowable matters' in awards from 20 to 16. While the four disallowed matters (jury service, notice of termination, long service leave and superannuation) may be regulated by other legislation and may not immediately appear to represent a major increase in managerial prerogative, the real impact remains to be seen. A more significant change, however, comes from the federal government's intention to impose a national system. Where federal awards take over from previous state awards, which were not limited in their scope (ie the range of issues included), then a significant expansion of managerial prerogative could well occur.

Finally, the implementation of several changes previously blocked in the Senate will also have an impact on decision-making at a workplace level: the 'protection' of independent contractors will almost certainly 'free up' the capacity of employers to use contractors in an unregulated way; the exemption of 'small business' from both unfair dismissal laws and redundancy payments will give management in these businesses more freedom to retrench staff without restriction; and further attacks on the strength of the union movement, in the building industry and beyond, will reduce the capacity of employees to challenge collectively management decisions.


The aim of the preceding discussion was to explore the trends in decision-making processes over non-wage issues in the employment relationship in Australia under the Howard Government. The first conclusion that flows from our survey is that there has been surprisingly little empirical research on the topic. Workplace studies directly addressing the issue of who makes decisions over non-wage issues are rare, as are more specific investigations of the effects of award simplification and the impact of enterprise bargaining (union and non-union) and individual contracts. These important questions represent an agenda for future research, along with subsequent issues about the impact of the decision-making process on substantive outcomes.

The second conclusion, based on the research that is available, is that the period since 1996 has seen a significant growth of unilateral decision making by management. This has been achieved, on the one hand, through a reduction in collective forms of decision making: the narrowing scope and declining importance of awards and the encouragement of decentralised enterprise bargaining at the same time that the power of unions has been greatly restricted. On the other hand, the effect of expanded individual contracting has not been to promote direct bargaining between employees and employers, but rather to increase directly management power and to undermine further the power of unions.

This conclusion says little about how management has used its new found freedom. But it says a great deal about the paucity of political debate in Australia and about the empty rhetoric of the Howard Government. Both the WRA of 1996 and the 2005 reform proposals have been justified by the need to give employees and employers 'choice' and to free employees and employers from the control of unions and arbitration tribunals so that they may make decisions together. Contrary to this rhetoric, it is employers and not employees who have achieved greater freedom. For most employees, the extent of their new freedom is a 'choice' whether to accept employment rules dictated by employers or to give up their jobs. This is a far cry from the government's rhetorical nirvana.


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* The authors wish to point out, and the editors acknowledge, that this paper was submitted before the presentation to Parliament of the 2005 WorkChoices legislation.

Mark Bray and Peter Waring, Newcastle Business School and Employment Studies Centre, University of Newcastle.
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Title Annotation:John Winston Howard
Author:Waring, Peter
Publication:Australian Bulletin of Labour
Geographic Code:8AUST
Date:Mar 1, 2006
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