The Australian Experience with Compulsory Arbitration: An Interesting Relationship with Labor Union Prevalence

By: Bryan Davis Jr.

The Australian experience with compulsory arbitration is an interesting one, and it is through a historical understanding of industrial relations within the country that a greater understanding can be garnered regarding the dissipation of such compulsory arbitration. Specifically, there is an occurrence that might be recognized between the compulsory arbitration structure which has existed in the country and the decline of labor union prevalence within the country.

Since the start of the 20th century, industrial relations within Australia have been regulated through systems of conciliation and arbitration.[1] Compulsory arbitration was brought about due to Australia’s experience with several major strikes and, in tow, economic depression.[2] The country attempted to introduce voluntary conciliation and arbitration systems, however, these voluntary systems lacked the ability to help effectively bring about a solution to the situation regarding industrial relations within the country.[3] Due to the ineffectiveness of these attempts, compulsory arbitration was introduced.[4] The first federal act imposed in Australia was found in the form of the Conciliation and Arbitration Act of 1904.[5]

The idea behind such compulsory conciliation and arbitration was that, in the event that employers refused to negotiate with a union, or if a negotiated agreement could not be reached, an independent tribunal could intervene and mandate a settlement binding on both parties.[6] These tribunals would attempt to bring about conciliation of a given dispute and, in the event that this was unsuccessful, the tribunal would then engage in compulsory arbitration.[7] Collective bargaining was thought to be the manner in which to resolve those issues which existed between employers and employees, however, the processes of conciliation and arbitration gradually became the standard, rendering collective bargaining a rarer occurrence.[8] In fact, it is perhaps because of the access to compulsory arbitration that unions pulled back on their efforts and time in the workplace and focused instead on politics and arbitration proceedings.[9]

Those awards issued by tribunals grew to encompass minimum rates of pay, overtime issues, and other matters, however, over time, unions’ wages rose to levels exceeding those found in awards.[10] The 1950s and beyond saw the conciliation and arbitration process become more and more complex, in part because the negotiations between employers and unions were resulting in terms and conditions which exceeded awards.[11] Additionally, lending towards the complexity of the arbitration structure within the country was the fact that such tribunals were established in both the federal jurisdiction and each of the six state jurisdictions.[12]

In 1972 the compulsory arbitration system utilized within Australia impacted both the minimum wages and conditions of employment for approximately 90% of the workforce.[13] Interestingly, despite the presence of such compulsory arbitration, strikes impacted the country to some great extent, leading to the loss of countless workdays within the country.[14] Perhaps most revealing is the fact that in 1968 there were 1,079,500 workdays lost due to strikes; in 1970 this number reached 2,393,700; and in 1971 this number soared to an incredible 3,068,600.[15] However, despite the prevalence of strikes in the country, the compulsory arbitration structure did seem to exert some control over wages within the country.[16]

Union growth was found to rise when the compulsory arbitration structure was originally introduced.[17] In fact, 27% of employees within Australia were union members by 1911 and 53% were union members by 1920.[18] However, following changes in the economics and politics of the country, union membership significantly decline, best highlighted in the fact that union membership declined 13% between 1976 and 1993.[19]

Acceptance of the system of conciliation and arbitration within the country began to face a challenge in the 1990s by not only employers but unions as well.[20] Due to these interests being brought forward and a new legislative order arising, conciliation and arbitration were replaced in the country with a system of “enterprise-level collective bargaining,” effectively bringing the Australian system more in line with countries like the United States, the United Kingdom, and Canada.[21] Interestingly, it was during this same time that both the prevalence of union members and the relative “industrial and political power of unions” declined.[22]

Throughout the course of the last several years, the Conciliation and Arbitration Act has undergone significant change, with various amendments occurring and the scope of the Act being altered.[23] Most notable was the introduction of the Industrial Relations Act of 1988, the Industrial Relations Reform Act of 1993, and the Workplace Relations Act of 1996.[24]

The Fair Work Act of 2009 replaced prior legislation and established numerous national employment standards and minimum standards which were to be included in awards.[25] While under the Fair Work Act parties are required to bargain in good faith, there is no requirement to reach an agreement and, beyond this, there is no arbitration unless a unique situation arises.[26] While a dispute resolution clause must be integrated into an agreement in the event that an agreement fails to take place, arbitration does not have to serve as the dispute resolution within the clause.[27] Importantly, the federal tribunal took on a role wherein they assumed regulation of the procedure surrounding collective bargaining.[28]

While tribunals within Australia are still prominent, their role has changed drastically over the past several years.[29] Contributing to this alteration is the fact that unions within the Country have declined in prevalence while individual’s employment rights have strengthened.[30] Interestingly, in 1976 union membership was over 2.5 million, while in 2016 union membership was only 1.5 million.[31] Similarly, union density fell from around 51% to 14% between these same periods.[32]

An acknowledgment must be made regarding the interaction between union prevalence and the availability of compulsory arbitration within Australia. It seems evident that the legislation regarding compulsory arbitration has a correlation with the relative strength of unions within the country. While there have undoubtedly been market forces and public policies which have impacted union strength and prevalence,[33] it is interesting to note the connection between the availability of compulsory arbitration and union prevalence. Observance of trends in labor union prevalence should be noted wherever they might be found. The ramifications of such labor union trends can necessarily implicate various changes within a country. As Australia has recently found, overall well-being has been uncovered as lacking, with wage increases having been stifled, and there being a lack of job security within the country.[34] A possible rationale for this occurrence is found in the decline in union membership within the country.[35]

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[1] Richard Mitchell & Richard Naughton, Australian Compulsory Arbitration: Will It Survive into the Twenty-First Century?, Osgoode Hall L.J. 31.2, 266 (1993)

[2] Id. at 267.

[3] Id. at 267-68.

[4] Id. at 268.

[5] See Keri Phillips, The History of Industrial Relations in Australia, ABC, (April 21, 2015), https://www.abc.net.au/radionational/programs/rearvision/bosses-and-workers-in-australia/6407092

[6] Id.

[7] Mark Bray & Johanna Macneil, Mediation and Conciliation in Collective Labor Conflicts in Australia, in Mediation in Collective Labor Conflicts, 247, 253 (Martin Euwema, Francisco J. Medina, Ana Belén García, & Erica Pender eds., 2019).

[8] See Phillips, supra note 5.

[9] Mark Bray & Jacques Rouillard, Union Structure and Strategy in Australia and Canada, 71 Labour History, 237 (Nov. 1996)

[10] See Phillips, supra note 5.

[11] See Phillips, supra note 5.

[12] See Bray & Macneil, supra note 7, at 251.

[13] Kingsley Laffer, Compulsory Arbitration: The Australian Experience, Monthly Labor Review, 45 (May 1972)

[14] Id.

[15] Id.

[16] Id.

[17] See Bray & Rouillard, supra note 9, at 207.

[18] Id.

[19] Id. at 226.

[20] See Bray & Macneil, supra note 7, at 252.

[21] Id. at 252.

[22] Id. at 256.

[23] See Colin Fenwich & Jane Hodges, National Labour Law Profile: Australia, ILO, https://www.ilo.org/ifpdial/information-resources/national-labour-law-profiles/WCMS_158892/lang--en/index.htm (last visited Dec. 17, 2019).

[24] Id.

[25] Fair Work Act 2009 (Cth) (Austl.).

[26] See New Matilda, So Much For Compulsory Arbitration, newmatilda.com, (March 24, 2011), https://newmatilda.com/2011/03/24/so-much-compulsory-arbitration/

[27] Id.

[28] See Bray & Macneil, supra note 7, at 253.

[29] See Bray & Macneil, supra note 7, at 260.

[30] See Bray & Macneil, supra note 7, at 260.

[31] See Geoff Gilfillan & Chris McGann, Trends In Union Membership In Australia, Parliament of Australia, (October 15, 2018), https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp1819/UnionMembership

[32] Id.

[33] See Bray & Macneil, supra note 7, at 256.

[34] See Swati Pandey, Divided We Fall? Australia Labor Unions’ Slump May Be One Reason for Low Wages Growth, Reuters, (June 17, 2018), https://www.reuters.com/article/us-australia-economy-wages-analysis/divided-we-fall-australia-labor-unions-slump-may-be-one-reason-for-low-wages-growth-idUSKBN1JD115

[35] Id.