This week’s Federal Court decision to reject union claims against BHP’s November 1999 offer of individual agreements to its iron ore workers could have significant implications for BHP’s productivity, the union movement and the workplace-relations policies of the major political parties in the forthcoming West Australian and federal elections.

 

Most significantly, Justice Susan Kenny’s judgement establishes that the conclusion of individual agreements between employers and employees under the Workplace Relations Act does not constitute discrimination against unions, if it can be shown that they were undertaken to improve efficiency. As BHP was able to show, Rio Tinto’s move to individual agreements had opened a productivity ‘gap’ of about 20 per cent in Rio’s favour.

 

What is more, after extensive cross-examination of senior executives, Justice Kenny noted their conclusion,  ‘rightly or wrongly, that negotiations with the unions had in the past hindered the introduction of necessary workplace changes.’     

 

The potential implications of the move by BHP away from its long-entrenched policy of collective bargaining with unions can be judged by the strong challenge mounted by unions and the year taken by the Federal Court to reach a decision. But in a modern economy it is unfortunate that a court can delay productivity-enhancing reforms by attempting to read the minds of management, employees and unions. And it is absurd that executives should have to face many weeks of court hearings on such matters. 

 

Still, the ruling eventually handed down may give employers greater confidence in the Federal Court’s approach, after justifiable criticism of earlier decisions as displaying a pro-union leaning in their interpretation of the act.

 

In recent years several leading companies have identified the potential for increased flexibility from extending individual agreements to a wider group of employees. And while BHP says it will only extend individual agreements if it cannot otherwise get the efficiency it needs, it would be surprising if it did not act.

 

Given the threat that the union movement has perceived from a spread of individual agreements, the foreshadowed appeal against Justice Kenny’s decision is hardly surprising. Nor would it be surprising if other extensions of individual agreements are similarly opposed. But unions should seriously consider the wisdom of such action from their own perspective.

 

They should recognize  Wednesday’s judgement accepts that the Workplace Relations Act really does protect union membership. And they should recognise that, under the act, collective bargaining can exist with or without individual agreements. But what is not protected is an absolute right of unions to insist that collective bargaining on union terms is the only way of determining employment conditions.

 

Justice Kenny also revealed the hollowness of the unions’ claim of discrimination when she noted that about half of those on individual agreements remained union members. Indeed, the judgment highlights serious dissatisfaction many union members with the hostile handling by union officials of both the company’s initiative and of employees who signed individual agreements.

 

It is evident that union officials made a serious tactical blunder. Instead of pursuing ideological objectives, union officials should haveoffered to help the many members who favoured the adoption of better-paid and more flexible individual agreements.

 

This decision and union attitudes have important implications for next month’s election in Western Australia, where the Opposition Leader, Dr Geoff Gallop, has attempted to overcome internal ALP differences by promising to reduce significantly the Court Government’s State legislation on individual agreements, which is more flexible than the regime under federal legislation.  The preservation of the existing workplace agreement laws used extensively by BHP and the mining industry in Western Australia, and now upheld by the Federal Court, is thus likely to become a major issue in the election.     

 

The Federal Opposition – which promises to take Australia back to the days of the Industrial Relations club with its legal protection of union monopolies -  will also face a serious problem with its promise to abolish individual agreements. But with more and more companies and employees likely to enter such agreements or to favour them, it is difficult to believe that such a policy can be seriously proposed, let alone sustained.