It has been twenty years since the Howard government passed the Workplace Relations Act. One of the significant changes to industrial relations law that this legislation introduced, freedom of association provisions, included a right not to join a trade union. This paper examines those changes and their effects, the background and arguments that underlie freedom of association and argues that the current arrangements are logically, economically, legally and morally flawed. It then posits an alternative to the current regime.
Historical Background to Closed Shops
Throughout much of the history of Australian industrial relations, unions had the right to “close the shop”. Whilst they always existed in somewhat of a legal grey zone, closed shops were workplaces which required workers to join a particular union, normally based on their trade or profession, as a precondition to employment. In the 1980’s it was estimated that these arrangements covered as much as 25% of the Australian workforce and approximately 50% of union members.
Another way in which union membership was strongly encouraged was through preference clauses in Awards. Until relatively recently, Awards regulated all terms and conditions of employees and most Awards contained a preference clause. Preference clauses typically provided for preferential treatment for union members in matters such as engagement, promotion and redundancy and had the practical effect of strongly encouraging union membership. It was easier to get and retain a job if you were a union member under these arrangements.
This system operated largely without complaint up until the 1980’s, save a few challenges from conservative state governments. Most employers were happy with the closed shop and preference arrangements as they helped to easily regulate their employment relations. It was an important part of the unique system of industrial relations that underpinned the so-called “Australian settlement” that had lasted since Federation. Indeed in 1914, the Commonwealth Liberal Party (a forerunner to today’s Liberal Party) under Prime Minister Joseph Cook held a double dissolution election at which the key question was the abolition of union preference arrangements in Commonwealth employment, a move that had been blocked in the Senate. The election saw the Fisher Labor government win power with a swing towards it and the move to abolish union preference arrangements was defeated.
82 years later, in 1996, the Howard government was elected partly on a platform of reforming industrial relations and in particular on a pledge to end the old system of compulsory unionism and union preference. In the Second Reading speech to the Workplace Relations Act 1996, then Minister Peter Reith highlighted a theme that has run throughout industrial relations legislation ever since, that under the new regime workers would be free to join or not to join a union.
Legal Background to Freedom of Association
The new right “not to join a union” was justified in terms of freedom of association. Indeed for the first time, this aspiration made it into the Objects of the Act. Section 3(j) of that Act stated an object of the Act was to: “ensur[e] freedom of association, including the rights of employees and employers to join an organisation or association of their choice, or not to join an organisation or association”.
The Act made closed shop arrangements unenforceable as a matter of law and declared that any union preference clause in an Award or other industrial agreement was void. Further provisions were introduced outlawing discrimination or victimisation against any person who did not join or was not a member of a union. The Howard government also created a statutory body, known as the Office of the Employment Advocate, who policed these new rights and prosecuted individuals and bodies (almost invariably unions) for breaching them. The government poured millions of dollars into advertising campaigns, including television ads, informing workers that it was illegal for them to be required to join a union.
In response, and based partly on international models, some Australian unions sought to utilise compulsory bargaining fees, otherwise known as the “Fairshare” principle, where workers who were not a member of a union but were benefiting from a collective agreement negotiated with their employer by a union would be required, by the terms of that enterprise agreement, to make some contribution to the union in acknowledgement of that benefit. The Howard government opposed these arrangements and amended the Workplace Relations Act to expressly prohibit bargaining fees. In 2004 in Electrolux Home Products Pty Ltd v AWU and Ors the High Court found that, as a result of the amendments made to the Act, bargaining fees were prohibited from inclusion as a term in an enterprise agreement.
The Freedom of Association and ban on bargaining fees were retained under the Howard government WorkChoices legislation which succeeded the Workplace Relation Act. The Fair Work Act 2009, introduced by the Rudd Labor government under the stewardship of then Minister for Workplace Relations Julia Gillard, also retained the provisions of the Workplace Relations Act with respect to freedom of association. The Act, which remains in place, retains prohibitions on preference clauses in Awards and the general protections provisions prohibit discrimination against workers who join or do not join an organisation. The Act specifically prohibits bargaining fees.
Effect of the change to closed shop arrangements
Coinciding as it did with a move from centralised wage fixing to a decentralised model of enterprise based bargaining, the change to closed shop arrangements had a dramatic effect on the Australian union movement. Unions were encouraged or required to devote significant time and resources to bargaining at a workplace level and fairly quickly this became the focus of nearly all of the activities of unions. Employees gain significant benefit from the work performed by unions in collective bargaining. Union negotiated enterprise agreements tend to have a significant premium over agreements not negotiated by unions. However, unfortunately for those unions, they were and are often negotiating benefits for people who were not members and indeed had a lawful right (and an active government agency) ensuring that they cannot be placed under undue pressure to become a member. On a strictly economically rationalist basis, there is no individual incentive under these legislative arrangements to join a union, as you receive the economic benefits of membership without the requirement to contribute. For those who are not covered by collective agreements and even for those who are, there is an Award system and national minimum wage operating as a safety net that underpins your terms and conditions and is maintained and protected, at significant expense, by the union movement. Again, on a strictly economically rationalist basis, there is no individual incentive to join a union as you receive the benefit of the Award and the national minimum wage without any need to financially contribute.
As a result, over the last two decades, union density has fallen from around 40% of the workforce to around 15% of the workforce with private sector membership sitting at around 11%. In that period Australia’s decline in union density ranks third highest in the world behind New Zealand and Turkey. This has occurred despite the fact that over 60% of Australian workers are covered by collective agreements or Awards, the vast majority of which are negotiated by unions. In economics this is known as the free rider problem: many people benefit from a public good (collective bargaining and Awards) but do not contribute.
Australia is somewhat unusual in legislating for a right not to join an association. The International Labor Organisation (ILO) specifically provides that a worker should have a right to join a union but is deliberately silent on whether a worker should have a right not to join a union. This is left to the discretion of member countries. There is no internationally recognised human right that Australia has enshrined in its own law.
In the USA, most workers work under legislation where they can vote for a contract (like an enterprise agreement) where workers are required to pay the union Fair Share provisions to cover the costs of bargaining and representation. Similar provisions operate in most Canadian provinces under the Rand formula and throughout Japan, which provides for “union shop” agreements. Quite different systems operate in Continental Europe. For example, France and Germany retain formal corporatist economic structures in Works Councils which mandate union involvement. The Scandinavian countries tie social insurance to union membership.
All these system (other than France) operate to either require workers to join unions, for example where a worksite votes to require it, or provide public resources for their work in collective bargaining and create strong social incentives to join unions. Australia, the U.K. and New Zealand stand in opposition to those models.
Philosophical basis for Freedom of Association
The prohibition on closed shops or preference clauses is said to be justified on the basis of the right of an individual to freedom of association, and in particular the right of an individual not to be coerced into joining an organisation unless they freely choose to do so.
Most of the philosophical debate and discussion around Freedom of Association is around a positive freedom to associate, that is, a right for people to associate with whom they choose. It is often discussed in conjunction with a freedom to assembly and a right to protest, particularly as this is routinely denied in countries that do not practice liberal democracy.
There is comparatively little academic and philosophical discussion about the negative right, or the right not to join an association, contained in Australian legislation. The ILO’s studied neutrality on the issue is one such example. However, on initial examination it appears to be a reasonable proposition. Associations are formed by people with likeminded views and beliefs and who wish to associate in each other’s company. If I do not share those views and beliefs I should not be forced to join an organisation nor to associate with people who are members. Forcing me to do so infringes on my freedom of choice.
It is undoubtedly true that many people hold a view or belief antithetical to unionism. For many people this is a deeply held conviction. At first instance, it seems like a reasonable statement that such people, should not, on the basis of where they work, be compelled to join a union when they have an ideological opposition to unions generally or even to one union in particular.
This argument is of course predicated on an acceptance of a rights based framework of human interaction as is common in our modern liberal society. For the purposes of this paper I will assume that a rights based framework has intellectual and moral force. If that rights based framework is accepted, the arrangements that prevailed in Australian industrial relations more or less up until 1996 (at a Federal level at least), did exist in conflict with the right not to associate.
Freedom of Association and the Closed Shop
The closed shop was a deal struck between a union and an employer and enforced normally without reference to the workers in that enterprise, although it would not occur without support from shop stewards and delegates. One reason that employers and unions agreed to close the shop, perhaps more common than is now admitted, was that they both wanted to keep another union out of that workplace, particularly in an era where the union movement was divided by Cold War ideology. Likewise, preference clauses contained in Awards operated throughout an industry either on a State or Federal basis. A worker who wanted to work within a particular industry, which might include a trade or profession that they had spent years training in and would have difficulty exiting, was subject to the Award and there was a strong pressure on them to join the relevant union to access the preference arrangements that operated within it. For example, it was difficult for a teacher or a carpenter bound by an Award to simply move out of that profession if they did not want to join a union.
As set out earlier, this had the effect where large numbers of union members were effectively conscripts, they had not made an active choice to join a union and circumstances largely beyond their control meant that had little choice but to remain a member. Arguably, this did not actually do much for the union movement, at least as a properly functioning democratic institution. On one view it encouraged a distancing between the union’s operations and its membership as the compulsory nature of the membership meant that unions were able to operate through Industrial Courts without organising or involving their members.
Conflicts with other rights and norms
The entrenchment of the negative right not to join a union in statute has had the effect of elevating it or privileging it over other countervailing rights, in this case the “right” for someone not to share the results and benefit of their work with others. This latter “right” has its basis in what is probably the foundational right of modern liberal society, the right to private property. These rights come into conflict under the current Freedom of Association provisions as a person who pays for union collective representation is forced to share the benefit of that representation with those who do not.
I have two young daughters and I read them a bedtime story every evening. One of our favourites is the story of the Little Red Hen. You may recall it from your own childhood. In the story a Little Red Hen finds a grain of wheat and asks other farmyard animals to help her plant it. They all decline. She then asks them to help her harvest and then mill the wheat and so on and at every stage the other animals decline to assist her. Her last task is to bake the loaf of bread which she does without assistance. She asks “Who will help me eat this bread?” and for the first time the other animals say they will help. She refuses to share the bread and eats it for herself. The moral of this story is intuitive, which we like to share with our children: you have to put something in if you want something back. We are all on the side of the Little Red Hen in this story, any other outcome would seem grossly unfair. However, when it comes to our laws regulating workplace conduct we work against this basic instinct and force the Little Red Hen to share her bread with the other animals irrespective of whether they have helped with its preparation. This surely impinges on her right to enjoy the fruits of her labour.
Whilst not directly relevant to the Freedom of Association provisions, the restrictions on bargaining fees conflict with notions of freedom of contract, that is the right of parties to freely enter into a contract without interference from the state. Under this principle, an agreement between an employer and her employees that bargaining fees should apply on a site are a matter for those parties and no business of the state. In Australia they are unlawful. Ironically, politicians and academics who pursue notions of freedom of contract when it comes to matters such as minimum wages oppose it when the contractual arrangement agreed upon provides for matters such as bargaining fees.
The right not to join a union conflicts with the right of the collective. In every society of any complexity there will be occasions when the collective will infringes on the right or the wishes of an individual - taxation, law and order and consumer regulation are all obvious examples. We all recognise that at times our individual liberties and rights must be subsumed to the collective will and, arguably, elevating a negative freedom of association above all other matters infringes on that.
In the American Revolution the American colonist took up the cry “No taxation without representation” protesting against the lack of any representative assembly in the colonies where the wishes of taxpayers could be heard. The corollary for that might be “no representation without taxation”, you do not get the chance to participate in the collective without contributing.
Finally, in practice, the negative right offends against common norms of behaviour and our deeply ingrained societal views on fairness. If runs counter to notions of mutuality of obligation that underpin human relations in modern complex societies. The story of the Little Red Hen is told across many cultures. A similar moral is contained in the story of the Cicada and the Ant told in Aesop’s Fables and read to children 2,500 years ago. It is not fair that the Little Red Hen should have to share her bread when the other animals refused to pitch in and help her. It is not fair that the Ant should have to share his hard work with the Cicada who sung the summer away instead of working (although in modern times we might find the ant’s position somewhat lacking compassion!). Likewise, it is not fair that someone gets to benefit with wages and conditions earned only through the financial contribution and work of others who contribute to the representation that obtained it.
These intrinsic notions of fairness have long been recognised by philosophers, for example the logic of self-interest and collective action is discussed from Plato through J.S. Mill to Mancur Olsen. Modern philosophers and scholars on jurisprudence such as H.L. Hart and John Rawls have argued that it is immoral for a person to benefit from the cooperation of others without doing his or her own share.
This paper has pointed out the flaws in the reasoning on Freedom of Association and the difficulties inherit when it is elevated and privileged above all other countervailing rights. It should be clear, I think, from this paper that I do not accept the central premise of the negative right not to associate. Nonetheless, in my view, the modern industrial system can operate to ensure the fundamental basis of the negative right not to join a union is upheld while curbing some of the unfairness and excesses currently associated with it.
One alternative system of freedom of association that accommodates all the conflicting rights discussed above, is one that provides for union recognition or union shops. That is, where an absolute majority of workers at an enterprise vote that a particular union should be recognised, anyone who works at that enterprise must be a member of that union. This is similar to the system operating in the U.S. and Canada already outlined.
In practice this would mean that workers could indicate that they wished to be bound by or represented by a union. Similar provisions already exist under the Fair Work Act for majority support determinations. Those workers could also indicate that they wanted a clause in an agreement that recognised the union(s) and required all employees operating under the terms of that agreement to become a member. This agreement, containing such a clause, would then be voted on in the normal way.
From a rights based or a freedom of association perspective this is harder to criticise. The arrangement is not entered into between a union and employer but rather by employees amongst themselves. Indeed there is no such thing in the Fair Work Act as an enterprise agreement between a union and an employer. If an absolute majority of employees democratically decide that they wish to be represented by a union then they bind the others to that decision. Those that do not wish to be represented by a union are free to argue against union recognition and to vote against it. If they convince more than half of their workmates, then none of them will be required to join.
However, let us say they a person is strongly opposed to union membership and more than 50% of their workmates disagree, then this person is faced with the prospect of being required to join a union. Ultimately, if this person strongly objects to union membership then they are free to either leave the enterprise or not seek employment there in the first place if it is a union shop. Under this system, there is no industry wide model of preference operating through an Award, so a worker will normally be able to find an enterprise where the other employees have not voted to recognise the union. The Australian labour market is increasingly characterised by high turnover with shorter periods of employment with larger numbers of part time and casual employees. A common experience is that workers who do not like a workplace simply leave and find another job. No person can be forced to work for any one employer and as a result no person, under this model, could be forced to join an association.
A union recognition model is analogous to that which applies, without comment, in many other facets of modern life. One example is the operation of strata schemes in unit or apartment blocks. If a person chooses to buy an apartment then they automatically become a member of the strata scheme. The strata scheme charges fees that go towards the upkeep of the building which all residents benefit from – cleaning, lifts, maintenance. The strata fund maintains a sinking fund which provides for long term structural work and which represents the accumulated contributions of past tenants (and indeed future tenants). The fees and actions of the strata scheme are decided democratically at Annual General Meetings where residents also normally elect an Executive Committee. Votes are determined by absolute majority.
It would be ridiculous and unworkable (as well as illegal) if a person could move into an apartment or unit block and exercise their right, under the banner of freedom of association, not to be a member of the strata scheme and not to pay the strata fees. They clearly benefit from the money paid by others into the scheme. They benefit from the work of the Sinking Fund which includes the contributions from people who may have left the block many years ago. They are required to join the Association and they are required to contribute to it. No-one seriously suggests that apartment tenants do not have freedom of choice. They have freedom of choice to purchase a unit. If they do not like the strata or the operation of the collective as represented by the strata they have freedom of choice to sell the unit.
It seems to me that there is no substantial difference, when it comes to the exercise of rights, between this arrangement and union recognition ballots. No person is compelled to work in any workplace just as no person is compelled to live in any apartment block. People are free to leave a workplace or an apartment block if they do not wish to be bound by decisions made in those places. It must be broadly conceded that allowing such a system to operate does not infringe on any notion of freedom of association.
Such a model would strike a balance between the right of people not to be compelled to join a union and the right of those who contribute not to have free riders benefit from their contribution. It would address some of the inequity of the current arrangements and the way they have operated against core cultural norms and moral assumptions underpinning our society.
Nonetheless it is likely to be opposed by most politicians, media and academia. It may be the case that the real reason for the right not to join a union being enshrined in legislation, is not for the professed reason of defence of freedom of association, but for the purpose of weakening unions and removing their influence from our economy and politics. As we have seen earlier it has certainly had that effect. If this is the case then the argument should be had on those terms without recourse to arguments on freedom of association. That is a debate beyond the scope of this paper.
David McElrea is an Assistant National Secretary of United Voice. These are his personal views and do not represent United Voice policy.