Are members-only awards dead?

Cases

Are members-only awards dead?

While the NSW Commission has jurisdiction to make awards applying only to union members, a recent Full Bench decision has cast doubts on whether a union will ever be able, in practice, to achieve a members-only award.

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While the NSW Commission has jurisdiction to make awards applying only to union members, a recent Full Bench decision has cast doubts on whether a union will ever be able, in practice, to achieve a members-only award.

Background

The Health and Research Employees’ Union of Australia, New South Wales Branch (HREA), lodged applications for awards granting pay and conditions which would only apply to its members.

HREA was seeking members-only awards to encourage employees to join the union and to discourage ‘free-loaders’ (ie non-union employees ‘who prefer that others [ie unionists] work and pay for the securing of award equivalent advantages for them to enjoy’).

Owing to the changing nature of industrial relations including increased deregulation, HREA submitted that a members-only award was one way that the union could arrest the decline in union membership through the provision of a unique service.

In this way, HREA submitted, the traditional approach (as enunciated in the High Court decision of Metal Trades Employers’ Association v The Amalgamated Engineering Union (1935) 54 CLR 387) that security of unionists’ employment was best secured by not awarding unionists higher pay and conditions than non-unionists was no longer useful in the 1990’s. It was submitted that current trade union security was best served by the opposite result to the Metal Trades case.

The evidence led by HREA showed the membership was strongly in favour of the applications. In fact, membership had grown since the time the applications were made.

The employers, while agreeing that the Commission had jurisdiction to grant the awards as sought, submitted that the awards should not be granted for reasons including:

  • the inequity of employees doing the same work being paid different rates;
  • the consequent disharmony at the workplace;
  • the significant administrative difficulties; and,
  • the difficulty for the employer in determining who are union members.
Jurisdiction to make members-only awards accepted

It was common ground between the parties, and accepted by all members of the Bench, that the Commission has jurisdiction to make the award as sought. As stated in the joint judgment of Cahill VP and Peterson J:

"...we accept that there is jurisdiction under the 1996 Act [NSW Industrial Relations Act 1996] for the Commission to make an award containing an Area, Incidence and Duration clause in the terms sought, the import of which is to restrict the award’s coverage to employees who are union members."

Majority rejects applications

By a majority of three (Fisher P, Cahill VP & Peterson J) to one (McKenna C), the Full Bench held that the applications, on their merits, should not be granted (Re Applications by the Health and Research Re Hospital Employees HREA Members (State) Award & Ors; Matter Nos IRC5997/96, 6522/96, 6524/96, 792/97, 793/97).

Will such applications ever succeed?

The most significant aspect of the case was the difference of opinion between the joint judgment of Cahill VP and Peterson J on the one hand, and the judgment of Fisher P on the other, in terms of whether members-only awards will ever, in practice, be awardable.

Cahill VP and Peterson J held:

"There is, in our view, an insurmountable barrier created by the conflict between the intention of the legislature manifested in the Actto prevent encouragement in the traditional form of preference and the principles underlying the members only application which would enhance the encouragement to a level considerably in excess of the concept of preference, indeed towards the level of practical compulsion. ...

"We further consider, with due respect to the views of the employees in the industry who consider otherwise, that the concept of making awards confined only to union members for the express purpose of encouraging increased union membership runs quite contrary to the general thrust of the NSW Industrial Relations Act 1996...

"There are other problems with the claim. The concept of ‘free riders’, that is, persons who benefit from the receipt of improved wages and conditions in awards achieved by the actions of unions and their members, is not a new feature of industrial relations in Australia ... In New South Wales, as we perceive it, the common rule aspect of awards has been recognised as a positive feature of the New South Wales industrial system. ...

"Further, the introduction of a concept whereby rates of pay fixed by an award are applicable only to members of a relevant union means, as this case illustrates perfectly, that two rates of pay will apply to the same work. Such a concept is novel and contrary to long-standing principles ...

"Finally, if an application for a members only award were to be granted, what should be done with the wage rates for persons employed in an industry who nevertheless choose to remain outside the membership of the relevant union? Wage rates for those employees would be lower, and employers would thereby have the opportunity to employ cheaper labour. In a time of high unemployment, this possibility might well react against the interests of the relevant union. Such a possibility may have been contemplated by the Labor Council when expressing support for the present application by reserving its position on the matter generally.

"Alternatively, as the employers submitted in this case, the Commission could not be sure that in fixing rates on the basis of their confinement to union members the rates would not be extended to non-unionists. The employers in this case declined to give any assurance that that course would not be followed if the Commission were to grant the application."

President Fisher, while agreeing with the result flowing from the decision of Cahill VP and Peterson J, made the following observations:

"The employer’s case emphasised administrative difficulties. I accept there may be such difficulties but of no greater order than frequently found in public administration. In any case once adjustments are made major problems could expect to disappear...

"I do not accept the tendency to accept arguments which might have the effect of going beyond what is necessary to decide this case and to put in place standards that might discourage other applications [emphasis added]. The categories should not be closed. ... It would be strange indeed if unions did not consider changed strategies to meet the different challenges of different times. ...

"I see no reason at all why in such a case where it is clear that the union does supply an effective service that the union should not seek to limit awards to members, or where the remedy for their award free status would be to pay union dues like a responsible employee should.

"There are of course some risks in moving to members only awards. One of the risks it should clearly be noted is that employers might retaliate by paying to non members less than the award rates. With unemployment high and the availability of full time employment in rapid retreat these difficulties may have to be faced. In such cases the primary decision must be taken by the union whose business it is to offer representation. ...

"In this case there does appear to be a substantial reason why at this juncture such a radical step as a members only award should not be made. Perhaps paradoxically, it is the union’s own success. The union has very creditably reversed the trend toward loss of membership and stands to regain further support from potential members because of the terms successfully negotiated for wage increases in the new award. ...

"All these challenging circumstances face union managements. New policies and new tactics will need to be explored. In suitable cases members only awards may be effective and there is no a priori reason why they should not be pursued."

 
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