The Final Frontier? Reflections on the decentralised approach to employment regulation in America By Troy Sarina* With the Coalition government intending to undertake further reform of Australia’s industrial relations system, it seems pertinent to reflect on what may result from pursuing a highly decentralised approach to labour regulation. Having just visited the United States, the ramifications of pursuing an individual system of regulating work were clearly visible. Picketing grocery clerks in Los Angeles. Their strike was part of a wider struggle by workers across the United States to fight employers' efforts to shrink wages and benefits. Much of the debate surrounding the current reform agenda of the Workplace Relations Act 1996 (Cth) (The Act) emphasises the rights of the individual to negotiate wages and conditions directly with their employer. The most obvious form of this type of workplace regulation takes the guise of Australian Workplace Agreements (AWAs). However, AWAs are not the only industrial instrument that is premised on direct negotiations with an employer. We now have a whole statutory framework that legitimises the traditional contract law model of employment regulation. That is, the parties are required to negotiate over the terms of their contract through a process of offer and acceptance. This is one of the key principles enshrined in the formation of enterprise bargaining agreements (EBAs). Although a union or group of employee representatives may negotiate an EBA, the process is inherently the same: The parties have to negotiate their way to an agreement by exercising their bargaining power. Apart from some statutory safeguards such as the 20 minimum award matters that form the basis of comparison on certification of an EBA, the parties are left to their own devices to regulate working conditions, often resulting in a better deal for the employer because of their superior bargaining position. The purpose of this brief discussion is not to provide a thorough analysis of the industrial instruments available under The Act. Rather, it is to highlight the ideological perspective that drives Australia’s system of workplace regulation. Likewise, the American system of employment regulation is based on similar contract law principles. The American model of workplace negotiation, which relies on the individual parties to negotiate the terms of agreement, is embedded in the notion of American Liberalism. Such a concept is premised on safeguarding against any encroachment on the rights of the individual to ‘choose’ what conditions and which contracts parties will enter into. The adoption of such an ideological stance has a number of disturbing consequences within the context of workplace regulation. One stark example relates to the type of discretion employers have in terminating workers not covered under some collective industrial agreement. Employees who fall into this category are ‘employed at will’. This means that apart from a number of discrimatory grounds, employers could terminate employees for any reason or at anytime unless some appropriate period of notice had been negotiated between the parties. Thus, unlike Australia’s statutory system of protection against unlawful and unfair dismissal, American employees are left to exercise their bargaining power against an employer to negotiate some sort of contractual protection against termination. With such an enormous excess labour pool in America, most employees simply do not have the bargaining power to negotiate the termination provisions of their contract, let alone any other provisions pertaining to their conditions of employment. Instead employers are often left in the superior position of offering incredibly low conditions of employment leaving the employee with little choice of accepting the offer or joining the unemployment queue. Although in theory employees in these types of circumstances have the right and ability to choose not to accept this offer, this Liberalist approach does not take into account the economic reality that faces most workers nor the asymmetrical power relationship that exists between the individual worker and a corporation.  As Justice Higgins noted in Federated-Drivers and Fireman’s Association of Australia v The Broken Hill Proprietary Co Ltd (1911), ‘the power of the employer to withhold bread is a much more effective weapon than the employee to refuse labour’. Unlike Australia where that has been reluctance to adopt individual contracts in the form of AWAs, the number of workers who have their employment conditions regulated by contract law in America is much higher. Coupled with declining union density (10-11% of the US workforce) has meant that many employees have failed to taste that fruits that a Liberalist approach to workplace regulation entails. I use this illustration of termination because this matter is one of the well-publicised areas of workplace reform that Coalition intends to target when parliament sits in July. The exemption for small businesses from the unfair dismissal provisions under The Act, mirrors the principles of ‘employment at will’ endured by American workers. This bill intends to exclude any business registered under The Act that has less than twenty permanent employees from having to provide substantive and procedural fairness to their workers, effectively allowing employers to dismiss them on previously unfair grounds. This type of reform becomes even more serious when consideration is given to the changing nature of the Australian workforce. With an increase in organisations that have a small core of permanent staff supported by an array of labour hire and casual staff could mean a dramatic increase in organisations that slip through the protective measures of the Act. However it is not only termination matters that highlight the consequences of adopting an extreme Liberalist approach to workplace reform. Many of the other conditions taken for advantage by Australian workers such as four weeks annual leave, sick leave entitlements and minimum wage rates are luxuries only granted to American workers who have been able to effectively organise at each workplace to form a union. Unlike Australia’s award system that enables conditions of employment to be established across a whole industry via a process of conciliation and arbitration, American workers are only able to negotiate at the enterprise level. Although there does seem to be a level of co-ordination between different sites, it remains in the hands of each particular constituency to negotiate an appropriate set of conditions with each employer. This Liberalist approach to regulating employment is supported by some minimum statutory requirements pertaining to particular entitlements such as annual leave. For example, legislation requires employers to only provide employees with two weeks annual leave not four. The idea being that any additional entitlement is to be negotiated or traded off with some other ‘benefit’ accessed by employees. The consequence of regulating work in such a manner is that there can be an enormous disparity between conditions of employment at each workplace. The notion of ‘social equity’ or improvement in standards of employment seems to be a foreign concept to our American counterparts. Those who are unfortunate enough to work in a non-unionised setting have the extra burden of individually negotiating any improvement in these low statutory minimums. With little bargaining power, it was no wonder that I had the opportunity to talk to adult workers in the hospitality industry who had a minimum hourly wage of $6.00. When I asked them why they agreed to such a low wage they responded by stating that ‘It is up to us to make extra money through tips that get given to us when we provide good service’. It seemed that the obligations placed on the employer were far and few between. Employers were simply to provide a place of work and the ‘opportunity’ to earn a wage. The Libertarian mindset outlined above was so entrenched in these workers that most of them were actually happy to rely on the generosity of patrons in order to obtain a reasonable hourly rate!! When I asked them how they might improve their conditions of work the notion of forming some sort of collective to enhance their bargaining position was not even considered. When the option of forming a union was put them they seemed hesitant, as many of these workers were unclear on the rights and responsibilities that forming such an association would entail. The type of employment standards experienced by these workers made me reflect on Australia’s situation. The Coalition’s intention to reduce the twenty award allowable matters to just six is an important aspect of the governments strategy to ensure minimum conditions of employment become the responsibility of the parties rather than having various minima imposed upon them by some arbitral body. I can’t help but believe that this reduction in allowable matters represents an eerie resemblance to the American system of providing workers with nothing more than a skeleton of minimum working conditions. One final reflection worth commenting on is a recent decree made by President Bush that made it illegal for airport baggage handlers to exercise their right to collectively bargaining under the Labor Relations Act in order to formalise a new collective agreement. The justification for outlawing the exercise of industrial muscle was that it was  ‘in the national interest’ to maintain baggage operations and hence tight border security. Not to dismiss national security concerns, but how does collective bargaining act as a threat to national interest? The right to organise in order to bargain over conditions of employment is recognised under the first amendment of the American Constitution! Thus a decree breaching that right seems to have been passed relatively unquestioned despite its questionable constitutional validity. One would of thought that an imperative would have been to ensure a reasonable deal between baggage handlers and aviation authorities was struck rather than outlawing the only avenue that these workers have to exercise industrial strength, which will no doubt make workers more reluctant to undertake their work in a proficient manner. If striking baggage handlers are seen as a threat to national security, which industry will be next? Surely postal workers, pilots, utility workers could easily fall under the same mandate. Hopefully, the national security exemptions to strike action under the Australian legislation will not be given such an expansive interpretation. Thus America’s love affair with Liberalism has resulted in an industrial system that is founded on protecting individual liberty and choice. This has resulted in strict observance of a contract law model of regulation no matter how inadequate these principles may be to regulating the employment relationship. After observing the outcomes from individualising the nature of work, I am concerned about the impact of further dismantling the remnants of our collective system of workplace regulation. I used to believe the worst of the reform agenda was over but after visiting America, I am not so sure………….. * Troy Sarina is a doctoral student with the University of Sydney. He has just recently visited Massachusetts Institute of Technology (MIT) and Harvard University as part of the Transformation of Work initiative developed by School of Business in the Faculty of Economics and Business, University of Sydney. Posted 28 April 2005 worksite home