Smart employers could use this week’s High Court decision to great advantage.
In effect, the High Court put corporations law ahead of industrial law.
Until this dispute arose, most wharfies imagined they were employed by Patrick’s Stevedores, not by one of three subsidiary labour-supply companies. The corporate distinction was lost on them, like it is on many employees.
For instance, I often tell people I work AT The Canberra Times. In fact, I am employed BY Federal Capital Press of Australia Pty Ltd ACN 008 394 063.
Industrial law is used to dealing with unions which have employees in many different companies and it is used to dealing with awards that bind a whole industry, or several companies or one conglomerate with several arms. It looks at the substance of what is going on, not at the legal entities doing the activities.
Corporations law, on the other hand, is very particular about individual corporate entities. It imposes duties on directors and administrators of companies and grants rights to shareholders and creditors. And these rights and duties are enforceable independently of the fact that a corporation might be a wholly or partly owned subsidiary of another company. Usually, there is no redress against the related company.
So Federal Capital Press might set up a company called “”FCP Landscaping Pty Ltd” in which it owns 9999 of the 10,000 shares. FCP Landscaping might be contracted to Federal Capital Press to doing the landscaping around the buildings. FCP Landscaping might employ a gardener full time. The banks lends FCP Landscaping money to buy tools. The loan is guaranteed by Federal Capital Press.
The gardener might tell his mates: “”I work at The Canberra Times.”
The gardener turns out to be a dud employee. Federal Capital Press deliberately defaults on its guarantee. The bank calls in the loan. The directors of FCP Landscaping (who are in effect appointed by Federal Capital Press) go in to voluntary liquidation. The gardener losses his job.
Of course, we are a nice company and would not do such things. Also, it seems a very elaborate way to dismiss one dud gardener. Much easier to give him a month’s pay.
But on a much bigger scale having a range of subsidiary employment companies with a core holding company has advantages. The small companies can be held constantly in debt and trading constantly at a loss with just enough to service the debt. Anytime the workforce or its union gives the central company a hard time, the company can be melted down by liquidation. And there is nothing to stop the core company from re-employing whomever it pleases to keep the business going.
Unfair-dismissal rules, occupational-health-and-safety and large redundancy payments can all be circumvented or reduced by a smaller workforce working for a company on the brink.
The law draws a line between the holding company and the employing companies. The High Court ruled as much on Monday. The High did not allow those employing companies to breach the Workplace Relations Act by sacking people because they are members of a union, but it did not say the core holding company is responsible for the contractual employment relationship and obligations of its subsidiaries.
The secondary boycott laws prevent unions from attacking the business of the holding company on pain of large fines. These have proved effective because a union’s financial viability and continued existence have always rated a higher priority among union officials than the protection of members.
It is a sorry state that relations between employers and employees have got to the state that companies even contemplate such elaborate corporate structures. But in some cases it has been an understandable reaction to unreasonable union conduct.
The real tragedy is that strong unionism in Australia has meant that governments (federal and state) have been very reluctant to lay down general laws to protect basic rights of employees. The rare exceptions being the recent unfair dismissal legislation and long-service leave.
Governments have feared that the public thought the balance between capital and labour was already skewed to favour labour, so any general legislative rights would be seen as unnecessary or unfair.
The result until quite recently has been two classes of worker: those in unions doing very well and those not in unions vulnerable to bosses’ whims.
But strong unionism begat two counter-forces. One was the corporate extremism seen, for example, in the Robe River and Patrick’s disputes. The other was that during the years of the Labor Government, Labor had to temper union extremism if it was to stay in power. So Labor forced amalagamations into fewer larger-sized units which were more manageable and then allowed them in to the decision-making process as a means of taming them.
The developments have been adversely affected the interests of most workers. Big unions did not satisfy or even acknowledge their needs. Workers have lost because instead of winning more money in their pockets they have expended an enormous amount of unproductive effort in bells and whistles (which were more about exercising union power in the workplace rather than money). In turn capital has spent and enormous amount of effort countering them. The fight between capital and labour Australian-style has hampered the potential of both.
And the “”hard-won” union-gained benefits have been fragile. They have been dependent on awards, companies being respondents to awards and a high level of unionism. But the economy has changed. The average size of businesses has fallen. Some businesses have deliberately shrunk themselves, out-sourcing work to non-union labour, purely to escape extravagant demands by unions. The union monopolies sowed the seeds of their own destruction. Other businesses shattered themselves into smaller parts to escape union pressure.
Further, unions have not entered many greenfields businesses. Overall the percentage of union members in the workforce has fallen.
Unions priced themselves out the market; not so much with demands for higher pay, but the expensive, detailed work practices.
But individual workers need protection against unscrupulous employers. However, there seems little point in looking to unions to give it. All that results in is confrontation and corporate antics that results in overall lower productivity and lower living standards.
Justice Higgins in the first Arbitration Commission was quite right in the Harvester decision of 1907. Businesses should be required to pay a living wage, the bare minimum required to support a family, otherwise they should not be in business. But the state should have stopped at that. It should set down some bare minimums (wages, leave and dismissal). It should never have engaged in detail arbitration between parties over shifts, overtime, machine allowances, training requirements and the like.
All of those “”hard-won” rights were won through union confrontation and are now vulnerable. Most of them should be vulnerable. Most of the bells and whistles in union-based awards are of little benefit to workers in the long run. They provide work for union officials and industrial-relations officers. But they have little to do with worker and shareholder prosperity Australia-wide. Indeed, they inhibit it.
Look at the present brawl. The wharfies have lost four week pay already.
With the downfall of union power (only a quarter of private-sector employees are in unions), many workers are left vulnerable. They are also left vulnerable by the preference given to corporations law over industrial law. A good recent example was the Woodlawn miners. They were not paid their leave and redundancy entitlements when the mine company went broke. Other creditors took precedence. The union was of no help. It was of no help because its past flexing of muscles resulted in a reaction but capital to put itself in a position to avoid the excess of union power. In doing so, some capitalists went too far and abused their power.
There is a role for the state in this. It should amend corporations law to prevent companies being used as artificial shells to escape liability for leave and redundancy. And it should lay down more minimum conditions so employees do not feel compelled to go to unions for help.
Legislative rights seem to have more permanency than union-won ones. Union-won rights have been proven to be too fragile. And this week’s High Court case shows they are now even more fragile. They are subservient to corporations law, which will put creditors before workers in a winner-takes-all framework.