Employment Relationships, Industrial

Relations and HRM

HRM 107
Lecture 3
Objectives of lecture 3

The Objectives of this lecture are to examine:

• the concept of industrial relations and its
relationship to strategic HRM;
• the framework that regulates industrial relations
and the major institutions, parties and
processes in that framework;
• the differing views of the employment
relationship;
• the implications of IR for HR practice and policy
in organisations.
HRM and Industrial Relations

• The term ‘industrial relations’ is used to describe the

formal relationships between employers and trade
unions or other collective groupings of employees,
together with the institutional arrangements that arise
from those relationships.
• Other terms used to cover broadly the same subject
include employment relationships, employee relations
and workplace relations.
HRM and IR

• The relationship between HRM and IR is often uneasy and contested;

• For many HR practitioners, IR refers specifically to the management of the
employment relationship with a unionised workforce. However, a union
presence is not necessary.
• For HR managers to be effective ‘they need to understand IR and all that it
covers; that is, the dynamics, contradictions and tensions of the employment
relationship’. (Nankervis et al, text, p83 7th ed.)
The Qantas Dispute 2011
Setting the scene..

• Jetconnect is 100% owned Qantas subsidiary registered

in NZ.
• NZ pilots were employed by Jetconnect to fly Qantas
planes under a “wet lease” arrangement.
• The AIPA lost their bid to require Qantas to extend
Qantas pay and conditions to the Jetconnect pilots.
• See Australian and International Pilots Association v
Qantas Airways Limited and Jetconnect Limited [2011]
FWAFB 3706.
• Why was this such a concern??
http://www.youtube.com/watch?v=m8j0l9FEvXA&feature=relmfu

As you watch this video, identify why conflict is occurring between Qantas
management and workers?

Are these issues related to the external environment? In what way?

Sources discussing the Qantas dispute and consequences in more detail:

• Sarina, Troy, and Russell D. Lansbury. "Flying high and low? Strategic
choice and employment relations in Qantas and Jetstar." Asia Pacific
Journal of Human Resources 51.4 (2013): 437-453.
• Riley, J. (2012). A Safe Touch-down for Qantas? Australian Journal of Labour
Law, 25(1), 76-83.
• Forsyth, A., & Stewart, A. (2012). ‘OF KAMIKAZES'AND'MAD MEN': THE
FALLOUT FROM THE QANTAS INDUSTRIAL DISPUTE. Melbourne University
Law Review, 36(3).
Partial work bans by three unions, in respect of three agreements:
• Pilots
• Baggage handlers
• Licensed Aircraft Maintenance Engineers (LAME)

Main contention: job security – outsourcing and off-shoring.

• (following the Jetconnect decision)

The Qantas dispute and lockout in October 2011

The result....

• New redundancy pay arrangements.

• Former agreement: 3 weeks pay for every year of service up to 5

and 4 weeks pay for years of service thereafter.

• New determination: 7 weeks pay for every year of service up to 5

and 8 weeks pay for years of service thereafter.

• Nothing on contracting out or off-shoring.

So what did this dispute achieve?
Penalty rates

• The Fair Work Act provides that the

Commission must conduct a 4 yearly review
of modern awards.

• Decision to vary certain penalty rate

provisions in some awards for the
hospitality, restaurant and retail industries.

• The decision affects penalty rate provisions

for some permanent and casual employees
working on Sundays, public holidays, early Source: Summary of Decision: 4 yearly review of Modern Awards – Penalty Rates
Fair Work Commission
23 February, 2017

mornings or late evenings in these

industries.

More info: http://www.fairwork.gov.au/about-us/news-and-media-releases/website-news/changes-to-penalty-rates-in-some-awards

What are the arguments for reducing penalty rates?

What are the arguments against?

Defining “Industrial Relations”

Industrial
“Pertaining to or of the nature of industry or productive labour… ; engaged in or
connected with industry”

Relations
“The existence or effect of a connection; .. The particular way that one thing
stands in connection with another”

Shorter Oxford Dictionary

What is the employment
relationship?

• An economic exchange – an agreement between the

employer and employee over the sale of the employee’s
potential to work.
• A power relationship – whereby the employee agrees to
submit to the authority and direction of the employer.
• It is also a continuous and open-ended contract
• employees can modify and restrict their actual work
effort;
• employees can combine collectively to challenge
managerial authority.
The Employment Relationship

The relationship is interdependent in nature.

• eg to some extent, employers must seek a cooperative
relationship with workers to gain their consent to
directives.
• Workers have an interest in the organisation’s viability.
Thus the employment relationship involves a ‘fractured
interplay of control, consensus and bargaining’. (Bray and
Littler in Labour & Industry, Oct 1988, p.568)
The employment relationship

• The multidimensional nature of the employment

relationship creates the potential for conflict between
the parties – industrial conflict – over such issues as
wages, employment conditions and managerial
prerogatives.

• This gives rise to IR systems which are ‘the rules,

regulations and institutions that govern the employment
relationship and which set the terms and conditions of
work and employment’ (see Nankervis,chapter 3).

• HRM influences and is influenced by this system. HR

practitioners must work within the regulatory framework
it provides and make corresponding strategic choices.
Applying frameworks to
understand industrial relations
• A frame of reference refers
to a person’s perspective on
the world.
• It comprises the
assumptions, values, beliefs
and convictions we use to
interpret and understand
events in the world around
us.
What is a frame of
reference?
• Frames of reference
The effect it has determine how managers
manage, how employees
respond & what other
societal groups think also;
• It determines:
• Alan Fox (1966) identified 3
• (a) how we expect people main frames of reference
to behave; and their influence on
• (b) how we react to approaches to the
people’s actual behaviour employment relationship
and
• (c) the methods we Frames of reference &
choose when we want to the employment
change that behaviour. relationship
Approaches to Industrial Relations

• IR is grounded in mutual cooperation, teamwork,

and a sharing of common objectives.
• There are no legitimate conflicting interests –
Unitarist conflict is pathological.
• Trade unions are regarded as competitors for
employee commitment and cooperation,
interfering with managements’ right to manage.

• Organisations are coalitions of competing interest

groups – it is management’s role to mediate those
interests;

Pluralist • Unions are legitimate representatives of employee

interests;
• A strong union movement is a necessity;
• Stability in IR is product of concessions and
compromises between mgmt and unions.

• Conflict between employer and employees is

Radical or inevitable product of competing interests of
employers and employees in our society;
• Trade unions are logical employee reaction to
exploitation and part of political process to

Marxist fundamentally change society;

• HRM is manipulative and exploitative of
employees.

Source: Fox, A., 1966. Managerial ideology and

labour relations. British Journal of Industrial
Relations, 4(1‐3), pp.366-378.
Exercise

• Move into small groups of 2 or 3

• Search for recent work on Paul Strebel and the
concept of “personal compacts” (which is
important for your group assignment) and make
a list of the number of articles you find
• What is the most recent article you can find?
• What does the abstract of this article talk about?
Strategic employment relations: the
influence of law (Walton et al. Strategic
Negotiations, 1994)
Employment relations Avoidance Accommodation Cooperation

Compliance Power & responsibility The parties The parties place joint
for managing the acknowledge emphasis on mutual
business are conflicting interests of goals and integrative
concentrated in employees and potential, as well as on
management while employers; emphasis increasing the “size of
diminishing the union’s on achieving equitable the (resource) pie”
role outcomes
Commitment New plant set-ups at Evidence of parties Emphasis is on
Greenfield sites experimenting with cooperative
quality circles and partnerships,
other forms of manifested in joint
employee participation structures and
programs processes for sharing
power & responsibility

For more discussion on strategic HR choices at Qantas see Sarina, T. and

Wright, C.F., 2015. Mutual gains or mutual losses? Organisational
fragmentation and employment relations outcomes at Qantas Group.
Journal of Industrial Relations, 57(5), pp.686-706.
The stakeholders in Australian
Industrial Relations

State and State and

Industrial
federal federal
tribunals
governments employers

Employer
Trade unions Employees
associations
Governments and IR

• Legislation regulating dispute settlement, terms and conditions

Legislation of employment, and the organisation and powers of other IR

parties eg the Conciliation and Arbitration Act 1904 (now
repealed); the current (Cth) Fair Work Act (2009) Cth

• Governments act as employers in their own right – employing

Employer the public sector workforce

• Governments often use their own workforce to role model new
practices, - eg establishing pacesetting conditions.

Tribunals • Establishing industrial tribunals charged with preventing and

settling industrial disputes
Governments and IR

• Since 1904, in Australia, the formal IR system has had a rich history
involving government-sanctioned compulsory conciliation and arbitration – a
unique, centralised system for resolving conflicts and setting work rules.
• During the 1980s, pressures to increase flexibility and efficiency led to
changes in IR laws that shifted the emphasis:
• from employer-union bargaining to individual negotiations; and
• from national/ industry-level bargaining to the workplace level.
• This culminated in the highly controversial Work Choices legislation which
seemed to shift power dramatically towards the employer.
• Work Choices was replaced by the Fair Work Act (2009) Cth.
Unions and the union movement

‘A union is an organisation, consisting predominantly of

employees, the principal activities of which include the
negotiation of rates of pay and conditions of employment for
its members.’
– Australian Bureau of Statistics
In Australia, unionisation rates have declined considerably
since the mid-twentieth century.
Unions and the Union Movement

• In 1954, 59% of Australia’s workforce was unionised. Between 1990

and 2008 density declined from 40.5% to approximately 18%, but
the slide has recently stagnated.
What factors explain the
decline in unionism
1954-2008? What does
the evidence suggest?
• Union density contains the following patterns:
– a higher proportion in the public sector than the private sector

– higher rates of unionisation among full-time than part-time workers

– higher unionisation levels for men than women

– highest rates of unionisation in power, water and gas supply; transport and
government; administration and defence sectors
 Trends in Trade union density
(Source: Australian Bureau of
Statistics ABS, 6310.0)

For more information see: http://www.smh.com.au/national/trade-union-membership-hits-record-low-20151027-gkjlpu.html

The impact of declining trade union
density

• The emergence of a ‘representation gap’

Bray, M., Waring, P., Macdonald, D. and Le Queux, S., 2001. The
‘representation gap’in Australia. Labour & Industry: a journal of the social and
economic relations of work, 12(2), pp.1-31.
Unions and the Fair Work Act 2009.

‘Industrial association’ is the term used to describe the

organisations that may represent either employees or
employers;

‘Freedom of association’ refers to the rights of employees

to belong or not belong to a union. The FW Act (s336)
provides that employees are free to:
• belong or not to belong to a union
• be represented or not be represented by a union
• to participate or not participate in lawful industrial activities

Unions are not defined as parties to agreements but are

‘covered’ by the agreement if they participated in the
negotiations
Employers and employer
associations
• In the past, employers formed employer associations to represent
them in multi-employer bargaining and before industrial tribunals.
• The emphasis of enterprise bargaining on single employer
bargaining has led to a shift in the role of employer associations
more to assisting individual employers.
• Employer associations also provide services in training, award
interpretation, legislation updates, HRM, dispute handling and how
to counter union activity.
Employers and employer
associations

• Employer associations are not monolithic – they differ in size, purpose,

power, influence, ideology and IR expertise.
• Major employer associations include
• The Business Council of Australia (BCA)
• The Australian Chamber of Commerce and Industry (ACCI) –
essentially, the employer counterpart to the ACTU; and
• the Australian Industry Group (AIG)
Employers and employer
associations

With changing political and union environments,

employers have adopted varying tactics:
• some have become increasingly aggressive with unions,
while adopting individualised employment contracts with
employees
• eg some key mining employers;
• others have worked towards greater employee commitment
with union cooperation
• Eg NAB (international frames of reference with trade
unions).
Industrial Relations processes

The processes of industrial relations deal with the mechanisms for establishing
wages and employment conditions and handling industrial disputes. Processes
include:
• Collective bargaining – the process of negotiating between management
and groups of employees and/or their unions;
• Conciliation – the process of a third party such as the current national
tribunal, Fair Work Australia (FWA) assisting management and unions to
reach an agreed settlement. An alternative may be private mediation;
• Arbitration – the process of a third party such as FWA making a judgment.
The Bargaining Framework

• Collective bargaining has been the customary way

of settling many industrial disputes in Australia.
• Previously the national tribunal (formerly the AIRC)
encouraged parties to try to resolve a dispute by direct
negotiation before getting involved in the conciliation
process. Arbitration was a last resort option.
• The arrangements by which the terms and
conditions of work and the employment relationship
are determined – are known as the bargaining
framework.(see Nankervis, Compton & Baird 2010, p.84)
• The bargaining framework establishes the ‘rules of the
game’ and ‘rules of the parties’. These are usually laid
down by legislation.
Strategic choices: The role of
regulation

Fair Work Act? Reaching objectives of The Act in an integrative way- reflecting
negotiation theory

i.e.

“achieving productivity and fairness through an emphasis on enterprise-

level collective bargaining underpinned by simple good faith bargaining
obligations” section, 3(f)
 Good Faith Bargaining: Reflecting
an integrative approach?
• Agreement making is still framed between an employer and the individual
employee
• Trade unions have no inherent privilege over other bargaining
representatives that an employee may appoint (s. 176)
• However, the re-insertion of Good Faith Bargaining (GFB) obligations may
lead to a convergence in theory and practice
 Possible outcomes?
• Enhance the coverage of collective bargaining
• Educate parties about best bargaining principles
• Provide industries with strong union coverage to consolidate their position
• Allow individual employees to exercise their rights to enhance workplace
democracy
• But does it lead to greater co-operation between the parties? (see recent
figures on industrial disputation).

• See released Fair Work Review of the Act

• http://employment.gov.au/fair-work-act-review

• This remains highly contested ground and is the subject of an enquiry being
held by the productivity commission
• http://www.pc.gov.au/inquiries/current/workplace-relations/issues
• Outcomes of Inquiry 2015-2016
• http://www.pc.gov.au/inquiries/completed/workplace-relations#report
Industrial action

AUSTRALIAN BUREAU OF STATISTICS DATA SHOWS INCREASE IN NUMBER,

PARTICIPATION AND DAYS LOST TO INDUSTRIAL DISPUTES
Recent data from the Australian Bureau of Statistics (ABS) indicates the following industry
trends relating to industrial disputes:
• Industrial disputes have increased over the last few months. In the June quarter 2017
there were 47 industrial disputes, compared to 32 in March quarter 2017.
• Participation in industrial disputes has increased. The number of employees involved in
industrial disputes in June quarter 2017 was 27,800, an increase from 22,700 in March
quarter 2017.
• Days lost to industrial disputes is at the highest level since mid 2013. There were 40.2
working days lost (per thousand employees) due to industrial disputation in the June
quarter 2017, an increase from 25.6 in the March quarter 2017.
• The manufacturing industry accounted for 36% of total working days lost in the June
quarter 2017. Other industries recording a high number of working days lost due to
industrial action included construction and mining.
• Victoria had the highest number of working days lost of any state or territory in June
quarter 2017, accounting for 55% of total working days lost.
Industrial action
Source: 6321.0.55.001 - Industrial Disputes, Australia, Sep 2017

http://www.theguardian.com/business/grogonomics/2015/mar/16/industrial-
action-is-at-near-record-lows-but-businesses-will-still-blame-unions
Key aspects of
The Fair Work Act 2009 (Cth)
The fair work act 2009: Implications

Macro-regulatory context:
• 10 minimum standards of employment
• Fair Work Commission is the main institution
• most private sector employees come under the one
national system.
Micro-environment:
• the rights of employees as individuals
• shifting the balance of power in the employment
relationship.
IMPLICATIONS FOR HR MANAGERS (cont.)

A range of issues still have to be considered, including:

• agreement-making
• relations with unions
• direct relations with employees
• organisational policies and systems
• legal liability and compliance.
Summing Up

• Industrial relations and HRM are both concerned with the relationships
between employees and employers at work.
• For HRM practitioners, the IR system – its participants, the framework,
frames of reference, and the system’s outputs - provide a continuous source
of regulation and influence over HRM policy and practice.
• An understanding of this system is therefore crucial to the effective
management of people.
• Next week: we are moving on to HR and the Law and a closer examination
of implications for HR Managers