Reflections on Industrial Conciliation and Arbitration in Australia

Jeff Shaw

The following is an edited version of a paper presented to the Australian Society for the Study of Labour History (Illawarra Branch), Wollongong, 28 August 2004.

The project of compulsory conciliation and arbitration of labour disputes was a unique Australian construction, emerging from the industrial conflagration of the 1890’s (the shearing, maritime strikes) and constituted an integral part of the early 20th century Laborist trilogy – protection by tariff, White Australia policy and compulsory third party neutral adjudication of industrial disputes. I should add, as specified in the 1902 “Fighting Platform”, old age pensions, a citizen defence force, nationalisation of monopolies, restrict of public borrowing and navigation laws.1

The asserted uniqueness of H B Higgins’ “new province for law and order” to resolve strife at the workplace (an example of Australian exceptionalism) must be qualified to some extent – its origins lie in New Zealand, some albeit limited forms of arbitration exist in the collective bargaining environment of the United Kingdom, private arbitration is available in the USA, and that nation has, by virtue of the Wagner Act of 1935 (enacted under the Roosevelt “New Deal” regime) a National Labour Relations Board which is predominantly concerned with approving labour unions as recognised bargaining agents in defined circumstances. Yet, Australian arbitration2 remains the most widespread and resilient such model available. Has it been a successful experiment in social intervention in the conflict between labour and capital? Minds will differ. Certainly, it has not been uncontroversial despite a broad consensus in its favour. Reference can be made to the 1929 federal election where the conservative parties’ proposal (under Prime Minister Bruce) to abolish the federal system was regarded as a material factor in the fall of the government. Further recent federal Labor and Liberal governments have sought to constrain its potency in favour of more de-regulated, enterprise-based bargaining processes and, in the case of the present government, of individual employment contracts, free from the constraints of award prescription. These developments constituted movements away from the traditional theory underpinning arbitral dispute resolution: industrial awards fixing minimum (and sometimes actual or “paid rates”) wages and conditions, a strong, neutral umpire independent of government and the disputants; registered organisations of employees and employers undertaking a representative role, to advance the views of both sides of the industrial divide in both processes of conciliation and arbitration.

The critics of arbitration have variously argued that it constitutes an unwarranted fetter on a free labour market leading to unsustainable outcomes and an adverse effect on employment levels. Sidney and Beatrice Webb argued in 1898 that “free competition” constituted individual bargaining between parties of very unequal bargaining strength.3 On the other hand, some have suggested that the imposition of a “bosses court” has sapped the will of the proletariat to fight, leading to mediocre or unfair results for workers, a convenient dumping ground for disputes where employers are facing a strong, united workforce.

Certainly, there have been low points: for example, the slashing of wages during the Great Depression contrary to what emerged in the Keynsian approach as to appropriate measures to pull an economy out of recession; and there were some extreme examples of judicial conservatism.4 But there is also a respectable argument that the system, and not only via the device of preference clauses, has generally enhanced trade union membership and density. And there have been some noteworthy innovations: Higgins’ Harvester basic wage case, though conceived in an era where plainly insufficient attention was given to the plight of women workers – subsequently partly rectified by equal pay and pay equity cases; equal pay for Aboriginal stockmen in the Northern Territory; the development of shift work allowances, annual leave loadings, overtime payments and the like; the evolution to a 38 hours per week ordinary time; redundancy payments; parental leave; a minimum wage and unfair dismissal remedies. It could also be said that prudent mechanisms are enshrined to cater for the changing more global and services-orientated labour market.

Some responsible commentators contend that not only has our system of conciliation and arbitration resulted in a civil and orderly option to resolve industrial relations controversies but that it has also has broadly (putting aside some aberrations) led to a somewhat more equitable society than would have resulted from pure, uncircumscribed market forces. Of course, in some cases, hard bargaining in the field can be meshed with an arbitral process: for example the 1971 accident pay dispute in the NSW building industry, led to the make up pay between the award rates and the level of workers’ compensation payments as a result of a dual strategy of industrial action and arbitral remedy.

Sometimes, traditional, balanced arbitration works well, resulting (inevitably) in an element of compromise especially when multiple, complex and competing claims are involved.5

On the other hand, there are other cases which render the system the subject of criticism: see, for example, the saga of the Rio Tinto dispute in NSW’s Hunter Valley in which the route to an arbitral resolution was tortuous and the ultimate result rather flat.6

A matter of current debate is whether there should be a unitary system of industrial relations (or, more fashionably, workplace relations) in Australia. In an earlier life, I suggested that there was no pressing necessity for such a move, and that there were, in any event, some downsides.7 It is unnecessary and inappropriate to restate those arguments, but it is self-evident that reliance upon the constitutional power with respect to corporations cannot result in a comprehensive industrial system. However, what can objectively be said is that may of the initiatives in our industrial relations have been taken in the NSW industrial relations tribunal (and, of course, some will not agree with their appropriateness or efficacy); for example, the NSW jurisdiction has made a major contribution to occupational, healthy and safety legislation (the notion that an employer has an absolute obligation to provide a safe workplace). There has been a creative tension between the tribunals.

I take as examples:

  • Shorter hours (achieved in part by NSW government legislation, and in part by arbitral determination, particularly the principle that hours reduction should not lead to a decrease in the weekly wage rate).
  • Unfair dismissal remedies (a fair go all round per Sheldon J in Loty’s Case of 1971)
  • Redundancy pay (the Fisher formula, to the credit of former President, W K Fisher J).
  • The current NSW Industrial Relations Commission constituted under the 1996 statute has played a positive role:
  • pay equity for librarians
  • reasonable salary hikes (contrary to Treasury submissions) for teachers and nurses, including interim increases pending the determination of work value cases
  • deduction of trade union subscriptions by employers
  • substantial penalties for breaches of occupational, health and safety laws
  • scaling back time management systems for storemen and packers in warehouses vexpeditious application of federally derived minimum wage prescriptions
  • efficient processing of unfair dismissal applications

No doubt the scope and viability of an arbitral system will continue to be the subject of (hopefully) informed and considered debate. Does third party neutral intervention harm employment levels? Does it lead to a more equitable society? These are essentially factual issues (albeit not free from value judgments) dependent on empirical data, not ideology or post-modernist mumbo jumbo!

Michael Kirby and Breen Creighton have recently concluded that “there will continue to be a need for a national tribunal of some kind to supplement and moderate the outcomes of unregulated market forces”.8


  1. L F Crisp, The Australian Federal Labour Party 1901 – 1951, Sydney, 1978, p 263.
  2. See Mark Perlman, Judges in Industry: A Study of Labour Arbitration in Australia, Melbourne, 1954.
  3. Quoted in Joe Isaac and Stuart Macintyre, eds., The New Province for Law and Order, Cambridge University Press, 2004, p 102.
  4. See for example Braham Dabscheck, Arbitrator at Work: Sir William Raymond Kelly and the Regulation of Australian Industrial Relations, Sydney, 1983.
  5. See for example, the Caltex Refinery/Kurnell arbitration by a Full Bench of the Australian Industrial Relations Commission in 2002.
  6. See J W Shaw, ‘Rio Tinto – a radical decision?’, CCH, Australian Industrial Law, 29 October 1999.
  7. J W Shaw, “Should We Centralise Labour Relations?” Jan/Feb 2002, Quadrant, p 36.
  8. Isaac and Macintyre, The New Province, p 138.