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One hundred years of arbitration
Nearly one hundred years ago a novel tribunal conducted its first hearing. A diminutive figure with a rasping voice and quick temper rose in a courtroom in Sydney to present a log of claims on behalf of the Merchant Service Guild. Opposing him was the counsel for the shipping companies, an experienced and smooth-tongued barrister. Presiding over the proceedings was one of the three judges of the recently formed High Court of Australia, seconded despite his resistance to serve as the foundation president of this Commonwealth Court of Conciliation and Arbitration.
The proceedings were remarkably tranquil. The president, Richard O'Connor, stately, careful and courteous, heard arguments from counsel and evidence from a number of witnesses, then arbitrated on the union's claims (terms of engagement, wage rates, hours of duty, classification levels) and embodied his decisions into a binding award.
It was a sweet moment for the union advocate, William Morris Hughes. His own work experience spanned employment as a young teacher-pupil in London, then migration to Queensland and later New South Wales where he took whatever was going, including spells as assistant to an oven-maker, and a mender of umbrellas. Billy Hughes knew the pinch of poverty: he worked his passage from Brisbane to Sydney as a galley hand. When he won election to the New South Wales parliament as a representative of the new Labor Party in 1894, his supporters bought him a suit.
Once in parliament Hughes enjoyed a steady income and also immunity from intimidation. He exploited these advantages to re-form the union of the Sydney wharfies, and when he moved to the new Federal Parliament in Melbourne in 1901 he organised a national Waterside Workers' Federation. He conducted negotiations with employers for these and other categories of transport workers, seeking to obtain improvements by collective bargaining. Ever since the Great Depression of the 1890s the employers had held the upper hand. Hughes relied on his formidable powers of oratory to control the stormy meetings of workers, and on his toughness and argumentative ability to bring employers to conference and wring concessions from them.
Parliament provided him with a further resource. First the New South Wales legislature and then the new Commonwealth one were used to enact legislation for the compulsory arbitration of industrial disputes. Industrial arbitration by a state tribunal, using the procedures and powers of a court, was a novel method of conducting industrial relations - hence the celebrated description by the second president, Henry Higgins, of his jurisdiction as a new province for law and order. The Court registered and thereby recognised the parties, while they in turn were bound by the Court's awards.
In place of older patterns of unilateral action, where the buyers or sometimes the sellers of labour used their market power to impose their will, or collective bargaining, where the parties negotiated with the ever-present threat of recourse to lockout or strike, the Court now determined pay and conditions according to what the legislation described as an equitable award.
Did this establish a new province for law and order? The first object of the Act was to prevent strikes and lockouts, but to this end the Court was required to facilitate the formation of representative bodies of employers and employees. Arbitration thus formalised and extended the organisation of labour and capital. Moreover, since the Court acted in response to claims, arbitration institutionalised an adversarial relationship. It created disputes in order to settle them.
An industrial dispute does not necessarily mean a stoppage of work. Throughout his fourteen years as president of the Court, Higgins refused to hear a union's claim while its members were on strike - if workers would not bring their grievances for resolution by the tribunal, then they would be denied the benefit of an award. When critics complained of the damage caused by protracted strikes in key industries and argued that this new institution had failed in its primary aim of keeping industrial peace, Higgins insisted that such lawlessness occurred outside his jurisdiction and that its record of resolving the disputes brought to it was well nigh perfect.
But employers wanted the Court to go further, and to impose penalties on strikers. The sanctions available to the tribunal would be a recurrent point of contention over the following decades. The union campaign against penal powers that culminated in the anonymous payment of Clarrie O'Shea's fine is a landmark of Australian history.
Henry Higgins clashed repeatedly with employers. Though not a member of the Labor Party - he was too independent to sign its pledge or sit in its Caucus - he had previously served as Attorney-General in the first Labor ministry after Billy Hughes showed uncharacteristic modesty and declined the portfolio. Like Hughes he was an immigrant who made his own way in colonial Australia, but his origins were from the frugal lower ranks of the educated middle classes (his father was a Methodist minister) and he supported himself as a teacher while he studied law and established a successful legal practice. An advanced liberal, his sympathies were with labour and the Trades Hall in Lygon Street flew its flag at half-mast when he died in 1929.
On one celebrated occasion Higgins likened the individual wage-earner who has to negotiate the terms of employment with a large business enterprise to Esau, who had to surrender his birthright for a square meal, or a traveller who had to give up his money to a highwayman for the privilege of life. Most employers were opposed on principle to a third party laying down pay and conditions; their protests at this gratuitous insult are understandable.
A further cause of difficulty was the status of the Court. Higgins' High Court colleagues took a dim view of the Commonwealth's exercise of industrial powers and repeatedly struck down decisions of the Arbitration Court after employers appealed on constitutional grounds. More than this, the other members of the High Court were reluctant to accept that the Arbitration Court, with its increase of functions and members, should be accorded the status of a court, and they were affronted by the pretensions of some of its principal officers.
In the most celebrated instance, the Chief Judge of the Arbitration Court in the early 1950s arrogated to himself the title of Chief Justice, and when his inscribed wig tin was presented by mistake to the magisterial Chief Justice of the High Court, Sir Owen Dixon, the real chief justice upheld a union appeal against fines on the grounds that an arbitral authority could not exercise judicial functions.
The judicial character of arbitration was the price unions had to pay for the advantages it conferred. The gathering of evidence and witnesses was expensive and lengthy; the proceedings were technical, the formality of wigs and gowns strange and even intimidating. We need to remember the social gulf that separated manual workers and members of the legal profession in an age when the former left school by the age of 14 and the latter needed substantial wealth to obtain their education and training. Here is the secretary of the New South Wales branch of the Australian Railways Union speaking some fifty years ago and recalling his first appearance before the Court.
My own impression was that it was an awe-inspiring spectacle designed to force its attitude and decisions rather than to serve justice in respect of the claims put forward on behalf of the workers.
Union militants regarded arbitration as a sham that diverted workers from fighting for their rights. They noted how the Court turned unions into registered bodies, how it imposed restrictions on a union's rules and operation, how an award became a substitute for workshop organisation, and how the dependence of weak unions on the Court's protection of their coverage strengthened the hand of timeserving officials. They burned Court ballots and they paraded effigies of the judges responsible for unpopular awards.
On more than one occasion the officers of the ACTU denounced Court decisions or even called for the Court's abolition. After the Court cut the basic wage in 1931, the ACTU secretary led unionists who were present at the hearing in singing the Red Flag and then called for three cheers for revolution.
Unions continued to appear before the tribunal, however, not least because it provided a means of improving wages and conditions. From an initial role of settling disputes by industrial arbitration the Court quickly expanded into the determination of national wage standards. Higgins insisted on a fair and reasonable wage as a first charge on industry, but before long the tribunal was working with cost of living indices and expert economic advice to make regular adjustments to the basic wage and margins.
For much of the last century the Court was in fact an agency of national economic policy. It was not working alone, of course - for the Tariff Board complemented its activity - but it was performing this role before the Commonwealth government assumed controls over interest rates, the money supply and other instruments of economic management.
And for that reason the Court had to defend itself from government interference. Higgins, for example, clashed with Hughes when the wartime Prime Minister intervened in major disputes. Their subsequent argument was conducted in the press and eclipses in its intemperance any subsequent disagreement between the executive branch of government and the head of an independent tribunal: the President documented the Prime Minister's surreptitious attempts to direct his Court and the Prime Minister accused the President of 'a deliberate and monstrous fabrication'.
Through subsequent amendments to the Arbitration Act as well as by exercising its powers of appointment and reappointment, the executive branch of government tried to shape the operation of the Court. In turn, successive presidents of the Court and the Commission learned how to maintain their authority by tempering it to political realities; Sir Richard Kirby was perhaps the most adept in this skill but even he was not infallible. And the tribunal could not be pushed too far, as the Hawke and Keating governments - not to mention their Accord partner, Bill Kelty - discovered.
Kelty's threat to abolish the Commission came as it had lost most of its significance as a determinant of economic policy. With the abandonment of the protective Deakinite Settlement and the deregulation of finance and commodity markets, the essential conditions for labour market regulation disappeared; national wage setting declined in importance as industrial awards gave way to enterprise agreements.
Since then the Howard government has used the same catchcry of labour market flexibility to make further changes, especially through workplace agreements. Lacking a Senate majority until this year, it has had to compromise so that the Commission has continued to facilitate agreements, resolve disputes, protect entitlements and maintain a safety net for low-paid workers. Now that the government enjoys control of the Senate, there is talk of ending the commission's determination of minimum rates of pay, substitution of private mediation for arbitration and exemption of small business from unfair dismissal laws.
The government talks of labour market reform in terms that would take Australia back one hundred years to the nineteenth-century ideal of a contract between employer and employee as a voluntary arrangement between equals that should be unfettered by any third party; neither a union nor a tribunal would interfere in the striking of an agreement between the buyer and the seller of labour according to the laws of supply and demand. The very terms 'fair', as embodied in the work of the Court and the Commission, and 'unfair', as in unfair dismissal, would be banished from the lexicon of industrial relations.
How did we reach this tyranny of market efficiency over equity and industrial justice? During the 1980s there was a concerted assault on the Commission for maintaining an Industrial Relations Club, a cosy circle of union officials and employers' representatives who advanced their own careers by using arbitration to shield the Australian workforce from competitive realities, and in due course were appointed to the Commission themselves to perpetuate this imposition on the Australian public.
Anyone familiar with Australian industrial relations would appreciate that this is a travesty. The history of arbitration reveals repeated arguments over wages, awards and the very ambit and operation of the Court and Commission.
The tribunal has repeatedly been reformed, most notably in the 1927, 1947, 1956, 1973 and 1993. But the only attempt to abolish it, by the Bruce-Page government at the end of the 1920s, led to the defeat of the government, first in Parliament and then in a general election.
The tribunal has repeatedly had to adjust to changing circumstances and changing expectations. Originally it discriminated against women workers with its principle of the male breadwinner, but by degrees it encompassed the principle of equal pay. For decades it set a lower wage for Indigenous workers until in the Cattle Station Industry (Northern Territory) Award of 1966 it became part of the process to extend wage justice to all Australians. Similarly, it has turned its attention to casual workers.
Its role in setting the hours of work enabled Australians to strike a balance between work and family when other countries were afflicted by excessive toil - our reputation for sporting success and participation in sport could not have been earned without such advantages. Arbitration served, in short, to lift and protect living standards as a national entitlement.
What is its future? The ambit of arbitration is already circumscribed and is likely to be reduced further, just as union coverage has shrunk to levels little greater than a hundred years ago. But the present-day zealots for freedom of contract are mistaken if they think that absence of such institutions removes the causes of industrial conflict. On the contrary, industrial relations before the advent of trade unions was characterised by explosive, often violent forms of protest.
Lack of representation, exploitation of the vulnerable, imposition of excessive hours, low pay, sweating of outworkers, unsafe work practices, neglect of training, absence of safeguards against arbitrary sackings or mass redundancies and denial of workers' dignity are conducive neither to long-term business success nor industrial peace. We remove the forms of social protection at our peril. Nor should we expect private mediation and common law remedies to provide a better mechanism for dispute resolution than an expert tribunal.
Historians deal with the past rather than the future. Looking back over a hundred years, we can see that arbitration has undergone many changes, survived many vicissitudes. As Mark Twain cabled home from Europe, reports of its death are an exaggeration.
Stuart Macintyre is Ernest Scott Professor of History, Dean of Arts and Laureate Professor at the University of Melbourne. Stuart is also a former member of the Evatt Foundation's Executive Committee. A prolific author, his most recent book (edited with Joe Issac) is The New Province for Law and Order: 100 Years of Australian Industrial Conciliation and Arbitration (Cambridge University Press). This is his Whitlam Lecture, presented in the Redmond Barry Room, Level 46, 55 Collins Street, 30 November 2004.