Good Faith and the Fair Work Act: Its Potential, in Light of the New Zealand Experience

By Dorsett, Shaunnagh; Lafferty, George | The Economic and Labour Relations Review : ELRR, October 2010 | Go to article overview

Good Faith and the Fair Work Act: Its Potential, in Light of the New Zealand Experience


Dorsett, Shaunnagh, Lafferty, George, The Economic and Labour Relations Review : ELRR


Introduction

The Australian Fair Work Act 2009 (Cth) reintroduced a statutory requirement of good faith bargaining, after a formal absence of over a decade. In this article, we assess the potential of this provision to expand good faith practices in both collective bargaining and broader employment relationships, drawing on the New Zealand experience of good faith under that country's Employment Relations Act 2000 to inform our discussion. New Zealand not only has close historical and economic ties with Australia; it also possessed until 1990 a very similar industrial relations system, although the two countries subsequently diverged during the 1990s. With the National Party government's Employment Contracts Act 1991, New Zealand's conciliation and arbitration system was rapidly dismantled, whereas Australia followed a more measured path towards decentralisation of its industrial relations.

Yet Australian unions following the election of the Rudd ALP government in November 2007 were in a position comparable to that faced by New Zealand unions at the election of Helen Clark's Labour-led government in November 1999. The respective labour movements in the two countries were emerging from lengthy periods of right-wing government and anti-union legislation. Neither situation appeared to offer particularly fertile ground for the promulgation of good faith principles and practices.

We suggest here that, despite the context within which New Zealand's Employment Relations Act was introduced, its good faith provisions have encouraged significant improvements in collective bargaining and employment relationships. Focusing on the period from when the Act came into force until the Labour Party's loss of government in November 2008, we explore what insights the New Zealand experience may afford for good faith within the Australian context. To inform our discussion, we draw on several sources: detailed interviews conducted with sixteen senior union officials; a series of annual surveys conducted between June 2004 and June 2008 of New Zealand collective agreements; plus published and unpublished material compiled by New Zealand's Department of Labor, on the perceptions of employers, unions and employees of the impact of the Employment Relations. These sources are used to assess how knowledge of the New Zealand experience may assist in the development of good faith in employment relationships within the Australian context.

Good Faith: A Compliance-Based Approach

There is nothing new or particularly innovative about good faith provisions in bargaining, either in Australia or internationally. Most notably, the United States has a lengthy and extensive history, institutional frameworks and case law on good faith in collective bargaining processes, with extensive discussion of employer resistance to the duty of good faith (for example, Cox 1958; Duvin 1964; Rathmell 2008; Cooper and Ellem 2009). Nor is the Fair Work Act the only legal context in which good faith is the standard by which behaviour is judged: mortgagees exercising a power of sale, company directors and those performing contractual obligations are also legally required to act in good faith. Even more importantly with respect to this paper's focus, the Fair Work Act is not the only Act in which good faith obligations are imposed on parties negotiating. Section 31(1)(b) of the Native Title Act 1993 (Cth) mandates that negotiations under that Act be undertaken in 'good faith'.

From March 1994 to December 1996, s 170QK of the Industrial Relations Act 1988 contained specific provisions giving the Australian Industrial Relations Commission (AIRC) the power to issue good faith bargaining orders, which were intended to assist negotiations that had already commenced (see Rathmell 2008) However, there was no enforceable requirement in the Act to bargain in good faith. Even this small encroachment of good faith into the bargaining arena was removed by the Howard Coalition Government in 1996, leaving only a residual power for the AIRC to suspend or terminate the bargaining period if the parties had not 'genuinely tried to reach agreement' before taking protected industrial action (s 170MW(2)). …

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