Cochlear and ResMed disputes highlight limitations of the Fair Work Act collective bargaining system

In a recent post, I started to examine the last ten years of enterprise bargaining in Australia through the lens of the recently published book Collective Bargaining under the Fair Work Act. (see:

I explained that a combination of legislative design flaws, unhelpful judicial interpretations and deliberate employer strategies have contributed to the fall in collective agreement coverage since the 2009 legislation came into effect.

All these factors are present in the case studies of the Cochlear and ResMed disputes that are the main focus of my chapter in the book, co-authored with Professor Bradon Ellem of the University of Sydney Business School.

We wanted to consider whether the Fair Work Act has been effective in preventing US-style ‘union-busting’ in Australia.

Many years of experience has shown that, in systems where the right to engage in collective bargaining is dependent on showing majority employee support through a workplace ballot, fertile ground is provided for union-busting. That is, vigorous employer campaigning to prevent a union from ever gaining the right to represent employees in bargaining.

The United States system under the National Labor Relations Act is the gold standard of this approach. An entire industry of consultants and lawyers has evolved, devoted to helping employers block union ‘recognition’ drives.

The framers of our legislation seemed to be mindful of this. They gave the Fair Work Commission (FWC) the power to make a majority support determination (MSD) – compelling a reluctant employer to bargain – on the basis of any reliable evidence. Mostly the FWC has relied on union petitions to be satisfied there’s majority support for bargaining among a particular group of employees, with ballots sometimes ordered (e.g. if there’s doubt about the legitimacy of a petition).

So overall, the Australian model has avoided the kinds of anti-union tactics that have undermined collective bargaining in (primarily) ballot-based systems like the US and the UK.

However, our case studies explored two major companies which have still been able to avoid entering into an enterprise agreement – despite the statutory provisions that compel negotiations to occur, and the efforts of the Australian Manufacturing Workers Union (AMWU) to ‘bring them to the table’.

It’s worth noting that these are two quite similar companies in many ways:

  • They are both engaged in high-tech manufacturing for the health care industry: Cochlear’s bionic ear implants, and ResMed’s devices to treat sleep apnoea and other respiratory conditions.
  • They are both located in north Sydney, in or near business parks where many global electronic, bio-tech and pharmaceutical firms have their Australian bases.
  • They have the same kind of attitudes towards human resource management, direct employee engagement and the role of unions.

Cochlear was an emblematic example of employer resistance to bargaining in the Howard era. It was also part of the Rudd Government’s rationale for including the MSD provisions in the Fair Work Act:

  • The AMWU obtained a MSD for the company’s manufacturing workforce soon after the legislation came into effect (August 2009).
  • Cochlear opposed the MSD and raised the prospect of uncertainty in the business if employees voted to involve the AMWU.
  • Almost 60% of employees indicated they supported bargaining in a ballot. Once the FWC issued the MSD, the focus shifted to the negotiation process.
  • The company and the AMWU took around nine months to negotiate a complex ‘bargaining protocol’. The parties then held many meetings and exchanged proposals between 2010 and 2012, but didn’t reach agreement.
  • In 2011, the union applied for an order claiming that the company was going through the motions or ‘surface bargaining’ (among other alleged breaches of the good faith bargaining obligations). Cochlear also alleged bad faith, in the form of the union’s non-adherence to the bargaining protocol.
  • In a lengthy decision in 2012, Commissioner Cargill determined that both parties had fought hard but generally they hadn’t breached the good faith obligations – with some exceptions, e.g. the company at times hadn’t responded to the union’s proposals quickly enough. (see:
  • On the issue of alleged surface bargaining, the Commissioner did not make an order requiring Cochlear to put any proposals to the union, because Justice Flick’s decision in Endeavour Coal Pty Ltd v APESMA prevented this. While negotiating parties must engage genuinely in the process and not simply reject the other party’s proposals, under section 228(2) of the Fair Work Act bargaining representatives do not have to make concessions or ultimately conclude an agreement. (see:
  • Very little has happened since the 2012 decision. It is understood that the parties have continued negotiating, but there’s still no enterprise agreement at Cochlear.

ResMed has adopted a different, highly litigious strategy to opposing recognition of the AMWU for bargaining and other purposes:

  • The union has been trying to get an agreement for ResMed’s production employees at its Bella Vista site since 2009.
  • The union applied for a MSD in 2012. This triggered extensive litigation between the parties over more than five years.
  • ResMed argued the FWC had no jurisdiction to make a MSD, as the union needed to show (under section 236) that it has the right under its rules to cover all employees who would be subject to a proposed enterprise agreement.
  • The FWC found that a union only needs coverage rights over one employee to act as bargaining representative and obtain a MSD. But ResMed appealed that point all the way to the Full Federal Court (and sought to take it to the High Court, which refused special leave to appeal).
  • ResMed’s other main line of attack has been to challenge the AMWU’s very right to represent the company’s manufacturing workforce under the union’s rules.
  • The company made an application under the Fair Work (Registered Organisations) Act for an order that the union is not to have representational rights over those workers. This was partly based on an argument that the AMWU’s rules relate to employees engaged in ‘old’ metals manufacturing processes, rather than modern bio-tech manufacturing.
  • A Full Bench of the FWC rejected ResMed’s application, and with it, the further argument that a union should only have the right to represent workers if a majority wants that (union representational rights under the Registered Organisations Act are not based on that kind of ‘majoritarian’ principle). (see:
  • The Full Federal Court rejected ResMed’s appeal, noting there was ‘an air of desperation’ about the company’s arguments.
  • However the point is: the union has had to go to extraordinary lengths, time and expense to prove it has the right to cover workers it has always represented.
  • As we say in the chapter: ‘ResMed’s strategy, lifted straight from the playbook of the most determined US union-busters, has … proved successful: the company has had very few legal wins, but for [nearly 10] years it has avoided sitting down to bargain with the union.’

What lessons did we draw from these case studies?

Most obviously, the cases show that the Fair Work Act can’t prevent determined, well-resourced employers from thwarting union attempts to represent and bargain on behalf of workers. Antipathy to the role of unions is a remnant of the Howard era (think of the big banks, telcos and mining companies) which has not been fully eradicated.

This points to some clear limitations in the legislation itself – e.g. it doesn’t adequately address surface bargaining tactics, and if one party wants to string things out (while technically complying with the good faith bargaining rules) they can do so. There is no end point to negotiations: the limited avenues to arbitration have also arisen as a problem in long-running public sector bargaining disputes at federal and state levels in recent years. ‘Last-resort arbitration’ was rejected by both the 2012 Fair Work Act Review, and the Productivity Commission Review in 2015. However, the Labor Opposition has committed to provide parties with greater access to arbitration in protracted disputes (possibly based on some of the Canadian models). (see:

There is another factor – not explored in our case studies – that might also explain the success of these two employer strategies of union non-engagement. This is the question of union strength at the workplace level. Majority support for collective bargaining (and therefore, for the role of the AMWU) has not been definitively tested at ResMed. Although it has at Cochlear, the employees and their union haven’t used the weapon of protected industrial action to pursue their objectives. The company’s past indications that union involvement could jeopardise job security may explain the reluctance of Cochlear production workers to take strike action in support of an agreement. However it perhaps also reflects the union’s limited penetration ‘on the ground’: an issue unions will still have to address, even if the ACTU’s #changetherules campaign leads to favourable legislative changes.