Dunlop's web of rules in industrial relations systems

Dunlop's Web Rules

The topic of industrial relations has been considerably important for both the employers as well as the employees. The topic is generally discussed in terms of relationship between both employer and the employees and moderating factors that govern outcomes of this relationship. John Dunlop was an eminent British economist who published his famous book called 'Industrial Relation System' in 1958. In this book, Dunlop presented the theory called systems theory of industrial relations. Briefly, Dunlop's systems theory observed that industrial relation/s is a system composed of four main elements. Thus, industrial relation system is composed of certain actors, ideology that bonds the industrial system, contexts of the relationships, and certain rules that govern and moderate the relationship of governance of these actors. This also implied that an industrial relation system can be having distinct subsystem from economic or societal system in which the employer operates. Thus, four elements of industrial relation system as identified by Dunlop were a) Actors (comprising employers and employees, b) ideology that binds actors together, c) context of relationships, and d) rules that govern the actors (Dunlop, 1984), also referred as 'web of rules'. The web of rules that enable development of relationship between both the parties was divided in procedural and substantive rules. This paper will only take into consideration the 'web of rules' as described by Dunlop.

This paper will describe and synthesize viewpoint that how the 'Fair Work Ac t 2009, Australia' does contains procedural and substantive rules in consistency with the systems theory of industrial relations as professed by John Dunlop. The essay will adopt descriptive-argumentative style and carry subsections to clearly demonstrate the understanding of industrial relations of Dunlop's systems theory. It will also try to include instances where Fair Work Act 2009 complied with 'web of rules' elements in Dunlop's industrial relation systems theory, thereby extensively covering the substantive and procedural rules of the act.

Web of rules: The Dunlop's systems theory of industrial relations

As mentioned in the earlier section, Dunlop's systems theory identifies four main elements of industrial relation system. Out of these four main factors/elements, 'web of rules' is the most critical of all elements as Dunlop holds these elements primarily responsible for governing relations between employers and employees. The systems theory of industrial relations state that both substantive and procedural rules, part of 'web of rules' element can be described as "The substantive rules pertain to issues involving wages/salaries, hours of work and other terms and conditions of employment. On the other hand, the procedural rules relate to the rules governing discipline, redundancy, settlement of disputes, periodicity of meetings, renewal of collective agreements and the like" (Lopez-Varela 2012, P. 268). Dunlop does not explain that these rules can only come into existence through mutual agreement of employer and employees, and further these rules can be written, verbal, and customary rules as adopted by the organization over a period of time.

It seems that Dunlop has differentiated between these two types of rules since it is not possible in case of procedural rules to quantify the relationship between employer and employee. Wages, over-time rates, compensation packages, and working hours can be defined in terms of numbers but in case of procedures, only broad parameters/rules of engagement can be set. Nonetheless, the creation of rules is most essential part in Dunlop's systems theory of industrial relations. It is the establishment and management of these 'web of rules' that forms the cornerstone of industrial relations. All other elements, as defined by Dunlop i.e. actors (employer, employee, governmental agencies, etc.), ideology, and relationship contexts are mediated/moderated through 'web of rules'. These rules can also be referred as 'rules of engagement' between different actors.

John Dunlop's (1958) systems theory of industrial relations also identified three main categories of actors within industrial context. There were I) hierarchy of managers as well as their representatives, II) hierarchy of employees that are non-managerial as well as their representatives, and III) specific governmental agencies as well as private agencies developed by employer and employees. The purpose of third actor, the governmental or private agency is to regulate and administer the relationship of first two actors. Dunlop also identified that contexts such as technological, market related, and political contexts shape the behavior of each of the actors. It seems that most of the scholarly work on industrial relations has been carried out keeping this tripartite framework developed by Dunlop. The Fair Work Act 2009 also indicates that these three actors are fundamental to industrial relations. Although, there has been much increase in number of agencies influencing the relationship or 'web of rules' between the employer and employee, the contemporary civic agencies have only come into existence as a means to consolidate the already acknowledged 'tripartite' framework. Before we delve into specific procedural and substantive details of Fair Work Act 2009, it is pertinent to quote the objective of this government promulgated act. The government of Australia stated that "The object of this Act is to provide a balanced framework for cooperative and productive workplace relations that promote national economic prosperity and social inclusion for all Australians" (Fair Work Commission, 2009; Chapter 1-Division 2). The objective implies that procedural transparency (originating from procedural rules) has assumed much dominance in Fair Work Act 2009 as compared to substantive rules. Nonetheless, we now identify procedural and substantive rules in the said act. The need for new frameworks on collective bargaining have been required due to change in forms of employment such as casual employment, flexible working hours, and other forms (Watson, 2003).

Substantive rules of FW Act 2009

FW Act 2009 is a lengthy document that has six elaborate chapters, each dealing with different but interrelated subject regarding industrial relations. Each chapter has sub-parts and each sub-part has multiple divisions (Department of Education, Employment, and Workplace Relations, 2013). Each division has several numbered sections, subsections, clauses, sub-clauses, and provisions. Chapter two is titled as 'Terms and Conditions of Employment' for national system employees in Australia. Part 2-2 of this chapter contains 10 benchmark standards called 'The National Employment Standards'. Out of these 10 standards, 8 standards are related to 'substantive rules'. For instance, standards 1-4 contains detailed rules regarding maximum weekly hours, flexible work arrangements, parental leave, and annual leave respectively. All these standards are related to substantive rules and thus bind the national system employers to comply with them. Standards 5-8 are also related to substantive rules of national system employees and carry detailed rules in form of divisions, sub-divisions, sections, and subsections related to personal or compassionate leave, community service leave, long service leave, and leaves on public holidays respectively. Thus, part 2-2 of the FW Act 2009 sets out detailed rules regarding substantive elements of employment such as those related to leave and holiday entitlements, working hours, and flexibility in hours to be worked. 38 hours work week for full time employees has been mandated under subsection 62(1) clause A of the FW Act (FWC, 2009). Similarly, clauses A & B. Of subsection 65(1) in Division 4 of part 2.2 makes it mandatory for employers to grant flexible working hours of employees having children I) under school-age and II) under 18 having disability. Exception to this legal obligation for the employer is only under reasonable business grounds. Entitled public holidays (under the public holiday standard (7), division 10, section 115(1) of the FW Act) are January 1 (New Year), January 26 (Australia Day), Good Friday, Easter Monday, 25 April (Anzac Day), 25 Dec. (Christmas), 26 Dec. (Boxing Day), and Queens Birthday.

Procedural rules of FW Act 2009

Standards 9 and 10 are carrying procedural rules such as termination notice as well as redundancy pay and sharing of fair work information sheet with employees. Under the standard number 9 of 'The National Employment Standards', termination notice and redundancy pay rules are described by the Fair Work Commission FWC. Subsection 117(3a) in subdivision 11(A) of part 2-2 makes it mandatory for the employer to serve a notice to employees before effectuating their termination. Relevant notice periods are 1 week for employees having continuous service less than 1 year, 2 weeks for employees having served fewer than 3 years but more than 1 year, and progressively the time period of termination notice should be increased to 4 weeks for an employee having served more than 5 years of continuous service with the same employer. If the employer does not intend to serve the notice according to mandated time period, the employer must make payment in lieu of the notice. The subsection 119(1) and 119(2) mentions specific conditions under which redundancy pay shall be paid to the employee. Thus, redundancy at the initiative of employer or due to the bankruptcy of employer makes it mandatory for the employer to pay redundancy pay. Redundancy pay period shall be calculated as 4 weeks for employees having 1>2 years of continuous service, 6 weeks for employees having 2>3 years of service, and 7 weeks for those continuously serving for 3>4 years. The time period progressively increases with an increase in number of years of continuous service with same employer and an employer is legally obliged to pay redundancy pay equaling 12 weeks for employees having served continually for more than 10 years. Waiver conditions for employer in context of redundancy pay and termination period are described in sections 120-123 of part 2-2 of the FW Act 2009. Sections 124-125 make it mandatory for the employer to share and provide Fair Work Information Sheet to all employees. It seems that this standard is also included in the national standards of employment in order to make the relationship of employer and employee transparent and accountable, should legal issues between both of these actors arise at a later stage. Division 13 of part 2-2 of FW Act 2009 is titled as Miscellaneous and contains rules detailing relationship and interaction of different provisions of national employment standards, modern awards, and enterprise agreements. The last division 13 of part 2-2 of FW Act 2009 sets rules detailing the nature of relationship between modern award and national employment standards as well as between enterprise agreements and national employment standards. It actually details the mediation and moderating role of this division within FW ACT 2009.

Procedural rules in modern awards: Part 2.3 FW Act 2009

Modern awards have been cited as important course of creating 'safety nets' for low pay employees (Forsyth & Stewart (Eds.), 2009). Subsections 156(1-5) in division 4 of part 2.3 clearly identifies that 4 yearly review of modern awards are to be made. During the review, the modern award may be divided into two modern awards and further revision in wage rates as well as nature of work can also be done by the FWC. Division 5 of part 2.3 (modern awards) of FW Act 2009 details the powers that FWC has in exercising of moderns awards along with annual wage reviews. Several subsections of section 157 of FW Act 2009 delegates FWC with the authority to determine variance in modern award, make a modern award, or revoke an existing 'modern award'. Thus, section 157 makes it possible for FWC to review any modern award without waiting for 4 years review deadline. Over here, it is clear that Dunlop's systems theory identified various actors that play role in developing and maintaining relationship between an employer and an employee. This can be a governmental agency in form of regulator. FWC is acting as a regulator in the case of FW Act 2009. The FW Act 2009 clearly sets boundaries of all actors i.e. employees, employers, as well as the governmental agencies. Clause C. Of subsection 157(1) clearly states that purpose of FWC while revoking or invoking or altering a modern award must be achievement of objective of modern award. And FWC clearly operates under sections of FW Act 2009 while deriving provisions about its structural formation, powers, and limits as well as method of exercising powers. Modern awards under FW Act 2009 cannot be revoked, revised, or invoked without a decision of a 'Full Bench' i.e. comprised of 3 FWC members including president, vice president, or deputy president of FWC. John Dunlop in his other scholarly works on industrial relations in America has clearly observed the importance of checks, balances, and adoption of consultative mechanisms to manage the industrial relationships. Sections 612-648 of FW ACT 2009 clearly outline the organization structure of FWC and details upon the remuneration of commission members as well as all employees of the FWC. In the following subsection of this essay, the procedural rules related to enterprise agreements will be identified.

Procedural rules of enterprise agreements: Part 2.4 of FW Act 2009

Enterprise agreements are those agreements made at the enterprise level. Such agreements carry terms and conditions for national system employees that are part of that enterprise. Terms and conditions of enterprise agreements are held ancillary and supplementary to National Employment Standards. Except introductory division (1) in part 2.4, there are 11 divisions within part 2.4 that deal with different aspects of enterprise agreements. Government of Australia has repeatedly emphasized the development of flexible and fair framework for relationship building of employer and the employee. This is why each part of FW Act 2009 having substantive rule is followed by elaborate procedural rules that enables collective bargaining and dispute settlements, both for employer and the employees. The objective of this part (2.4 Enterprise Agreements) has been termed as providing flexible, simple, and fair framework for collective bargaining (in good faith) at enterprise level. An important procedural provision in this part of the act is section 173 that makes it mandatory for the employer, that is signatory to enterprise agreement (not Greenfield agreement) to intimate and inform the employees regarding their right to be represented by a bargaining representative. This is a reasonable demand set in this act and consistent with 'rules of web' aspect of Dunlop's systems theory of industrial relations. Subdivisions 3A and 3B in part 2.4 of the FW Act 2009 clearly identify that enterprise agreements can only come into effect after the approval of employees and FWC. It is also mandatory for FWC to approve the enterprise or multi-enterprise agreements only and only when provisions of subsections 186(1) and 186(2) have been met. These relate to genuineness of employee willingness to sign the agreements as well other employers (in case of multiple-enterprise agreements). Subsection 183(3) also requires FWC to consider if the group of employees covered by the agreement is fairly chosen. Division 4 of part 2.4 also identifies conditions and procedures that should be adopted by the employer for getting the enterprise agreements approved by FWC. Employees are adequately safeguarded under sections 180-183 of FW Act 2009 whereby it is made mandatory upon the employer to share the complete text of enterprise agreements as well as related reference documents. In division 4 of part 2.4 of FW Act 2009 and section 206, it is clearly stipulated that base rate of pay should not be less than modern award rate or national minimum wage. Division 7 details procedural rules regarding variation and termination of these agreements.

Collective bargaining through role and responsibility identification of different actors: Procedural rules in Chapter 3 of FW Act 2009

Rules related to redundancy of employees, along with applicable pay rate, are provided in division 11 of part 2.2 (sections 117-119) and section 141 of FW Act 2009. The aforementioned procedural rules of FW Act 2009 imply that government and governmental regulators have learned lesson after experiencing several economic downturns as how to protect employees from the adverse impact of economic crisis or unemployment periods while not burdening the employer too much. Bisom-Rapp (2009) argued that organizational health and safety (OHS) act's failure to effectively mitigate threat to well being of employees has enabled governments to introduce fair work frameworks. Head and Redmond (2011) also argued that prevention of social problems related to employment remains the main aim of governments while introducing procedural rules under the guise of fair work frameworks.

The government of Australia, while publishing an overview of FW Act 2009, herself mentioned that 'safety net' provisions were included in the act for protecting rights of community and enhancing responsibilities of employers (Australian Government, 2010). Sections 340-345 clearly identify the workplace rights of employees, thus clearly making provision on eliminating adverse actions, coercion, undue influence, and misrepresentations. Part 3.2 deals with unfair dismissal whereby sections 382 describe when an employee is protected from unfair dismissal. Sections 385 and 386 of FW Act 2009 clearly define 'unfair dismissal'. Despite being a comprehensive fair work and collective bargaining framework, some researchers have observed that FW Act 2009 fails to protect rights to strike and is inconsistent to International Labor Organization's Freedom of Association and Protection of the Right to Organize Convention 1948; No. 87 (McCrystal, 2010). Other researchers such as Gollan (2009) have also identified inherent limitation of FW Act 2009 in perspective of Australia's economic conditions.