Graeme Watson speech – Captured Courts and Tribunals: A Threat to Democracy

Address to the Centre For Independent Studies | 21 March 2017

When we read about Cambodian Prime Minister Hun Sen’s control over that country’s judiciary, it confirms a pattern of judicial subservience that has been evident for much of Hun Sen’s 30 years in power. Laws passed in 2014 formalized de facto control over the courts which have, in turn, been seen in the West as politicized, ineffective and corrupt.  For a country that cannot be described as a democracy, it comes as no surprise.

But when the President of the United States resorted to twitter to criticize recent judicial decisions we were rightly alarmed.   It was an obvious undermining of the rule of law – all the more concerning because it was committed by the leader of a modern western liberal democracy who should be upholding, not undermining, such fundamental democratic principles. Former Chief Justice of Australia’s High Court, Robert French, made the obvious comment in his first speech following his retirement:

“The US President’s statement could not be dignified as ‘criticism’ of a judicial decision. It was rather a content-free coupling of epithets calculated to mitigate the political embarrassment caused by the ruling by suggesting that it and the ‘so-called judge’ somehow lacked legitimacy. Such remarks may be seen as calculated to undermine respect for the rule of law.”

In the context of Australian industrial tribunals, the first determination of the Road Safety Remuneration Tribunal was last year quashed by legislation and the tribunal abolished in the process. The recent penalty rates determination of the Fair Work Commission has been described as weak and unfair by Opposition leader Bill Shorten. He called it a “shocker” and said that workers had been “kicked in the guts”. He has sought to initiate legislation to overturn it. The new ACTU Secretary, Sally McManus, has expressed the view that there is no problem in unions breaking laws perceived by the union movement to be unjust.

These are all examples of covert interference or undermining of the rule of law and the independence of courts and tribunals. Such transgressions are easy to identify. Supporters of democratic principles, (apart from Bill Kelty) have been quick to condemn them. On the other hand, covert capture and interference is much harder to detect and more difficult to remedy. But which causes the most damage? And when you have both forms operating in tandem, it can be a devastating combination. It can cause untold damage to democracy and the integrity of its institutions. The flow-on consequences for justice, the economy and society can be immense.

In this address, I will examine Australia’s democratic processes are being undermined by the capture of courts and tribunals, with specific reference to industrial tribunals. My central thesis is that what we are seeing now is not a recent phenomenon; it is the natural consequence of inappropriate interference over a number of years, much of it under the radar. These transgressions have not been highlighted or condemned, and there has been a significant deterioration in the standing and integrity of industrial tribunals as a result. I contend that it is both the interference itself, along with tacit acceptance of its exercise, that have led us to this situation. It is no longer appropriate to observe it and walk on by. Those who do so, are a large part of the problem.

The principles of the rule of law are perfectly clear. They encompass the notions of government bound by, and ruled by law, equality before the law, the maintenance of law and order, the efficient and predictable application of justice and the protection of human rights. As Thomas Paine said:

“As in absolute governments the King is law, so in free countries the law ought to be King: and their ought to be no other.”

Courts and tribunals also have a responsibility to respect these principles, and society needs to hold them to account to ensure that they do. It is 15 years since Dyson Heydon’s celebrated address to the Quadrant Society in which he attacked judicial activism. He said that a key factor in the speedy and just resolution of disputes is the disinterested application by the judge of known law, drawn from existing and discoverable legal sources, independently of the personal beliefs of the judge. He said that judicial activism badly impairs the dual requirements of a firm grip on the applicable law and total probity. Dyson Heydon said that a fundamental change in the judiciary has taken place where a large segment is comprised of ambitious, vigorous, energetic and proud judges who think they can not only right every social wrong, but achieve some sort of immortality in doing so. He said that thirty years previously, a typical civil case would produce an ex tempore judgment of three or four pages. Now such judgments are ten or a hundred times longer. Heydon observed that probity was undermined by the tendency to state the applicable law in a manner entirely unconstrained by the way it had been stated before because of a perception that it ought to be different.

Dyson Heydon’s views have had a profound effect on the jurisprudence of the High Court in the intervening 15 years – and I suspect its effect will continue for some time. However, the message has not filtered down to all courts and tribunals.

The growth of administrative power is another relevant development. Administrative tribunals have become parallel court systems with different procedural rights. If tribunals are to assume the same standing as courts they must at least apply the necessary elements of probity and the application of a settled body of law.

A further ingredient with respect to tribunals is the extent of discretion which can be applied. Legal constraints exist and legal tests must be applied, but a decision, for example, as to whether penalty rates should be modified or whether a dismissal is unfair, involves the application of a broad discretion, based on a legislative requirement to take a non-exhaustive list of factors into account. It is here that Heydon’s observations about ambitious, vigorous, energetic and proud judges comes into focus. Many members of industrial tribunals have spent a professional lifetime pushing a particular cause, or representing parties from one side of the labour/capital divide. For the proper functioning of an independent tribunal there is an acute need to rise above partisanship. Outcomes should not depend on the background of the tribunal member. The law must be properly applied. Principles should be developed in an inclusive and balanced way, they should be well understood and consistently applied.

It is the same for bodies such as the Human Rights Commission. Unless its role is broadly accepted, and it exercises its powers in a way that is generally regarded as consistent, fair and appropriate, it runs the risk of losing the broad community support necessary to maintain its integrity and standing – and even support for its very existence. Overreach, looseness with the truth, low commitment to accountability and excessive zeal are not appropriate attributes. Safeguards against capture and partisanship, and the appointment of people with the highest level of integrity, are necessary to maintain community support.

In recognition of the inherently political nature of labour relations, safeguards against capture exist in other western democracies. In the UK, the Employment Appeals Tribunal hears appeals against decisions of Employment Tribunals. It replaced the National Industrial Relations Court in 1975. It has a President, and a small number of permanent and part-time judges. A single judge sits on each appeal and the business of the tribunal is governed by the President. Presidents are appointed for four year terms and are generally judges of the High Court, which in the UK, sits below the Court of Appeal and the Supreme Court in the judicial hierarchy. The President will generally be a serving judge of the High Court who comes to the EAT to assume the President’s role, and returns to the Court after the four-year term. There are no questions of Full Bench compositions or a lengthy period of domination by powerful individuals. The jurisdiction is stable, and by Australian standards, remarkably free of political controversy.

In the US, The National Labor Relations Board dates back to 1933. It originally had three members, expanding to 5 with the passage of the Taft Hartley Act in 1947. The members are appointed for 5 year terms. Each year, the five-year term of one of the five members expires and a replacement can be appointed. Appointments are made on the nomination of the US President but must be confirmed by the Senate. Interestingly, the political affiliation of each appointee (usually Democrat or Republican) is disclosed on their appointment. The balance and composition of the Board is transparent, and appears to acknowledge the openly political nature of the role. The political affiliation of all members of the NLRB since its establishment is set out on the NLRB website.

Australians would be very uncomfortable with such disclosures, because they would think that on appointment to such a body, the members become apolitical. However, in the US the disclosure appears to be intended to highlight backgrounds and guard against covert bias and capture.

Nevertheless, the system of appointments to the NLRB has not been free from controversy. In 2008, the number of members dropped from five to two after the Senate Democrats refused to confirm some nominations by President George W Bush and he refused to make some nominations to the Board. This left the Chair, Wilma Leibman and member, Peter Schaumber. One Democrat and one Republican. The chair did not have a casting vote. Leibman and Schaumber informally agreed to decide only those cases on which they could agree and issued approximately 400 decisions between January 2008 and September 2009.

The US Court of Appeals for the First, Second and Seventh Circuits upheld the two-member NLRB’s authority to decide cases, while the DC Circuit Court of Appeals did not. The matter was then taken to the US Supreme Court and in 2010 it was held that the two-member board had no authority to issue decisions, invalidating all 400 previous rulings made by Leibman and Schaumber. An expanded NLRB then reheard all of the 400 cases and decided them in the same manner as their predecessors.

The question of a legitimate quorum arose again in 2013 when the DC Court of Appeals ruled that President Obama had violated the Constitution when he by-passed the Senate to fill three Board vacancies.

The head of the US Federal Mediation and Conciliation Service, which deals with labour disputes in the unionized sector of the economy is regarded as a political appointment and as such the President has the right to appoint its Director, even though, as its name implies, it does not have the power to make binding determinations.

The transparency and fixed terms of appointment for key workplace relations court and tribunal roles in the UK and the US are obviously designed as a check on domination and capture. The provisions appear to acknowledge the danger that can arise from the perceived conflict between capital and labour and the tendency of practitioners in the area to represent one side or the other in their previous professional lives.

How does Australia compare?

Over the last ten years, the NSW Industrial Commission has had a spectacular fall from grace. It was once the self-proclaimed leading industrial tribunal in Australia. It had a busy jurisdiction, many very distinguished lawyers amongst its members, and a fine reputation. Now it is a shadow of its former self. Confined to NSW public sector disputes, and with only a few Commissioners as members, its decisions carry little external significance.

No doubt there are many reasons for its decline, including the dominance of the federal jurisdiction after Work Choices. But there were examples of judicial overreach:  such as interpreting a remedy to deal with unfair work contracts as a vehicle for challenging commercial contracts on fairness grounds. Ultimately the NSW Court of Appeal had to step in.  Extrapolations of the same unfair contract remedy to become a right to challenge any unfair act in employment also had huge ramifications. These interpretations were internationally unique and created a lawyers’ picnic – a hugely costly drain on NSW based employment. NSW lawyers have now turned their attention to the Federal general protections provisions in an effort to reboot the gravy train.

But there were also inappropriate practices in allocating important matters. Commencing under President Bill Fisher, some Presidential members fell out of favour – and found themselves not utilized on important Full Bench matters. The situation worsened under the next President, where all important Full Bench matters were dealt with by a few select presidential members. Leading lawyers on the tribunal were sidelined and a practice known as the A and B team approach seriously undermined the tribunal’s standing and integrity.

A consideration of the Federal industrial jurisdiction must of course start in the 1980s with the Staples affair. Former communist, Justice Jim Staples, who died only last year, became a controversial figure on the Australian Conciliation and Arbitration Commission, so much so that the President, Sir John Moore confined him to Full Bench matters – where the outcome of cases was likely to depend on the views of others. Mary Gaudron resigned in protest, but the restrictions on his caseload continued until the Hawke government invoked a special variant of the pea and thimble trick. As part of a rewrite of the legislation, the government replaced the Australian Conciliation Commission with a new body, the Australian Industrial Relations Commission and appointed all previous members, apart from Jim Staples, to the new body.  Michael Kirby said at the time:

“How could any member of the Australian Industrial Relations Commission henceforth perform his or her duties without the knowledge that he or she acts under the implied threat established by the Staples case? An important pillar of the independence of a vital national tribunal has been knocked away.”

Michael Kirby was also vocal about the next assault on the independence of the Commission. The Hawke government departed from a long-standing convention of appointing successive members on the nomination of the respective peak bodies. The ACTU not only nominated many of its own bright young acolytes, but also chose several employer representatives, rather than allow the Confederation of Australian Industry to nominate its preferred candidates. Rumour has it that an employer nominee had his appointment vetoed by the ACTU. Kirby criticized this breach of protocol in a patron’s night address to the Industrial Relations Society of Victoria. I was present at that speech. In delivering the speech Kirby laid the blame fairly and squarely at the feet of ACTU Secretary Bill Kelty, consistent with media reports at the time. But in his written speech, which is still located on the High Court website, the mention of Bill Kelty is not there.

The appointment protocol delivered a sense of balance to the tribunal and contributed to its reputation and standing. Since the protocol was abandoned, every successive government has sought to redress perceived imbalances created by the previous government by appointing people acceptable to the new government. So, ever since the later 1980’s, the appointment process has become politicized and it is doubtful that the tribunal has been truly balanced ever since. Kirby was right to criticize the abandonment of the protocol. Its demise has had a lasting and ongoing effect on the standing of the tribunal.

But this was not the most egregious assault.

The appointment of Justice Barry Maddern as President of the Australian Conciliation and Arbitration Commission, and the successor Australian Industrial Relations Commission (following the retirement of Sir John Moore) was an unusual choice for a Labor Government. Justice Maddern had a strikingly similar background to me. We both worked in industrial relations in the resources sector before moving into the law. We did our articles at the same law firm, renowned for its dominant employer clientele industrial relations practice. In 2012, the prospects of Minister Shorten in the Gillard government appointing me as President could safely be estimated as next to zero. However, in 1985, widely understood to be with the support of Bill Kelty, Justice Maddern was appointed to the prized position of President by the Hawke government.

It appears from subsequent events that support for his appointment carried with it an expectation of future favourable treatment.

On his elevation to President comment was made about Justice Maddern’s open-door policy. He was said to have had the door between his associates offices and his office removed. He made himself available for consultation with relevant parties about emerging and important matters. Of course, representations needed to be appropriate. If only they were.

It wasn’t long before relations between Bill Kelty and Justice Maddern soured. There were scathing public comments about decisions. After the 1991 National Wage case decision Kelty was quoted as saying:

“It’s a sickening decision but there is no reason for the trade union movement to eat the vomit.”

The ACTU then launched a wage campaign regarded as designed to put pressure on the Commission to revisit the matter of enterprise based wage increases, which it subsequently did.

It was widely rumoured at the time that there were also private phone calls to Justice Maddern berating him from the same quarter. From what I have been told, those rumours may well be true. My source is a current ALP member of parliament who was a senior union official at the time. He told me that he was in Justice Maddern’s chambers at the time of one such call and heard the conversation on load speaker. Justice Maddern told his visitor that he wanted him to be aware of the treatment meted out to him.

Barry Maddern was principled and strong. He did not succumb to pressure. So, the pressure increased.

The ACTU worked closely with the Keating government to shift the emphasis of the system away from conciliation and arbitration and towards enterprise bargaining. Indeed, as I recall it, the then Assistant Secretary of the ACTU, Iain Ross, was seconded into the Prime Minister’s office in the lead up to the passage of the Industrial Relations Reform Act 1993. That Act involved momentous changes to the industrial relations system in Australia. But tucked away in the legislation was also a very significant change to the structure of the Commission. The bargaining functions of the Commission – all powers in relation to certified agreements, enterprise flexibility agreements, powers over bargaining periods and protected industrial action, facilitating agreements, conciliations over agreements and paid rates awards – in fact the most important functions under the revised system – and the functions that materially affected the most important industries in the country – were to be dealt with in a special way. They were not to be administered by the President, but by a Vice President assigned by the Governor General to be the head of the Bargaining Division. In other words, not the President or a person chosen by the President, but by a person chosen by the Executive. The first, and only, Vice President assigned to the bargaining division, was the newly appointed, architect of the legislation, then 35-year old, Assistant Secretary of the ACTU, Iain Ross.

Justice Maddern’s powers were to be relegated to the back seat. However, he died in office early in 1994, before the new provisions came into effect. There could not have been a more direct attempt to upset the power structure of the Commission than this episode.  But it was not the last. Like many of these transgressions it became a precedent for future actions.

When the ALP won the 2007 federal election, it planned to implement far reaching workplace relations reforms. It was intended that the tribunal could become a “one-stop shop” operating out of shopping centres and regional locations rather than just capital cities. The existing tribunal was to be replaced by a modern version. Positions would be up for grabs. Press reports suggested that certain members would not be reappointed to this post-modern circus. ‘Union sources’ put me at the top of that list. So, was the Rudd/Gillard government going to invoke the Staples pea and thimble trick? For two years the answer to that question was uncertain. Ultimately it did not take that step. A body known as ‘Fair Work Australia’ was established with the same members as the AIRC. The name was awful supported only by the person who apparently devised it. But the implied threat against AIRC members, identified by Michael Kirby in the wash up of the Staples affair, operated with great force for that entire two-year period until the composition of the new tribunal was finalized.

In addition to these structural manipulations there have been examples of actual executive interference with industrial tribunal decision-making and outcomes. A significant example was the 2008-9 award modernization exercise.

Award modernization was a process intended to significantly rationalize the Australian Award system – not just Federal Awards. By using new constitutional heads of power, it was intended to replace Federal and State Awards that had been brought into the federal jurisdiction by Work Choices. Modern awards were to have common rule application. In other words, they were to apply to all employers covered by the federal system in the industries or vocations falling within the scope of the awards. The process was begun under Work Choices under a different name and initiated under amendments to the Workplace Relations Act prior to their incorporation into the Fair Work Act. Under the scheme of the Gillard legislation, award modernization had to be undertaken in accordance with a ministerial instrument known as the award modernization request.

The process commenced in March 2008 with a completion deadline of 31 December 2009, in order that the replacement awards would commence from 1 January 2010. The Minister’s request was a prescriptive instrument. The 41-paragraph initial request issued in March 2008 contained provisions dealing with additional objects, procedural issues and specific requirements for certain terms and conditions of employment. It was here that the seemingly inconsistent objects of not disadvantaging employees and not increasing costs for employers were mandated. The assignment of a task by the Executive with specific substantive and procedural requirements was a new level of Executive intervention into the work and decision-making of the tribunal. The tribunal’s functions in this regard could hardly be described as independent.

As the process unfolded, various matters began to be addressed in stages by the Full Bench. It initially published exposure drafts of awards and then decided on the terms of final awards. By its nature, award modernization was always going to be an imperfect exercise; able to be fine-tuned by subsequent reviews or variation applications. It was essentially a consolidation of disparate instruments. Approximately 1700 federal and state instruments were replaced by 122 modern awards. Given the time constraints on the process there was little opportunity for the parties or the AIRC to debate or reconsider the merit of individual award clauses.

Unsurprisingly, many parties were not happy. Soon it became apparent that there was a parallel process in operation – an informal appeal to the Executive. When a party was not happy with an outcome, they made representations to the Minister. Over the period from June 2008 to November 2009 Minister Gillard issued 8 sets of variations to the Ministerial request. The 41 paragraphs ballooned out to 70.  By way of example, prescriptive provisions such as the following were inserted:

“Airline Industry

Where a modern award covers airline ground staff, the Commission should consider whether separate classification structures and rates of pay should be provided for ground staff employed in regional, domestic and overseas airline operations, having regard to the existing classification structures and rates of pay that apply to this work and the intention of the award modernisation process to not disadvantage employees.
Where a modern award covers airline cabin crew, the Commission should ensure that hours of work and rostering provisions appropriately balance the objectives of: • recognising the need to assist employees to balance their work and family responsibilities effectively and to improve retention and participation of employees in the workforce; • promoting the safety, health and welfare of employees; and • promoting flexible modern work practices and the efficient and productive performance of work having regard to the needs of employers in the airline industry, including the need for employers to be able to re-schedule work efficiently and effectively where changes to flying schedules occur.
The Commission should consider whether to include provisions in the modern award applying to aircraft cabin crew to supplement the National Employment Standards in respect of parental leave and related provisions (such as the provision of alternative duties during pregnancy) having regard to: • the nature of duties performed by aircraft cabin crew; • any risks to the health, safety and welfare of employees associated with flying during pregnancy; • the nature and scope of coverage of existing award entitlements; and • whether such provisions are necessary in order to provide a fair minimum safety net of employment conditions for aircraft cabin crew.”
The Fair Work Act built on the directly legislated employment entitlements for the vast majority of Australian employees initiated by WorkChoices.  The Award modernization process could only be described as a joint Executive/tribunal exercise to supplement the legislative safety net. By this process, the independent role of the tribunal to determine terms and conditions in awards was grossly compromised.

The next assault in 2012 involved bench-stacking. The background needs explanation. As I have mentioned, the Fair Work Act also implemented reforms to the structure of the new tribunal, then entitled “Fair Work Australia”. At the suggestion of the then President, Justice Giudice, and with the support and acceptance of most Presidential members, the five-level structure of AIRC members was replaced by three levels – President, Deputy President and Commissioner. The levels of Vice President and Senior Deputy President were abolished but existing members of the AIRC who held such titles were able to retain their previous titles on their appointment to FWA. But that new simplified structure was soon to become more complicated. The Staples trigger had not been pulled, but there were other tools in the toolkit, this time a variant of the Maddern technique.

Justice Iain Ross was appointed by the Gillard government to replace Justice Giudice from 1 March 2012.

In October 2012, Employment Minister Shorten announced his intention to introduce legislation to recreate two Vice President positions within the Commission structure above the level of Deputy President. The effect would be to demote all existing Deputy Presidents, especially the two deputy presidents designated as Vice Presidents, one of whom was me. Like most other members of the Commission, I found out about the proposal when the Minister made that announcement. The President told me that he found out about it when he was given a copy of an exposure draft of the legislation shortly before it was released by Minister Shorten.

To say that the proposal was controversial would be an understatement. The Law Council condemned the proposal and said that it tended to reduce the independence of the tribunal as a result of the reduction in status of the existing designated Vice Presidents. The Australian Chamber of Commerce and Industry said that unless the previous two designated Vice Presidents were appointed to this level the proposal would “seriously undermine the trust, confidence and standing of the tribunal.”

Representations as to the need, rationale and purpose of the changes were inconsistent and confusing. President Ross advised FWA members that he had raised concerns with the government about remuneration, status and cross appointments from the Federal Court, and that absent changes to address these concerns, he saw little purpose in the proposed re-creation of the Vice-Presidential level.

However, when the changes were considered by a Senate Committee the government representative, John Kovacic (now a Deputy President of FWC) said in written and oral submissions that the Vice President positions had been created based on recommendations made by President Ross. No other purpose or rationale for the changes was provided. I asked the President to clarify his position publicly and he declined to do so. The legislation was passed by the parliament in December 2012.

There can only be two possible explanations for this important discrepancy. Either the President did not in fact convey the views to the government that he told FWC members he had conveyed, or the government misled the Senate by creating the impression that Justice Ross supported the changes when it had been advised that he did not. Justice Ross did not correct the representations of the government to the Senate enquiry. Whichever explanation is correct, the episode is a blight on the integrity and standing of the Commission. The fix was in, but not everyone got their lines right.

In June 2013, Justice Ross confirmed to Senate Estimates that he had made the proposal to the government in April 2012, well before the government announced its intention to recreate the positions, and the only confusion was whether he sought one or two positions.

It is unprecedented for the head of a tribunal to secretly seek changes in the structure of the tribunal, without explaining any rationale, or communicating to those affected. It is unprecedented for a government to pick up and run with such a proposal, with or without the belief of ongoing support from its proposer, with no rationale other than a request by the President, and in the face of very strong principled opposition from bodies such as the Law Council of Australia.

There would appear to be no other explanation than that this was a deliberate collaboration to stack the tribunal with favoured appointees at the expense of those who held senior positions in the hierarchy of the tribunal. It utilized the precedent of the Maddern technique, so deftly applied 20 years earlier. Michael Kirby was asked to comment on these events. In what must surely be a first, he declined.

Incidentally, Michael Kirby’s speeches are a rich source of material and are all still conveniently located on the High Court website. He always said that he wrote his judgments for posterity and that applies with greater force to his speeches – which cover every topic imaginable.

You may recall some publicity concerning one of my speeches about productivity delivered to the Industrial Relations Society of NSW in 2012. Earlier at the confernece, the President of the NSW Industrial Relations Commission gave a speech calling for a return to more powers of compulsory arbitration in intractable disputes. My central thesis was that high productivity depends on good leadership at the enterprise level, a positive workplace culture and a strong commitment to employee engagement. Enterprises which are able to replace adversarial industrial relations with cooperative relationships at the workplace level were likely to be far more productive than those caught in the conflict model. There is a mountain of evidence to support this proposition.

I received a great many positive comments about the speech. It was described by many as refreshing and insightful. Several articles were written about different aspects of the speech in the Australian Financial Review. Editorials lauded its sentiments. Inside the tribunal views were much more mixed. You will not find that speech on the Fair Work Commission website because all mention of it was expunged at the direction of the President. Indeed, it was reported at the time that my speech was part of the rationale for a formalized code of conduct against members. Justice Ross was reported on the front page of the Australian as saying in an interview ‘I do not want to engage in a public caning of Graeme Watson’. Of course, that is precisely what he did, apparently because he did not approve of the contents of the speech.

More changes to long standing practices that provided stability and balance were soon to be made. The allocation of matters to FWA members has long been conducted under a panel system, in which members are appointed to a panel of industries, and a head of that panel, allocates matters to appropriate panel members. Members gain specific industry knowledge and members with particular skills can be allocated to matters appropriate to their expertise. Panel heads have important responsibilities and are a contact point for parties for significant and urgent disputes. For as long as I can recall, there has been a convention of appointing the most senior members of the tribunal as ‘panel heads’. This convention was dispensed with by President Ross in 2012 when he appointed the most junior Commissioner as a panel head within a few months of her appointment to the tribunal. A former ACTU industrial officer, her husband was Secretary of the ACTU at the time. Inside the Commission, this sort of change was criticized in hushed tones. The culture of favourites and enemies became very obvious.

More significant manifestations of capture then began to emerge. Aaron Patrick, writing in the Australian Financial Review in 2014, exposed a practice of the President to favour members with a union background, over those with a business background, for important Full Benches. The full article contains detailed analysis and was an important expose. (See Fair Work Commission Bench Line up not so Fair says Business -AFR 14/4/2014)

Full Benches deal with appeals or important matters warranting the involvement of at least three members. When they deal with important matters, they establish principles or precedents for similar matters in the future. They often deal with disputes or issues where there are high stakes and represent the most influential work of the tribunal.

The practice of favouring some members and marginalizing others in Full Bench allocations, similar to the NSW Commission A and B team approach, is well known to close observers of FWC practice. However, the practices are heavily camouflaged and difficult to expose. It is easy, for example, to allocate members to insignificant Full Bench matters and create the appearance of equal treatment.

I carried out my own analysis for important Full Benches from the start of 2013 to July 2015 – a period of approximately 30 months. There were about 40 important Full Bench decisions handed down in that period, each with at least two presidential members. I excluded the President from the analysis as he should sit on as many important matters as his workload will allow, as indeed he does. The issue is the involvement of other senior members and the participation of those with other perspectives.

Four of the most senior presidential members at the time – in fact the most senior members in each of Qld, WA, SA and Victoria (apart from the President) were allocated to those important Full Benches on just six occasions between them. Those four members happened to have a business background. The four presidential members who most frequently sat on important Full Bench matters happened to have a union background. They were given 54 Full Bench positions between them. In other words, the four presidential members with a business background had a very minimal involvement in major cases and those from a union background had a significant involvement.

This is an obvious and significant discrepancy and has translated to decisions and precedents that reflect the views of those with a favoured background. The practice of favouritism and exclusion are supported by fellow members of the tribe and flourish where principle and courage of others are in short supply. It is more convenient to keep one’s head down and avoid detrimental treatment than to raise one’s head above the parapet. By virtue of these practices, the conflict that exists between parties is extended to conflict within the tribunal.

It is significant that the four marginalized senior presidential members mentioned in the above analysis have since departed the tribunal, or are about to do so. The Maddern device was not only carried into effect on this occasion, but it was given greater potency by use of the combined use of the A and B team sidelining technique.

Dyson Heydon has emphasised the importance of principle in the administration of justice, and the importance of the rule of law in a democratic society. The application of these principles to our industrial relations jurisdiction is overdue. The President or Chief Justice of a court or tribunal is a first among equals in decision-making with additional administrative and leadership responsibilities. The ability to decide matters is limited to participation in the cases in which the tribunal head is involved. However, using presidential powers to influence the outcomes of other cases transgresses that fundamental principle. It undermines the position of others in the tribunal who are marginalized and misappropriates a power that the legislation does not confer. It is a misuse of authority, and authoritarian, but not by the current government. It is better described as capture by an interest group conferred when Labor was last in power. It is the combination of techniques, overt interference and covert capture, that renders the current situation untenable.

It is often said that unions have never had greater political power than they have today. This is a reference to the funding and participation of unions in the ALP, and the interdependence each has on the other. The ALP is heavily dependent on unions for funding and is heavily populated with former officials. Unions increasingly depend on labor government policies to provide them with the influence and power that they would not otherwise have. In the Hawke/Keating/Kelty Accord era, the powers of unions were probably greater. But there is an important difference. The Accord era drove important economic changes. The changes were broadly supported and history has judged them well.

The current players appear to be resistant to change, and direct their attention to providing power and influence to interest groups. Favours are regularly exchanged. It is intuitive to help the tribe when power and influence is available for that purpose.

In its December 2015 report into the Workplace Relations system, the Productivity Commission said:

“Some commentators have suggested that the politics of institutional change is too hard, and that the issues at the heart of Workplace Relations are ones that distinguish the political identities of the two main parties. Each new government, faced with the appointment choices of former governments, attempts to restore ‘balance’ in the FWC by making safe appointments that more closely reflect its viewpoints. The argument is that if there is a reasonable mix of members with somewhat varying views, the FWC as a whole can reflect both sides of politics. This is exceptionally weak institutional design, and undermines the integrity of one of Australia’s foremost decision-making bodies.

The Productivity Commission is aware of the prevailing view that no Minister or government willingly gives up the power to determine appointments. Several decades ago, governments around the world struggled with the concept of independent central banks, but reforms occurred, and few would now contemplate reversing this policy. Genuine reform consists of breaking customary bad habits. The Productivity Commission strongly encourages a lateral shift in thinking about the governance and design of Australia’s workplace regulatory institutions. This reflects the primacy of these institutions in wage-setting and in interpreting, applying and enforcing the Fair Work Act — roles that are critical in an evolving economy. This shift would not remove the Australian Minister for Employment’s power, but is designed to lift skill levels and the standards of appointees, change the culture, and improve consistency in a system that has shifted away from arbitration cases heard by several Commissioners to a workload now more dependent on the determination of individual Commissioners. Outcomes in cases should not be a lottery draw depending on the background of a Commissioner. Institutional change would represent one of the bigger microeconomic reforms in the last 15 years.

With the benefit of a more fulsome analysis, it appears that the problems identified by the Productivity Commission were understated.

The pattern of capture and undue influence by interest groups that I have referenced has been occurring since the late 1980s. Some of the brazen examples of capture and misuse of authority are occurring now because nothing has been done about these very things in the past. If unchecked, they are bound to continue. The Productivity Commission and international perspectives provide the necessary impetus to address this problem. It was correct to identify it as a necessary and important reform.

Perhaps it is preferable that the safety net is determined by the federal parliament. Parliament has every right to assume that role. But if the task is to be delegated, the body charged with that task must be truly expert, it must fairly and rationally take into account all perspectives, it must be independent of external influence and be free to discharge its functions without fear or favour. In other words, it must reflect the principles of the rule of law and it must be held to account if it deviates from that path. The experience over the past thirty years suggests the current Australian tribunal does not meet that standard, and the result now, as a result of utilizing a combination of previous devices and operating under the radar, is worse than it has ever been.

I have spoken to many people over the past few years about the standing of the Fair Work Commission. The problem of capture is well known. It needs to be condemned in the same terms as overt undermining. The problems need to be fixed, not left in the too hard basket.

I commenced this speech with a reference to international examples of capture and interference which undermine the rule of law. As it happens, the Fair Work Commission has an ‘international engagement strategy’ which it conducts in conjunction with the International Labour Organisation. I am sure that it is a pure coincidence that the country to which the FWC has devoted most of its attention, and been involved in the largest number of international visits and delegations, is Hun Sen’s Cambodia.