Colebatch, the owner of Kemalex Plastics, a small business that makes components for the automotive industry, wanted to pay his workers "not less than" an agreed wage.

This would give him the flexibility to pay good workers more if they were offered jobs elsewhere. The union didn't like the smell of it. Why? "When you understand unions," Colebatch says, "you realise it's all about control. They want to have control."

At his factory in Adelaide, Colebatch looks at his business card, which has the phone number of his now-abandoned Melbourne plant. "I don't need that any more," he says, tossing it to one side.

An entry on the company's website says: "Unions Cause Dandenong Plant Closure - 31st October 2005." It is a closure Colebatch blames entirely on the union movement, a 10-week strike that cost the company $1.1million in legal fees, excessive production costs and plant damage.

In April, Kemalex, a family-owned business that began in Adelaide in 1947, was suddenly elevated to the status of cause celebre in the federal Government's push for new industrial relations laws, Work Choices.

According to the ACTU, these proposed laws, which were the subject of mass rallies yesterday, are so draconian they threaten not only workers' security and conditions, but also the Australian way of life.

Much of what Colebatch attempted at Kemalex reflects Work Choices, although the dispute predated the introduction of the legislation. Having already transferred most of his work force in Adelaide into individual self-employed subcontractors 10 years ago, he attempted to do the same at the company's Melbourne plant, in the industrial centre of Dandenong. The decision would not affect existing employees but all future hirings would be on contract.

Colebatch believed contracts were a way for employees to "think like businesspeople", to end the "master-servant" relationship and to give employees "control over their own destiny", by grossing up and paying out award entitlements. But while this view had been accepted in Adelaide, in Melbourne, at a time of historic change in industrial relations, it hit a wall of union opposition.

ACTU secretary Greg Combet condemned Kemalex's move to transfer responsibility for holidays, sick leave, tax, superannuation and workers' compensation to assembly line workers earning minimum wages of about $480 a week. He called it a sham.

When all parties knew the federal Government was planning an industrial relations revolution, about 55 employees, most of them female factory workers with Croatian, Laotian and Cambodian backgrounds, including two who did not speak English, went on strike and stayed out for 10 weeks. When they eventually returned, the company was hit by such disruption, including WorkCover claims and sabotage of parts, that Colebatch closed the doors on the Melbourne plant. "Sometimes you've got to chop off the arm to save the rest of the body," he says.

Ken Phillips, workplace reform director for the conservative Institute of Public Affairs, writes that the collapse of Kemalex in Melbourne "demonstrates the worst excesses of the old system and gives a glimpse of the new". But the Kemalex dispute is also a case about a small group of workers who were lost in the big picture.

Colebatch bought the moulding machines and presses that would become the Melbourne operation of Kemalex in a liquidation sale in August 2002. In 2003, Kemalex signed an enterprise agreement with the NUW that allowed the company to use self-employed contractors in its new plant.

Last year, Colebatch "invited the union in for a meeting" where he informed the NUW's assistant state secretary, Antony Thow, that all new employees would be hired as contractors, which he said would have zero effect on award workers.

Thow was shocked. He recalled Colebatch praising the union for its "commercial approach" to earlier negotiations. "Why?" Thow asked. "What's wrong with the traditional employment model? Why do you want to do this?"

It was three meetings before Colebatch gave him an answer, finally citing the 40 minutes he spent haggling over the words "not less than" during an earlier negotiation. He said the award "tied his hands" as an employer. To the union, it sounded a hollow explanation.

The change Colebatch was pressing for would have meant that a machine operator, working as a self-employed contractor, would earn $17.31 an hour, compared with a level two production worker's award pay of $12.62 an hour ($479.42 a week), but without benefits such as holidays and sick leave. NUW Victorian secretary Martin Pakula says the union was not opposed to higher rates of pay but wanted them to be transparent.

"The facts are that Kemalex Plastics had the worst set of wages in the automotive component industry and the worst redundancy package in the car industry, and our members were prepared to fight to improve that," Pakula says.

In March, the union presented Kemalex with what Colebatch regarded as an ambit claim. "What were you smoking when you prepared this?" he asked. The union demanded the company get rid of all self-employed contractors and pressed for a new three-year agreement with wage rises of 10per cent a year with no productivity offsets.

Colebatch made a counter-offer, which the union rejected, and said that if he was paying for 38 hours' work, he wanted 38 hours' work, rather than the real machine time of 35.5 hours. He warned his staff of the dangers of going on strike "on ideological grounds". But by then Kemalex and the union were on a collision course.

The strike began on April 27. During the next 10 weeks, it would spiral out of control, with claims of thuggery on both sides, the closure of the Melbourne plant, recrimination, expense and blame-shifting.

On the eve of the strike, two women, Lyn Crawford and Lidiaija Gvozdich, resigned from the union and crossed the picket line. Crawford was the company's warehouse supervisor. Her husband was a contracted truck driver. "I was one of the ones on the other side trying to hold the company together," she says.

She describes the strike as a nightmare and says she believes it was "all to do with Howard's new reforms".

Under Work Choices, a strike related to independent contracts would be illegal. If the new laws had been in place, hefty fines would have been applied to the unions and Kemalex would have been able to sue for civil damages. Customers of Kemalex also could have made application to stop the strike.

Colebatch says the first fortnight of the strike was "very, very ugly". A long-time member of the Australian Industry Group, Australia's leading industry organisation representing about 10,000 employers, he phoned the AIG's industrial relations officer, Terry Bourke, and asked what he should do. He was advised to get a good lawyer. Colebatch took the answer as confirmation that the "old IR club" was alive and well. "I was mortified," he says. "Absolutely disgusted."

But Colebatch did get representation, high-profile industrial relations lawyer Tanya Cirkovic, an industrial warrior of the Right who previously worked with Liberal Party powerbroker Michael Kroger. Tanya Cirkovic & Associates provides what it calls "a complete industrial relations service".

Says Colebatch: "The strike commenced. It was like hand-to-hand bloody warfare."

In the first two weeks, a dozen workers returned to work. "With 40 of us or thereabouts, we beavered on, 24 hours a day, being threatened, yelled at, abused, spat on, cars being vandalised, the truck being vandalised, windows being smashed," Colebatch says. "It was horrible."

Colebatch accuses the union of bringing in hardened goons from other unions. "They were goons," he says. "They came in from the CFMEU [Construction, Forestry, Mining and Energy Union], the MUA [Maritime Union of Australia], the AMWU [Australian Manufacturing Workers Union], and our employees just looked on in total amazement at the way these thugs carried out their role."

It is an accusation that Pakula angrily denies, describing it as "outrageous and stupid". Officials from other unions had "brought cheques to the ladies" and food parcels, he says. "The only violence perpetrated on the picket line was perpetrated by the company." Pakula says Colebatch had an obsession with individual contracts. He describes him as an employer "who cannot brook any disagreement" and recalls him saying during negotiations: "I answer to only two people, my mother and my wife." He also recalls an intensely ideological meeting in Cirkovic's office during which Colebatch's operations manager, Mark Reynolds, asked him: "Do you follow football?"

Pakula replied: "Yes, of course I do."

Reynolds: "Don't you think the players in your team play better when their position is under threat?"

Pakula says he was disgusted by the analogy.

"That's why it went of the rails," he says. "Because we are dealing with ideologues."

After 10 weeks of strike, rancour and grudging conciliation, Kemalex and the union agreed to terms: pay rises of almost $100 a week, more machine time and the retention of individual contractors. But the return to work failed.

"Initially, the first week, everyone was pleasant and trying hard, supposedly," Colebatch says. "But then their WorkCover claims started ... We had a new medical condition that I had never come across before called PTS, part-time stress.

"You've got to understand, they were all sitting on their arses for 10 weeks with nothing to do. They all put on 5kg. When they came back to work on these machines they weren't work-hardened."

The final straw was the suggestion of sabotage: "We had food being pushed into plastic mouldings that ended up with our customers. We had operators - trained, skilled people - deliberately putting in inserts back to front."

Colebatch closed the operation, saying Kemalex had been used "in a political stunt by the unions against the federal Government's workplace reforms". Eighty workers, both award and contracted, lost their jobs.

Asked how the confrontation has affected his thinking, Colebatch says he is more convinced than ever about the need for industrial relations change.

"We wonder about the future of Australia and manufacturing in Australia when unions can behave as thugs, take no responsibility and destroy a business and people's jobs," he says. "They seem to think that it's some sort of game. But they are playing with people's lives and they don't care."

But he is not optimistic about the battle ahead for the Government's industrial relations legislation, which he describes as modest. "It will certainly help people who are starting in a greenfield site," he says. "But my experience in Melbourne is that for anyone to try [to] change an existing culture, you try at your peril. The unions and the [Australian] Industrial Relations Commission will find other ways to stay in the sun."

The Australian 16 Nov 2005.