In the 106 years of the Australian Federation the boundaries of Commonwealth-State power have been more tested by industrial relations than any other question.
Seven referendums attempting to expand Commonwealth power over industrial relations and/or wages have failed: in 1911, 1913, 1919, 1926, 1944, 1946 and 1973.
The Commonwealth has often sought to expand the legislative exercise of industrial-relations power and been regularly challenged in the High Court, but usually it has got most of what it wanted.
But in the 106 years neither the people nor the High Court has given the Commonwealth open slather to set up a national industrial relations system to the exclusion of the states. The Howard Government’s Workplace Relations Amendment (Work Choices) Bill 2005 is the first time a Commonwealth Government has attempted to do such a thing with.
This week Queensland became the latest state to file a High Court challenge to it and it now seems all states and territories will line up against the Commonwealth in the challenge.
The Commonwealth is treading on new constitutional ground. Before it relied on the industrial relations power in the Constitution which gives the Commonwealth power to make laws “with respect to . . . . the conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one State”.
The trouble with this is that industrial relations had to be based on “disputes” that were interstate. It meant workers had to be members of national unions and be in dispute with their employers before the federal system kicked in. It led to unnecessary friction and almost compulsory attendance and interference by national officers of unions who had agendas beyond the workers at a given workplace.
It led to inefficiency because the settlement of these disputes (often artificially created) led to the making of an extremely detailed and inflexible awards of working conditions which until recently usually included a requirement that all workers be a member of the union and for the union to be notified of any dispute and for the union to have a right to enter a workplace. Moreover, state systems ran in parallel, adding duplication and confusion for employers.
On any fair view, the system has not been good for the Australian economy and the employers and workers in it. The Labor Party likes it because it gives unions lots of power and the unions give the Labor Party lots of money.
Is the new law better? Will it survive challenge?
The new law relies on the Commonwealth’s power to make laws “with respect to . . . foreign corporations and trading or financial corporations formed within the limits of the Commonwealth”
The legislation calls these “constitutional corporations” and says the industrial relations of a constitutional corporation shall be regulated by the new law to the exclusion of state law.
The new law then strips away the system of detailed awards applying to whole industries thereby removing most of the role of unions. It removes union rights of entry to the workplace and demands secret ballots before a strike. A new Fair Pay Commission will set minimum standards without need for it to be done as a result of an interstate dispute. Finally, the law says it is to operate to the exclusions of all state and territory industrial law.
The critical question for the High Court will be the meaning of the words “with respect to” in the Constitution.
Is a law governing the relations between an employee and the corporation a law “with respect to” corporations? How close must the connection be between what the law seeks to do and the subject matter of the power granted in the Constitution, in this case “corporations”? For example, could the Commonwealth set up a separate national vehicle registration system for vehicles owned by corporations, to the exclusion of the state systems? Is that a law “with respect” to corporations? Or has the connecting elastic between law and subject matter been stretched so far that it has snapped?
It is a legal question, not a political one. The court will not concern itself with whether the new system is more efficient, better for the economy, cuts union power or the like.
Corporations are formed to trade, so laws governing their trading (such as trade practices) are clearly within power. But what about a law banning a corporation from building a dam in a world heritage area? Or advertising tobacco? Or giving it immunity from state defamation laws?
The High Court has not been conclusive in the past. But given that no corporation can operate without employing people, it seems to me that the law will be held to be valid even on a fairly restrictive view of the corporations power.
And in the long run Australia will be the better for it because the industrial relations framework it sets up is more rational and practical. Sure, in the short term, it is far too mean to workers and unions and too generous to employers.
But the law does not work in a vacuum. Unions will have to work harder to attract and represent members and will be the better for it. Governments change. A Labor Government could be more generous with minimum conditions and appoint people with a different outlook to the Fair Pay Commission.
In the long run the states might even refer their industrial relations power to the new federal body, so that employees of non-financial and trading corporations (charities, sole traders and so on) are covered.
There are a couple of big ironies about the whole event. The Coalition usually proselytises states’ rights, deregulation and individualism. But under Work Choices the states’ laws are to be pushed aside. The federal system will encompass 80 per cent of the workforce, up from 30 per cent and the states’ systems will contract to cover just 20 per cent of the workforce. Moreover, about 800,000 individuals who work in an unregulated relationship will now come under the ambit of federal regulation.