The constitution and a national IR regime

The main impediment to achieving a national scheme has been a political one. While this may disappear now the Federal (Commonwealth) Government  has control of the Senate, a key problem remains.

It is whether it has the power under the Australian constitution to enact such a law. The federal parliament can pass laws in the 40 different areas listed in s 51 of the constitution, however, it does not have a general power over “workplace relations”. The closest the section comes is the power in s 51(35) over “[C]onciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one state”.

To pass a national law the commonwealth will need to be creative and to compromise on coverage. It is likely to turn to its power in s 51(20) to make laws with respect to “[F]oreign corporations, and trading or financial corporations formed within the limits of the Commonwealth”. The commonwealth might rely on this power to set out the conditions of employees working for every constitutional corporation in Australia.

In combination with its other powers, such as its power over the territories and interstate trade and commerce, as well as the referral of power over industrial matters by Victoria, this could allow the commonwealth to enact a scheme that might extend to 85 per cent or more of the workforce.

Where a state law also sought to cover these employees, it would be overridden. Section 109 of the constitution states, “[W]hen a law of a State is inconsistent with a law of the Commonwealth, the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid”. This can be done expressly.

A potential problem for the commonwealth is that the extent of the corporations power is unclear. There are two important limitations on the scope of the power.

First, it is addressed only to corporations (and thus not to partnerships, sole traders and the like), and even then it is addressed only to certain types of corporations (that is, foreign, trading and financial corporations). High Court decisions mean that most corporations will fall into these categories (R v Federal Court of Australia; Ex parte WA National Football League (1979) 143 CLR 190; State Superannuation Board of Victoria v Trade Practices Commission (1982) 150 CLR 282). On the other hand, some corporations clearly will not, such as Australian corporations that do not have substantial trading or financial activities.

People who might escape the federal net and so remain under state law would be those working for partnerships, sole traderships and other unincorporated associations that operate within the limits of one state. In addition, the constitutional immunity of each of the states from some commonwealth laws would also mean the federal scheme would not apply to some, especially senior, members of the state’s public service.

Second, there is an unresolved division of opinion in the High Court as to which activities of the listed corporations can be regulated. Two possible views, a narrow and a broad view, border the possible scope of the power:

• Narrow view: The clue is in the categories of corporations specified as being within power: “foreign corporations”, and Australian-based “trading” or “financial” corporations. Thus the aspects or activities that the commonwealth can regulate must have something to do with the characteristic that brings corporations within commonwealth power. This would mean, for example, that only the trading activities of a trading corporation could be regulated and not any of the other activities of the corporation (such as the relationship between the corporation and its employees where this lies outside of its trading activities).
• Broad view: There are no limits at all. Provided a corporation has the characteristics that bring it within s 51(20), any aspect or activity of that corporation can be regulated by the commonwealth (including the relationship of a constitutional corporation with its employees).

A majority of the High Court has gone beyond the narrow view but has yet to accept the broad view of the power. In Commonwealth v Tasmania (Tasmanian Dam Case) (1983) 158 CLR 1, a majority of the court held that s 51(20) at least enables the commonwealth to regulate the activities of trading corporations undertaken for the purposes of the trading activities of that corporation.

Under this approach, it is likely the commonwealth can regulate some aspects of employment within a constitutional corporation (the degree is unclear) on the basis that such employment is for the purpose of the trading activities of the corporation. While the reasoning might extend to the regulation of all actions of all of the employees of a constitutional corporation (each employee being taken on for the purpose of the trading activities of the corporation), it is unclear whether the High Court would interpret the power to extend that far. The answer will depend on the detail of the new law.