Arbitration In Contempt

Constitutional Aspects of Deregulating the Labour Market

I.C.F. Spry, Q.C.


Deregulation of the labour market involves the repeal of Commonwealth and State statutes, regulations and other instruments that detract from the rights of persons to enter into contracts of employment according to their wishes.

In essence, regulation involves substantial constitutional difficulties in a federal system. By reason of limitations set out in the Constitution the Commonwealth government can pass regulatory legislation only if that legislation comes within one of the various specific heads of power in s.51 or some other particular provision. For example, the Commonwealth has no power to pass a general law regulating the wages of all employees, nor does it have power to pass a general law regulating the settlement of all industrial disputes. Hence difficult questions often arise as to the validity of Commonwealth regulatory legislation. Conversely, laws of the States are subject to valid Commonwealth laws, and accordingly their own laws are over-ridden to the extent that valid Commonwealth statutes, regulations and other instruments operate. Hence further difficult questions often arise as to whether particular State laws that would otherwise be valid have been over-ridden by Commonwealth legislation or awards.

But in so far as deregulation involves the repeal of Commonwealth statutes, regulations and other instruments no constitutional difficulties arise. If a statute is valid, it can be repealed. To the extent that it is invalid, its repeal is unnecessary save for the purpose of removing doubts or uncertainties.

Hence so far as Commonwealth laws are concerned, deregulation by the Commonwealth involves political considerations but is not subject to constitutional obstacles. Likewise so far as State laws are concerned, clearly there are no constitutional difficulties for the States. Any relevant State statutes, regulations and other instruments may simply be repealed.

Complications would however arise if the Commonwealth effected deregulation through the repeal of its own laws but some or all of the States wished to retain their existing laws or even wished to take over what the Commonwealth had vacated, so as to increase the extent of State regulation. Is there any way in which the Commonwealth could in these circumstances provide protection against, or prevent wholly or partly, regulation of labour markets by the States? This question will be considered subsequently herein.

Deregulation---Commonwealth Legislation

The critical item of Commonwealth legislation in regard to relations between employers and employees is the Conciliation and Arbitration Act 1904 as amended. This Act has been enacted in the light particularly of s.51(xxxv) of the Constitution, which empowers the Parliament to make laws for the peace, order and good government of the Commonwealth with respect to 'Conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one state'.

The unsatisfactoriness of the Australian arbitration system has been seen by some commentators to have depended partly on the limited terms of s.51 (xxxv). On the one hand, the Commonwealth is limited under that provision to legislation in regard to conciliation and arbitration. On the other hand, the relevant conciliation and arbitration must, under that provision, relate to industrial disputes extending into two or more States. So, for example, this head of power does not extend at all to one-State industrial disputes. Nonetheless s.51(xxxv) has come to support, within the area of its operation, a Commonwealth system of regulation that extends to the laying down of national general minimum wage levels by the Australian Conciliation and Arbitration Commission. The conception of s.51(xxxv) was of provision for the conciliation and arbitration of particular disputes, but over time the Australian Conciliation and Arbitration Commission has established a system whereby it has a quasi-legislative role. It is able to make decisions that govern the general terms of employment of millions of employees, although in substance few of them are involved in an actual or apprehended industrial dispute.

Clearly the consequence of the repeal of the Conciliation and Arbitration Act would be to cause employers and employees in their relations with each other to be governed by the general laws of the land that apply to other persons, subject to any special provisions that might be found in other specific legislation. Thus, for example, by s.23(f) of the Income Tax Assessment Act the income of trade unions and of associations of employers and employees registered under any Commonwealth or State or Territory law relating to the settlement of industrial disputes is wholly exempt from income tax. It appears to be difficult to support this exemption as desirable at the present time, especially in regard to investment income. If a union or an employee organisation derives investment income, for example, it is clearly arguable that a privileged tax position should not exist.

A more difficult position arises with other items of specific legislation that involve complex policy considerations. Thus s.45D of the Trade Practices Act 1974 as amended forbids what are commonly referred to as secondary boycotts. Subs.(1) provides,

    'Subject to this section, a person shall not in concert with a second person, engage in conduct that hinders or prevents the supply of goods or services by a third person to a fourth person (not being an employer of the first-mentioned person), or the acquisition of goods or services by a third person from a fourth person (not being an employer of the first-mentioned person)' if, inter alia,

    '(b) the fourth person is a corporation and the conduct is engaged in for the purpose, and would have or be likely to have the effect, of causing---

      (i) substantial loss or damage to the business of the fourth person or a body corporate that is related to that person;


      (ii) a substantial lessening of competition in any market in which the fourth person or a body corporate that is related to that person supplies or acquires goods or services.'

It will be noted that under these provisions an exception arises, and the sub-section does not apply, where the first person, that is, the person whose conduct is otherwise proscribed, is an employee of the fourth person, that is, of the corporation which is likely to suffer substantial loss or damage. Now the general policy of the provisions is that if two persons freely agree to provide goods or services to each other, other persons should not be permitted to interfere with their freedom to do so. It is certainly arguable that this general policy should not be detracted from merely because the persons who wish to interfere are employees of one of the two freely contracting parties. It is one thing for an employee or employees to withhold his or their labour. It is entirely a different thing for them to hinder or prevent other freely contracting persons from providing goods or services. Hence it is arguable that s.45D(1) should be amended so as to terminate special exemptions from its operation in favour of employees.

A similar question is raised by s.45D(3), which provides inter alia that a person shall not be taken to contravene sub-s.(1) by engaging in conduct where the dominant purpose for which the conduct is engaged in is substantially related to- '(i) the remuneration, conditions of employment, hours of work or working conditions of that person or of another person employed by an employer of that person; or (ii) an employer of that person having terminated, or taken action to terminate, the employment of that person or of another person employed by that employer'. This exemption is of wide operation. Thus, for example, it extends to protect an employee who acts in concert with non-employees in relation to working conditions of a co-employee. Again it is clearly arguable that special protection of this kind is not appropriate. Here also what is protected goes beyond the mere withholding by employees of their own services.

Indeed, as a general principle it may be thought that the deregulation of industrial relations should as far as is possible leave both employers and employees, as well as their respective organisations, in the same position as other members of the community. In particular there do not appear to be decisive reasons of policy why the ordinary rules of contract should not apply to agreements between employers and employees or why tort rules and criminal law rules should not apply likewise if particular acts come within their tenor.

So if, for example, an employer agrees with an employee to employ him for a defined term, if he dismisses him in breach of contract he should be liable in damages. Conversely, if an employee is himself in breach of a special term of an agreement, such as a term whereby he agrees not to strike during a defined period, he should likewise be liable in damages. Similarly, if employees withhold their labour, that is, strike, they should be permitted to picket on the strict and limited basis that they are doing no more than expressing an opinion or attitude. But if their acts go beyond the mere expression of opinions or attitudes and, for example, interfere with the rights of others to pass freely on roads or footpaths, or intimidate or harass other persons who are entitled to ingress or egress for the performance of services or delivery or collection of materials, or involve some other tortious act, the civil and criminal laws should not be suspended but should apply in accordance with their general principles. Assaults, intimidation and harassment generally come within the operation of provisions of the criminal law, and where injury or loss takes place damages in tort may generally be recovered as compensation, together with punitive damages where an actionable tort is committed in unduly offensive circumstances, for example. Further, injunctions may under the general law be obtained in appropriate cases to forbid the commission of criminal or tortious acts. There does not appear to be any compelling reason of policy why a special position should apply merely because a defendant has acted criminally or tortiously in relation to an employment, as opposed to some other area of activity.

To a large extent tortious, criminal and statutory remedies remain applicable in Australia as much in industrial law contexts as elsewhere. Save in special cases where statutory or other provisions provide to the contrary, tortious, criminal and statutory liabilities arise regardless of whether the acts in question relate to or arise out of an employment. It may be thought that the existing exceptions to this general position should be abrogated and that further exceptions should not be allowed to arise.

Deregulation---State Legislation

Generally similar considerations apply to the repeal of State legislation as apply to the repeal of Commonwealth legislation. Whatever questions may arise in regard to the constitutional validity or invalidity of State legislation, no difficulties arise in repealing what is valid and, at least for removing doubts, in repealing statutes, regulations and other instruments about whose validity there is uncertainty.

An example of State regulatory legislation is found in the Industrial Relations Act 1979 (Vic.) as amended. This Act constituted the Industrial Relations Commission of Victoria, the powers of which resemble in a number of respects those of the Australian Conciliation and Arbitration Commission. Thus under s.16(1) appeals may be brought to the Industrial Relations Commission of Victoria against awards or any part thereof. A system of Boards is also established by the Act, and under s. 34(1), for example, power is conferred upon them to make awards relating to any industrial matter whatsoever in relation to relevant trades or groups of trades, including awards determining such matters as hours of work, wages, terms and conditions of employment, the employment or non-employment of persons of any particular age and the demarcation of functions and of employees and classes of employees, as well as awards determining industrial disputes.

No constitutional difficulties would arise in wholly repealing the Industrial Relations Act 1979 (Vic.) and all associated and other legislation governing the relations between employers and employees. Here as in regard to Commonwealth legislation the relations of employers with employees might properly be governed by the general laws of contract and tort and by the criminal law, as they apply otherwise to all members of the community. On this basis any law that confers special privileges upon employers' organisations or upon employees' organisations should be repealed.

An example of the operation of general common law and equitable rules in regard to relations between employers and employees is seen in Thomas v. National Union of Mineworkers (South Wales Area) (1985) 2 W.L.R 1081. It appeared that at particular collieries striking miners and demonstrators, who were present in large numbers at pickets, abused and threatened working miners with violence, and large numbers of police were required to be present in order to prevent any breach of the peace. An application was made to Mr Justice Scott for injunctions restraining wrongful behaviour, and injunctions were duly granted. Mr Justice Scott stated at p.1114, 'The legitimate purpose of picketing is peaceful persuasion or the peaceful communication or obtaining of information. Threats of violence and intimidatory language are inconsistent with peaceful persuasion'. In each case the relevant injunction enjoined inciting, procuring, assisting or organising members of the union or others 'to congregate or assemble at or near the entrance to the colliery (a) otherwise than for the purpose of peacefully obtaining or communicating information or peacefully persuading any person to work or abstain from working and (b) otherwise than in numbers not exceeding six.

Ancillary injunctions restrained the organising of pickets or demonstrations outside the homes of working miners.

Decisions such as that of Mr Justice Scott reflect a general acceptance of the view that violent or intimidatory behaviour or other unlawful acts should not be allowed simply because those concerned are unionists or employees. As has been observed here already, it may be thought that the proper deregulation of industrial relations should include the repeal in full of any statutory or other provisions that confer special privileges or immunities upon employers or employees or their respective organisations or those involved in industrial disputes.

Commonwealth-State Relations

A question of interest relates to the possibility that the Commonwealth may deregulate industrial relations but that a number of States may fail to do so. If different States adopted different courses there would be economic pressures which might lead to the removal of enterprises from regulated States to deregulated States or to States with less onerous regulation. It may be that pressures of this kind would be sufficient to cause all States to proceed with substantial deregulation, since a failure to do so might result in a significant loss of employment, growth and wealth.

However a constitutional issue might arise if the Commonwealth chose not merely to rely upon economic pressures of this kind but rather wished to enact legislation that would prevent the States from continuing with or enlarging the regulation of industrial relations.

In view of the limited nature of the industrial disputes power in s. 51 (xxxv) of the Constitution it would not be possible to use that power so as to ensure that all employers and employees are free to agree upon such terms of employment as they choose. In particular, that power does not extend to one-State industrial disputes. However the concept of 'industrial dispute' has been given a wide operation by the High Court: Caledonian Collieries Ltd. v. Australasian Coal and Shale Employees' Federation (1930) 42 C.L.R 527. Likewise the concept of 'arbitration' has been accorded a wide operation: see the observation of Mr Justice Isaacs and Mr Justice Rich cited in Queen v. Kirby, ex parte Boilermakers Society of Australia (1956) 94 C.L.R 254 at p.281 that 'the function of the arbitral power in relation to industrial disputes is to ascertain and declare, but not enforce, what in the opinion of the arbitrator ought to be the respective rights and liabilities of the parties in relation to each other, as well as Australian Railways Union v. Victorian Railways Commissioners (1930) 44 C.L.R 319. There would not appear to be any legal objection to the inclusion, in legislation governing the carrying out of arbitrations, of a requirement that the arbitral body should, where the parties have by express or implied agreement set out their contractual rights, give full force and priority to that agreement, notwithstanding any other considerations or matters such as Commonwealth or State awards (if any) or specified legislation which might otherwise have been applicable. Ancillary provisions could in effect ensure that the effective resolution of disputes would take place in accordance with the agreement of the parties, without any power to impose upon them conditions contrary to their wishes.

A mechanism of the kind here being discussed would not be entirely satisfactory. Clearly it would be preferable, in order to bring about deregulation, simply that all recent legislation, both Commonwealth and State, be repealed. However if any particular State or States were unco- operative it would provide a means whereby, despite State legislation, employers and employees would in many cases have their rights governed by their actual agreements.

It may be noted that it would not be necessary on this basis that the Australian Conciliation and Arbitration Commission or some similar body should be kept in existence. It would be sufficient that it should be provided in the relevant legislation that an arbitrator should be selected by agreement of the parties (with a procedure for selection in their non-agreement on a suitable person). The critical requirement is that it should also be provided that the arbitrator or arbitral tribunal in question should give full force and effect to actual agreements of the parties.

An alternative or additional basis on which the Commonwealth might wish, if it found it desirable to do so, to protect agreements between employers and employees from the operation of State laws, could be found in the Commonwealth corporations power. Under the Constitution the subject matter of power set out in a 51(xx) is 'Foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth'. The overwhelming majority of large employers, and many smaller employers, are corporations within s.51(xx): see generally Queen v. Federal Court of Australia; ex parte Western Australian National Football League (Inc.) (1979) 143 C.L.R. 190, State Superannuation Board v. Trade Practices Commission (1982) 150 C.L.R. 282 and Fencott v. Muller (1983) 152 C.L.R. 570. The full extent to which the Commonwealth may validly legislate in regard to a corporation within s.51(xx) is not clear. So, for example, it has been suggested that the relevant legislation must relate to the trading or financial activities of the corporation in question before it can be supported by s.51(xx): compare Strickland v. Rocla Concrete Pipes Ltd. (1971) 124 C.L.R. 468 at pp. 489-490 and Fencott v. Muller (1983) )152 C.L.R. 570 at pp. 598-599. It is not clear whether this limitation will be applied by the High Court, since in Commonwealth v Tasmania (1983) 57 A.L.J.R. 450 differences of opinion were expressed on the question whether the powers of the Commonwealth under s.51(xx) extend to activities that are not trading or financial activities of the corporation in question. Thus Mr Justice Deane said at p.349, 'In my view, the legislative power conferred by s.51(xx) is not restricted to laws with respect to trading corporations in relation to their trading activities. It is a general power to make laws with respect to a trading corporation'. Mr Justice Mason said at p.500, 'There is no suggestion in the paragraph that it is looking to some hypothetical or notional incorporation which covers only the trading activities of a trading corporation'. An unrestricted operation of s.51(xx) was favoured by Mr Justice Murphy. However Chief Justice Gibbs expressed the opposing view at p.483: 'I further consider that, even if the Commission were a trading corporation, the provisions of ss. 7 and 10 of the (World Heritage Properties Conservation Act 1983 (Cth.)), if valid, could apply to the Commission only in relation to such of its activities as are properly regarded as trading activities'. Mr Justice Wilson and Mr Justice Dawson also expressed qualifications as to the area of operation of s.51(xx) and, like Chief Justice Gibbs, adopted a narrow view of that provision.

In view of these considerations, if it were wished to rely upon s.51(xx) of the Constitution it would be appropriate to ensure that a law intended to over-ride State legislation, regulations, awards and other instruments should in the first place be expressed to apply to foreign corporations, trading corporations and financial corporations formed within the Commonwealth and corporations formed in Commonwealth Territories. The law might include some such provision as, for example, a general section that provided that agreements between a corporation and employees should take effect according to their terms and should be enforceable in, for example, the Federal Court and the Supreme Courts of the States, notwithstanding Commonwealth or State awards (if any) or specified legislation which might otherwise have been applicable. Ex abundant cautela a parallel section might also be enacted to make provision to similar effect but in relation to trading and financial activities only. Clearly considerable care would require to be taken in drafting, so as to ensure as far as possible that the legislation would be upheld in accordance with the judicial analyses of s.51(xx) of the Constitution that have been referred to here.

Other possible constitutional bases also exist on which Commonwealth legislation directed at protecting employers and employees from State legislation and awards might be rested. It is not convenient to consider these at length here, but reference should be made especially to s.51(i) of the Constitution, which relates to trade and commerce with other countries and among the States, and to s.51(xxix), which relates to external affairs. Under the latter provision it has been held that the Commonwealth has wide powers of enacting legislation that is based or purportedly based upon international agreements, conventions and treaties to which Australia is a party: see generally Commonwealth v. Tasmania (1983) 57 A.L.J.R 450.


From a constitutional viewpoint deregulation within each individual jurisdiction is a simple matter. It involves the repeal or amendment of legislation and, where necessary, consequential repeals or amendments of regulations, awards and other instruments.

More complex questions arise where it is sought by Commonwealth legislation to over-ride State legislation so as to free employers and employees from State regulation. However the various provisions of the Commonwealth Constitution appear to be broad enough in their aggregate, if not to exclude State regulation altogether, at least to allow it only a small area of operation.