Standing Fast

Federal Regulation of Industrial Relations in Victoria

Richard Tracey

The advent of the Kennett government in October, 1992 had a profound impact on the way in which industrial relations was regulated in Victoria. The Employee Relations Act abolished the Industrial Relations Commission, brought an end to all state awards with effect from 1 March, 1993, provided for individual and collective employment agreements and for future awards to be made by a new Employee Relations Commission if and only if the parties agreed to arbitration by the Commission. At the same time the Public Sector Management Act radically altered employment arrangements in the public sector. "Permanency" of employment subject to good behaviour was removed. The Public Service Board was abolished. Public Service Board determinations and awards affecting public sector employees ceased to have effect and were replaced by employment agreements. Simultaneously the payment of annual leave loadings were abolished for all Victorian public sector employees and private sector employees under State awards.

The reaction of most of the unionised work-force in Victoria which was subject to state regulation was to apply for Federal awards. The process is now well under way and the secretary of the Victorian Trades Hall Council Mr Halfpenny is quoted in the press as predicting that most Victorian employees who are currently subject to State regulation would be in the Federal system within twelve months.

The Federal government has sought to facilitate this transition by amending s.lll(l)(g)(ii) of the Industrial Relations Act and introducing a new s.lll(lA) into the Act. The aim is to prevent Victorian employers from relying on key provisions of s.lll(l)(g) of the Act which empowers the Federal Commission to refuse to proceed with applications for Federal awards.

I have been asked to review developments over the past six months and to anticipate what might occur in the latter part of 1993.

Applications for Federal awards have been made by a wide range of employees. They include health professionals, public school teachers, public servants, shop assistants, clerks, cleaners and others. For the most part these attempts have been strenuously resisted by the employers concerned. At the threshold stage the applications have been resisted on constitutional grounds. Some of the grounds are common to both public and private sector matters; others are only relevant to the public sector. It is convenient to deal first with the area of public employment.

It will be remembered that, in 1983, the High Court ended some eighty years of uncertainty arising from inconsistent decisions as to what type of disputes between employers and employees could be properly characterised as "industrial". This was done in the Social Welfare Union case (1983) 153 CLR 297. However, in that case, the court specifically reserved the question of whether or not disputes between State governments and some or all of their employees fell within Federal legislative competence. The joint judgment noted that:

"It is also unnecessary to consider whether or not disputes between a State or a State Authority and employees engaged in the administrative services of the State are capable of falling within the constitutional conception. It has been generally accepted, notwithstanding the Engineers case, that the power conferred by s.51(xxxv) is inapplicable to the administrative services of the States....
If the reasons hitherto given for reaching that conclusion are no longer fully acceptable, it may be that the conclusion itself finds support in the prefatory words of s.51 where the power is made "subject to this Constitution". The implications which are necessarily drawn from the Federal structure of the Constitution itself impose certain limitations on the legislative power of the Commonwealth to enact laws which affect the States (and vice versa)......
If at least some of the views expressed in [decided] cases are accepted, a Commonwealth law which permitted an instrumentality of the Commonwealth to control the pay, hours of work and conditions of employment of all State public servants could not be sustained as valid, but as Walsh J. pointed out in the Payroll Tax case, the limitations have not been completely and precisely formulated and for present purposes the question need not be further examined": at 313.

This passage was subsequently relied on in a number of cases in which State instrumentalities sought to resist Federal award coverage. The most significant of these cases was the Queensland Electricity Commission case (1985) 159 CLR 192 which arose out of the SEQUEB dispute in Queensland. The Federal government sought to impose the dispute settling procedures of the Commonwealth Conciliation and Arbitration Act on the parties to the dispute. To this end it passed special legislation. This legislation gave the Federal Commission power to settle the dispute but prevented the Commission from exercising powers to refrain from hearing the matter on the grounds that the dispute was being dealt with by a State Industrial Authority in Queensland or that further proceedings were not necessary or desirable in the public interest. The Act further required that the powers of the Commission should be exercised by a Full Bench. The High Court struck down the Act because it discriminated against the State of Queensland by imposing a special burden or disability on it which was not imposed on persons generally. The argument which prevailed was that other employers appearing before the Commission could have their matters dealt with by single members of the Commission and could seek to persuade the Commission to refrain from hearing those matters. Mason J also referred to a Constitutional "prohibition against laws of general application which operate to destroy or curtail the continued existence of the States or their capacity to function as governments": at 217. Dawson, J too was prepared to recognise that "a general proposition arises by implication from the Federal structure of the Constitution that the Commonwealth Parliament cannot impair the capacity of the States to exercise for themselves their constitutional functions; that is to say, their capacity ... to function effectually as independent units": at 260.

By 1986 some members of the High Court appeared concerned to limit the potential for the States to resist Federal regulation. In R. v. Lee: ex parte Harper (1986) 160 CLR 430 at 453, Mason, Brennan and Deane JJ said that:

"There is accordingly much to be said for the proposition that, assuming that there is no discrimination against a State or singling out, such as occurred in Queensland Electricity Commission v. The Commonwealth, the exercise of the arbitration power in the ordinary course of events will not transgress the implied limitations on Commonwealth legislative power. The exercise by the Commission of its authority with respect to the employment relationship between the State and its employees in the course of settling an interstate industrial dispute appears to fall within s.51(xxxv). Although the purpose of the implied limitations is to impose some limit on the exercise of Commonwealth power in the interest of preserving the existence of the States as constituent elements in the federation, the implied limitations must be read subject to the expressed provisions of the Constitution. Where a head of Commonwealth power, on its true construction, authorises legislation the effect of which is to interfere with the exercise by the States of their powers to regulate a particular subject matter, there can be no room for the application of the implied limitations.
The same point may be expressed in another way by saying that, in deciding whether Commonwealth legislation has the effect of impairing or inhibiting the continued existence of the States or their capacity to govern, we must look to the role which the States have to play under the Constitution. If the Constitution contemplates that the States will be subject to control or regulation by the Commonwealth or its agencies in particular respects, their subjection to that control or regulation cannot amount to a relevant impairment or inhibition of their capacity to govern. On the view which we are presently inclined to take of the implied limitations, they do not protect the States from the consequences of the exercise by the Commonwealth of the powers granted to it by the Constitution which contemplate their application to the States. Nor do they protect the States from an erosion in their status occasioned by the increasing regulation of community affairs by the Commonwealth in accordance with its powers".

The employees involved in that case were teachers employed in schools in Queensland.

Although Lee's case was something of a setback to State authorities, they were offered some reassurance by the High Court's decision in the political advertising case---Australian Capital Television Pty. Ltd. v. The Commonwealth (No. 2) (1992) 66 ALJR 695. In that case the High Court ruled that the Commonwealth's attempts to restrict political advertising at the time of Federal and State elections was invalid. In coming to this conclusion a number of members of the court relied upon the implied limitation on the use of general Commonwealth powers over broadcasting where the exercise of those powers had an impact on the functioning of the States as independent bodies: see Mason CJ at 701, Brennan J at 713 to 714 and McHugh J at 747 to 749. It was held, insofar as the advertising ban applied to State elections, that it struck at an essential aspect of the functioning of the States, namely their electoral processes.

In December, 1991 the State of Western Australia commenced proceedings in the High Court to challenge dispute findings by the Federal Industrial Relations Commission in matters in which the State Public Services Federation was seeking Federal award coverage for State public servants in Western Australia, Queensland and Tasmania. The challenge relies upon the implied limitations doctrine and on an argument that the finding of a dispute imposes a special burden or disability on the States concerned, thereby discriminating against those States. The High Court heard argument on these matters in June, 1992 and its decision remains reserved.

In the period since October, 1992 dozens of similar applications have been made by the Victorian Government and its instrumentalities as the Federal Commission has sought to impose its jurisdiction in respect of State employees.

Many of these cases also raise a Constitutional challenge to the changes to s.111 of the Industrial Relations Act. As has already been observed, these changes were made to the Act late in 1992. Their purpose was to make s.lll(l)(g)(ii) and (iii) inapplicable to proceedings which had the potential to affect the terms and conditions of employment of employees who were subject to State regulation. Paragraph (ii) permits the Commission to dismiss or refrain from hearing a matter on the ground that it is proper for the matter to be dealt with by "a State arbitrator" (i.e. an industrial authority with powers of compulsory arbitration---see s.111(4)). Paragraph (iii) empowers the Commission to dismiss or refrain from hearing a matter on the ground that further proceedings are not necessary or desirable in the public interest. Although these amendments purport to have general application, the Federal Minister for Labour made it plain at the time of their introduction that they were designed to enable employees who had been subject to State awards in Victoria to move with greater ease into the Federal jurisdiction. No other State industrial system is caught by the legislation because all have provision for compulsory arbitration. The result is that it discriminates in application, if not in form, against Victoria. Not surprising its validity is being challenged on this ground.

It is difficult to predict how the High Court will react to these various challenges. On the one hand, there appears to be a reluctance to exempt States, in their capacity as employers, from being party to the same dispute settling processes as are applied to other employers. On the other, there is an understandable concern that Commonwealth legislative power ought not to be exercised in such a way as to imperil the continued existence of the States. Where Commonwealth legislation discriminates against the States in their capacity as employers it is self evident that the States are not being treated in the same way as other employers and the Court will have little reluctance in striking down the offensive legislation. There is a strong argument that the amendments to s.111 should fail for this reason. They are substantially similar to the amendments to the forerunner of s.111(s.41(1)(d) of the Conciliation & Arbitration Act) which were held, in the SEQUEB case, to offend the prohibition against discriminatory legislative treatment. It is more difficult to argue that, in subjecting the States to the normal processes provided for in the Industrial Relations Act, they are being subject to discrimination.

The strength of the arguments based on the need to preserve the autonomy of the States is harder to assess. Three senior members of the Court were reluctant to rely on this concept in Lee's case. Terms such as "the administrative services of the State" and "the functioning of the States as independent bodies politic" remain undefined. The question of when Commonwealth legislation can be said to "threaten" the capacity of States to govern remains unanswered in any definitive way. Nonetheless, the general observation might be ventured that the closer the work performed by State employees comes to the centre of government activity, the more likely it is that the Court will imply a limitation. It would follow that some, but by no means all, areas of State employment could be beyond the reach of the Federal Industrial Relations Act. One would thus expect that attempts to regulate the terms and conditions of employment of State government ministers, ministerial staff, very senior public servants, the officers of State Parliament and public servants who provide policy advice would be beyond the reach of the Commission, whereas State employees who perform menial work such as cleaners, caretakers, messengers and drivers could have their employment regulated by Federal awards. Between these two extremes lie the bulk of State employees who will, depending on their duties, be positioned at differing points in the spectrum. It remains to be seen where the line will be drawn.

Another variable which may have some bearing on the outcome of the proceedings is the extent to which particular categories of employment impact on the State budget. Expenditure on salaries for public school teachers and health workers in the public hospital system make up a very large proportion of government expenditure. Although it may not be possible to say that teachers and nurses do work which forms part of the administrative services of the State, it may, nonetheless, be possible to argue that the effect of Commonwealth regulation of wage levels, in such circumstances, has the potential to strike at the very heart of a State's fiscal viability. Such considerations have even greater force at a time at which Victoria's finances are in a critical condition.

As has been seen, the High Court has, at times, been prepared to uphold the exercise of general legislative powers by the Commonwealth Parliament even when the exercise of these powers impacts adversely on the States. At other times the Court has seen a need to place a Constitutional fetter on the use of general powers where it is persuaded that the independent existence of the States is threatened. The cases currently pending in the Court could fall within either of these groups of precedents. Perhaps it is because the competing arguments are so finely balanced that the Court's decision on the first of these cases has been so long reserved.

The full range of Constitutional doctrines on which the States and their instrumentalities are able to rely are not available to the private sector employers. They may, however, be able to derive some comfort from the attack on the amendments to s.111 because these amendments prevent the employers from asserting the desirability of maintaining Victorian State regulation.

My best guess is that the outcome of all the legal manoeuvring which is presently going on will be that Mr Halfpenny's prediction will come true. His majority may not be as great as he predicts because I doubt that the High Court will concede control of the terms and conditions of employment of all State public servants to the Federal Commission. Nonetheless, the union movement is likely to secure a substantial victory. The fundamental reason for this will be that the success of the Victorian industrial strategy was always dependent on the existence of complementary Federal legislation. Once this expectation was dashed on 13 March the writing was on the wall.

Why HR Nicholls?