Federal Regulation of Industrial Relations in Victoria
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
- 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
- "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
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
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?