Lining up the Bills: Preparing for a Double Dissolution
Can the Corporations Power be Used to Limit the Regulation of
Employment Contracts in Australia?
Adam Bisits
A. Introduction
The corporations power in the Australian constitution was
used in the legislation for a type of employment contract, the
"Australian workplace agreement". Generally AWAs prevail
over inconsistent Australian and state laws and awards. The purpose
of this paper is to consider whether the corporations power may
be used to facilitate the employment contracts of corporations
generally and not just those which fit the description of an
AWA.
Experience
and analysis brings us to this question. Twenty five years ago
when it was asked "Can the contract of employment be regulated
through the corporations power" a fear was raised that the
corporations power might be used for an undesirable, coercive
method of regulation of employment.[1]
More than 10 years ago the issue before the HR Nicholls Society
was whether the corporations power could be used at all for "voluntary
industrial agreements". Professor Greg Craven in his paper
"Voluntary Industrial Agreements: You Agree, I Agree, But
Will the High Court Agree?" thought that the power would
be available but he was troubled by the composition of the High
Court; by whether "industrial agreement laws are directly
for the protection of a corporation or its trade;" whether
"entry into employment contracts by corporations" fell
into the category of acts undertaken for the purpose of trade;
and by the fact that the "non-corporate employment sector",
which included many small businesses, burdened by excessive industrial
regulation, would not be exposed to the new regime.[2]
At
the 1992 conference of the society, Mr. S.E.K. Hulme QC in his
paper "A Constitutional Basis for the Federal Coalition's
Industrial Relations Policy and Related Matters" thought
that the corporations power would be available. He laid Professor
Craven's doubts to rest and indicated that even the conciliation
and arbitration power in the constitution could be used to remove
laws which conflicted with the freedom to make contracts of employment.
He pointed out that the corporations power is not limited to
the trading activities of trading corporations but to all things
to do with trading corporations. The breadth of the power can
be understood when it is said that "any law in the form
'No trading or financial corporation formed within the Commonwealth
shall' or 'Every trading or financial corporation formed, etc.
shall,' must necessarily be valid".[3]
Legislation about the voluntary industrial agreements of trading
corporations is about their activities for the purpose of trade.
As to the non-corporate employers, Mr Hulme said that they "and
their employees want little but to be left alone, and that is
what [the voluntary agreements policy or legislation] seeks to
do for them."[4]
It is natural to now ask, after
(i) the corporations power has been used to make employment laws,
both in the Workplace Relations Act 1996 and earlier;
(ii) AWAs have been made for some years---181,437 had bee approved
up to August 2001;[5] and (iii)
the fear of coercive regulation of employment has not materialised,
whether a broader concept of employment agreement could be made
which, like an AWA, could prevail over inconsistent state and
federal industrial laws and awards.
It is useful next to see how employment agreements in the
form of AWAs have been provided for in the Workplace Relations
Act.
B. Current contracting
freedom
S. 170VF (1) of the Workplace Relations Act says: "An
employer and employee may make a written agreement, called an
Australian workplace agreement, that deals with matters pertaining
to the relationship between an employer and employee." The
agreement must include an anti sex and race etc. discrimination
code (s. 170VG (1) and schedule 8 to the Workplace Relations
Regulations). The agreement cannot be required to be kept confidential
(s. 170VG (2)) and it must include a dispute resolution procedure
which could include referral of power to settle disputes to the
Australian Industrial Relations Commission (s. 170VG (3)(4)).
The requirement to file the agreements with the Employment Advocate
arises from the fact that unless so filed the agreement is of
no effect (s. 170VC). The filing results in some checking of
the agreement (s. 170VA) and testing whether the agreement disadvantages
employees in relation to their terms and conditions of employment
(the test is set out in part VIE, ss. 170X ff).
The effect of an Australian workplace agreement on awards
and agreements and other laws is broadly that the agreement "operates
to the exclusion of any award that would otherwise apply to the
employee's employment" (s. 170VQ (1)) subject to an exception
for certain awards and exceptional matters (s. 170VQ (2) (3)).
S. 170VQ (4) provides:
During its period of operation, an AWA operates to the exclusion
of any State award or State agreement that would otherwise apply
to the employee's employment.
There is provision for a certified agreement (between a business
and a union or the employees concerned) to prevail over an AWA
in some cases but otherwise the AWA "operates to the exclusion
of any certified agreement that would otherwise apply to the
employee's employment." (s. 170VQ (6)).
S. 170VR provides for the effect of an AWA on other laws as
follows:
(1) Subject to this section, an AWA prevails over conditions
of employment specified in a State law, to the extent of any
inconsistency.
(2) Provisions in an AWA that deal with the following matters
operate subject to the provisions of any State law that deals
with the matter:
(a) occupational health and safety;
(b) workers' compensation;
(c) apprenticeship;
(d) any other matter prescribed by the regulations.
(3) If a State law provides protection for an employee against
harsh, unjust or unreasonable termination of employment (however
described in the law), sub-section (1) is not intended to affect
the provisions of that law that provide that protection, so far
as those provisions are able to operate concurrently with the
AWA.
(4) To the extent of any inconsistency, an AWA prevails over
prescribed conditions of employment specified in a Commonwealth
law that is prescribed by the regulations.
(5) [contains definitions].
The result is that a specific type of contract of employment,
the AWA, is facilitated and is allowed to prevail over many conflicting
Australian and state industrial laws and awards.
C. Greater freedom to contract
The present issue is whether contracts of employment generally,
or contracts of employment described in a more general way than
those which are AWAs, could be made to prevail over conflicting
Australian and state industrial laws and awards. For instance
such a contract of employment would not necessarily have to have
the anti-sex, racial etc. discrimination code. It would not necessarily
have to have a dispute settlement procedure. Nor a requirement
to be filed in order to be effective. Nor would it necessarily
have to be vetted by the Employment Advocate. Nor pass a no-disadvantage
test.
The freedom to contract terms
of employment could be expressed in many ways. At one extreme
there would be no legislation on the contents of the contract
at all, recognising that a corporation already has a statutory
power to make contracts with employees, but only making provision
for such employment contracts as are made to prevail over some
or all inconsistent Australian state industrial laws and awards.
If one took the view that employer and employee best know what
terms they should agree on there is very little for an Australian
Act to say, creating the possibly unusual situation that the
main operative provision of the Act would be that such employment
contracts to which the corporation was party (or whichever subset
of such contracts are chosen) should exclusively regulate the
employment relationship between the parties.[6]
Analysis of the experience with the 180,000 plus AWAs and
with the workplace agreements allowed under Western Australian
legislation, and projections of the impact of different types
of contract or ways of making a contract on levels of employment
could indicate how any greater freedom to contract should be
defined.
D. Conciliation and arbitration
power
This "original" power
has been a fertile source of employment legislation and practice.
Mr Hulme's 1992 paper showed that it could also be used in shutting
down the award system at the same time as introducing voluntary
industrial agreements.[7] It is
worth considering for the present issue.
The power of the Australian parliament under s. 51 (xxxv)
of the constitution is to make laws with respect to:
Conciliation and arbitration for the prevention and settlement
of industrial disputes extending beyond the limits of any one
State.
This is a power "with respect to" conciliation and
arbitration etc. The purpose of the conciliation and arbitration
described in the power includes "the prevention ... of industrial
disputes extending beyond the limits of any one State".
It may be said that encouraging employers and employees to enter
into a particular type of employment agreement (or employment
agreements entirely of their own choosing) itself prevents industrial
disputes and can help prevent them extending beyond the limits
of any one state. One can then envisage a law under the conciliation
and arbitration power which first encourages employers and employees
to make these employment agreements. For instance, making conciliation
and arbitration conditional on the existence of such agreements
would be to do something with respect to conciliation and arbitration
which was within the power. In the past, and in the present Act,
industrial disputes of a grand kind are able to be established
because the Act facilitates the creation of employer and employee
associations, each of whom may be a party in dispute with the
other or with employers and employees. However the Act could
also focus on Industrial disputes of a more intimate kind, coming
out of a contract of employment.
It may be that only a collection of these contracts involving
parties in different states could give rise to an interstate
dispute. But it could hardly be an objection to legislation under
a power to prevent disputes that the legislation makes it difficult
for a dispute to arise.
E. Corporations power
The corporations power is the power under s. 51 (xx) of the
constitution for parliament to make laws with respect to:
Foreign corporations, and trading or financial corporations
formed within the limits of the Commonwealth;
As Mr. Hulme says, the trading
or financial corporations to which the power applies are "the
vast majority of corporations, statutory or otherwise, which
employ people in Australia".[8]
How the power could be used (if the doctrine of powers reserved
to the states does not apply, as has turned out to be the case)
was stated by Griffith CJ. in Huddart, Parker & Co. Pty.
Ltd. v Moorehead (1909) 8 CLR 330, 348:
The Commonwealth Parliament can make any laws it thinks fit
with regard to the operation of the corporation, for example,
[it] may prescribe what officers and servants it shall employ,
what shall be the hours and conditions of labour, what remuneration
shall be paid to them, and may thus, in the case of such corporations,
exercise complete control of the domestic trade carried on by
them.
The width of the corporations powers is now acknowledged.
It covers incorporated football clubs (R v Federal Court;
Ex parte WA National Football League (1979) 143 CLR 190;
state superannuation boards (State Superannuation Board
v TPC (1982) 150 CLR 282; incorporated government utilities (Tasmanian
Dam case (1983) 1153 CLR 1 and shelf companies with the potential
to trade (Fencott v Muller (1983) 152 CLR 570 and even
universities (National Tertiary Education Industrial Union
v University of Wollongong (1997) 74 IR 348.
The limits on the power, as much a matter of interpretation
as, it is submitted, a response to strained use of the power,
emerge from Re Dingjan; Ex parte Wagner (1995) 183 CLR
323, 339. Here the Australian Industrial Relations Commission's
power to review contracts between constitutional corporations
(that is those referred to s. 51 (xx)) and independent contractors
was considered. A company in Tasmania with rights to harvest
timber , contracted with Mr. & Mrs. Wagner to harvest some
of the timber. The Wagners in turn subcontracted some of their
harvesting rights to Mr. & Mrs. Dingjan. The company initiated
changes to these arrangements which affected the Dingjans who,
through their union, the TWU, applied to the AIRC for a review
of the subcontract. The AIRC's power was to review a contract
on the ground that it was unfair, harsh or against the public
interest (s. 127A (2), Industrial Relations Act 1988).
The contracts referred to were contracts for services by an independent
contractor (other than for private and domestic work for the
other party) where, relevantly, a party to the contract was a
"constitutional corporation" or if the application
to review or the commission's decision to set aside the contracts
was "in relation to a contract relating to the business
of a constitutional corporation" (s. 127C (1) (a) and (b)).
The
subcontracts between the Wagners and the Dingjans fell into the
second category as a contract relating to the business of a constitutional
corporation, the Tasmanian company. The issue was whether this
second category was authorised by the corporations power. The
High Court by a majority of 4 to 3 struck down the second category
as outside the corporations powers. The limits to the power which
were taken into account by the majority included: that there
was no corporation which was a party to the contract; that the
setting aside of the subcontract may have no effect on the business
of the Tasmanian company;[9] that
the corporate nature of the Tasmanian company had no rational
connection with the AIRC's power to set aside the subcontract;[10] that the relationship in the second
category was insufficient "as a peg upon which to hang legislation;"[11] that the "personality"
of the person bound (in this case the Tasmanian company) was
not an element in the second category;[12]
and that the connection with corporations was too remote and
tenuous.[13]
The
minority would have found the second category within the corporations
power which in the words of Mason, CJ. "extends to the enactment
of laws dealing with activities undertaken for the purposes of
the business of a constitutional corporation."[14]
Gaudron, J. would have, if necessary, read down the second category
to bring it within power.[15]
Could the greater freedom to contract terms of employment
be bestowed on corporations under these powers and within these
limits? Yes, since, first, the power embraces practically any
corporation in Australia. Secondly if the law was in the form
"No trading or financial corporation formed within the limits
of the Commonwealth shall have its contracts of employment regulated
by any state industrial tribunal or award or be the subject of
proceedings in such a tribunal" it would come within the
very breadth recognised for the power. It is a type of employment
regulation under the power envisaged by Griffith CJ himself.
Thirdly the law would be within the limits in the Dingjan
case since the law would have a much closer connection with the
corporation than merely 'relating' to it. Contracts of employment
give the corporation the ability to act and to trade and the
contents of those contracts also can limit that ability.
Thus even accepting the limits in Dingjan, the greater
freedom to contract that is proposed would, it is submitted,
be within power.
F. Prevailing over state
laws and awards
A further issue is whether the few provisions which might
constitute the Australian law on the subject of corporations'
contracts of employment and the freedom for such contracting
that that law created, could be made to prevail over inconsistent
state industrial laws and awards.
This is not a case of allowing
an industrial award to be created and specifying in an Australian
or federal law that the awards have exclusive authority.[16]
It is not a case of having the facilitated contract checked and
filed and specifying that that contract prevails over the state
laws and awards---the present situation with AWAs.
The problem has been explained as follows:
There is no doubt great difficulty
in satisfactorily defining the limits of the power to legislate
upon a subject exhaustively so that s. 109 will of its own force
make inoperative State legislation which otherwise would add
liabilities, duties, immunities, liberties, powers or rights
to those which the Federal laws had decided to be sufficient.
But within such limits an enactment does not seem to me to be
open to the objection that it is not legislation with respect
to the Federal subject matter but with respect to the exercise
of State legislative powers or that it trenches upon State functions.
Beyond those limits no doubt there lies a debatable area where
Federal laws may be found that seem to be aimed rather at preventing
State legislative action than dealing with a subject matter assigned
to the Commonwealth Parliament.[17]
The aim of preventing state industrial tribunals and awards
from regulating the contracts of employment of corporations cannot
be the sole aim of the proposed Australian law But in fact there
would be the further aim, namely ensuring that the general law,
or specified law, did apply to the contract, and possibly also
the aim of specifying how those contacts are made. Laws with
these aims would, it is submitted, not fall afoul of the above
limit.
The industrial systems of the states are so well established
that it might be thought that depriving them of their jurisdiction
over companies is a threat to the existence of the states themselves
and discriminated against the states.
There is
a prohibition derived from the federal structure of the Australian
constitution that "the Commonwealth's legislative powers
do not extend to making a law which denies one of the fundamental
premises of the Constitution, namely that there will continue
to be State governments separately organised."[18]
This prohibition has been explained in terms of discrimination,
and in an explanation, that has now criticised,[19]
as consisting of two elements: (i) a prohibition against discrimination
which involves the placing on the States of special burdens or
disabilities; and (ii) a prohibition against laws of general
application which operate to destroy or curtail the continued
existence of the States or their capacities to function as governments.[20] In explaining this implied prohibition,
Mason, J. said that "it does not follow that every law which
deprives a State of a right, privilege or benefit which it enjoys
will amount to discrimination ... A law which deprives a State
of a right, privilege or benefit not enjoyed by others, so as
to place the State on an equal footing with others, is not a
law which isolates the State from the general law."[21]
Speaking of special federal laws dealing with conciliation
and arbitration and the electricity industry in Queensland, Mason,
J .has said:
... when the Parliament singles out disputes in the electricity
industry to which agencies of the State of Queensland are parties
and subjects them to special procedures which differ from those
applying under the principal Act to the prevention and settlement
of industrial disputes generally, and of industrial disputes
in the electricity industry in particular, it discriminates against
the agencies of the State by subjecting them to a special disability
in isolating them from the general law contained in the principal
Act.
The proposed greater freedom for contracts of employment would
it is submitted have no bearing on the states as governments
separately organised nor would it discriminate against their
industrial tribunals and awards. The jurisdiction of courts and
tribunals within states and between the Australian and state
systems has been adjusted many times in the past, and the proposed
limit on the state tribunals and awards would be of the same
kind.
It would seem that that since
the AIRC no longer deals with interstate industrial disputes
generally and since the other changes brought by the Workplace
Relations Act 1996 and perhaps earlier, the aim of excluding
state governments and their instrumentalities (at least the non-business
ones) from any aspects of the Act would not necessarily be viewed
as discriminatory against them. These developments since the
Queensland electricity industry case, which was in 1985, and
the recent decision striking down a federal tax on state judges'
pensions,[22] should be taken into
account in any proposal to have the state governments themselves
control the employment contracts of their own employees. Such
a proposal would in fact be consistent with employers being granted
a greater freedom to contract the terms of employment with their
employees.
G. Other aspects of the
proposed freedom to contract
A general freedom to make contracts of employment necessarily
involves a contraction of the roles of the states. It calls into
question the role of the state industrial tribunals and awards
generally.
The president of the Australian Industrial
Relations Commission spoke on this topic last October.[23]
Interpreting what the president put forward, it may be said:
(i) there is practical uniformity in the minimum wage because
state industrial commissions as a rule award the same increases
as does the AIRC;[24] and (ii) half-yearly
conferences between the heads of the industrial tribunals and
provisions for joint sittings contribute to co-ordination.[25] His recommendations are expressed
in terms of objectives---eliminating differences in the minimum
wage; having the same rights of access to industrial tribunals
around Australia; consistent laws about termination of employment;
elimination of jurisdictional disputes---and in comments on past
attempts at uniformity or co-ordination. He notes that co-operation
between the jurisdictions varies and says "It seems to me
to be sensible to ask whether this strategy has been effective
and whether the issues are still the same." He appears to
query whether economic developments since 1985 such as deregulation
of the banking and financial systems, tariff reductions, globalisation
in many industries and reduction in union membership have been
taken into account in the industrial relations structure in Australia.
In these comments Justice Giudice was asking whether there
should be a unitary industrial relations system in Australia.
Creating a single freedom to contract terms of employment would
be a practical way of dealing with this problem.
It
would also be practical, it is submitted, to regularise the flow
on of minimum wage determinations by the AIRC so that the one
determination applies in the whole country. The minimum wage
or safety net wage is determined by the AIRC for the purpose
of assisting it in its other functions. It is determined by reference
to living standards in the Australian community and various economic
factors including productivity and inflation (ss 88B(2) and 89
of the Workplace Relations Act). Even the terms of an
award or agreement can show the links between the economy, trade
and terms of employment.[26] Under
a recent bill[27] the objective
of the minimum wage protecting the low paid is to be expanded.
This is high level economic enquiry and determination with a
bearing on Australia's trade and commerce and external relations,
which could be made under various powers in the constitution,
even the power in s 101 for an Inter-State Commission. It is
submitted that there is ample power for a minimum wage to be
determined to apply around the whole country without the intervention
of state tribunals. Incidentally a change in the law would also
be an opportunity to remove the words "safety net"
from the minimum wage concept. What do these chattering words
really add to the concept?
It may be asked: how will non-corporate employers and their
employees be bestowed with this new freedom to contract? One
would first research the problem. If these people really want
to be left alone it may be that no law has to be passed or that
some intrusive law has to be lifted from them. Secondly if a
law is required it may be that the power to make laws with respect
to trade and commerce among the states, in s 51(i) of the constitution,
supplies the power since even small business will often be involved
in interstate trade.
Next it has been pointed out that
the legislative practice of preserving state laws on sex, racial
or other forms of discrimination and also on matters of termination
of employment leads to different treatment of these subjects
with risks of legal ineffectiveness and invalidity.[28]
Legislation on the proposed freedom to contract could also deal
with this problem.
Finally the proposed freedom for
contracts of employment may call into question the contents of
certified agreements and awards. A recent study by the Institute
of Public Affairs[29] shows the
many non-pay clauses in these agreements and awards, which impinge
on a company's capacity to manage its own affairs. The study
shows the way to a further use of the corporations power to regulate
the terms of employment of company employees.
Endnotes
[1]
See J.O. Donovan's paper of this name at (1977) 51 ALJ 234, 246
[2]
P 4
[3]
P 9 of Mr. Hulme's paper. The words are those of Griffith CJ
in Huddart, Parker & Co v Moorehead (1909) 8 CLR 330,
348, quoted with approval by Mason J in the Tasmanian Dam
case (1983) 158 CLR 1, 149.
[4]
P 10
[5]
M J Pittard and RB Naughton, Australian Labour Law, 4th
edn, Lexis Nexis Butterworth, 2003, p 777.
[6]
Speaking of a judge having to consider the use of the trade and
commerce power for voluntary industrial agreement legislation,
Mr. Hulme said: "His quandary here would arise from the
fact that the trade and commerce power would, unusually, be used
in support of legislation not leading to Commonwealth power."---P
11
[7]
P 9 of his paper.
[8]
P 9
[9]
Brennan, J. at p 338
[10]
Brennan, J. at p 338
[11]
Dawson, J. at p 347
[12]
Dawson, J. at p 347
[13]
Toohey, J. at p 354
[14]
P 337
[15]
P 366
[16]
As explained by Dixon, J. in Ex parte McLean (1930) 43
CLR 472, 484
[17]
Wenn v Attorney General (Vic) (1948) 77 CLR 84,
120
[18]
Austin v Commonwealth (2003) 77 ALJR 491, 516, para 115
[19]
Austin v Commonwealth, at p pp 523-524, para 143-145.
[20]
Queensland Electricity Commission v Commonwealth (1985)
159 CLR 192, per Mason, J. at P 217
[21]
at p 217
[22]
Austin v Commonwealth.
[23]
Justice Giudice in a paper dated 18 October 2002 to the Industrial
Relations Society of Victoria entitled "A Unitary IR System?"
[24]
P 2
[25]
P 3
[26]
Eg, Mitsubishi Motors Australia Ltd Enterprise Agreement
2001, which in cl 9 gives a local and global economic 'background'
to the agreement, including links between domestics and international
markets and flexibility and other matters dealt with or encouraged
by the agreement.
[27]
Workplace Relations Amendment (Protecting the Low Paid) Bill
2003.
[28]
G. McCarry "Landmines Among the Landmarks: Constitutional
Aspects of Anti-Discrimination Laws" (1989) 63 ALJ 327.
[29]
Australian Financial Review, 9 April 2003, pp 60-61.
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