The Workplace Relations Case - Implications for the States

Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion.

Briefing Paper No. 18/2006 by Lenny Roth and Gareth Griffith

On 14 November 2006, the High Court handed down its long-awaited decision in the Workplace Relations Case. By a majority of 5:2, the Court rejected all of the challenges by the States and unions to the constitutional validity of the Federal Government’s new workplace relations laws, which were passed in December last year.

The issue in the case
The principal issue was the Commonwealth’s capacity to rely on the corporations power (s 51(xx)) in the Constitution to sustain the Workplace Relations Amendment (Work Choices) Act 2005. Section 51(xx) allows the Commonwealth to makes laws ‘with respect to’ –

Foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth.

The majority judgment
The majority of the High Court, as constituted by Gleeson CJ and Gummow, Hayne, Heydon and Crennan JJ, rejected all the plaintiffs’ challenges to the validity of the legislation. In coming to their decision:

The majority rejected the argument that the power conferred by s 51(xx) is restricted to a power to regulate the dealings of constitutional corporations with persons external to the corporation, but not with employees.
The majority also rejected the argument that s 51(xx) should be read down, or restricted in its operation, by reference to s 51(xxxv), which only allows the Commonwealth to make laws with respect to the conciliation and arbitration for the prevention and settlement of interstate industrial disputes.
The majority seemed to adopt a very broad construction of the corporations power, one that holds that, as long as a law is addressed to foreign, trading or financial corporations, the Commonwealth can regulate any aspect of what that corporation does, including any relationship the corporation may have with a third party or its employees.

The minority judgments
Justices Kirby and Callinan held that the legislation was invalid because, in their view, the corporations power cannot be relied upon to enact laws regulating the industrial relations of corporations and their employees, which extend beyond the limitations of the conciliation and arbitration power in s 51(xxxv). Although it was not necessary for the minority judges to reach a conclusive view about the ambit of the corporations power generally, they indicated that they would not support the wide interpretation of the power adopted by the majority because it had the potential to greatly distort the nation’s federal balance.

Implications of the decision for industrial relations
The High Court’s decision means that the new Federal workplace relations laws are valid and they will continue to operate. With respect to the regulation of industrial relations:

The NSW Government has recently enacted legislation to modify the coverage and impact of the new Federal laws. This includes legislation to allow unions and employers to operate outside the new Federal system by entering into a private agreement to refer disputes to the NSW industrial tribunal, legislation to ensure that public sector employees of statutory corporations are not covered by the new Federal system and legislation to introduce a safety net of minimum conditions and unfair dismissal remedies for child employees of corporations.
The Federal Government is currently seeking to enact new laws relating to independent contractors. The proposed legislation would also use the corporations power in the Constitution to override provisions in State industrial laws relating to independent contractors. In the future, the Federal Government may also decide to rely on the corporations power to create national schemes of regulation in relation to occupational health and safety and workers compensation.

Implications for other areas of government responsibility
For many commentators, the High Court’s adoption of a broad construction of the corporations power has implications that extend far beyond the specific field of industrial relations. In his dissenting judgment, Justice Kirby suggested potential areas for the expansion of Commonwealth power, including education, health, town planning, security and protective activities, local transport, energy, environmental protection, aged and disability services, land and water conservation, agricultural activities, corrective services, gaming and racing, sport and recreation services, fisheries and many Aboriginal activities. Justice Kirby stated: ‘All of the foregoing fields of regulation might potentially be changed, in whole or in part, from their traditional place as subjects of State law and regulation, federal legal regulation, through the propounded ambit of the corporations power’.

Implications of the decision for Australian federalism
There are those in the business community and beyond who have welcomed the High Court’s decision, saying it provides an opportunity for positive reform at the State level and for the adoption of a ‘national’ approach in several key areas of social and economic life. Others have been more critical. For Professor Greg Craven, the decision ‘changes federalism and constitutionalism in this country from being determined by the constitution to really the political will of the Commonwealth’.

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