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Industrial Relations: The Referral of Powers

Industrial Relations: The Referral of Powers

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. 7/2009 by Jason Arditi

Constitutional Foundations: For most of the 20th century, Commonwealth industrial relations law was based on the conciliation and arbitration power of the Commonwealth Constitution (s 51(xxxv)). This head of power provides that the Commonwealth may make laws with respect to the:
      Conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one State.
Historically, this power limited the Commonwealth’s role in industrial relations legislation to establishing the machinery of dispute resolution and handling interstate disputes. [2.1] – [2.2]

In the 1990’s, both the Keating and Howard Governments amended relevant industrial relations laws using different constitutional heads of power. The external affairs power (s 51(xxix)) was invoked to legislate on minimum wages, leave entitlements and anti-discrimination, while the corporations power (s 51(xx)) was invoked to legislate with respect to a corporation’s ability to enter into enterprise bargaining agreements, both collectively and with individual employees. [2.3]

A major constitutional step-change occurred when, in 2005, the Howard Government’s Work Choices legislation was founded primarily on the corporations power. By sidestepping the conciliation and arbitration power, the Commonwealth was announcing it could now make laws on industrial relations for constitutional corporations, unencumbered by previous limitations. The effect was to bring approximately 85% of workers within the remit of the Commonwealth industrial relations system. A subsequent High Court challenge – NSW v Commonwealth [2006] HCA 52 - confirmed that the Commonwealth could indeed rely on the corporations power when legislating on industrial relations matters. [2.4]

While the Work Choices legislation has since been replaced by the Fair Work reforms of the newly elected Rudd Government, the constitutional implications remain. An overwhelming majority of workers are still under the Commonwealth system with only public sector workers, as well as employees of partnerships and other unincorporated organisations spread across the remaining coverage of the States.

Referral Powers: The current situation has prompted suggestions that the States refer their remaining powers to the Commonwealth. Section 51(xxxvii) of the Commonwealth Constitution provides that:
      Matters referred to the Parliament of the Commonwealth by the Parliament or Parliaments of any State or States, but so that the law shall extend only to States by whose Parliaments the matter is referred, or which afterwards adopt the law. [3.1]

These can be either general powers, where a State (or States) gives the Commonwealth almost unlimited ability to legislate as it considers fit on a designated matter, or text-based, where a State (or States) proscribes the scope and extent of the Commonwealth’s ability to legislate on a matter that is being referred. [3.2]

As confirmed by the High Court, the States are able to make referrals for a specified period of time, or else insert termination clauses that take effect in certain circumstances. Similarly, the High Court has ruled that the referral power does not diminish the ability of a State (or States) to legislate concurrently with the Commonwealth, provided that the State does not enact legislation that is inconsistent with a relevant Commonwealth law.

While the High Court has ruled on some aspects of the referral power, others remain to be determined. This includes whether a general reference can be revoked and whether laws made pursuant to a reference remain valid after the reference expires. [3.3] – [3.6]

The Position of the States: Although all States have referred matters to the Commonwealth at some point in their history, such as the nationwide referral of corporate matters and terrorism related matters, to date, only Victoria has referred its industrial relations powers. [4.1] However, this situation may change as the Commonwealth is seeking to establish a national industrial relations system. [4.2] To this end, South Australia and Tasmania have both announced their intention to introduce referral legislation. At this stage Queensland has provided in-principle support for such a referral of power. On the other hand, Western Australia has indicated it does not intend to refer its industrial relations power. [4.3] The NSW position remains to be decided. Certain benefits of a national industrial relations system are acknowledged, while at the same time there is recognition of the advantages of particular features of the NSW system. A 2007 report by George Williams, commissioned by the NSW Government, canvassed the options available to NSW with respect to its industrial relations system, including the possibility of a referral of powers to the Commonwealth. [4.4]

Arguments in Favour and Against: The arguments on behalf of a State referring its industrial relations powers tend to focus on the merits of having uniform industrial relations law with a strong focus on the certainty, clarity and efficiency for businesses and workers that a uniform system would bring. In addition, proponents stress the inherent fairness in having just one industrial relations law. [5.1]

The contrary arguments tend to centre on the positive contribution competitive federalism has on policy creation, together with the negative constitutional implications for Australia’s federal system of government. [5.2]