Industrial relations responsibility in Australia

23 March 2015
While the Australian Constitution notionally gives the states the primary responsibility for regulating industrial relations, today there are two avenues through which state government agencies may be covered by the federal system.

By Giri Sivaraman and Anika Wells

Firstly, states can refer their industrial powers to the Commonwealth under s 51
(xxxvii) of the Constitution, to enable the creation of a national system. Secondly, a state government agency may be deemed a constitutional corporation, which is defined as a ‘trading or financial corporation formed within the limits of the Commonwealth’. The Commonwealth, as was made clear in the ‘Work Choices’ decision of the High Court in 2007, can legislate for industrial and employment law matters for constitutional corporations.

This Full Court decision dealt with a number of issues related to agreement making and the constitutional limitations of the Fair Work Act. We set out the background and then deal with the significant finding that restricts the ability of state governments to walk away from Enterprise Agreements.

Background

This proceeding arose from a dispute between the Country Fire Authority (CFA) and the UFU (United Firefighters’ Union (UFU) in October 2010. Clause 27 of the Country Fire Authority/United Firefighters’ Union of Australia Operational Staff Enterprise Agreement 2010 (Agreement), required the CFA to employ 342 career firefighters over a six-year period and to conduct a minimum of three recruitment courses every year, each of which trained at least 30 recruits.  The Brumby Labor Government was in office at the time, but the Coalition came to power a month later at the November 2010 election. Under the new government, the CFA backed away from the recruitment regime, saying it had voluntarily committed to the additional firefighters.  The UFU sought to enforce the Agreement in the Federal Court.

Issues in Dispute

Two of the key issues for determination before the Full Court were:

a) whether the CFA was a trading corporation, and

b) whether the relevant clauses within the Agreement were invalid and unenforceable because of the implied constitutional limitation on Commonwealth legislative power articulated in Melbourne Corporation and Re AEU. That is, whether the agreement impaired the capacity of the State Government to determine the number and identity of State Government employees or who it makes redundant, and therefore curtails the State Government’s capacity to function as a government.

Is the CFA a Trading Corporation?

The Full Court upheld Justice Murphy's finding that the CFA was a trading corporation within the meaning of section 51(xx) of the Constitution.  In the Court's view, while the CFA was characterised as a 'volunteer and community based fire and emergency services organisation' and was plainly dependent on the State Government and fire insurers for the vast bulk of its financial support, the trading activities in which it engaged (generating nearly AU$13 million in revenue), although secondary to the CFA's primary purpose, could not be regarded as insignificant, incidental, trivial or unimportant.

Are the relevant clauses within the Agreement invalid and unenforceable by reason of the implied constitutional limitation articulated in Melbourne Corporation and Re AEU?

The Full Court accepted the UFU's contention, holding that the relevant clauses of the Agreement did not offend the implied limitation enunciated in Melbourne Corporation and Re AEU in circumstances where the CFA had voluntarily agreed to make the Agreement and, as such, had consented to its approval by the Commission in accordance with the Act. 

In particular, the Full Court observed that the Act's regime for the (voluntary) making and approval of enterprise agreements did not have the effect of the Commonwealth imposing on the State of Victoria or the CFA a significant impairment, interference, curtailment, control or restriction on governmental functions of the kind envisioned in Re AEU. That case involved the imposition of a binding award in an arbitrated context under a different statutory regime.

Implications

This is a landmark case for state governments, authorities and unions seeking to implement and uphold enterprise agreements. However, the immediate impact of the decision is confined to public sector corporations which are constitutional corporations.

  1. The most essential element is that if a body voluntarily makes an agreement on matters like staffing agreements or redundancies, it will be bound to it.

  2. State agencies or statutory bodies may be regarded as a trading or financial corporation (and therefore not affected by Referral legislation limitations), if their trading or financial activities are not incidental or unimportant.

  3. The implied constitutional limitation may still apply to public sector constitutional corporations in the context of:

    a) workplace determinations, particularly where the terms are arbitrated, or

    b) in circumstances of enterprise agreement making where the public sector constitutional corporation agreed to a term (such as redundancy or number and identity of employees) in factual circumstances where the agreement could not be regarded as voluntarily entered into by the employer (eg the Court gave the example of a strike by firefighters at the height of firefighting season).

  4. State agencies which are not constitutional corporations but are covered by the Federal System through a referral of powers, are still limited in enterprise agreement making to subject matters referred by the State Referral legislation.  However this decision now gives a proper basis for public sector unions and state governments to revisit State Referral legislation to give effect to the sophisticated reading of Re AEU by the Full Court.