Does one IR umbrella really provide protection?

by 25 Jun 2008

Can we have a single industrial relations system when individual States hold so much power? Greg Robertson and Manoj Dias-Abey, of Harmers Worklplace Lawyers, examine the Federal Governments recent industrial relations changes and whether they effectively protect the rights of the employer and the employee

Human Resources practitioners are often called upon to determine whether a Federal or State law applies to an employee. Unfortunately, this task is made more complicated by the fact that, even for employers and employees covered by the Federal workplace relations system, certain State laws continue to apply.

Determining the precise line of demarcation between Federal and State industrial laws can be a minefield for employers. Whether Federal law, State law – or even both laws – operate can be difficult to work out. How should HR practitioners go about ensuring that they are complying with the correct law?

Can we have a single system?

This complexity adds to inefficiencies and costs, particularly for employers operating in more than one State. For that reason, many have argued for a single industrial relations system for Australia. Can we have such a system when, under our Australian Constitution, the Federal Government is given no direct power over “industrial relations” and States jealously guard their powers?

The Coalition experiment: WorkChoices

“WorkChoices”– the industrial relations legislation introduced by the Howard Government – was, among other things, an attempt to comprehensively regulate the relationship between corporate entities and their employees. There was much talk of finally achieving a single industrial relations system in Australia, with WorkChoices bringing most (an estimated 85 per cent) private sector employers into the Federal system.

Traditionally, Federal governments in Australia had used the Constitution’s “conciliation and arbitration”power as the basis for industrial relations legislation, but this only gave the Commonwealth power to deal with industrial disputes when they affected more than one State, leaving large areas for the States to regulate.

The Howard Government relied not on that power, but on the power given to the Commonwealth to make laws regarding “trading and financial” corporations. A challenge by States and the unions in the High Court (with the States arguing, in effect, that those who wrote the Constitution could not have intended the corporations power to be used to govern the employment relationship) failed and the Court in 2006 found the legislation was constitutionally valid.

Because the Commonwealth has the power to legislate in the area of industrial relations for trading and financial corporations, the Federal Government is able to exempt Federal-system employers from large tracts of State industrial laws by using section 109 of the Constitution.

This section provides that where laws are inconsistent, Commonwealth law will prevail over State law. Historically the High Court has interpreted this provision broadly, allowing the Federal Government to exclude the operation of State laws even where the Commonwealth has not specifically legislated in an area, but simply expressed an intention to cover that area of regulation exhaustively.

The extent of the federal legislation

It is important to note that, despite its wide powers, the Commonwealth did not seek to override all State industrial laws. Recognising that the Commonwealth did not have an entirely comprehensive regime of regulation when it came to industrial relations, the Government preserved areas of State regulation, such as OH&S. Accordingly, even under WorkChoices, employers were also bound by a number of State industrial laws.

Section 16 of the Workplace Relations Act, for example, operates as a statement of the Commonwealth’s intention to exclusively regulate industrial relations for Federal-system employers, but specifically states that a number of State laws continue to operate. These include laws dealing with:

• discrimination and equal opportunity laws;

• superannuation;

• workers’ compensation;

• occupational health and safety (OH&S);

• outworker regulation;

• child labour;

• long-service leave;

• public holidays;

• payment of wages and salary;

• industrial action affecting essential services;

• jury service; and

• the regulation of industrial organisations.

Attempts to keep and expand State powers

The unions and some State governments have attempted to use the exemptions in section 16 to extend the reach of the State systems. The New South Wales Government, for example, relied on the child labour exemption to pass the Industrial Relations (Child Employment) Act 2006, ensuring that employees aged under 18 employed by a Federal-system employer were still covered by State award provisions.

Union attempts to use the exemptions have resulted in litigation in various State industrial tribunals and in the Federal Court. One of the most publicised cases was the 2007 decision of the Industrial Court of NSW in Construction, Forestry, Mining and Energy Union v Brolrik Pty Ltd, which considered whether the anti-victimisation provisions in the Industrial Relations Act 1996 (NSW) could be characterised as laws with respect to OH&S, and therefore, allowed to co-exist with the Federal industrial relations system.

Mr Hemsworth was dismissed by Brolrik Pty Ltd after he refused to attend a compulsory OH&S training session. The Industrial Court, in ruling that Brolrik Pty Ltd had breached State anti-victimisation laws, found that those provisions in State legislation could indeed be characterised as laws with respect to OH&S, and were, therefore, binding on that company even though it was an employer within the Federal system.

Another case which received attention in 2007 was the CFMEU’s attempt to test whether Endeavour Coal Pty Ltd and 26 other coal companies, under the Federal system but operating in New South Wales, could be bound by a State award about long-service leave.

The union argument that this was permissible because State laws about long-service leave were explicitly preserved by section 16 was initially successful, but the companies appealed to the Federal Court which found in favour of the coal companies. In handing down its decision, the Full Bench of the Federal Court commented that the Commonwealth had expressed an intention to establish a safety net for employees in the Workplace Relations Act, and allowing the State tribunals to make awards binding Federal employers would run counter to this intention.

The need for change

Where the law remains unclear and the boundary between jurisdictions porous, parties will understandably attempt to use the laws opportunistically to their own advantage. Territorial battles between the Commonwealth and States about jurisdiction lead to uncertainty and do not benefit either employers or employees in the long run.

It is clear that a co-operative approach between the Commonwealth and the States is necessary to establish a truly Federal system of industrial relations regulation. The fact that Governments of the same political persuasion are in power federally and in all States and Territories presents a unique opportunity for forging a truly workable system because it is less likely that political considerations will intrude to influence outcomes.

A truly National system under Forward with Fairness?

Prior to the elections in late 2007, the Rudd Labor Government pledged to create a truly Federal industrial relations system and has prioritised the achievement of such a unitary system as a part of the “Forward with Fairness” reforms.

The early signs look promising. In a recent meeting of the Workplace Relations Ministers Council, a set of principles to guide the development of a uniform national system for the private sector was determined. These principles include a national system which will:

• provide a strong safety net of minimum standards; • facilitate collective bargaining at the workplace level; and

• provide unfair dismissal remedies and other effective remedies through an impartial industrial umpire.

The ministers’ meeting was vague in terms of a definite timeline for achieving a Federal system, but this will be an important area for employers to keep under review.

There are a number of methods by which a truly national system can be achieved, including the States referring their industrial relations powers to the Commonwealth (similar to what Victoria did in 1996) or the States passing legislation that mirrors Federal legislation.

A serious drawback about the second option is that it will not allow a uniform system of enforcement because the High Court has previously ruled that Federal Courts cannot enforce State laws.

This could mean that, for example, an employee employed by an unincorporated entity will have to utilise a State Court to enforce an industrial law in circumstances where a trading corporation would have resort to the Federal Court regime.

It is entirely conceivable that State Courts may interpret identical laws in a different manner to the Federal Courts, and, over time, this could mean that State laws will begin to diverge from comparable Federal laws.

However, allowing the States the discretion to elect how they will co-operate with the Federal Government to create a national industrial relations system may be a palatable solution to a political impasse that may otherwise stymie this important development.

While negotiations between the Commonwealth and States to determine a federal system of industrial regulation proceed, employers will need to continue to be aware of overlapping Federal and State regulation and try and circumnavigate both systems to the best of their ability.

This could mean that, for example, an employee employed by an unincorporated entity will have to utilise a State Court to enforce an industrial law in circumstances where a trading corporation would have resort to the Federal Court regime.

It is entirely conceivable that State Courts may interpret identical laws in a different manner to the Federal Courts, and, over time, this could mean that State laws will begin to diverge from comparable Federal laws.

However, allowing the States the discretion to elect how they will co-operate with the Federal Government to create a national industrial relations system may be a palatable solution to a political impasse that may otherwise stymie this important development.

While negotiations between the Commonwealth and States to determine a federal system of industrial regulation proceed, employers will need to continue to be aware of overlapping Federal and State regulation and try and circumnavigate both systems to the best of their ability.

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