Industrial Relations Reforms: The proposed national system
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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. 11/2005 by Lenny Roth
| On 26 May 2005 the Prime Minister, John Howard, announced major reforms to the regulation of industrial relations in Australia. One of these reforms is the creation of a national system of industrial relations. The Federal industrial relations system, which presently operates concurrently with each of the State industrial relations systems, will replace the State systems. As the States are unwilling to refer their industrial relations powers, the Federal Government will rely on the corporations power to extend the existing Federal system to cover most corporations and their employees. The Federal Government has also proposed a number of other reforms. It will introduce the new legislation into Parliament on 2 November 2005 with a view to it being passed by 8 December 2005. |
Overview of Federal and State systems
The reason that we have both Federal and State industrial relations systems is because the Federal Constitution left the States with the primary responsibility for regulating industrial relations but gave the Federal Parliament a limited power, in section 51(35), 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”. A Federal system based on this power has operated since 1904 and in that time the Federal industrial tribunal has made awards covering 27 percent of employees in NSW (as at 1990). The NSW system has also operated for over 100 years and the NSW industrial tribunal has made awards covering 49 per cent of employees in NSW (as at 1990). In addition, legislation in NSW has set certain minimum conditions of employment (eg annual leave) for all employees. Since the early 1990s, both Federal and State systems have provided for, and placed an emphasis on, the setting of wages and employment conditions through the making of enterprise agreements, in place of awards. The Federal system relies on the corporations power to allow for the making of enterprise agreements between a corporation and a group of employees.
History to proposed national system
Since federation, six unsuccessful attempts have been made to amend the Constitution by referendum to give the Federal Government a general power to legislate with respect to industrial relations. A comprehensive review of Australian industrial relations by the Hancock Committee in 1985 discussed the idea of a national industrial relations system. It believed that it was unlikely that this could be achieved by referendum or by the States referring their powers. It considered whether the Federal Government could rely on the corporations power to greatly extend the coverage of the Federal system but recommended against this option. In 1996, the Victorian Government referred its industrial relations powers to the Federal Government and the Federal system now operates in Victoria. In March 1999, Minister Reith raised the idea of using the corporations power to create a simpler workplace relations system. The Minister released discussion papers in late 2000, which explored this option in more detail. In 2002 the Federal Government attempted to create a national unfair dismissal system but this was blocked by the Senate.
Coverage of proposed national system
The proposed national system will apply to “trading” and “financial” corporations and their employees. A significant proportion of small and medium businesses are not corporations and would therefore not be covered by the new system: In 1997, it was estimated that around 26 per cent of employees in the private sector were not employed by corporations. The terms “trading” and “financial” corporations cover commercial corporations operating for profit as well as a wide range of other corporate bodies such as local councils, public universities, and providers of medical services, but not corporate charities and community service organisations that do not receive fees for services provided. State government corporations will be covered by the new system but the implied immunity principle restricts the coverage of federal industrial laws in relation to State public servants.
Constitutional validity of national system
The proposed system will primarily be based on the corporations power, which allows the Federal Parliament to make laws with respect to trading and financial corporations. The main constitutional issue is: to what extent can the Federal Government use this power to enact laws regulating the industrial relations of corporations and their employees? The High Court has not issued clear guidance on this issue and there are varying expert opinions on whether the High Court would uphold comprehensive industrial relations laws that apply to corporations and their employees. Another constitutional issue is whether validly enacted Federal industrial laws can override State industrial laws. Section 109 of the Constitution provides that Federal laws prevail over inconsistent State laws; and the Federal Parliament can create inconsistency by showing a legislative intention to “cover the field”.
State legislation to protect conditions
Queensland has passed legislation to provide protections for workers whose entitlements are eroded or removed under the Federal Government’s reforms. The Tasmanian Government is proposing to introduce similar legislation. It appears, however, that the Federal Government could exclude these new State laws.
Debate about proposed national system
The main arguments in favour of the proposed national system relate to the complexity, cost and inefficiency of having both multiple State systems and dual Federal and State systems. In view of the importance of industrial relations for the economy, it is argued that it should be a matter of Federal Government responsibility. The Howard Government also argues that the proposed national system is important for productivity gains and a strong Australian economy. The main arguments against the proposed national system are that the new system will still be a dual system with some complexity, that a national system should be achieved in consultation with the States rather than by hostile takeover, and that the proposed national system will substantially reduce workers’ entitlements.