The Regulation of Industrial Relations by Reference to the Corporations Power

A paper delivered at the 8th Biennial Australian Labour Law Association National Conference, Novotel Hotel, St Kilda.

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1.  When, on 14 December 1982, Dr Bob Brown and his supporters commenced their blockade of the works for the construction of what was to have been the Gordon below Franklin Dam, thereby putting in train a series of events that would lead to the establishment of Commonwealth legislative protection for large areas of the Tasmanian wilderness, little did they realise that they were sharpening the axe that would eventually bring down s 51(xxxv) of The Constitution. Not using it at that stage, just sharpening.

2.  It was on 1 July 1983 that the High Court upheld the validity of laws and regulations that enabled the Commonwealth to prevent the construction of the dam: The Tasmanian Dam Case (1983) 158 CLR 1. One of the grounds upon which the majority did so was that these laws and regulations, at least to the extent necessary for the Commonwealth’s then purposes, came with s 51(xx), that is, they were laws with respect to trading corporations, the corporation in question being, of course, the Hydro-Electric Commission of Tasmania. Mason (158 CLR at 148-149), Murphy (158 CLR at 179) and Deane (158 CLR at 268) JJ regarded this head of power as extending to any law on the subject of a trading corporation, whether or not touching the trading activities of it (thereby raising what had been the previous high-water mark established in cases such as Strickland v Rocla Concrete Pipes Ltd (1971) 124 CLR 468 and Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd (1982) 150 CLR 169). The fourth member of the majority, Brennan J, decided the point – on what was then the more conventional basis – because the legislation under challenge was, in one of its alternative formulations, confined to conduct by a body corporate “for the purposes of its trading activities” (158 CLR at 240-242).

3.  The Tasmanian Dam Case appears not to have excited any interest, at least at the governmental level, in using the corporations power as a vehicle for the regulation of industrial relations. A fortnight after the judgment in that case, the Minister for Employment and Industrial Relations constituted a tripartite “Committee of Review into Australian Industrial Relations Law and Systems”, the terms of reference for which, though broad, provided no encouragement for a recommendation that might favour recourse to a head of power other than para (xxxv). When the committee reported, on 30 April 1985, it dismissively referred to the corporations power, along with the trade and commerce power and the external affairs power, as “exotic”, the use of which would involve “a serious risk of antagonising the States and significant sections of the industrial relations community and might be counter-productive” (Report, para 7.13). This was one genie that would be kept firmly in the bottle.

4.  Or would it? Those with a lateral train of thought might have noticed that, since 1977, the Trade Practices Act 1974 (Cth) had contained s 45D, the constitutional foundation of which was the corporations power and which had been held to be valid by the High Court seven months before Dr Brown’s blockade: Actors and Announcers. The Court rejected the argument advanced by Michael McHugh QC: “Section 45D is not a law with respect to … trading corporations …. It is a law regulating the conduct of persons imposing secondary boycotts.” (150 CLR at 171) So the section survived, and provided the basis for much subsequent litigation in an area that fell within, albeit perhaps towards the fringes of, industrial relations. This placement of the problem was reflected in the report of the Committee of Review to which I have referred. Unusually in the context of its report, the Committee was here unable to present a consensus position to the Minister. Within the Committee, there were two “conflicting views”, one which saw s 45D as concerned with the regulation of what were “essentially industrial” activities, and the other which saw it as the means by which third parties could secure “legal redress” for loss and damage inflicted on them by participants in a dispute in which they were not directly involved (Report, para 10.320).

5.  It was the former view which, it seems, informed the decision to include Div 7 of Pt VI in the Industrial Relations Act 1988 (Cth) (“the IR Act”). The provisions of that division, which provided a mechanism to involve the Industrial Relations Commission in conciliation for the settlement of so-called boycott disputes, relied on the corporations power. Then, in 1992, ss 127A-127C were introduced into the IR Act. They invested the Commission with the power to set aside or to vary a contract to which a “constitutional corporation” was a party on the ground that it was unfair, harsh or against the public interest. To the extent that the new provisions went further and empowered the Commission to deal with a contract which was linked to a non-party constitutional corporation only because it related to the business thereof, those provisions were held to be invalid in Re Dingjan (1995) 183 CLR 323, but that limited qualification on the emerging utility of the corporations power need not detain us at this point.

6.  The following year, with the enactment of the Industrial Relations Reform Act 1993 (Cth) (“the Reform Act”), s 45D of the TP Act was rendered inapplicable to boycott disputes as defined in the IR Act, and a new s 162 was introduced which provided, in subs (3), that “a person must not take part in a boycott if either the third person or the fourth person is a constitutional corporation”. But the Reform Act went much further than to reconfigure the way that boycott disputes were dealt with. It introduced the first form of enterprise-level industrial instrument – I shall not call it an “agreement” – which did not need to have, on the employee side, a party to an industrial dispute as the relevant party: the “enterprise flexibility agreement”. Such an instrument could be “prepared” only by “an employer that is a constitutional corporation”. By this stage, the corporations power was being used for the explicit purpose of regulating conduct occurring in the industrial relations context: the genie, as it were, was now head and shoulders out of the bottle.

7.  The validity of the amendments made by the Reform Act was challenged in the Industrial Relations Act Case (1996) 187 CLR 416, but it was, with one minor exception, conceded “that the Parliament [had] power to legislate as to the industrial rights and obligations of constitutional corporations” (187 CLR at 539).

8.  That power was utilised to provide a statutory and regulatory framework for the making and enforcement of conventional collective agreements in amendments made to the IR Act by the Workplace Relations and Other Legislation Amendment Act 1996 (Cth). There was thus ushered in a period characterised by hybrid industrial relations regulation: the conciliation and arbitration power continued to sustain so much of the legislation as related to the prevention and settlement of industrial disputes, including those provisions under which awards were made and agreements which tended to settle such disputes were negotiated, while the corporations power sustained so much of the legislation as related to agreements made between constitutional corporations and their employees, or organisations representative of the industrial interests of their employees. By this stage, the genie was well and truly out of the bottle, but he discovered that his freedom was less congenial than he might have anticipated, in that he was required to share it with that curmudgeonly old traveller, the conciliation and arbitration power.

9.  Doubtless because of what had been said by the High Court in the Industrial Relations Act Case, there was no challenge in that court to the validity of the 1996 amendments, to the extent that they utilised the corporations power in the way I have described. Thus the way was open for the legislature to phase out reliance on the conciliation and arbitration power, which it did – almost, but not quite, completely – in amendments introduced by the Workplace Relations Amendment (Work Choices) Act 2005 (Cth). If there was one thing that the re-named Workplace Relations Act 1996 (Cth) (“the WR Act”) did not do thereafter in relation to the regulation of industrial relations at the collective level, it was to provide a choice as between a stream which relied on the conciliation and arbitration power and a stream which relied on the corporations power, as had hitherto been the case. The genie now had unchallenged occupation of his new paradise.

10.  Indeed, it was the almost complete abandonment of the conciliation and arbitration power as a constitutional justification for industrial relations legislation that formed the basis of a High Court challenge to the 2005 amendments. In the Work Choices Case (2006) 229 CLR 1, that challenge was unsuccessful, but it was the words of Kirby J in dissent (229 CLR at 245-246 [614]) which, albeit deprecatingly, captured the mood of the age:

The precise constitutional issue now presented has not previously been decided by this Court because, for most of the past century, its resolution was regarded as axiomatic. It was self-evident that the corporations power did not extend so far as the majority now holds it to do. It was for this reason that, through referendums, successive governments sought – without success – popular approval for the enlargement of federal power with respect to industrial disputes. The repeated negative voice of the Australian people, as electors, in votes on these referendums, is now effectively ignored or treated as irrelevant by the majority. I accept that the corporations power in the Constitution, when viewed as a functional document, expands and enlarges so as to permit federal laws on a wide range of activities of trading and financial corporations in keeping with their expanding role in the nation's affairs and economic life. But there are limits. Those limits are found in the express provisions and structure of the Constitution and in its implications. This Court's duty is to uphold the limits. Once a constitutional Rubicon such as this is crossed, there is rarely a going back.

(As a matter of interest (albeit, it must be said, of no present relevance), this classical metaphor appears to have been much loved by his Honour. In Wilson v Anderson (2002) 213 CLR 401, 457 [139], he used it to convey what had happened apropos native title in Mabo v Queensland [No 2] (1992) 175 CLR 1, and, in Central Bayside General Practice Association Ltd v Commissioner of State Revenue (2006) 228 CLR 168, 206 [113], he used it with reference to the removal of the stifling effect of an inconvenient Privy Council judgment on the development of the Australian law of charities.)

11. While the WR ACT was “in large part, an exercise of the corporations power” (Work Choices Case 229 CLR at 55 [1]), the Fair Work Act 2009 (Cth) (“the FW Act”) which replaced it comprehensively involved, and continues to involve, an exercise of that character, at least so far as the mainstream of private sector industrial relations are concerned. By comparison with a system which relied on the conciliation and arbitration power, what changes has this brought in the conduct of industrial affairs? Industrial relations practitioners tend to have a more laid-back disposition apropos changes in the law than their counterparts in other areas affected by Commonwealth legislation such as, for example, those who practise in the areas of intellectual property and tax. The silent premise seems to be that the underlying realities will never change, and that the outcome of any disagreement or issue will tend to be the same, regardless of the legislative framework within which the practitioners go through their required motions. With respect to the changes that we have seen in the last decade, I am not so sure about this premise.

12. Things were much simpler under the conciliation and arbitration power. The rules surrounding the creation, and the limits, of industrial disputes had been established in a series of High Court cases over a number of generations. The existence of a dispute based on a carefully formulated log of claims provided both the ambit of any agreement or award which might be made by way of settlement and the parties to such an agreement or award. Once the only constitutional requirement was that one of the parties to an agreement be a constitutional corporation, however, the question arose: who might the other party be? Since about the mid-1990s, the idea that an employer might make an agreement with its employees, rather than with a union, has gained currency, to the point where such a procedure is now the paradigm outcome, as it were, of successful collective bargaining. Indeed, as is well-known, it is only in relation to “greenfields” agreements that employers may make agreements with unions as such. Otherwise, the role of unions is as bargaining representatives of employees who will be asked to approve the agreement.

13. Then there was the question of to whom a collective agreement would apply. This question had, and has, dimensions both of latitude and of longitude. As to latitude, the question involves the spread of the agreement over the employer’s workforce. At the outset, this appears to be entirely a matter for the employer, a circumstance which, the legislature clearly anticipated, might lead to problematic outcomes. Thus the facility for the making of “scope orders” under s 238 of the FW Act, but only, it should be noted, on the application of a bargaining representative, that is to say, a representative of someone who will be covered by the agreement in its then proposed terms. As to longitude, the question involves the relationship between the employees who approve the agreement and the employees who, over the term of the agreement, will have their terms and conditions of employment covered by it. As the Full Court has pointed out (Toyota Motor Corporation Australia Ltd v Marmara (2014) 222 FCR 152, 179 [88]), for employees in the latter group who were not in the former, it is not an agreement in the generally understood sense at all. Under legislation based on the conciliation and arbitration power, it was always thus, of course, but the opportunity for a well-advised employer to secure the approval of an agreement from a very limited cohort of employees in circumstances where it is reasonably anticipated that the size of that cohort will greatly increase has not gone unnoticed in recent times and may not be ideal from a policy point of view: see Construction, Forestry, Mining and Energy Union v John Holland Pty Ltd (2015) 228 FCR 297, 302-303 [20].

14. If there were one thing which characterised the operation of the conciliation and arbitration system, it was the broad discretion which was reposed in the tribunal by which disputes were prevented and settled. The sanctity of the processes concerned was underpinned by the privative clause which was to be found in the IR Act and its predecessor. The Fair Work Commission still has a substantial role in the administration of collective bargaining under the FW Act, and the size of its decision-making function by reference to matters of assessment, judgment or discretion is considerable (by my count, the expression “if the FWC is satisfied” appears 65 times in the FW Act). But its decisions are now exposed to the chill winds of judicial review, winds which, largely as a result of High Court activity in migration and refugee cases, blow more strongly, and over a wider front, than they ever have before. A generation ago, who would have thought that the decision of the tribunal on whether to grant leave (now described as “permission”) to appeal not only might, but would, be subject to contested proceedings in a court on administrative law grounds? But that has been the experience: see Australian Postal Corporation v D’Rozario (2014) 222 FCR 303 and Australian Commercial Catering Pty Ltd v Fair Work Commission (2015) 235 FCR 441.

15. Still, regulation by judicial review of decisions of the Commission may be preferable to the alternative. Under the WR Act in its post-Work Choices terms, there were no fewer than 36 civil remedy provisions which regulated, by direct statutory edict, the conduct of parties under Pt 8, which dealt with the matter of “Workplace Agreements”. Part 2-4 of the FW Act, which correspondingly deals with “Enterprise Agreements”, contains but one civil remedy provision. The enforcement of the various rules which together make up the system of collective bargaining we have today is done by administrative means, largely by requiring the Commission to be satisfied that these rules have been observed, absent which the next step, presumed to be desired by the employer concerned, may not be taken. For example, as the Full Bench of the Commission in Peabody Moorvale Pty Ltd v Construction, Forestry, Mining and Energy Union [2014] FWCFB 2042 pointed out, the result of a notice of employee representational rights not having been validly given under s 173 of the FW Act is that there will be no reference point for the time within which the employer may ask its employees to approve the agreement by voting under s 181(2), and, unless the Commission is satisfied under s 188(a)(ii) that s 181(2) has been complied with, it will consequently not be satisfied that the agreement was genuinely agreed to for the purposes of s 186(2)(a), and the agreement will not be approved.

16. The option of taking protected industrial action lies, of course, at the centre of the collective bargaining regime contemplated by the FW Act. Yet, and perhaps necessarily, it is set about with countless requirements and qualifications, both positive and negative. It is not beyond the memory of many living souls that the Conciliation and Arbitration Act 1904 (Cth) (“the CA Act”) not only contained no prohibition upon the taking of industrial action but expressly forbad the then Australian Industrial Court, and later the Federal Court, from enforcing, by injunction, a bans clause in an award. How things have changed. Now, the FW Act contains both direct (eg s 417) and indirect (eg s 343) prohibitions upon industrial action. As a generality, the prohibitions will not apply if the industrial action is protected. Whether a particular instance of industrial action is protected may depend upon the presence or absence of qualifying or disqualifying factors as determined by a court some time later. In a recent case, whether the action was protected depended, amongst other things, on whether it fell within the terms of the relevant notice given by the union concerned under s 414 of the FW Act; and that, in turn, raised an issue as to the construction of the notice. A series of notices was given in January, February and early March 2015, and industrial action followed. The conformity of the action with the notices was challenged in court, and an interlocutory restraint upon the taking of industrial action was obtained. In due course, a final judgment delivered on 24 July 2015: Esso Australia Pty Ltd v Australian Workers’ Union (2015) 253 IR 304. The case went to the Full Court, which delivered its judgment on 25 May 2016: Esso Australia Pty Ltd v Australian Workers’ Union [2016] FCAFC 72. Subsequently, both sides sought special leave to appeal to the High Court. In the meantime, I presume, collective bargaining, such as it would be, is proceeding in the absence of protected industrial action.

17. To descend to a point which is, on one view, of minute detail, an issue which arose in Esso was whether, in making an order under s 418 that industrial action stop etc, the Commission was limited, and if so how, to “the” industrial action which had been the subject of a finding under subs (1) of the section. The Full Court held that it was. Such a limitation on the Commission’s ability to deal with what would often have been the ebb and flow of a live industrial dispute had no place in the system which relied on the conciliation and arbitration power. Although the enforcement of a bans clause may have been problematic in a number of respects, the Commission was blessed with almost infinite flexibility in the making of such a clause, so long as it did not stray too far from the dispute for the enduring settlement of which the clause would provide support. This is but one of many instances of the justiciability of facts, matters and circumstances which arise in the regulation of industrial affairs where the only constitutional prop is that one of the relevant parties is a corporation. Under such a system, so much of the regulation is now a matter of edict by the statute itself, compliance with which must, if push comes to shove, take the relevant parties to court.

18. Traditionally, the main regulatory instrument in industrial relations was the award. It was possible for the parties to reach an agreement as to all or some of the matters in dispute, and have the agreement certified, but, in an era when awards could be made by consent and did not have their “safety net” function, certified agreements were a minor part of the scene. The recent statutory focus upon award rationalisation and modernisation stands as a formal reminder of the sometimes chaotic state into which the pattern of awards had drifted under the conciliation and arbitration power. The legislature’s attempt to wind back the range of matters exposed to regulation by award in 1996 survived by a single vote in a seven-member High Court: Re Pacific Coal Pty Ltd (2000) 203 CLR 346. Nowadays, however, the “modern award” with which we are all familiar is an unashamedly legislative instrument tightly regulated by the statute under which it is made.

19. The question arises, should we approach the construction and enforcement of a modern award by reference to the well-known advice given by Madgwick J in Kucks v CSR Ltd (1996) 66 IR 182, 184 that the framers of an award were likely to have been “of a practical bent of mind”, thus requiring us to give effect to the evident purposes of the award, having regard to the context in which it was assumed to have been made, namely, that of “the relevant industry and [the] industrial relations environment”. His Honour did not put it in these terms, but the image evoked was that of a smoke-filled crib room, and of the terms of an award being thrashed out on a laminex-topped table by workers and managers who were soon to return to their tools and their boardrooms. If this ever was the setting of award-making, it would create a misleading impression of the contemporary realities of the making of a modern award under the FW Act. At base, the difference flows from the circumstance that the modern award, unlike its predecessor under the C&A Act and the IR Act in at least its early years, is not the property of any party. It has more in common with a regulation made under statute than with an award made in settlement of a dispute.

20. It is otherwise, of course, with respect to an enterprise agreement made and approved under the FW Act. From what I have seen, there remains every reason to assume that these kinds of instruments are often the work of people in the enterprises or industries concerned, as they should be. From a regulatory point of view, that circumstance does not, one observes, uniformly produce satisfactory outcomes. It may be that a court tends only to see the worst of examples, but the impression I get is that enterprise agreements generally could benefit from a greater awareness, on the part of their drafters, of the importance of a clear identification of what must, or must not, be done in specific situations, and from a reduction in the use of euphemisms which, as often as not, reflect not a consensus on the part of the agreement-makers but a successful search for a “form of words” designed to accommodate, and to conceal, very different understandings. In a regulatory setting, a drafting approach of the latter kind inevitably leads to litigation: see eg National Tertiary Education Union v La Trobe University (2015) 254 IR 238.

21. On the subject of trade unions, the judgments of the High Court which defined the jurisprudence which both upheld legislation which provided for the registration and incorporation of registered organisations as participants in a system of conciliation and arbitration and marked out the limits of their capacity to act as “party principals”, even where flesh and blood members were lacking, formed the backbone of many an undergraduate course in industrial law. I presume this was the case until at least the mid-1990s, but I can vouch only for the later 1960s. As you will need no reminding, the legislation which dealt with registered organisations has never been repealed: the Fair Work (Registered Organisations) Act 2009 (Cth) is the twice-renamed IR Act. The FW Act itself is replete with the phrase, apropos organisations and, in some situations, associations, “entitled to represent the industrial interests of ….” But, in a legislative setting in which the principle for which R v Dunlop Rubber Australia Ltd (1957) 97 CLR 71 stands is irrelevant, what does it mean to say that an organisation has such an entitlement? It was recently held in Regional Express Holdings Ltd v Australian Federation of Air Pilots [2016] FCAFC 147 that it meant the same as it has always meant, although it was recognised that this might now be viewed as involving a legal fiction to a degree.

22. Adverse action, as someone pointed out at a Victorian Bar seminar recently, is “the new black”. Proceedings under Pt 3-1 of the FW Act just keep coming through the doors of the Federal Court and the Federal Circuit Court. The options for an intending applicant under ss 340 and 346 are dizzying. These provisions have their origins, of course, in what was s 5 of the C&A Act, the content of which was expanded considerably in s 334 of the IR Act. But, from the statutory menu which is presented by the FW Act, examples of delicts which could never have been validly legislated under the conciliation and arbitration power are readily to be found. For instance, adverse action may not be taken against an employee because he or she is entitled to the benefit of a State law dealing with occupational health and safety; or because he or she complies with a lawful request made by an unregistered, informally constituted, industrial association. These prohibitions, and others like them, are validly enacted because the employer concerned is a constitutional corporation, and the employee concerned is employed by the employer. From there, the range of actions which are regulated, and the range of reasons which are prohibited, become entirely matters of policy.

23. I bring this discussion of some of the respects in which the regulation of industrial relations under the corporations power has challenged our institutional and cultural assumptions in a number of areas to an end at this point for the best reason of all: I have run out of time. I do not suggest that the areas I have canvassed are exhaustive, or nearly so. Doubtless many of you will have other examples to add to the list. My parting hope is that what I have said will stimulate you to further inquiry and analysis which must, at base, always be the driver of improvements in the law.