Australia: The High Court Says Yes To The Work Choices Legislation

On Tuesday, 14 November the High Court handed down its 401 page Judgment on the States’ challenge to the Work Choices legislation. A majority of 5:2 supported the validity of the Act. Interestingly, the breakdown between the majority broadly supports the predictions of those in the Court based on the Justices’ body language and comments from the Bench made during the proceedings.

There is now no uncertainty about whether or not the national system is here to stay.

Some employers may have been ‘sitting on the fence’ awaiting the High Court’s decision, not quite sure what to do and when to do it. Now, there are no excuses. 2007 (and, indeed, the rest of 2006) will be the time to start acting.

Seven actions were brought soon after Work Choices came into effect in March this year seeking declarations that the entire act was invalid, or alternatively, that specific provisions were invalid. All of the challenges made were unsuccessful with costs awarded against the States and two unions.

The crux of the issue in the States’ challenge focussed on the breadth of the ‘corporations power’ in section 51(xx) of the constitution. Of course, the Federal Government only has the power to enact laws where it has the power to do so emanating from the Federal Constitution. Until the early 90s, Federal industrial relations laws were based on what has been called ‘the conciliation and arbitration’ power set out at 51(xxxv) of the Constitution. This was available for the ‘prevention and settlement of industrial disputes beyond the limits of any one State’.

The ‘corporations power’ allows Federal laws to be made with respect to ‘trading’ corporations. The majority recognised that a corporation’s dealings with its employees are part of its ‘trading activities’ and rejected the argument that a distinction should be drawn between ‘external’ and ‘internal’ relationships of a corporation so to limit the corporations power to only ‘external’ issues.

We have, in the past, seen a number of parts in the Workplace Relations Act (1996) Cth (the Act), such as the certified agreement and Australian Workplace Agreement provisions enacted based on the ‘corporations power’ and not the ‘arbitration’ power, but nothing to the scale of the Work Choices amendments. The majority said that if Work Choices should fail on the basis of constitutional invalidity, then so should the earlier legislation.

Another argument against the use of the corporations power for workplace laws was essentially that ‘if the conciliation and arbitration power has always been used in the past, why is the Federal Government all of sudden using the corporations power?’ The High Court rejected this argument and has demonstrated a willingness to allow a much broader use of the corporations power.

The majority noted that in one of the most significant industrial cases in 2004, Electrolux Home Products Pty Ltd v Australian Workers Union [2004] 221 CLR 309, the constitutional underpinning of certified agreements in the Act (as it then was) was ‘noted, but not questioned’. Further, the majority noted that no party in the proceedings questioned the validity of the Trade Practices Act 1974 (where based on the corporations power) in its application to domestic (intra-State) trade of constitutional corporations.

Mr Justice Kirby’s strong and characteristically eloquent dissent led him to describe the Commonwealth’s use of the corporations power in this way as a species of ‘co-ercion’. The title ‘Workplace Relations Act’ was retained for comfort reasons only, given the radically altered thrust and content of the amendments. He concluded that in ‘moving the Constitutional goalposts ... the imperative to ensure a "fair go all round" ... is destroyed in a single stroke’.

He lamented the crossing of a ‘constitutional rubicon’ from which there was rarely a going back despite its attack on core Australian values and the serious imbalance it presented to the Federal character of the nation’s governance.

Mr Justice Callinan, also at odds with the majority, offered in terms of length the largest Judgment in the decision. He opens with the finding that ‘Work Choices’ is ‘well beyond, and in contradiction of what was intended and expressed in the Constitution by the founders’ and that nothing less than the future integrity of the Federation and the existence of powers of the States are at stake.

Justice Callinan gives a detailed review of how those founders and their successors historically approached the interface of capital and labour, from the Convention Debates onwards, where despite the myriad of cases and reviews, until now no one had contemplated the corporations power being used in this way. He also noted that the 36 or so attempts to enlarge the only relevant power - industrial power - by referenda had repeatedly been rejected by Australian voters. His concern over the impact on what he sees as the critical concept of the ‘Federal balance’ was also emphasised, despite what he saw as its ‘disparaging’ treatment by the majority, who seemed content to see the Parliament of a State reduced to an ‘impotent debating society’.

Every employer should be clear on its legal status and whether or not the Act applies to it. For many employers, the Act may not apply. For some employers it may not be immediately apparent whether or not they are a ‘constitutional corporation’ (unless in Victoria or the Territories) and therefore whether the Act applies. If there is any doubt, immediate advice should be sought.

One can now expect greater confidence in use of the Act by employers and, to that end, a consideration of your future workplace relations strategy can now be embraced.

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