CHAPTER TEN
Constitutional Issues
Background
10.1 It is the opinion of the Attorney-General's Department that the
Workplace Relations and Other Legislation Amendment Bill 1996 is constitutional.
[1] However, evidence was presented to the Committee
that questioned the constitutional validity of certain aspects of the
Bill. This chapter examines those parts of the Bill about which constitutional
questions have been raised in submissions to the Committee.
10.2 The main power of the Commonwealth to legislate on industrial
relations matters is set out in section 51(xxxv) of the Constitution
which provides that the Commonwealth has the power 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'.
10.3 The wording of section 51(xxxv) of the Constitution means that
the Commonwealth (under this power) cannot legislate directly on the
subject of industrial disputes or set universal minimum wages or conditions.
Instead, it is limited to establishing the machinery to enable the prevention
and settlement of interstate industrial disputes through conciliation
and arbitration. While there are instances where other powers are relied
upon for the purposes of the provisions of the Act, they supplement
the general reliance on section 51(xxxv).
Conciliation and Arbitration Power - Section 89A
10.4 In R v. Commonwealth and Arbitration Commission (ex parte EAU)
[2], the High Court stated:
The constitutional power in this area is to make laws with respect
to the settlement of industrial disputes extending beyond the limit
of one State by a specific means, namely, by conciliation and arbitration.
The parliament is unable itself to legislate the level of wages to
be paid. Nor has it power to direct the arbitrator as to the level
of wages he shall prescribe in the settlement of the dispute as to
wages. The constitutional power requires that settlement of the dispute
be left to the arbitrator. His award will be valid if it remains within
the ambit of the dispute and its terms are relevant to that dispute
and to its settlement, the dispute of course, itself falling within
the constitutional limitation.
Therefore, in my opinion, the parliament could not have seized upon
one method of determining a wage in settlement of a dispute as to
wages and have directed the Commission to follow that method and none
other. To have done so would, in my opinion, have transcended the
constitutional power (per Barwick CJ).
10.5 Proposed section 89A of the Bill will limit the Commission's power
to make awards in settlement of an industrial dispute to 18 allowable
award matters. However, by limiting the content of the awards which
the Commission has power to make, it was argued that this would go beyond
establishing the machinery to prevent and settle disputes, and would
seek to dictate the outcome of the process (albeit in a negative way).
[3]
10.6 The Labor Council of NSW (the Council) considered that this potential
difficulty also arose in relation to the provision that limits the Commission's
powers to making a minimum rates award in the settlement of a dispute
(proposed section 89A(3)).
Parliament cannot direct the Commission, which is entrusted with
a conciliation and arbitration function, to exercise its discretion
in fulfilling that role to produce a specific result. In our view,
the Bill is fundamentally flawed in this respect. [4]
10.7 In support of this argument, the Council referred to the decision
of the Industrial Relations Court of Australia in Comalco Aluminium
(Bell Bay) Ltd v. O'Connor & Ors (1995) 131 ALR 657 (the Bell
Bay case) where the Court said:
There are statements in a number of cases to the effect that a person
or body invested with the power to settle disputes by conciliation
and arbitration cannot consistently with the limits arising out of
s.51 (xxxv), be directed by Parliament to exercise its arbitration
power so as to produce a specified result.
10.8 The Council concluded that the Bill, by prescribing that the Commission
only has the power to make minimum rates awards, offends against the
authorities discussed in the Bell Bay case.
10.9 The submission of the South Australian Government, however, states
that: 'provided that the power conferred on the AIRC is not so circumscribed
that it no longer constitutes settlement of a dispute by conciliation
and arbitration, the Parliament is entitled to restrict matters that
may be included in awards'. [5]
It argued that the range of matters provided in proposed section 89A
were sufficient for the power to still be one of conciliation and arbitration,
although no authorities were cited in support of this contention.
Corporations Power
10.10 A variety of provisions of the Bill rely on the power of the
Commonwealth to make laws with respect to foreign corporations and trading
or financial corporations formed within the limits of the Commonwealth
(section 51(xx) of the Constitution). These include the making of Division
3 Certified Agreements, the making of AWAs, and parts of the Division
relating to unfair dismissal.
10.11 A submission from Mr George Williams, Lecturer in Constitutional
Law at the Australian National University, examined in some detail the
use of the corporations power in the Bill and recent High Court decisions
on the extent of the power. [6]
10.12 Mr Williams outlined the narrow and broad views of the power.
The narrow view holds that the aspects or activities of corporations
which the Commonwealth can validly regulate are connected with the characteristic
which brings the corporation within power (ie, that the corporations
are foreign trading or financial corporations). This would mean that
only the trading activities of trading corporations could be regulated
(and so on). The broad view, however, holds that there are no limits
on the Commonwealth's power to regulate any aspect or activity of a
corporation (provided that is one of the corporations mentioned in section
51(xx) of the Constitution).
10.13 Mr Williams examined the most recent case on the scope of the
corporations power, Re Dingjan; Ex parte Wagner (1995) 128 ALR
81. In this case the lowest agreed position of four of the judges was
that 'the power conferred by section 51(xx) extends, at the very least,
to the business functions and activities by constitutional corporations
and to their business relationships' [7].
Only one judge (Justice Dawson) adhered to the narrow view.
10.14 Mr Williams concluded that this judicial view would provide some
support of the validity of Subdivision B of Schedule 7 (Termination
of Employment) but that its validity might be bolstered if section 170CB(3)
were amended to extend the application of the subdivision only to persons
employed by a constitutional corporation for the purposes of that corporation's
trading activities.
10.15 The validity of Division 3 of Part VIB of the Industrial Relations
Act (Enterprise Flexibility Agreements) which was inserted into the
Act by the 1993 Reform Act, and which relies on the corporations power,
has been the subject of a challenge by several States in the High Court.
Although one of the plaintiff's statement of claim (Western Australia)
alleged that Division 3 was not a law with respect to foreign corporations
or trading or financial corporations, it was not a point argued in any
of the plaintiffs' written submissions. It is unlikely therefore that
the High Court's decision on the validity of the Reform Act, when handed
down, will provide any great assistance in determining the scope of
the power.
The Corporations Power, the Right to Strike and AWAs
10.16 Mr Richard Naughton of the University of Melbourne examined the
right to strike in connection with AWAs and non-union certified agreements.
[8] These agreements rely on the
corporations power of the Constitution and permit the taking of protected
industrial action by employers and employees during the negotiation
of the agreement.
10.17 Mr Naughton questioned whether the provisions permitting such
action (in essence, a law dealing with the right of an individual or
group of employees to engage in industrial action) fall within the parameters
of the corporations power. He drew specific attention to the judgment
of Toohey J. in Re Dingjan where his Honour stated 'the law must
operate on the rights, duties, powers or privileges of corporations
in such a way as to evidence a sufficient connection between the law
and the corporations'. [9] In Mr
Naughton's view, the right to strike provisions (at least in the case
of Certified Agreements and AWAs) are unlikely to satisfy this test.
Unfair Dismissal - Separation of Powers
10.18 Proposed section 170CG requires the Commission to arbitrate on
an application to determine whether an employee's dismissal was harsh,
unjust or unreasonable. Where it so finds, section 170CH provides that
the Commission may make an order providing for a remedy (such as reinstatement
or payment in lieu of reinstatement).
10.19 The ACTU suggested that this conferral of power on the Commission
may offend against the doctrine of the separation of powers required
by the Constitution. [10] This
argument states that the powers conferred are judicial in nature and
may therefore be exercised only by a Chapter 3 (Federal) Court.
10.20 On the other hand, the Australian Chamber of Commerce and Industry
(ACCI) referred in its submission to the High Court's decision in Re
Dingjan; Ex parte Wagner which upheld the validity of the powers
conferred on the Commission to review the contracts of independent contractors.
10.21 According to ACCI, the power to make orders concerning unfair
contracts 'is clearly analogous to the proposed conferral of power on
the Commission to make orders about unfair termination and they would
therefore also be upheld'. [11]
10.22 The Hon Jeff Shaw QC (Attorney-General for New South Wales) discussed
the prohibition on non-judicial bodies exercising judicial power, most
recently upheld by the Brandy decision [12],
and stated:
[T]here is an argument for querying the validity of those provisions
in the federal Bill which would empower the Commission to determine
by arbitration whether or not a termination of employment is harsh,
unjust or unreasonable (see proposed s.170CG) and make orders for
reinstatement or compensation (s.170CH) which are "final and
binding between the parties" (s.170CI). Although the High Court
has upheld the jurisdiction to make reinstatement orders of the then
Conciliation and Arbitration Commission in the case of Re Ranger
Uranium Mines Pty Ltd; Ex parte Federated Miscellaneous Workers' Union
of Australia (1987) 163 CLR 656, that case was dealing with the
powers of the Commission to settle disputes under the conciliation
and arbitration power. It was held that the Commission was performing
an arbitral function of creating rights and obligations. But this
case also makes it clear that the inquiry into, and determination
of, matters to ascertain legal rights and obligations is a judicial
function. [13]
10.23 Mr Shaw concluded that 'the termination of employment provisions,
in so far as they confer functions on the Commission are susceptible
to a legal challenge'. [14]
Use of the External Affairs Power - Termination of Employment
10.24 The current Industrial Relations Act relies fully on the external
affairs power of the Constitution to ensure that all employees in Australia
whose employment has been unlawfully terminated are able to obtain a
remedy under Division VIB (provided they do not already have access
to an adequate alternative remedy). Thus, regardless of the State in
which an employee resides, or whether that employee is covered by an
award, he or she has protection against unlawful termination.
10.25 By contrast, the Workplace Relations Bill relies, variously,
on the external affairs power according to the relevant subdivision
of the Bill (and the entitlements or powers created therein).
10.26 Subdivision B of the Bill deals with harsh, unjust or unreasonable
termination of employment and is limited to employees who come within
'the traditional Federal sphere'; that is, Federal award employees,
employees of the Commonwealth and employees in a Territory. This coverage
is achieved by a range of constitutional powers, namely, the corporations
power, the trade and commerce power, the Territories power and the Commonwealth's
power to legislate with respect to its own employees.
10.27 To the extent that these powers to do not extend the protections
contained in Subdivision B to all Federal award employees, the external
affairs power is then relied on, in proposed subsection 170CB(4), to
give effect to Australia's international obligations contained in ILO
Convention 158 (see paragraphs 11.25 onwards). However, the Bill also
provides that if a State confers powers on the Court and the Commission
to perform powers and functions related to the termination of the employment
of Federal award employees in that State, reliance is no longer made
on the external affairs power.
10.28 The Bill therefore leaves the States responsible for providing
appropriate protections against harsh, unjust or unreasonable termination
of employment for all other employees within their respective jurisdictions.
10.29 The protections contained in Subdivisions C, D and E apply to
all employees and rely on the external affairs power (subsections 170CB(5)
and (6)). These subdivisions deal with unlawful termination of employment,
Commission orders on severance allowances, and consultation and Commission
orders where an employer fails to consult with trade unions about terminations.
10.30 In partially vacating the field in relation to harsh, unjust
or unreasonable terminations, the Federal Government is relying on the
cooperation of the States to ensure that the State systems comply with
Australia's international obligations.
10.31 The Commonwealth has the power to legislate under the external
affairs power to the extent that the laws it enacts are 'capable of
reasonably being considered to be appropriate and adapted' to meeting
a treaty obligation. [15] If there
is insufficient conformity, the law will be invalid. Whilst the provisions
of the Bill would seem to depart somewhat further from the terms of
the Convention than is the case under the current Act, most submissions
which address the issue indicated that subdivisions B and C are likely
to be constitutionally valid. [16]
Registration of Trade Union: The Conciliation & Arbitration Power
or the Corporations Power?
10.32 The requirement that organisations of employees (unions) be capable
of engaging in an (interstate) industrial dispute is to be repealed.
[17] As Mr Richard Naughton indicated
in his submission, the history of this requirement was the acceptance
by the High Court of a system of registration of unions as 'incidental'
to the conciliation and arbitration power. [18]
The High Court held that a union which was itself incapable of being
involved in an interstate industrial dispute was entitled to be registered
if it was capable of becoming a party to such a dispute as a member
of a combination of organisations. [19]
10.33 Mr Naughton queried the constitutional basis for a system of
union registration, if unions need not be capable of engaging in an
interstate industrial dispute to obtain registration. Once again, if
the corporations power is relied on, the connection with the corporation
would seem fairly removed. [20]
10.34 The Labor Council of New South Wales also drew attention to the
repeal of this requirement stating that 'it is strongly arguable that
the Bill offends the principle that to be registered under the Federal
Act an industrial organisation must be capable of being a party to an
interstate industrial dispute'. [21]
Conclusions
10.35 The majority of the Committee is mindful of the extent to which
there will always be divergent views about the constitutionality of
the Bill. The majority of the Committee is not in a position to determine
definitively the extent to which the proposals are valid or otherwise.
This is the role of the High Court. While the majority of the Committee
takes strong notice of the advice of the Attorney-General's Department
that the Bill is constitutional, the majority of the Committee believes
that there is substance in some of the submissions which question the
constitutionality of the Bill.
10.36 This belief does not, however, lead the majority of the Committee
to make any recommendations which may make more certain the constitutionality
of the Bill.
10.37 The majority of the Committee, however, does emphasise that where
there are alternative ways of implementing a legislative scheme, they
should be explored and relied on before any constitutionally uncertain
provisions are pursued, or unnecessarily complex and difficult drafting
is adopted. Therefore, in relation to unfair dismissal, for example,
given the existence of a broad power pursuant to the external affairs
power which would support the legislation as drafted, this should be
used in preference to the approach that the Government has adopted.
10.38 Government members of the Committee disagree with the above conclusions.
Footnotes
[1] Submission No. 1016, p. 154, DIR.
[2] (1967) 118 CLR 219 at 242.
[3] See for example, Submission No. 1017,
p. 106, ACTU.
[4] Submission No. 1282, pp. 2-3, The Labor
Council of New South Wales.
[5] Submission No. 413, p. 22, South Australian
Government, the Hon. Graham Ingerson MP, Minister for Industrial Affairs.
[6] Submission No. 43, p. 2, Mr George Williams.
[7] (1995) 128 ALR 81 at 111.
[8] Senior Lecturer, Centre for Employment
and Labour Relations Law, Law Faculty, University of Melbourne, Submission
No. 1159.
[9] Submission No. 1159, p. 3, Mr Richard
Naughton.
[10] See for example, Submission 1017, p.
107, ACTU.
[11] Submission No. 905, p. 25, ACCI.
[12] Brandy v. Human Rights and Equal
Opportunity Commission (1995) 127 ALR 1.
[13] Submission No. 1179, pp. 10-11, New
South Wales Government, the Hon. Jeff Shaw QC.
[14] Submission No. 1179, p. 11, New South
Wales Government, the Hon. Jeff Shaw QC.
[15] Tasmanian Dams Case (1983) 158 CLR 1
at 259-60.
[16] See Submission No. 43, Mr George Williams.
[17] See paragraph 188(1)(b) and subparagraph
189(1)(a)(i)] (Item 4 of Schedule 15).
[18] Submission No. 1159, p. 6, Mr Richard
Naughton.
[19] Jumbunna Coal Mine (NL) v. Victorian
Coal Miners' Association (1908) CLR 309.
[20] Submission No. 1159, p. 6, Mr Richard
Naughton.
[21] Submission No. 1282, p. 6, Labor Council
of New South Wales.