Chapter 2 - Creating a national workplace relations framework
2.1
Provisions
for the transition from a federal to a national system of workplace regulation
is perhaps the most significant feature of the Work Choices Bill. The bill will
move Australia towards a national workplace relations
system which is vital if Australia is to maintain its current level of
economic prosperity. For over 100 years the federal framework for workplace
relations has been based on the conciliation and arbitration power of the
Australian Constitution.[25] The
Commonwealth Workplace Relations Act is primarily, but not exclusively, based
on section 51 (xxxv) of the Constitution, which provides that:
The Parliament shall ...
have power to make laws for the peace, order, and good government of the
Commonwealth with respect to: ... conciliation and arbitration for the prevention
and settlement of industrial disputes extending beyond the limits of any one
State.
2.2
The
inclusion of the conciliation and arbitration power was provoked by bitter
memories of the strikes of the early 1890s. It was argued that this conflict,
extending as it did beyond the borders of a single state, required the exercise
of Commonwealth laws for protection of the national interest. Agreement, by a
narrow majority, to the use of compulsory conciliation and arbitration powers to
prevent and settle future conflict, and avoid its disruptive effects, resulted
in the form of words contained in section 51 (xxxv).
2.3
By the
time of federation, all states had established conciliation and arbitration
tribunals or wages boards to deal with industrial disputes. However, delegates
to the Constitutional Conventions of the 1890s considered that the states were poorly
equipped to deal with interstate disputes, such as those that had occurred
during the 1890s. It was felt that the Commonwealth should establish machinery
to deal with such matters, subject to limitations, and without prejudice to the
powers to be held concurrently by the states. Thus, the wording of the
provision has been interpreted by the High Court to impose the following
limitations:
-
the
Commonwealth Parliament cannot directly legislate on workplace relations, but
can provide for third party tribunals;
-
the
tribunals set up by the Commonwealth can only use particular mechanisms (conciliation
and arbitration) for particular resolutions (prevention and settlement) to
particular types of disputes (which must be both ‘industrial’ and ‘interstate’
in character); and
-
the
Commonwealth’s power is not comprehensive, and overlaps with that of the states.[26]
2.4
The
limitations inherent in the provision have resulted in a number of undesirable
outcomes, insofar as the Commonwealth is obliged to legislate alongside the
states, giving no jurisdiction an opportunity to provide for a comprehensive,
efficient and integrated system. One of the primary drawbacks has been the
difficulty in ensuring widespread and effective safety net coverage and
compliance.
Inconsistency of result
2.5
Concurrent
powers have resulted in employees coming within either the Commonwealth or
state jurisdiction in regard to awards and dispute resolution processes.
Employees and employers can change from one award jurisdiction to another, if
it is to the advantage of either. Problems arising from a multiplicity of
awards are compounded by the multiplicity of systems and tribunals. This has meant
that the field of workplace relations in Australia has been divided between interstate
matters, which are the province of the Commonwealth, and intrastate matters,
which by and large cannot be dealt with by the Commonwealth and must be dealt
with by each state
2.6
Unsurprisingly,
the existence of more than one body regulating the same broad subject matter is
likely to bring about different outcomes. This situation can result from the
nature of the submissions made, the guiding principles used or the perceptions
and values of different parties, both presiding over and appearing before the
body. The different outcomes can result in workplace relations difficulties,
most notably unequal treatment of those appearing before the body, or at least
the impression of this, and declining confidence in the overall system.
2.7
The
practical effect of this disharmony between systems is that, within one
workplace, it is not uncommon to find federal awards applying to some employees
while state legislation and industrial awards apply to other workers. This
creates added administrative expense for the employer, and makes the
propagation of a united and harmonious workplace much more difficult to
achieve, which in turn is harmful to productivity.
Duplication, complexity and cost
2.8
The
obverse of this is the duplication and complexity involved in the operation of
multi-jurisdictional systems. There are currently over 130 pieces of industrial
legislation and almost 4000 awards across state and federal jurisdictions. It
is therefore self evident that the maintenance of dual systems involves
additional costs for taxpayers. According to figures provided by the Department
of Employment and Workplace Relations, the various state industrial relations
systems cost the following amounts to maintain per year:
NSW: |
$39,146,000 (2004/05) |
Qld: |
$33,228,000 (2002/03) |
WA: |
$18,162,000 (2002/03) |
SA: |
$16,351,000 (2003/04) |
Tas: |
$2,075,000 (2002/03) |
Based
on these figures, around $109,000,000 per year is spent on state systems which
replicate the role of the federal system.
2.9
Businesses
face higher costs where they have to deal with multiple jurisdictions.
Duplication and overlap adds to complexity and confusion. This undermines the
effectiveness of the award safety net and creates difficulties for agreement
making.
2.10
Determining
which award applies to which employee requires an employer to be able to determine
which of a number of overlapping factors prevails in law. These factors can
include:
-
geographic
location of employment;
-
class
of occupation of the employee;
-
industry
basis of the employment;
-
whether
or not the employer has been roped into a federal award, for all or part of
their workforce;[27]
-
whether
there is an applicable state or territory common rule award; and
-
whether
the employer is a member of a relevant employer association.
2.11
The
conciliation and arbitration power is also built on the outdated notion that
employers and employees must be in dispute before they can work out
arrangements that best suit them. It creates non-existent disputes by legal
fictions, in order to then solve them. For instance, the conciliation and
arbitration power requires that there be a dispute (or at least a potential
dispute) to settle, and this had led the parties to contrive disputes (known as
‘paper disputes’) in order to come within the federal system.
2.12
Professor Andrew Stewart has described the consequences in this way:
...while the federal
award system has assumed a much greater coverage than might have been expected
by the framers of the Arbitration power, its reach will always be limited if
based only on that power. Since interstate disputes rarely occur spontaneously,
federal award coverage is constantly dependent on unions manufacturing
appropriate paper disputes. With some unions content to have state awards for
some or all of the occupations or industries they cover, the result is a
patchwork of regulation which causes particular inconvenience for employers who
have workers covered by both federal and state instruments.[28]
2.13
Critically,
the concept of arbitration, which is central to this power, requires that there
be identified parties to a dispute. The practical consequence of this is
that it has not been possible to make Commonwealth 'common rule' awards—awards
which would bind every employer in an industry, whether named in the award or
not. The inability to make common rule awards under the conciliation and
arbitration power has created a range of significant problems. Most seriously,
it has compromised the availability of safety net arrangements, and has also
necessitated costly roping-in exercises, which can be bewildering to those
unfamiliar with the system.
2.14
The
existence of Commonwealth and state systems inevitably raises jurisdictional
issues, which can be costly and difficult to resolve, and can result in delays
in handling the real issues in dispute. The operation of more than one tribunal
can also encourage ‘forum shopping’, where parties seek to gain from another
tribunal what they have been denied or refused in their traditional area of
industrial coverage. Such moves are also commonly associated with costly legal
argument about jurisdictional issues.
2.15
Despite
the progress that has been made, the workplace relations system remains very
complex and further reform to make the system simpler, more accessible and more
effective is hamstrung by reliance on the conciliation and arbitration power.
Reliance on that power prevents the achievement of a more coherent national
framework of laws. It also limits the Commonwealth government’s ability to
deliver an effective safety net with broader coverage. It is for this reason
that the government relies predominantly on the corporations power as the basis
for the legislation currently under examination by this committee.
The corporations power
2.16
In the Pacific Coal case Gaudron J said that she had 'no doubt' that the corporations power:
... extends to laws
prescribing the industrial rights and obligations of corporations and their
employees and the means by which they are to conduct their industrial
relations. [29]
2.17
In the Electrolux
case, Kirby
J (in dissent) referred to the capacity of
the corporations power to provide a basis for regulating workplace relations
under the current Workplace Relations Act, and said:
Even more important is the signal given in s.170LI(1) that the
relationship in question is one between an employee and an 'employer who is a
constitutional corporation'. This makes it clear that the Parliament had
decided to cut the Act loose from the controversies arising in the past from
implied limitations considered inherent in the notions of an 'industrial
dispute', as that phrase is used in s 51 (xxxv) of the Constitution, and to
substitute new and additional reliance on the relationships of an employee with
a corporation qualifying as envisaged by s 51 (xx) of the Constitution. In a
stroke, a new constitutional foundation for federal regulation is created. It
is no longer necessary to read into the resulting employment 'relationship'
limitations, broad or narrow, adopted for constitutional reasons in past cases
such as Portus and Re Alcan. The Parliament has thus
embraced a new constitutional paradigm.[30]
2.18
Under the
Government's proposal, it was estimated that around 800 000 employees not
currently regulated by the federal system will be brought within an award
system for the first time, and as many as 85 per cent of all employees will be
covered by the national system. It was estimated by the Department of
Employment and Workplace Relations in 2000, that under a system as proposed in
the bill before the committee, the federal jurisdiction could expand from an
estimated 30 per cent of employees to an estimated 80 per cent, or about 1.9
million employees, with the jurisdiction of states likely to contract to about 20
per cent (466 000 employees). It is estimated that South Australia would see 79
per cent of all employees the federal system, while about 76 per cent of
Queensland employees, 80 per cent of Western Australian employees and 72 per
cent of Tasmanian employees would, it was estimated, be covered by the new
system.[31]
2.19
It was further
estimated that over 90 per cent of employees in the industries of mining,
manufacturing, wholesale trade, transport and storage, communication services,
finance and insurance, and property and business services could be drawn into
the proposed system. The new system will cover an estimated 6.1 million of Australia’s 7.15 million (non-farm) employees. This is 85 per cent of the total population
of (non-farm) employees. Of this, around 800,000 will be employees who are
currently award or agreement free. This
will leave approximately 15 per cent of employees under one of the remaining
state jurisdictions, with the majority of those being in New South Wales and Queensland.[32]
2.20
Of course it would
be open to states to follow the lead of Victoria and refer workplace relations powers to the
Commonwealth, enabling the Commonwealth to include all businesses and employees
in the state in the one national system.[33]
This would have the obvious effect of amplifying the benefits of a national
system which have been outlined in this section. The committee notes that the
transfer of state powers in Victoria by the Kennett Liberal Government was not
reversed by the Labor Government which was elected in 2001. The resistance of
state governments to the national system, and their apparent determination to
challenge the legislation in the High Court probably owes more to the
machinations of state political organisations than to anything else.
2.21
Importantly,
the new national system will cover all employees of constitutional
corporations, based on the status of the employer, rather than on the fact that
an interstate dispute, actual or contrived, has arisen between an employer and
employee. Instead, it will depend on the legal character of the
employer, as a constitutional corporation, and the relationship of employees
with the corporation. As a result after the transitional period employers and
employees will, under the legislation, be located in either the federal system
(corporations), or in the state system (non-corporations). A summary of the
effect of the bill on both incorporated and unincorporated employers operating
a under a variety of employment arrangements is contained at Appendix 6.
2.22
Another important benefit of a system based on the
corporations power is in the capacity of the Commonwealth to legislate directly
about minimum terms and conditions of employment. Essentially, the High Court
has found that under the conciliation and arbitration power, the Commonwealth
can only establish tribunals to arbitrate on terms and conditions between the
parties. The Commonwealth cannot itself establish such conditions using that
head of power. That function has to be performed by a third party. The corporations power is different. Using
that head of power, the Commonwealth parliament will, under the legislation,
directly legislate for the setting by the Australian Fair Pay Commission of
minimum and award wages and the conditions of employment of all employees of
constitutional corporations through the Australian Fair Pay and Conditions
Standard.
2.23
The
concepts of paper disputes, roping in and the ambit of a dispute, so
bewildering to many employers and employees (especially in small business),
will be rendered obsolete. The problems associated with the need to have
identified parties to a dispute (and thus to an award) will disappear. In the
longer term, awards will be capable of being made on a common rule basis. That
is, they could be made to operate, not so they bound a list of thousands of
employers and the thousands of employer members of a handful of employer
associations, but so they bound all employers in an industry.
The question of constitutionality
2.24
Use of
the corporations power in the industrial arena is now largely uncontentious and
was approved by the High Court in connection with industrial matters in the
1990s in two leading cases involving challenges to the (then) Industrial
Relations Act.
2.25
The Workplace Relations Act 1996 relies on
the corporations power and the 'constitutional corporation' concept, including
in relation to freedom of association, the making of certified agreements and
the institution of unfair dismissal claims.
2.26
The
corporations power was used to underpin Enterprise Flexibility Agreements (EFAs)
in the Industrial Relations Reform Act
1993. This move was supported by the ACTU, who also supported the Keating
government's expansion of enterprise bargaining in this way, with the caveat
that it was opposed to the introduction of non-union enterprise agreements.
2.27
In his
second reading speech for the Industrial
Relations Reform Act 1993, Laurie Brereton said that:
Selective use in the
federal jurisdiction of the corporations power will allow any matter pertaining
to the employment relationship to be covered by agreement ... [T]he operation of
enterprise flexibility agreements will be supported by the use of the
corporations power. This removes the requirement for an interstate dispute and
makes the arrangements more accessible.[34]
2.28 In a country of Australia’s size operating in the
international economy it is utterly and profoundly irrational, not to say
inefficient to seek to maintain six different systems of workplace regulation.
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