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Workplace Reform Depends on Ministerial Mettle

This article was published in the Financial Review, 8 February 2005

Although academics and lawyers agree that reducing the duplication and complexity of Australia’s industrial relations system is ‘do-able’ and in the best interests of our national economy, the Federal Government appears reluctant to make it happen.

The most recent statement about how this issue will be tackled went no further than the Federal Minister for Workplace Relations saying he was keen on ‘investigating ... a more simplified and harmonized workplace relations system’.

All the investigations that need doing have been done. It is regrettable that after more than 100 years of Federation, the Commonwealth does not have an express power to regulate industrial relationships. Our six separate industrial relations systems are confusing, complex and costly. In public speeches, the Minister has pointed to ‘constitutional limitations’ as the reason why any changes must be ‘incremental’.

Armed with this apparent belief in the inadequacy of the Constitution, the Minister says that major change can be brought about only by a referendum or by the States referring powers to the Commonwealth. Having regard to our poor record on referenda and the fact that only Victoria has engaged in the referral process it is not through these measures that the necessary major change will be brought about. But this belief that the Constitution is more hindrance than help is misguided. Rather than creating the impossibility that some people believe exists, the Constitution actually opens the door which would give us a centralised industrial relations system.

The Constitution contains both a ‘corporations power’ and a ‘foreign affairs power’ either of which the government could use, in concert with or aside from the existing ‘arbitration power’ to make the States feel compelled to refer their industrial relations powers to the Commonwealth.

Despite the Minister’s blind spot about what the Constitution provides, the Howard Government has already proved itself willing to use the corporations power both in its Right of Entry Bill and its failed bid to extend the operation of the federal unfair dismissal system to all employees of what are known as constitutional corporations. That is to say, bodies corporate within the meaning of the Constitution as opposed to partnerships, sole traders or individuals who operate their own businesses under something other than a company structure.

If the Commonwealth used the corporations power to wrest workplace relations from the States in relation to constitutional corporations, a new federal system would encompass an estimated 85 per cent of the Australian workforce. Such a move would leave the States with precious little incentive to retain their own expensive industrial relations systems for the sake of the relatively few employees who fell outside the system. There is no logical basis for limiting the use of the corporations power for the purpose of expanding the Commonwealth’s jurisdiction in relation to only unfair dismissal and right of entry.

As one of the Minister’s predecessors, Peter Reith, explained in a discussion paper more than four years ago, the conciliation and arbitration power enshrined in the Constitution imposes strict limitations on the Commonwealth. Under this power, the Commonwealth cannot legislate directly on industrial relations. Although it can establish third party tribunals, such as the Industrial Relations Commission, these bodies can only use conciliation and arbitration for resolving disputes which are both ‘industrial’ and ‘interstate’ in character. While the Government continues seeing Constitutional holes and relying on this power, widespread structural reform will remain beyond reach.

Using the corporations power does not involve a giant intellectual leap. It already supports some of the federal workplace relations system and has proved successful in reducing procedural complexity and improving access to formalised workplace agreements. Former Minister Reith estimated that if the corporations power and other non-conciliation and arbitration powers contained in the Constitution were relied upon, two worthwhile goals could be achieved. First, 69 per cent of all employees who are currently in State systems would be brought under the new federal system and, second, about 90 per cent of all private sector employees would be covered federally.

Such a transformation in the industrial relations landscape would be monumental and deliver monumental benefits. But those benefits do not appear to be sufficiently a part of the Government’s fourth term agenda.. The problem is that only Victoria has chosen to refer its industrial relations powers to the Commonwealth, thereby facilitating common rule awards in that State. The result has been a simple unitary system which has benefited local employers without any detriment to employees’ terms and conditions of employment. If the other States continue to refuse to come to the party, it is in the national interest for the Federal Government to leave them no choice. And, to do that, it needs to better understand the opportunities that the Constitution offers rather than focus on its limitations

Leigh Johns

Partner

Australian Business Lawyers