November 2006

High Court decision on Work Choices sees State industrial relations powers moving to the Federal arena

After a hard fought six day hearing in May the High Court has just handed down its decision on the most important Constitutional case in decades. The States challenged the ability of the Federal Government to use the corporations power in the Constitution to regulate workplace relations. The challenge has failed comprehensively, with the legislation upheld in its entirety. The High Court has confirmed the Federal Government's power to use the corporations power to control the ways in which corporations may deal with their employees, and to limit what employees and unions can do to advance their interests. Five of the seven judges delivered a joint decision, while Justices Kirby and Callinan would have declared the Work Choices changes invalid entirely.

What does this mean? The big picture will see the withering away of the various State industrial relations systems, with States eventually referring any residual workplace powers to the Federal arena. All those corporations that may have been waiting for the decision before utilising Work Choices can now proceed with certainty. There must be some doubt regarding the ability of unions to survive given their reduced role and with no substantive rights of recognition.

For corporations it is the end of waiting to see what will happen and now needing to decide how to proceed. A big change on pre Work Choices systems is that businesses have a greater ability to set their own agenda for their relationships with their employees, and can no longer rely on things being worked out by the various Industrial Commissions or through their industry associations. Every business that wants to be competitive needs to understand how Work Choices operates and must then develop its own approach to workplace relations - the era of the "neutral third party umpire" is over and employers are pretty much free to do as they please.

Businesses no longer need be bound to existing industrial instruments and can offer the terms that they think best suit their operations, although in a time of sectional tight employment the terms of those offers may favour some employees, at least until a change in the market.

The only area left undecided by the judgment is what kinds of corporations fall within the constitutional expression "trading or financial corporations formed within the limits of the Commonwealth". The High Court has said that debate about those questions must wait for individual cases to be determined.

The existing jurisprudence supports the conclusion that all corporations covered by the Corporations Act are covered, and most likely any other corporation that has some trading activities, whether for profit or not, and whether or not for private or public purpose.

And more changes are on the way. Minister Andrews has announced "finetuning" of parts of the Act to do with stand downs, cashing out sick leave, annual leave calculations and some minor protections for redundancy entitlements. The Independent Contractor legislation is now before Parliament. Given the High Court\'s consolidation of the corporations power we can expect more legislation that deals with the ways in which corporations behave and how others may deal with corporations.

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