Judges Choose WorkChoices

The decision of the High Court of Australia yesterday to reject the challenge by the States to the Howard Government’s WorkChoices legislation was not unexpected. However, the emphatic nature of the rejection was a surprise the Court finding the legislation wholly valid by a margin of five to two.

The five majority Justices wrote a long joint judgement, giving a very wide interpretation of the Commonwealth’s ‘corporations power’ according to the Constitution. The dissenters, Justices Michael Kirby and Ian Callinan, went ballistic, wrote separate judgements and found the legislation wholly invalid.

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The three judgements run to hundreds of pages but, before summarising the decision, it is necessary to note the way in which our federal structure works.

Essentially, the States have legislative power in all areas except to the extent that the Constitution allocates specific powers to the Commonwealth. When respective Federal and State powers overlap the Commonwealth’s legislation overrides any State law dealing with the same area.

So far as industrial matters are concerned, the States have legislative power to make laws in the area concerning intra-State industrial relations. Under section 51(xxxv) of the Constitution, the Federal Parliament was also given power in the area, but only with respect to ‘conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one State.’

The ‘industrial relations’ power just referred to, has been interpreted liberally and for decades the Commonwealth and States have had co-existing industrial relations systems.

The Commonwealth also has legislative power under section 51(xx) of the Constitution to make laws with respect to ‘foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth’ the so-called ‘corporations power.’

One of the States’ arguments in the WorkChoices case was that the corporations power does not allow the Federal Parliament to pass laws concerning all corporate activities, only those concerning the ‘external relationships’ of corporations. The power would not extend to laws concerning their ‘internal relationships’ including relationships with their employees.

A further key argument of the States was that the corporations power should be interpreted subject to the Constitution’s IR power. On that argument, the Federal Parliament’s powers to make laws relating to corporations concerning industrial relations only extends so far as the IR power goes.

Yesterday, the High Court rejected those arguments and, at the risk of over-simplification, said yesterday that the Federal Parliament has a very wide power to make laws with respect to all of the activities of corporations. The majority denied any distinction between external and internal relationships and declined to recognise any limit on the corporations power arising from the limited ambit of the IR power.

Justice Kirby flatly rejected the approach of the majority and accepted the argument that the corporations power in the field of workplace relations must be restricted by the limits of the IR power. He said of the majority’s approach:

Truly, this reveals the apogee of Federal Constitutional power and a profound weakness in the legal checks and balances which the founders sought to provide to the Australian Commonwealth.

That Michael Kirby should express himself that way is not unexpected. However, when his colleague from Queensland, Ian Callinan, joins in that dissent in similarly colourful language, something is going on. Callinan had this to say yesterday:

The potential reach of the corporations power, if it is as extensive as the majority would have it, is enormous The reach of the corporations power, as validated by the majority, has the capacity to obliterate powers of the State hitherto unquestioned. This Act is an act of unconstitutional spoliation.

Later he went on to say:

To give the Act the valid operation claimed by the Commonwealth, would be to authorise it to trespass upon essential functions of the States industrial affairs within the States, whether of corporations or of natural persons, are for the States, and are essential for their constitutional existence.

And near the end of his judgement he concluded:

The validation of the legislation would constitute an unacceptable distortion of the Federal balance intended by the founders, accepted on many occasions as a relevant and vital reality by justices of this court, and manifested by those provisions of the Constitution to which I have referred, and its structure.

Thanks to Bill Leak

During the coming days and months, the three judgements will be pored over not only by lawyers but also by politicians and their advisers. However, even on a skim reading, it is clear that the decision will give greater impetus to the dominance of the Commonwealth in our federation.

To many of our Federal politicians, this is not a problem. Conservatives, as well as some Labor opponents, see virtue in the accretion to the Commonwealth of wider powers. To them, the States are nothing more than a nuisance and they often express frustration that the federal structure means that opportunities for differing laws between the various States/Territories and the Commonwealth are numerous.

There is one difficulty with that point of view. The States are not going away no matter how ignorant the citizens of New South Wales and Victoria are of the State loyalties of their compatriots resident in other States.

As a former WA resident who, on arrival there, was shocked at the extent to which Western Australians regard themselves as sandgropers first and Australians second, I know our federal structure still retains a real resonance in the smaller States.

As the recent Warren Report  to the NSW Government pointed out, Australia is the most centralised federation in the world. It is the only federation where the power of the national government is continually increasing rather than decreasing.

The dominance of the Commonwealth in financial matters is astonishing. The Commonwealth now raises 82 per cent of all revenue and yet spends only 54 per cent of all expenditure. By comparison, the States raise about 16 per cent of all revenue but account for 40 per cent of all expenditure. (Local government accounts for the rest).

The States very legitimately complain that, while they are responsible for 40 per cent of all expenditure, they are in practice subjugated to the will of the Commonwealth because they raise less than half the funds they need.

There may be a case for some accretion of power to the Commonwealth but not for the huge ‘vertical fiscal imbalance’ which currently exists between the Commonwealth and the States. It is just not democratic, and distorts the will of the people as expressed through their State legislatures.

This is an example of Constitutional dysfunction and something needs to be done about it. To those who say that a referendum would be impossible to
pass, I suggest the chances of carrying a referendum which gave taxing powers back to the States would be substantial simply because the States would support it.

The proposal could be coupled with a sensible realignment of powers, under which the Federal Government is handed sole responsibility for, say, health, and the States are given education, like in most other federations. Thereby, the Constitution could be dragged by its own bootstraps (a referendum) into the 2 1st Century.

Until that happens, the States personified by Michael Kirby and Ian Callinan are entitled to go ballistic.