'Corporations power' debate kept alive


'Corporations power' debate kept alive

A prominent industrial lawyer has re-examined the question of using the Corporations Power to regulate Australian Industrial Relations.


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A prominent industrial lawyer has re-examined the question of using the Corporations Power to regulate Australian Industrial Relations. At the 8th Annual Labour Law Conference, which was presented by the Australian Centre for Industrial Relations Research and Training (ACIRRT) on June 16 2000, Professor Andrew Stewart, Professor of Law at Flinders University of South Australia and Legal Consultant to Piper Alderman Lawyers, considered this power in the light of recent federal Government proposals. Initiated by the Government, the debate regarding the use of the Corporations Power examines the feasibility of a simplified and less complex system of industrial relations regulation.


The reliance upon s51(xxxv) of the Constitutionfor over 90 years has created a system that is supported by the willingness and ability of the trade union movement to rely upon "paper disputes" to attract the jurisdiction of federal tribunals. The ninety odd years however, have revealed significant limitations associated with the arbitration power as the principal source of industrial relations regulation, the most obvious being the fact that the Commonwealth cannot directly regulate industrial relations.

Over the years a number of alternative Constitutional powers have been utilised to circumvent the limitations of the arbitration power. These powers include:

  • the trade and commerce power - giving the Commonwealth power over employment relationships associated with interstate or overseas trade or commerce (s51(i));

  • the defence power - giving the Commonwealth power over the employment relationships involved in defence related projects (s51(vi));

  • the corporations power - giving the Commonwealth power over employment relationships associated with financial, trading or foreign corporations (s51(xx));

  • the external affairs power - giving the Commonwealth power over employment relationships where an obligation is mandated by an international treaty that Australia has ratified (s51(ix));

  • the referrals power - where the Commonwealth is referred legislative authority by a State (s51(xxxvii)); and

  • the Territories power - where the Commonwealth may regulate employment relationships in a Territory (s122).

Professor Stewart noted that the 'alternative' powers listed above had been invoked in recent years by the Commonwealth to extend "...the reach of rules or processes of a kind already enacted under the arbitration power". However, in using the alternative powers as a supplement to the arbitration power, federal regulation of industrial relations has been made more complex.

The Reith proposal

In an attempt to alleviate this complexity the Minister of Employment, Workplace Relations and Small Business, Mr. Reith has proposed that the corporations power be used not to supplement but as a substitute for the arbitration power. The push to utilise the corporations power, whilst not government policy in a formal sense, is foreshadowed as the 'third wave' of Reith legislation to be used as a circuit-breaker to the government's inability to pursue pattern bargaining and unfair dismissal legislation.

The Corporations power authorises the Commonwealth to enact legislation with respect to "...foreign corporations, and trading and financial corporations formed within the limit of the Commonwealth". To this end Professor Stewart noted that the terms "trading" and "financial" constitute key issues in relation to the scope of the corporations power. In recent years the High Court has adopted a broad view of these terms holding that a corporation is distinguished by the fact that trading or financial activities represent a substantial part of what the corporation does, irrespective of the purpose of the corporation. As such non-commercial entities such as local councils and universities have been held to be corporations.

According to the Minister (see HR Link 27and 52of 2000) the proposal to rely on the corporations power for regulation of Australian industrial relations would serve to dispense with the artificial creation of interstate disputes; would establish a national framework of minimum standards and would enable federal awards to operate on a common rule basis. However, it was noted by the Professor, exclusive reliance upon the corporations power would exclude incorporated bodies such as charities, community service organisations, trade unions and small employers who operate as sole traders or partnerships. As such the most obvious disadvantage of such a system is that a sizeable group of workers would not be covered by the federal award system.

Other options

Aside from substituting the corporations power for the arbitration power, Professor Stewart believed there to be three other options for regulating industrial relations in Australia.

The first was the option of using the corporations power as the underlying constitutional power and plug the gaps with other powers. This would involve extending the scope of the Commonwealth's power by relying on powers such as the territories, external affairs and the trade and commerce powers. The obvious advantage of this option is the fact that it would reduce the number of employees disadvantaged by a switch to a corporations-based system. In fact, the Professor noted that a genuinely national system could be developed if more States referred their industrial relations powers. Given the developments in Victoria since the election of the Bracks government, this scenario, conceded the Professor, was unlikely to eventuate. Therefore, even under this option gaps in coverage would continue to remain. 

The second option is a system based upon the corporations and arbitration powers in parallel. Distinct from substituting the corporations power for the arbitration power, or using the corporations power merely to extend the operation of a system based on the arbitration power, this option is one of dual regulation with a corporations regime operating alongside the current system. The advantage of the dual system approach is that it will overcome the problem of having a percentage of the workforce drop out of the federal system. However, the advantage of the previous two options, namely a simpler system would be lost to all bar corporate employers who alone would be free from the complexities of the present award system. The technicalities of a paper-drive award system would remain. 

The third option presented by Professor Stewart, involved a system that extended the supplementary use of the corporations power. That is the present system founded on the arbitration power with the corporation power used for example, to empower the federal Commission to make common rule awards for corporations. The disadvantage of this approach is that the more 'supplementation' that occurs the more complex the system becomes.


Professor Stewart's sketch of the options for the greater use of the corporations power was welcomed by the Minister as it keeps this debate alive. In terms of preferred options, Professor Stewart believes that there is much to be said for the option of a corporations-based system with other constitutional powers being used to 'plug the gaps'. However, the reality of politics is that there may be too much short-term political pain associated with that option and this will force either of the major parties to examine quick fix alternatives which maintain the arbitration power as the foundation of industrial relations regulation in Australia.

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