16 May 2019

Victoria extends its Fair Work referral for public sector employees

By Dan Trindade, Stuart Pill, Matt Garozzo, and James Daff

The Victorian Government has extended the industrial relations powers referred to the Commonwealth, levelling the playing field for Victorian public sector employees.

A recent amendment to the Fair Work (Commonwealth Powers) Act 2009 (Vic) (Referral Act) means that, in Victoria, certain public sector employees can now include valid and enforceable terms in enterprise agreements regarding matters which would previously have been excluded, such as those pertaining to the number, identity or appointment of employees.

Victorian public sector employees left out

The Commonwealth Constitution  provides no direct power for the Commonwealth Parliament to make laws with respect to employment or industrial relations.  The Fair Work Act 2009 (Cth) (FW Act) relies for its validity on a number of other broad legislative powers, most significantly the Corporations Power, which, put simply, allows the Parliament to make laws with respect to what are referred to as "Constitutional Corporations" (being a corporation to which that power applies), including the relationship between such corporations as employers and their employees.  The States retain the exclusive power to make laws with respect to employment and industrial matters falling outside the scope of direct Commonwealth power, such as for State public sector employers which are not Constitutional Corporations.  A national approach to regulating employment and industrial relations is therefore reliant on the States referring employment and industrial relations powers to the Commonwealth.

Accordingly, with the introduction of the FW Act, all States except Western Australia referred industrial powers to the Commonwealth in order to expand the scope of the FW Act's application. Victoria referred a broad range of employment and industrial matters to the Commonwealth by way of the Referral Act.  However, the Referral Act excluded certain matters, including "matters pertaining to the number, identity or appointment (other than terms and conditions of appointment) of employees in the public sector who are not law enforcement officers" (Excluded Matters).  These excluded matters largely reflect certain categories of matters which were identified by the High Court in Re Australian Education Union & Australian Nursing Federation; ex parte Victoria (1995) 184 CLR 188 (Re AEU) as being appropriately left to the domain of the States to regulate in Australia's federal system of government, and as thereby forming part of an implied constitutional limitation on Commonwealth legislative power.

This meant that many Victorian public sector employees could not validly bargain for, include or enforce matters in their enterprise agreements that pertained to Excluded Matters.  By contrast, Excluded Matters could be included and enforced in enterprise agreements regarding private sector employers, or regarding some Victorian public sector employers which are also Constitutional Corporations.

In 2015, the Full Court of the Federal Court in UFU v CFA [2015] FCAFC 1 held that, considering the Commonwealth's head of power to legislate with respect to Constitutional Corporations, Victorian public sector employers that were Constitutional Corporations could voluntarily enter into enterprise agreements that included Excluded Matters, and that this would not infringe the implied limitation identified by the High Court in Re AEU.  This decision created an anomaly whereby private sector employees and employees of public sector Constitutional Corporations could include Excluded Matters in their enterprise agreements, however such matters could not validly be included in enterprise agreements regarding Victorian public sector employees who do not fall into those categories.

Levelling the playing field

Recognising the anomaly created by the Referral Act and the subsequent decision of the Full Court of the Federal Court, the Victorian Parliament recently passed the Fair Work (Commonwealth Powers) Amendment Act 2019 (Vic) (Amending Act) to limit the extent of the exclusion set out in the Referral Act. The Amending Act now permits Victorian public sector employees to bargain for and reach an enterprise agreement about Excluded Matters.  Such matters will not be excluded from the referral of power to the extent that they are included in an enterprise agreement or workplace determination made under the FW Act. 

The Amending Act will allow for enforcement of Excluded Matters in enterprise agreements, and will give jurisdiction to the Fair Work Commission to deal with disputes in relation to Excluded Matters (other than by arbitration of a bargaining dispute under section 240 of the FW Act).

It is important to note that this change does not apply to law enforcement officers, and that therefore it remains that enterprise agreements regarding police and protective services officers cannot include matters pertaining to the number, identity or appointment of officers, or pertaining to probation, promotion, transfer from place to place or position to position, physical or mental fitness, uniform, equipment, discipline or termination of employment of officers.

The Amending Act will come into effect on 31 December 2019 (or an earlier proclaimed date) which is incidentally the same date as the nominal expiry date of the Victorian Public Service Enterprise Agreement 2016.

Takeaway for Victorian public sector employers

The Amending Act does not impose any drastic change on Victorian public sector employers. It merely allows Victorian public sector employers and employees to bargain for, include and (importantly) enforce Excluded Matters as terms in an enterprise agreement, like most other employers and employees.

While such matters have previously been included in enterprise agreements covering Victorian public sector employers and employees, legally speaking such clauses would have been invalid and unenforceable (though in recent times the Victorian Government has included in its industrial relations policies that such arguments are not to be raised for the purpose of avoiding agreed terms).  The effect of the Amending Act is that, on the current state of the law, such clauses may be valid and enforceable in the Fair Work Commission and in the courts. 

Victorian public sector employers should accordingly carefully consider the content of proposed enterprise agreements to cover their organisation, as, by and large, content which would not previously have been enforceable by virtue of being an Excluded Matter for the purposes of the Referral Act will now likely be valid and enforceable in the Fair Work Commission and in the courts.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.