State or Federal? The high court has found that state entities may be corporations and fall under federal legislation
The High Court in the recent case of Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Queensland Rail has found that QR was a trading corporation for the purposes of section 51(xx) of the Constitution. As such, the Fair Work Act (FW Act), and not the Industrial Relations Act 1999 (Qld) (IR Act), applied to QR’s employees.
Implications for employers
State employers, who are established as statutory authorities, should now be aware that if they carry on business in a similar manner to QR, they may be considered a national system employer and any existing awards or agreements made under State law may no longer be valid and enforceable.
Whether or not a corporation will be a trading corporation is a discrete consideration. The Court’s analysis of QR was primarily based on whether or not an authority could, at the same time, be a corporation. Less time was spent on the issue of whether QR’s trading activities affected the type of corporation mainly because on the established tests, QR clearly qualified as a trading corporation.
In other scenarios, however, the answer may be less obvious. The cases on whether a corporation is a trading corporation can be difficult to reconcile, with the analysis shifting between the objectives of the corporation, and the nature and extent of its trading activities. However, the modern trend appears to approach the question with a more liberal eye, and to treat evidence of material trading activities as highly indicative. For example, recently the Fair Work Commission held that the Australian Health Practitioner Regulation Agency was a trading corporation, principally because it’s trading activities were not insignificant (and despite it being formed for a public purpose). The Commission adopted an extremely broad brush approach when making that assessment. It is evident that the characterisation of each corporation will turn on a number of factors and cannot easily be predicted.
QR was established by the Queensland Rail Transport Authority Act 2013 (Qld) (QRTA Act). The purpose behind its establishment was to move workers previously engaged by a Government Owned Corporation to QR, a statutory authority. The employees were covered by enterprise agreements created under the FW Act and its predecessor. These enterprise agreements were carried over to the State system by the QRTA Act, as certified agreements under the IR Act.
The Applicants took issue with the move from one industrial relations regime to another and sought to have QR declared a trading corporation within the meaning of section 51(xx) of the Constitution. The Applicants contended that QR bore all the characteristics of a trading corporation, irrespective of the label given to it by the QRTA Act, and that this made QR a national system employer for the purposes of the FW Act. In effect, the Applicants argued more generally that an entity established under law with its own name, and with separate legal personality and perpetual succession, is a trading corporation within the meaning of s 51(xx) of the Constitution.
QR advanced a number of arguments in response to the Applicants’ contentions. Namely, that QR is not a corporation because it was State’s intention to establish an entity that was not a corporation and the State has the ability to do so. However, it is clear from the QRTA Act that QR has characteristics similar to those of a corporation: QR can create and be made subject to legal rights and duties; QR can sue and be sued in its name; QR can own property; and the QRTA Act states that QR does not represent the State.
The Court found that QR is a trading corporation for the purposes of section 51(xx) of the Constitution. Whether based on its legislative functions, or in light of its labour hire functions, the Court held that this conclusion was ‘irresistible’.
The Court held that even if QR was treated as now doing nothing more than supplying labour to Queensland Rail Limited at a price which yields no profit, that neither permitted nor required the conclusion that QR was not a trading corporation. By analogy, the Court pointed out that labour hire companies were now a common form of enterprise. The engagement of personnel by one enterprise for supply of their labour to another enterprise was clearly accepted as a trading activity. That the parties to the particular supply arrangement were related entities did not deny the activity bearing a characterisation of being a trading activity. That the prices for supply are struck at a level which yielded no profit to the supplier likewise did not deny that the supplier was engaged in a trading activity.
Consequently, the FW Act applied to QR and its employees. Accordingly, sections of the QRTA Act recognising the IR Act as the governing legislation were invalid due to inconsistency. The FW Act intends to cover the field of corporate employment and exclude the operation of the IR Act
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