Posted on March 25, 2024 by Dimitrious Havadjia and Lindsay Taylor 4

Fair Work Commission decision raises doubt about legal status of local councils in NSW

Section 220 of the Local Government Act 1993 (NSW) declares that a council is ‘is a body politic of the State’ and ‘is not a body corporate (including a corporation)‘. Amongst other things, this declaration is considered to largely shield local councils in New South Wales from the operation of the Fair Work Act 2009 (Cth) (FW Act). In a recent decision of the Fair Work Commission (FWC), the question of whether a local council was a ‘constitutional corporation’ was considered in the context of a claim against a NSW council brought by a recently terminated employee. The employee sought to rely on the protections in the FW Act against what she alleged was an unlawful termination. Although the FWC made a finding consistent with the existing case law, it did not accept the declaration in section 220 as binding left open the possibility that a council could be a constitutional corporation in some circumstances.

Background

The FW Act (and its WorkChoices predecessor) consolidated most industrial relations powers under the jurisdiction of the Federal Government. In the absence of an express power in the Commonwealth Constitution enabling the Federal Parliament to legislate in relation to employment matters, the FW Act relies on other areas legislative powers in the Constitution for validity, primarily the ‘corporations’ power contained in section 51(xx) of the Constitution. Section 51(xx) of the Constitution gives Federal Parliament power to make laws regarding “foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth.”

Most provisions of the FW Act (including those concerning unfair dismissal and general protections claims) only apply to employers that are one of the types of corporations mentioned in Section 51(xx) of the Constitution (Constitutional Corporation).

In Veronika Bonora v Council of The City of Ryde, Ms Bonora argued that the City of Ryde Council (Council) was a Constitutional Corporation. On that basis, she had submitted a general protections claim against Council.

Council disagreed and relied on several previous decisions (including of the High Court) that determined NSW councils are bodies politic of the State of NSW (see section 220 of the Local Government Act), and therefore not a Constitutional Corporation.

Decision

In this case, the FWC accepted the Council’s evidence that the Council was not a Constitutional Corporation, in particular because the activities it conducted that generated revenue (such as library services and recreational programs) ultimately ran at a loss. The FWC was satisfied that they were part of providing community services and not ‘business activities.’

However, while the FWC ultimately agreed with the Council, the judgment reveals a dissatisfaction on the part of the FWC with the view that Council was only a body politic and could not also be a corporation of some kind, with the Deputy President noting:

“It is sufficient to record, as the above authorities make clear, that the NSW Parliament’s declaration in s.220 of the LG Act does not, without more, remove the legal possibility that Ryde Council is a constitutional corporation.”

The FWC decision thus left open the possibility that local councils (and by extension county councils) could be Constitutional Corporations for the purposes of the FW Act in some circumstances.

Implications

The fact that the FWC was unwilling to accept the declaration in section 220 of the Local Government Act as definitive is, in and of itself, interesting. Further, the FWC sought evidence from the Council on this issue, rather than just accepting the existing legal position at face value.

This raises several noteworthy implications for councils.

The substantial differences between the FW Act and NSW industrial relations legislation mean compliance with both would be problematic, as the FW Act, which is largely unfamiliar to councils, would prevail to the extent of any inconsistency.

Perhaps more significantly, the FWC’s decision opens the possibility that the expanded protections for aggrieved employees under the FW Act could be brought into council workplaces, which is an area where these protections have never applied before.

Finally, this decision should serve to remind councils that some other FW Act provisions already apply to them, in addition to the recently expanded federal anti-discrimination legislation.

To read the FWC’s decision in full, click the link here.

If you have any questions about this post, please leave a comment below or email Dimitrious Havadjia or Lindsay Taylor.