The Fair Work Commission has confirmed a Victorian local council is a ‘constitutionally-covered business’ and thus falls within the stop bullying jurisdiction of the Commission. The decision will have implications for larger Victorian councils regarding the bullying jurisdiction, but may have more significance in relation to the impact on the industrial relations arrangements of some councils.
What was the issue in this case?
The decision involved an application by an employee for an order directed to the City of Port Phillip. The Commission decision found that the Council was a constitutionally-covered business. The decision did not examine the facts of the application. Under the Fair Work Act 2009 (Cth), a worker can make an application for a stop bullying order if the alleged bullying occurred ‘at work’ in a ‘constitutionally-covered business’. This involves questions about the application of the Commonwealth Constitution which involves consideration of whether this council met the criteria to be a ’trading corporation’. Previous decisions in a range of other jurisdictions have found that some councils and statutory authorities can be trading corporations, while others may not be.
What is the test that was applied?
The Commission applied a ‘current activities test’ to characterise Council as a trading corporation. This involves a factual consideration of the proportion of revenue that comes from trading activities being sufficient to warrant characterisation of its current trading activities as substantial. This required an assessment of the absolute and relative volume of trading activities.
The Commission observed that 54.16 percent of Council’s total revenue came from rates and charges, while revenue from user fees and other income accounted for 16 percent and 7.8 percent respectively. The Commission considered a range of revenue raising activities (other than rates and charges) and held that Council’s activities included trading activities as they resulted in a revenue stream arising from the exchange of goods and services. It referred particularly to childcare centres which were run as businesses by Council. It also referred to the commercialisation of public assets, such as car parking fees collected by Council, which was similar to a commercial parking business.
The Commission emphasised the South Melbourne Market was Council’s most commercial service and constituted a trading activity. It referred to the net surplus position of Council as roughly equivalent to the income derived from operating the Market.
It was noted even ‘not profitable’ trading activities still had the character of trading activities. The regulatory functions of Council were said to be taking place ‘in conjunction with’ the Council’s trading activities.
What did the Commission decide?
It was held by the Commission that Council was trading in services and that those activities were not merely peripheral to its broader activities. The critical point was that the trading activities of the Council were significant, even though not predominant. The Commission assessed the value of Council’s trading activities as $56 million per year or more than 25 percent of Council’s total revenue. It held that Council undertakes sufficient trading for its trading activity to be considered a substantial and not merely peripheral activity.
Will all councils be trading corporations and subject to the stop bullying jurisdiction?
No. It will depend on the circumstances of each council.
The Commission dealt with a similar issue in a matter involving allegations of bad behaviour by a South Australian Councillor. In that decision, the Commission held that the Burnside City Council in Adelaide was not a ‘constitutionally-covered business’, and the Commission therefore could not deal with the application for a stop bullying order. In contrast to this decision, the Commission found that the Burnside City Council earns only 7.1 percent of its revenue from activities that are ‘trading activities’. You can read more about this decision here.
For a council or other public body to contend that it is a not a constitutionally-covered business for the purposes of stop bullying applications, it will need to produce evidence to the effect that its trading activities are not significant or substantial but merely peripheral to its broader activities.
Whilst the proportion of total revenue derived from trading activities will be a relevant factor, it will always be a question of fact and degree whether those activities are substantial. Another way of expressing that test is to ask whether the trading activities of a corporation are proportionally significant or merely peripheral to the operations of the body. In a decision involving the trading corporation test (though not involving the stop bullying jurisdiction), the Full Court of the Federal Court held that the Country Fire Authority was a trading corporation because the volume of trading activities of $13 million was not insubstantial despite it making up only a small part of the total $467 million revenue.
What are the other implications?
The other main implication that flows from the decision relates to the modern award coverage of Victorian local councils.
In making modern awards, the Commission has previously taken the view that a ‘typical’ local council is not a constitutionally-covered business and therefore a ‘typical’ council would not be covered by the Local Government Modern Award 2010 (see our update about this here). Following from those statements, the State Public Sector award modernisation process was followed by the Commission and the Victorian Local Government Award 2015, the Nurses (ANMF – Victorian Local Government) Award 2015 and the Victorian Local Government (Early Childhood Education Employees) Award 2016 were made as a result.
Most councils have been using these ‘public sector’ modern awards as the relevant underlying award for the purpose of the Better Off Overall Test (BOOT) (see our earlier update here) and the relevant award for governing employment terms and conditions for senior officers or senior executive officers where that council’s enterprise agreement excludes them.
For councils that are a constitutionally-covered business (which will mostly be larger metropolitan Victorian councils), the public sector awards have no application. This was always the case. But what has changed is that there is now a decision from the Commission that has expressly found a Victorian council is a constitutionally-covered business and, by implication, there is a much larger number of councils in Victoria that will need to reference the Local Government Industry Award 2010, the Nurses Award 2010 and other relevant modern awards made as part of the 2010 process for the purposes of the BOOT and for other staff not covered by an enterprise agreement.
Take-aways for Councils
- Some Victorian councils, particularly larger councils with substantial commercial business operations will be subject to the stop bullying jurisdiction of the Commission.
- Smaller councils and/or councils with few commercial activities (ie no gym memberships, child care centres) may not be subject to the Commission’s stop bullying jurisdiction. These councils may wish to raise a jurisdictional objection to the Commission considering an application and will need to provide evidence of their total budget and their commercial activities to support such an objection.
- Victorian councils that are constitutionally-covered businesses will need to reference the Local Government Industry Award 2010, the Nurses Award 2010 and other relevant modern awards made as part of the 2010 process for the purposes of the BOOT, and for determining the entitlements of any other staff not covered by an enterprise agreement.
|Lindy Richardson | Partner
T +61 3 9258 3721
|Catherine Dunlop | Partner
T +61 3 9258 3633
|Katherine Southwell | Lawyer
T +61 3 9258 3311
   FWC 7650.
 Mr Martin Cooper  FWC 5974 (15 November 2017).