On 20 August 2008, the Federal Court determined that local
councils are not constitutional corporations and therefore not
'employers' for the purposes of the Workplace Relations
Act 1996 (Cth).
This decision has implications for local councils across
AWU v Etheridge Shire Council
In the case of AWU v Etheridge Shire
Council1, the Federal Court considered
whether the Etheridge Shire Council in Queensland could enter into
a workplace agreement with its employees under the Federal
industrial relations system.
Under the Workplace Relations Act 1996 (Cth), the
agreement could only be made if the Council was a constitutional
corporation, that is, a trading or financial corporation formed
within the limits of the Commonwealth.
Council Activities Key to Status
Justice Spender held that, in determining whether the Council
was a trading or a financial corporation, the primary focus is on
the activities of the Council.
There was evidence that the Council's activities included
providing a tourism centre, road works for the Department of Works,
private works (services to residents and organisations), hostel
accommodation, childcare centres, office space rental, residential
property rental, sale of land, hire of halls, sale of water and
services to the Federal Government.
In finding the Council was not a trading corporation, Justice
Spender held that:
All of the above activities "entirely lack the essential
quality of trade"
Almost all activities ran at a loss
All activities were directed to public benefit objectives
In monetary terms they were "so inconsequential and
incidental to the primary activity and function of the Council as
to deny the Council the characterisation of a 'trading
corporation or a financial corporation'."
Workplace Agreements unavailable to Councils
The decision means that local councils cannot enter into
workplace agreements under the Federal industrial relations system
and are not employers for the purposes of the Federal unfair
We understand that an appeal is unlikely against the decision.
This is due in part to legislative amendments made to the Local
Government Act 1993 (Qld) in March 2008 which expressly
provided that councils are not corporations.
However, for councils that have implemented Federal workplace
agreements, such as in Western Australia, the Federal Court's
decision is likely to cause significant uncertainty.
In NSW, the government legislated to shield some public sector
employees from Federal industrial relations law, but not council
employees2. However, councils have not sought to enter
into Federal agreements and the issue in Etheridge has not
Status of Non-Profit Organisations Unclear
Etheridge turned on the nature of local councils and
their functions and provides little guidance as to the status of
incorporated notfor- profit organisations.
1. Australian Workers' Union of Employees,
Queensland v Etheridge Shire Council  FCA 1268 (20
August 2008) per Spender J
2. Public Sector Employment Legislation Amendment Act
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Long experience representing many of Australia's leading employers has taught us that in employment litigation the identity of an employee's representative is a major factor in how employee litigation runs.
Australian employees receive certain entitlements (such as annual leave and superannuation) where contractors do not.
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