Courting Disaster

Late last week we found out that the High Court has granted special leave to the Public Service Association and Professional Officers' Association Amalgamated Union of NSW (who I'll call the PSA, for convenience) to argue that the Industrial Relations Amendment (Public Sector Conditions of Employment) Act 2011 is invalid.

To understand that, we need to climb back in time a bit.

In 2007, the Labor government recognized that if the NSW budget was to be kept in check, then public sector wages would need to be tightly controlled.  Wage growth was outstripping revenue growth, and if action was not taken then enormous budget deficits would become entrenched.

The policy they came up with was that public sector wages would be limited to 2.5% except where specific productivity savings could be identified.  Sensible enough.

The problem was that, as Greg Pearce (Minister for Finance) said, "The policy was first introduced by the previous Labor Government in 2007, but that Government failed to implement it." The policy was inconsistently and weakly applied, which pretty much rendered it useless.

The Coalition decided on a different approach, and introduced the the bill in question.

What the bill did was insert s146C into the Industrial Relations Act 1996.  The section reads as follows:

It essentially forces the Industrial Relations Commission to apply the 2.5% policy.  Labor had lost multiple battles in the Industrial Relations Commission before losing government, and it was hoped that this law would effectively remove the Commission as a recourse for aggrieved public sector workers.

The PSA brought an action to the Industrial Relations Court asking that the amendment be declared invalid. Their main submission was as follows:

This was more or less the same argument that had succeeded in the notorious bikies case.  In that case, the bikie clubs challenged the legislation as compelled the Supreme Court to act in a certain way, and in that sense made the court little more than a rubber stamp. This was held by the High Court to be inconsistent with the purpose of a judiciary and, in short, breached the doctrine of separation of powers.

That decision would have been extremely embarrassing for the O'Farrell government but for the fact that the legislation had been passed by the Labor government.

This bill was a Coalition creation - and notwithstanding the fact that the 2.5% had been Labor policy, Labor had argued strenuously and at some length against it when it passed in June 2011.

I don't want to get stuck into a detailed analysis of the decision, given that it lies thoroughly outside my professional experience. Having said that, the decision appears to be a fairly straightforward one, which is usually a bad sign for any challenge. Suffice to say that the Court seemed pretty unimpressed by the PSA's argument.

That makes it perhaps a little surprising that the High Court has agreed to hear the matter.

The High Court is the highest court in Australia, and the final point of call for any party. Given that there are only so many days in a year, the court has to be selective in which matters it agrees to hear.

The court regularly conducts Special Leave Hearings where one or two judges sit and hear a large number of short arguments as to whether special leave should be granted to argue the matter before the full court.

An overwhelming majority of applications are rejected. Having a good chance of winning is not enough - the court will need to convinced, in short, that the matter is significant enough to warrant their time.

Unfortunately the transcript of the special leave application has not, at the time of writing, been published, so for now we are in the dark as to what went on at the hearing. But the news that special leave has been granted must have sent a shiver up O'Farrell's spine.

He has a big agenda.  A very big, very expensive agenda. He will have enough trouble paying for it with moderate wages growth.  If wages grow out of control, he is going to struggle to find the money he needs.

I suspect he'll be saying a little prayer the night before the High Court hears the appeal.

UPDATE: The transcript of the application for special leave has now been posted, if you're super-keen.