Two different industrial relations systems operate in WA, the state system and the national fair work system. Which system applies to a particular business or organisation and its employees depends on the type of business arrangement under which the employer operates.
Generally, the state system includes businesses (and their employees) that are:
- sole traders (e.g. Jane Smith trading as Jane’s Cafe)
- unincorporated partnerships (e.g. Jane and Bob Smith trading as Jane’s Cafe)
- unincorporated trust arrangements (Jane and Bob Smith as trustees for Jane’s Cafe)
- incorporated associations that are not trading or financial corporations and other not-for-profit organisations that are not trading or financial corporations
The national ‘fair work’ system covers Western Australian businesses that are constitutional corporations. This includes:
- Pty Ltd businesses that are trading or financial corporations (e.g. Smith Pty Ltd trading as Jane’s Cafe)
- incorporated associations that are trading or financial corporations and other not-for-profit organisations that are trading or financial corporations.
More detail is provided on constitutional corporations below.
There are some areas of overlap between the state and national systems. The provisions of the national Fair Work Act 2009 on notice of termination and parental leave apply to employers and employees in the state system and information on these requirements is included on this website. State laws on when children can work apply to all national system employers and employees in Western Australia, and the state Long Service Leave Act 1958 also covers many national system employers and employees.
Getting it right is important
It is essential that business owners and employees understand whether the business is covered by the state system or national system, because the two industrial relations systems have different employment rights and obligations.
WA awards cover many employees in the state system and these provide different rates of pay to the national modern awards which cover most employees in the national system. The state minimum wage and state minimum conditions of employment also differ from the national minimum wage and the National Employment Standards.
Tips for employers
Employers who are unsure whether their business is in the state system can contact Wageline or their business adviser.
If the employer is an incorporated association or other not-for-profit body, there is no definitive rule on whether such an organisation is a constitutional corporation (and therefore covered by the national industrial relations system). This will depend on whether it engages in ‘sufficiently substantial’ trading activities. Wageline is not in a position to advise on this matter, and the organisation would need to seek its own legal advice to determine this question.
Tips for employees
Employees who are unsure if their employer is a state system or national system employer may wish to:
- Ask the employer or manager
- Check the business entity name of the employer on a payslip or annual payment summary (group certificate), or on a contract or letter of appointment. The business entity name may be different from the trading name e.g. you may work at Perth Café (the trading name) but Cafe Pty Ltd is the employer.
- Look up the business on the Australian Government’s ABN lookup website – www.abr.business.gov.au. A free search of the trading name on this website will often provide the entity name. If the business entity name is a trust, employees will need to contact Wageline, and Wageline can undertake a more detailed search.
- Ring Wageline on 1300 655 266.
Which businesses are constitutional corporations?
In Western Australia, the national industrial relations system covers only employers who are constitutional corporations and their employees. This is different to the situation in other states of Australia.
There is no absolute rule that determines whether a particular corporation is covered by the national industrial relations system. Broadly speaking, Proprietary Limited [Pty Ltd] or Limited [Ltd] companies tend to be in the national system by virtue of their trading or financial activities, as discussed below.
A constitutional corporation is incorporated. Incorporation can be done under the federal Corporations Act 2001 or under other legislation, such as the WA Associations Incorporation Act 1987.
A constitutional corporation engages in trading or financial activities. Trading activities typically involve buying or selling, and produce revenue for the corporation. Financial activities involve the borrowing of money and the provision of finance. A corporation that trades or engages in financial activities is not automatically a constitutional corporation. Rather, the corporation must engage in sufficiently substantial trading or financial activities. This will vary from corporation to corporation. The key test to determining whether a corporation is a constitutional corporation is to assess the activities of the corporation, not its purpose.
Foreign corporations that are incorporated overseas are automatically constitutional corporations in Australia.
Not for profit organisations
Organisations incorporated under the Associations Incorporation Act are not-for-profit associations. This means that any profits they make can only be used to further the association’s objects and not to provide personal gain for members.
Not-for-profit associations – for example, sporting clubs – are not automatically excluded from the national industrial relations system. They may be constitutional corporations if they have sufficiently substantial trading or financial activities, even if the purpose of the organisation is something other than trading or finance.
Corporations or incorporated associations that provide public services – for example, public universities or non-government organisations (NGOs) – may also be constitutional corporations if they engage in sufficiently substantial trading or financial activities. This is despite the fact that the organisation has not been created for the purpose of trading or finance, and trading or finance is not the organisation’s predominant activity.
The fact an organisation receives government funding does not prevent it from being a constitutional corporation. Again, the test for this will be the organisation’s level of trading or financial activities.
Situations involving trusts are not clear cut. Legal advice should be sought where a trust is involved in an employment situation, particularly regarding whether the trustee or the beneficiary is the employer. Issues can arise because the trust itself cannot be an employer as it is not a legal “person”. A trust is simply a legal relationship where one person – the trustee – holds property or rights on behalf of another person – the beneficiary.
In very general terms, if the trustee is the employer (of a third person/s), it is incorporated and if it engages in sufficiently substantial trading or financial activities, the business may be covered by the national system. There is the potential that the beneficiary may be the employer (of a third person/s), not the trustee. In such a situation, the incorporation of the beneficiary and the nature of its trading or financial activities would be the deciding factor regarding national system coverage.