The Department was established in 1920 with the appointment of a Commissioner for Labour. The portfolio of Minister for Labour was created in 1924 and in 1936 a Secretary for Labour was appointed and the Department became advisory bureau for all government departments (except Railways) in regard to industrial matters affecting government wages and employees.

The Department was responsible for the administration of the industrial code, apprentices, construction safety, weights and measures, machinery, shops and factories and consumer protection. It also assumed responsibility for the Small Claims Tribunal and the licensing of credit providers in 1975.

Following the 1983 State election, the Division of Industrial Training was transferred to the Department of Employment and Administrative Services, and the Weights and Measures Branch was transferred to the Department of Consumer Affairs.

In October 1983 industrial functions then being carried out by the Department of Labour and Industry (WAA 54), including that of industrial inspection, were transferred to the Western Australian Government Industrial Relations Service. The Service has renamed the Office of Industrial Relations. The remaining industrial relations function of the Public Service Board - that is, responsibility for industrial matters affecting Public Service employees - was transferred to the Office of Industrial Relations in January 1987. This resulted in a consolidation of Government industrial relations functions in the Office, providing a consistent approach to industrial relations in the Western Australian public sector. Thus all industrial relations matters such as policy development; industrial relations research; representation of employers; award compliance; and legislative review were centred in the Office of Industrial Relations. This assisted outside organisations in their industrial dealings by identifying the place of the Office of Industrial Relations within Government to deal with all matters.