1
Fair Work Act 2009
s.156 - 4 yearly review of modern awards
4 yearly review of modern awards—Plain language re-drafting
(AM2016/15)
JUSTICE ROSS, PRESIDENT MELBOURNE, 16 OCTOBER 2018
4 yearly review of modern awards – standard absorption clause – take-home pay order –
referral to Plain Language Full Bench
[1] Section 156 of the Act requires the Fair Work Commission (the Commission) to
review all modern awards every four years (the Review).
[2] This statement concerns two outstanding issues relating to clause 1 – Title and
commencement – in all exposure drafts. A number of general drafting and technical issues
which arose during the course of the review of the Group 1 awards were dealt with in a
decision issued on 23 December 2014 (the December 2014 decision).1 As a consequence of
that decision the standard Title and commencement clause was as follows:
‘1. Title and commencement
1.1 This award is the xx Award 2015.
1.2 A variation to this award does not affect any right, privilege, obligation or liability
that a person acquired, accrued or incurred under the award as it existed prior to that
variation.
1.3 Schedule H—Definitions sets out definitions that apply in this award.
1.4 The monetary obligations imposed on employers by this award may be absorbed
into overaward payments. Nothing in this award requires an employer to maintain or
increase any overaward payment.
1.5 Neither the making of this award nor the operation of any transitional
arrangements is intended to result in a reduction in the take-home pay of employees
covered by the award. On application by or on behalf of an employee who suffers a
reduction in take-home pay as a result of the making of this award or the operation of
any transitional arrangements, the Fair Work Commission may make any order it
considers appropriate to remedy the situation.’
1 [2014] FWCFB 9412.
[2018] FWC 5810
STATEMENT
E AUSTRALIA FairWork Commission
[2018] FWC 5810
2
[3] The two outstanding issues concern clause 1.4 (the absorption clause) and clause 1.5
(the take home pay order clause). It is convenient to deal with the second matter first.
The take home pay order clause
[4] In the December 2014 decision2 it was decided that the current take home pay clause
(clause 1.5 above) would remain in all modern awards, with the intention that it would be
removed in the next four yearly review.
[5] The take home pay clause was also considered in the 4 yearly review of modern
awards – Penalty rates – Transitional arrangements decision3 (the Transitional arrangements
decision). The Full Bench in the Transitional arrangements decision concluded:
‘[100] Item 13A of the TPCA Act and the take-home pay order clauses in modern
awards are limited to reductions in take-home pay suffered by employees as a result of
the award modernisation process, including as a result of any transitional arrangements
phasing in differences between the pay rates in pre-modernised awards and modern
awards. Item 13A was inserted to address both the inclusion of take-home pay order
terms in modern awards, and their scope, which expands the class of employees
eligible to seek a take-home pay order to include employees employed after the
commencement of modern awards (who are not eligible for a take-home pay order
under Part 3, item 9 of Schedule 5 to the TPCA Act).
[101] Any reductions in take-home pay arising from the Penalty Rates decision will
not be attributable to the award modernisation process or any residual issues arising
from that process, but, rather, will result from the variation of specified modern
awards as part of the 4 yearly review of modern awards. It follows that take-home pay
orders are not available to mitigate the impact of the proposed reduction in Sunday (or
public holiday) penalty rates.
[102] One of the questions on notice put to all parties in the present proceedings was
in the following terms:
“It seems to be common ground that the take home pay order provisions of the
TPCA Act are not an available option to mitigate the impact of the reductions
in penalty rates set out in the Penalty Rates decision. Does any interested party
take a different view?”
[103] No party expressed a view contrary to that posed in the question. Ai Group ,
ACCI, the Hospitality Employees, ABI, the Pharmacy Guild, RCI, the SDA and
United Voice all submitted that the take-home pay provisions of the TPCA Act were
not an available option to mitigate the impact of the reductions in penalty rates.
(references omitted)’
2 [2014] FWCFB 9412 at [12] to [16].
3 [2017] FWCFB 3001.
[2018] FWC 5810
3
The absorption clause
[6] A decision issued on 20 September 20154 considered, among other things, whether an
absorption clause such as clause 1.4 can be included in modern awards. The Commission
concluded that:
the absorption clause was intended to be transitional in character;5
there was doubt as to whether the absorption clause can properly be said to be about
one or more of the matters specified in s.139(1)(a), but it was not necessary to reach
a concluded view in respect of that issue;6 and
it is not necessary to include the absorption clause in modern awards to achieve the
modern awards objective.7
[7] As to the last matter the Full Bench said:
‘Modern awards are part of the minimum safety net of terms and conditions established by the
Act. It is not the function of such a minimum safety net to regulate the interaction between
minimum award entitlements and overaward payments. Such matters are adequately dealt with
by the common law principles of set off to which we have referred and should be left to
individual employers and employees to determine. It is not necessary to include an absorption
clause in modern awards in order to provide a fair and relevant minimum safety net. As the
absorption clause is not a term which is necessary to achieve the modern awards objective it
cannot be included in a modern award.’
[8] In those proceedings ABI, Ai Group and the MBA submitted that it would not be
appropriate to remove the absorption clause while the take home pay order clause remained.
After noting the comments in the December 2014 decision, the Full Bench said:
‘[77] Our conclusion in respect of the absorption clause raises a question as to the
appropriateness of retaining the take-home pay order subclause. In the summary document
published on 25 August 2015 interested parties were put on notice that if there was no relevant
source of power then the subclause should be deleted…
[81] We do not propose to determine this issue at this time. We will revisit the take-home pay
provision before the conclusion of the Review after providing all interested parties with a
further opportunity to make submissions regarding the relevant source of power and, if there is
such a power, whether we should exercise our discretion to retain the subclause in either its
current form or with amendments.’
[9] The award stage of the Review is nearing completion and only a small number of
common issue matters remain and so we propose to now consider the issues in relation to take
home pay orders that were deferred by the December 2014 decision.
4 [2015] FWCFB 6656.
5 Ibid at [27].
6 Ibid at [56].
7 Ibid at [57] to [74].
[2018] FWC 5810
4
Next steps
[10] The take home pay clause will be referred to the Plain Language Re-drafting Full
Bench for consideration.
[11] Interested parties are invited to make submissions addressing the following issues:
Whether there is a power to retain the take home pay clause in modern awards and if
so, the relevant source of that power;8 and
If there is such a power, should the Commission exercise the discretion to retain the
provision.
[12] Interested parties are to file submissions by 4 pm on 6 November 2018.
[13] Submissions in reply must be filed by 4 pm on 20 November 2018.
[14] This matter will be determined on the papers unless a party requests an oral hearing by
13 November 2018.
[15] All material should be sent to amod@fwc.gov.au. All material will be published on the
Commission’s website.
PRESIDENT
Printed by authority of the Commonwealth Government Printer
PR700423
8 In written submissions filed on 28 August 2015 the ACTU and AMWU addressed the source of the power.
mailto:amod@fwc.gov.au
