[2015] FWCFB 6656

The attached document replaces the document previously issued with the above code on 30 September 2015.

Typographical error in endnote 42 has been corrected.

Miriam Henry

Associate to Justice Ross, President

Dated: 30 September 2015

[2015] FWCFB 6656
FAIR WORK COMMISSION

DECISION



Fair Work Act 2009
s.156 - 4 yearly review of modern awards

4 yearly review of modern awards
(AM2014/1 and others)

JUSTICE ROSS, PRESIDENT
VICE PRESIDENT HATCHER
SENIOR DEPUTY PRESIDENT HAMBERGER
DEPUTY PRESIDENT BULL
COMMISSIONER BISSETT

MELBOURNE, 30 SEPTEMBER 2015

4 yearly review of modern awards – award stage – standard absorption clause – calculation of casual loading.

1. Introduction

[1] A decision issued on 13 July 2015 1 (the July 2015 decision) dealt with a number of general issues which arose in subgroups 1A and 1B of the Award stage of the 4 yearly review of modern awards. This decision deals with two aspects of the July 2015 decision which were the subject of further submissions. The first is the standard absorption clause currently in all modern awards and the second concerns the calculation of casual loadings in awards which provide for an all purpose allowance.

[2] A list of the further submissions filed in respect of these two issues is set out at Attachment A. A Summary of the submissions filed in respect of absorption issue was published on 25 August 2015 and a Summary of the submissions filed in respect of the calculation of the casual loading was published on 26 August 2015. Both of these issues were the subject of a hearing on 27 August 2015.

[3] We turn first to the absorption clause issue.

2. The absorption clause

[4] Clause 2 in all modern awards is a standard provision which provides as follows:

[5] In a decision 2 issued on 23 December 2014 (the December 2014 decision) the Commission decided to vary the current modern awards, rather than superceding them; to retain the transitional provision relating to take home pay orders (ie subclause 2.4); and to delete subclauses 2.3, 2.5 and 2.6. As a consequence of the December 2014 decision, and that part of the July 2015 decision which dealt with the commencement date provision,3 the current ‘commencement and transitional’ clause in modern awards will become clause 1 ‘Title and commencement’. Clause 1 provides as follows:

[6] Clause 1.4, the ‘absorption clause’, is in the same terms as the current subclause 2.2 in all modern awards and is the issue in contention in these proceedings.

[7] In the proceedings which led to the July 2015 decision the AMWU contended that subclause 1.4 should be deleted on the basis that the provision upon which it is based (current subclause 2.2) was intended to be a transitional provision only. In their further submission 4 on 21 November 2014 the AMWU submit that the absorption clause ‘did not appear in pre-modern awards and was simply a product of the Part 10A modernisation process to facilitate transition to modern awards’.

[8] The AMWU’s submission was directed at the exposure draft in respect of the Manufacturing and Associated Industries and Occupations Award 2010, but, as we have mentioned, the relevant provision is found in all exposure drafts and so the issue has much broader application. Any decision to remove or modify subclause 1.4 will have application across all modern awards and so the July 2015 decision concluded that all interested parties should be given a further opportunity to make submissions in respect of this issue. Directions were issued in relation to the filing of such submissions. 5

[9] The AMWU initially contended that the absorption clause should be replaced by an alternate provision but this contention was abandoned during the course of the hearing on 27 August 2015.

[10] The submissions advanced in relation to the absorption clause raise the following issues:

[11] We now turn to consider each of these issues.

Issue 1: Was the clause intended to be transitional in nature?

[12] The AMWU submits that the absorption clause is a transitional provision and that this is made clear by the relevant Award Modernisation Full Bench decisions. 6 The AMWU – Vehicle Division, APESMA, AWU, CFMEU (C&G Division) and TCFUA support the AMWU’s submissions.

[13] Ai Group, ABI/NSWBC, Business SA, CCIWA, HIA and MBA filed submissions on the issue of absorption. The employer organisations differ as to their characterisation of the absorption clause and in the submissions they advanced in favour of retaining the current provision.

[14] Ai Group, Business SA and CCIWA submit that the absorption clause is not a transitional provision and that it deals with the absorption of any monetary obligation contained in the award against any overaward payment. 7

[15] Ai Group rejects the proposition that the absorption clause was designed to cease operation at the end of the transitional period, but in any event contends that if that was the intention of the AIRC then that would not justify removing the absorption clause from modern awards and submits that the absorption clause ‘has continuing relevance and is necessary in the sense contemplated by s.138 of the Act’. 8

[16] Ai Group also submits that it would not be appropriate to remove the absorption clause from awards while the take-home pay order clause remains (ie subclause 1.5). 9 We deal later with the interaction between the absorption clause and the take home pay provision.

[17] HIA’s position on the characterisation of the absorption clause is unclear. At paragraph 2.2.8 of its submission HIA says:

[18] The emphasised words in the above extract suggest that HIA acknowledges that the absorption clause was intended to be a transitional arrangement, though it does not say so expressly.

[19] The MBA acknowledges that the absorption provision was introduced as part of the transitional arrangements, but argue that it continues to be relevant whilst the take home pay provisions remain in the award. 10

[20] ABI submits that the current absorption clause is transitional in nature but supports its retention ‘for a little while longer’,:

[21] In the course of oral argument ABI submitted that Item 7 of Part 2 of Schedule 5 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (the Transitional Provisions Act) provided a source of power for the retention of the absorption clause. Schedule 5 of the Transitional Provisions Act provides, among other things, that the AIRC is to continue and complete the award modernisation process provided for by Part 10A of the Workplace Relations Act 1996 (WR Act). Item 7 of Part 2 of Schedule 5 of the Transitional Provisions Act provides as follows:

[22] ABI submits that subject to the retention of the ‘review terms’ (that is subclause 2.6 in current modern awards) the absorption clause could be retained if it still has work to do,:

[23] Later in the course of oral submissions ABI acknowledged that the retention of the absorption clause was not necessary to facilitate the finalisation of the transition process. 13

[24] Ai Group took a different view in relation to the source of the power to include an absorption clause in a modern award. In the course of oral argument Ai Group contended that to the extent that the Transitional Provisions Act contained such a power – and it was not conceded that it did – then it was extinguished by ss.136 and 137 of the Act. 14

[25] The ACTU filed a submission in reply. The ACTU submits that the absorption clause is a transitional provision and were the clause intended to operate otherwise than a transitional provision then,:

[26] The essence of the ACTU’s submission is that outside of the transitional arrangements the absorption clause is not permissible.

[27] Contrary to the submissions advanced by Ai Group, Business SA and CCIWA it is clear from the arbitral background that the absorption clause was intended to be transitional in character. Further, for our part we doubt that Item 7 of Part 2 of Schedule 5 of the Transitional Provisions Act provides a source of power to include a term in a modern award which does not meet the requirements in Subdivision A of Division 3 of the Act. There is no explicit provision to that effect and such a legislative purpose is inconsistent with the ‘note’ in Item 7 of Part 2 of Schedule 5. But it is unnecessary for us to reach a concluded view on this issue. We accept that to the extent that such a power exists its purpose is to facilitate the finalisation of the transition process. We agree with ABI that it is not necessary to retain the absorption clause for this purpose.

[28] The award modernisation process commenced on 28 March 2008 when the Minister for Employment and Workplace Relations signed an award modernisation request pursuant to s.576C(1) of the WR Act. Part 10A of the WR Act, combined with the award modernisation requests (and its various iterations), set out the framework for the award modernisation process.

[29] On 29 April 2008, the AIRC outlined its proposal for the conduct of the award modernisation process. 16 Essentially the process involved dividing industries or occupations into various groups, much like the current 4 yearly review. Exposure drafts of each proposed modern award were published and parties were given an opportunity to comment on those exposure drafts.

[30] On 20 June 2008, the AIRC selected the industries that would be dealt with first as priority industries or occupations. 17 On 12 September 2008, the AIRC published exposure drafts of modern awards for the priority industries and occupations.18

[31] In the Statement of 12 September 2008, the AIRC made the following observation in respect of transitional provisions:

[32] On 19 December 2008, the AIRC made 17 modern awards as part of the priority industry stage of the modernisation process. 20 In that Statement, the AIRC made the following observations in relation to transitional provisions generally:

[33] On 23 January 2009, the AIRC published 24 exposure drafts of Stage 2 industries, and took the same approach in relation to transitional provisions; that is they would be considered at a later stage of the process, although the AIRC sought proposals and submissions as to the manner in which transitional issues should be dealt with. 21

[34] On 3 April 2009, the AIRC foreshadowed the need for transitional provisions to operate in modern awards in order to ‘cushion the impact of changes in wages and other conditions’ as a result of the making of modern awards. 22 The AIRC programmed a separate proceeding to deal with transitional provisions relating to priority industries and Stage 2 industries and this occurred by way of a consultation process over the period from 29 May to 18 July 2009. Parties were invited to file written submissions by 29 May 2009 and reply submissions by 26 June 2009, with a hearing heard in the week of 13 July 2009.

[35] On 2 September 2009 23 the AIRC handed down a decision relating to the transitional provisions to be included in the priority and Stage 2 modern awards. It is uncontroversial that the model absorption clause arose out of this decision. The relevant passages of that decision are: 

[36] The model absorption provision was subsequently considered by a Full Bench of Fair Work Australia in 2010 in the context of an application by Ai Group to insert an absorption provision with wider application than the standard provision. In that case the Full Bench considered clause 2.2 to be a “transitional” clause observing that:

[37] It is clear from the above observation (and from the AIRC discussion of 2 September 2009, see [21] above) that the absorption clause was intended to be transitional. The purpose of the clause was to facilitate the transition from pre-modernised instruments to modern awards. The clause was not directed at overaward payments in the traditional sense but rather at payments referable to pre-modernisation obligations in award or agreement based transitional instruments. The AIRC decided that the phasing arrangements to the modern award system would take place as follows:

[38] The transition to modern awards was effectively complete on 1 July 2014. It is not necessary to retain the absorption clause in order to facilitate the finalisation of the transition process.

[39] We acknowledge the force of the submission put by Ai Group that even if the clause was intended to be transitional that would not be the end of the matter. The question remains as to whether the absorption clause should be retained in either current form or with amendments.

Issue 2: If the absorption clause no longer has any transitional purpose on what basis can such a clause be included in a modern award?

[40] Division 3 of Part 2–3 of the Fair Work Act 2009 (FW Act) deals with the terms of modern awards. Subsection 136(1) provides that a modern award must only include terms that are permitted or required by:

[41] Subsection 136(2) provides that a modern award must not include terms that contravene:

[42] In determining whether the absorption clause can be included in a modern award two preliminary questions must be determined:

[43] As to the first preliminary question subdivision D of Division 3 of Part 2–3 of the Act sets out the terms which must not be included in modern awards. A modern award must not include:

[44] It seems to us that the absorption clause is not excluded by any provision in Subdivision D of Division 3 of Part 2–3 and no party contended to the contrary.

[45] As to the second preliminary question it is clear that the absorption clause is not a term which must be included in a modern award. The issue is whether the absorption clause is a term which may be included in a modern award. In other words is it a permitted term?

[46] Subdivision B of Division 3 of Part 2–3 deals with terms that may be included in modern awards. In particular, s.139(1) provides:

[47] Section 142 is also relevant. It provides that a modern award may include incidental terms (within the meaning of s.142(1)) or machinery terms (within the meaning of s.142(2)), as follows:

[48] The absorption clause is plainly not a ‘machinery term’ within the meaning of s.142(2) and no party contended to the contrary. Hence the issue becomes whether the absorption clause can be properly characterised as being a term ‘about’ one or more of the matters specified in ‘ paragraphs 139(1)(a) to (j), or whether it is an ‘incidental term’ within the meaning of s.142.

[49] The unions generally contended that there was no power to include the absorption clause in a modern award. ABI advanced a submission in similar terms.

[50] ABI submits that the word ‘about’ in s.139 requires a more than incidental connection between an award term and the specified subject matters before the term can be included in an award pursuant to the power confirmed by s.139. At paragraph 46 of its written submission ABI says:

[51] ABI submits that the absorption clause is about ‘over award payments’ rather than any matter falling within the scope of s.139 and on that basis the term cannot be inserted in a modern award pursuant to the power in s.139(1).

[52] Further, ABI submits that s.142(1) does not provide a source of power to include the absorption clause in modern awards. ABI contends that the word ‘essential’ in s.142(1)(b) imports a high bar: “absolutely necessary, indispensable’ and submits that the absorption clause does not meet this requirement,:

[53] ABI concludes its submission as follows:

[54] Ai Group submits that, properly construed, the absorption clause is not about overaward payments but is about the status of award obligations, such as minimum wages. Ai Group advanced the following argument during the course of oral argument,:

[55] Ai Group also submits in the alternative, that the absorption clause is an ‘incidental term’ within the meaning of s.142(1).

[56] For our part, we doubt the absorption clause can properly be said to be ‘about’ one or more of the matters specified in paragraphs 139(1)(a) to (j). It seems to us that such a clause is ‘about’ overaward payments rather than any matter falling within the scope of s.139(1). Nor do we consider that the absorption clause is ‘essential for the purpose of making a particular term operate in a practical way’ and hence it is not an incidental term within the meaning of s.142(1). But in the end it is unnecessary for us to reach a concluded view on these issues. Even if the absorption clause was a permitted term (pursuant to either s.139(1) or s.142(1)) it could only be included in a modern award if it was necessary to achieve the modern awards objective. For the reasons which follow we are not persuaded that it is necessary to include an absorption clause for this purpose.

Issue 3: If an absorption clause can be included in a modern award is the inclusion of such a clause necessary to achieve the modern awards objective or the minimum wages objective?

[57] Section 138 provides, relevantly, that a modern award may include terms that it is permitted to include ‘only to the extent necessary to achieve the modern awards objective’. The modern awards objective is to ensure that modern awards, together with the NES, provide “a fair and relevant minimum safety net of terms and conditions”, taking into account the matters specified in paragraphs 134(1)(a) to (h).

[58] The ACTU (and the unions generally) and ABI submit that the absorption clause is not necessary to achieve the modern awards objective. Such a submission may be inferred from ABI submissions and is put directly by the ACTU. ABI submits:

[59] The ACTU submits:

[60] The common law principles in respect of set off are canvassed in one of the award modernisation decisions.  32 The decision in question dealt with an application by Ai Group to vary the absorption clause in the Manufacturing and Associated Industries Award 2010. The Full Bench cited, with approval, the summary of relevant principles concerning set off contained in a judgment of Anderson J of the Western Australian Industrial Appeal Court in James Turner Roofing Pty Ltd v Peters33 (James Turner Roofing). In James Turner Roofing Anderson J summarised the relevant principles, as follows:

[61] In the decision dealing with Ai Group’s claim the Full Bench noted that the absorption clause (ie clause 2.2, upon which clause 1.4 is based) ‘is not intended to modify the principles regarding set-off established by the Courts and summarised [by Anderson J in James Turner Roofing]’. 35

[62] Ai Group, HIA and CCIWA submit that the retention of the absorption clause is necessary to achieve the modern awards objective and they rely on a number of the s.134 considerations in this regard. Ai Group advances the following submission,:

[63] HIA submits that the absorption clause is necessary to ensure that modern awards meet the modern awards objective. In support of this proposition HIA submits that ‘a provision that facilitates the absorption of increases in monetary obligations under modern awards where over-award payments are made provides certainty as to employment costs and assists in reducing regulatory burden in furtherance of s.134(1)(e)’. 37

[64] CCIWA advances a similar submission and adds that the continued operation of the absorption clause is consistent with the matters specified in s.134(d)(e) and (g) in that:

[65] In relation to the other s.134 considerations CCIWA submits that the retention of the absorption clause does not adversely impact any other relevant consideration. CCIWA also submits that the absorption clause has been ‘significantly utilised’,:

[66] In considering whether the absorption clause is necessary to achieve the modern awards objective we first turn to the legal effect of the clause. The submissions of the various employer organisations varied significantly on this issue.

[67] Ai Group initially submitted that the absorption clause ‘merely ensures that it is open to employers to absorb monetary entitlements under the award into overaward payments where this is otherwise permissible in accordance with the principles concerning absorption/set off’. 39 But during the course of oral argument Ai Group acknowledged that the first sentence of the absorption clause established a right, exercisable by the employer, to absorb any monetary obligation under the award into any over award payment.40

[68] ABI takes a different, more benign, view as to the legal effect of the absorption clause,:

[69] Contrary to ABI’s submission we think that the first sentence of the absorption clause creates a right whereby an employer may set off the monetary obligations imposed by the award against overaward payments. Further, such a right overrides any contrary contractual arrangement between the employer and employee.

[70] We acknowledge that Ai Group submits that the absorption clause was not intended to override contractual arrangements and that the clause may need to be redrafted to confine its scope. But such a submission fails to adequately address two points.

[71] The first is that if the absorption clause is intended to coexist with existing contractual arrangements then it’s difficult to see how such a clause ensures that the award is simple and easy to understand (as contended by a number of employer organisations). In each case the existing contractual arrangement would have to be ascertained before the absorption clause was applied.

[72] The second point is that if the absorption clause only operated in circumstances where the contractual parties had not turned their minds to the question of set off then that begs the question – why should the Award system dictate the outcome? Ai Group is proposing, in effect, that an award term should create the default position with respect to absorption and that the default position would operate in the absence of any contrary contractual position. We fail to see how such a term is necessary to achieve the modern awards objective. As we have mentioned, the modern awards objective is to ensure that modern awards, together with the NES, provide ‘a fair and relevant minimum safety net of terms and conditions’. The safety net nature of modern awards was emphasised in the July 2015 decision, as follows:

[73] For completeness, we would observe that contrary to Ai Group’s submission, we are not persuaded that there are any award derived barriers to the operation of the common law principles of set off.

[74] 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.

[75] ABI, Ai Group and MBA submit that it would not be appropriate to remove the absorption clause from awards while the take home pay order clause remains in awards. The take home pay order clause is subclause 1.5 (see paragraph [5] above), which states:

[76] The take-home pay order clause was one of the matters addressed in the 23 December 2014 Full Bench decision, at paragraphs 12-16, as follows:  43

[15] The Ai Group initially submitted that the clause should be deleted, arguing that the clause will be obsolete when the transitional provisions end on 31 December 2014, 46 but in a later submission did not object to the retention of the clause for the time being.47 Australian Business Industrial (ABI) and the NSW Business Chamber submitted that leaving the current clause 2.4 in the exposure drafts would be an appropriate solution.

[16] The current take home pay clause (see paragraph [13] above) will remain in all modern awards. Our intention is that the clause will be removed in the next four yearly review.’

[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.

[78] In written submissions filed on 28 August 2015 (pursuant to leave granted during the hearing on 27 August 2015) the ACTU and AMWU addressed the source of power to make the take-home pay order provisions in modern awards. The ACTU submits that Item 3A of Schedule 5 of the Transitional Provisions Act provides a relevant source of power, it states:

[79] The ACTU contends that sections 136 and 137 of the Act are to be read down to the extent required to allow Item 13A to operate. The ACTU also submits that whether or not the take-home pay order clause ought to be retained is a discretionary matter which it submits need not be dealt with at this time,:

[80] The AMWU supports the ACTU’s submissions.

[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.

3. Casual loading and all purpose allowances

[82] One of the issues raised in the proceedings which led to the July 2015 decision concerned the calculation of casual loadings.

[83] Casual employment provisions in exposure drafts have in most cases been drafted along the following lines:

[84] However, in the case of modern awards containing any allowance characterised as all purpose in nature, the exposure draft has provided that a casual employee must be paid the ordinary hourly rate and in addition a loading of 25% of the ordinary hourly rate. Because the ordinary hourly rate (as distinct from the minimum hourly rate) includes any all purpose allowance, the consequence of this is that the 25% loading is payable on any such all purpose allowance. This distinction between the minimum hourly rate and the ordinary hourly rate was explained in the July 2015 decision as follows (footnotes omitted):

[85] However in respect of the calculation of the casual loading vis-a-vis all purpose allowances, the Commission went on to say in the July 2015 decision:

[86] Parties were given an opportunity to make further written submissions in relation to whether the casual loading should be applied to any all purpose allowances. The submissions of union parties were consistently in opposition to the general rule as proposed in the July decision. The submissions of employer parties generally supported the establishment of a consistent principle, but differed in their degree of support for the provisional decision identified in paragraph [70] of the July 2015 decision.

[87] The written submissions gave rise, we consider, to the following issues:

[88] A number of parties made oral submissions in relation to these issues at the hearing before us on 27 August 2015. We will consider each of these issues in turn having regard to those submissions.

Issue 1: Does the provisional decision result in substantial change to any modern award?

[89] The unions appearing in the matter identified a number of modern awards which, they contended, would be substantially affected by the provisional decision. The AWU referred to the Aluminium Industry Award 50, the Cement and Lime Award51, the Premixed Concrete Award52, the Quarrying Award53 and the On-Site Award as being awards in which it had an interest which currently provided that penalty rates and the casual loading were payable on the ordinary-time rate inclusive of all purpose allowances. It characterised any reductions in the rate of pay for casual employees as a result of the application of the proposed approach as being significant and substantial. The CFMEU made particular reference to the On-Site Award, and tendered a document54 which calculated the effect on casual hourly rates for classifications in that award if the provisional approach was applied. This showed that there would be a reduction in the hourly rate of an amount in excess of one dollar in relation to a majority of classifications. The AMWU identified the Manufacturing and Associated Industries and Occupations Award55, the Graphic Arts, Printing and Publishing Award56 and the Food, Beverage and Tobacco Manufacturing Award57 as awards which would be affected.

[90] ABI submitted that approximately 20 awards would be affected by the provisional decision. Using the Quarrying Award as an example, it submitted that the result of the change would be a reduction in earnings of about half a percent. As to whether this was substantial, the following submission was made:

[91] The MBA and the HIA addressed the first issue only by reference to the On-Site Award, being the award in which they had a major interest. They identified that there was a controversy concerning the calculation of casual rates under the On-Site Award in that the CFMEU, the employer organisations and the Fair Work Ombudsman all had different views about the correct method of calculation. This difference of interpretation turned upon whether the casual rate should be calculated by reference to the daily hire rate in clause 19.3(a) (CFMEU), the weekly hire rate in clause 19.3(b) (employer organisations) or the minimum rates in clause 19.1 plus certain allowances (Fair Work Ombudsman). The calculations prepared by the CFMEU as to the effect of the provisional decision was based, they submitted, upon the interpretation of the award it preferred. Different results would be produced if the alternative interpretations were to be utilised.

[92] The Ai Group accepted that there might be changes, including substantive changes, caused by the adoption of the provisional decision in some awards, but also identified a range of awards in relation to which there would be no effect because the award provided that the casual loading was to be applied to the prescribed minimum rate and/or because the award did not contain any all purpose allowances.

[93] Having considered these submissions, we are satisfied that it is likely that the adoption of the provisional decision would, in respect of a number of awards which contain allowances which are currently expressly described as being all purpose in nature or which are stated to form part of the ordinary hourly rate, result in reductions in the hourly rates of pay for casual employees. Consistent with the submissions advanced by ABI, we accept that those reductions, which may be in the order of one half of one per cent of the current rate, would not be regarded as insignificant by those employees on award minimum rates who would be directly affected by the proposed approach. It is not necessary for current purposes to attempt to exhaustively identify the number of awards affected, but it appears to be only a minority of awards.

Issue 2: Is the provisional decision inconsistent with any previous decision of the Commission and if so what is to be made of this?

[94] The AWU submitted that the provisional decision was inconsistent with the 2008 Australian Industrial Relations Commission Full Bench Award Modernisation Decision of 19 December 2008 59 (2008 decision), which confirmed that the general rule was that the casual loading was to be applied to the “ordinary rate”. The Full Bench stated:

[95] The AWU also referred to the High Court decision in Scott v Sun Alliance Australia Ltd 60:

[96] The AWU submitted that the approach in the 2008 decision should be followed.

[97] In relation to the On-Site Award, the CFMEU submitted that the provisional decision was inconsistent with the AIRC Full Bench decision in Wages and Allowances Review 2006 – Supplementary Decision 61. In that decision, the Full Bench had determined that the “follow the job” loading and leading hand rates in the On-Site Award fell within the definition of “basic periodic rate of pay” in s.178 of the WR Act as it was at the time of the decision - that is, that they were part of the “rate of pay for a period worked (however the rate is described) that does not include incentive-based payments and bonuses, loadings, monetary allowances, penalty rates or any other similar separately identifiable entitlements”.62 A result of that conclusion was that the casual loading then prescribed in s.185 of the WR Act was payable on those amounts.

[98] The CFMEU also referred to the AIRC Full Bench Award Modernisation Decision of 3 April 2009 63 (2009 decision), in which the Full Bench determined that it was necessary that all-purpose industry allowances, which were characterised as a type of minimum award payment, be expressed separately from minimum classification rates.64 It submitted that it followed from that decision that in determining the actual minimum rates to be paid, it was necessary to take into account any all purpose allowance which were payable. It was further submitted that it was consistent with that decision that the casual loading apply to the ordinary time rate applicable in any award.

[99] The AMWU supported the submissions of the AWU and the CFMEU in relation to issue 2.

[100] ABI submitted that the provisional decision was inconsistent with the decisions made by the AIRC as part of the award modernisation process to make those modern awards in which the casual loading was currently payable on all purpose allowances as well as the minimum, as well as decisions made as part of the two-yearly review process to retain that position.

[101] The Ai Group submitted that the provisional decision was not inconsistent with any previous decision. It disagreed in particular with the AWU’s submission that there was any substantial inconsistency with the 2008 decision, submitting that the issue constituted the ordinary rate was not dealt with in any serious way in that decision. Alternatively the Ai Group submitted that even if there was inconsistency with any previous decision, there may well be cogent reasons to depart from that decision. The HIA likewise submitted that the CFMEU had placed too much weight on the 2008 decision, and that the 2009 decision dealt with a different subject matter.

[102] We accept the submission that the provisional decision is inconsistent with the general approach adopted in the 2008 decision, namely that the casual loading should be applied to the ordinary time rate. Although what constituted the ordinary time rate was not the subject of express consideration in the 2008 decision, we consider it to be well understood that an allowance which is described as all purpose in nature is one that necessarily forms part of the ordinary time rate. That being the case, any departure from that approach proposed by the provisional decision must be justified by cogent reasons.

Issue 3: Should there be exceptions to the proposed general rule e.g. Building and Construction General On-Site Award 2010 where specific circumstances warrant?

[103] The primary submission of the AWU, the CFMEU and the AMWU was that the proposed general rule should not be adopted, so that issue 3 did not arise. The AWU submitted in the alternative that, if the proposed general rule was adopted, it should be on the basis that no employee suffered a reduction in remuneration as a result. The AMWU submitted that the 2008 decision demonstrated that there may be departures from a general rule in relation to particular modern awards.

[104] ABI declined to make a submission in relation to issue 3 beyond noting that the On-Site Award and the Cotton Ginning Award were examples of modern awards which might require individual consideration. The Ai Group submitted that there should generally be a consistent position across all awards, but accepted that there could be a justification for a departure from that position in relation to particular awards, in which case the party contending for the departure should carry the onus of demonstrating the requisite justification.

[105] The MBA and the HIA both contended that adoption of the provisional decision in the On-Site Award would resolve the existing dispute concerning the interpretation of that award, but that if it was not considered appropriate to resolve the dispute in that way, the problem should be given specific consideration by the Commission as expeditiously as possible.

[106] The obligation in s.134(1) of the FW Act to ensure that modern awards provide a fair and relevant minimum safety net of terms and conditions carries with it a requirement (in s.134(1)(g)) to take into account “the need to ensure a simple, easy to understand, stable and sustainable modern award system …”. We accept that the adoption of a clear and consistent approach in relation to whether the casual loading should apply to all purpose allowances is desirable in the interests of simplicity and ease of understanding, although the particular circumstances of some awards may require special consideration. The question is whether the approach proposed by the provisional decision is the one which should be preferred in this respect.

Conclusions

[107] We have come to the conclusion that the approach in the provisional decision should not be adopted. We are not satisfied on balance that there are sufficiently cogent reasons to justify a departure from the general approach adopted in the 2008 decision. Leaving aside the dispute concerning the interpretation of the relevant provisions of the On-Site Award for the time being, we do not consider that there is anything before us which suggests that there has been any practical difficulty in the operation of current modern awards provisions which are consistent with the 2008 decision. In that circumstance, the adoption of a change which may cause not insignificant reductions in pay to some award-dependent employees is not justified.

[108] Additionally, and on reflection, the application of the provisional decision may add unnecessary complexity to modern awards. Its effect would be that allowances which are currently described as all purpose in nature would no longer operate on a truly all purpose basis, but would apply for certain purposes only. For the sake of clarity, that would then require those purposes to be clearly identified. As was pointed out in the submissions of the AWU, a requirement in the case of casual employees that the casual loading be calculated on the minimum hourly rate, but that other loadings and penalties be calculated on the ordinary hourly rate would add difficulty to the process of calculating the correct hourly rate. This difficulty will not be able to be overcome by the addition of detailed rate schedules specifying the casual hourly rates payable for each ordinary time, overtime, weekend work and shift work scenario because, particularly in those awards where there are different all purpose allowances applying to different categories of employees, it will become impracticable to produce comprehensive rate schedules coverings every possible scenario for every category of employee.

[109] The concern which underlay the provisional decision was whether it was appropriate for certain allowances currently expressed as all purpose allowances to be paid at an increased level for casual employees by reason of the application of the casual loading. Ultimately however we have concluded that to deal with this concern in the manner proposed by the provisional decision is too broad-brush an approach and involves conducting the analysis from the wrong starting point. We consider that the preferable approach is to permit reconsideration, on an award-by-award basis during the course of the 4-yearly review, as to whether any existing allowance should retain its “all purpose” designation or should be payable on some different basis.

[110] The general approach will remain as expressed in the exposure drafts, namely that the casual loading will be expressed as 25% of the ordinary hourly rate in the case of awards which contain any all purpose allowances, and will be expressed as 25% of the minimum hourly rate in awards which do not contain any such allowances.

[111] In respect of the specific controversy concerning the On-Site Award, we note that the MBA and HIA have lodged applications to resolve that controversy in the proceedings before the Full Bench dealing with the issues of part-time and casual employment. 65 We consider that those applications constitute the appropriate vehicle by which that very specific issue may be resolved. We do not propose to give it any further consideration in this decision.

PRESIDENT

Appearances:

M Butler for the Association of Professional Engineers, Scientists and Managers, Australia.

S Crawford for The Australian Workers’ Union.

S Maxwell for the Construction, Forestry, Mining and Energy Union.

B Ferguson for the Australian Industry Group.

R Calver for Master Builders Australia.

S Taylor for the “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU)

S Taylor for the “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU)—Vehicle Division

N Ward for Australian Business Industrial and the New South Wales Business Chamber.

M Adler for the Housing Industry Association

Hearing details:

2015.

August 27.

Melbourne: (with video links to Sydney, Adelaide and Canberra)

Attachment– Submissions & Reply Submissions

1A and 1B – Absorption clause and casual loading issues

Australian Business Industrial and NSW Business Chamber (ABI)

Submission

7 August 2015

“Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU)

Submission

3 August 2015

“Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU)

Additional reply submission

17 August 2015

“Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU)—Vehicle Division

Submission

3 August 2015

Association of Professional Engineers, Scientists and Managers, Australia (APESMA)

Submission

30 July 2015

Reply submission

17 August 2015

Australian Council of Trade Unions

Reply submission

17 August 2015

Australian Industry Group (Ai Group)

Submission

3 August 2015

Reply submission

17 August 2015

Australian Workers’ Union (AWU)

Submission

3 August 2015

Reply submission

17 August 2015

Additional reply submission

20 August 2015

Business SA (Bus SA)

Submission

31 July 2015

Chamber of Commerce and Industry of Western Australia (CCIWA)

Submission

3 August 2015

Construction, Forestry, Mining and Energy Union—Construction and General Division (CFMEU C&G)

Submission

3 August 2015

Reply submission

17 August 2015

Housing Industry Association (HIA)

Submission

3 August 2015

Master Builders Australia (MBA)

Submission

3 August 2015

Reply submission

17 August 2015

Textile Clothing & Footwear Union Of Australia (TCFUA)

Submission

4 August 2015

 1   [2015] FWCFB 4658

 2   [2014] FWCFB 9412

 3   [2015] FWCFB 4658 at [5]

 4   AMWU submission, 21 November 2014 at paragraphss 4-6.

 5   [2015] FWCFB 4658 at [19] and [97]

 6   See [2009] AIRCFB 800 and [2010] FWAFB 4488

 7   Ai Group submission at paragraph 14; Business SA submission at paragraphs 2 and 3; CCI of WA submission at paragraphs 5 and 12; Ai Group submission 3 August 2015 at paragraph 6

 8   Ai Group submission 3 August 2015 at paragraph 6

 9   Ibid at paragraphs 38-41

 10   MBA submission at paragraphs 2.4 and 2.7

 11   ABI and NSWBC submission 7 August 2015 at paragraphs 24-26

 12   Transcript 27 August 2015 at paragraph 551

 13   Ibid at paragraph 554

 14   Ibid at paragraphs 654-662

 15   ACTU submission 17 August 2015 at paragraphs 6 and 8

 16   [2015] FWCFB 4658

 17   See [2008] AIRCFB 550

 18   [2008] AIRCFB 717

 19   Ibid at [31]

 20   [2008] AIRCFB 1000

 21   [2009] AIRCFB 50 at [11]

 22   [2009] AIRCFB 345 at [19]

 23   [2009] AIRCFB 50 at [11]

 24   [2009] AIRCFB 800 at [19]-[20]

 25   Ibid

 26   [2009] AIRCFB 800 at [30]

 27   ABI submission 6 August 2015 at paragraphs 51-52

 28   Ibid at paragraph 53

 29   Transcript 27 August 2015 at paragraph 408

 30   ABI submission 7 August 2015 at paragraphs 52-53

 31   ACTU submission 7 August 2015 at paragraph 11

 32   [2010] FWAFB 4488

 33   [2003] WASCA 28

 34   Ibid at [21]

 35   [2010] FWAFB 4488 at [18]

 36   Ai Group submission 3 August at paragraphs 16-17 and 29-37

 37   HIA submission, 3 August 2015 at paragraph 2.3.2

 38   CCIWA submission, 3 August 2015 at paragraph 8

 39   Ai Group submissions 3 August 2015 at paragraph 31

 40   Transcript 27 August 2015 at paragraphs 369-401

 41   Transcript 27 August 2015 at paragraphs 519-521

 42   [2015] FWCFB 4658 at [96]

 43   [2014] FWCFB 9412

 44   For example, clause 2.1 in the Manufacturing and Associated Industries and Occupations Award 2010 at item 2

 45   Further submissions of the ACTU: Stage 1 Exposure Drafts, 31 October 2014, item 6

 46   Ai Group supplementary submission, 13 November 2014, items 13-16

 47   Correspondence from Ai Group dated 24 November 2014

 48   ACTU written submission 28 August 2015 at paragraph 12

 49   MA000020

 50   MA000060

 51   MA000055

 52   MA000057

 53   MA000037

 54   Exhibit CFMEU 1

 55   MA000010

 56   MA000026

 57   MA000073

 58   Transcript 27 August 2015 at paragraphs 773-776

 59   [2008] AIRCFB 1000

 60   (1993) 178 CLR 1 at 5

 61   [2007] AIRCFB 439

 62   Ibid at [21]-[28]

 63   [2009] AIRCFB 345

 64   Ibid at [43]

 65   AM2014/196 and AM2014/197

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