[2015] FWCFB 6847

FAIR WORK COMMISSION

DECISION

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

4 yearly review of modern awards—Award flexibility common issue—time off in lieu of payment for overtime—model term
(AM2014/300)

JUSTICE ROSS, PRESIDENT DEPUTY PRESIDENT KOVACIC COMMISSIONER ROBERTS

MELBOURNE, 6 OCTOBER 2015

4 yearly review of modern awards common issue - award flexibility - time off in lieu - finalisation of model term.

CONTENTS

Chapters		Paragraph
1.	Introduction	[1]
2.	The Award Flexibility Decision	[2]
3.	The issues	[14]
4.	The next steps	[76]

ABBREVIATIONS

AAA	Accommodation Association of Australia
Act	Fair Work Act 2009
ABI/NSWBC	Australian Business Industrial and the New South Wales Business Chamber
ACTU	Australian Council of Trade Unions
AHA	Australian Hotels Association
Ai Group	Australian Industry Group
AIRC	Australian Industrial Relations Commission
AMWU	“Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU)
APESMA	The Association of Professional Engineers, Scientists and Managers, Australia
ASU	Australian Municipal, Administrative, Clerical and Services Union
Award Flexibility Decision	4 Yearly Review of Modern Awards: Award Flexibility [2015] FWCFB 4466
CFMEU (C&G)	Construction, Forestry, Mining and Energy Union (Construction and General Division)
CFMEU (M&E)	Construction, Forestry, Mining and Energy Union (Mining and Energy Division)
Commission	Fair Work Commission
Family Leave Test Case	Family Leave Test Case – Stage 1 – November 1994 decision – (1994) 57 IR 121 Personal/Carer’s Leave Test Case – Stage 2 – November 1995 decision– (1995) 62 IR 48
HIA	Housing Industry Association
HSU	Health Services Union of Australia
MIMA	The Motor Inn, Motel and Accommodation Association
MBA	Master Builders Australia
NES	National Employment Standards
NFF	National Farmers’ Federation
Preliminary jurisdictional issues decision	4 Yearly Review of Modern Awards: Preliminary Jurisdictional Issues [2014] FWCFB 1788
provisional model TOIL term	provisional model term dealing with time off in lieu of payment for overtime
Review	4 yearly review of modern awards
TOIL	time off in lieu
Transitional Review	Transitional review of modern awards under Item 6 of Schedule 5 to the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009

1. Introduction

[1] On 16 July 2015 the Fair Work Commission (the Commission) issued a decision 1 (the Award Flexibility Decision) dealing with a number of claims to vary modern awards to include certain award flexibility terms as part of the first 4 yearly review of modern awards. The decision dealt with the variation of modern awards in relation to two particular matters: time off in lieu (TOIL) of payment for overtime and make-up time. In respect of the first matter the Commission set out a provisional model term dealing with time off in lieu of payment for overtime (the provisional model TOIL term). In Directions issued on 16 July 2015 interested parties were provided with an opportunity to file submissions in relation to both the wording of the provisional model TOIL term and the proposition that the model term be inserted into all modern awards. This decision settles the terms of the model TOIL term. It is convenient to first summarise the relevant parts of the Award Flexibility Decision before turning to the issues which are the subject of the present matter.

2. The Award Flexibility Decision

[2] The Award Flexibility Decision begins with a consideration of the legislative context for the Review, noting that the Review is broader in scope than the Transitional Review of modern awards which took place in 2012–13. The Full Bench also observed that the Review proceedings provided the first full opportunity to consider the content of modern awards. 2 The Full Bench’s consideration of the specific claims is set out below, albeit in summary terms.

[3] The Full Bench also noted that in dealing with matters arising in the Review the Commission will have regard to the relevant historical context and will take into account previous decisions relevant to any contested issue. The context in which those decisions were made will also need to be considered, as the Full Bench observed in the Preliminary Jurisdictional Issues decision:

‘... In conducting the Review it is appropriate that the Commission take into account previous decisions relevant to any contested issue. The particular context in which those decisions were made will also need to be considered. Previous Full Bench decisions should generally be followed, in the absence of cogent reasons for not doing so.’  3

[4] The above observation was particularly relevant in the award flexibility proceedings as Ai Group’s claims were said to be based on model clauses determined by a Full Bench of the AIRC in the 1994 Family Leave Test Case decisions (the Family Leave Test Case).

[5] The Ai Group made two claims in the award flexibility case. The first claim sought to insert a model TOIL clause into 26 modern awards that did not currently have a TOIL provision, and to delete existing TOIL provisions in 10 modern awards and replace them with the model clause. Ai Group’s second claim sought to insert a ‘make-up time’ provision into 51 of the 122 modern awards.

[6] The Australian Manufacturing Workers’ Union (AMWU) sought to vary the provisions relating to TOIL in 5 modern awards to provide for the accrual of TOIL at the ‘time for penalty’ rate rather than on an ‘hour for hour’ basis.

[7] As we have mentioned, Ai Group’s claims were said to be based on model clauses determined by a Full Bench of the AIRC in the 1994 Family Leave Test Case decisions. In the Award Flexibility Decision, the Full Bench noted that there are some similarities and some significant differences between the current statutory context and the context at the time the Family Leave Test Case was decided. Compared to the position when the Family Leave Test Case was determined, the current statutory framework provides additional flexibilities, protections and rights for employees and employers. Further, the role of modern awards and the nature of the Review are quite different from the arbitral functions previously performed by the AIRC. Under the current Act, the modern awards objective is central to the Review, and modern awards, together with the NES, provide a ‘fair and relevant minimum safety net of terms and conditions’. Parties seeking a variation to a modern award must demonstrate it is necessary to achieve the modern awards objective.

[8] Despite the differences in the statutory framework the Full Bench concluded that some aspects of the Family Leave Test Case TOIL provision are relevant in the current statutory context. The Full Bench did not depart from the test case standard regarding the calculation of time for the purpose of TOIL, that is, at the ordinary rate (i.e. time for time) rather than the overtime rate (i.e. time for penalty) and on that basis rejected the AMWU’s claim. In doing so, the Full Bench held that the ‘time for penalty rate’ aspect of the claim was inconsistent with the Family Leave Test Case standard and the AMWU had not mounted a persuasive case to depart from that standard.

[9] The Full Bench also rejected the Ai Group’s claim in relation to make-up time on the basis that the type of agreement sought to be facilitated by the claim could be entered into pursuant to the model flexibility term in all modern awards. It was accepted that while Ai Group’s proposed make-up time provision may be more administratively convenient, the material fell short of establishing that the variations proposed were necessary, within the meaning of s.138 of the Act.

[10] Ai Group’s claim to vary the existing TOIL provision in 10 modern awards was also rejected. However, the Full Bench held that it was necessary to vary modern awards which do not presently contain a TOIL provision to insert a model TOIL provision. The Full Bench was satisfied that Ai Group had advanced a sufficient merit case, though they provisionally reached a different conclusion as to the content of a proposed model TOIL clause.

[11] The Full Bench set out a provisional model TOIL term at paragraph [267] of the Award Flexibility Decision. The provisional view of the Full Bench was that the proposed model term will facilitate agreements between an employee and their employer to take TOIL instead of payment for overtime at a time or times agreed, subject to appropriate safeguards. It was proposed that TOIL will generally be calculated at the ordinary time rate, consistent with the Family Leave Test Case standard except in relation to those modern awards which currently provide for TOIL at the ‘time for penalty’ rate.

[12] The provisional model TOIL term provides as follows:

‘1. Time off in lieu of payment for overtime

1.1 An employee may elect with the consent of the employer to take time off in lieu of payment for overtime at a time or times agreed with the employer, in accordance with this clause.

1.2 The following requirements apply to an agreement to take time off in lieu of payment for overtime:

(a) A separate written agreement must be made by the employee and employer for each occasion on which overtime that has been worked is to be taken as time off in lieu. Each such agreement must:

(i) state when the employee started and ceased working overtime hours;

(ii) state that if requested by the employee the employer must pay the employee for any accrued entitlement to take time off in lieu of payment for overtime which the employee has not yet used. Payment must be made at the overtime rate applying to the overtime worked and must be made in the first pay period following the request for payment; and

(iii) be retained as an employee record.

(b) Overtime taken as time off during ordinary time hours shall be taken at the ordinary time rate; that is, an hour for each hour worked.

(c) The employee and employer must, within four weeks of the overtime being worked, agree on when the time off will be taken, otherwise payment for the overtime must be made to the employee at overtime rates in the first pay period after that four weeks.

(d) The time off in lieu of overtime must be taken within 12 weeks of the overtime being worked, otherwise payment for the overtime must be made to the employee at overtime rates in the first pay period after that 12 weeks.

(e) Notwithstanding subclauses (c) and (d) above, if requested by an employee, the employer must pay the employee for any accrued entitlement to take time off in lieu of payment for overtime which the employee has not yet used. Payment must be made at the overtime rate applying to the overtime worked and must be made in the first pay period following the request for payment.

(f) If, upon termination of employment, an employee has an accrued entitlement to take time off in lieu of payment for overtime which the employee has not yet used, the employee must be paid for the overtime at the overtime rate applying to the overtime worked.

1.3 An employee who is entitled to request a change in working arrangements under section 65 of the Fair Work Act 2009 may make a request under that section for time off in lieu of payment for overtime at a time or times specified in the request or at a time or times to be subsequently agreed with the employer. This clause will apply to such time off in lieu. Pursuant to section 65(5) of the Fair Work Act 2009, the employer may refuse such a request only on reasonable business grounds.

1.4 An employer must not exert undue influence or undue pressure on an employee in relation to a decision by the employee to make, or not make, an agreement to take time off in lieu of payment for overtime.

Note: Under s.345 of the Fair Work Act 2009, a person must not knowingly or recklessly make a false or misleading representation about an employee’s workplace rights under this award clause.’

[13] We now turn to the matters presently before us.

3. The issues

[14] As we have mentioned, directions were issued to provide interested parties with an opportunity to file written submissions in relation to both the wording of the provisional model TOIL term and the proposition that the model term be inserted into all modern awards. A list of the submissions received is set out at Attachment 1. A hearing was held on 4 September 2015.

[15] A number of parties made submissions regarding whether particular modern awards should be varied to insert the provisional model term. Ai Group submits that it is not necessary to vary awards that already contain a TOIL provision. 4 Similarly, ABI/NSWBC submit that the model term should not be included in all modern awards.5 Submissions were also directed at the following awards:

Party	Award
ASU	Social Community, Home Care and Disability Services Industry Award
APESMA	Professional Employees Award 2010
NFF	Pastoral Award 2010 Horticultural Award 2010

[16] In a Statement issued on 2 September 2015 the relevant parties were informed that the hearing on 4 September 2015 would not be dealing with the submissions referred to at paragraph [15] above. These matters along with any other objections to the insertion of the model term in other modern awards, will be dealt with at a hearing to be held on 10 December 2015.

[17] We decided to split the hearings in the manner outlined so that the terms of the model TOIL term was finalised prior to any consideration about the insertion of the model term into particular modern awards. We now turn to the issues which were the subject of the proceedings on 4 September 2015.

[18] Ai Group and ABI/NSWBC propose a number of specific amendments to the provisional model TOIL term. As a general proposition, Ai Group submits that the provisional model TOIL term is ‘unnecessarily restrictive and complex’, 6 and that the proposed safeguards are excessive.7 Ai Group further submits there is ‘insufficient factual or evidentiary justification for the inclusion of certain elements’ of the model term,8 and for the purposes of s.138 of the Act, a ‘simpler or less restrictive approach would be preferable or all that is necessary’.9

[19] Ai Group proposed an alternate model term which it submits is better aligned with the modern awards objective in s.134(1) of the Act. 10 Ai Group’s alternate model provides as follows:

‘1. Time off in lieu of payment for overtime: Ai Group proposed model term

1.1 An employee may elect with the consent of the employer to take time off in lieu of payment for overtime at a time or times agreed with the employer, in accordance with this clause.

1.2 The following requirements apply to an agreement to take time off in lieu of payment for overtime:

(a) A written agreement must be made by the employee and employer for the occasions on which overtime is to be taken as time off in lieu. Each such agreement must:

(i) State the times at which overtime is worked;

(ii) Be retained as an employee record.

(b) Overtime taken as time off during ordinary hours shall be taken at the ordinary time rate; that is, an hour for each hour worked.

(c) An employer shall, if requested by an employee, provide payment, at the rate provided for the payment of the overtime worked in the award, for any overtime worked under paragraph (b) of this subclause where such time off has not been taken within four weeks of accrual.

(d) If such time off has not been taken within 12 weeks the employer may elect to pay the employee for the overtime worked at the applicable overtime rate.

(e) If, upon termination of employment, an employee has an accrued entitlement to take time off in lieu of payment for overtime which the employee has not yet used, the employee must be paid for the overtime at the applicable overtime rate.

(f) Any payment for overtime that is made pursuant to this clause will calculated at the applicable award rate applying to the overtime worked.

1.3 An employee who is entitled to request a change in working arrangements under section 65 of the Fair Work Act 2009 may make a request under that section for time off in lieu of payment for overtime at a time or times specified in the request or at a time or times to be subsequently agreed with the employer. This clause will apply to such time off in lieu. Pursuant to section 65(5) of the Fair Work Act 2009, the employer may refuse such a request only on reasonable business grounds.

Note: Under s.345 of the Fair Work Act 2009, a person must not knowingly or recklessly make a false or misleading representation about an employee’s workplace rights under this award clause.’ 11

[20] ABI/NSWBC advance three central propositions:

(i) the requirement in subclause 1.2(a) that a separate written agreement must be made by the employee and employer for each occasion on which overtime that has been worked is to be taken as TOIL is “unclear and may give rise to unnecessary administrative complications”;

(ii) the requirement in subclause 1.2(c) that an employee and employer must agree within four weeks following accrual on when TOIL accrued will be taken is “unnecessary and potentially counterproductive”; and

(iii) the requirement in subclause 1.2(d) that TOIL must be taken within 12 weeks of accrual is “overly restrictive and potentially counterproductive”.

[21] The NFF submits that the provisional model TOIL term does not meet the modern awards objective and that it “imposes an unreasonable and unnecessary layer of regulatory burden on employers” 12. In particular, the NFF is concerned about the following elements of the provisional model TOIL term:

‘(i) the requirement for a separate written agreement be made each time overtime is worked and an employee elects to take time off in lieu, which must include certain specified content;

(ii) two separate time frames within which certain action must be taken, including agreement being reached within four weeks, and leave being taken within 12 weeks;

(iii) the ability for the employee to disregard the written agreement at any time and instead elect to be paid out at overtime rates;

(iv) the short time frames for payment of overtime at the request of the employee (immediately in the pay period after the employee changes their mind, or otherwise upon expiry of the 12 week period).’  13

[22] The ACTU supports the retention of wording of subclauses 1.1, 1.2(a), 1.2(c)–(f), 1.3 and 1.4 of the provisional model TOIL term. In relation to subclause 1.2(b) the ACTU acknowledges the remarks of the Full Bench in the Award Flexibility decision but submit that the “door should be left open” for a party to advance a case during the award stage of the Review that TOIL should be provided for at the appropriate penalty rates in a particular modern awards. 14 The AMWU, AMWU—Vehicle Division, ASU, CFMEU, HSU and MUA support the ACTU’s submissions.

[23] APESMA submits that the wording of the model TOIL term may need to be varied in respect of awards which include provisions for annualised salaries either explicitly or implicitly. 15

[24] It is convenient to summarise the submissions by reference to the particular components of the provisional model term. We note that no submissions were made in respect of subclause 1.1 and we do not propose to amend the subclause.

Clause 1.2(a)

1.2 The following requirements apply to an agreement to take time off in lieu of payment for overtime:

(a) A separate written agreement must be made by the employee and employer for each occasion on which overtime that has been worked is to be taken as time off in lieu. Each such agreement must:

(i) state when the employee started and ceased working overtime hours;

(ii) state that if requested by the employee the employer must pay the employee for any accrued entitlement to take time off in lieu of payment for overtime which the employee has not yet used. Payment must be made at the overtime rate applying to the overtime worked and must be made in the first pay period following the request for payment; and

(iii) be retained as an employee record.

[25] Ai Group seeks the deletion of paragraph 1.2(a)(i) and (ii) and the insertion of the following:

‘1.2 The following requirements apply to an agreement to take time off in lieu of payment for overtime:

(a) A written agreement must be made by the employee and employer for the occasions on which overtime is to be taken as time off in lieu. Each such agreement must:

(i) State the times at which overtime is worked;

(ii) Be retained as an employee record.’

[26] In the course of oral argument Ai Group made it clear that while it did not necessarily take issue with the proposition that there should be a written agreement in relation to TOIL arrangements, it had two concerns with the provisional model TOIL term,:

(i) the provisional term precludes such an agreement being struck prior to the overtime being worked; and

(ii) the provisional term requires that a separate agreement be struck each time a TOIL arrangement operates. 16

[27] ABI/NSWBC propose that subclauses 1.2(a) and (b) of the model term be amended in the following terms:

‘(a) The employer must inform the employee in writing that if requested by the employee the employer must pay the employee for any accrued entitlement to take time off in lieu of payment for overtime which the employee has not yet used. Payment must be made at the overtime rate applying to the overtime worked and must be made in the first pay period following the request for payment.

(ab) A separate written agreement record must be made by the employee and employer for each occasion on which overtime that has been worked is to be taken as time off in lieu. Each such agreement record must:

(i) state when the employee started and ceased working the overtime hours which are to be taken off as time in lieu; and

(ii) state that if requested by the employee the employer must pay the employee for any accrued entitlement to take time off in lieu of payment for overtime which the employee has not yet used. Payment must be made at the overtime rate applying to the overtime worked and must be made in the first pay period following the request for payment; and

(iii) be retained as an employee record.’ 17

[28] During the course of oral argument ABI/NSWBC acknowledged that the separate written record envisaged by its proposed paragraph 1.2(b) would be a record created by the employer rather than a record made ‘by the employee and employer’. 18

[29] In support of their contention that the requirement for a separate written agreement for each occasion on which overtime is to be taken as TOIL is unnecessary ABI/NSWBC advances the following submission:

‘… the requirement to produce a ‘separate written agreement’ on each occasion where TOIL is accrued may unnecessarily increase the administrative burden on employees and employers in circumstances where arrangements can be appropriately managed at a “policy” and “employee record’ level, without the inclusion of a formal written agreement on each occasion.

… in some circumstances and in some businesses, such agreement will be ‘at large’ and will be on an ongoing basis. In these scenarios, a requirement to produce a written agreement on each occasion an employee wishes to accrue TOIL appears to be needlessly burdensome, particularly given that ordinarily, each accrual of TOIL will relate to a relatively small period of time.’  19

[30] AHA submits that paragraph 1.2(a)(ii) of the provisional model TOIL term should be deleted ‘as the obligation is adequately addressed in subclause 1.2(e) and the duplicated requirement adds an unnecessary layer of complexity and detail to the proposed arrangement’. 20 AHA also expresses the concern that the parties to a written agreement may find themselves in breach of the award in the event that the agreement were to inadvertently omit the reference required pursuant to subclause 1.2(a)(ii), despite the award otherwise providing a mechanism at subclause 1.2(e) requiring the payment of any accrued entitlement upon request by the employee.21 In the course of oral argument AHA stated that the proposal advanced by ABI/NSWBC would meet its concerns with respect to the provisional model TOIL term.22 AAA and MIMA support the submissions of the AHA.23

[31] HIA and MBA also broadly supported ABI/NSWBC’s proposal in respect of subclause 1.2(b). 24

[32] As we have mentioned, the NFF expressed concern about the requirement in subclause 1.2(a) of the provisional model TOIL term for a separate written agreement to be made each time overtime is worked and an employee elects to take TOIL. During the course of oral argument the NFF favoured the approach advanced by ABI/NSWBC. 25

[33] The ACTU submit that it is necessary for a TOIL arrangement to be made in writing on each occasion an agreement is made and reject the proposition that such a requirement is “in any way burdensome”. 26 It submits that in most, if not all cases, a simple template would be developed27 and that such a written agreement would both document the agreement and demonstrate that the arrangement was consensual.

[34] Contrary to the submissions advanced by the various employer interests we do not propose to delete the requirement that a separate written agreement be made for each TOIL arrangement entered into by an employee and their employer. In circumstances where TOIL is taken at the ordinary time rate, that is an hour TOIL for each hour of overtime worked, employers have a financial incentive to encourage such arrangements. It is important that such a financial incentive not result in employees being pressured into entering into TOIL arrangements. The requirement for a separate written agreement both evidences the consensual nature of the arrangement which has been entered into and provides an important safeguard for employees.

[35] We accept that the requirement for a separate written agreement on each occasion gives rise to a regulatory burden. But we agree with the ACTU’s submission that in most, if not all cases, a simple template can be developed. To assist in this regard we propose to add a schedule to each modern award which incorporates the model TOIL term setting out a template TOIL agreement. The proposed template agreement is set out at Attachment 2. We emphasise that the template agreement is included by way of example and there will be no requirement to use it.  While the template agreement is in the form of a signed hard copy document, a TOIL agreement could be made through an exchange of emails between the employer and employee or by other electronic means.

[36] We note that the requirement for a separate written argument is not necessary in those awards where TOIL is calculated by reference to the overtime rate as the financial incentive for employers to enter into a TOIL arrangement on those terms is much less.

Clause 1.2(b)

1.2 …

(b) Overtime taken as time off during ordinary time hours shall be taken at the ordinary time rate; that is, an hour for each hour worked.

[37] As we have mentioned, the ACTU submits that the “door should be left open” for a party to advance a case during the award stage of the Review that TOIL should be provided for at the appropriate penalty rates. The ACTU submits that “it would be a matter for the party seeking such a provision to demonstrate that payment at ‘time for penalty’ meets the modern awards objective”. 28

[38] The AMWU contends that the modern awards objective can only be achieved if TOIL of payment for overtime is provided at the applicable overtime penalty rate but that in light of the Award Flexibility Decision it submits that “without considering industry specific circumstances” the provisional model term achieves the modern awards objective. 29

[39] The AMWU—Vehicle Division supports and adopts the submissions of the ACTU. 30 The AMWU—Vehicle Division supports the terms of the model term but that in modern awards where TOIL is provided at overtime rates, the use of the phrase “time for penalty” in subclause 1.2(b) of the model term may create confusion.31 The AMWU—Vehicle Division submits it would be more appropriate to state that “overtime taken as time off during ordinary hours shall be taken at the ‘overtime rate’”.32 It is submitted that where the modern award provides for TOIL at the overtime rate the following wording should be used for subclause 1.2(b) of the model term:

‘(b) Overtime taken as time off during ordinary time hours shall be taken at the overtime rate: that is, if the employee works one hour of overtime and elects to claim time off instead of payment, the time off would be equal to time and a half (or one and a half hours)” (emphasis added)’ 33

[40] The AMWU—Vehicle Division also submits that where clause 1.2(b) provides for TOIL at overtime rates an example should be included in the relevant modern award, as follows:

‘…that is, if the employee works one hour of overtime and elects to claim time off instead of payment, the time off would be equal to time and a half (or one and a half hours).’ 34

[41] The ACTU supports the submissions made by the AMWU—Vehicle Division in relation to the wording of the model term.

[42] In the Award Flexibility Decision the Full Bench decided that TOIL will generally be calculated at the ordinary time rate except in the ten modern awards which currently provide for TOIL at the overtime penalty rate. In those awards subclause 1.2(b) will be replaced by a reference to the time for penalty rate. 35 We agree with the propositions advanced by the AMWU—Vehicle Division and the revised exposure drafts will reflect the change proposed.

Clause 1.2(c)-(e)

1.2 …

(c) The employee and employer must, within four weeks of the overtime being worked, agree on when the time off will be taken, otherwise payment for the overtime must be made to the employee at overtime rates in the first pay period after that four weeks.
(d) The time off in lieu of overtime must be taken within 12 weeks of the overtime being worked, otherwise payment for the overtime must be made to the employee at overtime rates in the first pay period after that 12 weeks.
(e) Notwithstanding subclauses (c) and (d) above, if requested by an employee, the employer must pay the employee for any accrued entitlement to take time off in lieu of payment for overtime which the employee has not yet used. Payment must be made at the overtime rate applying to the overtime worked and must be made in the first pay period following the request for payment.

[43] Ai Group seek the deletion of paragraphs 1.2(c), (d) and (e) and propose the insertion of the following:

(c) An employer shall, if requested by an employee, provide payment, at the rate provided for the payment of the overtime worked in the award, for any overtime worked under paragraph (b) of this subclause where such time off has not been taken within four weeks of accrual.

(d) If such time off has not been taken within 12 weeks the employer may elect to pay the employee for the overtime worked at the applicable overtime rate.

[44] ABI/NSWBC submit:

(i) the requirement in subclause 1.2(c) of the provisional model term is unnecessary and should be removed; 36 and

(ii) the 12 week period in clause 1.2(d) is too short, is overly restrictive and potentially counterproductive. 37

[45] As to the first point, ABI/NSWBC submit that “the requirement imposed by subclause 1.2(d) to take TOIL within a limited period of time after accrual provides sufficient protection for employees” 38 and that

‘[p]lacing a requirement on employees and employers to identify with clarity when they would like to take TOIL within a relatively short period after accrual unnecessarily compromises the flexibility afforded by the Model Clause.’³⁹

[46] As to the second point, ABI/NSWBC submit that the 12 week period should be extended and that “six months seems a suitable period”. 40 ABI/NSWBC advance the following points in support of their submission:

‘Placing a requirement on employees to take leave within 12 weeks after accrual unnecessarily compromises the flexibility afforded by the Model Clause. ABI and NSWBC submit that an extension of this period would not necessarily result in excessive leave balances or any lost or untaken TOIL accruals given the protections afforded by the other components of the Model Clause.

… the longer the available period in which to take TOIL, the less likely it is that parties will reach the “deadline” date and be forced to cash out their TOIL accrual, thereby circumventing the purpose of the TOIL clause.

… such an approach would be consistent with Modern Award Objective s 134(1)(d): the need to promote flexible modern work practices and the efficient and productive performance of work.’ 41

[47] ABI/NSWBC did not make a submission about subclause 1.2(e). 42

[48] In relation to subclauses 1.2(c) and (d) of the provisional model TOIL term NFF submit that the specification of two separate timeframes (i.e. four weeks in subclause 1.2(c) and 12 weeks in subclause 1.2(d)) can be confusing 43 and HIA favoured a single timeframe, as proposed by ABI/NSWBC.44

The ACTU supports the retention of the safeguards in subclause 1.2(b), (c) and (d). It submits that subclause 1.2(b) provides the trigger to ensure the parties agree on a time that TOIL will be taken and that this is agreed within a reasonable timeframe. Subclause 1.2(c) provides a ceiling to ensure that the TOIL is actually taken. The ACTU submits that the two provisions work effectively together as a safeguard. 45

[49] The ACTU submits that the safeguard in subclause 1.2(e) is a “fundamental provision which must be retained in any model clause”,:

‘The fundamental idea … that underpins TOIL is the agreement itself and this, in our view, means that an employee must retain the right to withdraw that agreement at any time.

Any employee has to first get the agreement to accrue TOIL and then, secondly, they need the agreement about when they can actually take the TOIL. So if you can’t take TOIL at a time that you wish to take it then it defeats the purpose of the agreement which may have been reached in the first instance. Employee shouldn’t have to settle for second best and they certainly shouldn’t feel that they are forced to take time in lieu at a time that isn’t mutually convenient for them.’ 46

[50] We agree with the submissions advanced by ABI/NSWBC. The requirement in subclause 1.2(c) of the provisional model term is unnecessary and too restrictive – it will be deleted. As to subclause 1.2(d) we accept the proposition that a 12 week period is too short – it will be replaced with a six month period.

[51] We are not persuaded to delete subclause 1.2(e) of the provisional model term. The subclause is fundamental to the operation of the model term as it provides an important safeguard to ensure that TOIL arrangements are consensual.

[52] Subclause 1.2(e) of the provisional model TOIL term provides that if requested by an employee the employer must pay the employee for any accrued but unused TOIL entitlement. The subclause specifies that such a payment “must be made in the first pay period following the request for payment”. NFF submit this request is too restrictive and that it would be appropriate to provide some flexibility as to when the payment is to be made, such as within 14 days following the request for payment. 47

[53] We are not persuaded to make the amendment proposed by NFF. In the usual course overtime payments would be made in the following pay period and we see no reason for prescribing a different approach in relation to accrued but unused TOIL entitlements. We also note that the employer will have had the benefit of the employee’s overtime and will have benefitted from any delay between the working of that overtime and the time at which payment for it is made.

[54] Subclause 1.2(f) was not the subject of any adverse comment by any party and we do propose to retain the provision.

Clause 1.3

1.3 An employee who is entitled to request a change in working arrangements under section 65 of the Fair Work Act 2009 may make a request under that section for time off in lieu of payment for overtime at a time or times specified in the request or at a time or times to be subsequently agreed with the employer. This clause will apply to such time off in lieu. Pursuant to section 65(5) of the Fair Work Act 2009, the employer may refuse such a request only on reasonable business grounds.

[55] Ai Group retain a clause in the same terms as subclause 1.3 as part of its proposed model term and the ACTU also supported the retention of subclause 1.3. The only party seeking the deletion of subclause 1.3 was the NFF who submit that it is not necessary. 48

[56] Subclause 1.3 was inserted in the provisional model TOIL term in response to a submission advanced by the CFMEU (C & G) to the effect that the model term was inconsistent with s.65 of the NES because it requires the consent of the employer before an employee can access TOIL. In the Award Flexibility Decision the Full Bench said,

‘[109] It seems that an award TOIL clause could only potentially exclude some or all of s.65 if:

● the clause applies in circumstances where s.65 also applies (that is; where an employee is in one of the personal circumstances specified in s.65(1A) and wishes to take TOIL because of those personal circumstances, is not excluded by s.65(2), and makes the request in writing setting out the details required by s.65(3)); and

● the clause would enable a request for TOIL in those circumstances to be refused by the employer without the employer having reasonable business grounds for the refusal.

[110] We do not consider that an award TOIL clause could lawfully operate in this way, to circumvent the protections in s.65 of the Act:

● If a request for TOIL was made in accordance with s.65 then an employer could not assert that the provision for employer consent in the TOIL clause itself allowed it freedom to decline the request as it saw fit, as this would in effect exclude s.65(5). Therefore, to this extent, the TOIL clause would be of no effect pursuant to s.56. 

● If a request for TOIL was made in circumstances where s.65 applies but was not made in accordance with that section, then a request for TOIL could always subsequently be made in accordance with s.65, even if it had previously been refused under the terms of the TOIL clause. 

[111] However, out of an abundance of caution it is considered desirable to make the relationship between an award TOIL clause and s.65 of the Act clear on the face of the model TOIL term. This will avoid any uncertainty about an employer’s obligations where a request for TOIL is made in circumstances where s.65 also applies. We return to this issue later in our decision. …

[277] Subclause 1.3 addresses any potential inconsistency between the NES (in particular s.65) and the model term. Pursuant to ss.55(1) and 56 of the Act, the model term would be of no effect to the extent that it excluded any provision of the NES (see paragraphs [97]–[111] above).’

[57] We adhere to the provisionally expressed view in the Award Flexibility Decision and for that reason propose to retain subclause 1.3.

Clause 1.4

1.4 An employer must not exert undue influence or undue pressure on an employee in relation to a decision by the employee to make, or not make, an agreement to take time off in lieu of payment for overtime.

Note: Under s.345 of the Fair Work Act 2009, a person must not knowingly or recklessly make a false or misleading representation about an employee’s workplace rights under this award clause.

[58] NFF submit that subclause 1.4 and the ‘Note’ should be deleted on the basis that they are unnecessary. 49

[59] The model term proposed by Ai Group deletes subclause 1.4 of the provisional model TOIL term but retains the ‘Note’. Ai Group submit that it is not necessary for the additional protection provided by subclause 1.4 to be inserted into modern awards and pointed to the absence of any evidence that the current TOIL provisions in modern awards were being abused. 50

[60] The ACTU submits that subclause 1.4 should be retained “to ensure that everybody understands what the rights and obligations are under their TOIL provision”. 51

[61] Contrary to the view expressed by Ai Group and the NFF we are satisfied that subclause 1.4 is necessary. It is relevant to observe that the prohibition against undue influence or pressure in s.344 does not apply to TOIL arrangements under a term of a modern award. Section 344 provides as follows:

‘344 Undue influence or pressure
An employer must not exert undue influence or undue pressure on an employee in relation to a decision by the employee to:
(a) make, or not make, an agreement or arrangement under the National Employment Standards; or
(b) make, or not make, an agreement or arrangement under a term of a modern award or enterprise agreement that is permitted to be included in the award or agreement under subsection 55(2); or
(c) agree to, or terminate, an individual flexibility arrangement; or
(d) accept a guarantee of annual earnings; or
(e) agree, or not agree, to a deduction from amounts payable to the employee in relation to the performance of work.
Note 1: This section is a civil remedy provision (see Part 4-1).
Note 2: This section can apply to decisions whether to consent to performing work on keeping in touch days (see subsection 79A(3)).’

[62] The model TOIL term is not a term permitted to be included in an award under s.55(2) and nor is it an individual flexibility arrangement.

[63] Absent subclause 1.4 there would be no prohibition on an employer exerting undue influence or undue pressure on an employee to enter into a TOIL arrangement.

[64] Ai Group also sought to insert a new provision into the model term, as follows:

‘1.2 The following requirements apply to an agreement to take time off in lieu of payment for overtime:

… (f) Any payment for overtime that is made pursuant to this clause will be calculated at the applicable award rate applying to the overtime worked’.

[65] In the course of oral argument Ai Group advanced the following argument in support of the proposed new subclause:

‘… the intention there is to make it very clear that the obligation to pay overtime that will arise under this clause, because that’s where it would arise from, would be at the award rate, if you will; that it’s at the award rate that would have applied at the time the overtime was worked, because obviously the issue might arise that the award rate goes up.’ 52

[66] Given the terms of subclause 1.2(a) and in particular the fact that payment for accrued but unused TOIL ‘must be made at the overtime rate applying to the overtime worked’ we are not persuaded that it is necessary to include a provision in the terms sought by Ai Group.

[67] For the reasons given we have decided to vary the provisional model TOIL term in a number of respects. A marked up version of the provisional model TOIL term incorporating the changes we propose to make is set out below:

1. Time off in lieu of payment for overtime

1.1 An employee may elect with the consent of the employer to take time off in lieu of payment for overtime at a time or times agreed with the employer, in accordance with this clause.

1.2 The following requirements apply to an agreement to take time off in lieu of payment for overtime:

(a) A separate written agreement must be made by the employee and employer for each occasion on which overtime that has been worked is to be taken as time off in lieu. Each such agreement must be retained as an employee record and must:

(i) state when the employee started and ceased working the overtime hours;

(ii) state that if required by the employee and the employer agree that the employee may take time must pay the employee for any accrued entitlement to take off in lieu of payment for the overtime which the employee has not yet used. Payment must be made at the overtime rate applying to the overtime worked and must be made in the first pay period following the request for payment; and

(iii) be retained as an employee record include a note in the following terms:

‘If requested by the employee at any time, the employer must pay the employee for any accrued entitlement to take time off in lieu of payment for overtime which the employee has not yet taken used. Payment must be made at the overtime rate applying to the overtime worked and must be made in the next pay period following the request.’

(b) Overtime taken as time off during ordinary time hours shall be taken at the ordinary time rate; that is, an hour for each hour worked.

(c) The employee and employer must, within four weeks of the overtime being worked, agree on when the time off will be taken, otherwise payment for the overtime must be made to the employee at overtime rates in the first pay period after that four weeks.

(d) The time to be taken off in lieu of overtime must be agreed between the employee and employer and must be taken within six months 12 weeks of the overtime being worked. Ootherwise, payment for the overtime must be made to the employee at overtime rates in the first next pay period after that six month period 12 weeks.

(e) Notwithstanding any other provision of clause 1.2 subclauses (c) and (d) above, if requested by an employee at any time, the employer must pay the employee for any accrued entitlement to take time off in lieu of payment for overtime which the employee has not yet used. Payment must be made at the overtime rate applying to the overtime worked and must be made in the first next pay period following the request for payment.

(f) If, upon termination of employment, an employee has an accrued entitlement to take time off in lieu of payment for overtime which the employee has not yet used, the employee must be paid for the overtime at the overtime rate applying to the overtime worked.

1.3 An employee who is entitled to request a change in working arrangements under section 65 of the Fair Work Act 2009 may make a request under that section for time off in lieu of payment for overtime at a time or times specified in the request or at a time or times to be subsequently agreed with the employer. This clause will apply to such time off in lieu. Pursuant to section 65(5) of the Fair Work Act 2009, the employer may refuse such a request only on reasonable business grounds.

1.4 An employer must not exert undue influence or undue pressure on an employee in relation to a decision by the employee to make, or not make, an agreement to take time off in lieu of payment for overtime.

Note: Under s.345 of the Fair Work Act 2009, a person must not knowingly or recklessly make a false or misleading representation about an employee’s workplace rights under this award clause.

[68] The final version of the model TOIL term is set out at Attachment 3. Revised draft determinations incorporating the changes outlined in this decision will be published on the Commission’s website.

[69] Subject to what may be put about the circumstances pertaining to particular modern awards our general view is that the variation of modern awards to incorporate the model term is necessary to ensure that each modern award provides a fair and relevant minimum safety net, taking into account the s.134 considerations (insofar as they are relevant) and would also be consistent with the objects of the Act.

[70] We also accept that flexible working arrangements, such as TOIL, may encourage greater workforce participation, particularly by workers with caring responsibilities. The evidence referred to in the Award Flexibility Decision also supports a general finding that regardless of the industry employees work in, the most important aspect of determining employee satisfaction with their current job is the flexibility to balance work and non-work commitments.

[71] As a general proposition we accept that flexible working arrangements, such as TOIL, may encourage greater workforce participation, particularly by workers with caring responsibilities. The insertion of an appropriate TOIL facilitative provision in modern awards is consistent with the objective of promoting social inclusion through increased workforce participation (see s.134(1)(c)).

[72] Section 134(1)(d) of the modern awards objective requires the Commission to take into account the need to promote flexible modern work practices and the efficient and productive performance of work. We accept the proposition that inserting a TOIL provision into a modern award which provides for overtime but does not presently contain a facilitative provision permitting TOIL, is consistent with the promotion of flexible modern work practices.

[73] Section 134(1)(f) provides that the Commission must also take into account the likely impact of any exercise of modern award powers on business, including on productivity, employment costs and the regulatory burden. The insertion of the model term will assist in ensuring that modern awards are relevant to the needs of the modern workplace, and will assist businesses.

[74] Finally, the insertion of the model term into modern awards is also consistent with the objects of the Act by: providing workplace relations laws that are fair to working Australians and are flexible for businesses (s.3(a)); ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through the NES and modern awards (s.3(b)); assisting employees to balance their work and family responsibilities by providing for flexible working arrangements (s.3(d)); and acknowledging the special circumstances of small and medium-sized businesses (s.3(g)). In respect of s.3(g), a modern award variation of the type proposed will provide a simple mechanism for all such businesses to provide access to mutually beneficial TOIL arrangements between an employee and their employer.

4. The next steps

[75] We have now finalised the terms of the various model terms. The next phase of these proceedings will deal with the insertion of the model terms into modern awards. We propose to provide all interested parties with an opportunity to make submissions and adduce evidence in relation to whether the various model terms we have determined should now be inserted into particular modern awards. Directions in relation to the next phase of these proceedings will be issued shortly. The matter will be listed for further hearing before the Full Bench at 9.30 am on Thursday 10 December 2015 in Sydney.

PRESIDENT

Appearances:

M Burns for the Maritime Union of Australia.

B. Ferguson and R Bhatt for the Australian Industry Group.

M Adler for the Housing Industry Association.

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

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

J Arndt for the New South Wales Business Chamber and Australian Business Industrial.

S Morrisey for the Australian Hotels Association, Accommodation Association of Australia, and Motor Inn, Motel and Accommodation Association.

G Starr for the Australian Council of Trade Unions.

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

L Svendsen for the Health Services Union of Australia.

M Rizzo for the Australian Services Union.

S McKinnon for the National Farmers’ Federation.

R Sostarko for Master Builders Australia Limited.

Hearing details:

2015.

Sydney: (with video link to Melbourne and Canberra).

September 4.

Attachment 1— Submissions

Award flexibility – model TOIL clause
Accommodation Association of Australia	Correspondence	28 August 2015
Australian Business Industrial and NSW Business Chamber (ABI)	Submission	28 August 2015
Australian Council of Trade Unions	Submission	28 August 2015
“Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU)	Submission	28 August 2015
“Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU)—Vehicle Division	Submission	28 August 2015
Australian Hotels Association	Submission	28 August 2015
Australian Industry Group	Further Submission	28 August 2015
Australian Salaried Medical Officers’ Federation	Submission	4 September 2015
Association of Professional Engineers, Scientists and Managers, Australia (APESMA)	Submission	28 August 2015
Australian Services Union	Submission	28 August 2015
Housing Industry Association (HIA)	Submission	28 August 2015
Master Builders Australia (MBA)	Correspondence	28 August 2015
National Farmers’ Federation	Submission	28 August 2015

Attachment 2

AGREEMENT TO TIME OFF IN LIEU OF PAYMENT FOR OVERTIME

Name of employee: _____________________________________________

Name of employer: _____________________________________________

The employee and employer agree that the employee may take time off instead of payment for the overtime specified below:

Date and time overtime started: ___/___/20___ ____ am/pm

Date and time overtime ended: ___/___/20___ ____ am/pm

Amount of overtime worked: _______ hours and ______ minutes

Signature of employee: ________________________________________

Date signed: ___/___/20___

Name of employer
representative: ________________________________________

Signature of employer
representative: ________________________________________

Date signed: ___/___/20___

Note:

If requested by the employee at any time, the employer must pay the employee for any accrued entitlement to take time off in lieu of payment for overtime which the employee has not yet used. Payment must be made at the overtime rate applying to the overtime worked and must be made in the next pay period following the request for payment.

Attachment 3 – final version of the model TOIL term

1. Time off in lieu of payment for overtime

1.1 An employee may elect with the consent of the employer to take time off in lieu of payment for overtime at a time or times agreed with the employer, in accordance with this clause.

1.2 The following requirements apply to time off in lieu of payment for overtime:

(a) A separate written agreement must be made by the employee and employer for each occasion on which overtime that has been worked is to be taken as time off in lieu. Each such agreement must be retained as an employee record and must:

(i) state when the employee started and ceased working the overtime hours;

(ii) state that the employee and employer agree that the employee may take time off in lieu of payment for the overtime; and

(iii) include a note in the following terms:

‘If requested by the employee at any time, the employer must pay the employee for any accrued entitlement to take time off in lieu of payment for overtime which the employee has not yet used. Payment must be made at the overtime rate applying to the overtime worked and must be made in the next pay period following the request.’

(b) Overtime taken as time off during ordinary time hours shall be taken at the ordinary time rate; that is, an hour for each overtime hour worked.

(c) The time to be taken off in lieu of overtime must be agreed between the employee and employer and must be taken within six months of the overtime being worked. Otherwise, payment for the overtime must be made to the employee at overtime rates in the next pay period after that six month period.

(d) Notwithstanding any other provision of clause 1.2, if requested by an employee at any time, the employer must pay the employee for any accrued entitlement to take time off in lieu of payment for overtime which the employee has not yet used. Payment must be made at the overtime rate applying to the overtime worked and must be made in the next pay period following the request for payment.

(e) If, upon termination of employment, an employee has an accrued entitlement to take time off in lieu of payment for overtime which the employee has not yet used, the employee must be paid for the overtime at the overtime rate applying to the overtime worked.

1.3 An employee who is entitled to request a change in working arrangements under section 65 of the Fair Work Act 2009 may make a request under that section for time off in lieu of payment for overtime at a time or times specified in the request or at a time or times to be subsequently agreed with the employer. This clause will apply to such time off in lieu. Pursuant to section 65(5) of the Fair Work Act 2009, the employer may refuse such a request only on reasonable business grounds.

1.4 An employer must not exert undue influence or undue pressure on an employee in relation to a decision by the employee to make, or not make, an agreement to take time off in lieu of payment for overtime.

Note: Under s.345 of the Fair Work Act 2009, a person must not knowingly or recklessly make a false or misleading representation about an employee’s workplace rights under this award clause.

 1   [2015] FWCFB 4466

 2   [2015] FWCFB 3406 at [36] and [38]

 3   [2014] FWCFB 1788 at [27]

 4   Ai Group submission 28 August 2015 at paragraph 63

 5   ABI and NSWBC submission 28 August 2015 at paragraphs 3.1-3.11

 6   Ai Group submission 28 August 2015 at paragraph 7

 7   Ai Group submission 28 August 2015 at paragraph 10

 8   Ai Group submission 28 August 2015 at paragraph 9

 9   Ai Group submission 28 August 2015 at paragraph 10

 10   Ai Group submission 28 August 2015 at paragraph 56, see also paragraphs 62–65

 11   Ai Group submission 28 August 2015 paragraph 11

 12   NFF submission 28 August 2015 at paragraph 38

 13   NFF submission 28 August 2015 at paragraph 40

 14   ACTU submission 28 August 2015 at paragraphs 10-11 and Transcript at PN1719-1722, see [2014] FWCFB 4466 at [171]-[181]

 15   APESMA submission 28 August 2015 at paragraph 3(a) (page 3)

 16   Transcripts at PN1558-1564

 17   ABI and NSWBC submission 28 August 2015 at paragraph 2.32

 18   Transcript at PN1627-1635

 19   ABI and NSWBC submission 28 August 2015 at paragraphs 2.30-2.31

 20   AHA submission 28 August 2015 at paragraph 2

 21   AHA submission 28 August 2015 at paragraph 2

 22   Transcript at PN1672-1678

 23   AAA correspondence 28 August 2015.

 24   Transcript at PN1669-1670 and 1711

 25   Transcript at PN1681

 26   Transcript at PN1729-1730

 27   Ibid at PN1738

 28   ACTU submission 28 August 2015 at paragraph 11

 29   AMWU submission 28 August 2015 at paragraph 4

 30   AMWU—Vehicle division submission 28 August 2015 at paragraph 9

 31   AMWU—Vehicle division submission 28 August 2015 at paragraph 12

 32   AMWU—Vehicle division submission 28 August 2015 at paragraph 12

 33   AMWU—Vehicle division submission 28 August 2015 at paragraph 15

 34   AMWU—Vehicle division submission 28 August 2015 at paragraph 13

 35   [2015] FWCFB 4466 at [268]

 36   ABI and NSWBC submission 28 August 2015 at paragraphs 2.4–2.15

 37   ABI and NSWBC submission 28 August 2015 at paragraphs 2.16–2.24

 38   ABI and NSWBC submission 28 August 2015 at paragraph 2.7

³⁹ ABI and NSWBC submission 28 August 2015 at paragraph 2.13

 40   Transcript at PN1652

 41   ABI and NSWBC submission 28 August 2015 at paragraphs 2.22-2.24

 42   Transcript at PN1652-1657

 43   Transcript at PN1682

 44   Transcript at PN1669-1670

 45   Transcript at PN1741

 46   Transcript at PN1743-1744

 47   Transcript at PN1683

 48   Transcript PN1706-1708

 49   Ibid

 50   Transcript at PN1624

 51   Transcripts at PN1746

 52   Transcript at PN1612

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