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

4 yearly review of modern awards—Plain language project
(AM2016/15)

4 yearly review of modern awards – plain language project – determination of various issues

1. Introduction

[1] Five ‘standard clauses’ are common to most awards, namely:

•  Award flexibility

•  Consultation

•  Dispute resolution

•  Termination of employment; and

•  Redundancy.

[2] These standard clauses have now all been redrafted in plain language and determinations varying most modern awards were issued on 26 October 2018 and 13 December 2018.

[3] A decision issued on 11 December 2018 1 (the December 2018 Decision) addressed a number of award specific issues with respect to the model standard clauses and expressed a range of provisional views about these matters. Draft Determinations were issued on 13 December 2018 and interested parties had until 25 January 2019 to file submissions. Submissions in reply were due by 7 February 2019. These matters were the subject of hearings on 26 September 2019.

[4] This decision deals with some award specific issues relating to the plain language redrafting of certain standard clauses in five modern awards:

•  Educational Services (Teachers) Award 2010 (the Teachers Award);

•  Cleaning Services Award 2010 (the Cleaning Award);

•  Joinery and Building Trades Award 2010 (the Joinery Award);

•  Manufacturing and Associated Industries and Occupation Award 2010 (the Manufacturing Award); and

•  Timber Industry Award 2010 (the Timber Industry Award).

[5] We deal with the submissions made in the context of our consideration of the issue raised in relation to each award.

Educational Services (Teachers) Award 2010

[6] The current termination of employment term in the Teachers Award departs from the plain language standard term in the following ways:

(i) there is no exclusion of employees under 18 years of age from the capacity of the employer to make a deduction from wages;

(ii) there is no prohibition of deductions in circumstances where an employer has agreed to accept less than the required period of notice;

(iii) the amount that may be deducted from monies due to the employee is not ‘capped’ at one week’s wages; and

(iv) there is no qualification that any deduction made pursuant to the clause must not be unreasonable in the circumstances.

[7] As to matters (ii) to (iv), the rationale for the other elements of the standard term was explained in the October 2017 Decision 2 and the June 2018 Decision.3 These elements of the standard clause were inserted to ensure that a deduction of an amount from monies owed to an employee was not ‘unreasonable in the circumstances’, within the meaning of s.326(1)(b). In the December 2018 Decision we expressed the provisional view that clauses 11.4 and 11.5 of the Teachers Award should be redrafted to read as follows:

‘11. Notice of termination by an employee

(a) The notice of termination required to be given by an employee is the same as that required of the employee’s employer under clause 11.2 or 11.3.

(b) If an employee does not give the period of notice required under paragraph (a), then the employer may deduct from wages due to the employee under this award an amount that is no more than one weeks’ wages for the employee.

(c) If the employer has agreed to a shorter period of notice than that required under paragraph (a), then no deduction can be made under paragraph (b).

(d) Any deduction under paragraph (b) must not be unreasonable in the circumstances.’ (Emphasis added)

[8] A draft determination giving effect to the provisional views was issued on 13 December 2018 and interested parties were given the opportunity to comment on the draft.

[9] Submissions were received from:

•  Independent Education Union of Australia

•  Independent Schools of Victoria, Independent Schools Tasmania and the Associations of Independent Schools of NSW

[10] The issue raised in respect of this award concerns the ‘cap’ of ‘one weeks’ wages’ which may be deducted from wages due to an employee who fails to give the period of notice required under clause 11(a).

[11] Independent Schools Victoria, Independent Schools Tasmania and the Associations of Independent Schools of NSW (collectively, the Independent Schools Association) have made a submission and filed with a witness statement 4 in respect of this issue. The members of the Associations are non-government schools (otherwise known as independent schools) other than schools in the Catholic school system. Each of the Associations is a peak body for independent schools in its relevant State.

[12] The Associations oppose the incorporation of a ‘cap’ of one week’s wages in relation to the amount an employer may deduct from wages due to an employee who has not given the requisite notice of termination, noting that this view is limited to teachers employed by schools. The Associations otherwise agree that it is appropriate for the Teachers Award to be varied to incorporate paragraphs 1 (a) and 1 (c) above, and with the Full Bench’s view at paragraph [114] of the December 2018 Decision that the exclusion of employees under 18 years of age is unnecessary in the Teachers Award.

[13] The Associations submit that it is reasonable in the circumstances for schools to be authorised to deduct, from wages due to a teacher, the full amount of notice (if any) required by the award but not provided by the teacher.

[14] The Associations submit that it is reasonable in the specific circumstances of the school education industry to permit deductions of the full amount of notice not provided by an employee (i.e. up to 7 weeks) because:

(a) a deduction of the amount of notice not given, up to 7 weeks, more appropriately compensates schools for losses caused by insufficient notice;

(b) in an industry where both employers and employees are required to give 7 weeks’ notice, a deduction of up to 7 weeks is fair and proportional, and essential for the purpose of making the requirement for notice operate in a practical way

(c) the deduction of up to 7 weeks’ was clearly contemplated by the relevant employee organisation and raised with the Commission in the award modernisation proceedings and subsequently agreed to. 5

[15] The Associations also submit that in the specific context of teaching in the school education industry a deduction of up to 7 weeks is ‘highly unlikely to be disproportionate to the loss suffered by a school, or be otherwise unreasonable.’

[16] The Associations contend that when a teacher resigns without sufficient notice, schools experience a number of financial and non-financial disadvantages. These disadvantages are detailed in the Association’s written submissions (at [29]-[40]) and in Ms Knopp’s evidence. 6

[17] The Associations also contend that notions of proportionality and fairness lend support to their preferred position. The nub of the proportionality argument is that the one week ‘cap’ was determined in the context of the standard notice provisions in the NES and modern awards, that is, between one and 4 weeks. In contrast to the standard provision, the Teachers Award provides for 7 term weeks’ notice of termination and on that basis the Associations submit:

‘Both schools and teachers experience similar inconvenience and disadvantage as a result of insufficient notice of termination… The effect of introducing a one week cap introduces a dramatic imbalance between employer and employee in relation to the issue of notice.’7

[18] As to the fairness of their preferred position, the Associations submit:

‘the fairness of deducting an amount up to the whole period of insufficient notice is supported by the views of school staff, including other teachers. Some schools reported that teachers reacted with ‘anger’ and ‘annoyance’ where a teacher departed on short notice as it meant a significant burden falls to the remaining staff’. 8

[19] The Associations also rely on the history of the notice of termination provisions in the Teachers Award 9 and submit that allowing a greater period of deduction is necessary for the employee notice provision at proposed clause 11.3 to operate in a practical way:

‘A greater period of deduction will ensure that employers are either given sufficient time to recruit for a suitable replacement teacher, or are adequately compensated for the cost incurred when insufficient notice is provided.’

[20] The IEUA supports the provisional views set out in the December 2018 Decision and opposes the amendment to the ‘cap’ on withholding of wages proposed by the Associations.

[21] The IEUA contested the extent of the adverse impact of the provision of short notice, pointing to the oversupply of teachers and the availability of mechanisms whereby schools may mitigate the adverse effects of such events.

[22] The IEUA also submit that the Associations’ proposal (i.e. an entitlement for employers to withhold up to 7 weeks’ wages) does not meet the requirement imposed by s.142(1)(b), namely, that the term ‘is essential for the purpose of making a particular term operate in a practical way’. Clause 17 of the Teachers Award is said to support this submission.

[23] Clause 17 deals with frequency of payment of wages and provides, relevantly, that teachers are paid either fortnightly, four weekly or monthly. In the case of four weekly or monthly payment, wages are paid partially in advance and part in arrears.

[24] The IEUA concedes that there is some merit in the Associations’ proportionality argument ‘as the Commission clearly considered the capacity to withhold one week’s pay in the context of the standard 4 weeks’ notice’, 10 and submits:

‘If the Commission is minded to vary the period of withholding so as to ensure proportionality then the period should not be lengthened to be greater in total than 8.75 days or, if necessary for administrative convenience, 9 days.’ 11

Consideration

[25] We turn first to the legislative context.

[26] Section 151 provides:

‘Terms about payments and deductions for benefit of employer etc.

A modern award must not include a term that has no effect because of:

(a) subsection 326(1) (which deals with unreasonable deductions for the benefit of an employer); or

(b) subsection 326(3) (which deals with unreasonable requirements to spend or pay an amount); or

(c) subsection 326(4) (which deals with deductions or payments in relation to employees under 18).’

[27] The Explanatory Memorandum provides a guide as to the purpose of s.151:

‘587. Clause 151 prohibits a modern award from including a term that is of no effect because:

•  the term includes unreasonable payments and deductions for the benefit of an employer (subclause 326(1)); or

•  the term relates to unreasonable requirements in relation to how employees spend their wages or other amounts (subclause 326(3)).

588. Although such terms are of no effect, this clause ensures that such terms are not included in awards, as their inclusion (even though inoperative) could be confusing and create uncertainty.’

[28] Section 151(a) and (c), which make reference to various subsections in s.326, are particularly relevant to the matter before us.

[29] Section 326 is in Division 2 – Payment of Wages in Pt 2-9 of the Act (ss.323-327). Section 323 provides, relevantly for present purposes,:

‘323 Method and frequency of payment

(1) An employer must pay an employee amounts payable to the employee in relation to the performance of work:

(a) in full (except as provided by section 324); and

(b) in money by one, or a combination, of the methods referred to in subsection (2); and

(c) at least monthly.

Note 1: This subsection is a civil remedy provision (see Part 4-1).

Note 2: Amounts referred to in this subsection include the following if they become payable during a relevant period:

(a) incentive-based payments and bonuses;

(b) loadings;

(c) monetary allowances;

(d) overtime or penalty rates;

(e) leave payments.’

[30] Section 324 deals with ‘permitted deductions’, the relevant part states:

‘(1) An employer may deduct an amount from an amount payable to an employee in accordance with subsection 323(1) if:

…

(a) the deduction is authorised by or under a modern award or an FWC order;

…

Note 2: Certain terms of modern awards, enterprise agreements and contracts of employment relating to deductions have no effect (see section 326). A deduction made in accordance with such a term will not be authorised for the purposes of this section.’

[31] Section 326 provides that certain terms have no effect:

‘Unreasonable deductions for benefit of employer

(1) A term of a modern award, an enterprise agreement or a contract of employment has no effect to the extent that the term permits, or has the effect of permitting, an employer to deduct an amount from an amount that is payable to an employee in relation to the performance of work, if the deduction is:

(a) directly or indirectly for the benefit of the employer or a party related to the employer; and

(b) unreasonable in the circumstances.

(2) The regulations may prescribe circumstances in which a deduction referred to in subsection (1) is or is not reasonable.

Unreasonable requirements to spend or pay an amount

(3) A term of a modern award, an enterprise agreement or a contract of employment has no effect to the extent that the term:

(a) permits, or has the effect of permitting, an employer to make a requirement that would contravene subsection 325(1); or

(b) directly or indirectly requires an employee to spend or pay an amount, if the requirement would contravene subsection 325(1) if it had been made by an employer.

Deductions or payments in relation to employees under 18

(4) A term of a modern award, an enterprise agreement or a contract of employment has no effect to the extent that the term:

(a) permits, or has the effect of permitting, an employer to deduct an amount from an amount that is payable to an employee in relation to the performance of work; or

(b) requires, or has the effect of requiring, an employee to make a payment to an employer or another person;

if the employee is under 18 and the deduction or payment is not agreed to in writing by a parent or guardian of the employee.’

[32] As set out earlier, s.151 relevantly provides that a modern award must not include a term which has no effect because of ss. 326(1) and (4).

[33] It is common ground that any deduction in the event of insufficient notice is ‘directly or indirectly for the benefit of the employer’. Accordingly, the central question is whether such a deduction is ‘unreasonable in the circumstances’ within the meaning of s.326(1)(c)(ii). This expression was considered by Bromberg J in Australian Education Union v State of Victoria (Department of Education and Early Childhood Development) (AEU). 12 In the course of his judgment in AEU, Bromberg J made a number of general observations about the proper construction of s.326, and concluded that whether a deduction is ‘unreasonable in the circumstances’ is a question of fact and degree dependent upon the relevant surrounding circumstances.13 His Honour then proceeded to identify a number of considerations that are likely to be relevant (though not exhaustive) and as we observed in the October 2017 decision, those which are relevant in the present context may be summarised as follows:

1. Consideration must commence from the premise that the ultimate purpose of the scheme is to protect employees from practices that have the effect of denying them the benefit of the remuneration they have earned and are thus entitled to fully enjoy.

2. The extent to which the employer or its related party has benefited will likely be relevant. It will be relevant to assess whether the employee has been taken advantage of in some way, with the result that part of the benefit of his or her remuneration has been lost to the employer. A benefit to the employer is not, of itself, a reason for finding that a deduction was unreasonable. There is nothing wrong in an employer gaining a benefit, but, if that benefit is gained at the expense of the employee, that would tend to indicate unreasonableness. It is the possibility of an unreasonable transfer of the benefit from its intended recipient—the employee—to the employer, which is fastened upon by s.326(1)(c).

3. The phrase ‘in the circumstances’ is of wide import and a broad approach is to be taken to the extent of the circumstances which are considered.

[34] We accept that in the context of schools covered by the Teachers Award the resignation of a teacher without providing the requisite notice will often have an adverse effect on the school concerned. While Ms Knopp’s evidence somewhat overstates the impact of such an event, we accept that the provision of short or no notice by a teacher covered by this award is likely to be disruptive and have an adverse impact on the affected school.

[35] Putting to one side, for the moment, the question of whether a deduction of the magnitude proposed by the Associations may be characterised as ‘unreasonable in the circumstances’, it seems to us that there is a real question as to whether the term advanced by the Associations can be said to be ‘necessary’ to achieve the modern awards objective within the meaning of s 138.

[36] In the October 2017 Decision, we concluded that a term permitting an employer to deduct an amount from wages due to an employee who does not give the prescribed notice of termination was not a matter falling within the scope of s.139(1). In that decision, we also expressed the provisional view that clause E.1(c) of the standard termination of employment clause (which deals with the withholding of wages due where an employee fails to give the requisite notice) was incidental to a permitted term.

[37] In the June 2018 Decision we confirmed our provisional view and, further, concluded that clause E.1(c) of the standard term was ‘essential for the purpose of making [clause E.1(a)] operate in a practical way’, within the meaning of s.142(1)(b).

[38] As we noted in the October 2017 Decision, s 142(1)(b) poses a separate, antecedent, jurisdictional question to the issue of whether it is necessary to include a term in a modern award to achieve the modern award objective. In our view clause 17 raises a real question as to whether the Associations’ proposed term can be said to be ‘necessary’ within the meaning of s 138.

[39] Clause 17 of the Teachers Award provides, relevantly, as follows:

‘17. Payment of salary

17.1 All monies payable will be paid:

(a) once each fortnight;

(b) once every four weeks at the end of the first fortnight including payment for two weeks in arrears and two weeks in advance; or

(c) once every month with the payment being made as nearly as possible on the middle of each month including one half month in arrears and one half month in advance.’

[40] The practical effect of clause 17.1 is that the wages owed to an employee at any one time will not exceed two weeks’ pay. In these circumstances there is little utility in an award term which permits an employer to deduct 7 weeks’ pay from wages owed to an employee, if the employee fails to provide the prescribed notice of termination.

[41] This issue was put to the Associations’ representative during the course of oral argument. In response the Association directed us to clause 22 – Pro rata payment of salary inclusive of annual leave of the award. Clause 22 provides, relevantly,:

‘22.1 This clause of the award provides industry specific detail and incorporates the NES entitlement with respect to annual leave. This clause does not apply to teachers covered by Schedule B—Hours of Work and Related Matters—Teachers employed in early childhood services operating for at least 48 weeks per year.

22.2 The provisions of this clause will apply:

(a) in the calculation of payment in regard to pro rata salary where an employee’s employment ceases; or

(b) in the calculation of payment in regard to pro rata salary if:

(i) an employee commenced employment after the school or preschool service date;

(ii) an employee has taken leave without pay of more than two term weeks since the school or preschool service date; or

(iii) the hours which an employee has worked at school or preschool have varied since the school or preschool service date.

22.3 Calculation of payments

22.4 For the purpose of this clause:

(a) school or preschool service date means the date from which employees are paid at the commencement of the school/preschool year in their first year of service with the employer; and

(b) employee means an employee other than a casual employee.

22.5 The formula in clause 22.3 is intended to be used to calculate the pro rata salary inclusive of annual leave owing to an employee in respect of the school/preschool year in which the formula is applied.

22.6 Termination of employment

An employee will be entitled on termination of employment to a payment calculated in accordance with this clause.’

[42] The short point put on behalf of the Associations is that as a consequence of subclause 22.6 an employee who terminates their employment will receive a payment calculated in accordance with clause 22, which will exceed 2 weeks’ wages.

[43] The difficulty with this argument is that the payment required to be made by clause 22.6 incorporates the NES entitlement to annual leave (so much is clear from clause 22.1) and, as noted in the June 2018 Decision, an award term such as that proposed by the Associations cannot permissibly authorise deductions from NES entitlements. The Associations did not challenge our earlier conclusion that the award term cannot authorise deductions from NES entitlement.

[44] So where does all this leave us?

[45] As we have mentioned, the resignation of a teacher with little or no notice is likely to be disruptive and have an adverse impact on the affected school. Given the nature of the school sector, these adverse effects are likely to be greater than in other sectors. In addition, there is some substance to the Associations’ proportionality argument. These two considerations favour a ‘cap’ which is greater than one week.

[46] However, the proposal advanced by the Associations (i.e. the capacity to deduct 7 weeks wages) will, in some cases, over-compensate employers to the detriment of the employee concerned and hence be ‘unreasonable’ within the meaning of s 326(1)(b). Further, as a consequence of clause 17 of the Teachers Award the wages withheld would not amount to more than 2 weeks wages at any one time and to the extent they do (by virtue of clause 17) there is the added complexity associated with the impermissible deduction from a NES amount.

[47] Taking account of all of these considerations we have decided to increase the ‘cap’ on the amount that may be deducted from wages due to an employee who fails to give the prescribed notice of termination from one week to 2 weeks. We are satisfied that such an amendment to the standard term is necessary to ensure that the Teachers Award achieves the modern awards objective. Our decision in this regard should be read in conjunction with the October 2017 and June 2018 Decisions.

[48] For completeness we note that, in relation to the award history, we accept that at the time the award was made, the IEU consented to the existing withholding provisions. But the history of the existing term is far from decisive. There was no consideration of the current legislative context – in particular, the terms of s.326(1) – at the time the Teachers Award was made and, as submitted by the IEUA:

‘The IEUA has changed its position from that held in 2009 in light of the Commission’s successive decisions in this matter. The 4 yearly review of modern awards has already unilaterally varied, to reflect standardized entitlement across the majority of modern awards, a number of provisions agreed when the award was made.’ 14

Services Award 2010

[49] There is one outstanding issue in relation to the plain language redrafting of the Cleaning Award. The issue concerns the payment for annual leave and the payment of accrued annual leave on termination. A background document outlining the recent history of this issue is set out at Attachment 1.

[50] Ai Group filed two submissions in respect of this issue (on 23 November 2018 and 30 November 2018).

[51] United Voice has filed three submissions in respect of this issue (on 23 November 2018, 13 March 2019 and 24 September 2019).

[52] There is currently one outstanding issue in relation to the plain language re-drafting of the Cleaning Services Award 2010 (Cleaning Award). The issue has been raised by United Voice and concerns payment for annual leave.

[53] Clauses 29.1, 29.3, 29.4 and 29.7 of the Cleaning Award currently provide:

‘29.1 Annual leave is provided for in the NES. Annual leave does not apply to casual employees. This clause supplements or deals with matters incidental to the NES provisions.

. . .

29.3 Definition of ordinary pay

For the purposes of payment of annual leave, an employee’s ordinary pay means remuneration for the employee’s normal weekly number of hours of work calculated at the ordinary time rate of pay and in addition will include:

(a) leading hand allowance;

(b) first aid allowance;

(c) penalty rates paid for shiftwork or rostered ordinary hours of work on Saturday and/or Sunday; and

(d) part-time allowance for part-time employees working shiftwork (Monday to Friday) or rostered ordinary hours on a Saturday and/or a Sunday.

29.4 Payment of annual leave

(a) The terms of the NES prescribe the basis for payment for annual leave, including payment for untaken leave upon the termination of employment. In addition to the terms of the NES, an employer is required to pay an additional leave loading of 17.5% calculated on an employee’s ordinary time rate of pay.

(b) Provided that where the employee would have received a saved or transitional rate of pay, or shift, weekend (Saturday or Sunday), or public holiday penalty payments according to the roster or projected roster, had the employee not been on leave during the relevant period, and such saved, transitional or penalty payments would have entitled to employee to a greater amount than the loading of 17.5% on the rates set out in clause 16—Minimum wages of this award, then such rates will be paid instead of the 17.5% loading.

. . .

29.7 Payment of accrued annual leave on termination

Where an employee is entitled to payment of untaken annual leave on termination of employment under the terms of the NES, the employer must also pay the employee a loading of 17.5% calculated on an employee’s ordinary time rate of pay.’

[54] Following the first exposure draft of the Cleaning Award published on 8 September 2017, an issue arose between Ai Group and United Voice about clause 25.3(c) of the draft, which concerned the payment of the annual leave loading of 17.5% when leave was taken. Clause 25.3 of this exposure draft provided:

‘25.3 Payment for annual leave

(a) For the purpose of calculating the amount that the employer is required by section 90 of the Act to pay an employee for a period of paid annual leave, the employee’s base rate of pay for the employee’s ordinary hours of work in the period must be taken to include any of the following that are payable to the employee:

(i) a leading hand allowance; and

(ii) a first aid allowance; and

(iii) penalty rates paid for shiftwork or rostered ordinary hours of work on a Saturday or Sunday; and

(iv) a part-time allowance for part-time employees working shiftwork (Monday to Friday) or rostered ordinary hours on a Saturday or a Sunday.

(b) The employer must pay an employee for the employee’s ordinary hours of work in a period of paid annual leave an additional payment that is the greater of the following amounts:

(i) 17.5% of the employee’s ordinary hourly rate (that is the employee’s rate of pay for ordinary hours of work not including any shift, weekend or public holiday penalties);

(ii) the shift, weekend or public holiday penalty rates that the employee would have received for ordinary hours of work for which the employee would have been rostered in the period had the employee not been on leave.

(c) Clause 25.3 also applies in calculating the amount payable to an employee by the employer for a period of untaken paid annual leave when the employment of the employee ends.’

[55] Ai Group contended that the award currently only required that the loading be paid on annual leave payable on termination of employment and not any higher shift loading, and that clause 25.3(c) needed to be amended to reflect this. 15 United Voice’s position was that clause 25.3 of the exposure draft reduced the entitlements of employees because, under clause 29.7 of the Cleaning Award, the loading was payable on the ‘ordinary time rate of pay’, which was defined to include penalty rates for shift work. 16

[56] There were subsequently a number of conferences to resolve these issues, and further submissions were filed. It is not necessary to recount the entire procedural history, except to say that we expressed the following provisional views about the issue in our decision of 8 November 2018 17 (November 2018 Decision):

‘[54] It appears from the foregoing that it is common ground between the parties that the revised PLED should only provide that an employee receives either the relevant penalties (ie penalty rates for shiftwork or weekend work) or the 17.5% loading, but not both. Further, United Voice does not believe that the current award entitles an employee to be paid the relevant shift, weekend or public holiday payments twice in relation to a period of leave.

[55] It is our provisional view that, absent some special circumstances pertaining to this award, we would amend clause 24.3 of the PLED by deleting clause 24.3(a)(iii), as proposed by Ai Group. The proposed variation is consistent with the common position espoused by the parties. In taking annual leave an employee would receive the greater of either the relevant penalties (by virtue of clause 24.3(b)(ii)) or the 17.5% leave loading (by virtue of clause 24.3(a)), but not both.

[56] It is also our provisional view that clause 24.3(c) of the revised PLED be deleted. If clause 24.3(c) was retained it may result in an employee receiving less than would have been payable to the employee had the employee taken that leave. For example, if the employee’s shift, weekend or public holiday penalty rates they would have received for ordinary hours of work for which the employee would have been rostered in the period had they not been on leave are greater than 17.5% of the employee’s ordinary hourly rate, then the payment on termination under clause 24.3(c) would be less than they would have received had they taken the leave. Such an outcome would be contrary to s.90(2) and contravene s.55. In such circumstances the relevant award term – clause 24.3(c) – would have no effect (s.56).’

[57] We subsequently received further submissions from Ai Group and United Voice in response to the provisional views which we expressed. Significantly, United Voice submitted that our characterisation of its position in [54] of the November 2018 Decision was incorrect in that there was no common position between United Voice and Ai Group in respect of payment of annual leave on termination, and that it disagreed with the provisional view expressed in [55].

[58] On 13 February 2019 a revised exposure draft for the Cleaning Award was published which, in relation to payment for annual leave, reflected the provisional views expressed in the November 2018 Decision. Clause 24.3 of the revised exposure draft is as follows:

‘24.3 Payment for annual leave

(a) For the purpose of calculating the amount that the employer is required by section 90 of the Act to pay an employee for a period of paid annual leave, the employee’s base rate of pay for the employee’s ordinary hours of work in the period must be taken to include any of the following that are payable to the employee:

(i) a leading hand allowance; and

(ii) a first aid allowance; and

(iii) a part-time allowance for part-time employees working shiftwork (Monday to Friday) or rostered ordinary hours on a Saturday or a Sunday.

(b) The employer must pay an employee for the employee’s ordinary hours of work in a period of paid annual leave an additional payment that is the greater of the following amounts:

(i) 17.5% of the employee’s ordinary hourly rate (that is the employee’s rate of pay for ordinary hours of work not including any shift, weekend or public holiday penalties);

(ii) the shift, weekend or public holiday penalty rates that the employee would have received for ordinary hours of work for which the employee would have been rostered in the period had the employee not been on leave.’

[59] Save as to one matter raised in response to the submissions of United Voice, Ai Group is content with the revised claus 24.3. United Voice, in a submission filed on 24 September 2019 and in its oral submission made at the hearing before us on 26 September 2019, submitted that:

•  clause 25.3(a)(iii) of the 8 September 2017 exposure draft should not have been omitted, and the omission would cause a detriment to employees compared to their current entitlements under clause 29.4(a) of the Cleaning Award;

•  the current clause 29.3 defines what is ordinary pay for the purpose of clause 29.4, so that employees will when taking annual leave receive shiftwork and weekend penalty rates and in addition the annual leave loading on a compounding basis;

•  because of this the alternative method of payment of annual leave in the current clause 29.4(b) (and in the proposed clause 24.3(b)(ii)) had little work to do except perhaps if the roster during the period of annual leave would have encompassed a number of public holidays or particularly unsocial hours; and

•  the alternative method in clause 24.3(b)(ii) should not operate by reference to the employee’s base rate of pay as defined in clause 24.3(a) nor did it in the existing clause 29.4(b)), because this would (if paragraph (iii) of clause 24.3(a) was restored) lead to the double payment of shift and weekend penalties.

[60] In response, Ai Group said that, for its part, the United Voice submission had exposed a potential problem in the drafting of clause 24.3(a), in that it left unclear the rate upon which the annual leave loading was payable. Ai Group’s position was that the loading should be payable only on the minimum rate of pay.

[61] We do not consider that we should depart from the provisional view expressed in [54]-[55] of the November 2018 Decision, notwithstanding that we may have misapprehended United Voice’s position at that time. Although it may be accepted that the current clause 29 is badly drafted and ambiguous, the interpretation of that clause advanced by United Voice (on which it founds its submission that clause 24.3 of the revised exposure draft would cause a loss of entitlements for employees) would lead to absurd results and cannot be accepted for that reason. Clause 29.3 of the Cleaning Award contains a definition of ‘ordinary pay’ for the purposes of the payment of annual leave, and provides that it consists of ‘the employee’s normal weekly number of hours of work calculated at the ordinary time rate of pay’ and in addition the monetary benefits identified in paragraphs (a)-(d). The expression ‘ordinary pay’ is not used elsewhere in the clause, and clause 29.4(a) provides that ‘the terms of the NES prescribe the basis for payment for annual leave’. This leaves it unclear what work the clause 29.3 definition is intended to do. If the base rate of pay for the purpose of the payment of annual leave includes the entitlements set out in clause 29.3(c) – that is, ‘penalty rates paid for shiftwork or rostered ordinary hours of work on Saturday and/or Sunday’ – then under clause 29.4(a) they would receive those penalties plus the annual leave loading of 17.5%. That is unlikely to be an intended outcome, since the conventional industrial function of an annual leave loading is to compensate for penalties not received when annual leave is taken. Further, where the alternative method of calculation in clause 29.4(b) applies, United Voice’s approach would necessarily lead to the absurd result that the employee would, instead of the annual leave loading, be paid shift and weekend penalties twice. Such an interpretation of clause 29.4 is unsustainable. The provisional view whereby the employee receives the higher of the annual leave loading or shift and weekend penalties, but not both, is the conventional position applying in awards and will be adopted here.

[62] The ambiguity of expression in clause 24.3(b)(i) identified by the Ai Group will be rectified by amending the provision as follows:

(i) 17.5% of the employee’s ordinary minimum hourly rate (that is the employee’s rate of pay for ordinary hours of work not including any shift, weekend or public holiday penalties);

Manufacturing and Associated Industries and Occupations Award 2010 and the Timber Industry Award 2010

[63] It is convenient to deal with these two awards together due to the similarity in the issues raised.

[64] Both the Manufacturing Award and Timber Award contain a small employer redundancy term that refers to the predecessor awards to the modern awards. Both of these terms raise an issue about state-based differences. Clause 23.2 of the Manufacturing Award is set out below:

‘23.2 Small furnishing employer

(a) For the purposes of clause 23.2(b), small employer means an employer to whom Subdivision B of Division 11 of the NES does not apply because of the provisions of s.121(1)(b) of the Act.

(b) Despite the terms of s.121(1)(b) of the Act, the remaining provisions of Subdivisions B and C of Division 11 of the NES apply in relation to an employee of a small employer who performs any of the work within the Manufacturing and Associated Industries and Occupations which immediately prior to 1 January 2010 was in clauses 6.1 to 6.6 of the Furnishing Industry National Award 2003, except that the amount of redundancy pay to which such an employee is entitled must be calculated in accordance with the following table:

[65] The coverage clause of the predecessor award referred to in clause 23.2(b) limited the application of the award to specified States and Territories, whereas the Manufacturing Award covers employers throughout Australia. At [46] of the December 2018 Decision, we expressed the provisional view that clause 23.2 of the Manufacturing Award limits the application of small employer redundancy pay according to the ‘types of work’ covered by the predecessor award and not on a geographic basis.

[66] Clause 15.7 of the Timber Award raises a similar issue. Pursuant to clause 15.7(b) the redundancy pay entitlement applies to:

‘an employee … who performs any work within the scope of [the Timber Award] which immediately prior to 1 January 2010 was in clause 6 of the Timber and Allied Industries Award 1999, or clause 6 of the Furnishing Industry National Award 2003’.

[67] At [40] of the December 2018 Decision we expressed the provisional view that clause 15.7 of the Timber Award limits the application of small employer redundancy pay according to the ‘types of work’ covered by the two predecessor awards and not on a geographic basis.

[68] A second issue arises in respect of clause 15 of the Timber Award, namely the operation of clause 15.8 which states ‘such provisions do not apply to weekly piecework employees.’ In the December 2018 Decision we said that it was not entirely clear whether the exclusion in clause 15.8 is directed just to clause 15.7—Small employer, or to all of clause 15—Redundancy and expressed the provisional view that clause 15.8 appears to be unnecessary given the exclusion of pieceworkers from various award provisions (including clause 15) under clause 12.5(d) of the award. We proposed to omit clause 15.8 from the new redundancy provision.

[69] Interested parties were given an opportunity to make submissions about whether clause 23.2(b) of the Manufacturing Award and clause 15.7(b) of the Timber Award limit the application of ‘small furnishing employer’ redundancy pay on a geographic basis, and if so, how it should now be dealt with having regard to the prohibition of ‘State-based difference terms’ in s.154 of the FW Act. Parties were also invited to make submissions as to how the current description of the types of work to which the present redundancy pay provision applies may be simplified.

[70] Submissions were received from:

•  the Australian Industry Group (Ai Group); 18

•  the Australian Manufacturing Workers’ Union (AMWU);

•  Construction, Forestry, Maritime, Mining and Energy Union–Construction and General (CFMMEU-C&G);

•  Construction, Forestry, Maritime, Mining and Energy Union–Manufacturing (CFMMEU-Manufacturing); and

•  the Housing Industry Association (HIA). 19

[71] In summary terms, Ai Group contends that:

•  the geographical application of the two awards is preserved; 20

•  the small business redundancy provisions are is not terms that contains ‘State based differences’ within the meaning of s 154 of the Act; 21

•  that if the Full Bench rejects the Ai Group’s position on state based differences then the appropriate response would be to remove the clauses; 22

•  that should claims proceed that the small business redundancy provisions be extended to States not covered by the pre-reform awards then such claims should be treated as significant changes requiring a substantial merit based argument; 23

•  that if the Full Bench retains the small business redundancy provisions then the current description of the types of work to which it applies could be simplified by a link to the pre-modern award; 24 and

•  that the exclusions in the proposed clause 23.4 of the Manufacturing Award be extended to employees prescribed by regulations made under s.123(4)(d) of the FW Act.

[72] The last point raised is uncontentious and we will make the change proposed by Ai Group. As to the other elements of Ai Groups submission, the Unions oppose Ai Group’s characterisation of the small business redundancy provisions in these awards and oppose the removal of the provisions.

[73] Ai Group advances a range of contextual matters in support of its submission regarding the geographical limitations of the current terms. But there are three other contextual considerations, which it does not address and which are significant.

[74] First, the award modernisation process was conducted pursuant to Part 10A of the Workplace Relations Act 1996 (the WR Act) and was subject to a request from the Minister pursuant to s.576C of the WR Act. The Award Modernisation Full Bench characterised the consolidated Ministerial request in the following terms:

‘The consolidated request requires us to formulate award which apply to corporations throughout Australia in the industry or occupation concerned, replacing many hundreds of federal and state awards containing a wide diversity of terms and conditions … within the constraints of existing safety net award provisions; our approach has been to rationalise existing award provisions along logical industry and occupational lines’. 25 (Emphasis added)

[75] The formulation of modern awards along industry and occupational lines (as opposed to geographic lines) is consistent with our provisional view regarding the characterisation of the coverage of the small business employer redundancy terms in these two awards.

[76] Second, s.576T of the WR Act was in similar terms to s.154 of the Act and the Award Modernisation Full Bench had regard to s.576T in determining appropriate transitional provisions in modern awards. In its decision of 2 September 2009 the Award Modernisation Full Bench said:

‘It is apparent that s.576T requires that modern awards not include terms which apply by reference to State or Territory boundaries or which do not apply in all States and Territories. It provides, however, that such terms may be included in modern awards for a period of up to five years. In its decision of 3 April 2009 the Commission made the following observations about s.576T:

[19] In its 23 January 2009 statement the Commission sought proposals and submissions as to the manner in which transitional issues should be dealt with [[2009] AIRCFB 50]. Most modern awards will contain terms which involve changes in minimum terms and conditions for many employees. That is because modern awards will replace a number, in some cases many, pre-reform awards and NAPSAs and establish a uniform safety net for employees and employers formerly covered by those pre-reform awards and NAPSAs. The effect of s.576T is that while modern awards must not include terms and conditions of employment that are determined by reference to State or Territory boundaries, a modern award may include such terms for an initial period of five years. It is no doubt the legislature’s intention to permit the Commission to include transitional provisions in modern awards to cushion the impact of changes in wages and other conditions. In the case of employees such provisions might deal with any reductions in their terms and conditions. In the case of employers the focus might be on increases in costs.’ 26

[77] Further, in its decision of 19 December 2008 the Award Modernisation Full Bench explored the issues around state-based differences in pre-modern awards and NAPSAs with regards to redundancy provisions, saying:

‘there are a number of different redundancies pay schemes in the state award and legislation which are reflected in NAPSAs. The schemes sometimes include provisions which are more beneficial for employees that those contained in the NES. Provisions in this category include more generous redundancy pay scales, redundancy pay for employees of small business calculations for base pay and so on. It is appropriate that these interstate differentials be taken into account in transitional provisions.’  27

[78] The Award Modernisation Full Bench was plainly alive to the restriction on the inclusion of terms by reference to State or Territory boundaries and had it viewed the small business employer redundancy terms in these awards as offending s.576T then we would have expected that the Full Bench would have averted to that fact and provided an appropriate transitional arrangement. The absence of any such commentary or transitional arrangements suggests that the Award Modernisation Full Bench did not intend those provisions to operate by reference to State or Territory boundaries.

[79] Contrary to Ai Group’s submission the terms would plainly offend s 154 if we accepted the geographic limitation which is advanced by Ai Group. The Ai Group’s assertion that the geographical limitations of the relevant provisions do not offend s 154 is unsustainable. In a decision dealing with the proposal to create a Norfolk Island Award the Full Bench considered s.154 and said:

‘Section 154, we consider, is concerned with prohibiting modern award provisions which have the legal effect of establishing terms which operate differentially between States or Territories as such. That s.154(1)(b) prohibits terms and conditions which are expressed to operate in one or more but not every State and Territory does not mean that an award provision will offend s.154(1)(b) only if it literally recites the words of the statute. Rather, an award provision which is expressed in such a way as to give legal effect to a proscribed geographic limitation will offend s.154(1)(b).’ 28

[80] Applying these observations of the present matter leads inexorably to the rejection of Ai Group’s contention.

[81] Third, as noted in the Penalty Rates Decision, 29 in determining the final provisions in each modern award the Award Modernisation Full Bench generally adopted the terms and conditions in the preponderance of pre-reform instruments. As the Award Modernisation Full Bench observed in its decision of 2 September 2009:

‘The consolidated request also provides that the process is not intended to disadvantage employees or increase costs for employers – objectives which are potentially competing. The content of the awards we have formulated is a combination of existing terms and conditions in relevant awards and existing community standards. In order to minimise disadvantage to employees and increases in costs for employers we have generally adopted terms and conditions which have wide application in the existing awards in the relevant industry or occupation. However the introduction of modern awards applying across the private sector in place of the variety of different provisions in the Federal and State awards inevitably means that some conditions will change in some States. Some wages and conditions will increase as a result of moving to the terms which apply elsewhere in the industry. Equally some existing award entitlements will not be reflected in the applicable modern award because they do not currently have general application.

The creation of modern awards which will constitute the award elements of the safety net necessarily involves striking a balance as to appropriate safety net terms and conditions in light of diverse award arrangements that currently apply. It is in that context that the formulation of appropriate transitional provisions arises.’ 30

[82] Our provisional views are entirely consistent with the application of such an approach.

[83] The table below sets out the respective geographical coverage of the Timber and Allied Industries Award 1999 and the Furnishing Industry National Award 2003:

[84] The ‘weight’ of regulation plainly favours the adoption – across Australia – of the small employer redundancy terms.

[85] Having regard to the terms of clauses 23.2(b) and 15.7(b) and all of the contextual considerations (including those raised by Ai Group) we are satisfied that the relevant clauses limit the entitlement to redundancy pay by reference to the types of work covered by the predecessor awards, and not on a geographic basis. We confirm our provisional view and reject Ai Group’s submission.

[86] As to the second issue in relation to the Timber Award, the utility of clause 15.8, Ai Group agrees with our provisional view that it is not apparent whether the subclause operates to exclude weekly piecework employees from clause 15.7 (small business redundancy pay) or from clause 15 in general.

[87] Ai Group notes that clause 12.5(d) of the Timber Award provides an exclusive list of clauses that apply to weekly pieceworkers and that clause 15 is not listed amongst those clauses and contends that clause 15.8 is not otiose and should not be omitted from the new redundancy provision:

‘A large number of employers who read and apply modern awards are not legally trained or expert in industrial relations. It may not occur to some employers to examine the entirety of an award in the course of determining whether a particular employee is entitled to redundancy pay. Ai Group suggests that rewording clause 15.8 is preferable to deletion to avoid misunderstandings by employers of weekly pieceworkers who have not read clause 12.5(d). The intended effect of clause 15.8 may be clarified through the following wording:

‘Clause 15 does not apply to weekly piecework employees.’

[88] We agree with Ai Group and will amend the variation determinations accordingly.

[89] As to the simplification of the types of work to which the small employer redundancy terms apply; Ai Group’s submission is set out above (at [71]).

[90] The CFMMEU-MD did not oppose the deletion of current clause 15.8, but made no comment on Ai Group’s proposal. 31

[91] The AMWU submitted that the invitation to simplify the current description of the types of work to which these provisions apply ‘will require more time than what was available and may require discussions between interested parties.’ 32 The CFMMEU C&G also submitted that the simplification of the coverage of these terms ‘will probably need further consideration.’33

[92] A conference of interested parties will be convened by Vice President Hatcher to seek to resolve the simplification of these terms.

Joinery and Building Trades Award 2010

[93] In the December 2018 Decision, the Joinery Award was categorised as an award with an industry-specific redundancy element that supplements the NES as it contains a small business entitlement. The Full Bench expressed the provisional view that the award should be amended to include the plain language standard redundancy clause, but with adaptations as necessary to retain the substance of the industry-specific elements:

‘[28] Our provisional view is that awards with an industry-specific element that supplements the NES should be amended to include the plain language standard redundancy clause, but with adaptations as necessary to retain the substance of the industry-specific elements. The note at the beginning of the redundancy clause in these awards may also be amended so as to refer to the industry-specific elements.’ 34

[94] A draft determination was published on 13 December 2018, giving effect to this provisional view. Interested parties were invited to make submissions.

[95] Submissions were received from:

•  AMWU

•  CFMMEU-C&G;

•  CFMMEU-Manufacturing;

•  HIA

•  Master Builders Australia (MBA)

[96] The MBA seeks two amendments to the draft determination.

[97] The first concerns proposed clause 17.1(c). In particular MBA sought to amend clause 17.1 as shown below:

(c) If the employer acts as mentioned in paragraph (b)(ii), the employee is entitled to a payment of an amount equal to the difference between the ordinary rate of pay of the employee (inclusive of all-purpose allowances, shift rates and penalty rates applicable to ordinary hours) for the hours of work the employee would have worked in the first role, and the ordinary rate of pay (also inclusive of all-purpose allowances, shift rates and penalty rates applicable to ordinary hours) of the employee in the second role for the period for which notice was not given.

[98] The MBA contends that proposed clause 17.1(c) is inconsistent with the existing clause 17.3 of the Joinery Award, which states:

‘Where an employee is transferred to lower paid duties by reason of redundancy the same period of notice must be given as the employee would have been entitled to if the employment had been terminated and the employer may, at the employer’s option, make payment instead of an amount equal to the difference between the former ordinary time rate of pay and the new ordinary time rate of pay for the number of weeks of notice still owing.’

[99] It is submitted that the proposed clause now provides for payments that include other entitlements other than the employee’s base rate of pay for his or her ordinary hours of work.

[100] The AMWU, CFMMEU-C&G and CFMMEU-Manufacturing all object to the proposed amendment on the basis that this issue has already been determined.

[101] The history of the current standard redundancy term in modern awards was the subject of detailed consideration in the August 2017 Decision in which we concluded that the ‘best guide’ to the intended meaning of that part of the standard term which is the subject of the MBA’s present submission is to be found in the TCR Decision and the TCR Supplementary Decision. 35 We also concluded that a consideration of these earlier decisions revealed an intention that the payment in lieu of notice was intended to equalise the position of the employee to what it would have been if the employee had received actual notice of transfer. On this basis we determined that:

‘It necessarily follows that the payment, characterised as income maintenance, would include all payments payable to the employee for the working of ordinary time, including all-purpose allowances, loadings and penalties. The reference to the ‘former classification’ in the last sentence reflects the fact that because the ‘duties’ of the new role are ‘lower paid’ than for the old role, a change to the classification level will be involved, but there is no reason to read this as excluding some aspects of total ordinary time pay from the required payment in lieu of notice. The actual clause developed in the TCR Supplementary Decision (earlier set out), which refers to the payment constituting the difference between the old and new ordinary time rate of pay, confirms the Full Bench’s intention in this respect.’ 36

[102] As the meaning of ‘ordinary rate of pay’ is inclusive of all purpose allowances, shift rates and penalty rates applicable to ordinary hours, proposed clause 17.1(c) reflects the intent of the current provision and the intent of the TCR Decision and TCR Supplementary Decision. For those reasons we reject the MBA’s proposal.

[103] The second amendment proposed by the MBA concerns proposed clause 17.4(e), which states:

‘In paragraph (d) continuous service has the same meaning as in s.119 of the Act.’

[104] The MBA’s primary position is that it is not necessary to include a reference to the meaning of continuous service on the basis that the existing clause 17 does not contain such a reference.

[105] Paragraph 17.4(d) of the draft determination sets out the redundancy pay entitlements of employees of small business employers, as follows:

‘The amount of the redundancy pay in paragraph (c) equals the total amount payable to the employee for the redundancy pay period specified in column 2 of Table 2 – Redundancy pay period according to the period of continuous service of the employee specified in column 1, worked out at the employee’s base rate of pay for his or her ordinary hours of work.’ (Emphasis added)

[106] The entitlement to redundancy pay in clause 17.4(d) is based on the completion of specified periods of ‘continuous service’ and in such circumstances it is necessary to say something about the meaning of ‘continuous service’. We reject the MBA’s primary position.

[107] In the event that we were minded to include a reference to the meaning of continuous service the MBA submits that proposed clause 17.4(e) should be amended ‘to include a signpost to the correct provision within the Act’ (Emphasis added). In particular, the MBA submits:

‘It may simply be an oversight, however, we note that s.119 of the Act does not define continuous service, but rather prescribes the amount of redundancy pay payable for periods of an employee’s continuous service. If proposed clause 17.4(e) were to be implemented, we submit the following amendment would be appropriate:

In paragraph (d) continuous service has the same meaning as in s.119 s.22 of the Act.’ 37

[108] Contrary to the MBA’s submission the reference to s.119 was not ‘an oversight’.

[109] Section 119 provides as follows:

119 Redundancy pay

Entitlement to redundancy pay

(1) An employee is entitled to be paid redundancy pay by the employer if the employee’s employment is terminated:

(a) at the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or

(b) because of the insolvency or bankruptcy of the employer.

Note: Sections 121, 122 and 123 describe situations in which the employee does not have this entitlement.

Amount of redundancy pay

(2) The amount of the redundancy pay equals the total amount payable to the employee for the redundancy pay period worked out using the following table at the employee’s base rate of pay for his or her ordinary hours of work:

[110] The purpose of proposed clause 17.4(e) is to ensure that the basis for the entitlement to redundancy pay (i.e. the completion of prescribed periods of ‘continuous service’) is the same for both small business employees (under proposed clause 17.4(d)) and the employees of larger businesses (who derive their entitlement to redundancy pay from the NES). It would be anomalous, and unfair, if the meaning of ‘continuous service’ differed depending on the size of the employer.

[111] Further, contrary to the MBA’s submission, s.22 of the Act is not ‘the correct provision’, for two reasons. First, the purpose of proposed clause 17.5(e) is not to define the meaning of ‘continuous service’, it is to ensure that the meaning of that term in clause 17.5(d) is the same as it is in the NES. Second, s.22 does not contain a definition of ‘continuous service’; rather the definition of ‘continuous service’ is affected by s.22. So much is clear from the Dictionary to the Act (s.12) and the terms of s.22. Section 22 simply provides that certain ‘excluded periods’ do not break a national system employee’s continuous service but do not count towards the length of the employee’s continuous service. The section does not otherwise define what is meant by ‘continuous service’.

[112] For the reasons given, we reject the MBA proposal.

[113] The HIA raised an issue with proposed subclauses 17.4(f) and (g) of the draft determination which state:

(f) The terms of s.120 of the Act apply as if s.120 referred to ‘paragraph (c)’ rather than ‘section 119’.

Note: Under s.120 of the Act the Fair Work Commission can determine that the amount of redundancy pay under the NES is to be reduced if the employer obtains other acceptable employment for the employee or cannot pay that amount. Paragraph (f) applies these arrangements also to redundancy pay under clause 15.4.

(g) The terms of s.122 of the Act apply as if s.122 referred to ‘clause 15.4’ rather than ‘this Subdivision’ and to ‘paragraph (c)’ rather than ‘section 119’.

Note: Under s.122 of the Act transfer of employment situations can affect the obligation to pay redundancy pay under the NES and the Fair Work Commission can make orders affecting redundancy pay. Paragraph (g) applies these arrangements also to redundancy pay under clause 15.4.

[114] The ‘paragraph (c)’ referred to in proposed subclause 17.4(f) is a reference to subclause 17.4(c) which entitles an employee of a small business employer to redundancy pay.

[115] The HIA proposes that proposed 17.4(g) be deleted and that proposed 17.4(f) of the draft determination be replaced by a variant of the current wording of existing clause 17.2(b), as follows:

(f) Despite the terms of s.121(1)(b) of the Act, the remaining provisions of Subdivisions B and C of Division 11 of the NES apply in relation to an employee of a small employer who performs any of the work within the scope of this award except that the amount of redundancy pay to which such an employee is entitled must be calculated in accordance with Clause 17.4(d).

[116] The HIA advances three points in support of its proposal:

(i) proposed subclauses (f) and (g) are said to be ‘somewhat confusing’ and ‘have the potential to lead to issue of interpretation’ and that in ‘some cases it may be unclear to a reader where ‘paragraph (c) is from, and how to apply the provision ‘rather than’;

(ii) the proposed subclauses require the Act and the award to be read together and ‘sets a level of acumen in terms of legislative intent that may be beyond that which should be expected of modern award readers; and

(iii) the current wording in the Joinery Award is sufficient ‘insofar as it explains the application of the small business employer redundancy pay within the context of the operation of the Act’.

[117] Clause 17.4 of the draft determination supplements the NES by providing an entitlement to redundancy pay to employees of small business employers.

[118] The purpose of proposed subclause 17.4(f) is to permit a small business employer to seek to vary the amount of redundancy pay to be paid to an employee if the employer:

(i) obtains other acceptable employment for the employee; or

(ii) cannot pay the amount.

[119] So much is made clear by the ‘Note’ under proposed subclause 17.4(f).

[120] The purpose of proposed subclause 17.4(g) is to apply s 122 (which deals with the circumstances in which transfer of employment situations may affect the obligation to pay redundancy pay) to the obligation of a small business employer to pay redundancy pay under clause 15.4. This purpose is also spelt out in the ‘Note’ under proposed subclause 17.4(g).

[121] We accept that the issues which proposed subclauses 17.4(f) and (g) are seeking to address have a degree of complexity. The obligation to pay redundancy pay under s 119 of the NES does not apply to small business employers by virtue of s 121(1)(b). Sections 120 and 122 provide relief from the obligation to pay redundancy pay, under s 119, in certain circumstances. These sections only apply to an employees’ entitlement to redundancy pay under s 119. Hence absent proposed subclauses 17.4(f) and (g) a small business employer would not be able to avail themselves of the opportunity under ss 120 and 122 to reduce or eliminate the amount of redundancy they are required to pay an employee.

[122] The submissions advanced by the HIA in support of its proposed amendment to the draft determinations are unpersuasive.

[123] As to point (i) as we have mentioned, we accept that there is a degree of complexity in respect of this issue but in our view proposed subclauses 17.4(f) and (g) are simpler and easier to understand than the HIA proposal. The notes to each of the proposed subclauses make the purpose of each subclause clear and, moreover, direct the readers attention to the opportunity to seek an order from the Commission to reduce the amount of redundancy pay which the employer may otherwise be obliged to pay. The HIA proposal provides no guidance as to the meaning and effect of its proposed subclause 17.4(g).

[124] Regarding the proposition that it ‘may be unclear to a reader where paragraph (c) is from,’ that issue can be dealt with by changing the reference to ‘paragraph 17.4(c) above’. We will amend the variation determination accordingly.

[125] As to point (ii), the HIA’s proposed clause does not resolve the asserted difficulty as it also requires that the Act and the Award be read together.

[126] Point (iii) amounts to little more than an assertion and, contrary to the point put, we disagree with the proposition that the current wording ‘explains’ the interaction of the small business redundancy pay provisions in the Award and the NES.

[127] We note that the HIA advances essentially the same submission in relation to the Timber Award and, for the same reasons, we reject the HIA’s proposed variation of the draft determination in respect of that award.

Next steps

[128] We will now issue variation determinations in respect of each of the awards which have been the subject of this decision.

PRESIDENT

Printed by authority of the Commonwealth Government Printer

<PR713017>

Hearings

20 and 26 September.

2019.

Sydney

20 September:

S. Maxwell, on behalf of the CFMMEU Construction and General Division.

J. Monroe, on behalf of Independent Schools Victoria, Independent Schools Tasmania and the Association of Independent Schools New South Wales

A. Devasia, for the AMWU

S. Bull for United Voice

B. Ferguson for Ai Group

Ms K. Thomson in Newcastle via VC

L. Regan for the Housing Industry Association.

R. Sostarko for Master Builders Australia.

26 September 2019

A. Odgers on behalf of the Independent Education Union.

J. Monroe for the Associations in this matter, being Independent Schools Victoria, Independent Schools Tasmania and the Associations of Independent Schools of NSW in South Australia.

S. Bull, with Ms Dabarera, for United Voice

B. Ferguson for Ai Group

Ms K. Thomson in Newcastle via VC

ATTACHMENT 1 – Background document - Cleaning Services Award

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

4 yearly review of modern awards—Plain Language re-drafting—Cleaning Services Award 2010—annual leave provisions

This is a background document only and does not purport to be a comprehensive discussion of the issues involved. It does not represent the view of the Commission on an issue.

1. Introduction

[1] A plain language exposure draft of the Cleaning Services Award 2010 (Cleaning Award) was first published on 8 September 2017. 38 Conferences were held on 8 November 2017, 22 June 2018 and 27 September 2018 to discuss items raised by parties in relation to the plain language exposure draft of the Cleaning Award. Statements regarding the outcomes of the conferences were issued on 9 November 2017,39 21 February 201840 and 29 June 2018.41 There is currently one outstanding issue in relation to the plain language re-drafting of the Cleaning Award. The issue concerns the payment for annual leave and the payment of accrued annual leave on termination.

2. Background to annual leave loadings

[2] Annual leave loadings in Australia first appeared in the 1970’s as a mechanism for compensating employees for the loss of overtime earning during periods of leave. 42 In 1970 the Waterside Worker’s Federation made claims for an extra week’s annual leave. The compromise agreed between the parties took the form of an annual leave loading of 17.5%.43

[3] In the 1971 Engineering Oil Industry Case the union parties drew upon the 1970 Waterside Worker’s Federation decision, claiming an addition of 25% on the basis that an employee’s financial commitments continued during their annual leave. The unions argued that it would be unjust to allow a significant fall in income during a period of leave. The Full Bench reserved their judgment, leaving the matter open for future applications. 44

[4] In 1971 unions applied to the Australian Conciliation and Arbitration to have an extra week’s pay added to annual leave provisions in Federal awards. While annual leave loading was not claimed by the unions in the matter, the Commission observed that a number of awards and agreements provided for the payment of a 17.5% loading on annual leave without issuing a general ruling on the matter. 45

[5] A further attempt to include an annual loading provision across all modern awards was made in the Clothing Trades Award Case. In rejecting the union application the Full Bench observed that an annual leave loading of 17.5% had become a common feature of through many awards and agreements. However, the Full Bench was not prepared to accept the union’s proposal: 46

‘It is our opinion that a case has not been made out for a review of the 1971 decision as to matters of principle and that the variations of awards substantially by consent to superimpose an annual leave loading in addition to the general prescription do not provide a warrant at this time for departure from the current provisions of this award’.

[6] By the 1974 Airports and Overseas Passenger Terminals Employees Case the Commission accepted that an annual leave loading of 17.5% was an established standard in a large number of state and Federal Awards. In granting the application to include the annual leave loading, the Full Bench commented: 47

“Since October 1973, there have been rapid changes in this area. By a decision of 9th November 1973, the Industrial Conciliation and Arbitration Commission of Queensland awarded a loading of 17.5 per cent for annual in a declaration of common ruling. On 21st December 1973 a determination was made by the [Commonwealth] Public Service Arbitrator by consent varying many determinations by inserting a 17.5 percent…In February 1974 New South Wales Government employees were granted by the State Government a loading of 17.5 per cent…”

3. Background to the proceedings

[7] In response to the first published exposure draft on 8 September 2017, Ai Group submitted that clause 25.3(c) of the plain language exposure draft needed to be amended. It contended that the award required that a 17.5 percent loading be paid on annual leave on termination of employment; not any higher shift loading. 48

[8] United Voice disagreed with Ai Group. It submitted that clause 25.3 of the plain language exposure draft reduced the entitlements of employees. It stated that under the current award in clause 29.7, employees should receive a loading of 17.5 percent on their ‘ordinary time rate of pay’, which includes penalty rates for shift work as well as other entitlements outlined in clause 29.3. United Voice contended that under clause 25.3 of the plain language draft, an employee would only receive the greater of the two options in clause 25.3(b). 49 It submitted that this could substantially reduce an employee’s entitlements and supported retaining the current award clause.50

[9] A conference was held on 8 November 2017 to discuss the plain language re-drafting of the Cleaning Award. During the conference it was decided that the plain language drafter would provide comments about how this issue may be resolved. 51 In a summary of submissions document published by the Commission on 25 January 2018, the drafter’s proposed amendment was included at Attachment A of the document. The proposed rewording of clause 25.3(c) stated:

“(c) The employer must pay an employee for a period of untaken paid annual leave when the employment of the employee ends, a loading of 17.5% calculated on the employee’s base rate of pay as defined in paragraph (a).” 52

[10] The President issued a decision on 21 February 2018, setting out the next steps in the plain language project in relation to the re-drafting of the Cleaning Award following the conference held on 8 November 2017. The decision confirmed that the proposed rewording of clause 25.3(c) above had been provisionally resolved pending the parties’ views on those changes. Parties were invited to confirm their position in respect of the provisionally resolved item at a further conference to be held.

[11] The matter was relisted for conference on 22 June 2018, for parties to confirm whether the amendments proposed resolved the issue. The President issued a Statement on 29 June 2018 setting out the outcome of the June 2018 conference and the next steps in finalising the plain language exposure draft of the Cleaning Award. 53 The Statement confirmed that United Voice and Ai Group were to have further discussions in respect of this issue and provide a joint report on the outcome of those discussions, with submissions in reply to follow.

[12] On 13 August 2018, Ai Group and United Voice reported on the outcome of their discussions in relation to this item. The parties submitted that they were in agreement on the interpretation of how annual leave is paid when taken in accordance with clauses 29.3 and 29.4 of the Cleaning Award, however had not been able to reach agreement on the appropriate form of words to reflect this agreement in the plain language exposure draft. The parties further advised that they were in dispute regarding how the plain language exposure draft should reflect how annual leave is paid on termination in accordance with the ‘payment of accrued leave on termination’ clause in clause 29.7 of the Cleaning Award.

[13] On the same day, United Voice filed a submission in respect of the joint report filed by itself and Ai Group. United Voice submitted that clause 25.3 of the exposure draft which dealt with the ‘payment of annual leave when taken’ accurately reflected clauses 29.3 and 29.4 of the Cleaning Award. 54 With regards to ‘payment of annual leave on termination’, United Voice contended that the proposed rewording by the plain language drafter was an accurate reflection of clause 29.7 of the Cleaning Award. It submitted that in the modern award, the entitlement to receive shift loadings and the annual leave loading was separated when annual leave is taken during employment in clause 29.4 of the Cleaning Award; however this entitlement was not separated in clause 29.7 of the Award. As such, United Voice contended that the proposed amendment was an accurate reflection of the current entitlement and should be adopted.55

[14] Ai Group filed a submission in reply on 24 August 2018. 56 It submitted that whilst the scope of the discussions associated with this item were to be directed at issues associated with payment of annual leave on termination, they have revealed broader difficulties with the plain language exposure draft provisions dealing with payment of annual leave that is taken. The Full Bench in [2018] FWCFB 6781 set out the Ai Group’s submissions below:

“[40] Ai Group submits that the terms of clauses 29.3 and 29.4 of the Cleaning Award are ‘problematic’, noting that:

•  clause 29.3 purports to define the term ‘ordinary pay’ for the purpose of payment of annual leave but clause 29.4 (which deals with the payment of annual leave) does not actually refer to the term ‘ordinary pay’; and

•  read together, clauses 29.4(a) and 29.4(b), imply that penalties for shiftwork and ordinary hours worked on a weekend could be paid under both clause 29(3)(c) and 29.4(b) in connection with a single period of annual leave where the relevant penalties under clause 29.4(b) are higher than the 17.5% annual leave loading.

[41] In Ai Group’s submission the current award provisions result in ‘double dipping’ and are not justifiable in the context of a fair and relevant minimum safety net of terms and conditions. Ai Group submits that the revised PLED clarifies some of these matters but also gives rise to the potential for ‘double dipping’.

[42] The alleged ‘double dipping’ arises as follows. Clause 25.3(a)(iii) of the revised PLED includes ‘penalty rates paid for shiftwork or rostered ordinary hours of work on a Saturday or Sunday’ in the base rate of pay to be used to calculate the amount that an employer is required to pay an employee for a period of annual leave by s. 90 of the Act. However, clause 25.3(b)(ii) requires an employer to pay an employee for the employee’s ordinary hours of work in a period of paid annual leave, the ‘shift, weekend or public holiday penalty rates that the employee would have received for ordinary hours of work for which the employee would have been rostered in the period had the employee not been on leave’ where this amount would be greater than the 17.5% annual leave loading.

[43] Put simply, because clause 25.3(b) is worded so as to provide for a payment that is ‘an additional payment’ it appears to suggest that employees get both the payments under clauses 25.3(a) and 25.3(b). It is on this basis that Ai Group submits that the revised PLED has not resolved the issue of ‘double dipping’ with regard to payment of shift and weekend penalty rates during a period of annual leave.

[15] Ai Group outlined its understanding of the issue in contest as follows:

“17. The submissions filed by United Voice on 13 August 2018 do not address payment for annual leave that is taken in any detail. Nonetheless, Ai Group understands that United Voice does not believe that the current award entitles an employee to be paid the relevant shift, weekend or public holiday penalties twice in relation to a period of leave that is taken. Moreover, we understand that it is common ground between the parties that the Award should only provide that an employee receives either the relevant penalties or the 17.5% loading. As such, we understand that the contest between the parties relates to whether the drafting of PLED properly reflects this position. Ai Group contend that the proposed provisions require amendment.” 57

[16] Ai Group proposed deleting clause 24.3(a)(iii) of the plain language exposure draft in order to address the issue that arises regarding double payment of shift and ordinary hours of work penalties, and annual leave loading. It submitted that the suggested amendment preserves the entitlement to the rates listed in clause 24.3(b)(ii) where these are ‘collectively higher than the 17.5% annual leave loading payable under clause 24.3(b)(i).’ 58 In respect of clause 29.7 of the Cleaning Award, Ai Group submitted that clause 25.4(c) of the exposure draft should be deleted to avoid a circumstance where the award delivered an entitlement lower than the NES.

[17] On 10 September 2018, the Commission issued a draft list of outstanding issues summarising the list of outstanding claims, 59 followed by a revised list on 25 September 2018.60

[18] During the September 2018 conference, Australian Business Industrial and NSW Business Chamber (ABI) supported Ai Group’s proposed deletion of clause 24.3(a)(iii). United Voice agreed with Ai Group’s characterisation of the disputed issue however opposed the proposed deletion. United Voice stated that it was willing to consider amendment to clause 24.3(b) to resolve the item. 61 In respect of clause 29.7 of the Cleaning Award, United Voice submitted that it supported retaining the current award clause.

[19] In response, the Full Bench in [2018] FWCFB 6791 (November decision) stated as follows:

“[54] It appears from the foregoing that it is common ground between the parties that the revised PLED should only provide that an employee receives either the relevant penalties (ie penalty rates for shiftwork or weekend work) or the 17.5% loading, but not both. Further, United Voice does not believe that the current award entitles an employee to be paid the relevant shift, weekend or public holiday payments twice in relation to a period of leave.

[55] It is our provisional view that, absent some special circumstances pertaining to this award, we would amend clause 24.3 of the PLED by deleting clause 24.3(a)(iii), as proposed by Ai Group. The proposed variation is consistent with the common position espoused by the parties. In taking annual leave an employee would receive the greater of either the relevant penalties (by virtue of clause 24.3(b)(ii)) or the 17.5% leave loading (by virtue of clause 24.3(a)), but not both.

[56] It is also our provisional view that clause 24.3(c) of the revised PLED be deleted. If clause 24.3(c) was retained it may result in an employee receiving less than would have been payable to the employee had the employee taken that leave. For example, if the employee’s shift, weekend or public holiday penalty rates they would have received for ordinary hours of work for which the employee would have been rostered in the period had they not been on leave are greater than 17.5% of the employee’s ordinary hourly rate, then the payment on termination under clause 24.3(c) would be less than they would have received had they taken the leave. Such an outcome would be contrary to s.90(2) and contravene s.55. In such circumstances the relevant award term – clause 24.3(c) – would have no effect (s.56).”

[20] Submissions were received from Ai Group and United Voice in response to the Commission’s provisional views. United Voice submitted that the characterisation of its position on payment of annual leave on termination at [54] of the November decision is incorrect and that there is no common position between United Voice and Ai Group in respect of payment of annual leave on termination. 62 Further, United Voice submitted that it does not support the provisional view that clause 24.3(a)(iii) of the plain language exposure draft should be deleted and submitted that clause 24.3(a) defines the employee’s base rate of pay for the purposes of s.90 of the Act.63 It submitted that by deleting clause 24.3(a)(iii), an employee’s entitlement to ‘penalty rates paid for shiftwork or rostered ordinary hours of work on Saturday or Sunday will no longer form part of their base rate of pay.

[21] United Voice further objected to the provisional view that clause 24.3(c) of the plain language exposure draft be deleted and submitted that clause 24.3(c) is the only clause in the exposure draft that relates to payment of annual leave on termination. It submitted that clause 24.3(c) identifies the method for calculating annual leave on termination and that, regardless of which interpretation the Commission settles on, there should remain a clause in the award that stipulates to employers and employees how annual leave is to be paid on termination. 64

[22] On 30 November 2018, Ai Group filed a reply submission in which it submitted that United Voice’s submission does not raise any new or additional issues that warrant a departure from the provisional views expressed. If the Full Bench decided to alter from their provisional views, Ai Group requested another opportunity to comment on such a proposal.

[23] The Commission issued a decision on 20 August 2019, determining various issues in the plain language project. Given the complexity of the issues raised in this matter, the Full Bench proposed to list the matter for oral hearing at 9.30am on 26 and 27 September 2017 in Sydney.

Attachment A

Clauses 29.3, 29.4 and 29.7 of the Cleaning Services Award 2010

29.3 Definition of ordinary pay

For the purposes of payment of annual leave, an employee’s ordinary pay means remuneration for the employee’s normal weekly number of hours of work calculated at the ordinary time rate of pay and in addition will include:

(a) leading hand allowance;

(b) first aid allowance;

(c) penalty rates paid for shiftwork or rostered ordinary hours of work on Saturday and/or Sunday; and

(d) part-time allowance for part-time employees working shiftwork (Monday to Friday) or rostered ordinary hours on a Saturday and/or a Sunday

29.4 Payment of annual leave

(a) The terms of the NES prescribe the basis for payment for annual leave, including payment for untaken leave upon the termination of employment. In addition to the terms of the NES, an employer is required to pay an additional leave loading of 17.5% calculated on an employee’s ordinary time rate of pay.

(b) Provided that where the employee would have received a saved or transitional rate of pay, or shift, weekend (Saturday or Sunday), or public holiday penalty payments according to the roster or projected roster, had the employee not been on leave during the relevant period, and such saved, transitional or penalty payments would have entitled to employee to a greater amount than the loading of 17.5% on the rates set out in clause 16—Minimum Wages of this award, then such rates will be paid instead of the 17.5% loading.

29.7 Payment of accrued annual leave on termination

Where an employee is entitled to payment of untaken annual leave on termination of employment under the terms of the NES, the employer must also pay the employee a loading of 17.5% calculated on an employee’s ordinary time rate of pay.

Attachment B

Tracked clause 24.3 of the plain language exposure draft of the Cleaning Services Award 2010 as at 13 February 2019

24.3 Payment for annual leave

(d) For the purpose of calculating the amount that the employer is required by section 90 of the Act to pay an employee for a period of paid annual leave, the employee’s base rate of pay for the employee’s ordinary hours of work in the period must be taken to include any of the following that are payable to the employee:

(i) a leading hand allowance; and

(ii) a first aid allowance; and

(iii) penalty rates paid for shiftwork or rostered ordinary hours of work on a Saturday or Sunday; and

(iv)(iii) a part-time allowance for part-time employees working shiftwork (Monday to Friday) or rostered ordinary hours on a Saturday or a Sunday.

(e) The employer must pay an employee for the employee’s ordinary hours of work in a period of paid annual leave an additional payment that is the greater of the following amounts:

(i) 17.5% of the employee’s ordinary hourly rate (that is the employee’s rate of pay for ordinary hours of work not including any shift, weekend or public holiday penalties);

(ii) the shift, weekend or public holiday penalty rates that the employee would have received for ordinary hours of work for which the employee would have been rostered in the period had the employee not been on leave.

 (f) Clause 24.3 also applies in calculating the amount payable to an employee by the employer for a period of untaken paid annual leave when employment of the employee ends.

 1   [2018] FWCFB 7447

 2   [2017] FWCFB 5258

 3   [2018] FWCFB 3009

 4   Witness statement of Ms Kerri Knopp Director Strategic Relations of Independent Schools Victoria

 5   Associations submission at paragraph 15

 6   Exhibit ISV1.

7 Associations’ submissions at [42] and [46].

 8   Ibid at [43].

 9   Ibid at [49]-[58].

 10   IEUA submissions at [23].

 11   Ibid.

 12   Australian Education Union v State of Victoria (Department of Education and Early Childhood Development) (AEU) [2015] FCA 1196.

 13   Ibid at [176].

 14   IEUA submissions at [27].

 15   Ai Group submission, 12 October 2017 at [23]

 16   United Voice submission, 20 October 2017 at [32] – [33]

 17   [2018] FWCFB 6791

 18   Ai Group submission, 25 January 2019

 19   HIA submission, 21 December 2018

 20   Ai group submission, 25 January 2019, at paragraph 24

 21   Ibid at paragraph 42

 22   Ibid at paragraph 45

 23   Ibid, at paragraph 49

 24   Ibid at paragraph 58

 25   [2009] AIRCFB 800 at [3]

 26   [2009] AIRCFB 800 at [7]

 27   [2008] AIRCFB 1000 at [61]

 28   [2018] FWCFB 4732 at [40]

 29   [2017] FWCFB 1001 at [283]

 30   Award modernisation – Stage 2 modern awards, 2 September 2009, [2009] AIRCFB 800 at [4] – [5]

 31   CFMMEU-MD submission at [35]

 32   AMWU submissions 10 February 2019 at paragraph 14

 33   CFMMEU C&G submission at [32]

 34   [2018] FWCFB 7447 at paragraph [28]

 35   [2017] FWCFB 4419

 36   Ibid, at [167]

 37   MBA submission 25 January 2019 at [20]

 38   Cleaning Award – plain language exposure draft, 8 September 2017

 39   [2017] FWC 5874

 40   [2018] FWC 1117

 41   [2018] FWC 3842

 42   Creighton and Stewart’s Labour Law 6th edition p. 466

 43   Kelly, R., Plowman, D., and Watson, R. “Flexibility In Annual Leave Loadings”, Centre for Labour Market Research Discussion Paper, p.4; see also 132 CAR 752

 44   134 CAR 159

 45   144 CAR 528

 46   152 CAR 249

 47   166 CAR 612

 48   Ai Group submission, 12 October 2017 at [23]

 49   Clause reference to 25 should be clause 24

 50   United Voice submission, 20 October 2017 at [32] – [33]

 51   Statement [2017] FWC 5874, at [2] and see also attached Report

 52   Summary of submissions, 25 January 2018

 53   Statement [2018] FWC 3842

 54   United Voice submission, 13 August 2018 at [4]

 55   United Voice submission, 13 August 2018 at [14]

 56   Ai Group submission, 24 August 2018

 57   Ai Group submission, 24 August 2018 at [17]

 58   Ibid

 59   Draft list of outstanding issues, 10 September 2018

 60   Revised list and agenda, 25 September 2018

 61   [2018] FWCFB 6781 at [46] and [48]

 62   United Voice submission, 23 November 2018 at [2]

 63   Ibid at [5] and [6]

 64   Ibid at [8] to [10]