DECISION

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

4 yearly review of modern awards—Pest Control Industry Award 2010—Substantive claims
(AM2019/4)

4 yearly review of modern awards – award stage – group 4 awards – substantive issues – Pest Control Industry Award 2010.

1. Introduction

[1] This decision deals with a claim by the Australian Workers’ Union (the AWU) to vary clause 24.7 of the Pest Control Industry Award 2010 (the Pest Control Award) as part of the 4 yearly review of modern awards (the Review).

[2] Clause 24.7 of the Pest Control Award states, relevantly:

24.7 Payment and loading

Before the start of an employee’s annual leave the employer must pay the employee:

(a) instead of the base rate of pay referred to in the NES, the amount the employee would have earned for working their ordinary hours had they not been on leave; and

(b) an additional loading of 17.5% of the employee’s minimum rate prescribed in clause 14—Minimum wages, plus industry and first aid allowances where appropriate or, if they were a shiftworker prior to entering leave, their shift penalty, whichever is greater.

[3] The AWU seeks to amend clause 24.7 to make it clear that employees receiving a leading hand allowance also receive this allowance during periods of annual leave. In particular, the AWU seeks to amend clause 24.7(b) by deleting the word ‘industry’ and inserting the words ‘leading hand’ as follows:

‘(b) an additional loading of 17.5% of the employee’s minimum hourly rate prescribed in clause 14 – Minimum wages, plus industry leading hand and first aid allowances where appropriate…”’

[4] The AWU’s claim is opposed and directions for the hearing and determination of the claim were issued on 23 August 2019. 1 The following submissions were filed in accordance with the directions:

•  AWU (19 September and 21 November 2019); and

•  AFEI (30 October 2019) and 27 November 2019.

[5] The transcript of the proceedings was published on 28 November 2019. A background paper was published on 26 November 2019, which outlined the relevant claim and a summary of the submissions received. The matter was heard on 27 November 2019. The transcript of proceedings is available on the 4 Yearly Review website.

[6] It is necessary to first say something about the Commission’s task in the Review before turning to the submissions relating to the proposed variation.

2. The Review

[7] Section 156 of the Fair Work Act 2009 (Cth) (the Act) deals with the conduct of the Review and s.156(2) provides that the Commission must review all modern awards and may, among other things, make determinations varying modern awards. In this context ‘review’ has its ordinary and natural meaning of ‘survey, inspect, re-examine or look back upon’. 2 The discretion in s.156(2)(b)(i) to make determinations varying modern awards in a Review, is expressed in general, unqualified, terms.

[8] If a power to decide is conferred by a statute and the context (including the subject-matter to be decided) provides no positive indication of the considerations by reference to which a decision is to be made, a general discretion confined only by the subject matter, scope and purposes of the legislation will ordinarily be implied. 3 However, a number of provisions of the Act which are relevant to the Review operate to constrain the breadth of the discretion in s.156(2)(b)(i). In particular, the Review function is in Part 2-3 of the Act and hence involves the performance or exercise of the Commission’s ‘modern award powers’ (see s.134(2)(a)). It follows that the ‘modern awards objective’ in s.134 applies to the Review.

[9] Section 138 (achieving the modern awards objective) and a range of other provisions of the Act are also relevant to the Review: s.3 (object of the Act); s.55 (interaction with the National Employment Standards (NES)); Part 2-2 (the NES); s.135 (special provisions relating to modern award minimum wages); Division 3 (terms of modern awards) and Division 6 (general provisions relating to modern award powers) of Part 2-3; s.284 (the minimum wages objective); s.577 (performance of functions etc by the Commission); s.578 (matters the Commission must take into account in performing functions etc), and Division 3 of Part 5-1 (conduct of matters before the Commission).

[10] The modern awards objective is in s.134 of the Act:

SECTION 134 THE MODERN AWARDS OBJECTIVE

What is the modern awards objective?

134(1) The FWC must ensure that modern awards, together with the National Employment Standards, provide a fair and relevant minimum safety net of terms and conditions, taking into account:

(a) relative living standards and the needs of the low paid; and

(b) the need to encourage collective bargaining; and

(c) the need to promote social inclusion through increased workforce participation; and

(d) the need to promote flexible modern work practices and the efficient and productive performance of work; and

(da) the need to provide additional remuneration for:

(i) employees working overtime; or

(ii) employees working unsocial, irregular or unpredictable hours; or

(iii) employees working on weekends or public holidays; or

(iv) employees working shifts; and

(e) the principle of equal remuneration for work of equal or comparable value; and

(f) the likely impact of any exercise of modern award powers on business, including on productivity, employment costs and the regulatory burden; and

(g) the need to ensure a simple, easy to understand, stable and sustainable modern award system for Australia that avoids unnecessary overlap of modern awards; and

(h) the likely impact of any exercise of modern award powers on employment growth, inflation and the sustainability, performance and competitiveness of the national economy.

This is the modern awards objective.

When does the modern awards objective apply?

(2) The modern awards objective applies to the performance or exercise of the FWC’s modern award powers, which are:

(a) the FWC’s functions or powers under this Part; and

(b) the FWC’s functions or powers under Part 2-6, so far as they relate to modern award minimum wages.

Note: The FWC must also take into account the objects of this Act and any other applicable provisions. For example, if the FWC is setting, varying or revoking modern award minimum wages, the minimum wages objective also applies (see section 284).

[11] The modern awards objective is to ‘ensure that modern awards, together with the National Employment Standards, provide a fair and relevant minimum safety net of terms and conditions’, taking into account the particular considerations identified in ss.134(1)(a)–(h) (the s.134 considerations).

[12] The modern awards objective is very broadly expressed. 4 It is a composite expression which requires that modern awards, together with the NES, provide ‘a fair and relevant minimum safety net of terms and conditions’, taking into account the matters in ss.134(1)(a)–(h).5 Fairness in this context is to be assessed from the perspective of the employees and employers covered by the modern award in question.6

[13] The obligation to take into account the s.134 considerations means that each of these matters, insofar as they are relevant, must be treated as a matter of significance in the decision-making process. 7 No particular primacy is attached to any of the s.134 considerations8 and not all of the matters identified will necessarily be relevant in the context of a particular proposal to vary a modern award.

[14] It is not necessary to make a finding that the award fails to satisfy one or more of the s.134 considerations as a prerequisite to the variation of a modern award. 9 Generally speaking, the s.134 considerations do not set a particular standard against which a modern award can be evaluated; many of them may be characterised as broad social objectives.10 In giving effect to the modern awards objective the Commission is performing an evaluative function taking into account the matters in s.134(1)(a)–(h) and assessing the qualities of the safety net by reference to the statutory criteria of fairness and relevance.

[15] Further, the matters which may be taken into account are not confined to the s.134 considerations. As the Full Court observed in Shop, Distributive and Allied Employees Association v The Australian Industry Group 11 (Penalty Rates Review):

‘What must be recognised, however, is that the duty of ensuring that modern awards, together with the National Employment Standards, provide a fair and relevant minimum safety net of terms and conditions itself involves an evaluative exercise. While the considerations in s 134(a)-(h) inform the evaluation of what might constitute a “fair and relevant minimum safety net of terms and conditions”, they do not necessarily exhaust the matters which the FWC might properly consider to be relevant to that standard, of a fair and relevant minimum safety net of terms and conditions, in the particular circumstances of a review. The range of such matters “must be determined by implication from the subject matter, scope and purpose of the” Fair Work Act (Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; (1986) 162 CLR 24 at 39-40).’ 12 

[16] Section 138 of the Act emphasises the importance of the modern awards objective:

‘138 Achieving the modern awards objective

A modern award may include terms that it is permitted to include, and must include terms that it is required to include, only to the extent necessary to achieve the modern awards objective and (to the extent applicable) the minimum wages objective.’

[17] What is ‘necessary’ to achieve the modern awards objective in a particular case is a value judgment, taking into account the s.134 considerations to the extent that they are relevant having regard to the context, including the circumstances pertaining to the particular modern award, the terms of any proposed variation and the submissions and evidence. 13

[18] In 4 Yearly Review of Modern Awards - Penalty Rates (Hospitality and Retail Sectors) Decision (the Penalty Rates Decision) 14 the Full Bench summarised the general propositions applying to the Commission’s task in the Review, as follows:

‘1. The Commission’s task in the Review is to determine whether a particular modern award achieves the modern awards objective. If a modern award is not achieving the modern awards objective then it is to be varied such that it only includes terms that are ‘necessary to achieve the modern awards objective’ (s.138). In such circumstances regard may be had to the terms of any proposed variation, but the focal point of the Commission’s consideration is upon the terms of the modern award, as varied.

2. Variations to modern awards must be justified on their merits. The extent of the merit argument required will depend on the circumstances. Some proposed changes are obvious as a matter of industrial merit and in such circumstances it is unnecessary to advance probative evidence in support of the proposed variation. Significant changes where merit is reasonably contestable should be supported by an analysis of the relevant legislative provisions and, where feasible, probative evidence.

3. In conducting the Review it is appropriate that the Commission take into account previous decisions relevant to any contested issue. For example, the Commission will proceed on the basis that prima facie the modern award being reviewed achieved the modern awards objective at the time it was made. The particular context in which those decisions were made will also need to be considered.

4. The particular context may be a cogent reason for not following a previous Full Bench decision, for example:

•  the legislative context which pertained at that time may be materially different from the Fair Work Act 2009 (Cth);

•  the extent to which the relevant issue was contested and, in particular, the extent of the evidence and submissions put in the previous proceeding will bear on the weight to be accorded to the previous decision; or

•  the extent of the previous Full Bench’s consideration of the contested issue. The absence of detailed reasons in a previous decision may be a factor in considering the weight to be accorded to the decision.’ 15

[19] Where an interested party applies for a variation to a modern award as part of the Review, the proper approach to the assessment of that application was described by a Full Court of the Federal Court in CFMEU v Anglo American Metallurgical Coal Pty Ltd (Anglo American): as follows: 16

‘[28] The terms of s 156(2)(a) require the Commission to review all modern awards every four years. That is the task upon which the Commission was engaged. The statutory task is, in this context, not limited to focusing upon any posited variation as necessary to achieve the modern awards objective, as it is under s 157(1)(a). Rather, it is a review of the modern award as a whole. The review is at large, to ensure that the modern awards objective is being met: that the award, together with the National Employment Standards, provides a fair and relevant minimum safety net of terms and conditions. This is to be achieved by s 138 – terms may and must be included only to the extent necessary to achieve such an objective.

[29] Viewing the statutory task in this way reveals that it is not necessary for the Commission to conclude that the award, or a term of it as it currently stands, does not meet the modern award objective. Rather, it is necessary for the Commission to review the award and, by reference to the matters in s 134(1) and any other consideration consistent with the purpose of the objective, come to an evaluative judgment about the objective and what terms should be included only to the extent necessary to achieve the objective of a fair and relevant minimum safety net.’

[20] In the same decision the Full Court also said: ‘...the task was not to address a jurisdictional fact about the need for change, but to review the award and evaluate whether the posited terms with a variation met the objective.’ 17

[21] We will apply the above principles in this decision.

3. Submissions and Consideration

[22] The AWU submits that the amendment proposed is supported by two main factors:

(i) there is no industry allowance in the Pest Control Award; and

(ii) an analysis of the pre-modern awards shows that employees covered by those awards who were entitled to the leading hand allowance were also entitled to that allowance whilst on periods of annual leave.

[23] The relevant pre-modern awards identified by the AWU as informing the provisions of the Pest Control Award are as follows:

•  Pest Control Industry (State) Award (NSW);

•  Australian Environmental Pest Managers Association Ltd Award – State 2005 (QLD);

•  Pest Control Industry Award – State 2003 (QLD)

•  Pest Control Award (SA);

•  Pest Control Industry Award 1982 (WA);

•  Pest Control Industry (Victoria) Award 2000; and

•  Pest Control Industry (Northern Territory) Award 2002.

[24] The AWU submits that all of the pre-reform awards used to inform the Pest Control Award, with the sole exception of the Pest Control Industry (Northern Territory) Award 2002 provide for the payment of a leading hand allowance and also stipulate that the leading hand allowance is payable to an employee during periods of annual leave.

[25] The AWU submits that the Commission should vary the Pest Control Award to restore an entitlement to the Pest Control Award that existed across the industry (with the exception of the Northern Territory) prior to Award Modernisation. It submits that this entitlement has been removed as a consequence of the making of the Pest Control Award without any apparent rationale and in the circumstances the removal seems to be the result of an inadvertent error.

[26] The AWU submits that the variation sought is consistent with the modern awards objective and its submission in respect of each relevant consideration is set out below:

•  s 134(1)(a) (relative living standards and needs of the low paid): all award-reliant employees in the pest control sector are ‘low-paid’ employees within the meaning of s 134(1)(a) and the variation proposed ‘has the capacity to improve the relative living standards and needs of the low paid by re-introducing a prior entitlement that will result in a small improvement for some low-paid employees in the pest control industry.’

•  s 134(1)(b) (need to encourage collective bargaining): granting the claim will have a neutral impact on collective bargaining. The payment of a leading hand allowance to employees on annual leave is unlikely to determine the attitude of employers and employees to negotiating an enterprise agreement.

•  s 134(1)(f) (likely impact on businesses): the variation proposed ‘is very unlikely to have a significant impact on businesses in the pest control industry.’ The AWU accepts that the granting of this claim will result in a minor increase to employment costs but the payment of the leading hand allowance on annual leave is payable only to those few employees who are undertaking work as a leading hand and hence such increased costs will be minor. The AWU also notes that the impact on small business will necessarily be lesser than on medium and large businesses, as the quantum of the leading hand allowance is determined on the basis of how many employees a leading hand supervises. Accordingly, the smaller the business, the less of an impact the granting of this substantive claim would have.

•  s 134(1)(h) (likely impact on employment growth, inflation and the national economy): the effect of granting the claim is unlikely to have a significant impact on these considerations.

[27] It is common ground that the other s 134 considerations are not relevant in the claim.

[28] AFEI disagrees with the AWU’s submission that all pre-reform awards that were used to inform the Pest Control Award (with the exception of the Pest Control Industry (Northern Territory) Award 2002) required payment of the leading hand allowance during periods of annual leave. In particular, AFEI contend that the Pest Control Industry (Victoria) Award 2000 (the Victorian Pest Control Award) did not prescribe payment of a leading hand allowance during periods of annual leave.

[29] AFEI submits that it cannot be concluded that the absence of such a provision was an error of the award modernisation process. The Review commenced on the presumption that the Pest Control Award achieved the modern awards objective at the time that it was made and the award was made without a requirement for payment of the leading hand allowance during periods of annual leave.

[30] AFEI also submits that the change proposed by the AWU would require merit based arguments that address the relevant legislative provisions, accompanied by probative evidence directed to what are said to be the facts in support of their claim and that no such evidence has been adduced.

[31] Further, AFEI submits that the proposed variation presents practical issues of how it would operate. A leading hand under the Pest Control Award is defined to be:

‘an employee who is directed to control, supervise and take responsibility for the work performed by two or more employees’

[32] AFEI contend that the nature of the allowance is that an employee is only eligible to receive a leading hand allowance if they are directed to undertake this particular responsibility. The Pest Control Award does not require the ‘leading hand’ be the same person on any particular day, nor is ‘leading hand’ a substantive role under the award. Rather, it is submitted, an employer is able to determine when an employee (if any at all) will be so directed, and for how long.

[33] In a reply submission dated 21 November 2019 the AWU responded to the issues raised by AFEI. In relation to the historical context, and AFEI’s submission with respect to the Victorian Pest Control Award, the AWU contends that AFEI’s submissions do not explain the basis of their objection, offer an alternative interpretation of Clause 23.2, or engage with the AWU’s construction of the clause. In light of this, the AWU continues to maintain that the correct reading of Clause 23.2 of the Victorian Award is that the leading hand allowance is payable during periods of annual leave.

[34] The relevant clauses of the Victorian Award are Clause 17.1, which makes provision for a leading hand allowance and Clause 23.2, which states (our emphasis at underlined):

‘The pay rate for annual leave is the employee’s pay rate at the time the employee takes the annual leave, plus 17.5% of the rates prescribed in the award for the classification in which the employee was engaged immediately prior to the employee proceeding on leave. The employee shall pay each worker in advance before the commencement of the employees annual leave.’

[35] The AWU submits that annual leave in the Victorian Award was calculated using the following formula:

‘The employee’s pay rate at the time the employee takes the annual leave + 17.5% of the rate prescribed in the award for the employee’s classification.’

[36] The AWU submits the correct interpretation of Clause 23.2 is that the words ‘employee’s pay rate at the time the employee takes the annual leave’ encompass an employee’s monetary entitlements under the award – including allowances. This is said to be evidenced by the separate calculation of annual leave loading prescribed on the lesser amount of “the rates prescribed for the employee’s classification in the award.”

[37] In the event that we do not accept this interpretation of the relevant clauses of the Victorian Award, the AWU submits that the proposed change would nonetheless be consistent with the overwhelming majority of the relevant pre-modern awards that made provision for the payment of leading hand allowances during periods of annual leave.

[38] As to the AFEI’s submission regarding the ‘practical operation’ of the proposed amendment the AWU contends AFEI’s submission is misconceived for the following reasons:

1. It appears AFEI conceives of the leading hand role as one that regularly shifts from employee to employee at the discretion of the employer. However, this approach appears divorced from industrial realities. The role of leading hand and the additional responsibility it entails is likely to limit the number of employees who are regularly directed to perform the role;

2. There are numerous other modern awards that specifically require the payment of a leading hand allowance during periods of annual leave including following the following. These include:

•  Aluminium Industry Award 2010 – clause 22.4(b);

•  Building and Construction General On-site Award 2010 – clause 38.2(b);

•  Manufacturing and Associated Industries and Occupations Award 2010 – clause 32.1 and 41.4(b); and

•  Plumbing and Fire Sprinklers Award 2010 – clause 21.1(k) and 34.2(b).

3. Finally, AFEI’s submission that an employee cannot be paid a leading hand allowance whilst on annual leave due to the fact that at the time of taking annual leave the employee is not undertaking the responsibilities that attract the payment of the allowance is not sustainable. Not only does this submission fail to recognise that annual leave payments naturally require an assumption of earnings during the leave period even though no work will be performed, it is additionally noted that an employee taking annual leave is not performing any responsibilities during the leave period.

[39] Finally, as to the AFEI’s contention that the AWU has not adduced evidence in support of its proposed variation, the AWU submits that its proposal is self evident and can be determined without the need for an evidentiary case.

[40] It is convenient to deal with the last issue first. We agree with the AWU – this is not a case which requires probative evidence. It seems to us that the omission of a term requiring the payment of leading hand allowances while on annual leave was an error. Three matters lead us to this conclusion.

[41] First, as the AWU submits, most of the pre-modern awards used to inform the terms of the Pest Control Award provided for the payment of leading hand allowances during periods of annual leave. We note that AFEI contests the proposition that the Victorian Pest Control Award required such payments during periods of annual leave. However, it seems to us that the AWU’s construction argument in relation to clause 23.2 of the Victorian Pest Control Award is, at the very least, reasonably arguable. In any event, even if AFEI is correct in its interpretation of the Victorian Pest Control Award it is still the case that most of the relevant pre-modern Pest Control Awards provided for the payment of leading hand allowances during periods of annual leave.

[42] Second, we were not taken to any part of the relevant decisions of the Award Modernisation Full Bench which would suggest that the Full Bench gave any consideration to this issue.

[43] Finally, it is common ground that clause 24.7(b) erroneously refers to the payment of an ‘industry allowance’ to employees while on annual leave – the Pest Control Award does not provide for the payment of an industry allowance. This error supports an inference that the question of the payments to be made while employees were on annual leave was not given much (if any) consideration by the Award Modernisation Full Bench when the Pest control Award was made.

[44] Our conclusion regarding the erroneous omission of a term requiring that an employee receiving a leading hand allowance be paid that allowance while on annual leave is a consideration in favour of the AWU claims. We now turn to the other relevant considerations.

[45] We have referred earlier to AFEI’s submission that the proposed variation presents ‘practical issues’ (see [31] – [32] above). These submissions are unpersuasive. It seems to us to be inherently unlikely that the role of leading hand would frequently shift from employee to employee at the discretion of the employer. We also note that there are a number of other modern awards that specify that leading hand allowances are to be paid during periods of annual leave (see [38] above).

[46] We are satisfied that the variation sought is necessary to ensure that the Pest Control Award provides a fair and relevant minimum safety net of terms and conditions. In reaching this conclusion we have taken into account the s.134 considerations, insofar as they are relevant. In particular:

•  the variation will assist low paid employees covered by the Pest Control Award to better meet their needs (s.134(1)(a));

•  the variation is unlikely to have any effect on collective bargaining (s.134(1)(b)); and

•  the variation will lead to some, minor, increase in employment costs (s.134(1)(f)).

[47] We are not persuaded that the variation will have any discernible impact on the national economy; the other s.134 considerations are not relevant.

[48] For the reasons given, we propose to grant the claim. A draft variation determination will be published with the decision. Interested parties will have 7 days to comment on the terms of the draft variation determination.

PRESIDENT

Hearing:

2019.

November 27

Sydney

Appearances:

Z. Duncalfe, with C. Ackerman, from the Australian Workers’ Union

V. Lin from Australian Federation of Employers and Industries

Further written submissions:

AFEI, 27 November 2019

Printed by authority of the Commonwealth Government Printer

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 1   [2019] FWC 5888

 2   Shop, Distributive and Allied Employees Association v The Australian Industry Group [2017] FCAFC 161 at [38].

 3   O’Sullivan v Farrer (1989) 168 CLR 210 at p. 216 per Mason CJ, Brennan, Dawson and Gaudron JJ.

 4   Shop, Distributive and Allied Employees Association v National Retail Association (No 2) (2012) 205 FCR 227 at [35].

 5   (2017) 265 IR 1 at [128]; Shop, Distributive and Allied Employees Association v The Australian Industry Group [2017] FCAFC 161 at [41]–[44].

 6   [2018] FWCFB 3500 at [21]-[24].

 7   Edwards v Giudice (1999) 94 FCR 561 at [5]; Australian Competition and Consumer Commission v Leelee Pty Ltd [1999] FCA 1121 at [81]-[84]; National Retail Association v Fair Work Commission (2014) 225 FCR 154 at [56].

 8   Shop, Distributive and Allied Employees Association v The Australian Industry Group [2017] FCAFC 161 at [33].

 9   National Retail Association v Fair Work Commission (2014) 225 FCR 154 at [105]-[106].

 10   See National Retail Association v Fair Work Commission (2014) 225 FCR 154 at [109]-[110]; albeit the Court was considering a different statutory context, this observation is applicable to the Commission’s task in the Review.

 11   Shop, Distributive and Allied Employees Association v The Australian Industry Group [2017] FCAFC 161.

 12   Ibid at [48].

 13   See generally: Shop, Distributive and Allied Employees Association v National Retail Association (No.2) (2012) 205 FCR 227.

 14   [2017] FWCFB 1001.

 15   Ibid at [269].

 16   CFMEU v Anglo American Metallurgical Coal Pty Ltd [2017] FCAFC 123.

 17   Ibid at [46].