C0024 Dec 591/00 M Print S6443 [Incorporating correction to decision C0024 Dec 591a/00 M Print S6744]
AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION
Workplace Relations Act 1996
Review of awards pursuant to Item 51 of Part 2 of Schedule 5 of the
Workplace Relations and Other Legislation Amendment Act 1996
s.107 reference to Full Bench
Australian Municipal, Administrative, Clerical and Services Union
(C No. 00254 of 1998)
CLERKS (BREWERIES) CONSOLIDATED AWARD, 1985
(ODN C No. 01867 of 1979)
[Print F9905 [C0024]]
Clerical employees |
Liquor and accommodation industry |
VICE PRESIDENT ROSS |
|
SENIOR DEPUTY PRESIDENT WATSON |
|
COMMISSIONER GAY |
MELBOURNE, 26 MAY 2000 |
Award simplification - exemption rate.
DECISION
Introduction
[1] The matter before us arises from the review of the Clerks (Breweries) Consolidated Award 1985 (the Award) pursuant to Item 51 of Part 2 of Schedule 5 of the Workplace Relations and Other Legislation Amendment Act 1996 (the WROLA Act). The President granted an application by the Australian Municipal, Administrative, Clerical and Services Union (the ASU) under s.107 of the Workplace Relations Act 1996 (the WR Act) to refer the review of the `exemption rate' provision in the Award to a Full Bench for determination. The provision which is the subject of these proceedings appears in clause 4.3 - Definitions, of the Award in the following terms:
"Exempted persons means an adult employee receiving wages at a rate of more than $25 per week above the highest rate of pay prescribed by this award for adults in the relevant category of work."
[2] The ASU, supported by the Australian Council of Trade Unions (the ACTU), seeks the deletion of the above provision. This course is opposed by the employers respondent to the Award (the Employers). The Australian Chamber of Commerce and Industry (ACCI) supported the Employers in this regard. The Commonwealth made no submission about the particular circumstances applicable to the award before us but contended that there is nothing in the WR Act which requires, or should lead the Commission in the exercise of its discretion, to delete exemption type clauses. Before setting out the submissions of the parties and intervenors we propose to make some general observations about exemption type clauses.
Exemption Clauses
[3] Exemption clauses operate to exclude certain employees from some or all of the terms of an award. We agree with the Commonwealth's view that the function of these provisions is to determine the scope of award coverage - in effect, which employees are covered by an award. Viewed in this way exemption clauses are `allowable' as they are incidental to one or more of the matters in s.89A(2) and necessary for the effective operation of the award.
[4] The scope and nature of exemption clauses varies from award to award. In some awards, including the Award in this case, the clause excludes anyone above the exemption rate from all of the provisions in the award. In other awards the exemption clause operates to exclude relevant employees from only some parts of the award. For example, in the Business Equipment Industry - Technical Service - Award 19991 employees earning more than $37,686 per annum are excluded from a range of award provisions including several allowances and the hours of work, overtime, shift work and public holiday penalty rate clauses.
[5] Exemption rates are sometimes expressed as a percentage of a wage level. The Clerical and Administrative Staff (International Freight Forwarding & Customs Clearing Industry) Award 19922 exempts from some clauses in the award "any clerical employee in receipt of a rate of pay which exceeds by 20% or more" the rate of pay at the highest award classification. Similarly, the Clerks (Vehicle Industry - Repair Services and Retail) Award 19853 does not apply to any employee who receives an amount of 33 and 1/3 percent or more in excess of the highest award rate.
[6] In other awards, such as the Award before us, the exemption rate is expressed as a flat dollar amount. For instance the Macquarie Bank Award 19994 does "not apply to employees who are in receipt of actual weekly remuneration of $629.00 or more" (compared to the highest weekly wage rate in that award of $518). The Ampol Clerical Employees' Award 19965 does not apply "to any employee receiving a salary for work in ordinary hours that is greater then the highest total of the minimum rates prescribed by this award or any related enterprise agreement."
[7] In some cases holders of certain executive positions are excluded from award coverage. For example, in the Journalists (Metropolitan Daily Newspapers) Award 19916, the Assistant Editor, News Editor, Chief Sub-Editor and Bureau Chief (Canberra) of the Daily Telegraph are exempted from all clauses of the Award.
[8] The rationale behind the insertion of exemption clauses is not always clear because to a significant extent they have been inserted by consent. Some general observations can be made on the basis of the decided cases. In his report to a Full Bench in Alcoa of Australia Ltd v Federated Clerks Union of Australia Munro J refers to the "notion of an exemption rate as the point of demarcation between a subordinate employee and a staff or managerial level employee".7
[9] In the Business Equipment Industry Case the exemption clause was seen as a "notional bargain" between the employer and the employee. In that case the majority said:
"Before giving particular consideration to the decision of the Commissioner to delete the exemption clause we would point to the fact that it relates to employment in a service type industry where the ordinary award entitlements are difficult to monitor due to the exigent nature of the work and the itinerancy which is, so frequently, associated with its performance. Servicing work may be required suddenly and in a situation of urgency in a place where a cessation of work depends upon the completion of the job rather then upon returning to the place of employment and signing off for the day. The employers is frequently in no position to monitor the time worked by the employee in such circumstances; nor can practical application be given to award provisions such as meal breaks, mixed functions, call backs and the like.
In all these circumstances, the exemption clause, in concept, permits a bargain to be struck for an additional remuneration to compensate for such penalties and other award payments which would otherwise apply, were those penalties and payments not foregone . . .
The vital consideration in our view is the concept of the notional bargain made between the employer and the employee per medium of the exemption clause."8
[10] CUB characterised the exemption rate in the Award before us as permitting "a notional agreement to be made which comprehends a package of benefits substantially different from the terms and conditions contained in the award."9
[11] An exemption provision may also reflect a desire to separate management from other employees on, among other things, confidentiality grounds.10 We note that in its written submission in the proceedings before us Tooheys Limited and Castlemaine Tooheys Limited characterised the role of an exemption clause as providing a means of excluding employees who carry out professional and managerial roles from award coverage. It was argued that the degree of accountability and responsibility of such employees was quite different to employees who only carry out administrative or clerical duties.11
[12] There are also instances where exemption clauses were related to union membership agreements. Union acceptance of an exemption from award coverage was linked to an employer acceptance of an obligation to strongly encourage union membership for employees classified below the cut off exemption rate.12
Submissions
[13] In support of its contention that the provision subject to review should be deleted the ASU advanced the following points:
· the provision was obsolete and should be removed pursuant to Item 51(7)(d);
· exemption clauses were contrary to the safety net role of the award system under the WR Act;
· the existence of facilitative provisions and Australian Workplace Agreements allow employers more than enough flexibility to reach individual arrangements either through collective agreements (union or non-union) or directly with individual employees.
[14] It was argued that there was no legitimate reason to retain an exemption provision in the Award and it should be removed. The scope of the ASU's eligibility rules should be the means of determining the scope of the Award's coverage.
[15] The ACTU intervened in support of the position advanced by the ASU. The ACTU's principal line of argument was that exemption provisions are inconsistent with the Commission's statutory obligation to establish and maintain an effective award safety net of fair and enforceable minimum wages and conditions of employment. The ACTU also advanced the following submissions:
· exemption clauses operate to discourage bargaining [contrary to s.88A(d)] by removing employees from the award safety net;
· exemption clauses are inconsistent with freedom of association to the extent that they have the effect of discouraging employees from joining a union or remaining union members;
· the exemption clause is inconsistent with Item 51(7)(a) in that it is the antithesis of a facilitative provision - it is simply a device to avoid award obligations; and
· exemption clauses of type before the Commission are obsolete (Item 51(7)(d) because they:
· are inconsistent with the requirement for skill based classification structures;
· were frequently linked to preference clauses and membership agreements which are now unlawful;
· supported a distinction between weekly and monthly paid staff which is no longer appropriate; and
· undermine a system designed to encourage bargaining and agreement making whether formal or informal.
[16] The principal employer submissions were put on behalf of Carlton and United Breweries Limited (CUB). These submissions were adopted by the Cascade Brewery Company Limited and J. Boag & Son. CUB argued that the only appropriate action which should be taken in relation to the exemption rate is "to clarify the wording, review its level and ensure that it is updated in line with other movements and changes in the award."13 It was submitted that the arguments put by the ASU and ACTU fall well short of providing any justification to support the removal of the exemption rate.
[17] In relation to the wording of the provision under review Mr Watson, counsel for CUB, conceded that "the wording is ambiguous and ought to be fixed and it also ought to be considered in terms of updating."14 In this context it was also submitted that Item 51(7)(c) was relevant. These observations were also reflected in CUB's written submission which concluded in the following terms:
"The wording of the reference to exemption provisions is clearly inappropriate and amendments should be made to the scope clause of the award to properly exclude exempted employees. The parties should be directed to confer on the level of exemption rate with a view to having it updated in light of other changes in the award since the exemption rate was last adjusted."15
[18] Tooheys Limited and Castlemaine Tooheys Limited (Tooheys) also opposed the deletion of the provision under review. In this regard it was submitted that the Commission should have regard to the practical impact of the ASU's proposal:
"The implications of removing the exemption rate should not be underestimated. Employers and employees who for the whole of the employee's working career have dealt with each other directly in negotiating terms and conditions of employment would become subject to award terms and conditions and thus proscribing dealings between the parties."16
[19] ACCI also expressed concern about the effect of granting the application:
"The effect of granting the application would be to cause widespread confusion and industrial difficulties in the industries currently covered by the award; furthermore, granting the application would set a precedent for the overturning of other scope clauses which would cause a great deal of uncertainty and difficulties for employers and employees."17
[20] The Commonwealth, intervening pursuant to s.44 of the WR Act, argued that contrary to the central proposition put by the ACTU, there is nothing in the WR Act that suggests that exemption type clauses are inconsistent with the intention of the WR Act and that they should therefore be deleted. A number of the arguments advanced by the Commonwealth were also put by the Employers and the ACCI. In relation to the award system and agreement making the Commonwealth contended that they ACTU submissions misconstrued the objects and other provisions of the WR Act. In this context it was argued that the ACTU's submission did not recognise that the WR Act acknowledges a range of options for bargaining at the workplace level. A significant change under the WR Act which reinforces the emphasis on bargaining was said to be the recognition in the WR Act's principal object (s3) of the need to encourage agreement-making with employers and employees able to choose the most appropriate form of agreement, whether or not that form is provided for by the WR Act. For the first time the act expressly recognised the capacity of parties to bargain outside as well as within the formal system.
[21] The Commonwealth argued that, in the absence of evidence that an exemption-type clause has been, or is, operating unfairly, the ACTU's submission was unsubstantiated.
[22] While the Commonwealth rejected the ACTU's submissions it did consider that it would be open to the Commission under s.88B(2) of the WR Act to review the level and nature of an exemption-type clause in the context of the overall operation of a particular award.
Conclusion
[23] We begin our consideration of the submissions by adopting a proposition put by the ACCI, namely, that an Item 51 review is not a general review of the merits or otherwise of particular award provisions but rather the assessment of those provisions against specified criteria.
[24] All other issues associated with the review of the Award were dealt with in a decision by Vice president Ross given on 14 September 1999 in print R9120. It is apparent from his Honour's decision that the Award is affected by Item 50, which states:
"50 Parts of awards cease to have effect at the end of the interim period
(1) At the end of the interim period , each award ceases to have effect to the extent that it provides for matters other than allowable award matters."
[25] Item 51 requires the award to be reviewed to meet certain criteria, including:
51 Variation of awards after the end of the interim period
(1) As soon as practicable after the end of the interim period, the Commission must review each award:
(a) that is in force; and
(b) that the Commission is satisfied has been affected by item 50.
(2) The Commission must vary the award to remove provisions that ceased to have effect under item 50.
(3) When varying the award under subitem (2), the Commission may also vary the award so that, in relation to an allowable award matter, the award is expressed in a way that reasonably represents the entitlements of employees in respect of that matter as provided in the award as in force immediately before the end of the interim period.
(4) If, immediately before the end of the interim period, the award provided for rates of pay that, in the opinion of the Commission:
(a) were not operating as minimum rates of pay; or
(b) were made on the basis that they were not intended to operate as minimum rates;
the Commission may vary the award so that it provides for minimum rates of pay consistent with sections 88A and 88B of the Principal Act and the limitation on the Commission's power in subsection 89A(3) of that Act.
(5) If the Commission varies the award under subitem (4), it must include in the award provisions that ensure that overall entitlements to pay provided by the award are not reduced by that variation, unless the Commission considers that it would be in the public interest not to include such provisions.
(6) The Commission must, if it considers it appropriate, review the award to determine whether or not it meets the following criteria:
(a) it does not include matters of detail or process that are more appropriately dealt with by agreement at the workplace or enterprise level;
(b) it does not prescribe work practices or procedures that restrict or hinder the efficient performance of work;
(c) it does not contain provisions that have the effect of restricting or hindering productivity, having regard to fairness to employees.
(7) The Commission must also review the award to determine whether or not it meets the following criteria:
(a) where appropriate, it contains facilitative provisions that allow agreement at the workplace or enterprise level, between employers and employees (including individual employees), on how the award provisions are to apply;
(b) where appropriate, it contains provisions enabling the employment of regular part-time employees;
(c) it is expressed in plain English and is easy to understand in both structure and content;
(d) it does not contain provisions that are obsolete or that need updating;
(e) where appropriate, it provides support to training arrangements through appropriate trainee wages and a supported wage system for people with disabilities;
(ea) if it applies to work that is or may be performed by young people - protects the competitive position of young people in the labour market, promotes youth employment, youth skills and community standards and assists in reducing youth unemployment by including, if, on a case-by-case basis, the Commission determines it appropriate, junior rates of pay; and
(f) it does not contain provisions that discriminate against an employee because of, or for reasons including, race, colour, sex, sexual preference, age, physical or mental disability, marital status, family responsibilities, pregnancy, religion, political opinion, national extraction or social origin.
(8) If the Commission determines that the award does not meet the criteria set out in subitem (6) or (7), the Commission may take whatever steps it considers appropriate to facilitate the variation of the award so that it does meet those criteria.
[26] Contrary to the ASU/ACTU submissions we do not think that the provision subject to review can be properly characterised as a facilitative provision. In its September 1994 Safety Net Adjustment and Review decision the Commission defined facilitative provisions as:
". . . that part of an award clause which enables agreement at enterprise level to determine the manner in which that clause is applied at the enterprise. A facilitative provision normally provides that the standard approach in an award provision may be departed from by agreement between an individual employer and an employee or the majority of employees in the enterprise or part of the enterprise concerned. Where an award clause contains a facilitative provision it establishes both the standard award condition and the framework within which agreement can be reached as to how the particular clause should be applied in practice."18
[27] This definition was adopted in the Award Simplification decision.19 In a practical sense a facilitative provision introduces flexibility in the application of a particular allowable matter without changing the level of the entitlement provided. An exemption clause clearly does more than this - it removes award entitlements.
[28] Nor are we satisfied that the provision before us is "obsolete" within the meaning of Item 51(7)(d). It is apparent from the material before us that the clause still has some practical application.
[29] We are satisfied that the Award does not meet the criteria in Item 51(7)(d) in that the provision before us is in need of updating. The most obvious point in support of this conclusion is the doubt that exists about the legal effect of the provision. The provision in question defines "exempted persons" but that definition is not related to any substantive award provision excluding exempted persons from the operation of the Award. Historically there has been such a substantive provision but at some point it was removed from the Award and only the definition remains.
[30] This is not the only factor which supports the need to update the provision. In our view the concept reflected in the clause requires re-examination in the context of the contemporary legislative framework. One element of this is that to the extent that the exemption rate reflects a "notional bargain" we think it is unfair. We return to this point later.
[31] In terms of the contemporary legislative framework we recognise that a key feature of the WR Act is the provision for the determination of actual wages and conditions and working arrangements as far as possible by agreement of employers and employees at the enterprise or workplace level. While the focus of the WR Act is in agreement-making, the legislation seeks to ensure that wages and conditions of employment are protected by a system of enforceable awards, that awards provide a safety net of minimum wages and conditions of employment, and that they are simplified and suited to the efficient performance of work [s.88A(a)-(c)]. Section 88A(d) seeks to ensure that, in the award-making and varying process itself, the Commission exercises its powers in a way that encourages agreement-making at the enterprise or workplace level.
[32] In ensuring that a safety net of fair minimum wages and conditions is established and maintained, the Commission is obliged to have regard to the need to provide fair minimum standards for employees in the context of living standards generally prevailing in the Australian community, economic factors, and when adjusting the safety net, the needs of the low paid [s.88B(2)(a)-(c)].
[33] As we have noted the Commonwealth and the Employers contended that there is nothing in the WR Act which requires, or should lead the Commission in the exercise of its discretion, to delete exemption type clauses. In this context particular reliance was placed on object 3(c), namely:
". . . enabling employers and employees to choose the most appropriate form of agreement for their particular circumstances, whether or not that form is provided for by this Act."
[34] This object is directed at enabling employers and employees to choose the most appropriate form of agreement for their particular circumstances. The choice of agreement is not limited to the form of agreements specified in the WR Act, namely:
· Division 2 or 3 agreements;
· Australian Workplace Agreements; and
· Agreements made under a provisions included in an award pursuant to s.113A of the WR Act.
[35] In this context it was submitted that the ACTU's submission did not recognise that the WR Act acknowledges a range of options for bargaining at the workplace level. The Commonwealth argued, in essence, that agreements made as a consequence of the operation of an exemption clause are a "form of agreement" within the meaning of object 3(c). We do not think that object 3(c) was directed at exemption rate provisions at all. Rather it is concerned with the types of agreement provided for in the WR Act and "overaward" agreements. Overaward agreements typically provide a package of wages and conditions of employment in excess of the minimum entitlements prescribed in the relevant award; they do not operate to reduce award entitlements.
[36] Exemption rate clauses operate differently. In the matter before us the provision reflects a "notional bargain" - the employer agrees to pay the employee $25 above the highest rate of pay prescribed in the award and the employee agrees to forego the minimum entitlements in the award. The "bargain" may include other elements which are of benefit to the employee, but there is no award requirement to provide such benefits.
[37] The legislative context in which object 3(c) appears supports the construction we have adopted. Object 3(c) speaks of the provision of a framework of rights and responsibilities which "supports fair and effective agreement-making". The notion of fair agreement making is given legislative expression in the requirement that agreements meet a "no disadvantage" test.
[38] Section 170LT provides that, if an application is made to the Commission in accordance with Division 2 or 3 of Part VIB of the Act, the Commission must certify an agreement if, and must not certify an agreement unless, it is satisfied that, among other things, the agreement passes the no-disadvantage test. Similar provisions apply to the approval of Australian Workplace Agreements (AWAs) [see s.170VPB]. The no-disadvantage test is explained in s.170XA as follows:
"170XA When does an agreement pass the no-disadvantage test?
(1) An agreement passes the no-disadvantage test if it does not disadvantage employees in relation to their terms and conditions of employment.
(2) Subject to sections 170XB, 170XC and 170XD, an agreement disadvantages employees in relation to their terms and conditions of employment only if its approval or certification would result, on balance, in a reduction in the overall terms and conditions of employment of those employees under:
(a) relevant awards or designated awards; and
(b) any law of the Commonwealth, or of a State or Territory, that the Employment Advocate or the Commission (as the case may be) considers relevant."
[39] The no-disadvantage test is intended to ensure that employees will not receive less, on balance, under an agreement than they would have received if their terms and conditions of employment were determined by relevant awards or designated awards [defined in s.170X]. It requires a comparison to be made between the overall terms and conditions of employment of employees under, on one hand, the agreement and, on the other hand, the relevant awards or designated awards and any relevant Commonwealth, State or Territory laws.
[40] An exemption clause of the type before us would operate to undermine the legislative intent of Part VIE of the WR Act and in particular s.170XA. It would allow minimum award entitlements to be abrogated in circumstances where the Commission was denied the opportunity to compare the actual package provided to an employee with their overall terms and conditions of employment under the Award. In this context we note that in the April 1999 Safety Net Review - Wages decision the Commission rejected a proposal to change the standard federal minimum wage clause to provide that the federal minimum wage would operate as the "benchmark wages comparator" for the purpose of the no-disadvantage test in s.170XA of the WR Act. One of the reasons given for rejecting the proposal was that "it would create a fiction which would alter the operation of the no disadvantage test and would undermine the legislative intent of Part VIE of the Act and in particular s.170XA."20
[41] It is also relevant to note that s.88B(2) obliges the Commission to ensure that "a safety net of fair minimum wages and conditions of employment is established and maintained". The exemption provision before us is inconsistent with this obligation. It deals with wages only. The exemption rate is the only entitlement which is maintained. There is no obligation on an employer to provide other conditions of employment which constitute a fair minimum.
[42] The fact that the current arrangements may be operating fairly in practice is no answer to the concerns identified. The exemption provision is self executing. In the absence of Commission scrutiny there is no guarantee that the arrangements will continue to operate fairly.
[43] Pursuant to Item 51(8) we propose to take the following steps to update the provision before us:
1. We will delete the definition of "exempted persons" from the Award, effective 1 October 2000. the prospective date of effect is intended to minimise any disruption arising from the deletion of the provision. Employers will have an opportunity to formalise existing arrangements within the time frame provided.
2. The parties are directed to confer with respect to:
(a) a revised scope clause which excludes managerial employees from the operation of the Award - such an exclusion will reflect the limitation inherent in the ASU's eligibility clause; and
(b) an alternative method of payment clause.
[44] In relation to the last mentioned matter we draw the parties attention to clause 22 of The Hospitality Industry - Accommodation, Hotels, Resorts and Gaming Award 1998 which is in the following terms:
"22. OPTION FOR ANNUALISED SALARY
22.1 As an alternative to being paid by the week according to clause 18 - Classifications and wage rates, by agreement between the employer and the employee an employee can be paid at a rate equivalent to an annual salary of at least 25 per cent or more above the rate prescribed in clause 18 times 52 for the work being performed.
22.1.1 In such cases, there is no requirement under clauses 19 - Penalty rates, and 28 - Overtime, to pay penalty rates and overtime in addition to the weekly award wage, provided that the salary paid over a year was sufficient to cover what the employee would have been entitled to if all award overtime and penalty rate payment obligations had been complied with.
22.1.2 Provided further in the event of termination of employment prior to completion of a year the salary paid during such period of employment will be sufficient to cover what the employee would have been entitled to if all award overtime and penalty rate payment obligations had been complied with.
22.2 An employee being paid according to this clause will be entitled to a minimum of eight days off per four week cycle. If such an employee is required to work on a public holiday, they are entitled to a day off in lieu or a day added to their annual leave entitlement.
22.3 Where payment in accordance with this clause is adopted, the employer shall keep a daily record of the hours worked by an employee which shall show the date and start and finish times of the employee for the day. The record shall be countersigned weekly by the employee and shall be kept at the place of employment for a period of at least six years."
[45] Any notional bargain which the parties seek to include in the Award should have the following elements:
· specify the rate of pay (ie either a flat amount or a percentage above the minimum rates prescribed in the Award);
· identify a limited number of award clauses which do not apply to employees in receipt of the specified rate;
· provide adequate protection for employees including an entitlement to a specified minimum number of days off per work cycle;
· ensure that appropriate records are kept;
· provide an overall obligation that an employee will receive no less under the annualised salary than they would have been entitled to if all award obligations had been met; and
· provide a review mechanism whereby any employee may lodge a grievance with the Commission.
[46] In view of the steps we have decided to take pursuant to Item 51(8) it is unnecessary for us to address the ACTU's submission that exemption clauses discourage bargaining and are inconsistent with freedom of association.
BY THE COMMISSION:
Printed by authority of the Commonwealth Government Printer
<Price code D>
1 Print S1768 [B0018] at clause 8.2.
2 Print K5112 [C0358] at clause 5A.
3 Print F9424 [C0120] at clause 10.
4 Print S0324 [M0235] at clause 4.
5 Print N4097 [A1937] at clause 6.2.3.
6 Print J9044 [J0009CR] at clause 4.
7 (1990) 35 IR 134 at 151; also see Dey J in re Clerks (State) Award (1996) NSW IR COMM 190.
8 (1985) 14 IR 100 at 102 per Goldham J and Paine C.
9 Exhibit CUB2 at paragraph 6.
10 For example the Mobil Oil Clerical Employees Award 1994 does not apply to "clerical employees engaged in confidential positions."
12 Alcoa of Australia Ltd v Federated Clerks Union of Australia (1990) 35 IR 134 at 151.
13 Exhibit CUB 2 at paragraph 2.
14 Transcript 25 February 2000, p.99 at lines 18-20.
15 Exhibit CUB2 at paragraph 22.
19 Print P7500 at p.37.
20 Print R1999 at paragraph 110.