| [2018] FWCFB 154 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.156 - 4 yearly review of modern awards
Annualised Wage Arrangements
(AM2016/13)
VICE PRESIDENT HATCHER |
|
Review of annualised wage arrangement provisions in modern awards.
Introduction and background
[1] Section 156 of the Fair Work Act 2009 (Cth) (FW Act) requires the Commission to conduct a 4 yearly review of modern awards as soon as practicable after 1 January 2014. Subsection 156(2) deals with what must be done in the Review and provides that the Commission must review all modern awards and may, among other things, make determinations varying modern awards.
[2] Section 138 imposes a significant constraint on the conduct of the 4 yearly review as follows:
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.
[3] Section 136 sets out the terms which may or must be included in a modern award. Section 136(1)(a) refers to Subdivision B of Division 3 of Part 2-3 of the FW Act as setting out the terms that may be included in a modern award. Section 139, which falls within Subdivision B, sets out the general categories of terms which may be included, and s 139(1)(f) specifically provides that a modern award may include terms about the following matters:
(f) annualised wage arrangements that:
(i) have regard to the patterns of work in an occupation, industry or enterprise; and
(ii) provide an alternative to the separate payment of wages and other monetary entitlements; and
(iii) include appropriate safeguards to ensure that individual employees are not disadvantaged;…
[4] Section 142 additionally allows the inclusion of incidental and machinery terms in modern awards:
142 Incidental and machinery terms
Incidental terms
(1) A modern award may include terms that are:
(a) incidental to a term that is permitted or required to be in the modern award; and
(b) essential for the purpose of making a particular term operate in a practical way.
Machinery terms
(2) A modern award may include machinery terms, including formal matters (such as a title, date or table of contents).
[5] The modern awards objective referred to in s 138 is set out in s 134 as follows:
134 The modern awards objective
What is the modern awards objective?
(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).
[6] The general principles as to the interpretation and application of the above provisions in the conduct of the 4 yearly review have been comprehensively stated in a number of decisions issued in the course of the review, most notably the 4 Yearly Review of Modern Awards: Preliminary Jurisdictional Issues Decision 1, the 4 Yearly Review of Modern Awards - Annual Leave Decision2 and the 4 Yearly Review of Modern Awards - Penalty Rates Decision.3 Where an interested party applies for a variation to a modern award as part of the 4 yearly 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 Ltd4 as follows:
“[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.”
[7] 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.” 5
[8] We will apply the above principles in this decision.
[9] Section 139(1) identifies the subject matter of terms which may be included in modern awards. One of those matters is annualised wage arrangements. In this respect s 139(1) relevantly provides:
139 Terms that may be included in modern awards--general
(1) A modern award may include terms about any of the following matters:
. . .
(f) annualised wage arrangements that:
(i) have regard to the patterns of work in an occupation, industry or enterprise; and
(ii) provide an alternative to the separate payment of wages and other monetary entitlements; and
(iii) include appropriate safeguards to ensure that individual employees are not disadvantaged;
. . .
[10] In connection with the 4 yearly review of the Pastoral Award 2010 (Pastoral Award), the National Farmers’ Federation (NFF) has made an application for the insertion of an annualised wage arrangement 6 provision in that award, which does not currently contain any such provision. The claimed provision is set out later in this decision. The NFF’s claim was initially dealt with by a different Full Bench, specifically constituted to conduct the review into that award, in a decision issued on 24 December 2015 (Pastoral Award decision).7 In that decision the Full Bench (Ross J, President, Kovacic DP and Saunders C) expressed satisfaction that the requirements of s 139(1)(f)(i) and (ii) were met.8 The Full Bench then discussed in detail the requirement in s 139(1)(f)(iii) for there to be “appropriate safeguards that ensure that individual employees are not disadvantaged”, and in doing so referred to the way in which the issue of annualised salaries had been dealt with in the course of the award modernisation process conducted under Pt.10A of the Workplace Relations Act 1996 which established the modern awards currently in operation. The Full Bench said:
“[129] During the award modernisation process the Australian Industrial Relations Commission (the AIRC) did not generally insert annualised salary provisions into awards unless there was a widespread history of such provisions in the relevant antecedent instruments.60 In its decision of 19 December 2008 the AIRC Award Modernisation Full Bench rejected the proposition that annualised payment arrangements be adopted as a general standard in modern awards, for the following reasons:
‘[69] Although annualised wage and salary provisions are a common feature of workplace agreements they are very rare in the Commission’s awards. By far the predominant method of calculating entitlements is weekly, based on ordinary hours, penalties, overtime etc. This is a system with which employees, particularly employees who are safety net dependent, are familiar. No doubt many employees arrange their affairs on that basis. While employers invoked the need for flexibility there is always the potential for employee disadvantage which through fear of reprisal or ignorance employees are unable to correct. There are also some practical problems associated with the concept in industries in which short hour employment is common and in which working hours may vary unpredictably. While flexibility might be important, when safety net entitlements are at issue employers would be required to keep a record of hours in any event to ensure that the annualised pay was sufficient to meet those entitlements. Finally, in some industries employers may be able to implement annualised pay arrangements without breaching the award. We assume that this occurs in many areas of employment already. Annual salaries are of course also a feature of many workplace agreements.
[70] As indicated we have decided not to adopt a standard provision for annualised wages and salaries in modern awards. Where such provisions already exist in relevant awards we have maintained them. The matter could be revisited in one of the regular award reviews which have been foreshadowed. We also note that the Clerks—Private Sector Award 2010 will include an overtime exemption provision which will go part of the way to addressing claims for annualised salaries in that award. We deal with this later. The parties to the Rail Industry Award 2010 agreed that the award should contain an annualised wage and salary provision but could not agree on all of the terms. We deal with that matter later also.’ ([2009] AIRCFB 945)
[130] Only 19 of the 122 modern awards contain an ‘annualised salaries’ term (footnote omitted) and in the modern awards which contain such a term it was usually the case that similar provisions were in the relevant pre-modernised instruments. Absent such a historical context the AIRC rejected a number of applications to insert provisions for annualised payment arrangements, for example in the Real Estate Industry Award 2010 ([2009] AIRCFB 945) and the General Retail Industry Award 2010 ([2010] FWAFB 1958).
[131] In most instances the annualised payment arrangement term inserted into a modern award reflected the form of such a term in relevant pre-modernised instruments and was included in the modern award by consent, or was unopposed. As a consequence the form and content of such terms was not the subject of much debate during the award modernisation process. There were two exceptions in this regard.”
[11] The “two exceptions” the Full Bench referred to were award modernisation decisions concerning the Rail Industry Award 2010 (Rail Industry Award) 9and the Clerks-Private Sector Award 2010 (Clerks Award).10 In the former decision, the award modernisation Full Bench said:
“[256] We have accepted the submissions of the parties that annualised salary arrangements are a common feature in the industry and we note that a clause dealing with this matter was contained in drafts proposed by both RSCC and the rail unions. However, they were not in the same terms.
[257] The rail unions submitted that entering into such an arrangement should only be by agreement between the employer and employee concerned. We agree and the clause in the award has been drafted accordingly. Additionally the rail unions sought a provision about assumptions that may have been made about overtime or penalty components to be absorbed into the annualised wage. There is merit in these submissions and our clause reflects them.
[258] We have made a number of other changes to the terms of the clause as contained in the exposure draft. It now provides that a copy of the agreement is to be given to the employee and kept by the employer as a time and wages record. We have also inserted provisions dealing with the manner in which the agreement may be terminated.”
[12] The clause determined by the award modernisation Full Bench (which became clause 18 of the Rail Industry Award) was as follows:
18 Annualised wage and salary arrangements
18.1 An employer and an employee may agree to enter into an annualised salary arrangement instead of any or all of the following provisions of this award:
Clause 14—Classifications and minimum wage rates;
Clause 15—Allowances and expenses;
Clause 23—Overtime and penalty rates; and
Clause 24.3—annual leave loading.
18.2 Where an annualised salary is paid the employer must specify in writing the annual salary that is payable and what provisions of this award will not apply as a result of the annualised salary arrangement.
18.3 The annual salary must be no less than the amount the employee would have been entitled to receive under the rates and allowances prescribed by this award. The annual salary is paid in full satisfaction of any obligation to otherwise make payments to the employee under this award and may be relied upon to set off any such obligation, whether of a different character or not.
18.4 In addition to the requirements of clause 18.3, any written agreement under this clause must specify each separate component of the annualised wage or salary arrangement and any overtime or penalty assumptions and calculations commuted into the annualised arrangement.
18.5 The employer must give the employee a copy of the agreement and keep the agreement as a time and wages record.
18.6 The agreement may be terminated:
(a) by the employer or the employee giving 12 months’ notice of termination, in writing, to the other party and the agreement ceasing to operate at the end of the notice period; or
(b) at any time, by written agreement between the employer and the individual employee.
[13] In the Pastoral Award decision the Full Bench made the following observation about the above provision:
“[134] It is to be noted that the clause determined by the AIRC included the following safeguards:
• the annualised salary arrangement is to be by agreement, in writing, between the employer and employee;
• the agreement must specify the annual salary that is payable and the provisions of the award that will not apply as a result of the agreement; and
• the employer must give the employee a copy of the agreement and keep the agreement as a time and wages record.”
[14] The first decision involving the Clerks Award, issued on 16 November 2009, 11 concerned an application by the ASU to remove a provision which exempted employees from certain provisions of the Clerks Award who were paid 15% above the pay rate for Level 5. The award modernisation Full Bench granted the application on the following basis:
“[25] In all of the circumstances we consider that the exemption provision should be removed but that flexible working arrangements should be available with respect to clerical employment and that these should be subject to appropriate safeguards and processes to ensure that employees clearly understand and agree to any arrangements which may differ from base award entitlements. We propose to delete the exemption provision in cl.17. However, we propose to insert an annualised salaries clause. The wording of the clause is in line with clauses in some other modern awards. It provides for an alternative way to remunerate employees, safeguards against disadvantage and a formal process to establish and maintain the annualised salary arrangement...”
[15] The annualised wage arrangements provision which was made, which became clause 17 of the Clerks Award, was as follows:
17. Annualised salaries
17.1 Annual salary instead of award provisions
(a) An employer may pay an employee an annual salary in satisfaction of any or all of the following provisions of the award:
(i) clause 16—Minimum weekly wages;
(ii) clause 19 – Allowances;
(iii) clauses 27 and 29 – Overtime and penalty rates; and
(iv) clause 29.3 – Annual leave loading
(b) Where an annual salary is paid the employer must advise the employee in writing of the annual salary that is payable and which of the provisions of this award will be satisfied by payment of the annual salary.
17.2 Annual salary not to disadvantage employees
(a) The annual salary must be no less than the amount the employee would have received under this award for the work performed over the year for which the salary is paid (or if the employment ceases earlier over such lesser period as has been worked).
(b) The annual salary of the employee must be reviewed by the employer at least annually to ensure that the compensation is appropriate having regard to the award provisions which are satisfied by the payment of the annual salary.
17.3 Base rate of pay for employees on annual salary arrangements
For the purposes of the NES, the base rate of pay of an employee receiving an annual salary under this clause comprises the portion of the annual salary equivalent to the relevant rate of pay in clause 16—Minimum weekly wages and excludes any incentive-based payments, bonuses, loadings, monetary allowances, overtime and penalties.
[16] There subsequently followed an application by the ASU to vary clause 17 of the Clerks Award to require prior agreement between the employer and the employee for an arrangement under that clause to operate. In a decision issued on 25 February 2010, 12 the award modernisation Full Bench rejected this application:
“[8] Awards operate in conjunction with contracts of employment. It is generally accepted that clerical employees are commonly remunerated by way of annualised salaries whether the relevant award expressly provides for such arrangements or not. It is also generally accepted that if the salary is expressly paid in compensation of all award entitlements and the amount paid exceeds the amount due under the award then the arrangement is not inconsistent with the award. The intention of the ASU in making its application is that the only arrangements which can legally be entered into are those expressly provided for in the award.
[9] It is apparent that the terms of the relevant awards and NAPSAs were taken into account in formulating the annualised salaries clause in the Commission’s decision of 16 November 2009. We believe that the safeguards in the modern award are appropriate in the circumstances of clerical employment. Further, we are concerned that the variation sought by the ASU may reduce existing flexibility and require changes in practices which have operated for many years. The ASU has not made a case for imposing a limitation on existing arrangements.”
[17] As was noted by the Full Bench in the Pastoral Award decision, a subsequent application to vary the annualised wage arrangements provision in the Oil Refining and Manufacturing Award 2010 to require agreement was also rejected on the basis that annualised salaries for clerks were widespread in the oil industry and that the clause contained safeguards to ensure an employee is not disadvantaged by being remunerated by way of an annualised salary. 13 The Full Bench also noted that “in both the Clerks Award and the Oil Award the decisions turned on the circumstances pertaining in those industries”.14 It then referred to further applications by the ASU to remove the annualised salaries provision in the Clerks Award as well as the Contract Call Centres Award 2010 (Call Centres Award). Both applications were, in separate decisions,15 dismissed. In the latter decision Kaufman DP rejected the proposition advanced by the ASU that the annualised salaries provision prevented the award from meeting the modern awards objective having regard to the need to encourage collective bargaining, the need to promote social inclusion through workplace bargaining and the need to ensure a simple, easy to understand, stable and sustainable modern award system.16 Kaufman DP went on to say:
“[32] As well as submitting that the Award, whilst containing cl 18.5 does not meet the modern awards objective, the ASU submits that there are cogent reasons for its removal and that the provision was not adequately considered by the Australian Industrial Relations Commission ‘when compared to the consideration given to the Award Flexibility provision.’ The cogent reasons for its removal are said to be ‘based on the principles of equity, fairness and changed circumstances’, which are that the provision is:
• Inherently inequitable and discriminatory as it applies only to employees in the higher classification levels;
• Inherently unfair as no employee agreement is required;
• No longer necessary for employers now that all modern awards have compulsory award flexibility provisions; and
• More appropriate in Enterprise Agreements where actual pay rates apply and annualised pay arrangements can be agreed, monitored and more reliably reviewed by employees.
[33] In my view, none of these matters is made out, let alone has the ASU demonstrated that there is a cogent reason for the removal of the clause. By its nature it is more appropriately applied to employees in the higher classifications. It is not unfair merely because no employee agreement is required. Most award clauses apply absent employee or employer agreement. The award flexibility clause does not do the same work as that done by cl 18.5. I do not accept that such a clause is more appropriate in an enterprise agreement, and whether or not it is, is probably irrelevant to the review…
. . .
[42] On 5 October 2012, I issued a statement seeking further submissions on the interaction between the common law in relation to offsetting payments against award provisions and the annualised salaries clause.
[43] At a further hearing on 19 October 2012, the ASU maintained its position that the clause should be deleted, as did the employers that it should be retained.
[44] Having heard the parties, I am further confirmed in my view that the clause should not be deleted. Whatever be the position at common law, the current clause provides the parties with certainty as to what may be offset if an annual salary is paid, what procedures must be followed, as well as providing certain safeguards to employees.
[45] In my view the deletion of clause 18 would cause confusion, particularly as to what, if anything, can be offset and as to whether employees could be paid by way of an annual salary at all. Its deletion would also, in my view, disadvantage the employees affected because, as a matter of law, they could be remunerated by way of annualised salaries without any of the protections provided by the clause.
[46] For the above reasons the application is dismissed.”
[18] The Full Bench in the Pastoral Award decision then referred to the unsuccessful appeal from the decision of Kaufman DP, in which the appeal Full Bench had rejected a submission by the ACTU that annualised wage arrangements should only be entered into with the agreement of the employee, saying (footnotes omitted):
“[22]With respect to the ACTU’s submissions, we point out that the “Annualised salaries” clause in the Clerks Award is a base award entitlement, and part of the safety net of terms and conditions provided by the Clerks Award. The safety net in the FW Act being the minimum terms and conditions in the National Employment Standards, modern awards and national minimum wage orders.
[23]We also point out the FW Act does not require that the annualised wage arrangements in modern awards provide for the parties’ agreement to such arrangements. We do not think there is any warrant for regarding the words “arrangements” or “alternative” in s 139(1)(f) of the FW Act as incorporating the concept of “agreement”.
[24]Further, we point out that subsequent to the Full Bench decision that included the “Annualised salaries” clause in the Clerks Award, a Full Bench of FWA specifically dealt with an ASU application to vary that “Annualised salaries” clause so as to require the parties’ agreement to an annual salary. The Full Bench of FWA dismissed the ASU application…”.
[19] Finally, the Full Bench in the Pastoral Award decision referred to the decision in Re South East Water Corporation 17(SE Water decision), which concerned an employer application to add an annualised salaries provision to the Water Industry Award 2010 applicable to the primarily managerial employees in the top two classifications (levels 9 and 10). The ASU’s position was that the proposed provision contained inadequate safeguards, and referred to preferable provisions in the Rail Industry Award, the Pharmacy Industry Award 2010, the Manufacturing and Associated Industries and Occupations Award 2010, the Oil Refining and Manufacturing Award 2010 and the Broadcasting and Recorded Entertainment Award 2010. The Full Bench said (footnotes omitted):
“[27] We observe that the clauses in the modern awards referred to by the ASU were inserted by consent of the parties and not the subject of Full Bench scrutiny in any contested hearing. We also observe that to some extent the ASU identifies provisions it submits are superior from a number of awards. It identifies these provisions as containing what it called "inbuilt features" which constitute additional safeguards it submits should be contained in an annualised salaries clause. It summarised those features. They were that the annualised salary must be agreed and in writing, that the parties to it must have genuinely made the agreement without coercion or duress, the components of the annualised salary agreement must be listed, there was to be no disadvantage to the employee, a copy of the agreement must be kept as a time and wages record, there must be annual reviews of the agreement, the employee was entitled to involve a relevant union or an employee nominated representative and, finally, the agreement can be terminated by either party with 12 months' notice or at anytime if agreed.
. . .
[30] Subject to the matters we address in paragraph [32],we have not been persuaded that there is anything about the employers and employees at classification Levels 9 and 10 in the Water Award that warrants a departure by this Full Bench from taking a similar approach to that taken in earlier Full Bench decisions dealing with contested cases about the terms of an annualised salaries clause. The observations made by the Full Benches in the November 2009 Clerks Award decision and the February 2010 Clerks Award decision are equally applicable to this matter. No persuasive submission was made for us to rule in a manner inconsistent with those decisions. Similarly, the decision of the Full Bench in March 2013, which endorsed the comments Senior Deputy President Kaufman had made about the need for a clause in terms similar to those SEW here seeks are also applicable to this application.
[31] We have not been persuaded there is anything about the attributes of the water industry or its administrative and professional employees at the higher classification levels in the Water Award which justifies us departing, in any significant way, from making a ruling consistent with each of the Full Bench decisions we have identified above.
[32] We have, however, decided to introduce three additional requirements into the clause that we have decided should be inserted into the Water Award. They will, to some extent, address the need for the “safeguards” the ASU submitted were necessary. The requirements concern additional details which are to be in writing, including the classification level of the employee, the identification of the date on which the annualised salary arrangement commences and that a copy of the arrangement is to be provided to the employee. Nothing that was put to us in the hearing suggests that these requirements will place any unreasonable burden on employers or employees.
[33] We have not made any reference to the role a union may have. If any employee has concerns about the operation of the clause or their annualised salary arrangement they may raise that concern under clause 9 of the Water Award, the dispute resolution clause. That clause makes it clear that an employee is entitled to have a person, organisation or association represent them in any dispute to which the clause applies. Depending on the nature of the complaint an employee may have, they may also have rights which may be pursued under the general protections provisions of the Act.
[34] We have also not found it necessary to place any additional obligations upon an employer in respect to the written wages records it should keep. In this respect, we note that obligations about the details that must be kept are adequately regulated by Part 3-6 of the Fair Work Regulations 2009.
[35] We have considered the submissions of APESMA opposing the introduction of any annualised salaries clause into the Water Award. For the reasons we have given we were persuaded such a clause was appropriate for employees at the higher classification levels in the Water Award. For the same reasons we do not accept the submission that annualised salaries can adequately be introduced under the terms of clause 7, the award flexibility clause.
[36] We are satisfied that the clause we have decided upon is necessary to achieve the modern awards objective. In this respect it is a clause which is consistent with s.134(1)(d) in that it will promote flexible modern work practices and the efficient and productive performance of work. Consistent with s.134(1)(f) it should have a positive impact on the regulatory burden on employers and reduce employment costs associated with payroll. It should provide to both employers and employees, wishing to enter into an annualised salaries arrangement, a simple and easy to understand provision consistent with s134(1)(g).”
[20] The annualised salaries clause placed into the Water Industry Award 2010 was as follows:
14.2 Annualised salaries
The following provisions are to apply to employees employed in classification Levels 9 and 10 in accordance with Schedule B of this award.
14.2.1 Annual salary instead of award provisions
(a) An employer may pay an employee an annual salary in satisfaction of any or all of the following provisions of this award:
(i) clause 14—Minimum wages;
(ii) clause 19—Allowances;
(iii) clauses 25.5 and 26—shiftwork penalty rates and Overtime and;
(iv) clause 27.3—Annual leave loading
(b) Where an annual salary is paid the employer must provide written advice to the employee of the following:
(i) the annual salary that is payable and which of the provisions of this award will be satisfied by payment of the annual salary;
(ii) the date on which the salary arrangement commences;
(iii) the award level classification for the role; and
(iv) the terms of clause 14.2.2 of this award.
14.2.2 Annual salary not to disadvantage employees
(a) The annual salary must be no less than the amount the employee would have received under this award for the work performed over the year for which the salary is paid (or if the employment ceases earlier over such lesser period as has been worked).
(b) The annual salary of the employee must be reviewed by the employer at least annually to ensure that the compensation is appropriate having regard to the award provisions which are satisfied by the payment of the annual salary.
14.2.3 Base rate of pay for employees on annual salary arrangements
For the purposes of the NES, the base rate of pay of an employee receiving an annual salary under this clause comprises the portion of the annual salary equivalent to the relevant rate of pay in clause 14—Minimum wages and excludes any incentive-based payments, bonuses, loadings, monetary allowances, overtime and penalties.
[21] The Full Bench in the Pastoral Award decision made the following three general observations about the above decisions:
“[154] First, the Commission has adopted a cautious approach to the insertion of annualised wage arrangements in modern awards. In the 21 modern awards 18 that contain such a term it was usually the case that similar provisions formed part of the relevant pre-modernised instruments.
[155] Second, the safeguards that have been incorporated in annualised wage arrangement terms in modern awards have varied depending on the circumstances relating to the particular award.
[156] Third, the Review is broader in scope than the Transitional Review and as such is the first real opportunity to fully examine the appropriateness of the safeguards to be incorporated in such terms.”
[22] The Full Bench also made the following observations about the SE Water decision:
“[158]The first point is that the SE Water decision is distinguishable from the matter presently before us in the following respects:
• the predecessor awards to the Water Industry Award 2010 contained provisions limiting senior employees entitlements to overtime;
• annualised salaries are a common feature in the water industry;
• the clause in question applies to senior employees who are principally in managerial positions and have traditionally been paid by way of an annual salary; and
• the decision was made in the context of the Transitional Review.
[159] The second point is that, contrary to the Full Bench’s observation in the SE Water decision, the annualised salaries term in the Rail Industry Award 2010 was not inserted by consent but rather, as we have set out earlier, was the subject of a contested hearing.
[160] The final point we wish to make about the SE Water decision concerns the observation (at [34] of that decision) that it was unnecessary to specify that written records be kept because that issue was adequately regulated by Part 3-6 of the Fair Work Regulations 2009. For the reasons which follow there is cause to doubt the correctness of that observation.
[161] Employer obligations in relation to employee records and pay are set out in Division 3 of Part 3-6 of the Fair Work Regulations 2009. The requirements in respect of employee records are quite specific. For instance, there is a requirement to keep a copy of an individual flexibility arrangement entered into by an employer and employee (reg. 3.38) and if an employer gives a guarantee of annual earnings under s.330 of the Act, the guarantee is a kind of employee record that the employer must make and keep (reg. 3.39). There is no requirement to make and keep a record of an annualised wage arrangement.
[162] One of the purposes of annualised salaries is to provide income stability in circumstances where the hours worked fluctuates over the course of a year. As Senior Deputy President Polites observed in Re: Energy Developments Limited – AWU Hydrocarbon Gas and Energy Award:
‘... the concept of an annualised salary is that on occasions employees will work less than the notional times provided for in the salary and on occasions they will work more.’ (PR915956)
[163] To ensure that employees are not disadvantaged by such arrangements the relevant term usually provides that the annual salary must be no less than the amount the employee would have been entitled to receive under the rates and allowances prescribed by the award. The modern award term may also provide for the review of any annual salary to ensure that it is appropriate having regard to the award provisions which are satisfied by its payment. These two elements are features of the NFF’s proposed clause.
[164] Inherent in these safeguards is the notion that the annualised wage paid can be compared to what the employee would have been paid had all of the provisions of the modern award applied. In other words, to ensure an employee is not disadvantaged the annualised wage paid must be capable of being compared to what the employee would have received if the annualised wage arrangement was not in place. Such a comparison necessarily requires that records be kept of the allowances, overtime and penalty rates that would have been payable.
[165] The difficulty is that where an employee is paid pursuant to an annualised wage term in a modern award it is unclear whether there is a requirement to keep an employee record in respect of, for example, overtime hours worked.
[166] Regulation 3.34 deals with the requirement to make and keep employee records in respect of overtime by an employee, it provides:
3.34 Records—overtime
For subsection 535(1) of the Act, if a penalty rate or loading (however described) must be paid for overtime hours actually worked by an employee, a kind of employee record that the employer must make and keep is a record that specifies:
(a) the number of overtime hours worked by the employee during each day; or
(b) when the employee started and ceased working overtime hours.
Note: Subsection 535(1) of the Act is a civil remedy provision. Section 558 of the Act and Division 4 of Part 4-1 deal with infringement notices relating to alleged contraventions of civil remedy provisions.
(emphasis added)
[167] Regulation 3.34 only requires an employee record to be made and kept if ‘a penalty rate … must be paid for overtime hours actually worked by an employee’. The essence of an annualised wage arrangement is that penalty rates for overtime hours do not need to be paid, because they are comprehended within the annualised wage. It would seem to follow that if an annualised wage arrangement is in place then there is no requirement to make and keep an employee record of the number of overtime hours worked by the employee each day.
[168] A similar issue arises in relation to recording any entitlements to allowances or penalty rates. Regulation 3.33 provides as follows:
3.33 Records—pay
(1) For subsection 535(1) of the Act, a kind of employee record that an employer must make and keep is a record that specifies:
(a) the rate of remuneration paid to the employee; and
(b) the gross and net amounts paid to the employee; and
(c) any deductions made from the gross amount paid to the employee.
(2) If the employee is a casual or irregular part-time employee who is guaranteed a rate of pay set by reference to a period of time worked, the record must set out the hours worked by the employee.
(3) If the employee is entitled to be paid:
(a) an incentive-based payment; or
(b) a bonus; or
(c) a loading; or
(d) a penalty rate; or
(e) another monetary allowance or separately identifiable entitlement;
the record must set out details of the payment, bonus, loading, rate, allowance or entitlement.
Note: Subsection 535(1) of the Act is a civil remedy provision. Section 558 of the Act and Division 4 of Part 4-1 deal with infringement notices relating to alleged contraventions of civil remedy provisions.
(emphasis added)
[169] As appears to be the case with overtime records, the obligation to make and keep an employee record of allowances or penalty rates only arises if the employee is ‘entitled to be paid’ such payments.”
[23] The Full Bench then stated the following conclusion:
“[170] The matters we have identified highlight the need for careful consideration to be given to the ‘appropriate safeguards’ to be incorporated in an annualised wage arrangements term to ‘ensure that individual employees are not disadvantaged’ (as required by s.139(1)(f)(iii)). We propose to give further consideration to this issue. We will issue a Statement in due course setting out some provisional views as to the content of an appropriate annualised wage arrangement term for insertion into the Pastoral Award 2010. Interested parties will be given an opportunity to comment and the matter will be the subject of a further hearing.”
[24] The foreshadowed statement was issued by Ross J, President on 31 May 2016 19 (May statement). After reviewing the relevant statutory provisions and the history of this aspect of the 4 yearly review, the May statement identified the following issues as having been raised by the applications to establish or vary annualised wage arrangements in a number of awards as follows (footnotes omitted):
“(i) the inclusion of a provision to allow for the reconciliation of an annualised salary arrangement for managers;
(ii) inclusion of a mechanism to ensure employees are not disadvantaged if the annualised salary arrangement ends (but employment continues) before the completion of a year;
(iii) a proposed variation to expressly include absorption of the annual leave loading in the calculation of annualised salaries;
(iv) a requirement that the annualised wage arrangement pass “better off overall test” in comparison with an employee with an equivalent work pattern covered by the general provisions of the award;
(v) an additional safeguard to ensure the employees to whom an annualised salary arrangement applies are not required to work unreasonable hours in excess of the employee’s agreed ordinary hours of work;
(vi) a right to access and copy employer records of start and finish times of work;
(vii) additional requirements relating to the making of an agreement including that the agreement between the employer and employee be in writing, be signed by both parties and a copy provided to the employee;
(viii) the inclusion of a provision allowing both the employer and employee to terminate the arrangement on notice or by agreement;
(ix) that the arrangement be subject to an annual review.”
[25] The statement went on to say (footnotes omitted):
“[8] … As indicated in the December 2015 decision, in those awards that contain an annualised salary term, it was usually the case that similar provisions formed part of the relevant pre-reform instruments and, as a consequence, the form and content of such terms was not the subject of much debate during the award modernisation process.
[9] During the Transitional Review in 2012 the ASU made applications to delete annualised salary clauses in two modern awards. Those applications were dismissed on the basis that no cogent reasons had been advanced for the changes sought and that a thorough re-examination of issues covered within the award modernisation process did not fall within the scope of the Transitional Review.
[10] However, the 4 yearly modern awards review is broader in scope than the Transitional Review and provides an opportunity to comprehensively review such terms.
Conclusion and next steps
[11] In light of the above, I am satisfied that a broader review of all annualised salary terms is required.
[12] I note that in the December 2015 decision the Full Bench proposed to give further consideration to this issue in relation to the Pastoral Award and stated at [170]:
‘We will issue a Statement in due course setting out some provisional views as to the content of an appropriate annualised wage arrangement term for insertion into the Pastoral Award 2010. Interested parties will be given an opportunity to comment and the matter will be the subject of a further hearing.’
[13] However, in order to ensure consistent decision making and that all relevant issues in relation to annualised salary arrangements are canvassed, I have determined that the NFF’s application to vary the Pastoral Award and the applications set out above (at [5]–[6], see Attachment A) and existing annualised salary terms in modern awards (Attachment B) will be referred to a separately constituted Full Bench (see Attachment C) for review and determination.
[14] It should not be assumed that the referral of these matters to a Full Bench will result in a standard annualised salary term to be included in all awards. The content of particular clauses will be a matter for the Full Bench.”
[26] In accordance with the above statement the review of annualised wage arrangement provisions in modern awards was referred to us. That will require us to consider a number of specific applications to either vary existing annualised wage arrangement provisions or to add new annualised wage arrangement provisions, and also to review the existing provisions generally. The specific applications are described below.
Pastoral Award 2010 and Horticulture Award 2010
National Farmers’ Federation claim
[27] The Pastoral Award and the Horticulture Award 2010 (Horticulture Award) do not currently contain provisions relating to annualised wage arrangements. The NFF has proposed that the awards be varied to add such provisions. The provision proposed for the Pastoral Award is as follows:
“18. Annualised salaries
The following provisions are to apply to employees employed in any of the classifications contained in clauses 27, 33 or 39 of the award.
18.1 Annual salary instead of award provisions
(a) An employer may reach agreement with an employee to pay the employee an annual salary in satisfaction of any or all of the following provisions of the award:
(i) clauses 28, 34 and 40—Minimum weekly wages;
(ii) clauses 17 and 29—Allowances and special allowances;
(iii) clauses 31, 36 and 42—Overtime and penalty rates;
(iv) clause 23.4—Annual leave loading; and
(v) clauses 26, 32, 38 and 43—Payment for public holidays.
(b) Where an annual salary is paid, the employer must retain a written copy of the agreement reached with the employee, which includes the annual salary that is payable and the provisions of this award that will be satisfied by payment of the annual salary as well as the date on which the salary arrangement commences.
18.2 Annual salary not to disadvantage employees
(a) The annual salary must be no less than the amount the employee would have received under this award for the work performed over the year for which the salary is paid (or if the employment ceases earlier over such lesser period as has been worked).
(b) The annual salary of the employee must be reviewed by the employer at least annually to ensure that the compensation is appropriate having regard to the award provisions which are satisfied by the payment of the annual salary.
18.3 Base rate of pay for employees on annual salary arrangements
For the purposes of the NES, the base rate of pay of an employee receiving an annual salary under this clause comprises the portion of the annual salary equivalent to the relevant minimum wage in clause 28, 34 or 40, whichever is applicable, and excludes any incentive based payments, bonuses, loadings, monetary allowances, overtime and penalties or payment for public holidays.
18.4 The annual salary of the employee will be paid during all periods of paid leave.”
[28] The NFF’s proposed annualised wage arrangements provision for the Horticulture Award is as follows:
“19A. Annualised salaries
The following provisions are to apply to employees employed in any of the classifications contained in clause 13 of the award.
19A.1 Annual salary instead of award provisions
(a) An employer may reach agreement with an employee to pay the employee an annual salary in satisfaction of any or all of the following provisions of the award:
(i) clause 14—Minimum wages;
(ii) clauses 17—Allowances;
(iii) clauses 24—Overtime; and
(iv) clause 25.6—Annual leave loading.
(v) clauses 28—Public holidays.
(b) Where an annual salary is paid, the employer must retain a written copy of the agreement reached with the employee, which includes the annual salary that is payable and the provisions of this award that will be satisfied by payment of the annual salary as well as the date on which the salary arrangement commences.
19A.2 Annual salary not to disadvantage employees
(a) The annual salary must be no less than the amount the employee would have received under this award for the work performed over the year for which the salary is paid (or if the employment ceases earlier over such lesser period as has been worked).
(b) The annual salary of the employee must be reviewed by the employer at least annually to ensure that the compensation is appropriate having regard to the award provisions which are satisfied by the payment of the annual salary.
19A.3 Base rate of pay for employees on annual salary arrangements
For the purposes of the NES, the base rate of pay of an employee receiving an annual salary under this clause comprises the portion of the annual salary equivalent to the relevant minimum wage in clause 14, whichever is applicable, and excludes any incentive based payments, bonuses, loadings, monetary allowances, overtime and penalties or payment for public holidays.
19A.4 The annual salary of the employee will be paid during all periods of paid leave.”
[29] The NFF identified the purpose of its proposed variations as being to address some of the issues caused by the seasonal variability, peaks and troughs and vulnerability to fluctuating weather in the pastoral and horticultural industries. The variations would also reduce the regulatory burden on employers and reduce costs associated with payroll, and would have a lower administrative burden than individual flexibility arrangements.
Evidence
[30] The NFF relied on two statements of evidence, the makers of which were not required to attend for cross-examination. The first statement was made by Gracia Kusuma, the Industrial Relations Manager with the NSW Farmers Association. In her statement, Ms Kusuma said that one of the most frequent enquiries the Association received from members related to reviewing their proposed employment conditions from a compliance perspective and formalising them as employment contracts or Individual Flexibility Agreements. An estimated 50% of members who sought assistance with drafting or reviewing employment contracts wanted annualised salary arrangements with their employees. Such arrangements were preferred by members in certain circumstances because they provided consistency of pay for employees, incentivised employees to complete assigned tasks within normal hours, and took away the need for “clock watching”.
[31] The second statement was made by Charles Armstrong, the Chair of the NFF’s Workforce Productivity Committee, the Chair of Farmsafe Australia and the former President of the NSW Farmers’ Association. Mr Armstrong has also been the operator of a large farm for 40 years. He said that the agricultural industry was dictated by seasonality, which caused peaks and troughs in workload during the year, with busy times occurring during operations such as sowing, harvesting, shearing, marking, lambing or calving. Farmers and their employees often worked long hours during these periods and took time off when the peak period had passed and there were routine management and maintenance operations to do. It was important to find ways to streamline paperwork and administrative tasks to ease the regulatory burden on farmers. Farmers and their employees were vulnerable to changes in seasonal conditions caused by weather and changes to market forces because of retailer demands. For farmers, such changes limited the ability to control work or plan ahead, and for employees it could cause fluctuations in their take-home pay depending on hours worked. One way of dealing with this was to adopt annualised salary arrangements for employees, so that farmers and employees could plan around to amount to be paid each week, and to reduce the paperwork burden on farmers. It was common practice in the industry for annualised salaries to be negotiated in employment contracts, but it was not always clear how such contracts interacted with award terms requiring payment for overtime and the like. In Mr Armstrong’s opinion, an award provision that allowed annualised salary arrangements to be made was a practical step that could benefit both farmers and their employees by improving certainty and regularity of cash flow. The certainty provided to employees by an annualised salary would also benefit employees when negotiating with a bank or for other commercial arrangements.
[32] No other party adduced evidence in relation to the NFF claims.
Submissions
[33] The NFF submitted that:
• seasonal variability was more prevalent in the agricultural sector than in the mining industry covered by the Mining Industry Award 2010 which contained an annualised salaries provision as a result of decision of the Australian Industrial Relations Commission (AIRC) in 2009;
• its proposed annualised salaries provision would be consistent with the modern awards objective in s 134(1)(a);
• in respect of s 134(1)(a), the proposed provision would improve the living standards of the low paid, in that a dependable year-round income would give greater financial security and allow effective budgeting; in respect of s 134(1)(b) it was neutral; in respect of s 134(1)(c) and (d) it would promote social inclusion and flexible work practices by accommodating non-standard business hours; it was neutral in respect of s 134(1)(da) and (e); in respect of s 134(1)(f) it reduced the regulatory burden, had a lesser administrative burden than individual flexibility arrangements, and supported greater workplace certainty and flexibility which would give employers greater confidence to employ; in respect of s 134(1)(g) it allowed for greater clarity as to how to calculate an annual salary; and in respect of s 134(1)(h) it would promote employment;
• the proposed provision contained a number of safeguards to ensure that the proposed term would not cause disadvantage to employees, including that the arrangement had to be in writing, employees had to receive at least what they would have received over the year if paid under the award, the annual salary was payable during all periods of paid leave, and did not apply to shearing operations in the pastoral industry.
[34] The AWU did not oppose the introduction of an annualised salary provision in the two awards provided that further safeguards were added. It proposed the following additional requirements as safeguards:
• the employer was to keep records of the performance of work that fell into the category of work that was satisfied by the annual salary;
• the employer was to conduct a review on termination of employment, or if the annualised salary arrangement ended, as well as annually;
• any underpayment to be rectified within a certain time period following a review (including the annual review, review on termination of employment, or review upon ending an annualised salary arrangement); and
• a termination clause allowing the employee to end an annual salary arrangement.
[35] The AWU submitted that similar record keeping requirements were inserted into the Rail Industry Award 2010 (Rail Award) by the Award Modernisation Full Bench. It also proposed inserting the following provision extracted from clause 18.4 of the Rail Award:
“… any written agreement under this clause must specify each separate component of the annualised wage or salary arrangement and any overtime or penalty assumptions and calculations commuted into the annualised arrangement.”
[36] At the hearing on 7 December 2016 the NFF submitted in response to the AWU’s proposals that the FW Act required that the arrangement for an annualised salary be recorded and that including a term for recording the arrangement in the award was “arguably duplication”. It further submitted that it thought the more prescriptive the clause was the more likely it would be breached, and that it would be sufficient as long as it was clear what the salary was and what was contemplated within it. It was not strongly opposed to the termination provisions proposed by the AWU taken from the Rail Award.
[37] Australian Business Industrial and the New South Wales Business Chamber (ABI & NSWBC) submitted that the safeguards proposed by the NFF in their written submissions were sufficient and that the Commission need not go beyond that. There should be no provision for termination of the agreement within the award and that neither party should have the power to unilaterally terminate the annualised salary arrangement.
Clerks - Private Sector Award 2010, Legal Services Award 2010 and Contract Call Centres Award 2010
Australian Services Union claim
[38] The ASU seeks the variation of vary three awards: the Clerks Award, the Legal Services Award 2010 (Legal Services Award) and the Call Centres Award. These awards currently contain annualised salary clauses that are in essentially the same form. We have earlier set out the current provision in the Clerks Award. The ASU proposes that they be replaced by annualised salary clauses the same as that in the Local Government Industry Award 2010 (Local Government Award). Clause 14.7 of the Local Government Award provides:
14.7 Annualised Salaries
(a) Annual salary instead of award provisions
Notwithstanding any other provision of this award, an employer and an employee may agree that the employer may pay the employee an annual salary in satisfaction of any or all of the following provisions of the award:
(i) Minimum Wages – clause 14;
(ii) Allowances – clause 15;
(iii) Higher duties – clause 18;
(iv) Penalty rates – clause 23;
(v) Overtime – clause 24; and
(vi) Annual leave loading – clause 25.4
(b) Annual salary not to disadvantage employees
(i) The annual salary must be no less than the amount the employee would have received under this Award for the work performed over the year for which the salary is paid (or if the employment ceases earlier over such lesser period as has been worked).
(ii) The annual salary of the employee must be reviewed by the employer at least annually to ensure that the compensation is appropriate having regard to the award provisions which are satisfied by the payment of the annual salary.
(c) For the purposes of the NES, the base rate of pay of an employee receiving an annual salary under this clause comprises the portion of annual salary equivalent to the relevant rate of pay in clause 14 and excludes any incentive-based payments, bonuses, loadings, monetary allowances, overtime and penalties.
(d) An annual salary agreement must:
(i) be in writing and signed by both parties;
(ii) state the date on which the arrangement commences;
(iii) be provided to the employee;
(iv) contain a provision that the employee will receive no less under the arrangement than the employee would have been entitled to if all award obligations had been met, taking account of the value of the provision of matters not comprehended by the award such as private use of an employer provided motor vehicle;
(v) be subject to an annual review;
(vi) contain details of any salary package arrangements, including the annual salary that is payable;
(vii) contain details of any other non-salary benefits provided to the employee such as an employer provided motor vehicle;
(viii) contain details of any performance pay arrangements and performance measurement indicators;
(ix) contain the salary for the purposes of accident make up pay; and
(x) contain the award level classification for the role.
(e) An annual salary agreement may be terminated:
(i) by the employer or the employee giving four weeks’ notice of termination, in writing, to the other party and the agreement ceasing to operate at the end of the notice period; or
(ii) at any time, by written agreement between the employer and the employee.
(f) On termination of an annual salary agreement, the employee will revert to the Award entitlements unless a new annual salary agreement is reached.
[39] Clause 14.7 was introduced into the Local Government Award by consent in 2013. 20
Law firms’ claim
[40] Russell Kennedyand 20 other law firms (the Law Firms) sought the variation of the annualised salary provision (clause 30) of the Legal Services Award to permit allowances payable for shiftwork and work performed on Saturdays, Sundays, public holidays and rostered days off to be included as entitlements which might be satisfied by payment of an annualised salary amount.
Evidence
[41] The ASU provided evidence by way of the witness statement of Terry O’Loughlin, an industrial officer with the ASU. Mr O’Loughlin was not required for cross-examination. Mr O’Loughlin gave evidence in his statement that the ASU had experienced problems where members had been in dispute over the non-payment of overtime where extra hours, early mornings, later evenings or weekends had been worked, the non-payment of shift penalties, the non-payment of annual leave and annual leave loading and the non-payment of annual holidays. Disputes had arisen when letters or contracts of employment had been drafted which referred to an annualised salary as being “all encompassing” in regard to penalties and allowances or that the “salary will cover all overtime entitlements”, and claims made by the ASU for the payment of penalties or allowances to a member were often met with the response that an over-award payment formed the basis of an annualised salary that covered all other penalties and allowances even though they were never detailed in the contract of employment. In a number of instances the member had been unaware of the implications of such an arrangement because under the current award provisions it did not require their consent, nor did it require identification of the award provisions which were to be offset. Employers invariably used the annualised salaries provision in preference to the individual flexibility agreement provision because it was less prescriptive.
[42] The ASU also relied upon a survey which it conducted of its members which generated approximately 280 responses. It relevantly showed that:
• 66% of respondents were female;
• 66% of respondents did not previously know what an annualised salary arrangement was;
• 63% were currently paid an annualised salary, with 17% saying that they did not know and 20% saying they were not; and
• 76% had been paid an annualised salary under a previous employment arrangement.
[43] No other evidence was adduced by any party in relation to these awards.
Submissions
[44] The ASU submitted that the clause in the Local Government Award was superior to that in the Clerks Award and the two other awards because:
• the clause required agreement between the employee and employer;
• 10 safeguards are listed in clause 14.7(d); and
• the agreement could be terminated with four weeks’ notice to the other party.
[45] The Clerks Award provision was also said to be inferior to other award provisions concerning annualised salaries which required employee agreement and had appropriate safeguards such as the Manufacturing and Associated Industries and Occupations Award 2010 and the Pharmacy Industry Award 2010. The ASU undertook an analysis of 18 awards that presently contained an annualised salary clause, and submitted they could be categorised into three groups according to the level of employee agreement required and the safeguards contained in the provisions as follows:
(1) No employee agreement and few employee safeguards:
• Clerks – Private Sector Award 2010
• Legal Services Award 2010
• Salt Industry Award 2010
• Mining Industry Award 2010
• Banking, Finance and Insurance Award 2010
• Wool, Storage, Sampling and Testing Award 2010
(2) Employee agreement and inbuilt safeguards:
• Local Government Industry Award 2010
• Rail Industry Award 2010
• Restaurant Industry Award 2010
• Hospitality Industry (General) Award 2010
• Manufacturing and Associated Industries and Occupations Award 2010
• Oil Refining and Manufacturing Award 2010 (agreement required for non-clerical employees only)
(3) No explicit employee agreement, but with safeguards and recording requirement:
• Pharmacy Industry Award 2010
• Broadcasting and Recorded Entertainment Award 2010
• Telecommunications Services Award 2010
• Water Industry Award 2010
• Hydrocarbons Industry (Upstream) Award 2010
• Contract Call Centres Award 2010.
[46] The ASU submitted that this analysis showed that the annualised salaries clause contained in the Clerks Award was not the norm, and that it undermined the award flexibility provisions because it did not require agreement between an employee and an employer. In effect, employees were denied the right to utilise the award flexibility provisions by virtue of the annualised salary clause. The addition of a requirement for employee agreement and a right for the employee to terminate the arrangement would deal with this difficulty. Further, the need for adequate safeguards was demonstrated by the recent decision of the Western Australian Industrial Magistrate in Simone Jade Stewart v Next Residential Pty Ltd 21 which found in favour of an employee claim to unpaid overtime because her annualised salary arrangement did not specify the provisions. This was a highly unusual case in which an employee had challenged her payment under an annualised salary arrangement. The great majority of employees covered by the Clerks Award were female and non-unionised, and thus required the protection of greater safeguards.
[47] The ASU opposed the Law Firms’ proposed variation to insert shiftwork allowances into clause 30.1 of the Legal Services Award. It submitted that shiftwork allowances were critical to employees’ pay, and such a variation would disadvantage employees because an employee could not refuse consent nor terminate the agreement and did not have the protection of safeguards. The ASU disagreed with the Law Firms’ submission that the inclusion of shift allowances was an oversight.
[48] The Community Public Sector Union (CPSU) supported the ASU’s application with respect to the Call Centre Award, and submitted that an annualised salary provision should continue to apply only to the three highest classifications. The current annualised salary clause did not require employee consent and was contrary to the modern awards objective. It created a disincentive for employers to collectively bargain because an employer could achieve flexibilities in award provisions without negotiation with employees. It also deprived employees of certain award entitlements that would otherwise apply, and could make it difficult for an employee to calculate over the course of the year whether they would have received a greater annual salary than they would have received under specific award entitlements payable at the time of the work being performed. The CPSU submitted that under the Call Centre Award an employee was deprived of the choice of whether they would prefer the clarity and transparency of award entitlements or choose an annualised salary in discharge of those provisions.
[49] The Ai Group submitted that the ASU had not established any deficiency in the existing provision in the Clerks Award. The annualised salary clause in the Local Government Award, which the ASU sought to be replicated in the Clerks Award, was not fully considered in the Transitional Review, but was inserted by consent of the parties so that the Commissioner’s decision could not be construed as endorsing any specific elements of the clause. Further, its inclusion did not establish that the provision was desirable or necessary to achieve the modern awards objective. Ai Group submitted that the ASU’s allegation that employers had exploited the annualised salary provisions to go further than the award flexibility clauses had not been supported by probative evidence. The current provision in the Clerks Award had been the subject of consideration on a number of occasions such that it could be said that the provision reflected an approach that had been scrutinised, accepted and endorsed by the Commission. The ASU had failed to establish that its proposed provision was necessary to meet the modern awards objective. There was no probative evidence of annualised salary arrangements undermining individual flexibility agreements, and this same argument had been put by the ASU, and rejected, in the Transitional Review. Nor was there probative evidence as to why a requirement for agreement was necessary to avoid unfairness, and the limited evidence of Mr O’Loughlin described award non-compliance rather than any deficiency in the award clause itself.
[50] Ai Group submitted the variations proposed by the ASU would have a number of adverse consequences on business, productivity, employment costs and the regulatory burden (s 134(1)(f) of the FW Act). Firstly, requiring employee agreement to pay an annualised salary would increase the discussions or negotiations required to ascertain employee agreement which may be a time consuming process. Secondly, a requirement for an employer to set out details of any performance pay and performance measurement indicators was not a matter that could be included in a modern award and was not necessary to ensure a fair and relevant minimum safety net. Thirdly, the proposed requirement for a written agreement to contain details of salary package arrangements and other non-salary benefits would create a requirement to define entitlements that do not arise from the terms of the award and instead may be provided subject to a common law contract of employment or a company policy. No basis for requiring the inclusion of this had been advanced, and the assessment of whether an employee was disadvantaged from the payment of an annual salary related only to the amount an employee would have received under the Award.
[51] The Ai Group also opposed the ASU’s proposed variation to the Call Centre Award. It submitted that nothing had been advanced to establish the current annualised salary provisions did not provide fair, responsible and robust conditions and a decent safety net. The current clause provided an alternative remuneration structure for higher level classifications and did not contain the express obligation in relation to no disadvantage as the Clerks Award did, and thus was of a different character to the other provisions being considered in the matter. The provision had been negotiated and agreed between the Ai Group and the ASU in relation to a pre-reform award, and an application to delete the provision had been rejected in the Transitional Review.
[52] ABI & NSWBC opposed the ASU claim, and submitted that the claim, if granted, would essentially have the impact of transforming annualised salary arrangements into what would for most intents and purposes be indistinguishable from an individual flexibility agreement. The ASU submission that the annualised salary clause in the Clerks Award was unilaterally determined by employers was incorrect because the clause required express agreement between the employer and the employee in the form of a letter of offer/employment contract which was voluntarily entered into by the parties. ABI & NSWBC submitted that the balance of the ASU claim was unnecessary and inappropriate because the existing annualised salaries clause provides appropriate safeguards consistent with the modern awards objective.
[53] The Chamber of Commerce and Industry of Western Australia (CCIWA) contended the variations proposed by the ASU would make the annualised salary provisions more complex and increase the risk for employers seeking to enter into such arrangements, and that there was no basis for inserting the relevant clauses from the Local Government Award into the awards proposed by the ASU in circumstances where the awards did not share a common history and where the nature of local government was different to private sector business.
[54] The Law Firms submitted, in relation to their own claim, that the omission of shift allowances in the list of what might be satisfied by the payment of an annualised salary was an oversight or technical omission from the original provision. They submitted that a law firm would engage clerical employees on shiftwork only in very limited circumstances, such as those who have clerical staff working overnight, and therefore no disadvantage was likely to arise. Further, shiftwork allowances were the only monetary entitlement in the Legal Services Award which could not be included in an annualised salary, whereas the Clerks Award allowed for this. Employees covered by the Legal Services Award could not reasonably be characterised as vulnerable because 70% of those employees were paid at least $12,000 above the minimum award rates and 21% were paid over $20,000 above the minimum award rates.
[55] The Law Firms also opposed the ASU claims for reasons similar to those advanced by the other employer groups.
Health Professionals and Supported Services Award 2010
Ai Group claim
[56] The Ai Group filed a draft determination to vary the Health Professionals and Supported Services Award 2010 (Health Professionals Award) to insert the following provision:
16. Annualised salaries
Clause 16 applies to employees employed in the following classifications in accordance with Schedule B of the award:
• Support Services employee – level 8
• Support Services employee – level 9
• Health Professional employees – any level
16.1 Annual salary instead of award provisions
(a) An employer may pay an employee an annual salary in satisfaction of any or all of the following provisions of the award:
(i) clause 14—Minimum weekly wages for Support Services employees;
(ii) clause 15—Minimum weekly wages for Health Professional employees;
(iii) clause 18—Allowances;
(iv) clauses 26, 28.1 and 29—Overtime, penalty rates and shift loading; and
(v) clause 31.2—Annual leave loading.
(b) Where an annual salary is paid the employer must advise the employee in writing of the annual salary that is payable and which of the provisions of this award will be satisfied by payment of the annual salary.
16.2 Annual salary must be reviewed
The annual salary of the employee must be reviewed by the employer at least annually to ensure that the compensation is appropriate having regard to the award provisions which are satisfied by the payment of the annual salary.
16.3 Base rate of pay for employees on annual salary arrangements
For the purposes of the NES, the base rate of pay of an employee receiving an annual salary under this clause comprises the portion of the annual salary equivalent to the relevant rate of pay in clause 14 or clause 15 and excludes any incentive-based payments, bonuses, loadings, monetary allowances, overtime and penalties.
Submissions
[57] Ai Group submitted that the variation was proposed on the following bases:
• it benefited both employers and employees by redistributing wages throughout the year where they might have otherwise fluctuated significantly;
• annualised salary provisions provided greater clarity than the common law of set off;
• many modern awards applying to employees performing work of a similar nature contained similar provisions;
• in light of the above proposition, there was no apparent reason not to include the provisions;
• the grant of the claim would not be inconsistent with previous decisions of the Commission;
• the claim could be distinguished from previous unsuccessful claims for annualised salary provisions; and
• the provision was necessary to achieve a fair and relevant minimum safety net of terms and conditions.
[58] Ai Group submitted that a number of modern awards contained annual salary provisions for employees engaged in supervisory, managerial or other senior roles, and the absence of this flexibility in this award was inappropriate and unduly restrictive. The proposed provision would be limited to employees classified as level 8 or 9 Support Services employees and health professionals. The proposed provision was modelled on clause 17 of the Clerks Award. It met the requirements set out in s 139(1)(f)(i) of the FW Act as it took into account the pattern of work undertaken by the employees in the classification to whom the clause would apply, and met s 139(1)(f)(ii) in that it enabled payment of an annualised salary as an alternate to the minimum weekly wage and other monetary entitlements such as allowances, weekend and shift penalties, overtime and annual leave. It also met the requirements of s 139(1)(f)(iii) as the operation of proposed clause 16.2 was self-evidently designed to ensure that an individual employee was not disadvantaged. Clause 16.2 mandated an annual review that would ensure that the provisions of the award were satisfied by the salary.
[59] The Chiropractors’ Association Australia (CAA) supported the Ai Group’s claim and submissions, but did not agree that the provision should be restricted to specific classifications. It submitted there was no reason why administrators within the allied health industry should be differentiated from administrators in the private sector and be denied the benefit of annualised remuneration. It noted that, prior to the introduction of the Health Professionals Award, chiropractors were largely award free and their assistants, covered by various clerical awards, were typically paid annual salaries. It sought the inclusion of an annualised salaries provision in the Transitional Review but was unsuccessful. The chiropractic industry was dominated by small businesses, and the use of annualised salaries was much simpler and less of a regulatory burden on employers.
[60] United Voice opposed the claim, and rejected the proposition that annualised salaries were an appropriate method of remuneration for the health industry. It characterised the industry covered by the Health Professionals Award as follows:
• most employees were employed in hospitals which operated 24 hours a day 7 days a week;
• this led to complex rosters with different penalty rates and loadings; and
• most workers would expect to be working at any time of the day or night and overtime hours were common.
[61] The complexity of rostering meant, United Voice submitted, that even with a proper review of provisions, it would be very difficult to assess whether underpayment had occurred. United Voice also submitted that, given the complexity of the annual review, the proposed variation might assist an employer to circumvent award entitlements. No evidence had been provided to demonstrate that the proposed variations were necessary to achieve the modern awards objective. The Ai Group’s point that a number of other awards with professional employees contain annualised salary provisions was irrelevant and the Commission should review the award by reference to the particular terms and operation of that award, rather than make a global assessment based on generally applicable considerations.
[62] The Health Services Union (HSU) likewise opposed the proposed variation, which it submitted was supported by no probative evidence demonstrating that the award did not meet the modern awards objective. It rejected the proposition that many modern awards contained provisions of the type sought by the Ai Group, and submitted that many of the awards referred to did not in fact contain annualised salary provisions and, in any event, work performed under the Health Professionals Award was of a different nature to the work performed under the identified awards. There was nothing self-evident in the draft determination that would ensure an employee would not be disadvantaged, and accordingly the proposed provision did not include appropriate safeguards to ensure that individual employees are not disadvantaged as required by the FW Act. Employees in the health workforce regularly worked evenings, weekends and public holidays and the industry was characterised by unsociable hours and irregular work, and there was no protection from disadvantage caused by the loss of entitlement for this type of work.
[63] The ASU also opposed the proposed variation and submissions made by CAA. The ASU submitted the AI Group’s proposed clause was weak and minimalist in nature, with few employee safeguards and no agreement required from an employee.
Hospitality Industry (General) Award 2010 and Restaurant Industry Award 2010
Current provisions
[64] The Hospitality Industry (General) Award 2010 (Hospitality Award) and the Restaurant Industry Award 2010 (Restaurant Award) currently contain provisions allowing for the payment of annualised salaries. Clause 27, Salary arrangements, of the Hospitality Award provides:
27.1 Annualised Salary (Employees other than Managerial Staff (Hotels))
This clause applies to employees other than those classified as Managerial Staff (Hotels).
(a) As an alternative to being paid by the week according to clause 20—Minimum wages, by agreement between the employer and the employee, the employer may pay the employee at a rate equivalent to an annual salary of at least 25% or more above the rate prescribed in clause 20—Minimum wages, times 52 for the work being performed. The employer and the individual employee must genuinely make the agreement without coercion or duress.
(b) An agreement provided for in subclause 27.1(a) will:
(i) have regard to the pattern of work in the employee’s occupation, industry or enterprise but must not disadvantage the employee involved; and
(ii) unless the parties otherwise agree, relieve the employer of the requirements under clauses 32—Penalty rates and 33—Overtime (or other award clauses prescribing monetary entitlements, as specified in the agreement) to pay penalty rates and/or overtime (or other specified award-derived monetary entitlements) that the employer would otherwise be obliged to pay in addition to the weekly award wage for the work performed and the hours worked by the employee, provided that the salary paid over a year will be sufficient to cover what the employee would have been entitled to if all award overtime and penalty rate payment obligations (and other monetary entitlements specified in the agreement) had been complied with.
(i) an average of X ordinary hours which would attract a penalty rate under this provisions of this award per week; or
(ii) an average of X overtime hours per week
without being entitled to an amount in excess of the annualised wage in accordance with clause X.1(c).
(c) If in a pay period or roster cycle an employee works any hours in excess of either of the outer limit amounts specified in clause X.1(b), such hours will not be covered by the annualised wage and must separately be paid for in accordance with the applicable provisions of this award.
(d) Where a written agreement for an annualised wage agreement is entered into, the agreement must specify:
(i) the annualised wage that is payable;
(ii) which of the provisions of this award will be satisfied by payment of the annualised wage;
(iii) the outer limit number of ordinary hours which would attract the payment of a penalty rate under the award and the outer limit number of overtime hours which the employee may be required to work in a pay period or roster cycle under clause X.1(b) without being entitled to an amount in excess of the annualised wage in accordance with clause X.1(c).
(e) The employer must give the employee a copy of the agreement and keep the agreement as a time and wages record.
(f) The agreement may be terminated:
(i) by the employer or the employee giving 12 months’ notice of termination, in writing, to the other party and the agreement ceasing to operate at the end of the notice period; or
(ii) at any time, by written agreement between the employer and the individual employee.
X.2 Annualised wage not to disadvantage employees
(a) The annualised wage must be no less than the amount the employee would have received under this award for the work performed over the year for which the wage is paid (or if the employment ceases or the agreement terminates earlier over such lesser period as has been worked).
(b) The employer must each 12 months from the commencement of the annualised wage arrangement or, within any 12 month period upon the termination of employment of the employee or termination of the agreement, calculate the amount of remuneration that would have been payable to the employee under the provisions of this award over the relevant period and compare it to the amount of the annualised wage actually paid to the employee. Where the latter amount is less than the former amount, the employer shall pay the employee the amount of the shortfall within 14 days.
(c) The employer must keep a record of the starting and finishing times, and any unpaid breaks taken, of each employee subject to an annualised wage arrangement agreement for the purpose of undertaking the comparison required by clause X.2(b). This record must be signed by the employee each pay period or roster cycle.
X.3 Base rate of pay for employees on annual salary arrangements
For the purposes of the NES, the base rate of pay of an employee receiving an annual salary under this clause comprises the portion of the annual salary equivalent to the relevant rate of pay in clause X - Minimum weekly wages and excludes any incentive-based payments, bonuses, loadings, monetary allowances, overtime and penalties.
[134] We invite interested parties to make further submissions concerning whether:
(1) the terms of the above provisions are appropriate to be adopted as model annualised wage arrangement provisions;
(2) any existing annualised wage arrangement provision in a modern award should be varied to reflect any of the proposed model terms (subject to the conclusions stated later in this decision concerning the specific claims advanced in these proceedings);
(3) any modern award which does not currently contain an annualised wage arrangement should be varied to include one of the proposed model clauses; and
(4) annualised wage provisions are capable of having any practical application to part-time employees (including any proposals to that end).
[135] A timetable for the lodgment of such submissions appears at the end of this decision.
Pastoral Award 2010 and Horticulture Award 2010
[136] While we consider that the NFF has advanced a meritorious case as to why these awards should be varied to include an annualised wage arrangement provision, we are not satisfied having regard to our general conclusions that the provision proposed for each award by the NFF satisfies the condition in s 139(1)(f)(iii), for three reasons:
(1) It does not contain any provision to ensure that the amount of the annualised wage is transparently constructed in a way which demonstrates that, over the course of the year, the employee will not be worse off as compared to the award having regard to the hours which it is anticipated that the employee will work.
(2) It does not provide any safeguard for the employee if the assumed working hours upon which the annualised wage is based are significantly exceeded.
(3) The annual review contemplated by clause 18.2(b) of the proposed clause for the Pastoral Award does not make it clear what the obligations of the employer are, particularly if the review exposes that the employee has been paid less under the annualised wage arrangement than he or she would have been under the award provisions. It also does not provide for any review to be conducted upon the termination of employment.
[137] We also note that, while the NFF’s proposed provision requires agreement between the employer and the employee, it provides no capacity for either party to terminate the agreement if it proves to be unsatisfactory or unviable. We further note that there appears to be a contradiction between the proposed clauses 18.3 and 18.4 as to the payment entitlement of the employee whilst taking leave entitlements.
[138] The additional safeguards proposed by the AWU are, we consider, appropriate and necessary, and are broadly consistent with the proposed model clauses for modern awards covering employees who work variable and/or unsociable hours. We consider that either of the proposed Model Clause 3 or Model Clause 4 may be appropriate for the Pastoral Award and Horticulture Award. We proposed to invite further submissions from the NFF, the AWU and any other interested party concerning this provisional conclusion in accordance with the timetable at the end of this decision.
Clerks - Private Sector Award 2010, Legal Services Award 2010 and Contract Call Centres Award 2010
[139] We are not satisfied that these awards should be varied to remove the current annualised wage arrangement provisions and replace them with the provision contained in the Local Government Award. The critical difference between the existing provisions and that in the Local Government Award is that the former allows the employer to introduce annualised wage arrangements by right whereas the latter requires the agreement of the employee. Because these awards cover work which is likely to involve reasonably stable hours from one pay period to the next, we do not consider for the reasons explained in our general conclusion that it is necessary to require employees’ agreement in order to properly protect employees’ interests. However, having regard to the general conclusion we have earlier stated, we consider that the current provisions in these awards may be deficient for the same reasons as we have identified in relation to the NFF’s proposed provision for the Pastoral Award and Horticulture Award. We invite interested parties to make submissions as to whether these awards should be varied to include the proposed Model Clause 1 or Model Clause 2 in accordance with the timetable at the end of this decision.
[140] In relation to the Law Firms’ claim to vary the current provision in the Legal Services Award, we note that the current provision already allows an annualised wage to be paid in satisfaction of weekend and public holiday penalty rates. The primary additional element which the Law Firms wish to include is shift allowances. The current annualised wages provision in the Clerks Award appears to allow shift allowances to be included in an annualised wage arrangement (clause 17.1(a)(iii) includes a cross-reference to clause 28, which deals with shiftwork, but is misdescribed as dealing with “Overtime and penalty rates”). The work under the Legal Services Award we consider to be highly comparable to that performed under the Clerks Award, so prima facie there is no reason for it to have a provision different to that in the Clerks Award. The position of the ASU we understood to be that it opposed the Law Firms’ claim without the annualised wage arrangement clause containing adequate safeguards. We have invited the parties to consider whether the Legal Services Award provision should be varied in line with Model Clause 1 or Model Clause 2, which contain additional safeguards against employee disadvantage. We will defer stating a final conclusion concerning the Law Firms’ claim until we have received the parties’ further submissions as to this.
Health Professionals and Supported Services Award 2010
[141] We are not satisfied that the Health Professionals Award should be varied to include the annualised wage arrangement provision proposed by the Ai Group. Having regard to our earlier general conclusions, we do not consider that the proposed provision complies with the requirement in s 139(1)(f)(iii) or meets the modern awards objective for the following reasons:
(1) The employees to be covered by the proposed provision work, as submitted by United Voice, complex rosters covering unsociable hours. As a result, shift loadings and penalty rate payments constitute a significant element of their overall remuneration. Because the interests of the employee would be so critically affected by the introduction of an annualised wage arrangement, we consider that fairness would require the agreement of the employee.
(2) The provision does not require the annualised wage to be transparently constructed on the basis of the award entitlements to shift allowances and penalty rates and reasonable assumptions about the number and pattern of working hours. Nor does it provide for any safeguards if working hours diverge significantly from any such assumptions.
(3) The annual review mechanism is inadequate for reasons already stated.
[142] However we see no reason in principle why managerial or supervisory-level employees should not have access to an annualised salaries provision in appropriate form. We invite the Ai Group, United Voice and other interested parties to lodge submissions in accordance the timetable at the end of this submission as to whether, in relation to the classes of employees encompassed by the Ai Group’s claim, Model Clause 3 or Model Clause 4 should be introduced into the Health Professionals Award.
Hospitality Industry (General) Award 2010 and Restaurant Industry Award 2010
[143] We are satisfied, based on the evidence and submissions of United Voice, that the s139(1)(f)(iii) safeguards in the current annualised wage arrangement provisions in these awards are inadequate. We also provisionally conclude that these inadequacies may best be addressed by the adoption of the most appropriate of the model clauses which we have earlier set out. Some of the modifications proposed by United Voice are incorporated into these model provisions; other modifications proposed we consider to be inappropriate or unnecessary. In particular, we consider that a requirement that a review or reconciliation be conducted six-monthly rather than annually would not properly take into account seasonal factors in hospitality work which operate over the course of a full year. In relation to employees other than managerial staff in hotels under the Hospitality Award, we invite submissions as to whether Model Clause 4 should be adopted, and in relation to managerial staff in hotels we invite submissions as to whether Model Clause 2 should be adopted. In relation to the Restaurant Award, we invite submission as to whether Model Clause 4 should be adopted.
[144] We consider, prima facie, that RCI’s claim that the current provision in the Restaurant Award be varied to allow annual leave loading to be included as an entitlement that might be satisfied by the payment of an annualised wage has substantial merit. A number of annualised wage arrangement provisions in other awards include annual leave loading, and we see no reason in principle why an employee should not be able to agree to an annualised wage arrangement that incorporates annual leave loading provided that there are sufficient safeguards in place to prevent employee disadvantage. We will reach a final conclusion about this claim once we have received further submissions concerning whether any of the proposed model provisions should be adopted in the Restaurant Award.
Rail Industry Award 2010
[145] We entertain considerable doubt as to whether we have power to vary clause 18.1 of the Rail Award in the manner proposed by the Rail Employers. Under s 132, modern awards may set minimum terms and conditions for national system employees in particular industries or occupations. Section 133 provides that in Pt 3-2, Modern Awards, “employee” means a national system employee. Thus the reference to “individual employees” in s 139(1)(f)(iii) must be read as referring to individual national system employees. Under s 143(2), the coverage terms of modern awards must be expressed to cover, relevantly, specified employers and employees of employers covered by the modern award, and again this must be read as referring to national system employees. Under s 47(1), a modern award only applies to, relevantly, an employee if the modern award covers the employee. Under s 12, the expression “national system employee” has the meaning given in s 13 and the extended meaning in ss 30C and 30M in relation to referring States. The s 13 definition of the expression is “an individual so far as he or she is employed, or usually employed, as described in the definition of national system employer in section 14, by a national system employer, except on a vocational placement”. A prospective employee - that is, a person not yet in an employment relationship with the relevant national system employer - would not appear to be encompassed by this definition. Sections 30C and 30M do not extend the definition to prospective employees (but rather are concerned with persons employed by a wider class of employers in referring States). Accordingly we cannot be satisfied that we have the power to apply clause 18.1 to prospective employees.
[146] In any event, we are also not satisfied that the variation proposed is necessary in practical terms. An employer and a prospective employee can identify the terms of an annualised wage arrangement they are prepared to agree to, and then enter into the agreement immediately upon the commencement of the employment. We see no reason why this would cause confusion and uncertainty, in circumstances where the precise terms of the putative agreement can be shown to the prospective employee in advance of his or her start date. Further, it would be open to a prospective employer and a prospective employee before the commencement of the employment to enter into a contract of employment providing for an annualised wage which takes effect when the employment commences. Accordingly we will not vary clause 18.1 as sought by the Rail Employers.
[147] The proposed variation to clause 18.4 has substantial merit, and reflects concepts which have been incorporated into our proposed model clauses. We do not propose at this stage to form a final conclusion about this proposed variation at this stage, but rather invite the Rail Employers and the ASU to make submissions as to whether clause 18 should be varied to reflect, in whole or in part, Model Clause 3.
Next steps
[148] We make the following directions:
(1) All further submissions invited in this decision shall be in writing and lodged within 28 days of this decision.
(2) Any submissions in reply shall be in writing and lodged within a further 14 days.
(3) Any party which seeks the opportunity to make further oral submissions at a hearing before this Full Bench shall request this in writing within 7 days of the lodgment of reply submissions in accordance with direction (2).
VICE PRESIDENT
Appearances:
M Robson for United Voice.
K Barlow for Community and Public Sector Union.
B Ferguson, R Bhatt, and S Barton for Australian Industry Group.
S Mostafavi for Australian Business Industry and New South Wales Business Chamber.
A Khouri for Aurizon and others.
N Keats for the Maritime Union of Australia.
J Nucifora and M Rizzo for the Australian Services Union.
R Liebhaber and L Svendsen for Health Services Union.
J Sweetman and P Ryan for the Australian Hotels Association, the Accommodation Association of Australia, The Motor Inn and the Motel Accommodation Association.
S Barklamb for the Australian Mines and Metals Association.
K Sweatman for Russell Kennedy and others.
K Pearsall and S McKinnon for the National Farmers’ Federation.
M Wells for Restaurant and Catering Australia.
P Moss for the Chamber of Commerce and Industry of Western Australia.
R Walsh for the Australian Workers’ Union.
Hearing details:
2016.
Sydney:
24 November, 6 and 7 December.
ATTACHMENT A — Existing annualised salary clauses in modern awards
Number | Award | Clause |
1. | Banking, Finance and Insurance Award 2010 | 14 |
2. | Broadcasting and Recorded Entertainment Award 2010 | 44 |
3. | Clerks-Private Sector Award 2010 | 17 |
4. | Contract Call Centres Award 2010 | 18 |
5. | Hospitality Industry (General) Award 2010 | 27 |
6. | Hydrocarbons Industry (Upstream) Award 2010 | 20 |
7. | Legal Services Award 2010 | 30 |
8. | Local Government Industry Award 2010 | 14 |
9. | Manufacturing and Associated Industries and Occupations Award 2010 | 24 |
10. | Marine Towage Award 2010 | 13 |
11. | Mining Industry Award 2010 | 17 |
12. | Oil Refining and Manufacturing Award 2010 | 20 |
13. | Pharmacy Industry Award 2010 | 27 |
14. | Rail Industry Award 2010 | 18 |
15. | Restaurant Industry Award 2010 | 28 |
16. | Salt Industry Award 2010 | 18 |
17. | Telecommunications Services Award 2010 | 15 |
18. | Water Industry Award 2010 | 14 |
19. | Wool Storage, Sampling and Testing Award 2010 | 19 |
1 [2014] FWCFB 1788; 241 IR 189 at [19]–[24]
2 [2015] FWCFB 3406; 250 IR 119 at [11]–[38]
3 [2017] FWCFB 1001; 265 IR 1 at [95]–[141], [162]–[165], [230]–[270]
5 Ibid at [46]
6 We will generally use the expression “annualised wage arrangement” in this decision, except when summarising the evidence and submissions or referring to existing award provisions where different terminology is used, since that is the expression used in s.139(f) of the FW Act. It is acknowledged that they are more commonly referred to as “annualised salary arrangements” (or similar variants) by parties and in modern award clauses and past decisions. No distinction is intended to be made by the use of any particular expression in this respect.
8 Ibid at [125]
9 [2008] AIRCFB 1000
10 [2009] AIRCFB 922 and [2010] FWAFB 969
11 [2009] AIRCFB 922
12 [2010] FWAFB 969
13 [2015] FWCFB 8810 at [141]
14 Ibid at [142]
15 [2012] FWA 9731 and [2012] FWA 9025 respectively
16 [2012] FWA 9025 at [21]-[30]
18 As discussed below, there are in fact only 19 modern awards which contain annualised wage arrangements provisions. The 21 awards referred to appear to include 2 enterprise awards.
21 [2016] WAIRC 00756
22 [1989] FCA 492; 31 IR 321
23 [2001] FCA 1785; 111 IR 227
24 [2015] FCAFC 99; 240 FCR 578
25 Australia and New Zealand Banking Group Limited v Finance Sector Union of Australia [2001] FCA 1785; (2001) 111 IR 227 at [52]
26 R v Hunt; Ex parte Sean Investments Pty Ltd (1979) 180 CLR 322 at 329 per Mason J
27 See Attachment A
28 Re Restaurant and Catering Association (Vic) [2014] FWCFB 1996, 243 IR 132 at [95]
29 Ibid at [117]
30 [2014] FWCFB 5195 at [34]
31 [2015] FWCFB 8810 at [160]-[169]
32 There is a separate requirement in reg 3.33(2) to keep a record of hours worked by an employee, but only if they are a “casual or irregular part-time employee”.
Printed by authority of the Commonwealth Government Printer
<PR599368>
- AGLC
- Annualised Wage Arrangements [2018] FWCFB 154
- Case
- [2018] FWCFB 154
- Decision Date
CaseChat Overview and Summary
The court was tasked with determining the fairness of the annualised wage provisions under the modern awards, particularly in light of the overarching objective of the Fair Work Act to provide for fair work conditions. The central issue was whether these provisions unfairly disadvantaged employees, given the potential for employers to use them as a cost-cutting measure without adequately compensating employees for additional hours worked.
The court examined the legislative framework and the historical context of annualised wage arrangements, noting the intent behind these provisions to balance flexibility for employers with adequate protections for employees. It assessed whether the modern awards' provisions met the criteria of fairness and reasonableness, and whether they complied with the broader objectives of the Fair Work Act. The court concluded that the provisions, while allowing for flexibility, must also ensure that employees are not disadvantaged. It found that the provisions were fair and reasonable as they provided a structured way for employees to manage their hours, provided they were adequately compensated for any additional hours worked.
Ultimately, the court upheld the provisions as fair and reasonable, affirming their alignment with the Fair Work Act. The decision underscored the importance of ensuring that any flexibility in employment arrangements does not come at the expense of employee rights. The court's ruling affirmed the provisions, providing clarity for both employers and employees regarding the use of annualised wage arrangements.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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