Modern Awards Review 2012—Annual Leave - [2013] FWCFB 6266

[2013] FWCFB 6266 [Note: a correction has been issued to this document]

FAIR WORK COMMISSION

DECISION

Fair Work (Transitional Provisions and Consequential Amendments) Act 2009
Sch. 5, Item 6 - Review of all modern awards (other than modern enterprise and State PS awards) after first 2 years

Modern Awards Review 2012—Annual Leave
(AM2012/8, AM2012/11, AM2012/20, AM2012/23, AM2012/31, AM2012/32, AM2012/33, AM2012/35, AM2012/36, AM2012/42, AM2012/86, AM2012/91, AM2012/92, AM2012/94, AM2012/98, AM2012/106, AM2012/108, AM2012/113, AM2012/122, AM2012/125, AM2012/145, AM2012/147, AM2012/150, AM2012/151, AM2012/153, AM2012/154, AM2012/163, AM2012/165, AM2012/166, AM2012/167, AM2012/,168, AM2012/172, AM2012/173, AM2012/177, AM2012/178, AM2012/179, AM2012/180, AM2012/181, AM2012/195, AM2012/202, AM2012/204, AM2012/209, AM2012/216, AM2012/221, AM2012/228, AM2012/231, AM2012/232, AM2012/235, AM2012/240, AM2012/245, AM2012/256)

VICE PRESIDENT WATSON
SENIOR DEPUTY PRESIDENT ACTON
DEPUTY PRESIDENT GOOLEY

SYDNEY, 2 SEPTEMBER 2013

Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 - Transitional Review - annual leave provisions in particular modern awards - modern awards objective - Fair Work Act 2009 - Schedule 5, Item 6.

CONTENTS	Paragraph
Decision of Senior Deputy President Acton and Deputy President Gooley
Introduction	[1]
Legislative context	[5]
Consideration of the claims	[9]
(a) Cashing out of annual leave	[11]
(b) Requirement to take annual leave	[51]
(c) Additional one twelfth payment	[82]
(d) Leave loading provision	[103]
(e) Leave loading calculation	[109]
(f) Leave loading on advanced leave	[126]
(g) Leave loading on termination	[129]
(h) Payment for a period of annual leave	[141]
(i) Definition of a shiftworker	[156]
(j) Other claims	[181]
Conclusion	[189]
Decision of Vice President Watson	[195]

Abbreviations

AAA	Accommodation Association of Australia
ABI	Australian Business Industrial
AIRC	Australian Industrial Relations Commission
FW Act	Fair Work Act 2009 (Cth)
ACTU	Australian Council of Trade Unions
AMWU	“Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU)
ANF	Australian Nursing Federation
AFEI	Australian Federation of Employers and Industries
Ai Group	The Australian Industry Group
APESMA	The Association of Professional Engineers, Scientists and Managers, Australia
ARA	Australian Retailers Association
ASIAL	Australian Security Industry Association Ltd
ASU	Australian Municipal, Administrative, Clerical and Services Union
AWU	Australian Workers’ Union
Banks	Australia and New Zealand Banking Group Limited, Commonwealth Bank of Australia Limited, Westpac Banking Corporation Limited and GE Capital Finance Australasia Pty Ltd
BIAQ	Baking Industry Association Queensland - Union of Employers
BSCAA	Building Services Contractors Association of Australia, New South Wales Division
CEPU	Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia
CFMEU	Construction, Forestry, Mining and Energy Union
FSU	Finance Sector Union of Australia
FWA	Fair Work Australia
FWC	Fair Work Commission
HBIA	Hair and Beauty Industry Association
HIA	Housing Industry Association
Law Firms	Allens Linklaters (formerly Allens Arthur Robinson), Allen & Overy, Arnold Bloch Liebler, Ashurst Australia, Baker & McKenzie, Clayton Utz, Corrs Chambers Westgarth, Davies Collison Cave, Dibbs Barker, Herbert Smith Freehills, Gilbert + Tobin, Hall & Wilcox, Herbert Geer, King & Wood Mallesons, Lander & Rogers, Maddocks, K&L Gates (formerly Middletons), Minter Ellison, Norton Rose Fullbright, Piper Alderman, and Russell Kennedy
MBA	Master Builders Australia Limited
MUA	The Maritime Union of Australia
MPMSAA	The Master Plumbers’ and Mechanical Services Association of Australia
NES	National Employment Standards
NESA	National Employment Services Association
NRA	National Retail Association Ltd
NSW Local Government Union	New South Wales Local Government, Clerical, Administrative, Energy, Airlines & Utilities Union
PGA	The Pharmacy Guild of Australia
SDAEA	Shop, Distributive and Allied Employees Association
SAWIAI	South Australian Wine Industry Association Incorporated
TCFUA	Textile, Clothing and Footwear Union of Australia
Transitional Provisions Act	Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth)
Transitional Review	Modern Awards Review 2012
TWU	Transport Workers’ Union of Australia
WALGA	Western Australian Local Government Association
WCRA	Waste Contractors & Recyclers Association of NSW
WR Act	Workplace Relations Act 1996 (Cth)

DECISION OF SENIOR DEPUTY PRESIDENT ACTON AND DEPUTY PRESIDENT GOOLEY.

INTRODUCTION

[1] The Fair Work (Transitional Provisions and Consequential Amendments)Act 2009 (Cth) (Transitional Provisions Act) provides that the Fair Work Commission (FWC) 1 must conduct a review of all modern awards2 as soon as practicable after 1 January 2012 (the Transitional Review).

[2] This decision deals with applications to vary various matters associated with annual leave in various modern awards. The applications have been referred to this Full Bench as part of the Transitional Review.

[3] Directions in relation to these proceedings were issued directing parties to file outlines of submissions and any evidence on which the parties sought to rely, within given timeframes.

[4] Hearings were held, before the Full Bench, in Melbourne, with video links to Adelaide, Canberra and Sydney, on 22 April 2013 and 17 June 2013.

LEGISLATIVE CONTEXT

[5] The legislative context for the Transitional Review was comprehensively dealt with in a decision of a Full Bench of Fair Work Australia (FWA) on 29 June 2012 (the June 2012 Full Bench decision). 3 A useful summary of the legislative context was provided in a decision of a Full Bench of the FWC on 15 March 2013 (the March 2013 Full Bench decision)4 as follows:

“[5] The principal legislative provision in respect of the Transitional Review is Item 6 of Schedule 5 to the Transitional Provisions Act:

‘6 Review of all modern awards (other than modern enterprise awards and State reference public sector modern awards) after first 2 years

(1) As soon as practicable after the second anniversary of the FW (safety net provisions) commencement day, FWA must conduct a review of all modern awards, other than modern enterprise awards and State reference public sector modern awards.

Note: The review required by this item is in addition to the annual wage reviews and 4 yearly reviews of modern awards that FWA is required to conduct under the FW Act.

(2) In the review, FWA must consider whether the modern awards:

(a) achieve the modern awards objective; and

(b) are operating effectively, without anomalies or technical problems arising from the Part 10A award modernisation process.

(2A) The review must be such that each modern award is reviewed in its own right. However, this does not prevent FWA from reviewing 2 or more modern awards at the same time.

(3) FWA may make a determination varying any of the modern awards in any way that FWA considers appropriate to remedy any issues identified in the review.

Note: Any variation of a modern award must comply with the requirements of the FW Act relating to the content of modern awards (see Subdivision A of Division 3 of Part 2-3 of the FW Act).

(4) The modern awards objective applies to FWA making a variation under this item, and the minimum wages objective also applies if the variation relates to modern award minimum wages.

(5) FWA may advise persons or bodies about the review in any way FWA considers appropriate.

(6) Section 625 of the FW Act (which deals with delegation by the President of functions and powers of FWA) has effect as if subsection (2) of that section included a reference to FWA’s powers under subitem (5).’

[6] Subitem 6(1) provides that the Commission must conduct a review of all modern awards (other than modern enterprise awards and State reference public sector modern awards) as soon as practicable after 1 January 2012 (being the second anniversary of the Fair Work (Safety Net Provisions) Act commencement day).

[7] At the outset it is important to note that the Transitional Review contemplated in Item 6 is quite separate from, and narrower in scope than, the 4 yearly reviews of modern awards provided for in s.156 of the Fair Work Act 2009 (Cth) (the Act). The scope of the Transitional Review was a matter of contention in the June 2012 Full Bench proceeding.

[8] The June 2012 Full Bench decision construed Item 6 according to its terms, having regard to the context and legislative purpose. Part of that context was the award modernisation process conducted by the former Australian Industrial Relations Commission under Part 10A of the Workplace Relations Act 1996 (Cth) (the WR Act). We deal with the award modernisation process in section 2 of this decision.

[9] The June 2012 Full Bench decision observed that two points about this historical context were particularly relevant:

‘The first is that awards made as a result of the award modernisation process are now deemed to be modern awards for the purposes of the FW Act (see Item 4 of Schedule 5 of the Transitional Provisions Act). Implicit in this is a legislative acceptance that the terms of the existing modern awards are consistent with the modern awards objective. The second point to observe is that the considerations specified in the legislative test applied by the Tribunal in the Part 10A process is, in a number of important respects, identical or similar to the modern awards objective which now appears in s.136...’

[10] The June 2012 Full Bench decided that two other textual considerations were also relevant. The first is that subitem 6(2)(b) of Schedule 5 directs specific attention to whether modern awards ‘are operating effectively, without anomalies or technical problems arising from the Part 10A award modernisation process.’ No such legislative direction is reflected in the provisions which deal with the 4 yearly review of modern awards (s.156 of the Act).

[11] The second textual consideration is that, Item 6 does not prescribe how the Commission is to be constituted for the purpose of conducting the Transitional Review. This may be contrasted with the 4 yearly reviews provided in s.156 and the award modernisation process under Part 10A of the WR Act, both of which are to be conducted by a Full Bench. The fact that the Transitional Review of a modern award may be conducted by a single member also suggests that the legislature contemplated that the Transitional Review would be more confined in scope that the 4 yearly reviews in s.156.

[12] These considerations led the June 2012 Full Bench to conclude as follows:

‘[91] It is important to recognise that we are dealing with a system in transition. Item 6 of Schedule 5 forms part of transitional legislation which is intended to facilitate the movement from the WR Act to the FW Act. The Review is a “one off” process required by the transitional provisions and is being conducted a relatively short time after the completion of the award modernisation process. The transitional arrangements in modern awards continue to operate until 1 July 2014. The fact that the transition to modern awards is still occurring militates against the adoption of broad changes to modern awards as part of the Review. Such changes are more appropriately dealt with in the 4 year review, after the transition process has completed. In this context it is particularly relevant to note that s.134(1)(g) of the modern awards objective requires the Tribunal to take into account:

“the need to ensure a simple, easy to understand, stable and sustainable modern award system for Australia...”

[99] To summarise, we reject the proposition that the Review involves a fresh assessment of modern awards unencumbered by previous Tribunal authority. It seems to us that the Review is intended to be narrower in scope than the 4 yearly reviews provided in s.156 of the FW Act. In the context of this Review the Tribunal is unlikely to revisit issues considered as part of the Part 10A award modernisation process unless there are cogent reasons for doing so, such as a significant change in circumstances which warrants a different outcome. Having said that we do not propose to adopt a “high threshold” for the making of variation determinations in the Review, as proposed by the Australian Government and others.

[100] The adoption of expressions such as a “high threshold” or “a heavy onus” do not assist to illuminate the Review process. In the Review we must review each modern award in its own right and give consideration to the matters set out in subitem 6(2). In considering those matters we will deal with the submissions and evidence on their merits, subject to the constraints identified in paragraph [99] above.’

[13] We now return to Item 6 of Schedule 5.

[14] Under subitem 6(3) the Commission has a broad discretion to vary any of the modern awards in any way it considers necessary to remedy any issues identified in the Transitional Review. However, subitem 6(4) provides that in making such a variation the Commission must take into account the modern awards objective in s.134 of the Act, and, if varying modern award minimum wages, the minimum wages objective in s.284.

[15] The modern awards objective is set out in s.134 of the Act:

‘134 The modern awards objective

What is the modern awards objective?

(1) FWA 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

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

[16] Any variation of a modern award arising from the Transitional Review must also comply with the provisions of the Act which deal with the content of modern awards (see ss.136–155 of the Act). To the extent that any application seeks to alter the coverage of a modern award, then the requirements set out in ss.162–164 within Division 6 of Part 2-3 of the Act are relevant. Similarly Division 3 of Part 2-1 will be relevant if an application seeks to alter the relationship between a modern award and the National Employment Standards (NES).

[17] Section 138 of the Act, dealing with the content of modern awards, is also relevant and is a factor to be considered in any variation to a modern award arising from the Transitional Review.

[18] In conducting the Transitional Review the Commission is able to exercise its usual procedural powers, contained in Division 3 of Part 5-1 of the Act. Section 577 and 578 are also relevant to the conduct of the Transitional Review.” [Endnotes omitted]

[6] A decision of a Full Bench of the FWC on 15 April 2013 (the April 2013 Full Bench decision), 5 added to this summary as follows:

“[10] In considering the legislative context we note that one of the authorities referred to in the proceedings purports to summarise the views expressed in the June 2012 Transitional Review decision. In AMWU v Australian Business Industrial [[2013] FWCFB 580] a Full Bench expressed the approach to the Transitional Review in these terms:

‘Where an evidentiary case has been presented, direct submissions have been made and the tribunal has made a determination about the relevant award provisions on the basis of that material, cogent reasons will need to be advanced for departing from the award provision.’

[11] In our view, this statement does not accurately reflect the approach adopted by the June 2012 Full Bench decision. The relevant passage from the June 2012 Full Bench decision states that in the context of the Transitional Review:

‘the Tribunal is unlikely to revisit issues considered as part of the Part 10A award modernisation process unless there are cogent reasons for doing so, such as a significant change in circumstances which warrants a different outcome.’ [emphasis added]

[12] The approach posited by the June 2012 Full Bench decision is not qualified by reference to those instances ‘where an evidentiary case has been presented’. The reason for such an omission is that evidentiary cases were rarely presented in the Part 10A award modernisation process. To adopt such a precondition to the requirement to establish cogent reasons for a particular variation materially changes the intent of the June 2012 Full Bench decision.” [Endnotes omitted]

[7] The opportunity afforded by the Transitional Review was succinctly put in the March 2013 Full Bench decision as follows:

“[204] The Transitional Review is an opportunity to consider how modern awards are being applied in practice with a view to considering whether they continue to meet the modern award objective. In our assessment of these claims we have considered whether the General Retail Award 2010 and the Fast Food Industry Award 2010 achieve the modern awards objective in s.134 and whether they are operating effectively, without anomalies or technical problems arising from the award modernisation process.”

[8] The March 2013 Full Bench decision also said the following about evidence in the Transitional Review:

“[118] In assessing the evidence in these matters we have also been mindful of the approach adopted by the Full Bench in Victorian Employers’ Chamber of Commerce and Industry [[2012] FWAFB 6913]. Although in a different statutory context, the following observation is apposite to our task:

‘[13] In National Retail Association Limited ((2010) 199 IR 258) a Full Bench upheld a decision of Vice President Watson rejecting an application under s.157(1) on the basis that there was insufficient evidence to establish that the variation sought was necessary to achieve the modern awards objective.

[14] That is also the case with the evidence here. Although the rules of evidence do not apply to Fair Work Australia that means only that there is less constraint on Fair Work Australia, than exists in the Courts, on the range of evidence that it may admit. The Tribunal nevertheless requires evidence (or uncontested submission - R v Commonwealth Conciliation and Arbitration Commission and Others; Ex parte The Melbourne and Metropolitan Tramways Board (1965) 113 CLR 228 at 243 (per Barwick CJ) and 252 (per Menzies J)) sufficient to allow it to make any jurisdictional findings that condition the exercise of power sought in the originating application.’

[119] The need to advance probative evidence in support of an application to vary a modern award is particularly important in the context of the Transitional Review. The Transitional Review does not involve a fresh assessment of modern awards unencumbered by previous Tribunal authority, and, as we set out in section 2 of this decision, many of the aspects of the applications before us were the subject of consideration by the AIRC in the award modernisation process. It is also important to recognise that we are dealing with a system in transition. The transitional arrangements in modern awards continue to operate until 1 July 2014. The fact that the transition to modern awards is still occurring militates against the adoption of broad changes to modern awards as part of the Transitional Review. Such changes are more appropriately dealt with in the 4 year review, after the transition process has completed. As we have indicated the Transitional Review is narrower in scope than the 4 yearly reviews provided in s.156 of the Act and, as the June 2012 Full Bench stated, in the context of the Transitional Review:

‘...the Tribunal is unlikely to revisit issues considered as part of the Part 10A award modernisation process unless there are cogent reasons for doing so, such as a significant change in circumstances which warrants a different outcome [[2012] FWAFB 5600 at [99]]’.” [Endnotes omitted]

CONSIDERATION OF THE CLAIMS

[9] Below we summarise the claims before us in respect of each relevant modern award. So far as is possible, we have organised the claims according to the type of amendment proposed. The types of amendment proposed were:

(a) Cashing out of annual leave,

(b) Requirement to take annual leave,

(d) Leave loading provision,

(e) Leave loading calculation,

(f) Leave loading on advanced leave,

(g) Leave loading on termination,

(h) Payment for a period of annual leave,

(i) Definition of a shiftworker, and

(j) Other claims

[10] We turn then to deal with the claims before us.

(a) Cashing out of annual leave

(i) The claims

Ai Group proposal - AM2012/221

[11] The Australian Industry Group’s (Ai Group) application was made with reference to the Manufacturing and Associated Industries and Occupations Award 2010 6 (Manufacturing Award). However, Ai Group seeks a review of flexibility arrangements in all modern awards and the inclusion of its proposed variation in all those awards.

[12] The Award flexibility term in the Manufacturing Award is as follows:

7. Award flexibility

7.1 Notwithstanding any other provision of this award, an employer and an individual employee may agree to vary the application of certain terms of this award to meet the genuine individual needs of the employer and the individual employee. The terms the employer and the individual employee may agree to vary the application of are those concerning:

(a) arrangements for when work is performed;

(b) overtime rates;

(c) penalty rates;

(d) allowances; and

(e) leave loading.

7.2 The employer and the individual employee must have genuinely made the agreement without coercion or duress.

7.3 The agreement between the employer and the individual employee must:

(a) be confined to a variation in the application of one or more of the terms listed in clause 7.1; and

(b) result in the employee being better off overall than the employee would have been if no individual flexibility agreement had been agreed to.

7.4 The agreement between the employer and the individual employee must also:

(a) be in writing, name the parties to the agreement and be signed by the employer and the individual employee and, if the employee is under 18 years of age, the employee’s parent or guardian;

(b) state each term of this award that the employer and the individual employee have agreed to vary;

(c) detail how the application of each term has been varied by agreement between the employer and the individual employee;

(d) detail how the agreement results in the individual employee being better off overall in relation to the individual employee’s terms and conditions of employment; and

(e) state the date the agreement commences to operate.

7.5 The employer must give the individual employee a copy of the agreement and keep the agreement as a time and wages record.

7.6 Except as provided in clause 7.4(a) the agreement must not require the approval or consent of a person other than the employer and the individual employee.

7.7 An employer seeking to enter into an agreement must provide a written proposal to the employee. Where the employee’s understanding of written English is limited the employer must take measures, including translation into an appropriate language, to ensure the employee understands the proposal.

7.8 The agreement may be terminated:

(a) by the employer or the individual 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

(b) at any time, by written agreement between the employer and the individual employee.

7.9 The right to make an agreement pursuant to this clause is in addition to, and is not intended to otherwise affect, any provision for an agreement between an employer and an individual employee contained in any other term of this award.”

[13] The Ai Group’s proposal is to delete the word “and”after paragraph (d) in clause 7.1, and add the following new clauses:

“(f) arrangements for taking leave; and

(g) cashing out of paid annual leave, subject to the conditions in subclause 41.11(b).”

[14] The Ai Group’s proposal also includes an ancillary amendment to the annual leave clause in all modern awards. The example given in their application is that clause 41 of the Manufacturing Award be varied by inserting a new clause 41.11 as follows:

“41.11 Cashing out of annual leave

(a) The employer and the employee must not agree to the employee cashing out a particular amount of the employee’s accrued paid annual leave.

(b) An employer and an employee may agree to an individual flexibility arrangement in accordance with clause 7 of this award, varying the effect of paragraph 41.11(a) subject to the following conditions:

(i) Paid annual leave must not be cashed out if the cashing out would result in the employee’s remaining accrued entitlement to paid annual leave being less than four weeks; and

(ii) Each cashing out of a particular amount of paid annual leave must be by a separate agreement in writing between the employer and the employee; and

(iii) The employee must be paid at least the full amount that would have been payable to the employee had the employee taken the leave that the employee has forgone.”

BIAQ proposal

[15] The Baking Industry Association Queensland - Union of Employers (BIAQ) propose the following awards be varied to include a “cashing out of annual leave” clause:

● Fast Food Industry Award 2010 7 - AM2012/179

● General Retail Industry Award 2010 8 - AM2012/177

● Food, Beverage and Tobacco Manufacturing Award 2010 9 - AM2012/178

● Restaurant Industry Award 2010 10 - AM2012/180

[16] The variation BIAQ seeks is as follows:

“X Cashing out of annual leave

(a) An employer and an employee may agree to the employee cashing out a particular amount of the employee’s accrued paid annual leave.

(b) The employer and the employee must not agree to the employee cashing out an amount of paid annual leave if the agreement would result in the employee’s remaining accrued entitlement to paid annual/eave being less than 4 weeks.

(c) Each agreement to cash out a particular amount of paid annual leave must be a separate agreement in writing.

(d) The employer must pay the employee at least the full amount that would have been payable to the employee had the employee taken the leave that the employee has forgone.”

Aquaculture Industry Award 2010 11 - AM2012/181

[17] The Huon Aquaculture Group Pty Ltd propose that the Seafood Processing Award 2010 12cashing out clause be included in the Aquaculture Industry Award 2010 as follows:

“22.6 Cashing out of annual leave

(a) An employee and an employer can agree to cash out any accrued annual leave of the employee provided that does not result in the employee’s remaining accrued entitlement to paid annual leave being less than four weeks; and

(b) Upon agreement being reached for each cashing out of a particular amount of paid annual leave then that agreement must be recorded by a separate agreement in writing between the employer and the employee; and

(c) The employee must be paid at least the full agreed amount that would have been payable to the employee had the employee taken the leave that the employee has foregone.”

Banking, Finance and Insurance Award 2010 13 - AM2012/256

[18] The Australia and New Zealand Banking Group Limited and others (Banks) propose that the annual leave clause in the Banking, Finance and Insurance Award 2010 be varied to insert the following clause:

“24.6 Cashing out of annual leave

(c) The employee must be paid at least the full agreed amount that would have been payable to the employee had the employee taken the leave that the employee has foregone.”

Building and Construction General On-site Award 2010 14 - AM2012/228

[19] The Housing Industry Association (HIA) propose that the Building and Construction General On-site Award 2010 be varied to include a “cashing out of annual leave” clause as follows:

“38.4 Cashing out of annual leave

An employer and employee may agree to the cashing out of paid annual leave by an employee provided:

(a) the cashing out would not result in the employee’s remaining accrued entitlement to paid annual leave being less than 4 weeks; and

(b) each cashing out of a particular amount of paid annual leave is by a separate agreement in writing between the employer and the employee; and

(c) in cashing out the paid annual leave, the employee is paid at least the full amount that would have been payable to the employee had the employee taken the leave that the employee has forgone.”

General Retail Industry Award 2010 15 - AM2012/8 and AM2012/245

[20] The National Retail Association Ltd (NRA) and the Australian Retailers Association (ARA) propose the following “cashing out of annual leave” clause be inserted into the General Retail Industry Award 2010:

“32.6 Cashing out of Annual Leave

(a) An employer and an employee may agree to the employee cashing out a particular amount of the employee’s accrued paid annual leave.

(c) Each agreement to cash out a particular amount of paid annual leave must be a separate agreement in writing.

(d) The employer must pay the employee at least the full amount that would have been payable to the employee had the employee taken the leave that the employee has forgone.”

Hair and Beauty Industry Award 2010 16 - AM2012/172

[21] The Hair and Beauty Industry Association (HBIA) seeks to vary clause 33 of the Hair and Beauty Industry Award 2010 to insert a new clause for “cashing out of annual leave” as follows:

“33.6 Cashing out annual leave

(a) An employer and an employee may agree to the employee cashing out a particular amount of the employee’s accrued paid annual leave.

(c) Each agreement to cash out a particular amount of paid annual leave must be a separate agreement in writing.

(d) The employer must pay the employee at least the full amount that would have been payable to the employee had the employee taken the leave that the employee has forgone.”

Hospitality Industry (General) Award 2010 17 - AM2012/204

[22] The Accommodation Association of Australia (AAA) propose the insertion of a cashing out of annual leave clause in the Hospitality Industry (General) Award 2010 as follows:

“34.5 Cashing out of paid annual leave

Paid annual leave may be cashed out by an employee provided that the following circumstances are met:

(a) the employee and employer must make a separate agreement in writing to cash out each amount of paid annual leave;

(b) a balance of no less than four weeks’ annual leave must remain; and

(c) the particular amount of paid annual leave cashed out must be at least the full amount that would have been payable to the employee had the employee taken the annual leave foregone.”

Labour Market Assistance Industry Award 2010 18- AM2012/35

[23] The National Employment Services Association (NESA) propose the following clause be inserted into the Labour Market Assistance Industry Award 2010:

“25.5 Cashing out annual leave

(a) An employer and an employee may agree in writing to the cashing out of paid annual leave to a maximum of two weeks per year.

(b) The terms of the agreement must require that:

(i) paid annual leave must not be cashed out if the cashing out would result in the employee’s remaining accrued entitlement to paid annual leave being less than 4 weeks; and.

(ii) each cashing out of a particular amount of paid annual leave must be by a separate agreement in writing between the employer and the employee; and

(iii) the employee must be paid at least the full amount that would have been payable to the employee had the employee taken the leave that the employee has forgone.”

Pharmacy Industry Award 2010 19 - AM2012/36

[24] The Pharmacy Guild of Australia (PGA) propose the following clause be inserted into the annual leave clause of the Pharmacy Industry Award 2010:

“29.6 Cashing out of annual leave

(a) An employee and an employer may agree to cash out any accrued annual leave of the employee provided that does not result in the employee’s remaining accrued entitlement to paid annual leave being less than four weeks; and

(c) The employee must be paid at least the full agreed amount that would have been payable to the employee had the employee taken the leave that the employee has foregone.”

Plumbing and Fire Sprinklers Award 2010 20 - AM2012/202

[25] The Master Plumbers’ and Mechanical Services Association of Australia (MPMSAA) propose that the following clause be inserted into the Plumbing and Fire Sprinklers Award 2010:

“34.5 In accordance with the NES, the employer and an employee may agree in writing to cash out a particular amount of accrued paid annual/eave provided that the employee retains at least four (4) weeks of annual leave. Cashed out leave will be paid at the amount that would have been payable to the employee had the employee taken the leave.”

Waste Management Award 2010 21 - AM2012/216

[26] The Waste Contractors & Recyclers Association of NSW (WCRA) seeks to insert a “cashing out of annual leave” clause in the Waste Management Award 2010 as follows:

“33.3 Cashing out of accrued annual leave

(a) Subject to the provisions of the Fair Work Act 2009 (Cth) and this clause, an employer and an employee may agree to the employee cashing out a particular amount of the employee’s accrued untaken paid annual leave.

(b) Each cashing out of a particular amount of paid annual leave must be by a separate agreement in writing between the employer and the employee.

(c) The employee must be paid at least the full amount that would have been payable to the employee had the employee taken the leave that the employee has forgone.

(d) In any one year period, the particular amount of paid annual leave which may be agreed to be cashed out must not exceed ten (10) days.

(e) The total amount of annual leave must not be cashed out if the cashing out would result in the employee’s remaining accrued entitlement to paid annual leave being less than 4 weeks leave.

(f) Annual leave cannot be cashed out in advance of it being credited to the employee.”

ABI proposal

[27] Australian Business Industrial (ABI) proposed that a “cashing out of annual leave” clause be inserted into the following awards:

● Building and Construction General On-site Award 2010 22- AM2012/154

● Clerks—Private Sector Award 2010 23 - AM2012/113

● Graphic Arts, Printing and Publishing Award 2010 24 - AM2012/153

● Health Professionals and Support Services Award 2010 25 - AM2012/163

● Joinery and Building Trades Award 2010 26 - AM2012/106

● Nursery Award 2010 27 - AM2012/151

● Vehicle Manufacturing, Repair, Services and Retail Award 2010 28 - AM2012/108

[28] However, this part of the ABI application was withdrawn during the hearing before the Full Bench on 22 April 2013. 29

Legal Services Award 2010 30 - AM2012/145

[29] Allens Linklaters and others (Law Firms) proposed the insertion of a cashing out of annual leave clause in the Legal Services Award 2010. However, this part of their application was withdrawn on 23 April 2013.

Wine Industry Award 2010 31 - AM2012/158

[30] The South Australian Wine Industry Association Incorporated (SAWIAI) proposed an amendment to the annual leave clause in the Wine Industry Award 2010 to include a “cashing out of annual leave” clause. This part of their application was subsequently withdrawn on 24 April 2013.

(ii) Submissions

[31] In support of their proposed variations to the award flexibility clause in modern awards in respect of the cashing out of paid annual leave and ancillary amendments, the Ai Group submitted:

● the limited nature of the model award flexibility clause has led to modern awards not operating effectively as it prevents individual employees and their employers entering into individual flexibility agreements about one of the subject matters which is widely associated with flexible work arrangements and a widely recognised means of assisting employees to balance their work and family/life responsibilities, fails to reflect the legislature’s intent that award-covered employees have access to arrangements for the cashing out of annual leave, and is inconsistent with important objects set out in the Fair Work Act 2009 (Cth) (FW Act);

● the model award flexibility term includes anomalies and technical problems as it was determined prior to relevant provisions of the FW Act being determined, does not include leave, and does not include provisions available to award-free employees;

● the variations are necessary to enable modern awards to achieve the modern awards objective; and

● the above submissions also provide cogent reasons for making the variations sought.

[32] The AI Group referred to evidence that their members often telephone them for advice following queries from employees about cashing out a proportion of their annual leave.

[33] The submissions by employer bodies in support of the other variations seeking a specific cashing out of annual leave clause were that it will:

● allow employees access to an additional option to manage their affairs while appropriately balancing the need for rest and recreation;

● facilitate a consistent approach to cashing out of annual leave regardless of the applicable industrial instrument;

● assist in the management of contingent liabilities;

● mirror a common feature in some other enterprise agreements; and

● achieve the modern awards objective, particularly in respect of modern work practices.

[34] The cashing out of annual leave variations sought were opposed by the Australian Council of Trade Unions (ACTU), the “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU) (AMWU), The Association of Professional Engineers, Scientists and Managers, Australia (APESMA), the Australian Municipal, Administrative, Clerical and Services Union (ASU), The Australian Workers’ Union (AWU), the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU), the Construction, Forestry, Mining and Energy Union (CFMEU), the Finance Sector Union of Australia (FSU), the Shop, Distributive and Allied Employees Association (SDAEA), and the Textile, Clothing and Footwear Union of Australia (TCFUA) on the bases that:

● the industrial merit of annual leave is in its capacity to provide actual recreation time to employees;

● the issue of cashing out of annual leave was considered by the award modernisation Full Bench of the Australian Industrial Relations Commission (AIRC) as part of the Part 10A award modernisation process;

● once an employee reaches the relevant threshold of annual leave accrual, the employee can serially cash out their entitlement without ever taking annual leave;

● cashing out of annual leave is achievable through enterprise bargaining;

● sections 92 and 93 of the FW Act are permissive only;

● no fundamental changes since the modern awards were made warranting the cashing out of annual leave variations have been identified;

● cashing out of annual leave for employees in financial hardship is not an appropriate modern award remedy for the hardship;

● including cashing out of annual leave in the award flexibility term would require that the employee be better off overall because of the inclusion of such a test in the term;

● cashing out of annual leave was not included in the Labour Market Assistance Industry Award 2010 published in December 2009 despite the specific request by NESA to the Full Bench before that modern award was made for such cashing out to be included in it; and

● in determining the award flexibility term the Full Bench of the AIRC specifically recognised that to the extent modern awards include terms about the National Employment Standards (NES) such terms should deal directly with any flexibility issue in relation to the NES entitlement.

(iii) Consideration

[35] The NES deal with annual leave as follows:

“86 Division applies to employees other than casual employees

This Division applies to employees, other than casual employees.

87 Entitlement to annual leave

Amount of leave

(1) For each year of service with his or her employer, an employee is entitled to:

(a) 4 weeks of paid annual leave; or

(b) 5 weeks of paid annual leave, if:

(i) a modern award applies to the employee and defines or describes the employee as a shiftworker for the purposes of the National Employment Standards; or

(ii) an enterprise agreement applies to the employee and defines or describes the employee as a shiftworker for the purposes of the National Employment Standards; or

(iii) the employee qualifies for the shiftworker annual leave entitlement under subsection (3) (this relates to award/agreement free employees).

Note: Section 196 affects whether the FWC may approve an enterprise agreement covering an employee, if the employee is covered by a modern award that is in operation and defines or describes the employee as a shiftworker for the purposes of the National Employment Standards.

Accrual of leave

(2) An employee’s entitlement to paid annual leave accrues progressively during a year of service according to the employee’s ordinary hours of work, and accumulates from year to year.

Note: If an employee’s employment ends during what would otherwise have been a year of service, the employee accrues paid annual leave up to when the employment ends.

Award/agreement free employees who qualify for the shiftworker entitlement

(3) An award/agreement free employee qualifies for the shiftworker annual leave entitlement if:

(a) the employee:

(i) is employed in an enterprise in which shifts are continuously rostered 24 hours a day for 7 days a week; and

(ii) is regularly rostered to work those shifts; and

(iii) regularly works on Sundays and public holidays; or

(b) the employee is in a class of employees prescribed by the regulations as shiftworkers for the purposes of the National Employment Standards.

(4) However, an employee referred to in subsection (3) does not qualify for the shiftworker annual leave entitlement if the employee is in a class of employees prescribed by the regulations as not being qualified for that entitlement.

(5) Without limiting the way in which a class may be described for the purposes of paragraph (3)(b) or subsection (4), the class may be described by reference to one or more of the following:

(a) a particular industry or part of an industry;

(b) a particular kind of work;

88 Taking paid annual leave

(1) Paid annual leave may be taken for a period agreed between an employee and his or her employer.

(2) The employer must not unreasonably refuse to agree to a request by the employee to take paid annual leave.

89 Employee not taken to be on paid annual leave at certain times

Public holidays

(1) If the period during which an employee takes paid annual leave includes a day or part-day that is a public holiday in the place where the employee is based for work purposes, the employee is taken not to be on paid annual leave on that public holiday.

Other periods of leave

(2) If the period during which an employee takes paid annual leave includes a period of any other leave (other than unpaid parental leave) under this Part, or a period of absence from employment under Division 8 (which deals with community service leave), the employee is taken not to be on paid annual leave for the period of that other leave or absence.

90 Payment for annual leave

(1) If, in accordance with this Division, an employee takes a period of paid annual leave, the employer must pay the employee at the employee’s base rate of pay for the employee’s ordinary hours of work in the period.

(2) If, when the employment of an employee ends, the employee has a period of untaken paid annual leave, the employer must pay the employee the amount that would have been payable to the employee had the employee taken that period of leave.

91 Transfer of employment situations that affect entitlement to payment for period of untaken paid annual leave

Transfer of employment situation in which employer may decide not to recognise employee’s service with first employer

(1) Subsection 22(5) does not apply (for the purpose of this Division) to a transfer of employment between non-associated entities in relation to an employee, if the second employer decides not to recognise the employee’s service with the first employer (for the purpose of this Division).

Employee is not entitled to payment for untaken annual leave if service with first employer counts as service with second employer

(2) If subsection 22(5) applies (for the purpose of this Division) to a transfer of employment in relation to an employee, the employee is not entitled to be paid an amount under subsection 90(2) for a period of untaken paid annual leave.

Note: Subsection 22(5) provides that, generally, if there is a transfer of employment, service with the first employer counts as service with the second employer.

92 Paid annual leave must not be cashed out except in accordance with permitted cashing out terms

Paid annual leave must not be cashed out, except in accordance with:

(a) cashing out terms included in a modern award or enterprise agreement under section 93, or

(b) an agreement between an employer and an award/agreement free employee under subsection 94(1).

93 Modern awards and enterprise agreements may include terms relating to cashing out and taking paid annual leave

Terms about cashing out paid annual leave

(1) A modern award or enterprise agreement may include terms providing for the cashing out of paid annual leave by an employee.

(2) The terms must require that:

(a) paid annual leave must not be cashed out if the cashing out would result in the employee’s remaining accrued entitlement to paid annual leave being less than 4 weeks; and

(b) each cashing out of a particular amount of paid annual leave must be by a separate agreement in writing between the employer and the employee; and

(c) the employee must be paid at least the full amount that would have been payable to the employee had the employee taken the leave that the employee has forgone.

Terms about requirements to take paid annual leave

(3) A modern award or enterprise agreement may include terms requiring an employee, or allowing for an employee to be required, to take paid annual leave in particular circumstances, but only if the requirement is reasonable.

Terms about taking paid annual leave

(4) A modern award or enterprise agreement may include terms otherwise dealing with the taking of paid annual leave.

94 Cashing out and taking paid annual leave for award/agreement free employees

Agreements to cash out paid annual leave

(1) An employer and an award/agreement free employee may agree to the employee cashing out a particular amount of the employee’s accrued paid annual leave.

(2) The employer and the employee must not agree to the employee cashing out an amount of paid annual leave if the agreement would result in the employee’s remaining accrued entitlement to paid annual leave being less than 4 weeks.

(3) Each agreement to cash out a particular amount of paid annual leave must be a separate agreement in writing.

(4) The employer must pay the employee at least the full amount that would have been payable to the employee had the employee taken the leave that the employee has forgone.

Requirements to take paid annual leave

(5) An employer may require an award/agreement free employee to take a period of paid annual leave, but only if the requirement is reasonable.

Note: A requirement to take paid annual leave may be reasonable if, for example:

(a) the employee has accrued an excessive amount of paid annual leave; or

(b) the employer’s enterprise is being shut down for a period (for example, between Christmas and New Year).

Agreements about taking paid annual leave

(6) An employer and an award/agreement free employee may agree on when and how paid annual leave may be taken by the employee.

Note: Matters that could be agreed include, for example, the following:

(a) that paid annual leave may be taken in advance of accrual;

(b) that paid annual leave must be taken within a fixed period of time after it is accrued;

(d) that a specified period of notice must be given before taking paid annual leave.”

[36] The interaction between the NES and modern awards is dealt with in s.55 of the FW Act as follows:

“55 Interaction between the National Employment Standards and a modern award or enterprise agreement

National Employment Standards must not be excluded

(1) A modern award or enterprise agreement must not exclude the National Employment Standards or any provision of the National Employment Standards.

Terms expressly permitted by Part 2-2 or regulations may be included

(2) A modern award or enterprise agreement may include any terms that the award or agreement is expressly permitted to include:

(a) by a provision of Part 2-2 (which deals with the National Employment Standards); or

(b) by regulations made for the purposes of section 127.

Note: In determining what is permitted to be included in a modern award or enterprise agreement by a provision referred to in paragraph (a), any regulations made for the purpose of section 127 that expressly prohibit certain terms must be taken into account.

(3) The National Employment Standards have effect subject to terms included in a modern award or enterprise agreement as referred to in subsection (2).

Note: See also the note to section 63 (which deals with the effect of averaging arrangements).

Ancillary and supplementary terms may be included

(4) A modern award or enterprise agreement may also include the following kinds of terms:

(a) terms that are ancillary or incidental to the operation of an entitlement of an employee under the National Employment Standards;

(b) terms that supplement the National Employment Standards;

but only to the extent that the effect of those terms is not detrimental to an employee in any respect, when compared to the National Employment Standards.

Note 1: Ancillary or incidental terms permitted by paragraph (a) include (for example) terms:

(a) under which, instead of taking paid annual leave at the rate of pay required by section 90, an employee may take twice as much leave at half that rate of pay; or

(b) that specify when payment under section 90 for paid annual leave must be made.

Note 2: Supplementary terms permitted by paragraph (b) include (for example) terms:

(a) that increase the amount of paid annual leave to which an employee is entitled beyond the number of weeks that applies under section 87; or

(b) that provide for an employee to be paid for taking a period of paid annual leave or paid/personal carer’s leave at a rate of pay that is higher than the employee’s base rate of pay (which is the rate required by sections 90 and 99).

Note 3: Terms that would not be permitted by paragraph (a) or (b) include (for example) terms requiring an employee to give more notice of the taking of unpaid parental leave than is required by section 74.

Enterprise agreements may include terms that have the same effect as provisions of the National Employment Standards

(5) An enterprise agreement may include terms that have the same (or substantially the same) effect as provisions of the National Employment Standards, whether or not ancillary or supplementary terms are included as referred to in subsection (4).

Effect of terms that give an employee the same entitlement as under the National Employment Standards

(6) To avoid doubt, if a modern award includes terms permitted by subsection (4), or an enterprise agreement includes terms permitted by subsection (4) or (5), then, to the extent that the terms give an employee an entitlement (the award or agreement entitlement) that is the same as an entitlement (the NES entitlement) of the employee under the National Employment Standards:

(a) those terms operate in parallel with the employee’s NES entitlement, but not so as to give the employee a double benefit; and

(b) the provisions of the National Employment Standards relating to the NES entitlement apply, as a minimum standard, to the award or agreement entitlement.

Note: For example, if the award or agreement entitlement is to 6 weeks of paid annual leave per year, the provisions of the National Employment Standards relating to the accrual and taking of paid annual leave will apply, as a minimum standard, to 4 weeks of that leave.

Terms permitted by subsection (4) or (5) do not contravene subsection (1)

(7) To the extent that a term of a modern award or enterprise agreement is permitted by subsection (4) or (5), the term does not contravene subsection (1).

Note: A term of a modern award has no effect to the extent that it contravenes this section (see section 56). An enterprise agreement that includes a term that contravenes this section must not be approved (see section 186) and a term of an enterprise agreement has no effect to the extent that it contravenes this section (see section 56).”

[37] In its decision associated with the publishing of the modern awards for the priority industries on 19 December 2008 (the December 2008 Full Bench decision), 32 the award modernisation Full Bench considered a number of general issues and standard clauses in respect of modern awards. In respect of annual leave the Full Bench said:

“GENERAL ISSUES AND STANDARD CLAUSES

[11] We deal in this section with a large number of issues of general importance for the content of modern awards and, in particular, the content of standard clauses. We shall not deal with the same issues in later sections of the decision unless it is necessary to do so. Many matters not dealt with in this section are discussed in the context of the industry or occupation concerned in the next section of this decision…

Annual leave

[95] As we noted in our statement of 12 September 2008, it has not been possible to develop a single model clause for annual leave. While some parties have sought greater uniformity in the area, there is a wide range of differing provisions in the awards and NAPSAs that we are dealing with. In many cases the provisions are more generous to employees than the provisions of the NES. Areas in which this can be observed are the quantum of holiday pay, leave loading and the definition of shift worker. In considering what should be included in the modern award on each of these matters we have attempted to identify or formulate a standard entitlement in the area covered by the modern award rather than preserving a range of differing entitlements. This involves a degree of rationalisation at the award level only and will not result in standard provisions across all awards.

[96] There are also some issues concerning the time of taking leave. The time of taking leave is referred to in para. 33 of the consolidated request and s.36(1)(b) of the NES. Section 36(1)(b) reads:

‘36 Modern awards may include certain kinds of provisions

(1) A modern award may include provisions of any of the following kinds:

… …

(b) provisions requiring an employee (or allowing for an employee to be required) to take paid annual leave in particular circumstances;

… …’

[97] The provisions in awards and NAPSAs governing annual close-downs vary significantly. It is preferable that we do not alter provisions which have been specifically developed for particular industries. We have adopted the approach of attempting to identify an industry standard in each case. This means there may be some variation in the close-down provisions.

[98] One issue that has arisen repeatedly, and is provided for in the NES, is the right of an employer to require that an employee take arrears of annual leave. We think that an employer should have the ability to reduce annual leave liability by compelling employees to take annual leave provided appropriate notice is given. While there may be different approaches to this question, in each of the awards there will be some provision which will give the employer the ability to take action to reduce arrears.

[99] A number of employer interests sought provisions for cashing out of annual leave by agreement. Such arrangements are apparently included in many Australian Workplace Agreements (AWAs) and workplace agreements. Should cashing out of annual leave become widespread it would undermine the purpose of annual leave and give rise to questions about the amount of annual leave to be prescribed. We think some caution is appropriate when dealing with this issue at the safety net level. We do not intend to adopt a model provision. Consistent with our approach to annual leave provisions generally we shall be influenced mainly by prevailing industry standards, and the views of the parties, in addressing this issue.

[100] It has also been suggested that if awards do not provide for cashing out of annual leave it will not be legally permissible to make workplace agreements which provide for cashing out. In our opinion cashing out arrangements are an appropriate matter for bargaining. If, when the legislative regime is settled, it is apparent that workplace agreements cannot provide for cashing out of annual leave unless there is a relevant provision in a modern award it may be necessary to revisit the question.” 33

[38] Then in its May 2009 Full Bench statement 34 associated with the releasing of the exposure drafts of the modern awards for the Stage 3 industries, the award modernisation Full Bench said the following in respect of cashing out of annual leave in the exposure draft for the Tourism industry:

“Tourism industry…

[222] We decided not to include in the draft provisions for annualisation of salaries or cashing out of annual leave. Such arrangements are not common in the awards applicable to the alpine resort and snow sports industry. We have also decided not to make any special provision in relation to alpine resorts management boards. We have provisionally decided to include employees who perform hospitality and childcare duties. Nonetheless we would be assisted by further submissions on that matter.” 35

[39] The exposure draft of the Seafood Processing Award 2010 contained a cashing out of annual leave clause in respect of which the award modernisation Full Bench said the following:

“Food, beverages and tobacco industry (manufacturing)…

[90] A Seafood Processing Award 2010 exposure draft has also been developed based on the substantively agreed draft award proposed by numerous seafood organisations representing employers in the seafood processing industry, the AWU and the NUW.” 36

[40] In its September 2009 Full Bench decision 37 associated with the publishing of the modern awards for the Stage 3 industries, the award modernisation Full Bench said the following in respect of cashing out of annual leave in respect of several industries:

“Journalism…

[116] The employers requested that a provision allowing for the cashing out of annual leave be included in the modern award, reflecting the same arrangement as provided for in the Fair Work Act 2009 (Fair Work Act). Journalists receive more than the standard amount of annual leave and tend to accrue large amounts. The cashing out of annual leave is apparently a common request by employees. Nevertheless we have decided not to include a provision for cashing out of annual leave, consistent with our earlier decisions…

Wholesale and retail trade (wholesale) and commercial travellers…

[276] The Commercial Radio Association sought a provision for the cashing-out of annual leave. This position was supported by the media interests. There is no such provision in the current awards or NAPSAs and we have decided not to provide for it. We note that we have adopted the standard motor vehicle allowance in lieu of the rather complicated formula in the exposure draft. Should this give rise to unforeseen difficulties the issue can be reconsidered at a later stage.” 38

[41] The award flexibility term of modern awards was recently considered by a Full Bench of the FWC in Modern Awards Review 2012—Award Flexibility 39 (the 2012 Award Flexibility decision). In the 2012 Award Flexibility decision, the Full Bench traced the background to the award flexibility term in the modern awards prior to its decision. Relevantly, the Full Bench said:

“[16] The AIRC was required to prepare a model flexibility clause as part of the award modernisation process. The objectives of the clause were set out in the Ministerial request of 28 March 2008 and subsequently varied on 18 December 2008 and 2 May 2009…

[18] On 20 June 2008 a Full Bench decision of the AIRC dealt with the matters identified as priority tasks, including the determination of the model flexibility clause. The detailed reasons in support of the draft model clause are set out at paragraphs [155] - [192] of that decision. In the course of its reasons the Full Bench identified the differing views on a number of the features of the proposed clause. The aspects of the Full Bench decision which go to the scope of the clause and a number of ancillary matters are particularly relevant in the context of the applications before us. As to the scope of the proposed model clause the Full Bench said:

‘[166] The next issue concerns the clauses of the award in relation to which agreements might be made under the model clause. The ACTU suggested that we should not specify the types of clauses to which the model clause could apply, leaving that matter for consideration in relation to each model award. We do not think this is a sustainable approach. If it were accepted it would leave open for debate at some future time matters which we are able to decide now and thereby unnecessarily prolong the making of modern awards. Parties are entitled to whatever certainty about the operation of the model provision we can give at this point.

[167] Section 576J(1) provides that a modern award may include terms about a number of matters, as follows:

“576J Matters that may be dealt with by modern awards

General

(1) A modern award may include terms about any of the following matters:

(a) minimum wages (including wage rates for junior employees, employees with a disability and employees to whom training arrangements apply), and:

(i) skill-based classifications and career structures; and

(ii) incentive-based payments, piece rates and bonuses;

Note: Employee with a disability and junior employee are defined in subsection (3).

(b) type of employment, such as full-time employment, casual employment, regular part-time employment and shift work, and the facilitation of flexible working arrangements, particularly for employees with family responsibilities;

(c) arrangements for when work is performed, including hours of work, rostering, notice periods, rest breaks and variations to working hours;

(d) overtime rates;

(e) penalty rates, including for any of the following:

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

(ii) employees working on weekends or public holidays;

(iii) shift workers;

(f) annualised wage or salary 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, or salaries, and other monetary entitlements; and

(iii) include appropriate safeguards to ensure that individual employees are not disadvantaged;

(g) allowances, including for any of the following:

(i) expenses incurred in the course of employment;

(ii) responsibilities or skills that are not taken into account in rates of pay;

(iii) disabilities associated with the performance of particular tasks or work in particular conditions or locations;

(h) leave, leave loadings and arrangements for taking leave;

(i) superannuation;

(j) procedures for consultation, representation and dispute settlement.”

[168] Dealing first with s.576J(1)(a), minimum wages, we note that there is another award matter which deals with flexibility in relation to wages. Pursuant to s.576J(1)(f) awards may include terms about annual wage and salary arrangements, including alternatives to the separate payment of wages or salaries and other monetary entitlements. Award terms made under that paragraph must include appropriate safeguards to ensure that individual employees are not disadvantaged. In light of the fact that separate provision is made for flexibility in relation to the way in which wages, salaries and other monetary entitlements may be paid it is unnecessary to include terms about minimum wages in the model clause. Indeed it may be inappropriate to do so. It is difficult to see how the trading-off of minimum wages against other benefits could meet a genuine need for individual flexibility without at the same time weakening the function of the award as a safety net in an unacceptable way. There does not appear to be any sound basis for including award terms about minimum wages within the operation of the model clause. It follows also that award terms made under s.576J(1)(f), which is itself a flexibility provision, should not be included in the operation of the model flexibility clause either. We should emphasize that by excluding minimum wages from the model clause we obviously do not intend to limit arrangements which increase wages. Our concern is to guard against minimum wages being traded off.

[169] In relation to s.576J(1)(b), type of employment, award terms made under that section may include “the facilitation of flexible working arrangements, particularly for employees with family responsibilities.” Modern award terms about such matters will by definition provide for flexibility in the manner prescribed. For this reason there is no need to include award terms dealing with type of employment in the model clause.

[170] Award terms dealing with arrangements for when work is performed (paragraph (c)), overtime rates (paragraph (d)), penalty rates (paragraph (e)) and allowances (paragraph (g)) should all be brought within the operation of the model clause.

[171] Award terms of the kind described in s.576J(1)(h) require closer consideration. Generally speaking leave matters, although not leave loading, are dealt with in the NES. The interaction between the NES and modern awards is dealt with in cll. 28 to 46 of the Minister’s request. At this stage we would not be prepared to include any of the matters to be dealt with by the NES in the model flexibility clause. There are several reasons.

[172] The first point is that it is not clear what scope there will be for variation in the operation of the NES at the modern award level. Until the NES have been dealt with in the modern award concerned there will necessarily be uncertainty in relation to a number of aspects of their operation. It would not be prudent to make any provision for variation of NES terms at this stage. But there are other cogent reasons for caution. Clause 30 of the request provides that a modern award cannot exclude the NES or any provision of the NES. Clause 31 provides that a modern award may include industry specific detail about matters in the NES. Clause 32 provides that a modern award may supplement the NES in some circumstances. Clause 33 provides that particular types of provisions are able to be included in modern awards even though they might otherwise be inconsistent with the NES. It would seem to follow from these provisions that to the extent that modern awards will include terms about the NES those terms would deal directly with any flexibility issue in relation to the relevant NES entitlement.

[173] Returning to the terms of s.576J(1)(h), and with those considerations in mind, the only matter dealt with in that section which is appropriate for inclusion in the operation of the model clause at this stage is leave loading.

[174] The remaining award matters are superannuation (paragraph (i)) and procedures for consultation, representation and dispute settlement (paragraph (j)). There is a significant degree of uncertainty about the operation of any modern award clause dealing with superannuation and its relationship with relevant legislation. This is not an area in which the scope for flexibility is immediately apparent in any event. Modern award terms dealing with consultation, etc will require to be simple and flexible since they will necessarily have application in a wide range of circumstances. To include such terms in the operation of the model clause would be likely to add complexity and unnecessary regulation rather than increase flexibility. We do not regard either of these matters as appropriate for inclusion in the scope of the model clause.

[175] In summary, the award terms which might be included within the scope of the model flexibility clause are:

• arrangements for when work is performed;

• overtime rates;

• penalty rates;

• allowances; and

• leave loading.

[176] Before leaving the matters to be included in the model clause there is another question to be considered – whether limits should be put on the flexibility available in relation to the particular award terms we have specified. That approach has some attraction in that it would provide some additional protections for employees. The difficulty with the proposal is that the limitations might not be appropriate in all circumstances and their adoption might lead to unfairness to employers and employees in some cases. Bearing in mind that the clause will have the potential to apply in a very broad range of cases it would be undesirable to place limits on what the parties might agree as appropriate to their needs. On balance we think that additional restrictions would be too prescriptive and the other protections the clause will contain should be adequate.’

[19] Three things may be said about the Full Bench’s decision with respect to the scope of the model flexibility clause…

[21] Second, in relation to s.576J(1)(h) - leave, leave loading and arrangements for taking leave, the Full Bench noted that generally speaking leave matters, other than leave loading, are dealt with in the NES. At that stage the Full Bench was not prepared to include any of the matters dealt with in the NES in the model flexibility clause for the reasons stated at paragraph [172] of its decision.

[22] Flexibility in respect of leave and arrangements for taking leave are not before us and are being dealt with by another Full Bench constituted to specifically deal with Transitional Review applications relating to annual leave…

[25] A draft model clause was attached to the Full Bench’s decision of 20 June 2008. In a subsequent statement issued on 12 September 2008 the AIRC slightly modified the model clause:

‘Award Flexibility

[17] With one exception we have not found it necessary to modify the substance of the model award flexibility clause in any of the drafts. To put the intended operation of the clause beyond doubt we have included the words “Notwithstanding any other provision of this award” at the start of the model clause. The draft award flexibility clause in the exposure draft for the textile, clothing, footwear and associated industries contains some modifications directed to the nature of employment in that industry. They deal with translation and time for consideration of proposed agreements.’

[26] The model clause was subsequently modified in December 2008 and 3 April 2009 to take account of submissions from interested parties, amendments to the Ministers Request and legislative change.

[27] The current model clause is in the following terms:

‘7. Award flexibility