Modern Awards Review 2012 - Transitional Provisions - [2013] FWCFB 4539

[2013] FWCFB 4539

The attached document replaces the document previously issued with the above code on 18 July 2013.

Schedule B of the Decision has been amended.

Nathan Hill

Associate to Vice President Hatcher.

Dated 18 July 2013.

[2013] FWCFB 4539

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
Sch. 5, Item 7 - Review of transitional arrangements in modern awards
Review of all modern awards (other than modern enterprise and State PS awards) after first 2 years

Modern Awards Review 2012 - Transitional Provisions
(AM2012/41, AM2012/45, AM2012/139, AM2012/142 and AM2012/186)

VICE PRESIDENT HATCHER
SENIOR DEPUTY PRESIDENT ACTON
COMMISSIONER JOHNS

SYDNEY, 18 JULY 2013

Modern Awards Review 2012 - Transitional Provisions.

Introduction

[1] This Full Bench has been constituted to hear and determine a number of applications to vary transitional provisions in modern awards. Those applications have been advanced under items 6 and 7 of Schedule 5 to the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Transitional Act). Under item 6 of Schedule 5, the Commission is required to undertake a review of modern awards as soon as practicable after the second anniversary of their commencement. In that review, the Commission must consider whether modern awards achieve the modern awards objective and are operating effectively without anomalies or technical problems arising from the award modernisation process, and may vary the awards in any way considered appropriate to remedy any issues identified in the review. Item 7 of Schedule 5 empowers the Commission to review transitional provisions in modern awards in accordance with review terms in those awards and, if considered necessary, vary modern awards as a result of that review.

[2] Four modern awards are the subject of applications before us requiring determination: the Pastoral Award 2010, the Restaurant Industry Award 2010, the Children’s Services Award 2010 and the Educational Services (Teachers) Award 2010.

Background - the Development of Transitional Provisions in Modern Awards

[3] Modern awards are the outcome of an award modernisation process which began as a result of the statutory requirements found in Part XA of the former Workplace Relations Act 1996 (WR Act) and a Ministerial request made pursuant to s.576C of the WR Act and which continued after the commencement of the Fair Work Act 2009 (FW Act) by virtue of item 2(5) of Schedule 5 to the Transitional Act. A fundamental objective of the award modernisation process as mandated by the WR Act was the achievement within the area of employment covered by each modern award of a nationally uniform safety net of terms and conditions of employment within a five year period. Section 576T of the WR Act gave effect to this objective in the following terms:

“576T Terms that contain State-based differences

(1) A modern award must not include terms and conditions of employment that:

(a) are determined by reference to State or Territory boundaries; or

(b) do not have effect in each State and Territory.

(2) Despite subsection (1), a modern award may include terms and conditions of employment of the kind referred to in subsection (1) for a period of up to 5 years starting on the day on which the modern award commences.

(3) If, at the end of the period of 5 years starting on the day on which a modern award commences, the modern award includes terms and conditions of employment of the kind referred to in subsection (1), those terms and conditions of employment cease to have effect at the end of that period.”

[4] In the course of the award modernisation process, a Full Bench of the former Australian Industrial Relations Commission considered at various stages of the process how best to give effect to s.576T. In the Award Modernisation Decision of 3 April 2009¹, the Full Bench identified the need for transitional provisions as an adjunct to the establishment of a uniform safety net, saying:

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

[5] After determining to establish a separate programme to deal with transitional provisions, the Full Bench then stated two principles to apply to its process of determination in that respect:

“[25] There are two important matters of principle which deserve emphasis. First, we remain of the view, expressed by the Commission in its 19 December 2008 decision, that transitional provisions are better considered after the terms of modern awards are known. There are some cases in which it may be possible to deal with transitional provisions at the same time as the award is being made but these cases will be rare and likely to be limited to particular conditions. As the Commission indicated in its 19 December 2008 decision we shall also consider the overall economic impact of the move to modern awards. The actual cost impact will also be relevant. Secondly, we are concerned that there is a potential for transitional provisions in some awards to be overly-complicated. This is a danger in particular where the modern award is to replace a range of disparate conditions in pre-reform awards and NAPSAs. If transitional provisions are too complicated they will not serve the award modernisation objective and their implementation might be compromised. An approach is required which deals with the net effect of changes in conditions or perhaps which focuses on the main changes.”

[6] The Full Bench next gave significant consideration to s.576T and transitional provisions in its Award Modernisation Decision of 2 September 2009.² In that decision, the Full Bench firstly identified the problem required to be addressed by transitional provisions in the following terms:

“[5] Various parties have pointed to the impact of modern award provisions. The parties largely addressed this matter on the basis of a comparison between existing and proposed award obligations rather than the impact of the modern award on actual terms and conditions. Even so, it is clear that some award conditions will increase, leading to cost increases, and others will decrease, leading to potential disadvantage for employees, depending upon the current award coverage. The creation of modern awards which will constitute the award elements of the safety net necessarily involves striking a balance as to appropriate safety net terms and conditions in light of diverse award arrangements that currently apply. It is in that context that the formulation of appropriate transitional provisions arises.”

[7] The Full Bench, having considered various alternatives proposed by the parties making submissions before it, then determined that it would establish model transitional provisions, stating:

“[18] It was also submitted that we should adopt a uniform approach to transitional provisions. Some parties suggested that we should adopt a set of general principles for the guidance of parties. Some also proposed model transitional clauses. While we have decided not to formulate general principles as such, we nevertheless see benefits in a uniform approach. It is inevitable that transitional provisions will involve a degree of mathematical complexity. It is clearly preferable to reduce the potential complexity by taking steps to ensure that so far as practicable transitional provisions should be of a similar kind. For these reasons we have decided to adopt model transitional provisions. Although we have decided not to introduce a statement of principles, the model provisions will serve a similar purpose. This should minimise the potential for confusion and promote consistency of outcomes. It is our intention that the model provisions be applied generally although some modern awards will require special provisions. While the model provisions can be departed from to meet the circumstances of a particular case, departures should be limited. We add that the adoption of model provisions will reduce the amount of regulation that might otherwise apply to the transition to modern awards. For convenience we shall deal with the model provisions under two headings: the model commencement and transitional clause and the phasing schedule ...”

[8] With respect to the model commencement and transitional clause, the Full Bench formulated three model provisions. The first permitted the absorption of any increases in payments to employees resulting from a modern award, into overaward payments. The model provision was in the following terms 3:

“The monetary obligations imposed on employers by this award may be absorbed into overaward payments. Nothing in this award requires an employer to maintain or increase any overaward payment.”

[9] The second model provision provided protection to existing employees who would suffer a reduction in take-home pay as a result of the modern award coming into operation, and provided 4:

“Neither the making of this award nor the operation of any transitional provision is intended to result in a reduction in the take-home pay of employees covered by the award. On application by or on behalf of an employee who suffers a reduction in take-home pay as a result of the making of this award or the operation of any transitional provision, Fair Work Australia may make any order it considers appropriate to remedy the situation.”

[10] The third model provision provided for the review of transitional provisions, and was intended to constitute a “review term” for the purpose of item 7 of Schedule 5 to the Transitional Act. The Full Bench identified the rationale for the model review term in the following way:

“[22] ...Given the number and diversity of award matters to which the model provisions are capable of applying, it cannot be assumed that they satisfactorily deal with all of the issues which might arise during the transition period.”

[11] The model review provision established by the Full Bench was in the following terms 5:

“2.5 Fair Work Australia may review the transitional arrangements in this award and make a determination varying the award.

2.6 Fair Work Australia may review the transitional arrangements:

(a) on its own initiative; or

(b) on application by an employer, employee, organisation or outworker entity covered by the modern award; or

(c) on application by an organisation that is entitled to represent the industrial interests of one or more employers or employees that are covered by the modern award; or

(d) in relation to outworker arrangements, on application by an organisation that is entitled to represent the industrial interests of one or more outworkers to whom the provisions relate.”

[12] With respect to the establishment of a model phasing schedule, the Full Bench firstly determined to confine the operation of phasing-in to the “main matters effecting pay”, namely minimum wages, including wages for junior employees, employees to whom training arrangements apply and employees with a disability, casual and part-time loadings, and Saturday, Sunday, public holiday, evening and other penalties and shift allowances.⁶ The limitation upon the number of matters to be governed by the phasing provision was intended to “confin[e] the regulatory burden as much as possible” and to “minimise complexity and reduce the scope for confusion”.⁷ In this connection, the Full Bench decided not to include any phasing provision concerning hours of work in the model schedule⁸, and also determined that it would not establish model transitional provisions concerning allowances, stating that:

“[46] ...We have decided not to make model transitional provisions relating to allowances. The differences in the nature and application of allowances across the award system make it difficult to develop general rules. As we have already indicated, where industry allowances exist they will normally need to be taken into account in the phasing arrangements relating to minimum wages. We deal later with some issues related to allowances when considering whether special provisions are needed in particular awards. Where significant issues related to allowances remain unresolved, or unforseen problems arise, the review mechanism is available.”

[13] The Full Bench determined that the transitional provisions would apply uniformly to employers covered by modern awards, and that there would be no distinction between employers under a modern award who had been bound by a pre-modern instrument and those who came into the industry covered by the modern award after 1 January 2010. It said:

“[31]We deal now with the coverage of the transitional provisions. It is desirable that all employers covered by the modern award in question should be bound by the same transitional provisions. So far as practicable, the same minimum obligations should apply to all employers and the same minimum entitlements should apply to all of the employer’s employees. Employers who are obliged by the transitional provisions to pay minimum wages, penalties or loadings higher than those in the modern award during the transition period might be at a significant disadvantage if employers were permitted to come into the industry after 1 January 2010 and operate under the modern award conditions. Such a situation might have serious consequences for competitiveness and perhaps also for employment. There are other examples indicating why there should be a degree of uniformity. The provisions will apply to three identifiable groups of employers. First, they will apply to employers covered by a transitional minimum wage instrument or an award-based transitional instrument immediately prior to 1 January 2010. Secondly, they will apply to employers which would have been covered by such an instrument but for the operation of an agreement-based transitional instrument. Thirdly, they will apply to employers which would have been covered by a transitional minimum wage instrument or an award-based transitional instrument had they been employers in the industry or of the occupations covered by the award immediately prior to 1 January 2010.”

[14] The Full Bench went on to determine that the phasing process for increases and reductions should occur in five instalments occurring on 1 July in each year from 2010 to 2014 inclusive, at a flat rate of 20% per instalment. In respect of minimum wages specifically, the Full Bench said:

“[32] ...it is plain that in some cases minimum wages will have to be increased to reach the modern award standard and in others they will have to be reduced. The approach we have adopted will permit employers to phase-in increases in minimum wages over five years and will require them to phase-in reductions in wages over the same period. The phasing applies to the differential amount only and any increases resulting from a minimum wage review are to be included in minimum wages. We point out again, however, that the transitional provisions will operate subject to the requirement we have already mentioned above that employees do not suffer reductions in take-home pay.”

[15] The model phasing provisions for minimum wages determined by the Full Bench were in the following form⁹:

“A.2 Minimum wages – existing minimum wage lower

A.2.1 The following transitional arrangements apply to an employer which, immediately prior to 1 January 2010:

(a) was obliged,

(b) but for the operation of an agreement-based transitional instrument would have been obliged, or

A.2.2 In this clause minimum wage includes:

(a) a minimum wage for a junior employee, an employee to whom training arrangements apply and an employee with a disability;

(b) a piecework rate; and

(c) any applicable industry allowance.

A.2.3 Prior to the first full pay period on or after 1 July 2010 the employer must pay no less than the minimum wage in the relevant transitional minimum wage instrument and/or award-based transitional instrument for the classification concerned.

A.2.4 The difference between the minimum wage for the classification in this award and the minimum wage in clause A.2.3 is referred to as the transitional amount.

A.2.5 From the following dates the employer must pay no less than the minimum wage for the classification in this award minus the specified proportion of the transitional amount:

First full pay period on or after
1 July 2010	80%
1 July 2011	60%
1 July 2012	40%
1 July 2013	20%

A.2.6 The employer must apply any increase in minimum wages in this award resulting from an annual wage review.

A.2.7 These provisions cease to operate from the beginning of the first full pay period on or after 1 July 2014.

A.3 Minimum wages – existing minimum wage higher

A.3.1 The following transitional arrangements apply to an employer which, immediately prior to 1 January 2010:

(a) was obliged,

(b) but for the operation of an agreement-based transitional instrument would have been obliged, or

A.3.2 In this clause minimum wage includes:

(a) a minimum wage for a junior employee, an employee to whom training arrangements apply and an employee with a disability;

(b) a piecework rate; and

(c) any applicable industry allowance.

A.3.3 Prior to the first full pay period on or after 1 July 2010 the employer must pay no less than the minimum wage in the relevant transitional minimum wage instrument and/or award-based transitional instrument for the classification concerned.

A.3.4 The difference between the minimum wage for the classification in this award and the minimum wage in clause A.3.3 is referred to as the transitional amount.

A.3.5 From the following dates the employer must pay no less than the minimum wage for the classification in this award plus the specified proportion of the transitional amount:

First full pay period on or after
1 July 2010	80%
1 July 2011	60%
1 July 2012	40%
1 July 2013	20%

A.3.6 The employer must apply any increase in minimum wages in this award resulting from an annual wage review. If the transitional amount is equal to or less than any increase in minimum wages resulting from the 2010 annual review the transitional amount is to be set off against the increase and the other provisions of this clause will not apply.

A.3.7 These provisions cease to operate from the beginning of the first full pay period on or after 1 July 2014.”

[16] The Full Bench adopted a similar model provision for loadings and penalty rates¹⁰:

“A.4 Loadings and penalty rates

For the purposes of this schedule loading or penalty means a:

casual or part-time loading;

Saturday, Sunday, public holiday, evening or other penalty;

shift allowance/penalty.

A.5 Loadings and penalty rates – existing loading or penalty rate lower

A.5.1 The following transitional arrangements apply to an employer which, immediately prior to 1 January 2010:

(a) was obliged,

(b) but for the operation of an agreement-based transitional instrument would have been obliged, or

(c) if it had been an employer in the industry or of the occupations covered by this award would have been obliged by the terms of the transitional default casual loading or an award-based transitional instrument to pay a particular loading or penalty lower than that in this award for any classification of employee.

A.5.2 Prior to the first full pay period on or after 1 July 2010 the employer must pay no less than the transitional default casual loading or the loading or penalty in the relevant award-based transitional instrument for the classification concerned.

A.5.3 The difference between the loading or penalty in this award and the rate in clause A.5.2 is referred to as the transitional percentage.

A.5.4 From the following dates the employer must pay no less than the loading or penalty in this award minus the specified proportion of the transitional percentage:

First full pay period on or after
1 July 2010	80%
1 July 2011	60%
1 July 2012	40%
1 July 2013	20%

A.5.5 These provisions cease to operate from the beginning of the first full pay period on or after 1 July 2014.

A.6 Loadings and penalty rates – existing loading or penalty rate higher

A.6.1 The following transitional arrangements apply to an employer which, immediately prior to 1 January 2010:

(a) was obliged,

(b) but for the operation of an agreement-based transitional instrument would have been obliged, or

(c) if it had been an employer in the industry or of the occupations covered by this award would have been obliged by the terms of an award-based transitional instrument to pay a particular loading or penalty higher than that in this award for any classification of employee.

A.6.2 Prior to the first full pay period on or after 1 July 2010 the employer must pay no less than the loading or penalty in the relevant award-based transitional instrument.

A.6.3 The difference between the loading or penalty in this award and the rate in clause A.6.2 is referred to as the transitional percentage.

A.6.4 From the following dates the employer must pay no less than the loading or penalty in this award plus the specified proportion of the transitional percentage:

First full pay period on or after
1 July 2010	80%
1 July 2011	60%
1 July 2012	40%
1 July 2013	20%

A.6.5 These provisions cease to operate from the beginning of the first full pay period on or after 1 July 2014.”

A.7 Loadings and penalty rates – no existing loading or penalty rate

A.7.1 The following transitional arrangements apply to an employer not covered by clause A.5 or A.6 in relation to a particular loading or penalty.

A.7.2 Prior to the first full pay period on or after 1 July 2010 the employer need not pay the loading or penalty in this award.

A.7.3 From the following dates the employer must pay no less than the following percentage of the loading or penalty:

First full pay period on or after
1 July 2010	20%
1 July 2011	40%
1 July 2012	60%
1 July 2013	80%

A.7.4 These provisions cease to operate from the beginning of the first full pay period on or after 1 July 2014.”

[17] The Full Bench made it clear that the phasing arrangements dealt with minimum obligations only, and that employers might already be paying employees in a way which complied with the modern award or might choose to move employees onto modern award pay and conditions ahead of the obligation to do so under transitional provisions. In that connection, the Full Bench adopted an additional model provision to make this clear: “The provisions of this schedule deal with minimum obligations only”.¹¹

[18] The actual transitional provisions in the awards the subject of the applications before us were either determined as part of the 2 September 2009 Award Modernisation Decision (in the case of the Pastoral Award 2010) or in subsequent Full Bench decisions. We will deal with the genesis of the transitional provisions in these awards later in this decision. It is sufficient to note at this point that each of the subject awards contains the model review provision set out in paragraph [11] above as well as transitional provisions that were included as part of the award modernisation process conducted under Part XA of the WR Act.

[19] The final major development in the establishment of model transitional provisions occurred in the Full Bench Award Modernisation - Division 2B State Awards Decision¹²of 5 November 2010. That decision concerned the transition of employees from “Division 2B State awards” to modern awards. Division 2B State awards were notional federal instruments which came into effect under item 3 of Schedule 3A of the Transitional Act as a result of States referring to the Commonwealth after 1 July 2009 but on or before 1 January 2010 their industrial relations powers with respect to employers which were not constitutional corporations and their employees. Division 2B State awards incorporated the provisions of the State awards which previously applied to the employer and employees the subject of the referral, and operated for a period of twelve months only. Since the actual referrals which took place (from New South Wales, Queensland, South Australia and Tasmania) all took effect on 1 January 2010, Division 2B State Awards came into operation on that date and ceased to have effect on 31 December 2010.

[20] The task required to be undertaken by the Full Bench was described in its 5 November 2010 decision in the following way:

“[4] Items 29 and 30 of Schedule 3A provide that during the 12 month life of each Division 2B State award, Fair Work Australia must consider whether to:

(a) vary a modern award to continue the effect of terms of a Division 2B State award; or

(b) make orders to continue the effect of terms of a Division 2B State award relating to long service leave, for a transitional period after the Division 2B State award terminates.

[5] The enactment of these provisions was intended to facilitate the achievement of a national system of workplace relations. They require Fair Work Australia to consider whether additional transitional provisions are necessary for employers and employees covered by the national system pursuant to a State referral.

…

[8]At the outset it should be emphasised that the Transitional Act provides for the commencement of Division 2B State awards on 1 January 2010 and their termination 12 months later. It follows that Fair Work Australia is not considering whether the Division 2B State awards should be terminated. Our task is to consider what transitional provisions should be made. Division 2B State awards will terminate on 31 December 2010, subject to limited exceptions, by force of the statutory provision. At that time the employers and employees who have been subject to the Division 2B State awards other than enterprise awards will commence to be covered by the relevant modern award as operating at that time, subject only to any transitional arrangements established by Fair Work Australia for that purpose and the exceptions we have mentioned above.”

[21] The Full Bench then considered the effect of item 29 of Schedule 3A of the Transitional Act, which required consideration to be given to the variation of modern awards to continue in effect terms of Division 2B State awards. It is sufficient for present purposes to set out the Full Bench’s summary of the effect of item 29:

“[11] As can be seen from the terms of item 29, Fair Work Australia is required to consider, during the 12 month period commencing on 1 January 2010, whether to make a determination varying a modern award under the item. It is implicit in the terms of items 29(1)(a)(i) and (ii) that State-based differences may be maintained. Any determination takes effect on 1 January 2011 and ceases to have effect five years thereafter or at such earlier time as is provided for in the variation.”

[22] After reviewing the development of model transitional provisions in the award modernisation process, the Full Bench determined that it would not depart from the approach taken in respect of those model provisions for the purpose of Division 2B State awards, saying:

“[14] We see no reason to question these conclusions. In particular, and with the benefit of some hindsight, it would not be desirable to alter the scope and nature of the model transitional arrangements at this stage. While there have been departures from the model provisions, the departures have been limited and usually have involved the agreement of the main representatives. Be that as it may, the model arrangements have been in operation for some time and we would not want to disturb them. For that reason, if for no other, we would be reluctant to adopt a different approach for employers and employees presently covered by Division 2B State awards. In addition there are strong reasons of equity for not doing so. Any proposed arrangements for employers and employees covered by Division 2B State awards must be considered in the context of the existing model transitional provisions and the statutory objective that all parties within an industry will ultimately be subject to the same minimum terms of the relevant modern award.”

[23] The Full Bench also pointed to the fact that Division 2B State awards were derived from the same State awards as the transitional minimum wage instruments and State award-based transitional instruments which were dealt with by the model transitional provisions as a significant reason not to depart from the approach already established.¹³ Ultimately, the Full Bench determined that the standard phasing schedule already established for other national system employers should apply to employers then covered by Division 2B State awards, but with some identified exceptions.¹⁴ The primary exception was that the first phase in the model phasing schedule would operate from 1 February 2011. The Full Bench also recognised a further area of exception:

“[29] ...Awards which contain transitional provisions which depart from the model provisions may also require amendment to include reference to Division 2B State award employers and employees.”

[24] Determinations varying modern awards consistently with the principles stated in the Award Modernisation - Division 2B State Awards Decision of 5 November 2010 were issued prior to the end of 2010.

General Approach to the Review

[25] We consider that the primary power to review transitional provisions is that found in item 7 of Schedule 5 to the Transitional Act. Item 7 provides:

“7 Review of transitional arrangements included in modern awards

(1) If:

(a) a modern award includes terms (review terms) under which FWC may review transitional arrangements included in the award; and

(b) the review terms, and the transitional arrangements, were included in the award in the Part 10A award modernisation process;

FWC may:

(d) make a determination varying the award in any way it considers necessary, having regard to that review.

Note: Any variation to the 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).

(2) The review terms are taken to be terms that are permitted to be included in the modern award by Subdivision B of Division 3 of Part 2-3 of the FW Act.”

[26] Item 7 authorises the Fair Work Commission to “review the award in accordance with the review terms”. Apart from prescribing who may make an application for a review, the model review provision (set out in paragraph [11] above) does not limit the scope or nature of the review beyond identifying that the subject matter of the review is the “transitional arrangements in this award”. The action which may be taken arising from the review is identified in item 7(1)(d) as being to “make a determination varying the award in any way it [FWC] considers necessary, having regard to that review”, and is therefore not confined to variation of the transitional provisions.

[27] Where a power is conferred on the basis that it may be exercised as the decision-maker “considers necessary”, that is a grant of power in wide terms involving the exercise of a general discretion.¹⁵ Here, the general discretion is controlled in only two ways. First, in considering what award variation may be “necessary”, the Commission must have regard to the review which it has conducted. A statutory requirement to “have regard” to a matter signifies that the matter “must be treated as a matter of significance in the decision-making process”. 16 In the context of item 7 of Schedule 5 to the Transitional Act, we consider that this means that there must be a logical connection between any findings or conclusions reached as a result of the conduct of the review and any award variations subsequently made. Second, as the aid to construction in the statutory note in item 7 indicates, any variation must otherwise comply with the provisions governing the content of awards contained in the FW Act itself. This includes, importantly, the requirement in s.138 that permitted or mandatory terms may be included in an award only to the extent necessary to achieve the modern awards objective in s.134 and, if applicable, the minimum wages objective in s.284.

[28] However, it must not be forgotten that the exercise which the Commission is empowered to conduct under item 7 and the model provision is a review of the transitional provisions. That is, the Commission is not starting afresh in its consideration of the relevant transitional provisions, but re-examining them in the light of circumstances which have eventuated since the provisions were made in the course of the award modernisation process. The Full Bench’s stated rationale for the making of the model review provision, which we have earlier set out, is consistent with this approach since it indicates that the purpose of the review is to consider whether the transitional provisions have satisfactorily dealt with the issues which have arisen during the transition period. Thus the justification for any change to the transitional provisions must ordinarily be to remedy any problems in the operation of the provisions which are identified as having arisen since they were made. The review is not an opportunity for parties simply to revisit and re-litigate issues which have already been determined in the course of the award modernisation process.

[29] The applicants have generally also relied upon item 6 of Schedule 5 to the Transitional Act in connection with their applications, and a number of parties have referred to what the Full Bench had to say in Modern Awards Review 2012 17 about how that provision should operate. No party contended that item 6 was to be read down by reference to item 7. Item 6 provides:

“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, the FWC 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 the FWC is required to conduct under the FW Act.

(2) In the review, the FWC 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 the FWC from reviewing 2 or more modern awards at the same time.

(3) The FWC may make a determination varying any of the modern awards in any way that the FWC 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 the FWC making a variation under this item, and the minimum wages objective also applies if the variation relates to modern award minimum wages.

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

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

[30] In Modern Awards Review 2012 18, the Full Bench considered the proper approach to be taken to the conduct of a review under item 6 as properly construed, and expressed the following conclusions:

“[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.”

[31] Insofar as item 6 of Schedule 5 applies to these proceedings, we intend to apply these principles in our consideration of the applications before us. As with item 7, those principles make it clear that the required review of award provisions is not simply an opportunity for parties to revisit issues which have already been determined absent some justification based upon subsequent circumstances.

Pastoral Award 2010

[32] The Western Australian Shearing Industry Association Inc (WASIA) and the Western Australian Farmers Federation Industrial Association (WAFFIA) have made applications, expressed in identical terms, for a variation to the transitional provisions of the Pastoral Award 2010 19 (Pastoral Award).

Transitional Provisions in the Pastoral Award

[33] The Pastoral Award applies to all employees throughout the pastoral industry and their employees in the classification set out in the award.²⁰ “Pastoral industry” is defined to include a broad range of activities, relevantly including “the shearing and crutching of sheep and the classing and pressing of wool on farms”.²¹

[34] Clause 2 of the Pastoral Award contains the model transitional provisions concerning absorption of overaward payments²², protection of take-home pay²³ and review of transitional provisions²⁴. Schedule A to the award contains all the model phasing provisions concerning minimum wages, penalties and loadings, and former Division 2B State award employees. It also contains two additional special transitional provisions, including for relevant purposes clause A.9, which provides:

“A.9 Shearing Contractors in Western Australia

A.9.1 For the purpose of this clause shearing contractor means an employer that operates a business as a shearing contractor.

A.9.2 Shearers and Crutchers

(a) Notwithstanding the provisions of clause 48—Hours of work for Shearers and Crutchers in Part 7—Shearing Operations – the following provisions will apply to Shearers and Crutchers employed by shearing contractors in Western Australia:

(i) The ordinary hours of work of Shearers and Crutchers employed by a shearing contractor in Western Australia will be 38 per week.

(ii) Work will be performed in two hour runs with at least a thirty minute break between the first and second run and the third and fourth run and with a one hour break between the second and third run.

(iii) Only in exceptional circumstances, or where there is a desire to finish a shed, will more than four runs be permitted in any day or the breaks prescribed reduced and, if reduced, will not be by less than 20 minutes instead of 30 and 45 minutes instead of 60. Any change to the run times or break periods will only occur by agreement between employer and employees.

A.9.3 Cooks

(a) The ordinary hours of work of Cooks employed by a shearing contractor in Western Australia will be 38 per week.

(b) Cooks should work the hours necessary to provide the meals as required and to clean up after such meals.

A.9.4 Shed hands and Woolpresser-shed hands

Notwithstanding the provisions of clause 50—Hours of work and overtime rates for Shed hands and Woolpresser-shed hands in Part 7—Shearing Operations, the following provisions will apply to Shed hands and Woolpresser-shed hands employed by shearing contractors in Western Australia, the working hours of a Shed hand; Woolpresser or Woolpresser-shed hand (combined duties) will be the same as the working hours of the Shearer or Crutchers with such additional time each day as may be necessary to complete their duties for the day.

A.9.5 Clause A.9 ceases to operate on 1 July 2012.”

[35] The provisions in Schedule A to the Pastoral Award, including clause A.9, were determined by the Full Bench in the Award Modernisation Decision of 2 September 2009²⁵. The Full Bench’s reasons for including clause A.9 in Schedule A to the Pastoral Award were as follows:

“[108]The Pastoralist & Graziers Association, the NFF, the WAFFIA and the Western Australian Shearing Contractors Association (WASCA) sought a transitional provision for shearers and crutchers to ameliorate the impact of the removal of flexibilities currently available to employers under the Shearing Contractors' Award of Western Australia 2003 (Shearing Contractors’ Award). The flexibilities were said to include the capacity for teams to shear on whatever days of the week are required while maintaining award compliance, without additional costs. Transitional provisions were sought which would exempt shearing contractors in Western Australia from Part 7 of the Pastoral Award 2010 for a period of five years. In the alternative they sought transitional provisions which identify and exclude the operation in respect of Western Australian shearing contractors of the most problematic modern award provisions until 2015, permitting greater flexibility in hours arrangements in respect of shearers, crutchers and cooks. The hours of work provision was identified as the major relevant provision.

[109] We accept that the terms of the Pastoral Award 2010 are less flexible than the terms of the Shearing Contractors’ Award, particularly in relation to hours of work. It is nevertheless clear that Western Australian employers have had an advantage over most employers in the industry nationally and that shearers in Western Australia have been disadvantaged in relative terms. While we are not prepared to delay the operation of the totality of the conditions for shearing contractors and their employees in Western Australia, some relief beyond that provided by the model provisions is warranted. We intend to delay the implementation of the working hours provisions, except the requirement for a 38 hour week, until 1 July 2012. That transitional period should provide employers, employees and their representatives with an opportunity to assess the potential effect of the modern award on shearing contractors in Western Australia and to make application to vary the modern award, either on a further transitional basis or substantively, should that be necessary.

[110]The additional provision will broadly reflect the third alternative provision advanced in the joint submission of the WAFFIA and the WASCA. It follows that we have not accepted the primary position of the WAFFIA and the WASCA, which involved a delay in the operation of all of the new conditions for shearing contractors in Western Australia, save for the minimum wages provision. It is relevant to point out again, however, that the model transitional provisions will deal with some of the other cost increases arising from the modern award.”

The application and evidence and submissions in support

[36] The WASIA and the WAFFIA have both applied for a variation in the following terms:

“Delete clause A.9.5 in Schedule A - Transitional Provisions and insert in lieu thereof the following:

A.9.5 Clause A.9 ceases to operate on 31 December 2014.”

[37] The joint submissions of the WASIA and the WAFFIA contended that the period of time allowed by clause A.9.5 to Western Australian shearing contractors to transition to the modern award hours provisions was insufficient to allow employers, employees and their representatives to “disseminate the necessary information in ways that effectively penetrate to rural and remote workplaces”, to give the “opportunity for adequate assessment of the potential effects of the Award on operational matters”, and “to make necessary adjustments to operational practices”. It was further submitted that the variation would not disadvantage shed employees covered by the Pastoral Award, would not disadvantage shearing contractors outside Western Australia because they do not compete with Western Australian shearing contractors, and would assist Western Australian incorporated shearing contractors who compete with unincorporated Western Australian shearing contractors covered by a State common rule award. It was also submitted that the variation sought would allow employers covered by the award more time to enter into enterprise agreements based on the existing hours provisions.

[38] The applicants relied upon evidence given by two witnesses. The first was Ms Vikki Gates, who is the Executive Officer of the WASIA. In her statement of evidence dated 12 February 2013 26, she said:

“(5) During the hearings conducted for the development of the modern Pastoral Award 2010, both WASIA and WAFFIA submitted to the Commission that the greater bulk of shearing (and crutching) done in Western Australia is done by shearing contractors. Very little of this work is done directly by farmers and it would be exceptionally unusual for farmers to actually employ shed staff.

(6) Under the application we have made to vary the Award, what WASIA is essentially saying is that the industry needs more time to adjust to the substantial changes required of the industry in Western Australia due to the impact of the Pastoral Award 2010.

(7) Mr Beechey acknowledges, rightly, that the provisions of the Pastoral Award 2010 have changed the “arrangements they used to have in place in WA”. He also acknowledges that those arrangements still exist in the State based jurisdiction.

(8) These are certainly factors that have been identified within the grounds in support of our application.

(9) Further factors are:

(a) a high resistance to change after more than 100 years of operating in the same manner within the industry in Western Australia;

(b) long-entrenched methods of operation and individuals’ understanding of how the industry operates in Western Australia, including making of Federl and State Awards that endorsed these operations and established a “level competitive playing field” for the development of business models to maximise benefits under these conditions;

(d) limited penetration of information produced by relevant authorities about the changes reaching individual company operators in Western Australia; and

(e) the priorities of day-to-day operations take priority and a greater focus over what are often seen to be abstract matters of industrial relations.

(10) WASIA has undertaken efforts to provide information and guidance to its members about the Award changes, including:

(a) numerous circulars and newsletters;

(b) website information and links;

(d) regional industry meetings.

(11) Despite these efforts I am still confronted with members and other industry participants who do not understand or who remain unaware of the changes invoked under the Award. In the past this has been reported to me to have been exacerbated by Mr Beechey telling workers in Western Australia, that they are not being paid appropriately under the Pastoral Award 2010 when in fact those workers were actually covered under the State award conditions.

(12) In my opinion, the vast majority of shearing contractors, their workers and wool grower clients (farmers) have little understanding of the conditions within the Pastoral Award 2010 or the difference between this Award and the State award.”

[39] Ms Gates also made reference in her oral evidence to a survey of 54 employees in the shearing industry which she maintained demonstrated that employees value the opportunity to work weekends and flexibility in hours of work.

[40] The second was Mr Darren Spencer, a shearing contractor and current President of the WASIA, who said in his statement of evidence dated 12 February 2013 27:

“(3) Prior to the introduction of the Pastoral Award 2010 (PA2010), I engaged my workers under the Shearing Contractors Award of Western Australia 2003 (84 WAIG 1350), the common rule State award covering the industry in Western Australia. Now, as a shearing contractor operating under a company structure, the PA2010 applies to my business.

(4) Unfortunately, it has not been an easy task to understand why I have to change my business operations and practices when other non-company businesses operating in the industry in Western Australia do not. This is a sentiment that has been expressed to me by employees, clients (farmers) and other contractors, personally and in my role within WASIA, on a number of occasions since the introduction of the PA2010.

(5) The comments made by others to me tend to focus on several key points:

(a) changes required to a lifetime of habits and methods of operating to become compliant with PA2010 cannot be made overnight;

(b) the restrictions and inflexibilities of the PA2010 go against the flexible and workable industry practices that have been operating in Western Australia since long before the memory of current industry businesses and workers; and

(c) that the flexible and workable industry practices still applying to non-corporate businesses disadvantages company-run contracting businesses.”

Evidence and submissions in opposition to the applications

[41] The applications were opposed by the Australian Workers’ Union (AWU). The AWU submitted that the applicants had had more than three years since the commencement of the Pastoral Award to prepare for the changes to hours of work effected by that award, and the evidence was that the applicants had only begun a campaign educating their members concerning the changes in the last six months. A reversion to the transitional hours arrangements a year after they expired would, the AWU submitted, be contrary to the modern awards objective, cause confusion, add to the regulatory burden and raise issues concerning award enforcement.

Consideration

[42] The starting point for our consideration of this application to vary the Pastoral Award is the fact that hours of work provisions in modern awards were generally not subject to any transitional period or arrangements, so that employers and employees under modern awards were in most cases required to adjust immediately to any changes in hours of work on 1 January 2010. In the case of shearing contractors in Western Australia, they were given a special opportunity, until 1 July 2012, to prepare themselves for the changes in hours of work effected by the Pastoral Award. If shearing contractors have not made appropriate use of that special opportunity, that would not in the circumstances seem to us to be a proper basis to further extend it.

[43] It cannot be said that at least the applicant organisations, which represent shearing contractors, have failed to make use of the opportunity afforded by the special transitional provision granted by the Full Bench. The evidence, we conclude, demonstrates that the WASIA in particular has been assiduous in its efforts to inform and educate its members about the changes to working hours effected by the Pastoral Award on 1 July 2012. This has included the provision of numerous circulars and newsletters, website information and links, presentations at Annual and Half Yearly General Meetings, and the conduct of regional industry meetings occurring from three to eight times a year over the transitional period to date. Contrary to the AWU’s submission, the evidence of Ms Gates indicates that this has not simply occurred over the last six months, but has been occurring since the award modernisation process began. The WASIA considered further educational strategies at its annual general meeting held on 19 January 2013, but that by no means represented the start of its activities in that area.

[44] However, we do not consider that that factual conclusion assists the applicants. Having regard to the efforts made by the WASIA to inform its members about the changed hours arrangements in the modern award, we find it difficult to discern a justification for a further extension of time to transition to the new provisions on the basis that shearing contractors need to be provided with further information and educational opportunities. The period of time which has passed since the Pastoral Award was made in September 2009, together with the information which the WASIA has provided to the industry in Western Australia over that period, means that employers covered by the modern award have had every reasonable opportunity to familiarise themselves with the new hours provisions before they came into effect on 1 July 2012. The fact that, as the applicants submitted, a number of shearing contractors representing about 10% of the industry in Western Australia have been sufficiently aware of the changes such as to be able to enter into enterprise agreements preserving the flexibilities in working hours which they enjoyed under the previous pre-modern award shows that adequate information and educational support have not been lacking. The applicants were unable to identify clearly anything additional of substance they could do in this area which they have not already done.

[45] Indeed, we detect in the evidence an undercurrent of resistance to change by shearing contractors rather than a simple lack of knowledge about that change. Mr Spencer’s evidence in particular which we have set out above is indicative of this, and Ms Gates also made explicit reference in her evidence to “a high resistance to change” as being a relevant factor. This resistance appears to be motivated partly by a simple preference for the previous hours provisions, and partly by a concern that those shearing contractors which are not incorporated have obtained a competitive advantage because they operate under a State award which contains hours provisions the same as in the previous pre-modern award. Neither of those matters represents any new development that has occurred since the issue of transitional provisions for the Pastoral Award was considered and determined by the Full Bench in 2009, nor would those matters be resolved by an extension of the operation of the transitional provisions.

[46] We also cannot ignore the fact that the transitional provisions sought to be extended in operation actually ceased to have effect on 1 July 2012, more than a year ago, and therefore that the modern award hours provisions have had legal effect with respect to shearing contractors in Western Australia since that time. There was no evidence before us, nor were the applicants otherwise able to inform us, as to what the practical position “on the ground” has been since 1 July 2012. We do not know whether the new hours provisions are generally being complied with, and if so what the operational effect of those provisions has been, or whether there has been widespread non-compliance. For those who have complied, a reversion to the previous provisions for the period until 1 December 2014, when the modern award provisions would have to apply again, would be likely to be disruptive and confusing. For the non-compliant, it is not the purpose of transitional provisions to validate or reward non-compliance.

[47] The Full Bench decision of 2 September 2009 did state that a purpose for its grant of a transitional period until 1 July 2012 was to provide the parties with an opportunity to assess the potential effect of the modern award on shearing contractors in Western Australia and to make further applications of a transitional or substantive nature to vary the Pastoral Award on that basis. However, beyond general statements of concern about restrictions on weekend work and alleged loss of flexibility in working hours, we have been provided with no evidence or other tangible information about the actual or potential effects of the modern award provisions upon shearing contractors, such as any effect upon their capacity to service their clients, their costs of business or their ability to attract labour. Accordingly we have no foundation upon which to conduct a review of the type envisaged by the Full Bench in 2009. It of course remains open to the applicants to seek a substantive change to the hours of work provisions in the Pastoral Award either in the four-yearly review of the award required to be conducted under s.156 of the FW Act in 2014 or by applying to vary the award under s.157 of the FW Act. In either context the applicants would have the opportunity to adduce evidence concerning any relevant effects upon shearing contractors produced by the current hours of work provisions in the modern award.

[48] Finally, we reject the submission that an extension to the period of operation of the transitional provisions should be granted on the basis that it will allow employers more time to enter into enterprise agreements on terms more favourable to them than would otherwise be the case. That is not the purpose for which transitional provisions have been placed into modern awards.

[49] We do not consider that a proper basis has been demonstrated for the claimed variation to clause A.9.5 of the Pastoral Award. On the material before us, we cannot conclude that the transitional provisions are not achieving the modern awards objective, or are not operating effectively without anomalies or technical problems arising from the award modernisation process. We dismiss the application.

Children’s Services Award 2010

Educational Services (Teachers) Award 2010

[50] It is convenient to deal with these two awards together, since they are both the subject of applications made by Falcan Pty Ltd trading as the Rainbow Early Learning Centre (Falcan) which raise an issue common to both awards.

Transitional Provisions in the Children’s Services Award 2010

[51] The Children’s Services Award 2010 28 (Children’s Services Award) covers employers in the children services and early childhood education industry and their employees in the classifications listed in the award.²⁹ The “children services and early childhood education industry” is defined in clause 3.1 to mean “the industry of long day care, occasional care (including those occasional care services not licensed), nurseries, childcare centres, day care facilities, family based childcare, out-of-school hours care, vacation care, adjunct care, in-home care, kindergartens and preschools, mobile centres and early childhood intervention programs.”

[52] Clause 2 of the Children’s Services Award contains the model provisions concerning absorption into overaward payments³⁰, protection of take-home pay³¹ and review of transitional provisions³². Schedule A of the award contains transitional provisions. Clause A.2 of Schedule A contains the model provision concerning phasing-in of minimum wages where the existing minimum wage is lower, and within clause A.3 of the schedule, subclauses A.3.1-A.3.6 reproduce the model provision concerning phasing-in of minimum wages where the existing minimum wage is higher. However, clause A.3 then goes to contain two further subclauses which are not part of that model provision. Subclauses A.3.7 and A.3.8 provide as follows:

“A.3.7 New South Wales, Western Australia and Tasmania – Other than Division 2B State award employers

The following transitional arrangements apply to an employer in New South Wales, Western Australia and Tasmania which, immediately prior to 1 January 2010:

(a) was obliged,

(b) but for the operation of an agreement-based transitional instrument or an enterprise agreement would have been obliged, or

(c) if it had been an employer in the industry or of the occupations covered by this award would have been obliged by a transitional minimum wage instrument and/or an award-based transitional instrument to pay a minimum wage higher than that in this award for an employee engaged in a classification lower than Children’s Services Employee Level 3.1 and all classifications of Support Worker in Tasmania and Western Australia, and for all classifications in New South Wales.

The employer must:

(i) continue to pay no less than the minimum wage in the transitional minimum wage instrument and/or award-based transitional instrument; and

(ii) apply any increase in minimum wages in this award resulting from an annual wage review.

A.3.8 New South Wales and Tasmania – Division 2B State award employers

The following transitional arrangements apply to an employer in New South Wales and Tasmania which, immediately prior to 1 January 2011:

(a) was obliged,

(b) but for the operation of a Division 2B State employment agreement or an enterprise agreement would have been obliged, or

(c) if it had been an employer in the industry or of the occupations covered by this award would have been obliged by a Division 2B State award to pay a minimum wage higher than that in this award for an employee engaged in a classification lower than Children’s Services Employee Level 3.1 and all classifications of Support Worker in Tasmania and for all classifications in New South Wales.

The employer must:

(i) continue to pay no less than the minimum wage in the Division 2B State award and

(ii) apply any increase in minimum wages in this award resulting from an annual wage review.”

[53] Subclause A.3.9 then provides:

“These provisions cease to operate from the beginning of the first full pay period on or after 1 July 2014.”

It is evident that subclause A.3.9 applies to all of the provisions in clause A.3, including subclauses A.3.7 and A.3.8.

[54] The Children’s Services Award as first made arose in a direct sense from the Full Bench Award Modernisation Decision of 4 December 2009³³. In that decision the Full Bench considered and finalised a number of awards (categorised in the overall award modernisation programme as “Stage 4 Awards”) in the light of submissions and consultations on the “exposure draft” of the award which had earlier been issued. The decision records a conclusion by the Full Bench that transitional provisions proposed by the parties which departed from the model provisions should be included in the Children’s Services Award:

“[70]We have taken into account the views of the parties with respect to the transitional provisions. This has resulted in some modification of the model clause. We have also taken into account the position of non-teaching staff in pre-schools who currently work according to the same provisions, with respect to school vacations, as teachers. The exposure draft has been altered in some other respects to make the conditions of teachers and children’s services employees in the same workplace more consistent.”

[55] The above passage does not record what the nature of the special transitional provisions to be adopted was. However an examination of the record of the proceedings before the Full Bench prior to the issuing of the 4 December 2009 decision makes the position clear. On 20 October 2009 the Liquor Hospitality and Miscellaneous Union (LHMU, now United Voice) filed a submission for the purpose of the proceedings in which it proposed a set of transitional provisions which included the following provisions which departed from the model provisions:

“A.3.7 The following transitional arrangements apply to an employer in New South Wales, Western Australia and Tasmania which, immediately prior to 1 January 2010:

(a) was obliged, or

(b) but for the operation of an agreement-based transitional instrument would have been obliged, or

(c) if it had been an employer in the industry or of the occupations covered by this award would have been obliged by an award-based transitional instrument to pay a minimum wage for an employee engaged in a classification below that equivalent to the first year of Certificate III qualified Children Services Employee and Children’s Services Support employee in Tasmania and Western Australia and all classifications for Children’s Services Support Employee and Children’s Services Employees in New South Wales, the employer must:

(i) continue to pay no less than the minimum wage in the relevant award based transitional instrument; and

(ii) apply any increase in minimum wages in this award resulting from an annual wage review.”

[56] The submission said in respect of the proposed transitional provisions:

“The major parties also agree to the following transitional provisions. The intention of the following provisions is that there will be a preservation of the existing wage rates (no phasing out) for Children’s Services Support Employees and Children Services Employee (below Certificate III qualified) in Western Australia and Tasmania and preservation of the higher rates in New South Wales for all classifications. It is also intended that there would be no absorption for those preserved rates by way of the National Minimum Wage increases applying in July each year.”

[57] The “major parties” referred to were identified elsewhere in the submission (by their acronyms) as the Australian Childcare Centres Association (ACCA) and the Australian Community Services Employers Association (ACSEA).

[58] The Chamber of Commerce and Industry WA (CCIWA) filed a submission which responded to the proposed modifications to the model transitional provisions. This submission was filed on 16 October 2009, before the LHMU submission referred to above, but the CCIWA submission makes it clear that the CCIWA was aware of the proposal. The submission stated:

“5. The CCIWA submits that the standard Transitional provision as determined by the Full Bench of the AIRC of the 2nd September 2009 in matter [2009] AIRCFB 800 be incorporated into the Award with no modification.

6. The CCIWA are aware of a proposal by the LHMU to modify the Full Bench's model clause and effectively prevent WA employers from accessing the provisions if they are bound by the Child Care Long Day Care Award and the Child Care Outof School Playleaders Award.”

7. The effect of any amendment as outlined in Clause 14 would be to deny the WA employers to the possibility of defraying and costs that could be payable to them as and from 1st January 2010. This is manifestly unfair and inconsistent with the Ministers Consolidated Request at paragraphs 1 (c) and 2(d).”

[59] When the matter came on for hearing before the Full Bench on 27 October 2009, Mr W Ash appeared for the LHMU. Shortly after he commenced his submission, he addressed the CCIWA submission, saying³⁴:

“In relation to the submissions of the Chamber of Commerce and Industry Western Australia, the chamber states in their submission that they were aware of the submission of the LHMU in relation to modifying or proposing to modify the transitional provisions.

This is not the submission of the LHMU but rather an industry submission of the LHMU and those registered employer associations. The industry agreement in relation to the modified transitional provisions only affects Western Australian employers in respect of their unqualified employees. The COAG changes will be mean that before the completion of the transitional period certificate III will be the minimum qualification and the preservation of the unqualified childcare employees rates will be of no practical effect.”

[60] The transcript of the hearing subsequently records the following exchange concerning the proposed transitional provisions between the presiding member of the Full Bench, Justice Giudice, and Mr Ash³⁵:

“JUSTICE GIUDICE: Mr Ash, are you in a position to say whether there is any significant dissent among the other employers from the agreed transitional provisions that you have noted in your submission?

MR ASH: As the other employers have mentioned today, we did not directly involve them in those negotiations.

JUSTICE GIUDICE: I understand that.

MR ASH: Although I didn't hear anything, we've had the benefit of reading those submissions, I didn't hear any significant dissent voiced this morning.

JUSTICE GIUDICE: No. Well you're in no better position than us it seems, is that right?

MR ASH: It's my understanding that there's wide general agreement to that balanced agreed industry approach.

JUSTICE GIUDICE: Yes.”

[61] It is apparent from the transcript that no other party to the proceedings appearing at the hearing made any submission against the transitional provisions proposed in the LHMU submission or contradicted what Mr Ash submitted about that matter. The CCIWA did not appear at the hearing on 27 October 2009.

[62] It is plain therefore that when in its decision of 4 December 2009 the Full Bench said that it had “taken into account the views of the parties with respect to the transitional provisions” and that this would result in “some modification of the model clause”, it was referring to the transitional provisions proposed in the LHMU submission, including the proposed subclause A.3.7, which the ACCA and the ACSEA had supported and which no party other than the CCIWA had opposed. In short, the Full Bench adopted the LHMU proposal.

[63] The Children’s Services Award was made by way of an order also issued on 4 December 2009.³⁶ That version of the award did not contain sub-clause A.3.7 as proposed by the LHMU or anything similar, notwithstanding what the Full Bench had said in its decision of the same day. That was evidently an error, since on 11 December 2009 the Full Bench issued a correction order which inserted subclause A.3.7 in its current form, and renumbered subclause A.3.7 (relating to the expiry date of the transitional provisions) as A.3.8. Subclause A.3.7 is drafted somewhat differently than the LHMU proposal set out above, but is to the same effect.

[64] On 17 December 2010, a determination³⁷ was issued varying the Children’s Services Award to add transitional provisions applying to employers then covered by Division 2B State awards arising from the Award Modernisation - Division 2B State Awards Decision of 5 November 2010. In respect of minimum wages the current subclause A.3.8 was added, which provided for a transitional provision consistent with the pre-existing subclause A.3.7. The pre-existing subclause A.3.8 was re-numbered as A.3.9, with the effect was that the new subclause A.3.8, was as well as the other phasing provisions (including A.3.7) were to cease to operate on 1 July 2014.

Transitional Provisions in the Educational Services (Teachers) Award 2010

[65] The Educational Services (Teachers) Award 2010 38 (Educational Services (Teachers) Award) covers employers in the school education industry and the children’s services and early childhood education industry and their employees.³⁹ The industries so described are defined in clause 3.1. The “school education industry” is defined to include “preschool or early childhood education”, and the “children’s services and early childhood education industry” is defined to mean:

“the industry of long day care, occasional care (including those occasional care services not licensed), nurseries, childcare centres, day care facilities, family based childcare, out-of-school hours care, vacation care, adjunct care, in-home care, kindergartens and preschools, mobile centres and early childhood intervention programs.”

[66] The model provisions concerning absorption into overaward payments⁴⁰, protection of take-home pay⁴¹ and review of transitional provisions⁴² are contained in clause 2 of the award. Clause A.2 of Schedule A contains the model provision concerning phasing-in of minimum wages where the existing minimum wage is lower, and subclauses A.3.1-A.3.6 contain the model provision concerning phasing-in of minimum wages where the existing minimum wage is higher. Subclause A.3.7 however contains the following non-standard transitional provision:

“A.3.7 Notwithstanding clause A.3.5, the following transitional arrangements apply to an employer in New South Wales which immediately prior to 1 January 2010:

(a) was obliged,

(b) but for the operation of an agreement-based transitional instrument or an enterprise agreement would have been obliged, or

(c) if it had been an employer in the industry or of the occupations covered by this award would have been obliged by the Teachers (Non-Government Pre-Schools (State) Award 2006 (AN120546) or the Teachers (Non-Government Early Childhood Service Centres Other Than Pre-Schools) (State) Award 2006 (AN120545) (together, NSW Awards) to pay a minimum wage higher than that in this award for an employee in New South Wales.

During the period commencing with the first full pay period after 1 January 2011 and 1 July 2014 the employer must

(i) pay no less than the minimum wage in the relevant NSW Award immediately prior to 1 January 2010; and

(ii) apply any increase in minimum wages in this award resulting from an annual wage review, including the 2010 annual wage review.”

Subclause A.3.8 provides that the transitional provisions in clause A.3 cease to operate from 1 July 2014.

[67] Subclause A.3.7 did not appear in the Educational Services (Teachers) Award when it was first made on 4 September 2009⁴³, nor when it was varied to include transitional provisions on 4 December 2009⁴⁴, nor when the transitional provisions were varied by a correction order on 11 December 2009.⁴⁵ The provision was the result of a decision by Vice President Lawler in Independent Education Union of Australia issued on 29 December 2010⁴⁶ and an associated order issued on the same day.⁴⁷ The decision and order concerned an application by the Independent Education Union of Australia (IEU) to vary the Educational Services (Teachers) Award to include a transitional provision consistent with subclause A.3.7 of Schedule A to the Children’s Services Award. The basis of the IEU’s application was identified in the decision as follows:

“[6]It is common ground that the NSW NAPSAs covered teachers who are now covered by a combination of the Children’s Services Award 2010 andthe Educational Services (Teachers) Award 2010. For practical purposes, the Children’s Services Award 2010 covers teachers in ‘stand alone’ preschools and early childhood centres while the Educational Services (Teachers) Award 2010 covers preschool and early childhood teachers working in schools that also have pre-school or early childhood programs.

[7]A consequence of the inclusion of the special transitional provision in the Children’s Services Award 2010 but not the Educational Services (Teachers) Award 2010 is that teachers previously covered by one of the NSW NAPSAs who are now covered by the Educational Services (Teachers) Award 2010 will have their minimum wage entitlements reduced whereas those covered by the Children’s Services Award 2010 will not. This has led to anomalies. For example, if the existing transitional provisions remain in place the modern award rates of pay for two-year trained child care workers exceed those of four-year trained teachers who, in the majority of cases, will be supervising them.

[8]The present application seeks to address this issue by the inclusion of similar special transitional arrangements in the Educational Services (Teachers) Award 2010 to ensure that all teachers in NSW previously covered by one of the NSW NAPSAs who are not covered by either modern award will be treated in the same way in so far as their transitional wage entitlements are concerned.”

[68] Vice President Lawler determined that the application should be granted. He placed significance on the fact that Community Connections Solutions Australia Inc. (CCSA), an industry association with the largest membership of preschool and early childhood centre operators in NSW⁴⁸, supported the application⁴⁹, and concluded that the failure to include a special transitional provision in the award similar to that included in the Children’s Services Award was an oversight.⁵⁰ Vice President Lawler expressed his conclusion that the application should be granted in the following terms:

“[15]In all the circumstances I am satisfied that the Educational Services (Teachers) Award 2010 should be varied to include a special transitional provision similar to that included in the Children’s Services Award 2010 and that such variation is necessary to achieve the modern awards objective.”

Falcan’s applications and submissions in support

[69] Falcan operates the Rainbow Early Learning Centre in Singleton NSW. It has applied to vary the transitional provisions in both the Children’s Services Award and the Educational Services (Teachers) Award. In the case of the former award, the variations it seeks are as follows:

“2.1 By deleting the provisions of clause A.3.7 and replacing it with the following clause:

A.3. 7 New South Wales, Western Australia and Tasmania- Other than Division 2B State award employers

Any employee in receipt of a rate of pay higher than the transitional rate resulting from the application of this award’s transitional provisions must remain in receipt of that rate until such time as the transitional rate payable under this award equals or exceeds the employee’s rate of pay.

2.2 By deleting the provisions of clause A.3 .8 (i) and (ii) and replacing it with the following clause:

A.3.8 New South Wales and Tasmania- Division 2B State award employers

The employer must:

(i) continue to pay no less than the wage in the transitional minimum wage instrument and/or award-based transitional instrument that is higher than or equal to the modern award rate; or

(ii) the transitional rate that results from the application of clause A. 2 and A. 3 of this award being applied to the rate payable from 1 January 2011 including the transitional variation that applied on 1 July 2010.”

[70] In respect of the Educational Services (Teachers) Award, the variation sought by Falcan is:

“2.1 By deleting the provisions of clause A.3.7 and replacing it with the following clause:

A.3.7

(a) Any employee in receipt of a rate of pay higher than the transitional rate resulting from the application of this award’s transitional provisions must remain in receipt of that rate until such time as the transitional rate payable under this award equals or exceeds the employee’s rate of pay.

(b) Any new employee of an employer bound by this award will be entitled to receive the applicable transitional rate at the time of employment however that rate must be maintained at level in the event that further transitions reduce the employee’s base rate of pay. In this circumstance the employee’s rate of pay will be fixed until such time as the minimum rate of pay under the modern award for the employee equals or exceeds the employee’s rate of pay.”

[71] Falcan made two main points in its submissions in support of the variations it sought:

“(1) The effect of subclause A.3.7 and A.3.8 of Schedule A to the Children’s Services Award and subclause A.3.7 of Schedule A to the Educational Services (Teachers) Award was that a State-based anomaly in the awards was being preserved, in that the majority of classification rates for NSW employees was not transitioning to the modern award rates but rather continuing to increase. Falcan provided tables setting out comparative rates of pay for employees on the modern award rates, on rates under the model transitional rates, and on rates in NSW for incorporated and unincorporated business to demonstrate this point.

(2) The award modernisation process was not intended to result in employees engaged in the same industry and in the same classification of work with the same qualifications being entitled to different minimum wages based solely on the state or territory in which they are employed. The award modernisation process was intended to resolve this issue and bring about consistency and fairness to all parties by 1 July 2014.”

[72] Falcan’s applications were supported by Australian Business Industrial (ABI). ABI submitted that the transitional provisions in the two awards the subject of Falcan’s application were not meeting the modern awards objective in s.134 of the FW Act, in that they added to administrative and regulatory burden upon employers, added unnecessary complexity, have added to “instability, uncertainty and wages volatility”, and have the practical effect of maintaining significant State-based differences until the end of the transition period.

Submissions in opposition to the Falcan applications

[73] Falcan’s application to vary the Children’s Services Award was opposed by United Voice, the ACSEA and the CCSA, and its application to vary the Educational Services (Teachers) Award was opposed by United Voice, the IEU and the CCSA. The latter application was also opposed in its current form by the South Australian Employers’ Chamber of Commerce and Industry Inc. trading as Business SA (Business SA). It is fair to say, broadly speaking, that the submissions in opposition to the application made the common point that the relevant transitional provisions were the product of the earlier decisions we have earlier referred to, that they were operating as they were intended to operate, and that Falcan had not adduced any evidence of changed circumstances nor pointed to any cogent reason why the Commission would now effectively reverse those earlier decisions. However, the CCSA also made the following submission:

“CCSA agrees with Falcan Pty Ltd that earlier FWA decisions on NSW rates have effectively deferred 100% of the wage adjustment resulting from the introduction of the Modern Awards to 2014, rather than the gradual adjustment over the period 2010-2014 that has been available across most other states. A definitive statement now from the Commission on how the current Modern Award wording would affect NSW pay rates from 1 July 2014 would be invaluable to all parties in developing their approach to the 2014 reviews of both Modern Awards.

For example, the issue of differential pay rates in NSW on and after 1 July 2014 might be managed by the Fair Work Commission utilising Part 3A (sic) of Schedule 5 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009, dealing with avoiding reductions in take-home pay from modern award or transitional arrangements, during its 2014 review of the Children’s Services Award and the Educational Services (Teachers) Award. It would be open to the Commission to include a term that provided for employees employed by NSW employers to not suffer a reduction in take home pay until increased pay rates provided for in those Modern Awards and subsequent Annual Wage Reviews exceeded the rates applying at 30 June 2014.

Deferring such a statement of intent until the 2014 versions of the Modern Awards are approved by the Commission, presumably in the first half of 2014, will not give NSW-based ECEC services sufficient time to effectively budget for any changes to pay arrangements. This is exacerbated by the fact that, due to funding arrangements and the school year being based on the calendar rather than financial year, many ECEC services operate their finances on a calendar year basis. Significant changes to wage setting arrangements that take effect from 1 July 2014, therefore, ideally need to be known by at least October 2013.”

Consideration

[74] There was no dispute between the parties that, at least during the course of the transitional period, the effect of subclauses A.3.7 and A.3.8 of Schedule A to the Children’s Services Award and subclause A.3.7 of Schedule A to the Educational Services (Teachers) Award is and will be as was contended by Falcan - that is, in the majority of classifications, higher minimum rates for NSW employees are not transitioning downwards towards the standard modern award rates, but are in fact continuing to increase. However, that does not represent any changed circumstance which would cause us to review and perhaps vary those provisions. The effect complained of, having regard to the history of the making of those provisions which we have recited above, was clearly the intended effect. In its Award Modernisation Decision of 4 December 2009, the Full Bench determined to act upon an agreement between the “major parties” to depart from the model transitional provisions for the Children’s Services Award and to adopt an alternative proposal. That alternative proposal, which became subclause A.3.7 of Schedule A, self-evidently did not provide for any downwards transition of higher pre-existing rates in (inter alia) New South Wales during the transition period, but in terms required those rates to be maintained and increased in accordance with minimum wage increases. The Full Bench in adopting that proposal necessarily determined that that was the appropriate course to be taken. That approach was deliberately extended to Division 2B State award employers under the Children’s Services Award by the Full Bench’s determination of 17 December 2010, and then applied to the Educational Services (Teachers) Award by Vice President Lawler in his decision in Independent Education Union of Australia issued on 29 December 2010.

[75] Accordingly, it appears to that Falcan’s applications do no more than seek to revisit issues which have already been determined in the earlier decisions and orders we have identified. As we have stated earlier in setting out our general approach to these applications, this review does not represent an opportunity for parties to revisit issues which have already been determined absent some demonstration of changed circumstances. In its oral submissions, Falcan submitted that the introduction of the National Quality Framework for Early Childhood Education and Care, which requires that by 1 January 2014 all educators at child care centres must have a Certificate III level qualification and 50% of them must have or be working towards a diploma level qualification, was a relevant changed circumstance in that it required a higher proportion of employees to be paid at higher classification levels under the awards. There was no evidence about this matter, and its connection with the transitional provisions the subject of Falcan’s applications is unclear. We do not consider it warrants any revisiting of the transitional provisions in the awards.

[76] The suggestion in Falcan’s submissions that the relevant transitional provisions will preserve State based anomalies and not achieve the objective of having a nationally uniform safety net of minimum wages by the end of the transitional period is simply incorrect. It is clear that the effect of subclause A.3.9 of Schedule A to the Children’s Services Award is that subclauses A.3.7 and A.3.8 cease to have effect from 1 July 2014, as do all the other transitional provisions in Schedule A except for subclause A.9, which ceases to have effect from 1 December 2014. Similarly, subclause A.3.7 of the Educational Services (Teachers) Award also ceases to have effect from 1 July 2014 by virtue of subclause A.3.8. There can be no doubt therefore that by the end of 2014 both awards will conform to the requirements of s.576T of the WR Act. That is, again, the result intended when the transitional provisions were first made. The provisions are in our view achieving the modern awards objective and are operating effectively without any anomalies or technical problems that we can identify.

[77] There is therefore no proper basis to grant Falcan’s applications to vary the transitional provisions in the Children’s Services Award and the Educational Services (Teachers) Award. The applications are therefore dismissed.

[78] As to the matters raised by the CCSA, all that we can usefully say at this point is that from 1 July 2014 the Children’s Services Award and the Educational Services (Teachers) Award will, with respect to wage rates, establish minimum rates only, and will not operate to regulate wage payments above those minimum rates. Whether in any particular case overaward payments must continue to be maintained by the employer after 1 July 2014 will depend upon the terms of the contract of employment between that employer and each individual employee; it is not a matter in relation to which the awards impose any obligations.⁵¹ It is of course open to employers and employees and their representatives to address issues of the type raised by CCSA through enterprise bargaining. To the extent that the expiry of the transitional provisions from 1 July 2014 leads to in any reduction in take-home pay for employees, there may also be remedies available under Part 3 of Schedule 5 of the Transitional Act, as the CCSA has submitted. However the making of take-home pay orders requires an application to be made by a person eligible to do so.⁵² No such application has yet been made.

Restaurant Industry Award 2010

The application and submissions in support

[79] Sixteen individual employers, ABI and the Restaurant and Catering Association of Victoria (RCAV) have jointly applied to vary the Restaurant Industry Award 2010 53(Restaurant Industry Award). The Restaurant Industry Award contains all the model transitional provisions in clause 2, and all the model phasing provisions in Schedule A. The variation that is sought by the applicants is as follows:

“By deleting clause A.4 and inserting a new clause A.4 in lieu thereof:

A.4 Loadings and penalty rates

For the purposes of this schedule loading or penalty means a:

casual or part - time loading;

Saturday, Sunday, public holiday, evening or other penalty;

allowance/penalty.

Where a pre-modern award penalty rate is deemed not equivalent to a modern award penalty the new penalty rate shall be phased-in from zero in five instalments of 20% commencing from 1 July 2010 and the pre-modern award penalty shall be phased out from and no longer apply from 1 July 2010.”

[80] A retrospective operative date of 1 July 2010 is sought for the above variation.

[81] The applicants submitted in support of this application that the variation they seek is necessary to remedy anomalies and technical problems that have arisen in respect of the model provisions concerning the phasing of loadings and penalty rates. They identified three particular interpretational problems in this connection which, they contended, have arisen from advice issued by the Fair Work Ombudsman - in particular, from a document entitled “Guidance Note 7”⁵⁴ concerning “Transitional arrangements in modern awards”. The first problem was said to be that Guidance Note 7 at paragraphs 9.12-9.14 contained a method of calculation for the phasing of “non-equivalent” penalties and loadings which did not accord with what the applicants understood to be the correct approach, and which if applied in practice required different and higher transitional payments to be made by employers. The second was that the applicants disagreed with a statement in paragraph 6.3 of Guidance Note 7 that the model transitional provisions “also apply to new employees that commenced employment on or after 1 January 2010 (including after 1 July 2010)”; the applicants contended that such “new employees” were not entitled to the benefit of the transitional provisions. The third was that the Fair Work Ombudsman had “erroneously deemed” that the “split shift allowance’ provided for in subclause 24.2 of the Restaurant Industry Award was not a shift allowance subject to the phasing provisions in Schedule A.

Submissions against the application

[82] The application was opposed by United Voice, which submitted that there was no incongruence, ambiguity or technical difficulty in the current phasing provisions, and that the advice provided by the Fair Work Ombudsman was consistent with the proper meaning and effect of the transitional provisions.

Consideration

[83] In order for the applicants to persuade us that any type of variation to the model transitional provisions concerning loadings and penalties rates in the Restaurant Industry Award was justified, it would have to demonstrate that the interpretational advice given by the Fair Work Ombudsman was at odds with other reasonably available interpretations of those transitional provisions such as to give rise to an ambiguity requiring clarification. This is consistent with the approach taken by the Full Bench in Manufacturing and Associated Industries Award 2010⁵⁵concerning an application to vary the model absorption provisions:

“[15]The different interpretations adopted by employers, unions and the Fair Work Ombudsman in relation to the interpretation of clause 2.2 establish that an ambiguity exists as to its meaning and effect. It is desirable that this ambiguity be resolved so that employers, employees, their representatives and regulatory authorities can readily ascertain the nature of award entitlements and obligations.”

[84] We are not satisfied that there is any relevant ambiguity requiring clarification in the case of the applicants’ first point concerning the calculation of the amounts payable by employers under the phasing provisions for loadings and penalties. The provisions themselves are expressed in clear terms, and we are not aware of any employer or organisation covered by any other award containing the same model provisions raising any difficulty concerning the interpretation or operation of those provisions or the content of the Fair Work Ombudsman’s Guidance Note 7 in that connection. In that connection, we note and place weight upon the Australian Industry Group’s general submission that it “has not identified any problems with the model transitional provisions in so far as they operate in other modern awards”.

[85] The applicants attempted to demonstrate that the method of calculation described in paragraphs 9.12-9.14 of Guidance Note 7 produced different outcomes in terms of amounts payable compared to a proper application of the transitional provisions. However, while that part of Guidance Note 7 involves a mathematical method which is not the only and perhaps not the most direct method of calculation, we are not satisfied that in fact it produces any results which were not intended to be produced by the model provisions.

[86] One example of a mathematical calculation advanced by the applicants is sufficient to demonstrate why we were not satisfied by the applicants’ case on this point. In the applicants’ written submissions, they propounded an example concerning employees graded at Level 4 under the modern award required to work in the evening, Monday to Friday, from 7 pm to 12 midnight. Under the pre-modern Liquor and Accommodation Industry - Restaurants - Victoria Award 1998⁵⁶, an additional amount of $1.60 per hour was payable for each hour worked in this period (subject to a maximum daily payment for three hours). Under the modern award, a loading of 10% of the standard hourly rate per hour is payable, but only for work performed in the hours 10 pm to 12 midnight. As became clear from the applicants’ oral submissions, there was no issue that for work performed from 7 pm to 10 pm, the $1.60 was to be phased-down in 20% increments in accordance with clause A.6 of Schedule A. However, the applicants contended that for the period 10 pm to 12 midnight, when a phasing-up from the $1.60 to the 10% was required in accordance with clause A.5, the Fair Work Ombudsman’s method produced differing and incorrect results.

[87] To make good this contention, the applicant produced a table which set out, side by side, the differing calculation methods and their allegedly differing results. That table is reproduced in Schedule A to this decision. It should be emphasised that the calculation in the left-hand side of that table under the heading “Fair Work Ombudsman ‘Phase out, phase in method’” was produced by the applicants based on their understanding of the method set out in paragraphs 9.12-9.14 of Guidance Note 7, and is not an actual calculation by the Fair Work Ombudsman.

[88] It has become apparent to us that the applicants’ calculations in Schedule A contain a number of simple mathematical errors which skew the results. Once these are corrected, and additional calculations are carried out based on award rates as known up to 1 July 2013, it is apparent that the two methods produce the same results for the period 10 pm to 12 midnight.⁵⁷ Attached at Schedule B to this decision is a corrected version of Schedule A, with the corrections identified in track changes.

[89] To the extent that the right-hand column in the applicants’ table in Schedule A omits the applicants’ results for the period 7 pm to 10 pm, we assume that the applicants considered that unnecessary, since as earlier stated the applicants did not dispute that there was to be a phase-down of the $1.60 amount for this period as required by clause A.6 of Schedule A.

[90] After we raised some concerns about Schedule A with the applicants’ representative at the hearing of this matter, we gave the applicants the opportunity to file a further submission about the matter. The applicants subsequently filed a further submission which included an amended version of its earlier calculation appearing in Schedule A. We attach this amended calculation as Schedule C. It can be seen that the applicants have themselves picked up the mathematical errors in the calculation based on the Fair Work Ombudsman’s method in the left-hand column, and that it has now been amended in a way that produces results for the 10 pm to 12 midnight period which are the same as in the applicants’ original calculation using their own method set out in the right-hand column of Schedule A. The results in the left-hand column of Schedule C are also the same as the results we have produced in both columns of Schedule B, except that for one result there is a one cent difference. This difference, which we regard in any event as de minimis, appears to have been produced by a rounding error in the applicants’ calculations.

[91] In their new version of the calculation, however, the applicants have changed their own method of calculation of the transitional amounts for the 10 pm to 12 midnight period. The surprising result of this is that the amounts which the applicants calculate are payable by employers, set out in the right-hand column of Schedule C, are now higher than those they say are produced by the Fair Work Ombudsman’s method as set out in the left-hand column of Schedule C. The applicants’ further submission contains no explanation as to the nature of or rationale for the change to its own method of calculation. The change appears to be in the quantification of the “transitional percentage” upon which the transitional provisions in subclause A.5.4 operate. It is sufficient for us to say that the applicants’ original method of calculation in Schedule A (leaving aside rounding errors), which produced the same results as the Fair Work Ombudsman’s method of calculation in Schedule B, is correct, and the applicants’ new method is incorrect. For completeness, we also note that the right-hand column of Schedule C continues the omission which we earlier identified in the right-hand column of Schedule A of the transitional amounts for the 7 pm to 10 pm period required to be paid under clause A.6 of Schedule A.

[92] Our conclusion therefore is that the applicants’ stated concerns about paragraphs 9.12-9.14 of Guidance Note 7 are without practical substance. The mathematical method of calculation used by the Fair Work Ombudsman produces results which are consistent with Schedule A, are consistent with the applicants’ original method of calculation, and are correct. There is no anomaly or technical problem requiring resolution.

[93] The second issue raised by the applicants is without substance. Each of the model phasing provisions makes it clear that it applies not only to employers which immediately before 1 January 2010 had relevant obligations under a relevant provision of a transitional minimum wage instrument and/or an award-based transitional instrument, but also to those employers which, if they had been an employer in the industry or occupations covered by the modern award, would have had such obligations. The model provisions do not discriminate between employees of such employers on the basis of whether they were employed before or after 1 January 2010; they operate indiscriminately with respect to all employees of employers to which the provisions apply. The rationale for this approach was clearly stated in paragraph [31] of the Award Modernisation Decision of 2 September 2009, which we have earlier set out. Paragraph 6.3 of the Fair Work Ombudsman’s Guidance Note 7 is entirely consistent with this. No alternative interpretation of the type contended for by the applicants is reasonably available on the text of the model provisions. The applicants’ submission that there is an interpretational issue requiring resolution is rejected.

[94] As to the applicants’ third issue, it was not made clear to us how or in what circumstances the Fair Work Ombudsman “deemed” the “split shift” allowance in clause 24.2 of the Restaurant Industry Award not to be covered by the phasing provisions for penalties and loadings in Schedule A of the award. We cannot identify any statement in Guidance Note 7 about that matter. In any event, if the Fair Work Ombudsman gave advice that the transitional provisions did not apply to that allowance, we consider that such advice was correct.

[95] Subclause 24.2 of the Restaurant Industry Award, which is part of clause 24, Allowances, provides:

“24.2 Split shift allowance

Full-time and part-time employees who have a broken work day will receive an additional allowance of 0.5% of the weekly standard rate for each separate work period of two hours or more.”

[96] It is clear that subclause 24.2, despite its heading, does not operate with respect to shift work as such. Indeed, the Restaurant Industry Award does not provide for any system of shift work; instead it has a highly flexible regime for the working of ordinary time which is adapted for the specific characteristics of the restaurant industry. The allowance applies to any “broken work day” - that is a day which is broken into different components of paid working time (of two or more hours each), separated by periods of unpaid non-working time. Those working hours may be ordinary time hours paid at the ordinary rate of pay. The allowance is properly characterised as a disability allowance intended to compensate for the inconvenience associated with having to work a broken work day.

[97] As earlier stated, the Full Bench in the Award Modernisation Decision of 2 September 2009⁵⁸ decided not to establish transitional provisions for allowances. However, the applicants submit that the allowance provided for in subclause 24.2 is a “shift allowance”, presumably because of the way in which it is described in the subclause heading, and is therefore a loading or penalty for the purpose of the transitional provisions by virtue of the reference to “shift allowance/penalty” in subclause A.4 to Schedule A. We disagree. We consider that the Full Bench, in determining to include any “shift allowance/penalty” in the list of matters encompassed by the expression “loading or penalty” in the model provision which is subclause A.4, was referring to allowances or penalties operating upon a shift worked as part of a shift work system - that is, a system providing for a regular and recurring pattern of shifts to be worked at specified times during the day and week - provided for in an award. The expression “shift allowance” is apt to describe a flat dollar payment associated with working shifts, and “shift penalty” a percentage penalty or loading for working a particular shift. The allowance in subclause 24.2 Restaurant Industry Award is neither of those things, and its location in clause 24 within the list of various allowances provided for in award rather than in an hours of work or shift work clause confirms that it is an allowance simpliciter of a type not covered by the transitional provisions. To the extent that the applicants’ submissions have exposed any doubt or ambiguity about this matter, we consider that to have been resolved by the opinion we have just expressed.

[98] Accordingly, we conclude that the applicants have not made out a case for the variation they seek to the transitional provisions in the Restaurant Industry Award. For the reasons we have stated, the claimed anomalies and technical problems do not exist, and we have no reason otherwise to think that the transitional provisions are not achieving the modern awards objective or operating effectively. The application must be dismissed.

Conclusion

[99] The applications concerning transitional provisions in matters AM2012/41, AM2012/45, AM2012/139, AM2012/142 and AM2012/186are dismissed.

VICE PRESIDENT

Appearances:

P. Brunner, solicitor,for the Western Australia Shearing Industry Association Inc., and Western Australian Farmers Federation Industrial Association

D. Morphett for Falcan Pty Ltd T/A Rainbow Early Learning Centre

G. Parkes for Restaurant and Catering Association of Victoria

W. Ash for United Voice

Z. Angus for the Australian Workers’ Union

A. Odgers for Independent Education Union of Australia

G. Vaccaro for Australian Industry Group

J. Gunn for Community Connections Solutions Australia Inc.

M. Roucek for Australian Business Industrial

Hearing details:

2013.

Sydney: 9, July.

SCHEDULE A

Fair Work Ombudsman ‘Phase out, phase in method’

RCA interpretation of Schedule A Transitional Provisions of Restaurant Industry Award [MA000119] phase in method

Step 1 Determine comparative provisions

- Pre Modern Award Evening Allowance

o $1.60 per hour between 7pm – 12am

- Modern Award Evening Allowance

o 10% per hour between 10pm – 12am (determined at standard hourly rate)

Step 2 Determine phase out of pre modern award

- $1.60 per hour between 7pm – 12am to be phased out over 5 years

o July 2010 (80%) = 1.28
o July 2011 (60%) = 0.96
o July 2012 (40%) = 0.64
o July 2013 (20%) = 0.32
o July 2014 (0%) = 0

Step 3 Determine Phase in of Modern Award

- 10% of “standard hourly rate” between 10pm – 12am phased in over 5 years

o July 2010 (20%) = 0.35c
o July 2011 (40%) = 0.80c
o July 2012 (60%) = 6% of 2012 L4 hourly rate
o July 2013 (80%) = 8% of 2013 L4 hourly rate
o July 2014 (100%) = 10% of 2014 L4 hourly rate

Step 4 Determine Phase out + Phase in rates

- Note no equivalent in modern award between 7pm-10pm
- July 2010

o 7pm-10pm = (phase out) 1.28 + (phase in) 0 = $1.28
o 10pm-12am = (phase out) 1.28 + (phase in) 0.35c = $1.60

- July 2011

o 7pm-10pm = (phase out) 0.96 + (phase in) 0 = 0.96c
o 10pm-12am = (phase out) 0.96 + (phase in) 0.80 = $1.76

- July 2012

o 7pm-10pm = (phase out) 0.64c + (phase in) 0 = 0.64c
o 10pm-12am = (phase out) 0.64c + (phase in) 6% of 2012 L4 hourly rate

- July 2013

o 7pm-10pm = (phase out) 0.32c + (phase in) 0 = 0.32c
o 10pm-12am = (phase out) 0.64c + (phase in) 8% of 2012 L4 hourly rate

- July 2014

o 10pm-12am = 10%

Step 1 Determine comparative provisions

- Pre Modern Award Evening Allowance

o $1.60 per hour between 7pm –

12am

- Modern Award Evening Allowance

o 10% per hour between 10pm – 12am (determined at standard hourly rate)

Step 2 Determine if existing loading or penalty rate lower or higher than Modern Award as per A.5 and A.6

Step 3 As in this example the pre modern award rate is lower the employer must pay no less than the loading or penalty in the Modern Award minus the specified proportion of the transitional percentage as follows:-

- MA $1.74 per hour as at 2010/2011 minus 80% of 0.14 transitional percentage = $1.63 per hour from 1 July 2010

- MA $1.80 per hour as at 2011/12 minus 60% of 0.20 transitional percentage = $1.68 per hour

- MA $1.85 per hour as at 2012/13 minus 40% of 0.25 transitional percentage = $1.75

SCHEDULE B

Fair Work Ombudsman ‘Phase out, phase in method’

RCA interpretation of Schedule A Transitional Provisions of Restaurant Industry Award [MA000119] phase in method

Step 1 Determine comparative provisions

- Pre Modern Award Evening Allowance

o $1.60 per hour between 7pm – 12am

- Modern Award Evening Allowance

o 10% per hour between 10pm – 12am (determined at standard hourly rate)

Step 2 Determine phase out of pre modern award

- $1.60 per hour between 7pm – 12am to be phased out over 5 years

o July 2010 (80%) = 1.28
o July 2011 (60%) = 0.96
o July 2012 (40%) = 0.64
o July 2013 (20%) = 0.32
o July 2014 (0%) = 0

Step 3 Determine Phase in of Modern Award

- 10% of “standard hourly rate” between 10pm – 12am phased in over 5 years

o July 2010 (20%) = 0.35c
o July 2011 (40%) = 0.8072c
o July 2012 (60%) = ~~6% of 2012 L4 hourly rate~~ $1.11
o July 2013 (80%) = ~~8% of 2013 L4 hourly rate~~ $1.53
o July 2014 (100%) = 10% of 2014 L4 hourly rate

Step 4 Determine Phase out + Phase in rates

- Note no equivalent in modern award between 7pm-10pm
- July 2010

o 7pm-10pm = (phase out) 1.28 + (phase in) 0 = $1.28
o 10pm-12am = (phase out) 1.28 + (phase in) 0.35c = $1.603

- July 2011

o 7pm-10pm = (phase out) 0.96 + (phase in) 0 = 0.96c
o 10pm-12am = (phase out) 0.96 + (phase in) 0.8072 = $1.768

- July 2012

o 7pm-10pm = (phase out) 0.64c + (phase in) 0 = 0.64c
o 10pm-12am = (phase out) 0.64c + (phase in) ~~6% of 2012 L4 hourly rate~~ $1.11 = $1.75

- July 2013

o 7pm-10pm = (phase out) 0.32c + (phase in) 0 = 0.32c
o 10pm-12am = (phase out) 0.6432c + (phase in) ~~8% of 2012 L4 hourly rate~~ $1.53 = $1.85

- July 2014

o 10pm-12am = 10%

Step 1 Determine comparative provisions

- Pre Modern Award Evening Allowance

o $1.60 per hour between 7pm –

12am

- Modern Award Evening Allowance

o 10% per hour between 10pm – 12am (determined at standard hourly rate)

Step 2 Determine if existing loading or penalty rate lower or higher than Modern Award as per A.5 and A.6

- MA $1.74 per hour as at 2010/2011 minus 80% of 0.14 transitional percentage = $1.63 per hour from 1 July 2010

- MA $1.80 per hour as at 2011/12 minus 60% of 0.20 transitional percentage = $1.68 per hour from 1 July 2011

- MA $1.85 per hour as at 2012/13 minus 40% of 0.25 transitional percentage = $1.75 from 1 July 2012

- MA $1.91 per hour as at 2013/14 minus 20% of 0.31 transitional percentage = $1.85 from 1 July 2013

SCHEDULE C

Fair Work Ombudsman ‘Phase out, phase in

method’

RCA interpretation of Schedule A Transitional

Provisions phase in method

Step 1 Determine comparative provisions

- Pre Modern Award Evening Allowance

o $1.60 per hour between 7pm –

12am

- Modern Award Evening Allowance

o 10% per hour between 10pm –

12am (determined at standard

hourly rate)

Step 2 Determine phase out of pre modern award

- $1.60 per hour between 7pm – 12am to be phased out over 5 years

o July 2010 (80%) = 1.28 o July 2011 (60%) = 0.96 o July 2012 (40%) = 0.64 o July 2013 (20%) = 0.32 o July 2014 (0%) = 0

Step 3 Determine Phase in of Modern Award

- 10% of “standard hourly rate” between

10pm – 12am phased in over 5 years

o July 2010 (20%) = 0.35 o July 2011 (40%) = 0.72 o July 2012 (60%) = 1.11 o July 2013 (80%) = 1.52

o July 2014 (100%) = 10% of 2014 L4 hourly rate

Step 4 Determine Phase out + Phase in rates

- Note no equivalent in modern award

between 7pm-10pm

- July 2010

o 7pm-10pm = (phase out) 1.28 + (phase in) 0 hours = $1.28

o 10pm-12am = (phase out) 1.28 + (phase in) 0.35c = $1.63

- July 2011

o 7pm-10pm = (phase out) 0.96 + (phase in) 0 hours = $0.96

o 10pm-12am = (phase out) 0.96 + (phase in) 0.72 = $1.68

- July 2012

o 7pm-10pm = (phase out) 0.64c+ (phase in) 0 = $0.64

o 10pm-12am = (phase out) 0.64c + (phase in) $1.11 = $1.75

- July 2013

o 7pm-10pm = (phase out) 0.32c+ (phase in) 0 = $0.32

o 10pm-12am = (phase out) 0.64c + (phase in) $1.52 = $1.84

Step 1 Determine comparative provisions

- Pre Modern Award Evening Allowance

o $1.60 per hour between 7pm –

12am

- Modern Award Evening Allowance

o 10% per hour between 10pm – 12am

(determined at standard hourly rate)

Step 2 Determine if existing loading or penalty rate lower or higher than Modern Award as per A.5 and A.6 and calculate transitional percentage. [10% of L4 $16.78 p.h as at 1/1/2010 = $1.68 - $1.60 = $0.08 transitional percentage.

- MA $1.74 per hour as at 1/7/2010 [80% of 0.08 transitional percentage = 0.06] $1.74-$0.06 =

$1.68 per hour from 1 July 2010

- MA $1.80 per hour as at 1/7/2011 [60% of 0.08 transitional percentage = 0.05] $1.80-$0.05

=$1.75 per hour from 1 July 2011

- MA $1.85 per hour as at 1/7/2012 [40% of 0.08 transitional percentage = 0.03] $1.85-$0.03 =

$1.82 per hour from 1 July 2012

- MA $1.90 hour as at 1/7/2013 [20% of 0.08 transitional percentage =0.02] $1.90 -$0.02 =

$1.88 per hour from 1 July 2013

¹ [2009] AIRCFB 345

² [2009] AIRCFB 800

3 At [19]

4 At [20]

5 At [22]

⁶ At [23]-[24]

⁷ At [23]

⁸ At [24]

⁹ At [33]

¹⁰ At [39] and [42]

¹¹ At [45]

¹² [2010] FWAFB 8558

¹³ At [15]

¹⁴ At [27]

¹⁵ Australian National Airways Pty Ltd v Commonwealth (No 1) (1945) 71 CLR 29 at 67 per Latham CJ; Transport Workers Union of Australia v Qantas Airways Ltd(2012) 199 FCR 190 at 192 [4] per Gray J and 202 [51]–[52] per Buchanan and McKerracher JJ.

16 Edwards v Guidice (1999) 169 ALR 89 at 92 [5] per Moore J

17 [2012] FWAFB 5600

18 Ibid.

19 [MA000035]

²⁰ Clause 4.1

²¹ Clause 4.2

²² Clause 2.2

²³ Clause 2.4

²⁴ Clauses 2.5-2.6

²⁵ [2009] AIRCFB 800

26 Exhibit WA2

27 Exhibit WA1

28 [MA000120]

²⁹ Clause 4.1

³⁰ Clause 2.2

³¹ Clause 2.4

³² Clauses 2.5-2.6

³³ [2009] AIRCFB 945

³⁴ Transcript PNs 868-869

³⁵ Transcript PNs 875-881

³⁶ PR991088

³⁷ PR503637

38 [MA000077]

³⁹ Clause 4.1

⁴⁰ Clause 2.2

⁴¹ Clause 2.4

⁴² Clause 2.5-2.6

⁴³ PR988937

⁴⁴ PR991179

⁴⁵ PR991784

⁴⁶ [2010] FWA 10092

⁴⁷PR505582

⁴⁸ See [9]

⁴⁹ At [13]

⁵⁰ At [13]

⁵¹ The position in this respect is similar to that stated by the Full Bench in Manufacturing and Associated Industries Award 2010 [2010] FWAFB 4488 at [19] in relation to the operation of the model absorption provision.

⁵² Item 9(3) of Part 3 of Schedule 5 of the Transitional Act.

53 [MA000119]

⁵⁴ The first edition of Guidance Note 7 was issued on 31 May 2010, and the most recent edition on 21 December 2012.

⁵⁵ [2010] FWAFB 4488

⁵⁶ AP787213

⁵⁷ Differences of one cent may be produced depending upon whether amounts are rounded up or down to the nearest cent; we regard this as being de minimis.

⁵⁸ [2009] AIRCFB 800

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