Variation on the Commission’s own motion – Modern award superannuation clause review

[2023] FWCFB 264

[2023] FWCFB 264

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009

s 157—FWC may vary etc. modern awards if necessary to achieve modern awards objective

s 160—Variation of modern award to remove ambiguity or uncertainty or correct error

Variation on the Commission’s own motion – Modern award superannuation clause review

(AM2022/29)

Various industries
JUSTICE HATCHER, PRESIDENT VICE PRESIDENT CATANZARITI DEPUTY PRESIDENT CLANCY	SYDNEY, 22 DECEMBER 2023

Variation on the Commission’s initiative – review and variation of modern award superannuation clauses to reflect current superannuation requirements – Fair Work Legislation Amendment (Protecting Worker Entitlements) Act 2023 – superannuation in the National Employment Standards.

Introduction and background

1. Changes to superannuation laws in relation to stapled superannuation funds and underperforming superannuation products commenced in 2021.[1] This has meant that the superannuation clauses in modern awards may, in some respects, no longer reflect current superannuation requirements. This has arisen in the following context:

(1)Commencing from 1 November 2021, when a new employee does not choose a superannuation fund, their new employer must ask the Australian Taxation Office (ATO) whether the employee has a stapled superannuation fund.[2]

(2)A stapled superannuation fund is a complying superannuation fund, of which the employee is an existing member, which is able to accept contributions from the new employer.[3]

(3)If the ATO provides details of an employee’s stapled fund, the employer must make contributions to the employee’s stapled fund to satisfy superannuation choice of fund requirements.[4]

(4)However, if an employee does not choose a superannuation fund and does not have a stapled fund, the choice of fund requirements will be satisfied by contributions made to a fund specified in an award or enterprise agreement covering the employee, provided the fund is able to accept contributions for the benefit of the employee.[5]

(5)A fund will not be able to accept contributions for the benefit of an employee if the employee would be a new member of the fund’s MySuper product and the MySuper product is closed to new members because it has failed the Australian Prudential Regulation Authority’s (APRA’s) annual performance test for 2 consecutive years.[6]

(6)Because of the stapled fund requirements, there may be some circumstances in which an employer makes superannuation contributions in accordance with the terms of an award superannuation clause but nevertheless fails to comply with superannuation guarantee requirements.

(7)Due to the underperforming superannuation product arrangements, an employer, in some circumstances, will be unable to make superannuation contributions to a fund prescribed in an award clause and to the extent that an award clause would require such contributions to be made, it will be unenforceable.[7]

1. This matter was commenced on the Commission’s own motion to conduct a review of superannuation clauses in all modern awards so that they better reflect current superannuation law requirements. The review also aimed to ensure that employers and employees are not misled by the terms of award superannuation clauses. The background to this matter has previously been set out in two Statements[8] issued by the former President, Justice Ross, and a Statement[9] issued by Justice Hatcher. Three background documents prepared by staff of the Commission were also published to promote discussion of issues relevant to the review.[10]

1. Following a conference on 7 October 2022, Justice Ross confirmed that the proposed review would ‘be confined to reviewing and varying award superannuation clauses so far as necessary to accommodate the recent changes to superannuation laws, and the stapled fund and underperforming fund arrangements in particular’.[11]

1. During the course of proceedings, the Fair Work Legislation Amendment (Protecting Worker Entitlements) Act 2023 (Protecting Worker Entitlements Act) received royal assent on 30 June 2023. Schedule 3 to the Protecting Worker Entitlements Act amended the Fair Work Act 2009 (FW Act) by inserting a new entitlement to superannuation contributions in the National Employment Standards (NES). The key changes to the FW Act in relation to superannuation are in two parts and can be summarised as follows:

· Part 1 of Schedule 3 to the Protecting Worker Entitlements Act inserts a new Division 10A in Part 2-2 of the FW Act to provide a new entitlement to superannuation contributions in the NES. These provisions will introduce a requirement for employers to make contributions to a superannuation fund for the benefit of an employee so as to avoid liability to pay the superannuation guarantee charge under the Superannuation Guarantee Charge Act 1992 (Cth) in relation to the employee. These changes will come into effect on 1 January 2024.

·     An employer that contravenes the requirement to make superannuation contributions may be subject to a civil penalty, as is the current position for all contraventions of the NES. It would also be open to a court to make other orders, including for compensation, if these provisions are contravened.

· Part 2 of Schedule 3 makes a consequential amendment to s 149B of the FW Act to ensure alignment between the new Division 10A of Part 2-2 of the FW Act and the terms relating to superannuation in modern awards. This change came into effect on 1 July 2023.

1. Following a preliminary hearing on 13 July 2023, the Commission issued directions calling for position papers from the peak bodies and submissions from interested parties.

1. We received position papers, addressing the 6 broad categories of superannuation clauses identified in Background Document 3 – Award Superannuation Clauses by Category (Background 3 Document), from the following peak bodies:

·     Australian Industry Group (Ai Group);[12]

·     Australian Chamber of Commerce and Industry (ACCI);[13] and

·     Australian Council of Trade Unions (ACTU).[14]

1. Submissions were received from the following parties:

·     ACCI;[15]

·     ACTU;[16]

·     Ai Group;[17]

·     Australian Public Service Commission (APSC);[18]

·     Community and Public Sector Union (CPSU);[19]

·     Mining and Energy Union (previously the Mining Division of the Construction, Forestry, Maritime, Mining and Energy Union) (MEU);[20]

·     Construction, Forestry and Maritime Employees Union – Manufacturing Division (previously the Manufacturing Division of the Construction, Forestry, Maritime, Mining and Energy Union) (CFMEU – Manufacturing Division);[21] and

·     Financial Services Council (FSC).[22]

Award superannuation clause categories - overview

1. The Commission’s Background Document 3 set out award superannuation clauses by category. A short overview of the six categories is set out below.

1. Category 1 clauses, referred to as ‘short standard clauses’ for the purposes of Background Document 3, consist of a single subclause addressing superannuation contributions for defined benefit members. It does not include reference to any particular legislation. Nine modern awards were grouped in Category 1. Interested parties that addressed Category 1 clauses expressed a common view that Category 1 clauses are not inconsistent with superannuation laws and do not require any variation.

1. Category 2 clauses, referred to as ‘long standard clauses with absence from work provision’ for the purposes of Background Document 3, consist of five subclauses. The subclauses address superannuation legislation, employer contributions, voluntary employee contributions, superannuation funds, and superannuation payments for employees who are absent from work. Forty-nine modern awards and three modern enterprise awards, related to both the private and public sectors, were grouped in Category 2. Interested parties agreed that no changes are required to the subclauses addressing employer contributions, voluntary employee contributions or superannuation payments for employees who are absent from work. However, while agreeing that issues of consistency with superannuation law are present, the parties have not reached an agreed position regarding proposed variations to subclauses addressing superannuation legislation and superannuation funds.

1. Category 3 clauses, referred to as ‘long standard clauses without absence from work provisions’ for the purposes of Background Document 3, consist of four subclauses. The subclauses address superannuation legislation, employer contributions, voluntary employee contributions, and superannuation funds. Sixty-three modern awards and 13 modern enterprise awards, related to both the private and public sectors, were grouped in Category 3. Interested parties agreed that no changes are required to the subclauses addressing employer contributions or voluntary employee contributions. However, while parties are in agreement that issues of consistency with superannuation law are present, the parties have not reached an agreed position regarding proposed variations to the subclauses concerning superannuation legislation and superannuation funds.

1. Category 4 clauses, referred to as ‘standard public sector clauses’ for the purposes of Background Document 3, consist of a subclause setting out specific legislation dealing with superannuation rights and obligations of employers and employees in the Australian Public Service (APS). Four modern enterprise awards were grouped in Category 4. One variation proposal has been received regarding this category.[23]

1. Category 5 clauses, referred to as ‘standard newspaper sector clause’ for the purposes of Background Document 3, consist of six subclauses. The subclauses address superannuation legislation, employer contributions, voluntary employee contributions, superannuation funds, superannuation contributions for employees who are defined benefit members of a fund or scheme, and superannuation payments for employees who are absent from work. Six modern enterprise awards were grouped in Category 5. No variation proposals were received regarding this category.

1. Category 6 clauses, referred to as ‘non-standard clauses’ for the purposes of Background Document 3, diverged from the more standard approaches outlined in Categories 1 to 5. Eight modern enterprise awards, related to both the private and public sectors, were grouped in Category 6. Only the CPSU has made submissions about a general approach to varying awards in this category.[24]

Award specific issues overview

1. Background Document 1 identified that the Textile, Clothing, Footwear and Associated Industries Award 2020[25] (TCF Award) and Supported Employment Services Award 2020[26] (SES Award) specify an outdated superannuation guarantee percentage of 9.5%. The Commission invited submissions on how to resolve these outdated references.

1. The Commission received one proposal to vary the TCF Award[27] and two proposals to vary the SES Award.[28]

Proposed variations and submissions

ACTU

1. In respect of Category 2 and Category 3 awards, the ACTU proposed that the ‘superannuation legislation’ subclause and the ‘superannuation fund’ subclause be varied as follows:

X.1        Superannuation legislation

(a)Superannuation legislation, including the Superannuation Guarantee (Administration) Act 1992 (Cth), the Superannuation Guarantee Charge Act 1992 (Cth), the Superannuation Industry (Supervision) Act 1993 (Cth) and the Superannuation (Resolution of Complaints) Act 1993 (Cth), deals with the superannuation rights and obligations of employers and employees. The requirement to make superannuation contributions is also provided for in the NES.

(b)Under superannuation legislation individual employees generally have the opportunity to choose their own superannuation fund. From 1 November 2021 Iif an employee does not choose a superannuation fund, any superannuation fund nominated in the award covering the employee applies. the employer must ask the Australian Taxation Office (ATO) if the employee has a stapled superannuation fund. If:

(i)the ATO provides stapled fund details, the employer must make contributions to the employee’s stapled fund to satisfy choice of fund requirements;

(ii)an employee does not choose a superannuation fund and does not have a stapled fund, any superannuation fund nominated in the award covering the employee applies, provided

(c)A fund may not be able to accept contributions for the benefit of an employee if the employee would be a new member of the fund’s MySuper product and the MySuper product is closed to new members because it has failed the Australian Prudential Regulation Authority’s (APRA’s) performance tests. APRA lists MySuper products that are closed to new members on its website at: rights and obligations in these clauses supplement those in superannuation legislation and the NES.

X.4     Superannuation fund

Unless, to comply with superannuation legislation, the employer is required to make the superannuation contributions provided for in clause X.2 to another superannuation fund that is chosen by the employee, the employer must make the superannuation contributions provided for in clause X.2 and pay the amount authorised under clauses X.3(a) or X.3(b) to one of the following superannuation funds or its successor:

[No changes proposed to list of funds]

1. The ACTU submitted that the current Category 2 and 3 clauses awards do not address either stapling or the change relating to a superannuation funds’ ability to accept contributions for new members, leaving their provisions inconsistent with the current superannuation law obligations. The ACTU suggested that the clauses would lead to non-compliance by employers with stapled fund obligations, including the need to make superannuation contributions to a fund that can accept them. For these reasons, the ACTU submitted that Category 2 and 3 clauses give rise to uncertainty and/or ambiguity in a way which meet the prerequisite for the exercise of the discretion under s 160 of the FW Act. The ACTU also submitted that the Commission’s task is not confined to the strict excise of the ambiguity, uncertainty, or error.

1. The ACTU’s proposed variations would insert a reference to the NES entitlement to superannuation, outline the process and requirements attaching to stapled funds, address default fund allocation (and when that applies), and recognise that a fund may not be able to accept contributions. It was appropriate, it submitted, for modern awards to serve as a ‘manual for employers’, particularly small businesses, given the complexity of superannuation legislation. It further submitted the Commission’s task is to remove doubt, or uncertainty, about employee rights and employer obligations and that a minimalist approach to varying clauses may leave residual uncertainty.

1. The ACTU submitted that superannuation is a particularly important part of the industrial landscape, that there is a strong need to ensure superannuation contributions are made correctly, and that, to the extent possible, the Commission should assist in ensuring superannuation contributions are made correctly The ACTU contends that while the modern awards objective is not the basis for the process the Commission has undertaken, it is a relevant factor and should be considered by the Commission when determining the outcome. The ACTU argued that the Commission should avoid presiding over an outcome in this proceeding that would require a separate, subsequent application to be made pursuant to s 157 of the FW Act to ensure compliance with the modern award objective in relation to superannuation contributions. In particular, the ACTU invokes the need to ensure a simple, easy to understand, stable and sustainable modern award system (s 134(1)(g) of the FW Act). Recognising that unions and employers hold different views when it comes to the achievement of simplicity, the ACTU cautioned that simplicity and ease of understanding will not necessarily come from streamlining. The ACTU submitted that the key to achieving simplicity and ease of understanding in this case is for there to be some level of explanation in the award superannuation clauses in order to meet the objective of creating an awards system that is simple, easy to understand, and capable of practical application. It called for ‘a slightly greater level of prescription’ in order to cure uncertainty and argued that this is necessary due to the complexity of superannuation legislation and the fact that the clauses are underpinned by ‘an entirely different legislative scheme’ rather than the ‘rubric of industrial law’ underpinning other NES entitlements.

1. The ACTU submitted that its proposal addresses how an employer is required to go about assigning a default fund to a new employee. The ACTU submitted it is not enough to simply list the default funds and then leave an employer with no idea of the way in which they are to make compliant contributions. Citing the nature and application of superannuation, the ACTU submitted that it is desirable for award superannuation clauses to outline the procedure by which an employer will engage a new employee, make the relevant enquiries with the ATO, and ascertain whether there is a chosen fund ora default fund.

1. In relation to the SES Award, the ACTU submitted that the reference to a superannuation guarantee rate of 9.5% in clause 19.5 of the SES Award should be corrected to the current rate.[29]

Ai Group

1. In respect of Category 2 and Category 3 awards, the Ai Group’s proposal, in the form finally advanced, was that the ‘superannuation legislation’ subclause and the ‘superannuation fund’ subclause be varied as follows:

X.1        Superannuation legislation

(a)The NES and Ssuperannuation legislation, including the Superannuation Guarantee (Administration) Act 1992 (Cth), the Superannuation Guarantee Charge Act 1992 (Cth), the Superannuation Industry (Supervision) Act 1993 (Cth) and the Superannuation (Resolution of Complaints) Act 1993 (Cth), deal with the superannuation rights and obligations of employers and employees. Under superannuation legislation individual employees generally have the opportunity to choose their own superannuation fund. If an employee does not choose a superannuation fund, any superannuation fund nominated in the award covering the employee applies.

(b)The rights and obligations in these clauses supplement those in superannuation legislation and the NES.

X.4      Superannuation fund

Unless, to comply with superannuation legislation, the employer is required to make the superannuation contributions provided for in clause X.2 to another superannuation fund that is chosen by the employee, the employer must make the superannuation contributions provided for in clause X.2 and pay the amount authorised under clauses X.3(a) or X.3(b) to one of the following superannuation funds or its successor, provided that, in respect of new employees, the fund is able to accept new beneficiaries:

[No changes proposed to list of funds]

1. The Ai Group submitted that Category 2 and 3 clauses are inconsistent with laws related to stapled funds and underperforming funds and noted they refer to superannuation legislation in respect of rights or obligations that also arise under the NES (from 1 January 2024). It submitted that the ‘superannuation fund’ clause presently requires an employer to make superannuation contributions to a default fund identified by the award except where the employer is required to make contributions to a fund chosen by the employee, and does not expressly exclude circumstances in which an employer:

·     is required to make contributions to a fund other than a default fund by virtue of the stapled fund laws (that is, because an employee has a stapled fund); or

·     an employer is prohibited from making contributions to a default fund due to the operation of the underperforming fund laws.

1. The Ai Group therefore submitted that the ‘superannuation fund’ clause is inconsistent with superannuation laws to the extent described above and would be unenforceable to the extent that it requires an employer to make payments to a default fund where this is prohibited by the underperforming fund laws.

1. It submitted that the variations it proposes are premised on three propositions:

(1)superannuation terms in modern awards should not be inconsistent with superannuation laws;

(2)where modern award terms concerning superannuation refer to superannuation legislation, they should also refer to the new NES provisions concerning superannuation; and

(3)modern awards can only contain provisions that are necessary to achieve the modern awards objective (as per s 138 of FW Act).[30]

1. The Ai Group submitted that its proposal would squarely deal with the application of the ‘underperforming fund laws’ and the ‘stapled fund laws’ and would make clear that the obligation created by the ‘superannuation fund’ clause to make superannuation contributions to a default fund identified by the award:

·does not apply where an employee has chosen a fund or where the employee has a stapled fund; and

·applies subject to the application of the underperforming fund laws, whereby a particular default fund is unable to accept new beneficiaries.

1. The Ai Group also submitted that superannuation laws deal comprehensively with employers’ and employees’ rights and obligations, and information is widely available, including from the ATO. It submitted the existence of rights and obligations regarding superannuation are signposted by award terms and by the NES. It opposed ACTU’s proposed paragraphs (b) and (c) of the ‘superannuation legislation’ subclause, submitting they are neither appropriate nor necessary for the purposes of s 138 of the FW Act. The Ai Group’s concerns included that:

·     paragraph (b) introduces award-derived obligations associated with stapled superannuation funds;

·     paragraph (c) does not create a right or impose an obligation but instead provides information about the operation of the underperforming fund laws;

·     the variation uses new and undefined terminology, such as the term ‘stapled fund’ which the Ai Group suggests has no clear meaning;

·     it is unclear how the word ‘provided’ at the end of paragraph (b) is intended to operate in relation to other paragraphs;

·     paragraph (b) oversimplifies the process for ascertaining whether a new employee has a stapled fund; and

·     the APRA webpage link does little to assist with understanding paragraph (c) because it does not contain key information for applying the clause and it may become outdated.

1. The Ai Group submitted it is not necessary for awards to reproduce or summarise the effect of superannuation laws and, citing the 4 yearly review of modern awards,[31] argued the Commission does not generally use such an approach. It argued that there is no evidence of widespread non-compliance with the relevant laws. It also submitted the ACTU proposal is at odds with the need under s 134(1)(g) of the FW Act to ensure a stable awards system and, if adopted, any legislative amendments to stapled fund laws or underperforming fund laws may require another review of award superannuation terms. In support of this proposition, Ai Group noted that the Treasury Department intends to reassess the operation of the stapled fund laws following the conduct of a recent review of the Treasury Laws Amendment (Your Future, Your Super) Act 2021 (Cth).[32]

1. The Ai Group further submitted that, even if the ACTU’s proposal were adopted, awards would not serve the purpose that the ACTU seeks because various aspects of superannuation rights and entitlements would not be dealt with expressly by awards and it would remain the case that employers would need to consult superannuation legislation to understand their obligations properly and exhaustively. The ACTU’s proposal, it was submitted, goes well beyond simply removing uncertainties that have arisen between the interplay between awards and superannuation legislation, and the proposed requirement to ask the ATO whether an employee has a stapled superannuation fund would in fact create an inconsistency with the relevant superannuation legislation the proposal purports to summarise.

ACCI

1. The ACCI made general submissions addressing the right to superannuation in the NES, removal of monthly minimum threshold, performance testing and stapling of funds. It submitted that the new obligation on employers in the NES may generate inconsistencies with the modern awards, since superannuation statutes will no longer be the sole statutory source of superannuation obligations for employers. The ACCI also noted that all employers will be obliged to make sufficient contributions to employees’ superannuation funds to avoid liability to pay the superannuation guarantee charge. It described this as distinct from the manner in which superannuation obligations operate under superannuation legislation, which does not prevent employers from making insufficient contributions to employees’ superannuation funds, but imposes additional liability if they do.

1. The ACCI addressed the interaction between the new legislation and stapled funds. It submitted that an employer is not obliged to request the Commissioner of Taxation to identify or make contributions to a stapled fund to comply with superannuation legislation, but ‘may’ request the Commissioner of Taxation to identify a stapled fund. The ACCI further submitted that an employer is free to make contributions to a fund contrary to the choice of fund requirements without breaching superannuation law. Rather, such action would trigger additional liability to pay the superannuation guarantee charge. However, the ACCI submitted this conduct may soon lead to a contravention of the NES.

1. The ACCI submitted that new stapling of fund rules may generate inconsistencies between modern award superannuation clauses and superannuation law on the basis that superannuation clauses may suggest that an employer may make contributions to a specified default fund when an employee has not chosen a fund, without taking into account the need to identify a possible stapled fund.

1. The ACCI responded to the ACTU’s proposition that modern awards should provide guidance by making the general submission that employers look to modern awards for obligation and seek guidance from other sources. The ACCI submitted that whether superannuation law is more complex than other areas of law is irrelevant and argued that variations providing only ‘partial guidance’ risk creating confusion if some obligations have greater explanation attached to them than others.  The ACCI also submitted that greater detail in modern awards relating to superannuation may have the consequence of requiring the e the Commission to exert more effort to keep modern awards up to date.

1. The ACCI submitted that the ACTU’s proposed variations should not be adopted because:

·     The proposed variations to the superannuation legislation subclause in Category 2 and 3 awards exceed the scope of the review and what is ‘necessary to accommodate the recent changes to superannuation laws’.

·     Modern awards do not need to include guidance on the stapling of fund requirements and new performance testing rules because employers generally do not consult modern awards for guidance on superannuation obligations, relying on other sources.

· The proposed changes are not permitted under s 160 of the FW Act because they go well beyond remediating any ambiguities or uncertainties in the awards (citing Re Australian Payroll Association [2021] FWC 6228).

·     The proposed variations could generate further ambiguities or uncertainties if new legislative changes to superannuation law are introduced in the future (for example, further variations may be required if the weblink in the proposal becomes outdated).

·     There is no benefit to inserting ‘From 1 November 2021’ before a description of the stapling of fund requirements.

· If the Commission relies on s 157 of the FW Act to vary the superannuation legislation subclause, the proposed variations are not ‘necessary to achieve the modern awards objective’. The fairness or relevance of the minimum safety net is not undermined by omitting guidance in superannuation clauses. The extensive wording proposed by the ACTU increases the complexity of Category 2 and 3 awards and is contrary to the need to ensure a ‘simple’ and ‘easy to understand’ modern award system.

1. The ACCI supported the Ai Group’s proposal and submitted that the insertion of references to the NES in paragraphs (a) and (b) of the ‘superannuation legislation’ subclause would relieve the clauses of any implication that superannuation legislation is the sole statutory source of superannuation obligations. The ACCI further submitted the deletion of the words ‘If an employee does not choose a superannuation fund, any superannuation fund nominated in the award covering the employee applies’ in paragraph (a) of the ‘superannuation legislation’ subclause would reflect the new stapled fund requirements because, if an employee does not choose a superannuation fund, another fund (a stapled fund) will apply, rather than ‘any superannuation fund nominated in the award’. The ACCI submitted that this deletion also reflects the fact that a ‘superannuation fund nominated in the award’ may not be capable of accepting the employee who has not chosen a superannuation fund as a beneficiary because of the performance testing rules.

1. Specifically as to the SES Award, the ACCI acknowledged that clause 19.5 of the award is now inconsistent with superannuation law because contributions for employees with disability equivalent to 9.5% of their ordinary time earnings will be insufficient to ensure employers avoid liability to pay the superannuation guarantee. The ACCI noted that clause 19.2 of the SES Award presently states:

19.2     Employer contributions

Subject to clause 19.5 an employer must make such superannuation contributions to a superannuation fund for the benefit of an employee as will avoid the employer being required to pay the superannuation guarantee charge under superannuation legislation with respect to that employee.

1. The ACCI therefore proposed the following variation to clause 19.5 of the SES Award:

Superannuation contributions for employees with a disability will be either 9.5% of their ordinary time earnings the amount required by clause 19.2 or $15 per week, whichever is the greater.

1. ACCI submitted that its proposal will:

·     preserve the entitlement to minimum superannuation contributions of $15 per week for employees with disability;

·     remove the specified 9.5% that is inconsistent with the current superannuation guarantee charge percentage;

·     ensure that the Commission does not need to revisit the clause when the superannuation guarantee charge percentage changes in the future; and

·     reflect the fact that, even if uncommon, superannuation contributions for the benefit of employees equivalent to the superannuation guarantee charge percentage multiplied by their ordinary time earnings may not always be necessary for an employer to avoid liability to pay the superannuation guarantee charge, either now (see, for example, the ‘maximum contribution base’) or following any future legislative changes.

APCS

1. The APSC submitted it has an interest in the Australian Government Industry Award 2016[33] (grouped in Category 3) and the Australian Public Service Enterprise Award 2015[34] (grouped in Category 4). It did not propose any specific variations, but requested the Commission have regard to the specific Commonwealth superannuation scheme obligations and legislation, including any Commonwealth defined benefit schemes that are relevant. Generally, the APSC supported the Commission’s review of superannuation clauses in modern awards and the making of variations necessary to address:

·     legislation concerning underperforming superannuation products;

·     legislation concerning stapled superannuation funds; and

·     obligations to pay superannuation in the NES which come into effect 1 January 2024.

FSC

1. The FSC supported the ACCI’s submissions regarding variations to default superannuation fund terms. While the FSC notes it is important that modern awards are reflective of the legislative landscape to ensure consistency, it additionally submitted there is no significant ambiguity or confusion present within the business community in relation to obligations to pay superannuation. In this respect, it submitted employers are not looking to the award ‘as the source of truth’ for their legislative obligations and that a ‘myriad government resources’ are available to assist employers in understanding their obligations, which are kept up to date to reflect the appropriate obligations of the day.

1. To the extent that there are inconsistencies, the FSC supported the minimal changes necessary to provide clarity. It submitted the Commission’s power to vary modern awards under s 160 of the FW Act is limited and does not grant the Commission broad discretion to vary the modern award clauses to insert unnecessary guidance about superannuation obligations.

CPSU

1. The CPSU supported the ACTU submissions. It additionally submitted that it has an interest in the Telecommunications Services Award 2020[35] (grouped in Category 2); the CSIRO Enterprise Award 2016,[36] Broadcasting, Recorded Entertainment and Cinemas Award 2020,[37] Australian Nuclear Science and Technology Organisation (ANSTO) Enterprise Award 2016[38] and Northern Territory Public Sector Enterprise Award 2016[39] (grouped in Category 3); the Australian Public Service Enterprise Award 2015,[40] Australian Bureau of Statistics (Interviewers) Enterprise Award 2016,[41] and Parliamentary Departments Staff Enterprise Award 2016[42] (grouped in Category 4); and the Telstra Award 2015[43] and Australian Capital Territory Public Sector Enterprise Award 2016[44] (grouped in Category 6).

1. CPSU submitted that the principles articulated in the ACTU’s submissions and position document for Category 1, 2 and 3 clauses should be adopted for Category 4 and 6 superannuation clauses. It proposed the following variation to the Australian Public Service Enterprise Award 2015:

13.1     Superannuation legislation

(a)Superannuation legislation, including the Superannuation Guarantee (Administration) Act 1992 (Cth), the Superannuation Guarantee Charge Act 1992 (Cth), the Superannuation Industry (Supervision) Act 1993 (Cth), the Superannuation Benefits (Supervisory Mechanisms) Act 1990, the Superannuation (Resolution of Complaints) Act 1993 (Cth), the Superannuation Act 1976, the Superannuation (Productivity Benefit) Act 1988, the Superannuation Act 1990 and the Superannuation Act 2005 deals with the superannuation rights and obligations of employers and employees in the APS. The requirement to make superannuation contributions is also provided for in the NES.

(b)If an employee is a member of the Commonwealth Superannuation Scheme, the Public Sector Superannuation Schemes, the Public Sector Superannuation Accumulation Plan or covered by the Superannuation (Productivity Benefit) Act 1988 their employer superannuation contributions will be in accordance with the relevant legislation relating to those arrangements.

(c)If an employee:

(i)is not a member of a Commonwealth Superannuation Scheme, the Public Sector Superannuation Scheme or covered by the Superannuation (Productivity Benefit) Act 1988; and

(ii)has not chosen a superannuation fund; and

(iii)does not have a stapled fund, employer contributions are to be made to the Public Sector Superannuation Accumulation Plan in accordance with the relevant legislation, provided the fund is able to accept contributions for the benefit of the employee.

(d)A fund may not be able to accept contributions for the benefit of an employee if the employee would be a new member of the fund’s MySuper product and the MySuper product is closed to new members because it has failed the Australian Prudential Regulation Authority’s (APRA’s) performance tests. APRA lists MySuper products that are closed to new members on its website at:

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The MEU also supported the ACTU’s submissions, and submitted it has an interest in the Black Coal Mining Industry Award 2020[45] and the Mining Industry Award 2020[46] (grouped in Category 1), as well as the Coal Export Terminals Award 2020[47] and Electrical Power Industry Award 2020[48] (grouped in Category 3).

CFMEU – Manufacturing Division

1. The CFMEU - Manufacturing Division likewise supported the ACTU’s submissions and submitted it has an interest in the Dry Cleaning and Laundry Industry Award 2020,[49] Joinery and Building Trades Award 2020,[50] Manufacturing and Associated Industries Award 2020,[51] Timber Industry Award 2020[52] and TCF Award (grouped in Category 2), as well as the Storage Services and Wholesale Award 2020[53] (grouped in Category 3). It further submitted that any variations should not result in further unintended ambiguity or uncertainty and that the Ai Group’s ‘minimalist’ approach did not effectively remove ambiguity or uncertainty in award superannuation terms because there would be insufficient detail or ‘sign posting’ to allow employers to understand which fund they have to contribute to. In this context, the CFMEU - Manufacturing Division emphasised the importance of the correct payment of superannuation for low-paid employees and referred to evidence of widespread non-compliance with superannuation obligations.

1. Specifically in respect of the TCF Award, the CFMEU - Manufacturing Division submitted that the Appendix to Schedule F in the TCF Award should be varied to address the operation of the superannuation term and correct the name of the union. It proposed that the existing reference to superannuation obligations in the Appendix to Schedule F be replaced with the following:

Superannuation
By law, your employer has to make a superannuation contribution of 11.0% to a superannuation fund, for you. This percentage will increase to 11.50% on 1 July 2024 and 12.00% on 1 July 2025. The industry default funds under the Award are Australian Super Fund and SunSuper, which are approved by both the union and some employer organisations, unless you choose another fund. In some circumstances your employer may be required under the law to make contributions to another fund.

1. It was also proposed that the separate reference to the ‘Textile, Clothing and Footwear Union of Australia’ in the Appendix to Schedule F be replaced by ‘TCF Union (TCF Sector, Manufacturing Division, CFMEU)’.

Other submissions

1. During the hearing of 13 September 2023, the Communications, Electrical and Plumbing Union of Australia and the United Workers’ Union made oral submissions supporting the position of the ACTU and other unions.

Consideration

Statutory framework

1. Section 160 of the FW Act provides:

160 Variation of modern award to remove ambiguity or uncertainty or correct error

(1)  The FWC may make a determination varying a modern award to remove an ambiguity or uncertainty or to correct an error.

(2)  The FWC may make the determination:

(a)  on its own initiative; or

(b)  on application by an employer, employee, organisation or outworker entity that is 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)  if the modern award includes outworker terms—on application by an organisation that is entitled to represent the industrial interests of one or more outworkers to whom the outworker terms relate.

1. The principles applicable to the interpretation and application of s 160 are well established. It is first necessary to determine if the award provisions under consideration are ambiguous, uncertain or attended by error. To find ambiguity in respect of an award provision, there must usually be rival contentions as to the proper meaning of the provision which are reasonably arguable. The words ‘ambiguous’ and ‘uncertain’ are not synonyms, and uncertainty may be established even if the provision at issue has a clear meaning and is not ambiguous, since uncertainty may arise from the application of unambiguous terms to a given set of circumstances or if the provision is doubtful, vague or indistinct in its expression. Error will be demonstrated if some sort of mistake is shown, in that a provision of the award was made in a form which did not reflect the tribunal’s intention. It is only if ambiguity, uncertainty or error is found that a variation to remedy this may be considered.[54]

1. The Commission has a discretion as to the terms of the variation to be made, subject to the variation determined having the purpose and effect of removing the identified ambiguity or uncertainty or correcting the identified error.

1. Because s 160 is found within Part 2-3 of Chapter 2 of the FW Act, it is arguable that the exercise of the discretion must be guided by the modern awards objective in s 134(1) since s 134(2)(a) provides that the modern awards objective ‘applies to the performance or exercise’ of the Commission’s function and powers under Part 2-3.[55] However, the requirement in s 157(1) in respect of award variations made under that subsection is that the Commission must be satisfied that the variation is ‘necessary to achieve’ the modern awards objective.

1. Section 134(1) provides that the modern awards objective is as follows::

134 The modern awards objective

What is the modern awards objective?

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

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

(aa) the need to improve access to secure work across the economy; and

(ab) the need to achieve gender equality in the workplace by ensuring equal remuneration for work of equal or comparable value, eliminating gender-based undervaluation of work and providing workplace conditions that facilitate women’s full economic participation; and

(b)    the need to encourage collective bargaining; and

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

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

(da) the need to provide additional remuneration for:

(i) employees working overtime; or

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

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

(iv) employees working shifts; and

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

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

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

This is the modern awards objective.

Ambiguity, uncertainty or error?

1. As to the Category 1 award superannuation clauses, we agree with the common position of the parties that they are not inconsistent with superannuation laws and are therefore not ambiguous, uncertain or attended by error. Accordingly, the award provisions in this category do not require any further consideration.

1. As regards the Category 2 and Category 3 clauses set out in Background Document 3, we consider that, although they are not ambiguous or subject to error, they are uncertain. This uncertainty arises because:

(1)The first sentence of paragraph (a) of the ‘superannuation legislation’ subclause, in identifying legislation setting out superannuation obligations and entitlements, makes no reference to the NES provisions pertaining to superannuation in the FW Act which will take effect on 1 January 2024.

(2)The last sentence of paragraph (a) of the ‘superannuation legislation’ subclause indicates that contributions may be made to a default fund specified in the award. This may lead the employer to contravene the stapled fund legislative requirements where an employee is an existing member of a stapled fund.

(3)The ‘superannuation funds’ subclause indicates that the employer must make contributions to one of the specified default funds if it is not required to make contributions to a fund chosen by the employee. This disregards both any requirement which may exist to make contributions to a stapled fund and the fact that it may not be possible to make contributions a specified default fund because it is an ‘underperforming’ fund.

1. As a result of the above matters, compliance with the Category 2 and Category 3 award provisions may result in non-compliance with superannuation legislation. This is therefore a case of uncertainty arising from the application of non-ambiguous provisions in particular circumstances.

2. To the extent that the Category 4, 5 and 6 award clauses contain provisions which are in the same terms as the ‘superannuation legislation’ and ‘superannuation funds’ subclauses of the Category 2 and 3 award clauses, or have the same effect, we consider that they are also uncertain for the reasons stated above. We also consider that the Appendix to Schedule F to the TCF Award and clause 19.5 of the SES are uncertain because they specify a quantum of superannuation contributions (9.5 per cent) which is inconsistent with the quantum required by superannuation legislation and thus may, in their application, lead to non-compliance with superannuation legislation (and, from 1 January 2024, the NES).

Variations to remedy uncertainty

1. The main issue in contest between the ACTU and other unions on the one hand and the Ai Group and the ACCI on the other concerns the terms of the variations to Category 2 and 3 award clauses. In broad terms, the ACTU seeks the clauses be varied in a way which is broadly informative of employers’ obligations under the NES and superannuation legislation, while the Ai Group and the ACCI prefer an approach under which only the most minimal changes necessary to remedy the uncertainty are to be made.

1. In our view, both approaches are to some degree unsatisfactory. The ACTU’s approach has the effect of establishing new obligations overlaying those in superannuation legislation (for example, the requirement to contact the ATO for stapled fund details) and may require further adjustment in the event of any future developments in superannuation law. The minimalist approach of the Ai Group and the ACCI may render their proposed clauses difficult to understand and apply because of the lack of any explanation of the broader context.

1. The approach we prefer is to make minimal adjustments to the operative provisions of the Category 2 and 3 award clauses, but to include a note which gives a short description of the relevant aspects of the legislative context to aid understanding of the clauses. Our present view is that the ‘superannuation legislation’ and ‘superannuation fund’ subclauses of the Category 2 and 3 clauses should be varied to provide as follows:

X.1        Superannuation legislation

(a)The NES and Superannuation legislation, including the Superannuation Guarantee (Administration) Act 1992 (Cth), the Superannuation Guarantee Charge Act 1992 (Cth), the Superannuation Industry (Supervision) Act 1993 (Cth) and the Superannuation (Resolution of Complaints) Act 1993 (Cth), deal with the superannuation rights and obligations of employers and employees.

(b)The rights and obligations in clause X supplement those in superannuation legislation and the NES.

NOTE: Under superannuation legislation:

(a)    Individual employees generally have the opportunity to choose their own superannuation fund.

(b)   If a new employee does not choose a superannuation fund, the employer must ask the Australian Taxation Office (ATO) whether the employee is an existing member of a stapled superannuation fund and, if stapled fund details are provided by the ATO, make contributions to the stapled fund.

(c)    If an employee does not choose a superannuation fund and does not have a stapled fund, the choice of superannuation fund requirements will be satisfied by contributions made to a superannuation fund nominated in the award covering the employee, provided the fund is able to accept contributions for the benefit of the employee.

(d)   A fund may not be able to accept contributions for the benefit of an employee if the employee would be a new member of the fund’s MySuper product and the MySuper product is closed to new members because it has failed the performance tests of Australian Prudential Regulation Authority (APRA) for two consecutive years.

X.4     Superannuation fund

Unless, to comply with superannuation legislation, the employer is required to make the superannuation contributions provided for in clause X.2 to another superannuation fund, the employer must make the superannuation contributions provided for in clause X.2 and pay any amount authorised under clauses X.3(a) or X.3(b) to one of the following superannuation funds or its successor, provided that, in respect of new employees, the fund is able to accept new beneficiaries.

[No changes to list of funds]

1. We consider that, to the extent applicable, the above variations would be consistent with the achievement of the modern awards objective. The overriding consideration is that the variations would render the modern award safety net ‘relevant’ (in the context of the current legislative framework applicable to superannuation) without having any significant implications for fairness. As to the matters required to be taken into account under s 134(1) of the FW Act, the matter of primary relevance is ‘the need to ensure a simple, easy to understand, stable and sustainable modern award system’ in paragraph (g), and we have given this significant weight in our consideration and determination of the variations to be made. We also consider that the consideration in paragraph (a) (‘the needs of the low paid’) favours our proposed variations because they will aid compliance with superannuation obligations which are beneficial to low-paid employees. The other matters in s 134(1) are not of relevance in the current context.

1. In respect of the Category 4, 5 and 6 award clauses, we consider that they should be varied in terms consistent with the variations proposed for the Category 2 and 3 clauses, to the extent relevant. For the SES Award, we propose to adopt the approach proposed by the ACCI (as set out in paragraph [38] above). For the TCF Award, we propose to adopt the variation proposed by the CFMEU – Manufacturing Division which is set out in paragraph [47] above. However, we will not make the further proposed variation set out in paragraph [48], since the variation does not properly set out the name of the relevant registered organisation (the CFMEU). This is a matter which may be dealt with by separate application.

Next Steps

1. Because our present view is that the Category 2 and 3 clauses should be varied in terms not proposed by any party, we consider that all parties should be given an opportunity to comment on the proposed variations set out in paragraph [61] above. We direct that any submissions in this respect be filed on or before 25 January 2024. Parties may likewise comment on the proposed application of this approach to the Category 4, 5 and 6 award clauses by the same date, and are also invited to file draft determinations which would give effect to our preferred approach in respect of clauses in these categories. We make clear that any submissions filed should not repeat the matters which have already been canvassed but should be confined to identifying any particular difficulties in the proposed variations.

PRESIDENT

Appearances:

J Tinsley with S Farrow, Australian Chamber of Commerce and Industry.
S Kemppi, Australian Council of Trade Unions.
R Bhatt with B West, Australian Industry Group.
N Doukas, Australian Public Service.
Y Abousleiman, Communications, Electrical and Plumbing Union of Australia.
S Maxwell, Construction, Forestry and Maritime Employees Union (Construction and General Division).
V Wiles, Construction, Forestry and Maritime Employees Union (Manufacturing Division) .
E Womersley, United Workers’ Union.

Hearing details:

2023.
Sydney (By Video via Microsoft Teams).
13 September.

[1] See Treasury Laws Amendment (Your Future, Your Super) Act 2021 (Cth).

[2] Superannuation Guarantee (Administration) Act 1992 (Cth) s 32C(1A) (SGA Act).

[3] SGA Act s 32Q; Superannuation Guarantee (Administration) Regulations 2018 (Cth) reg 17A.

[4] SGA Act s 32C(1A).

[5] Under ss 32C(6) and 32C(6AAA) of the SGA Act, an employer will satisfy the choice of  fund requirements if it makes contributions in accordance with an enterprise agreement or workplace determination made before 1 January 2021 and the ATO has notified the employer there is no stapled fund for the employee. Furthermore, under s 32C(6) of the SGA Act, an employer will satisfy the choice of fund requirements if it makes contributions in accordance with an earlier form of federal industrial agreement.

[6] Superannuation Industry (Supervision) Act 1993 (Cth) s 60F(2).

[7] Ibid s 60H(2)–(3).

[8] [2022] FWC 2603 and [2022] FWC 2712.

[9] [2023] FWC 1652.

[10] Background Document 1 – Modern Award Superannuation Clauses and Changes to Superannuation Laws, 28 September 2022; Background Document 2 – All Modern Award Superannuation Clauses, 28 September 2022, Background Document 3 – Award Superannuation Clauses by Category, 28 September 2022.

[11] [2022] FWC 2712 at [10].

[12] Ai Group position paper published on 4 August 2023.

[13] ACCI position paper published on 4 August 2023.

[14] ACTU position paper published on 4 August 2023.

[15] ACCI submissions published on 7 September and 5 October 2023.

[16] ACTU submissions published on 4 September and 9 October 2023.

[17] Ai Group submissions published on 7 September and 5 October 2023.

[18] APSC submission published on 1 September 2023.

[19] CPSU submission published 6 September 2023.

[20] MEU submission published on 4 September 2023.

[21] CFMEU – Manufacturing Division submissions published on 4 September and 9 October 2023.

[22] FSC submission published on 6 September 2023.

[23] CPSU submission published on 6 September 2023.

[24] Ibid.

[25] MA000017.

[26] MA000103.

[27] CFMEU – Manufacturing Division submission published on 9 October 2023.

[28] ACTU submission published on 1 September 2023 and ACCI submission published on 5 October 2023.

[29] ACTU submission published on 1 September 2023 at [34].

[30] Ai Group submission published on 7 September 2023 at [3].

[31] 4 yearly review of modern awards [2014] FWCFB 9412 at [30] – [36].

[32] Ai Group submission published on 7 September 2023 at [23].

[33] MA000153.

[34] MA000124.

[35] MA000041.

[36] MA000148.

[37] MA000091.

[38] MA000144.

[39] MA000151.

[40] MA000124.

[41] MA000143.

[42] MA000145.

[43] MA000123.

[44] MA000146.

[45] MA000001.

[46] MA000011.

[47] MA000045.

[48] MA000088.

[49] MA000096.

[50] MA000029.

[51] MA000010.

[52] MA000071.

[53] MA000084.

[54] ReAustralian Industry Group [2021] FWCFB 115 at [20]–[21]; Journalists Published Media Award 2020 [2022] FWC 839 at [8]; Bianco Walling Pty Ltd v CFMMEU [2020] FCAFC 50, 275 FCR 385 at [73]–[78] (in relation to s 217 of the FW Act, which provides for the variation of enterprise agreements to ‘remove an ambiguity or uncertainty’); Vehicle Manufacturing, Repair Services and Retail Award 2010 [2016] FWCFB 4418 at [73].

[55] Local Government Industry Award 2010 [2010] FWAFB 4157 at [6].

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