[2015] FWC 6958
FAIR WORK COMMISSION

STATEMENT


Fair Work Act 2009

s.156 - 4 yearly review of modern awards

4 yearly review of modern awards—Award flexibility
(AM2014/300)

JUSTICE ROSS, PRESIDENT

MELBOURNE, 9 OCTOBER 2015

4 yearly review of modern awards – award flexibility – multiple modern award coverage.

Introduction

[1] Section 156 of the Fair Work Act 2009 (the Act) requires the Fair Work Commission (the Commission) to review all modern awards every four years.

[2] In a Statement issued on 17 March 2014, 1 the Commission stated that the first 4 yearly review of modern awards (the Review) would comprise of an Initial stage, dealing with jurisdictional issues, a Common issues stage and an Award stage.

[3] As part of the Award Flexibility Common Issue to the Review, the Commission intends to engage an external research provider to conduct research into the issues faced by employers who are subject to coverage by multiple modern awards.

[4] Multiple award coverage has the potential to create complexity for businesses. In its 2013-14 Annual Report the Fair Work Ombudsman (the FWO) states that:

[5] Majority clauses are one means by which award flexibility and efficiency may be increased by reducing the impact of multiple modern award coverage on employers. In National Wage Case April 19913 a Full Bench of the AIRC provided the following description of a majority clause:

“A majority clause is one which prescribes that where workers covered by a particular award in an individual establishment are in the minority, the conditions of employment prescribed in the award covering the majority of employees in that establishment shall apply.” 4

[6] The Commission will finalise the research methodology following consultation with the external research provider. It is anticipated that the research will target small and medium sized employers who are covered by two or more modern awards.

[7] A background paper prepared by Commission staff is attached to this Statement. It provides a brief overview of majority clauses as an award flexibility mechanism.

[8] This Statement outlines the background, scope and process for the research the Commission will be conducting into multiple modern award coverage and the utility of majority clauses.

Background

[9] The modern awards objective, in s.134 of the Act, is central to the review. The modern awards objective requires the Commission to take into account, among other things:

[10] Wright and Buchanan (2013) provide estimates on the number of awards used to set pay in non-public sector award-reliant organisations. They found that 24 per cent of all award-reliant organisations used more than one award. This figure was estimated to be 27 per cent for medium sized award-reliant organisations (20 to 99 employees).5

[11] Using data from the 2013 Award Reliance Survey (undertaken by Wright and Buchanan) the top five most common awards used by award-reliant organisations with multiple award coverage are (as percentage of award-reliant organisations using multiple modern awards):

[12] In contributing to the Review, the FWO has provided examples of cases which have raised issues related to the potential complexity of multiple modern award coverage within workplaces.6 In one example, the FWO cited a business which operated a service station, fast food outlet and a retail fishing tackle shop. The business employed 22 casual employees and during an audit by the FWO, it was found that the following awards applied to those employees:

[13] This is an example of a small to medium sized business that was required to pay staff under three separate awards each specifying different conditions and entitlements for staff at one workplace. The FWO audit concluded that 19 employees had been paid a flat rate and were not paid their entitlements to casual loadings or penalty rates in accordance with any award.

[14] If a majority clause had been included in the relevant awards, it may have reduced the regulatory burden on the employer by harmonising the conditions (depending on the terms of the majority clause) to which the employees were entitled. Such a reduction in complexity may have led to increased compliance.

[15] To inform the Review, the Commission proposes to engage an external research provider to undertake qualitative research into multiple modern award coverage.

[16] The purpose of the research is to canvass issues faced by employers with multiple modern award coverage and to explore the utility of majority clauses. The Commission will require the external research provider to provide a report which will be published on the Commission’s website.

[17] The research will explore the following issues in relation to multiple modern award coverage and majority clauses:

[18] It should be noted that the Commission has not formed a view on whether a majority clause should be included in any particular modern award.

Next steps

[19] The Commission will engage an external research provider, with a view to publishing a report of the findings of the research on the Commission’s website by February 2016.

[20] Interested parties are invited to provide comment on the scope of this research described at paragraph [17] above by no later than 23 October 2015 to amod@fwc.gov.au. Comments will be considered for incorporation into the research design in consultation with the external research provider.

[21] Following the completion of the research, the Commission will be seeking submissions providing proposed majority clauses from parties by 31 March 2016.

PRESIDENT

Attachment: Background paper

BACKGROUND PAPER

C001 FWC MONO.jpg

Contents

Page

1. 1. INTRODUCTION

2

2. 2. BACKGROUND

2

3. 3. SECTION 150A REVIEW

4

4. 4. AWARD SIMPLIFICATION

8

5. 5. AWARD MODERNISATION

8

6. 6. 4 YEARLY REVIEW OF MODERN AWARDS

10

7. 7. CONCLUSION

11

[1] The purpose of this background paper is to provide a brief overview of majority clauses as an award flexibility mechanism. It is not intended to be a comprehensive study of such clauses, but rather is intended to provide an overview of history, purpose and operation of these clauses. This background paper does not represent the views of the Fair Work Commission (the Commission) on any issue.
[2] A feature of the Australian industrial relations system is the potential for individual enterprises to find themselves subject to the coverage of multiple awards.
[3] Multiple award coverage may mean that a business is required to apply different sets of conditions to different groups of employees within the one enterprise. This has the potential to create a significant administrative burden for businesses and may lead to confusion and issues of non-compliance. One solution to this issue is through the use of mechanisms such as majority clauses.

[4] Majority clauses were a mechanism promoted by the Australian Industrial Relations Commission (AIRC), predominantly during the 1990s, as a means of increasing flexibility and efficiency in the workplace by reducing the impact of multiple award coverage in individual enterprises. In the 1991 National Wage Case decision a Full Bench of the AIRC provided the following description:

[5] The following example, taken from the Engine Drivers and Firemen - General - Award 1998 8, illustrates how such clauses appeared in practice:

[6] A study published in 1991 showed that Australian workplaces were covered by an average of 2.1 awards. In examining the incidence of multiple award coverage in individual enterprises, the study noted that:

[7] In response to this issue, the Confederation of Australian Industry (CAI), with the support of other employer organisations, advanced a submission to the AIRC’s 1991 National Wage Case made an argument for in support of the rationalisation of award coverage. It was submitted that the focus of award coverage should be on the particular industry in which the employer operates, rather than the individual roles performed by the employees within the enterprise. 11 The CAI submitted that the use of “broad majority clauses in occupational awards which span a number of different employer industries”12 was an appropriate means of rationalising both award and trade union coverage and reducing barriers to increased efficiency.13
[8] In response the AIRC declined to conduct a formal review of award and trade union coverage or structures, indicating a preference for dealing with the issue on an award-by-award basis. The AIRC suggested that parties facing the issue of multiple award coverage give consideration to the use of majority clauses, while cautioning the parties to:

[9] Majority clauses received further attention from the AIRC in its 1994 Safety Net Adjustments and Review decision, where it endorsed the comments made in the earlier 1991 National Wage Case. 15 The need for discussions between interested parties as a precursor to the inclusion of majority clauses was emphasised:

[10] As part of the 1994 Safety Net Adjustments and Review, the AIRC established a process for reviewing awards pursuant to s.150A of the Industrial Relations Act 1988. Section 150A required the AIRC to review awards for the purpose of remedying any deficiencies in respect of the following:

[11] In order to meet its obligations under s.150A the AIRC decided to develop a set of detailed principles to provide the framework for the award review process. The AIRC considered that the best method of developing these principles was through a pilot award review programme. 18
[12] The pilot programme was preceded by a conference of relevant parties, conducted by the AIRC, in which it was decided that a number of key issues would be best addressed by specific working parties. A working party was tasked with considering the issue of majority clauses 19, and it subsequently made the following recommendation:

[13] The recommendation of the working party was addressed in Third Safety Net Adjustments and Section 150A Review decision. 21 The submissions made by various parties tended to focus on whether standard majority clauses should appear in all awards, or whether the insertion should be considered on an award-by-award basis:

[14] Ultimately, the AIRC determined that granting the third award level arbitrated safety net adjustment, would be contingent on relevant parties having had discussions on the introduction of a majority clause into the award in question. In situations where the parties were unable to reach agreement, the matter would be subject to conciliation and, if necessary, arbitration. The AIRC further stated that, in exercising its arbitral powers, the following principles would be applied:

[15] In order to assist parties navigate the s.150A review, the AIRC published a Resource Book—Making Federal Awards Simpler— the aim of which was to provide parties with “readily accessible information concerning review techniques” 24 together with model clauses, guidance on drafting and other information “in relation to meeting the specific requirements of s.150A of the Act and about the process, timetabling and mechanisms necessary to carry out an effective review of awards.”25
[16] The Resource Book included a brief overview of majority clauses and excerpts of previous Full Bench decisions on the topic, an overview of the principles to be applied by the AIRC when exercising arbitral powers on the subject, and a model clause in the terms recommended by the central working party:

[17] Under the Transitional Provisions of the Workplace Relations and Other Legislation Amendment Act 1996, the AIRC was required to review all federal awards, in what became known as the Award Simplification process. In the 1997 Award Simplification decision the Full Bench, commenting on the Joint Government submission on the use of majority clauses, reaffirmed its view that:

[18] The AIRC began the award modernisation process in March 2008, following a written request from the Minister for Employment and Workplace Relations to the AIRC President under s.576C(1) of the Workplace Relations Act 1996 (the WR Act). The process was governed by Part 10A of the WR Act, and in May 2008 a Full Bench was constituted to oversee the process.
[19] All stakeholders and interested parties were invited to make submissions on what should be included in modern awards for a particular industry or occupation. Separate processes, including variously, the provision of submissions, hearings and release of draft awards, were undertaken in respect of the creation of each modern award to ensure parties were able to make submissions and raise matters of concern relevant to particular awards. By the end of 2009 the AIRC had reviewed more than 1500 federal awards and notional agreements preserving State awards (NAPSAs) and created 122 industry and occupation based modern awards. These awards commenced operation on 1 January 2010.
[20] While the award modernisation process saw a significant reduction in the number of awards the Productivity Commission recently observed in Issues Paper 2 (published in January 2015) that multiple award coverage remains an issue for some employers:

[21] Majority clauses received very little attention during the Award Modernisation process. The issue was only raised in relation to the proposed Road Transport and Distribution Award 2010 29. In explaining the content of the coverage clause as it appeared in the first exposure draft, and with specific reference to the Transport Workers (Mixed Industries) Award 200230, the Full Bench made the following comments:

[22] Clause 4.3, as it existed in the first exposure draft for the Road Transport and Distribution Award 2010, was expressed as follows:

[23] Ai Group sought to have a majority clause inserted into the Road Transport and Distribution Award 2010 32, and put the following submissions to the AIRC:

[24] The Australian Federation of Employers and Industries, argued for a majority clause in similar terms to that which appeared in the Transport Workers (Mixed Industries) Award 2002 34, and submitted that:

[25] Ultimately, the Full Bench concluded it would be inappropriate to include a majority clause. In response to the submission of Ai Group, the Full Bench made the following observations about the Transport Workers (Mixed Industries) Award 2002 36 and the rationale behind the decision not to include a majority clause:

[26] The Commission is currently conducting a review of all modern awards, in accordance with section 156 of the Fair Work Act 2009 (4 Yearly Review).
[27] The issue of award flexibility is being addressed as part of the review but as yet, no submissions have been advanced to insert a majority clause into a particular modern award.
[28] To date a limited number of parties have made submissions on the issue of award coverage. However, those submissions relate to the issue of overlapping coverage and the problems that may arise in determining which award is most appropriate to the role being performed, rather than the number of awards that may apply within a specific enterprise.
[29] For example, it was submitted by the Housing Industry Association (HIA) that the following clause should be inserted into the Timber Industry Award 2010 (the Timber Award) in order to address the issue of multiple award coverage:

[30] In support of the change proposed, the HIA submitted that:

[31] A Full Bench of the Commission, in a decision issued on 18 June 2015, declined to vary the coverage clause as sought by the HIA. 40
[32] The issue of overlapping modern award coverage has, to some extent, been addressed through the inclusion of Multiple Coverage Clauses, which take the following form:

[33] The office of the Fair Work Ombudsman (the FWO) has submitted that:

[34] Despite the significant attention given to majority clauses in the 1990s, and broad support for their inclusion in awards, majority clauses do not appear to have been inserted in many awards. In its 2001 Living Wage Claim decision, the Full Bench reflected on the scarcity of such clauses, commenting that:

[35] With the exception of the Road Transport and Distribution Award 2010 44, there appears to have been no discussion of including majority clauses in any other modern awards during the award modernisation process and it would seem that there has been no meaningful discussion of the desirability of including them in federal awards generally since 2001.

 1   [2014] FWC 1790.

 2   Fair Work Ombudsman, Annual Report 2013–14, p. 23.

 3   AIRC, National Wage Case April 1991, Dec 300/91 M Print J7400 (16 April 1991).

 4   AIRC, National Wage Case April 1991, Dec 300/91 M Print J7400 (16 April 1991), p.48.

5 Wright S and Buchanan J (2013), Award Reliance, Research Report 6/2013, Fair Work Commission, Melbourne, p. 25.

6 See Enforceable Undertaking between the Commonwealth of Australia (as represented by the Office of the Fair Work Ombudsman) and Bransfords (Qld) Pty Ltd (ACN: 061 777 722).

 7   AIRC, National Wage Case April 1991, Dec 300/91 M Print J7400 (16 April 1991), p.48.

 8  Engine Drivers and Firemen – General – Award 1998 (AP780049) [Fed], para 12.

 9   ibid.

 10   R Callus, A Moorehead, M Cully and J Buchanan, Industrial Relations at Work, the Australian Workplace Industrial Relations Survey, AGPS 1991, p.41

 11   AIRC, National Wage Case April 1991, Dec 300/91 M Print J7400 (16 April 1991), p.48.

 12   Ibid., p.47.

 13   ibid.

 14   ibid., p.48.

 15   AIRC, Safety Net Adjustments and Review September 1994, Dec 1634/94 M Print L5300 (21 September 1994), p. 25.

 16   ibid.

 17   Industrial Relations Act 1988 (Cth) s.150A(2).

 18   AIRC, Safety Net Adjustments and Review September 1994, Dec 1634/94 M Print L5300 (21 September 1994), p. 39.

 19   AIRC, Third Safety Net Adjustments and Section 150A Review October 1995, Dec 2120/95 M Print M5600 (9 October 1995) p. 12.

 20   ibid., p.31.

 21   ??

 22   ibid., pp. 31-34.

 23   ibid.

 24   AIRC, ‘Introduction’ in Making Modern Federal Simpler, 1995, p. 3.

 25   ibid., p.4.

 26   AIRC, ‘Majority Clauses’ in Making Modern Awards Simpler, 1995, p. 3.

 27   AIRC, Award Simplification Decision, Dec 1533/97 M [Print P7500 (23 December 1997)], p.36.

 28   Productivity Commission, Workplace Relations Framework: Safety Nets – Issues Paper 2, January 2015.

 29   Road Transport and Distribution Award 2010 (MA000038) [Fed].

 30   Transport Workers (Mixed Industries) Award 2002 (AP813166) [Fed].

 31   AIRC, Award Modernisation, [2009] AIRCFB 50 (23 January 2009) , at 100.

 32   Road Transport and Distribution Award 2010 (MA000038) [Fed].

 33   Australian Industry Group, Award Modernisation Submissions and Draft Award Provisions, Stage 2 Industries / Occupations, 13 February 2009, pp.118-121.

 34   Transport Workers (Mixed Industries) Award 2002 (AP813166) [Fed].

 35  Australian Federation of Employers and Industries, Submission on Behalf of the Australian Federation of Employers and Industries (AFEI), 31 October 2008, p.8.

 36   Transport Workers (Mixed Industries) Award 2002 (AP813166) [Fed].

 37   AIRC, Award Modernisation, [2009] AIRCFB 345 (3 April 2009), at 169-170.

 38   Housing Industry Association, Submission by the Housing Industry Association to the Fair Work Commission on the Timber Industry Award – AM2014/92, 19 December 2014, p.1.

 39   Ibid., p.16.

 40   [2015] FWCB 2856

 41   For example, see clause 4.8 of the Airport Employees Award 2010 (MA000049) [Fed].

 42   Fair Work Ombudsman, Modern Award Review – Coverage Issues in Modern Awards, 20 May 2014, p.2.

 43  AIRC, Safety Net Review – Wages May 2001, PR002001 (2 May 2001) at 162.

 44   Road Transport and Distribution Award 2010 (MA000038) [Fed].

 

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