Current and Emerging Issues for The

AMMA National Conference 2008

2 April 2008

CURRENT AND EMERGING ISSUES FOR THE

AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

JUSTICE GIUDICE

[1]Undoubtedly the principal activity of the Australian Industrial Relations Commission (AIRC) between now and the end of the next year will be the modernisation of the award system. As you all know the Parliament recently passed the Government’s bill amending the Workplace Relations Act 1996 (the Act). The amendments provide for, among other things, the development and implementation of a modern award system to operate in conjunction with the new workplace relations system foreshadowed for 2010. The amendments commenced to operate last week and the modernisation process, as it has been referred to, was officially commenced when the Minister signed a request to the AIRC to undertake that process.

[2]It seems generally accepted that there are compelling reasons for modernising awards. Perhaps the most compelling is the need to complete the transition to federal award coverage which the 2006 amendments (to the Act) commenced. That legislation, Work Choices, provided a three year transition period in which constitutional corporations not previously covered by federal awards would move to federal award coverage. During that period the Commission was to ‘simplify’ and ‘rationalise’ the federal award system to make provision for all constitutional corporations and others covered by the federal system including somein government and in the Territories. That process was to be undertaken on the basis of a request made by the Government. The previous Government never initiated the process. The present Government has extended the transitional period to the end of 2009 and set out a new processbut one which has as one of its principal aims to make provision for constitutional corporations migrating to the federal system. At the present time those corporations and their employees are in substance covered by the State award or agreement applying to them on 27March2006, but as federal instruments. Ofcourse some may also have entered the federal bargaining regime by making individual or collective agreements under the Act.

[3]Another important consideration is that since March 2006, minimum rates for classifications in federal awards, and state awards constituting Notional Agreements Preserving State Awards (NAPSA’s), have been altered as a consequence of Australian Fair Pay Commission’s (AFPC) decisions, but the awardsthemselves have not been varied. The WorkChoices legislation took away the AIRC’s power to vary wage rates in federal awards applying to corporations. This has led to difficulties in ascertaining the up-to-date legal minimum rates in a great many areas of award coverage. There is now no official publication of minimum rates to which employees of corporate employers covered by the federal system are entitled. The problem has not been made any easier by the legal separation of wage rates and allowances, with allowances remaining in federal awards.

[4]Another compelling reason for looking at the content of awards is that the legislature has once again altered the rules governing the content of awards. There are, or will be, 10NationalEmploymentStandards fixed directly by Parliament and a further 10allowableawardmatters. Awards will be required to be altered in order to meet the new legislative requirements.

[5]Finally, there is general agreement that there should be a simplification and modernisation of the award system so that it is easier for employers and employees to understand and apply.

[6]Will award modernisation simply be award simplification Mark II? In my view it definitely will not. The use of the corporations power in the Work Choices legislation to expand the federal system to include areas of the private sector which have never been covered by federal awards before necessitates a review of the scope and operation of federal awards that operate ona multiple-employer basis. The development of transitional provisions will smooth the path of new entrants to the system. And that must be done in time for the commencement of the new system foreshadowed by the Government to be in January2010. There is a real need, particularly in light of the significant changes in industrial regulation since the beginning of 2006, to remove doubts about the safety net entitlements of employees and the obligations of employers by restoring certainty to the operation of the award system.There is widespread understanding of these issues. And, if nothing else does, the deadline of 31December 2009 will bring home to all parties the need to treat the modernisation process seriously.

[7]The recent amendments to the Actset out the characteristics of modern awards.[1] They must be simple to understand, easy to apply and must reduce the regulatory burden on business. Together with legislated employment standards they must provide a fair minimum safety net of enforceable terms and conditions. They mustbe economically sustainable and promote flexible modern work practices and the efficient and productive performance of work. They must be in a form that is appropriate for a fair and productive workplace relations system that promotes collective enterprise bargaining but a system which does not provide for statutory individual employment agreements. The modern awards must result in a certain, stable and sustainable modern award system for Australia.

[8]Section 576C of the Act provides that an award modernisation process must be carried out by the Commission in accordance with a written request made by the Minister to the President. The Explanatory Memorandum for the recently passed bill contained a draft Award ModernisationRequest. The Request I have recently received from the Minister is substantially in the same form as the draft. The Request contains some additional guidance, beyond the statutory provisions, in relation to modern awards. It stipulates that the creation of modern awards is not intended to extend award coverage to classes of employees, such as managerial employees, who, because of the nature and seniority of their role, have traditionally been award free. The Request goes on to say that this limitation does not preclude the extension of modern award coverage to new industries or new occupations where the work performed is of a similar nature to work that has historically been regulated by awards (including state awards) in Australia. Nor is the creation of modern awards intended to:

(a) result in high income employees being covered by modern awards;

(b) disadvantage employees;

(c) increase costs for employers; or

(d) result in the modification of enterprise awards.

[9]In carrying out award modernisation functions the Commission is to have regard to a list of factors specified in the Act.[2] Most of these factors are recognisable from earlier legislation and invoke socially and economically desirable outcomes of the workplace relations system. Without wanting to detract from the importance of the others, some factors in particular should be mentioned. The first is the desirability of reducing the numbers of awards operating in the workplace relations system. This objective is aligned to one of the criteria set out in the Request:

“The Commission is to have regard to the desirability of avoiding the overlap of awards and minimising the number of awards that may apply to a particular employee or employer. Where there is any overlap or potential overlap in the coverage of modern awards, the Commission will as far as possible include clear rules that identify which award applies.”[3]

It can be seen from these requirements that the theme of rationalisation of the award system is a strong component in the modernisation process.

[10]The other factors that might be emphasized from the list concern rates of pay. Modern awards are to take into consideration rates of pay in the Australian Pay and Classification Scales, rates of pay in transitional awards and minimum wage decisions of the AFPC. This envisages for the first time a comprehensive national wages safety net for the private sector, and so much of government and Territory employment as is covered by the Act. Without wanting to be accused of understatement, establishing the wages safety net will be a complex task. An additional element is that each modern award is to have effect in each State and Territory and must not include terms and conditions determined by reference to State and Territory boundaries. However, the Actprovides for phasing in of changes over a maximum of five years.[4] These provisions obviously contemplate that in making modern awards the Commission will implement transitional arrangements to deal with the effect of bringing employees of constitutional corporations into the one safety net award system. The design of these transitional provisions will be another challenging aspect of the process.

[11]What are the dimensions of award modernisation? There are approximately 2,230 federal awards operating in relation to federal system employers and their employees. A number of these awards are not to be included because they are enterprise based or because they are awards made where bargaining had failed. Assuming those awards are excluded there are approximately 740 federal awards, based on the latest research, which will be subject to the modernisation process. Within that group there are also some 70 awards which deal with a single issue such as superannuation, long service leave, training wages, etc.Moving to the State jurisdiction, in making modern awards the provisions of up to 1670 State awards operating as NAPSAsare potentially relevant. No matter how one approaches it, the task is a significant one.

[12]The Request provides for the Commission to establish a priority list of modern awards, to draft the awards and then to make those priority awards by the end of this year. The balance of the modern awards are to be completed, according to a timetable determined by the Commission, by the end of next year. All modern awards commence to operate on 1 January 2010.

[13]At critical stages the Commission is required to consult with the parties. In particular, there is to be consultation with the major employer and employee representative bodies on the best process to be followed by the Commission when creating modern awards[5]. At the end of that consultation there is to be an announcement concerning the process to be followed. The Commission is also to consult with major workplace relations stakeholders and other interested parties concerning the selection of the priority industries or occupations, the drafting of a model flexibility clause and a timetable for completion.Each of those matters is to be settled and announced by 30 June this year[6]. The next step will beappropriate pre-drafting consultation with major employer and employee representative bodies in relation to each priority industry and occupation. There will be further consultation to permit all stakeholders and interested parties to comment on the exposure drafts once they have been published.[7] The exact nature of the consultation is yet to be decided but it is likely that consultation, in relation to the exposure drafts at least, will largely be done by electronic means. In addition there is provision for consultation between the President of the Commission and the AFPC and State industrial tribunals as appropriate.

[14]The process will involve one or more Full Benches. For example, as soon as practicable after receiving an Award Modernisation Request the President of the Commission must establish one or more Full Benches to carry out the Request.[8] Only a Full Bench can make a modern award.[9]The requirement for Full Bench involvement does not limit the power of the President or a Full Bench to direct that single members carry out award modernisation functions as appropriate.

[15]The substantive matters that may be dealt with in moderns awards are[10]:

• minimum wages, including disability and training wages;
• type of employment: full-time, part-time etc;
• arrangements for when work is performed;
• overtime rates;
• penalty rates;
• annualised wages and salaries;
• allowances;
• leave, leave loadings, etc;
• superannuation;
• procedures for consultation, representation and dispute settlement, and
• outworkers.

But the modern award may include terms about such matters only to the extent that the terms provide a fair minimum safety net.[11]

[16]Modern awards may include industry specific detail about the proposed ten National Employment Standards and build on entitlements in those standards where it is necessary to do so to ensure the maintenance of a fair minimum safety net for employees covered by the modern award, having regard to existing award entitlements for those employees.[12] But, modern awards may not include terms that breach freedom of association provisions in Part 16 of the Act, that require or authorise union right of entry or inspection, terms that are discriminatory or, as already mentioned, terms determined by reference to State or Territory boundaries.[13]

[17]Given the breadth and complexity of the task it is obviously desirable for the Commission to provide a database of the federal awards and the NAPSAs which are potentially relevant to the drafting of each modern award. Registry staff are preparing lists of awards classified into the Commission’s panels of industries. There are just over 100 industries in the list. The State awards constituting NAPSAs which are capable of being relevant to modernisation have also been classified on the same basis. While this is a convenient way of organising the federal and state awards lists, it does not constitute a template for award modernisation. Indeed some of the awards may be reallocated after further examination. These lists are extensive, as you would imagine, and will be publicly available electronically within the next week or so on the AIRC website.

[18]Some preliminary research has already been carried out comparing relevant clauses in significant federal and state awards. The relevant clauses included the scope and incidence provisions,provisions dealing with each of the matters that may be included in modern awards as well as provisions relevant to the National Employment Standards. Comparative schedules of these provisions will be prepared and made available progressively over the next 18 months. These schedules will be a resource for the parties as well as the Commission in the drafting process. The first schedules prepared will be those relevant to the priority industries and occupations and will also be made available on the AIRC website. All of this research work is being carried out by a specialist team within the Australian Industrial Registry. It is likely that the Commission or the Registry will also provide other material that may be useful in drafting modern awards, such as a drafting guide.

[19]I have tried to give you a summary of the key features of the award modernisation process. Please bear in mind it is a summary and it is not a substitute for looking at the statutory provisions and the terms of the Request. Now that the Deputy Prime Minister has dropped the flag to start the event, as it were, what are the first steps? I shall be convening a meeting in the next few weeks of the Australian Chamber of Commerce and Industry, the Australian Council of Trade Unions and the Australian Industry Group to discuss process and timetable. Shortly after that the Commission will be undertaking broader consultation in relation to the selection of the priority industries or occupations for the first modern awards, a model flexibility clause and the timetable for the process overall. During this period a Full Bench will also be established. By 30June the Full Bench should be in a position to publish the list of priority industries and occupations (if any), the model flexibility clause and the timetable.

[20]As the Minister’s Request acknowledges, the Commission will require the full support and cooperation of major workplace relations stakeholders and other interested parties. Once the timetable has been established it will be very important that it is adhered to. That will put strains on the resources of all involved, particularly the larger unions and employer bodies which represent interests in multiple industries. Circumstances, no less than the recent amendments, have made award modernisation a necessity. The workplacerelations community has a common interest in its success. While many of the outcomeswill be determined by the Commission, the Commission’s decision-making, as always, will be influenced to a very large extent by the input it receives from the parties directly involved and others with an interest.The process will require the resolution of difficult issues, a great deal of hard work and the ability to compromise will be a valuable commodity. But success is important. Award modernisation is an unprecedented opportunity for all of those involved to make a lasting contribution to the quality of industrial regulation in this country. I can assure you all that the Commission will play its part in achieving that objective.

1

[1]Section 576A.

[2] Section 576B(2).

[3] Clause 9 .

[4] Section 576T(3).

[5]Clause 6.

[6]Clauses 20 and 21.

[7]Clauses 14 and 15

[8]The Act s.576E (1).

[9]Section 576G(3).

[10]Section 576J and 576K.

[11]Section 576L.

[12]The Request cll. 29 and 30; see also cll. 31 to 33

[13]See the Act ss.576Q, 576R, 576S and 576T respectively.