Aged Care Award 2010 [2023] FWCFB 93 | Case summary

[2023] FWCFB 93

Aged Care Award 2010 [2023] FWCFB 93 | Case summary | Zoe

3. A number of complex issues require further submissions (and potentially further evidence) before they can be determined and we see no reason to delay an increase in minimum wages for direct care workers while that process takes place."[5]

[9] The Full Bench was satisfied that the interim increase should apply to PCWs and HCWs at all levels at and below the Certificate III level, along with RNs, ENs, AINs and Nurse Practitioners working in aged care.[6]

[10] The Full Bench did not propose to provide an interim increase for Head Chefs/Cooks and directed the parties to confer in respect of this issue. The Full Bench advised that, should the parties be able to agree upon the quantum of an interim increase and the classification(s) to which it would apply, the Full Bench would give further consideration to determining an interim increase for these employees during the next stage of proceedings. Absent agreement between the parties, the Full Bench indicated that any increase applicable to Head Chefs/Cooks would be dealt with in a later stage of the proceedings.[7]

[11] Further, the Full Bench did not propose to provide an interim increase in the minimum wages of Recreational Activities Officers/Lifestyle Officers (RAOs) and stated that the extent of agreement between the parties about whether work value considerations justify an increase for these workers required further clarification. Parties were directed to confer in respect of this issue and the Full Bench indicated that should the parties be able to agree on the quantum of an interim increase and the classification(s) to which it would apply, the Full Bench would give further consideration to determining an interim increase for RAOs in the next stage of the proceedings. As in the issue of Head Chefs/Cooks, absent agreement between the parties, any increase applicable to RAOs would be dealt with in a later stage of the proceedings.[8]

[12] The Full Bench concluded that an interim increase of 15 per cent to modern award minimum wages applying to direct aged care workers was 'plainly justified by work value reasons'.[9] The Full Bench clarified that the interim increase did not conclude its consideration of the Unions' claim for a 25 per cent increase for other employees, namely administrative and support aged care employees, nor did it necessarily exhaust the extent of the increase justified by work value reasons in respect of direct care workers.[10]

[13] The Full Bench concluded that the Applications would be determined in 3 stages, with the Stage 1 decision constituting the first stage in the process. Stage 2 would consider submissions and evidence in relation to:

The timing and phasing of the interim increase to modern award minimum wages applicable to direct care workers, including the appropriateness and application of the principles canvassed at paragraphs [974]-[990] in the Stage 1 decision;

Whether making the interim increases to modern award minimum wages applicable to direct care aged care employees in these proceedings is necessary to achieve the modern awards objective and the provisional views outlined at [1001]-[1072] in the Stage 1 decision; and

[18] On 5 December 2022, the ANMF wrote to the Commission and applied to vary the Directions to provide that the Commonwealth, the Unions and the Joint Employers make submissions and provide evidence in respect of the relevant amendments to the FW Act.

[19] On 6 December 2022, we issued Amended directions requiring parties to file submissions or evidence regarding the relevant amendments to the FW Act, Stage 2 matters set out at paragraph [13] above and, if relevant, consultation in respect of increases to minimum wages for Head Chefs/Cooks and Recreational Activities Officers/Lifestyle Officers by 16 December 2022 or 20 January 2023. All parties were required to file submissions and evidence in reply by 9 February 2023 and the matter was listed for hearing in Melbourne at 10:00am on Monday, 13 February 2023.

[20] On 10 February 2023 we issued a Statement and Directions[19] in which, to facilitate the efficient conduct of the Hearing, we requested parties to address various questions.

[21] At the outset of the Hearing before us on 13 February 2023, the Joint Employers advised formally that, due to the merger of bodies LASA and ACSA, the Joint Employers are now comprised of the Aged and Community Care Providers Association Ltd (ACCPA) and Australian Business Industrial (ABI).[20]

[22] During the Hearing, the Joint Employers and the HSU were granted leave to provide written responses to a number of the questions we posed, as well as address a further question raised in relation to Home care employees engaged in domestic assistance and home maintenance.[21] The parties were also granted leave to file written submissions as to the weight that should be accorded to evidence filed by the Joint Employers on 9 February 2023. The parties were asked to file the additional material by no later than Friday, 17 February 2023.

[23] On 21 February 2023, we published our Stage 2 decision together with draft determinations and tracked versions of each of the Awards to illustrate the proposed changes. Interested parties were directed to file any comments in relation to the draft determinations by no later than Wednesday, 1 March 2023.

[24] Final determinations effecting the interim increase to modern award minimum wages in line with the Stage 2 decision were issued on Friday, 3 March 2023.[22]

[43] The HSU provided written responses to questions 3 and 4 posed in our Statement and Directions issued on 10 February 2023.

[44] In relation to question 3, the HSU submitted that the interim increase should apply to all levels of Home care employee in Schedule E from level 1 to level 5. The HSU submitted this is consistent with the Joint Statement regarding Stage 2 and 3 of the proceedings.[31]

[45] The HSU submitted that employees engaged at level 4 and level 5 are involved in direct care work by way of mentoring, supervising and providing advice in relation to direct care work, and dealing with incidents or emergencies in relation to direct care work.[32]

[46] The HSU submitted that applying the increase at level 1 to level 3 but not at level 4 and level 5 would disrupt the relativities in the classification scale in Schedule E of the SCHADS Award. It would have the effect of employees at level 2 and level 3 receiving higher rates of pay than all level 3 employees and level 3.2 would receive higher rate of pay than level 5 employees. The HSU submitted that the relativities should be maintained as those rates have been previously set on the basis of comparable work value between the different roles.[33]

[47] In relation to question 4, the HSU noted that in previous submissions[34] and in the Joint Statement[35] the Joint Employers indicated their support that the interim increase should apply to Head Chefs/Cooks. In their submission dated 15 February 2023, the Joint Employers submitted that the increase should apply to employees from level 4 to level 7 but qualified that their perspective was the increase would apply to 'the most senior chef/cook in the facility with ultimate menu and nutrition responsibility, not a series of chefs or cooks within the catering team'.[36]

[48] The HSU submitted this was a departure from the position settled in the Joint Statement.[37] The position agreed by relevant stakeholders, pursuant to the request of the Full Bench in the Stage 1 decision,[38] should be given effect by the Full Bench.[39]

[49] The HSU submitted that the evidence does not suggest that there are facilities at which multiple chefs/cooks are employed at level 4 or above under the Aged Care Award. Accordingly, there is not an evidentiary basis for not extending the interim increase to all food service stream employees from level 4 to level 7.[40]

[50] The HSU submitted that the proposal that the classification structure in the Aged Care Award be reviewed in order to separate out the 'most senior' chef/cook at a facility is likely to cause uncertainty, confusion and delay. If the interim increase were to be limited to the 'most senior' chef/cook at a facility, there is no utility in limiting the increase to levels 4 to 7. Instead, determining the interim increase to apply to all employees in the food services stream from level 4 to level 7 is easier for employers to implement and for employees to understand.[41]

[51] The HSU noted that during the hearing on 13 February 2023, a further question was raised in relation to the application of the interim increase to Home care employees where those employees are engaged in domestic work. The question posed was as follows:

[93] The Commonwealth submitted that the reference to 'secure work' in s.134(1)(aa) is directed to a similar purpose as the reference to 'job security' in the object of the Act, is not defined and takes its ordinary meaning. The Commonwealth offered that indicators of secure work may include, but are not limited to, the degree of certainty an employee has about the duration of their employment, the predictability of their pay and the circumstances in which their employment may end. The Commonwealth submitted that as a result, s.134(1)(aa) is 'most likely to be engaged in relation to award terms that relate to matters such as the type of employment, arrangements for when work is performed, and notice of termination and redundancy rather than terms that relate only to hourly rates of pay.'[85]

[94] The Commonwealth argued that the Applications do not seek to vary any award terms that are directly relevant to secure work and, in any event, the Government's commitment to fully fund the interim increase means that any additional costs associated with the Stage 1 decision will not affect employer incentives around secure work. Consequently, the Commonwealth submitted that s.134(1)(aa) is a neutral consideration.

[95] The Commonwealth submitted that the introduction of s.134(1)(ab) means that the issue as to the proper construction and application of s.134(1)(e) falls away. The Commonwealth noted that 'gender equality', 'gender-based undervaluation of work' and 'gender pay gaps' are not defined in the FW Act and so take on their ordinary meaning. The Commonwealth submitted that the breadth and depth of these terms means the Commission need not engage in the comparative exercise contemplated at [1057] of the Stage 1 decision, nor limit the application of the objectives to situations where an award variation would equalise wages for men and women workers performing work of equal or comparable value as contemplated at [1060] of the Stage 1 decision.[86]

[96] The Commonwealth submitted the amendments provide a clear basis for the Commission to consider that its provisional views set out at [1048] of the Stage 1 decision and its findings as to gender-based undervaluation and the gender pay gap at [740]-[758] and [859]-[866] support implementing the interim increase, specifically:[87]

the Commission must take into account the object of the FW Act in amended s.3(a) to promote gender equality (s.578(a))

the provisional views expressed at [1048] and the findings as to gender-based undervaluation and the gender pay gap at [740]-[758] and [859]-[866] would lead the Commission to consider that new s.284(1)(aa) is a positive factor in terms of whether the interim increase is necessary to achieve the modern awards objective, as it would support achieving gender equality in the workplace, including by reducing gender-based undervaluation of work and addressing the gender pay gap.

[97] The Commonwealth submitted that as the Commission has not yet made a determination varying the Awards, it is necessary for the Commission to be satisfied that its consideration of work value reasons conforms with s.157(2B).

[98] The Commonwealth maintained that s.157(2B)(a) imposes a negative standard or requirement on how the Commission considers work value reasons within the existing meaning in s.157(2A), that is, in considering work value reasons, the Commission must not make assumptions based on gender.[88]

[99] The Commonwealth submitted that the Commission has extensive expert evidence before it about the 'gendered assumptions which have historically been applied in the assessment of the work value of work in the aged care sector' and has given 'close consideration to that evidence'. The Commonwealth further submitted that in conducting its assessment of work value, the Commission has relied on and applied the expert evidence of Assoc Professor Junor 'which exposes invisible skills that may have been given inadequate weight in previous work value assessments including because of gender-based assumptions'. The Commonwealth submitted that consequently the Commission's consideration of work value has met the requirements of s.157(2B)(a).[89]

[100] The Commonwealth submitted that the 'principal mischief' that s.157(2B)(b) is intended to address is the use of minimum rates that were improperly fixed because of gender-based assumptions as a foundation or datum point for applying later changes in work value:

[104] The Commonwealth argued that even though the Commission was not required to make a finding as to whether the minimum rates were affected by gender undervaluation, 'it is apparent that the Commission gave consideration to whether work in the aged care sector had been undervalued because of gender-based assumptions' for the following reasons:[95]

1. The expert evidence before the Commission and the submissions addressed historical gender-based undervaluation. The Stage 1 decision 'comprehensively summarises this evidence and argument.'[96]

2. The Commission accepted key propositions from the expert evidence that there is historical undervaluation of care work for gendered reasons.[97]

3. After giving close consideration to expert evidence on gender undervaluation in the aged care sector, the Commission accepted key propositions on gender-based undervaluation, including accepting that there were 'barriers and limitations to the proper assessment of work value in female dominated industries and occupations' and that the 'approach taken to the assessment of work value by Australian industrial tribunals and constraints in historical wage fixing principles have been barriers to the proper assessment of work value in female dominated industries and occupations.'[98]

4. The Commission drew on expert evidence to ensure that its assessment of work value was free of assumptions based on gender, including accepting the evidence of Associate Professor Junor that Spotlight skills identified in the Junor Report in respect of RNs, ENs and AINs/PCWs working in aged care are correctly characterised as skills, and should be brought to account in the assessment of work value.[99]

[105] The Commonwealth concluded that there are 'clear indications' that the Commission has turned its mind to historical gender-based undervaluation and that is 'sufficient to discharge the obligation in s.157(2B)(b), especially given the Commission's finding that wages were never properly fixed.'[100]

[115] The ANMF noted that the explanatory memorandum and second reading speech to the Secure Jobs, Better Pay Bill refer to the legislative amendments putting gender equity at the 'heart' of the Commission's decision making and the Fair Work system.[112]

[116] In respect of the amendment to the object of the FW Act at s.3(a), the ANMF identified that the explanatory memorandum notes that s.15AA of the Acts Interpretation Act 1901 (Cth) requires that the FW Act be interpreted in a way that would best achieve the object of the FW Act, and that s.578(a) of the FW Act requires that the Commission take into account the objects of the FW Act when performing its functions or exercising its powers under the Act.[113]

[117] The ANMF submitted that the amendment to the object of the FW Act will be relevant to the proper interpretation of s.166, providing the Commission's powers regarding when determinations varying modern awards minimum wages come into operation, s.157 including the meaning of 'work value reasons' for the purposes of s.157(2A) as well as both the modern awards objective at s.134 and the minimum wages objective at s.284.[114]

[118] In respect of s.134(1)(aa), the ANMF agreed with the Commonwealth that the applications before the Commission do not seek to vary any award terms that are directly relevant to secure work, however, it submitted that the interim increase is likely to contribute to increased security of work, and would not prejudice the objective.[115] The ANMF noted the Full Bench has before it substantial evidence and material going to the high rates of staff turnover in the industry and the financial difficulties faced by aged care workers.[116]

[119] The ANMF submitted that granting the interim increase would make a contribution to countering the exploitative use of the 'many faces' of job insecurity such as casual employment, labour hire arrangements, part-time employment and rolling fixed-term contracts, in line with the purpose of s.134(1)(aa), and would also contribute to the retention of direct aged care workers in the sector.[117]

[120] The ANMF further submitted the interim increase would not have a significant negative impact upon the business of aged care providers or have a negative impact upon need to improve access to secure work across the economy.[118]

[121] In respect of the need to achieve gender equality, the ANMF noted that s.134(1)(ab) introduces new elements, which involve a substantial re-casting of this aspect of the objective. The ANMF submitted that the use of 'the need to achieve', as well as the words 'ensuring', 'eliminating' and 'providing' in this context highlights that the necessary goal is achieving gender equality, rather than merely aspiring to gender equality.[119]

[122] The ANMF submitted that the amendments to ss.3(a) and 134(1)(ab), which now include references to promoting gender equality, are a significant change to the legislation applied by the Full Bench in Stage 1 of this proceeding.[120]

[123] The ANMF submitted that the primary task for the Full Bench remains to determine the actual value of the work in aged care and whether a variation is justified by 'work value reasons'. However, the ANMF submitted that in light of the amendments the Full Bench must now take into account whether the work of direct aged care workers is undervalued for gender-based reasons.[121]

[124] The ANMF noted the Full Bench has already found that care work has been historically undervalued and further submitted that in the context of legislative amendments, the Full Bench would now further find that the work of direct aged care workers has been historically undervalued for gender-based reasons, a finding which may be comfortably made based on the evidence, in particular that of Assoc Professor Junor.[122]

[125] The ANMF noted the Full Bench previously found Assoc Prof Junor's evidence 'cogent, probative and relevant to our assessment of whether a variation of modern award minimum wages in the relevant awards is 'justified by work value reasons' (s.157(2)(a)).' The ANMF submitted that in its consideration of s.134(1)(ab), the Full Bench will retain this view of Assoc Prof Junor's evidence.[123]

[126] The ANMF submitted that the minimum award rates applicable to direct aged care workers undervalue the work for gender-based reasons, is a natural conclusion to be drawn, based upon:

[135] The UWU submitted that the amendments arising from the Secure Jobs, Better Pay Act have the effect of making the Stage 1 decision even more compelling and its implementation more urgent.[135] The UWU agreed with the Commonwealth's submissions generally, regarding the operation of the Secure Jobs Better Pay Act, except in so far as they are relevant to the timing of the implementation of the interim increase.[136]

[136] The UWU agreed with the provisional views of the Full Bench expressed at paragraphs [1053] to [1063] of the Stage 1 decision concerning consideration s.134(1)(e), the principle of equal remuneration, noting that this decision was made prior to the amendments of the Secure Jobs, Better Pay Act.[137]

[137] The UWU submitted that, to the extent it is necessary to satisfy the modern awards objective, the Full Bench should depart from earlier decisions in respect to the proper construction of ss.134(1)(e) and 284(1)(d) of the Act.[138] Further, UWU submitted that in light of the Secure Jobs Better Pay Act, the continued application of Teachers Decision, the Equal Renumeration Decision 2015 and the Annual Wage Review 2021-22 (and similar) would be inconsistent with the new ss.134(1)(aa) and 134(1)(ab) and s.284(1)(aa).[139]

[138] The UWU submitted that if the Full Bench was to perform the 'comparative exercise in which the remuneration and the value of the work of a female employee or group of female employees is required to be compared to that of a male employee or group of male employees' per the Equal Remuneration Case 2015,[140] the Full Bench would fall into error.[141] The UWU submitted that such a comparison would not be comparing like with like and would have the effect of perpetuating the gender pay gap because of the historical undervaluation of work in aged care.[142]

[139] The UWU submitted that the Full Bench should instead adopt a broader interpretation of ss.134(1)(e) and 284(1)(d) that would be consistent with, or 'promote' the 'the principle of equal remuneration for men and women workers for work of equal or comparable value'.[143]

[140] The UWU submitted that a timely implementation of the interim increase would reduce the gender pay gap sooner and in this respect be consistent with the repealed considerations of s.134(1)(e) of the modern awards objective and s.284(1)(d) of the minimum wages objective, as well as benefit female participation.[144]

[141] The UWU submitted that the new ss.134(1)(ab) and 284(1)(aa) support this approach as they require the Full Bench to consider 'the need to achieve gender equity 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'.[145]

[142] The UWU agreed with the submission of the HSU in respect of the operation of ss.134(1)(ab) and 284(1)(aa).[146]

[143] The UWU submitted the new s.284(1)(aa) operates similarly to the new s.134(1)(ab) and reiterated its submissions relating to that consideration in respect of s.284(1)(aa).[147]

[152] In respect of the Joint Employers' submissions on 20 January 2023, the HSU submitted that the Joint Employers appear to assume the tasks of considering the new ss.157(2B), 134(1)(ab) and 284(1)(aa) have been exhausted by the consideration of the Full Bench in the Stage 1 decision.[156]

[153] The HSU does not fully accept the Joint Employers' submission that the requirement to eliminate gender-based undervaluation has been achieved by the Commission in the Stage 1 decision or that the Commission has completed the task of setting the rates in the relevant awards. The HSU stated that the Full Bench has made clear the interim increase does not exhaust the extent of the increase and has not completed consideration of the modern awards and minimum wages objectives.

[154] The HSU also submitted that the considerations in s.284(1)(aa) are not only relevant in the assessment of work value reasons contemplated by s.157(2A), now supplemented by s.157(2B), but that ss.134(1)(ab) and 284(1)(aa) make clear the need to achieve gender equality must be taken into account in providing a fair and relevant minimum safety net and establishing and maintaining fair minimum wages. The HSU submitted that these considerations are particularly relevant to submission of the Commonwealth as to the phasing of the interim increase, and is a factor militating against delay in giving effect to the interim increase.[157]

[155] The HSU contested the Joint Employers' submission that addressing the gender pay gap has already been fully achieved by the Commission or that the Full Bench has reached a view that the gender pay gap would be eliminated by the 15 per cent interim increase.[158]

[156] In respect of the Joint Employers' submission that the 'some care' should be applied to how a statistical concept derived from aggregate level of pay should be translated into a jurisdiction concerned with setting fair minimum rates, the HSU submitted that this ignores the express requirement in s.284(1)(aa) for the Commission to take into account 'the need' to address gender pay gaps in establishing and maintaining a safety net of fair minimum wages. The HSU further submitted that although it can be measured in various ways, the 'gender pay gap' refers to the difference between average earnings of men and women, and this is consistent with how it is understood in the Explanatory Memorandum to the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022.[159]

[157] In response to the submissions of the ANMF, the HSU submitted that in respect of s. 134(1)(aa), the submissions of the ANMF appear to go beyond the object of improving access to secure work across the economy. The ANMF suggested that the interim increase would improve the attraction and retention of employees in the aged care sector, and would thereby have a positive impact on secure work.[160] The HSU submitted that the fact that s.134(1)(aa) refers to the need to 'improve access to secure work' suggests that it is directed at security from the perspective of the employee and that the objective is to ensure that modern awards provide security to employees in relation to matters such as certainty of ongoing engagement and predictability of duties, hours of work and pay. The HSU added however that the findings of the Full Bench with respect to attraction and retention, and the ample evidence before the Full Bench, are otherwise relevant to the task of providing a fair and relevant minimum safety net of terms and conditions of employment and, at least to the factors in ss.134(1)(c) and 134(1)(f).

[160] The ANMF submitted that despite the submissions of the Joint Employers, it was not concluded by the Full Bench in the Stage 1 decision that the elimination of gender undervaluation has been achieved in awarding the interim increase.[163] The ANMF submitted that the increase foreshadowed is expressly interim only and further increases will be required before the Commission would conclude that gender-based undervaluation has been eliminated.[164]

[161] Similarly, the ANMF disagreed with the Joint Employers and submitted the process of addressing gender pay gaps is still a work in progress. The ANMF submitted the Joint Employers may have suggested 'addressing' gender pay gaps is synonymous with 'considering' gender pay gaps.[165] The ANMF submitted that this should be rejected, and state that 'addressing gender pay gaps' relates to material action, not reasoning and is in service of the achievement of gender equality.[166]

[162] Responding to the Joint Employers, the ANMF submitted that it is not accurate to say that with the award of the interim increase the minimum wages objective is achieved. The ANMF submitted that further increases are required in order to ensure the relevant objective is achieved.[167]

[163] So far as the Joint Employers utilised minimum-wages propositions in addressing the modern awards objective, the ANMF repeated its submissions in regard to the Joint Employer's minimum wages submissions.[168]

[164] The ANMF referred to the submission of the Joint Employers that the Full Bench does not need to consider s.134(1)(aa) at length because it operates at 'a macro level'. The ANMF agreed this consideration operates at a macro level in the sense that it is economy-wide, but further submitted that the macro level is a confluence of decisions at the micro level and that s.134(1)(aa) is a mandatory relevant consideration.[169]

[165] The ANMF submitted that the Full Bench should analyse whether the variation will either 'enhance, detract from, or be neutral in regard to, the security of work'. If it enhances security of work, then this enhances the economy-wide position. The analysis is mirrored for micro detraction, or micro neutrality. In this matter, the ANMF submitted, the Full Bench is able to find that increasing minimum wages will enhance the security of the relevant work.[170]

[166] For reasons given above, the ANMF submitted that s.134(1)(aa) weighs in favour of the variation, rather than being neutral as submitted by the HSU.[171] The ANMF agreed with and adopted the positions of the HSU that the considerations under ss.134(1)(ab) and 284(1)(aa) strongly weigh in favour of the interim increase.[172]

[171] The inclusion of s.134(1)(aa) in the modern awards objective requires the Commission to take into account the need to improve access to secure work across the economy. We consider that this is a neutral consideration in the current context. Whilst 'secure work' is undefined, we consider that it is directed at a similar purpose to the new reference to 'job security' in the objects of the Act. We agree with the Commonwealth's submission that secure work is concerned with the security of a person's position while employed. The consideration of s.134(1)(aa) would be most directly engaged in relation to considering terms such as those relating to the forms of employment, the conditions of engagement and termination of employment, and terms relating to levels of certainty and predictability of when work is performed, from the perspective of an employee. Increases to the minimum rate of pay may increase the attractiveness of the work and in doing so positively impact recruitment and retention in the aged care industry. They may encourage an employee to seek employment in and remain employed in the industry, however the rate of pay itself does not provide either lower or higher levels of secure work or job security from an employee perspective. The issues of attraction and retention of employees are more relevantly considered, and in the Stage 1 decision have been, in relation to s.134(1)(c).

[172] In the Stage 1 decision the Full Bench invited further submissions as to the proper construction and relevance of s.134(1)(e), specifically, whether the approach taken in the Teachers Decision of requiring a male comparator ought to be reconsidered. The repeal of s.134(1)(e) and insertion of new s.134(1)(ab) resolves that issue.

[173] The new s.134(1)(ab) requires consideration of the principle of 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. In the Stage 1 decision the Full Bench found that the aged care workforce is predominantly female and that work in feminised industries has historically been undervalued, likely for gender-based reasons.[177] The Full Bench also accepted the proposition that gender undervaluation of work is a driver of the gender pay gap and Assoc Prof Junor's evidence that the skill, responsibility and effort required in the RN, EN and AIN/PCW classifications is under-recognised in the current award rates.[178]

[174] In light of the Full Bench's findings we consider that the consideration in s.134(1)(ab) weighs in favour of the interim increase, and note that no party contended otherwise. We also reaffirm that the Stage 1 decision provides for an interim increase and does not conclude consideration of the Unions' claim for a 25% increase for all employees.[179] Accordingly, the requirements in s.157, including consideration of whether any further increases are necessary to achieve the modern awards objective and the minimum wages objective, will be further dealt with in Stage 3.

[180] The new s.157(2B) requires that the Commission's consideration of work value reasons must be free of assumptions based on gender; and include consideration of whether historically the work has been undervalued because of assumptions based on gender.

[181] Whilst not directed at that particular statutory requirement, the Full Bench in the Stage 1 decision gave detailed consideration to the evidence, including extensive expert evidence, about gendered assumptions in the work value of work in the aged care industry, including evidence of 'invisible skills that may have been given inadequate weight in previous work value assessments including because of gender-based assumptions.'

[182] We are satisfied that the Commission's consideration of the work value reasons justifying the interim increase is free of gender-based assumptions, noting that no party contends otherwise. In relation to the need to include consideration of whether historically the work has been undervalued because of gender-based assumptions, the ANMF contends that s.157(2A)(b) requires an express finding to be made. We consider that whilst it may often be appropriate to make such a formal finding, we do not consider that the provision imposes an obligation to do so. The language of the provision is to 'include consideration of' rather than require the Commission to reach a state of satisfaction that historically the work has been undervalued because of gender-based assumptions. In this regard we accept the Commonwealth's submission that the obligation imposed by the provision is for the Commission to actively turn its mind to the question of historical undervaluation and does not require the making of a positive finding.

[183] We are satisfied that the Full Bench in the Stage 1 decision actively considered the question of historical undervaluation because of gender-based assumptions, as required by s.157(2A)(b). In addition to the matters in paragraph [173], the Full Bench closely considered expert evidence on gender undervaluation in the aged care industry and historical gender-based undervaluation for example in the Charlesworth Report, the Charlesworth Supplementary Report, the Eagar Report and the Meagher Report, and comprehensively summarised the evidence and submissions.

[188] The Commonwealth supports the interim increase and submitted that it is committed to funding the full increase, including on-costs incurred by aged care providers, in all Commonwealth funded aged care.[182]

[189] The Commonwealth submitted that it will provide funding for the increase in the following phases:[183]

An increase in funding corresponding with a 10 per cent increase in wages (including on-costs) from 1 July 2023; and

A further increase in funding corresponding with the remaining 5 per cent increase in wages (including on-costs) from 1 July 2024.

[190] The Commonwealth submitted that its proposed timing will allow it to implement the interim increase appropriately through its various funding mechanisms, while commencement from 1 July 2023 will allow implementation of the interim increase to align with the annual indexation of aged care programs, scheduled funding changes to aged care program arrangements and the minimum wage uplift flowing from the annual wage review.[184]

[191] The Commonwealth submitted that the following mechanisms will likely be used to implement the interim increase:[185]

Residential Aged Care - the Australian National Aged Care Classification (AN-ACC) price will be determined on an annual basis from 1 July 2023, based on advice from the Independent Health and Aged Care Pricing Authority (IHACPA). IHACPA's advice will include advice in relation to the cost (including the cost of any increase in wages) of providing specified care and services to care recipients. As such, the future AN-ACC price can incorporate the pricing impact of the proposed interim increase from 1 July 2023 onwards.

Home Care Packages Program (HCPP) - annual subsidy indexation on 1 July 2023 to also factor in the additional cost of wages incurred by providers to deliver wage increases to home care workers and nurses. Indexation from 1 July 2023 will allow the necessary subordinate legislation to be drafted and registered.

Commonwealth Home Support Programme (CHSP) - development and negotiation of a large volume of grant agreements ahead of a commencement date of 1 July 2023.

A number of other small aged care and related programs funded by grant agreements or contractual arrangements that involve direct care workers will need to be adjusted.

[192] The Commonwealth maintained that it is 'not feasible' to implement a funding increase prior to 1 July 2023 for the following reasons:

the Commonwealth does not provide funding to directly fund wages and associated on-costs in the aged care sector;

given that the proposed interim increase applies only to direct care workers, it is difficult to calculate and apply a standard indexation uplift to funding across the various aged care programs, which is the usual method of implementing wage increases in this sector; and

• it is necessary to ensure that increased funding is distributed accurately and that there are appropriate accountability mechanisms in relation to the expenditure of additional funding, which takes time given the diverse Program arrangements.[186]

[193] The Commonwealth further noted that while it supports continuing to improve wages and conditions for aged care workers to properly reflect the value of work performed, this must be balanced against the need to ensure that funding is properly targeted so that it contributes to improving the quality and safety of the aged care system for older Australians.[187]

[194] The Commonwealth noted that on-costs are 'a significant proportion of the total wage bill for aged care providers' and submitted that the following on-costs are likely to increase as a result of the interim increase:[188]

Superannuation

Payroll tax

Workers' compensation

Allowances and entitlements which are based on a percentage of the standard rate.

[195] The Commonwealth proposed a 2-stage approach to funding on-costs:[189]

Initially, funding increases may be determined by using sector average labour costs by Program (including both wages and on-costs) and making the corresponding upwards adjustment to the subsidy or grant relevant to that program to account for the proposed interim increase.

In the future, the costs of delivering both residential and home aged care will be further investigated through the IHACPA, which will provide advice to Government regarding the costs of care, informing future price setting arrangements.

[196] The Commonwealth submitted that its proposed 2-stage approach is appropriate because:[190]

The Commonwealth does not fund aged care wage costs directly, so it is not possible to calculate the precise level of Commonwealth funding needed according to a specified list of on-costs;

Historically, Commonwealth funding has not been calculated 'from the ground up' so there is not a prescribed list of labour input costs that can be separated and adjusted for the purposes of Commonwealth funding;

Expenditure on wages varies in and across aged care programs, due to the diversity of roles, business and employment models, the number of awards and higher wages paid by some employers under Enterprise Agreements. Examples of variability across aged care programs include:

On-costs associated with the Aged Care and Nurses Award are higher than those for the SCHADS Award, mainly due to higher shift allowances and overtime in residential aged care due to the 24/7 nature of residential aged care service delivery;

In the HCPP, the care recipient may spend their subsidy on a range of services, equipment, aids and home modifications and as a result expenditure on labour-related costs is variable and, to an extent, dependent on the preferences of the care recipient, and

In the CHSP, services are delivered under grant-based funding, only a proportion of which are delivered by HCWs employed under Schedule E in the SCHADS Award who are eligible for the interim increase.

Using sector by sector average labour costs by aged care program as the basis for determining the funding necessary to fund on-costs is an equitable approach across providers that factors in existing labour costs, including on-costs.

[197] The Commonwealth agreed with the summary of relevant principles set out at [976]-[990] of the Stage 1 decision in respect of the approach to timing and phasing-in taken by the Commission in previous decisions.

[198] The Commonwealth noted that s.166(1)(a) of the FW Act creates a 'presumption' that the interim increase would commence on 1 July 2023 and accepts that this presumption may be displaced if the Commission is satisfied that it is 'appropriate' to specify a different day of operation.[191]

[199] The Commonwealth submitted, consistent with its funding commitment, that a commencement date of 1 July 2023 should be adopted in respect of the first phase of the interim increase. The Commonwealth further submitted that an earlier commencement date would not be appropriate, having regard to its funding commitments and administrative arrangements.[192]

[200] The Commonwealth noted the principles set out in the Penalty Rates - Transitional Decision and Application by Independent Education Union of Australia - New South Wales/Australian Capital Territory Branch (130N-NSW)[193] as considered in the Stage 1 decision at [986] and [981] respectively.[194] The Commonwealth submitted that given its funding commitment and the central role it plays in funding the sector, a phasing-in approach that reflects its funding commitment would be appropriate and consistent with the principles established in the aforementioned cases.[195] The Commonwealth's proposed phasing-in is set out in paragraph [189] above.

[201] The Commonwealth submitted that if the Commission adopts its proposed phasing the impact on business and employment costs will be 'minimal' but if another approach is adopted it may have impacts on business and employment costs which 'must be weighed and assessed against the benefits in providing an earlier uplift in wages.'[196]

[202] In respect of productivity, the Commonwealth agrees with the view expressed at [1065] of the Stage 1 decision that an increase in wages should not be regarded as affecting productivity. In this respect, the Commonwealth submitted that s.134(1)(f) is a neutral consideration.[197]

[203] In relation to regulatory burden, the Commonwealth submitted that the interim increase would have no increased regulatory burden and any accountability mechanisms introduced with the implementation of the funding increase would result in 'minimal' regulatory burden. In this respect, the Commonwealth submitted that s.134(1)(f) is a neutral consideration.[198]

[204] Regarding the impact on business and employment costs, the Commonwealth agreed with the Commission that the 'extent to which the Commonwealth funds any outcome from these proceedings is plainly relevant to [the Commission's] consideration of the impact of any increase in employment costs on the employers in the aged care sector'.[199]

[205] The Commonwealth submitted that, as a result of its funding commitment, the Commission can be satisfied that granting the interim increase with timing and phasing arrangements consistent with the timing of the Commonwealth's funding commitments 'would have a non-material impact' on business and employer costs. On this basis, the Commonwealth submitted that s.134(1)(f) would be a neutral consideration.[200]

[206] In the event the Commission decides to grant the interim increase earlier, or without the phase-in reflected in the Commonwealth's funding commitment, the Commonwealth conceded that this could have an impact on business. The Commonwealth recognised and accepted the observations from [911]-[916] of the Stage 1 decision, including that there is no primacy to any of the s.134(1) considerations and so s.134(1)(f) should not be given 'determinative weight'.[201]

[210] The HSU submitted that various findings of the Full Bench demonstrate the necessity for the interim increase to commence operations immediately or as soon as practicable, in particular:[206]

The extensive evidential findings that the work of at least direct care workers in residential aged care homes and home care settings has changed very substantially;

The evidence establishing that the existing minimum wages for direct care workers in the aged care sector do not properly compensate employees and 'significantly undervalue the work performed by these employees';

That the Full Bench made clear that the 15 per cent interim increase does not exhaust the extent of the wage increases justified by work value reasons;

That the Full Bench observed that most of the award classifications the subject of the interim increase are 'low paid' for the purposes of s.134(1)(a) and the evidence of financial challenges faced by the workers;

The finding of the Full Bench that the evidence painted a picture of chronic understaffing, and that it was common ground that attracting and retaining aged care employees is a significant issue that increasing minimum wages will help to alleviate;

The Full Bench's conclusion that varying the relevant awards to give effect to the interim increase will have a beneficial effect on the gender pay gap and promote gender pay equity; and

• That the Full Bench indicated it was not persuaded that varying the relevant awards to give effect to the interim increase would have any material effect on the national economy.[207]

[211] The HSU submitted that due regard to the factors arising with respect to the modern awards and minimum wages objectives and considerations of fairness demands a conclusion the interim increase commence operation immediately or as soon as possible. The HSU provided the following reasons:[208]

(a) Applying ss.134(1) and 284(1), any delay will result in direct care workers continuing to receive wages significantly below the true value of wok they perform;

(b) the Full Bench set the interim increase 'comfortably below' the increase the Full Bench may determine on a final basis, meaning even after the commencement of the interim increase, direct care employees will continue to receive wages less than the true value of their work;

(c) it is inherent in the interim nature of the increase determined by the Full Bench that it was intended to commence operation within a short period and, the reasoning of the Full Bench (at [922]) was that there is no reason to delay an increase in minimum wages at least for direct care employees whilst further complex issues are being determined;[209]

(d) most of the classifications to which the interim increase will apply are 'low paid' for the purposes of s 134(1)(a). The interests of employees on low rates of pay receiving the increase determined by the Commission to be warranted are strong and the consideration in s.134(1)(a) favours a conclusion that the interim increase should commence at the earliest possible date;[210]

(e) for the purposes of s.134(1)(f) any delay in the implementation of the interim increase is likely to perpetuate the industry's attraction and retention difficulties and, in turn, have a negative impact on business and the standard of care able to be provided to elderly persons;

(f) for the purposes of s.134(1)(g) there is no reason to conclude that any period of adjustment is needed to permit employers to give effect to the interim increase which has been determined by the Full Bench, and no evidence has been provided demonstrating any particular difficulty in carrying out such an adjustment.[211]

(g) the new considerations in ss.134(1)(ab) and 284(1)(aa) and, in particular, the requirement to take into account the need to eliminate gender-based undervaluation of work and address gender pay gaps further supports the early commencement of the interim increase. As the Full Bench found, the interim increase will go some way towards addressing the gender-based undervaluation of work ; and

(h) There are no other reasons which warrant any delay. The HSU notes the finding of the Full Bench that the increase is not likely to have any relevant impact on the national economy for the purposes of ss.134(1)(h) and 284(1)(a).

[212] The HSU submitted that the Commonwealth's preference for phasing-in does not provide a proper basis for delay, and the Full Bench should not accept the propositions advanced by the Commonwealth in relation to the practicability of implementing the interim increase.[212]

[213] The HSU submitted that the Full Bench should determine that the relevant awards be varied to give effect to the interim increase with effect immediately from the date of the Full Bench's determination. It submitted that 'any further delay would not give effect to the modern awards and the minimum wages objectives and would perpetuate the profound unfairness in direct care workers receiving wages which do not reflect the value of their work.'[213]

[214] If the Full Bench finds some practical difficulty with the interim increase commencing immediately from the date of the determination as a result of the nature of Commonwealth funding mechanisms, the HSU submitted that this should be addressed by the variations providing for back payment to employees at least to the date of the determination. The HSU submitted that this could be achieved through a number of mechanisms, including:

[222] The HSU engaged Prof Kathleen Eagar to prepare a Second Supplementary Report,[227] which was provided alongside its submissions of 20 January 2023.

[223] The report addressed the following issues:

the nature of funding mechanisms for aged care including for residential aged care, Home Care and the Commonwealth Home Support Programme (including pricing methodology, how current prices have been set and what entity set those prices; transitional arrangements; payment distribution methods and frequency of payments);

the role (if any) of IHACPA in setting pricing and funding amounts in the aged care industry;

what changes to legislation and subordinate legislation would be required in order to change pricing and/or funding in aged care;

whether, having regard to the current funding mechanisms, it is feasible for the Commonwealth to fund any increase awarded by Commission prior to 1 July 2023;

any examples of any prior occasions in which the Commonwealth has changed funding or payments to providers before the end of a financial year and what mechanisms were used for enacting the funding changes;

whether there any administrative or procedural funding impediment that would prevent a full 15 per cent increase being paid prior to 1 July 2023;

whether it would be administratively or procedurally simpler to administer funding of a one off 15 per cent increase, or to administer funding of two instalments of 10 per cent and 5 per cent as proposed by the Commonwealth in the submissions;

whether the Commonwealth has access to data on the mix of staff and staffing profile of employees in the aged care industry and whether this is relied upon to conduct budget forecasts and budgeting; and

whether the Professor considers that there would be any adverse impacts on the aged care industry, if the payment of the 15 per cent interim increase is delayed.

[224] Prof Eagar stated that following the introduction of the Aged Care and Other Legislation Amendment (Royal Commission Response) Act 2022, IHACPA has the role of providing costing and pricing advice on aged care to the Commonwealth Government. IHACPA's advice is to inform Commonwealth Government decisions on the pricing of residential aged care and respite care using the AN-ACC from 1 July 2023. This role is an advisory role only. Responsibility for pricing and funding rests with the Commonwealth government. In relation to aged care, IHACPA has an advisory role only. It is not a determination body.[228]

[225] Prof Eagar addressed which, if any, changes to legislation and subordinate legislation would be required in order to change pricing and/or funding in aged care. Prof Eagar stated no changes would be required for government to increase payments to providers to cover pay increases. Prof Eagar noted the administrative matter of recording price changes in relevant determinations and outlined the relevant legislation.

[226] Having regard to the current finding mechanisms, Prof Eagar found an award increase is feasible for the Commonwealth to fund prior to 1 July 2023.[229] Prof Eagar outlined two options of mechanisms that could be used to fund the increase prior to 1 July 2023.[230]

[227] Option One was to incorporate award increases into existing payment systems:

(a) In relation to residential care, one option available to Government is to incorporate award increases into the 'AN-ACC starting price' and include these in an updated schedule of subsidies and supplements as well as into their automated payment systems. The IHACPA need have no role in this as IHACPA has an advisory role only.

(b) In relation to Home Care Packages, one option available to Government is to incorporate award increases into the subsidy paid for each of the Home Care Subsidy Rates and include these in an updated schedule of subsidies and supplements as well as into their automated payment systems.

(c) This same option is not available for CHSP as the Government grant is awarded to each organisation individually. Thus any increase for changes in award payments would need to be calculated for each organisation individually.[231]

[228] Option Two was to reimburse providers from the date they begin paying the increase:

(a) Department of Health advises aged care organisations to begin paying increased award rates to eligible staff from the earliest possible date and that they will be reimbursed for eligible expenses from the date those expenses are incurred. This will give providers an incentive to begin pay increases as soon as they can do so.

(b) Aged care providers apply for reimbursement and provide the necessary documentation.

(c) Aged care providers are reimbursed for eligible costs.[232]

[229] Prof Eagar addressed prior examples where the Commonwealth has changed funding or payments to providers before the end of financial year. Prof Eagar stated the reimbursement method has been used in the past and is currently being used. As a result, systems are already in place to allow it to be used for the purpose of paying for award increases outside of the usual funding cycle. Prof Eagar gave the example of the COVID-19 Aged Care Support Program.[233]

[230] Prof Eagar stated that although it would be easier and administratively tidier for the Commonwealth if the 15 per cent increase took effect from 1 July 2023, there is no administrative or procedural impediment if the pay increase took effect before that date.[234]

[231] Prof Eagar addressed whether the Commonwealth has access to data on the mix of staff and staffing profile of employees in the aged care industry and whether this is relied upon to conduct budget forecasts and budgeting. Prof Eagar stated the staff profile of each organisation is subject to frequent changes as staff come and go and thus staff profile data are never entirely accurate for purposes such as budget forecasts. Nevertheless, the Commonwealth prepares budget forecasts every year with the best available data and this is the case whether or not a pay increase occurs.[235]

[232] Finally, Prof Eagar addressed whether there would be any adverse impacts on the aged care industry if the payment of the interim increase is delayed.

[233] Prof Eagar reiterated that the pay rise is urgently required to help improve attraction and retention in the aged care sector. Prof Eagar stated the sector is in immediate crisis in terms of its ability to staff existing aged care services and deliver necessary services to people in their homes. Prof Eagar claimed she has been informed by public hospital informants that an increasing number of aged care residents are being transferred to emergency departments for conditions that would normally be managed within the home. The reason for these additional emergency department attendances is reportedly because the home cannot provide adequate care due to staff shortages.

[234] Further, Prof Eagar stated that although the two instalments will save the Commonwealth funding in the short term, it will exacerbate existing staff shortages and service deficiencies. Prof Eagar stated that residents receiving inadequate care are more likely to become seriously unwell and be admitted to hospital, at a greater cost to government (Commonwealth, States and Territories). Prof Eagar stated that those receiving inadequate care at home are more likely to require premature residential care, at a greater cost to the Commonwealth and ultimately to taxpayers.[236]

[235] The ANMF submitted that the principles canvassed by the Full Bench at paragraphs [974]-[990] of the Stage 1 decision are 'generally appropriate'. The ANMF however stated that aspects of the decisions extracted by the Full Bench relate to the specific facts and evidence of their respective matters, and the principles identified are not necessarily applicable 'in the same way or to the same end' in these proceedings. [237]

[236] In respect of Australian Workers Union [2022] FWCFB 4 at [163] and [169], extracted in the Stage 1 decision at [980], the ANMF submitted that the variation concerned in that matter was substantially different to a percentage increase to minimum award rates. Further, the ANMF submitted that unlike that decision, there is no material before the Full Bench in these proceedings establishing that the regulatory burden of an interim increase is such that employers would require any particular time to adjust after a determination is made. If such material were adduced it would be open to the Commission to order the that the interim increase come into effect from the date of determination, but that implementation be deferred for a period. Following this, the increase could be payable to employees retrospectively. Such an approach, the ANMF submitted, would prevent further delays in awarding the increase to direct care workers and allow their employers a reasonable period to make arrangements for the increase.[238]

[237] The ANMF submitted the principles canvassed by the Full Bench at [974]-[990] predate the amendments to ss.3(a), 134(1)(ab) and 284(1)(aa) and must therefore be revised. In particular, the ANMF submitted that regard must be had to the amendment to the object of the FW Act in the proper interpretation of s.166 and the need to achieve gender equality in respect of matters relevant to phasing-in variations, as set out in the Penalty Rates Decision and others.[239]

[238] The ANMF noted that the Full Bench has recognised that the interim increase is justified by work value reasons and current award minimum rates, 'significantly undervalue' the work of direct care workers.[240] The ANMF submitted the relevant awards do not provide a safety net of fair minimum wages or a fair and relevant minimum safety net of terms and conditions.

[239] Given this, the ANMF claimed the phasing-in proposed by the Commonwealth fails to meet the statutory objectives[241] and that direct care workers in aged care should receive the interim increase without further delay. It highlighted also that the initial applications have been on foot since November 2020, in respect of the initial application to vary the Aged Care Award, and May 2021 and June 2021 in respect of the further applications.[242]

[240] The ANMF submitted direct care workers should not have to wait until 1 July 2024 to receive the full interim increase that was plainly justified by work value reasons. It submitted that it would be appropriate for the Full Bench to order the interim increase was to come into operation immediately and that would be consistent with the revised object of the FW Act in putting gender equity at the 'heart' of Commission's decision making.[243]

[241] The ANMF submitted the Full Bench may find a transitional arrangement that applies the increase retrospectively may be appropriate if it is satisfied the regulatory burden of the interim increase was such that employers would require a reasonable time to adjust after a determination was made.[244] However at present, the ANMF submitted there is no such evidence before the Commission. Upon being satisfied such an arrangement is appropriate, the ANMF submitted the Full Bench may specify the interim increase is deferred for a period of a number of weeks but must apply retrospectively from the date of the Stage 1 determination.[245] Such an arrangement would satisfy the requirements of s.157(2).[246]

[242] Regarding s.134(1)(f), the ANMF submitted that the interim increases would not have any negative effect on productivity. The ANMF accepts granting the interim increase prior to those increases being fully funded by the Commonwealth may have some impact on business, given the increased employment costs. However, even having regard to this, the ANMF submitted that the application of the interim increase in its entirety upon the making of the determination is necessary to ensure that the modern awards, together with the National Employment Standards, provide a fair and relevant minimum safety net of terms and conditions, taking into account all of the factors in s.134(1).[247]

[243] The ANMF noted the only material currently before the Full Bench regarding the likely impact on business of any increase to award minimum wages are analyses conducted by StewartBrown. The ANMF reiterated its submissions of 22 July 2022 that this analysis has not been adequately proven or verified and therefore the report should not carry any significant weight.[248]

[244] The ANMF contested that the 'accountability mechanisms' referred to by the Commonwealth would be a relevant consideration in respect of the regulatory burden on business, as they relate to funding arrangements and are not a consequence of the proposed award variations. Accordingly, the ANMF submitted the regulatory burden of varying the award rates would be a neutral consideration, and the additional regulatory burden associated with the variation would be limited to ensuring employees are paid the increased minimum award rates.[249]

[245] The UWU submitted that the interim increase in the Aged Care Award and SCHADS Award should be implemented as soon as possible. The UWU opposes the Commonwealth's proposal that the interim increase be phased in over two instalments and instead submitted that the variations to the relevant awards should be made effective from the first pay period on or after the date of the determination.[250]

[246] If the Full Bench were of the view that there are practical difficulties with immediate implementation, then the UWU would support the HSU's proposal for a back payment mechanism from the date of the determinations.[251]

[247] The UWU claimed the Commonwealth has not explained the need to phase in the interim increase, and why remaining 5 per cent should not be paid until 1 July 2024.The UWU submitted the Full Bench should not be satisfied there is a need to phase in the interim increase, especially factoring in both the modern award and the minimum wages objectives.[252]

[248] The UWU submitted that s.166 of the Act provides that determinations varying modern awards generally come into operation on 1 July in the next financial year, unless Commission considers it appropriate to specify another day.[253] If considering the appropriateness of another day, 'fairness' is a key factor.[254] UWU submitted particular focus should be had to the considerations at s.134(1)(a) - the needs of the low paid; s.134(1)(f) - the likely impact of any exercise of modern award powers on business, including on productivity, employment costs and the regulatory burden; and s.134(1)(g) - the need to ensure a simple, easy to understand, stable and sustainable modern award system that avoids unnecessary overlap of modern awards.[255]Consideration should also be given to the new provisions, s.134(1)(aa) - the need to improve access to secure work - and s.134(1)(ab) the need to achieve gender equity.[256]

[249] The UWU acknowledged that the determination of transitional arrangements is a broad judgement, but claimed that, in relation to the consideration of whether it is appropriate to deviate from the presumption in s.166, the Commonwealth appears to give no weight to the needs of the low paid, to job security or to gender equity.[257]

[250] In respect to the objectives of gender equity, UWU submitted it is appropriate to deviate from the presumption of s.166 to implement the interim increase as soon as possible.[258]

[251] In respect of the needs of the low paid and the need to improve access to secure work across the economy, UWU submitted the Full Bench should have regard to the considerable evidence before it demonstrating retention and workforce issues in the industry.[259] and cited in particular a report by the Committee for Economic Development of Australia[260] and the Royal Commission's Final Report.[261]

[252] The UWU submitted that applying the interim increase no earlier than 1 July 2023 gives no weight to the needs of the low paid, job security and pay equity and is not consistent with fairness.[262]

[253] The UWU submitted the approach in ALHMWU re Child Care Industry (Australian Capital Territory) Award 1998 and Children's Services (Victoria) Award 1998 - re Wage rates 5 (the ACT Child Care Decision**)** is apposite, as there is significant material before the Full Bench demonstrating a significant workforce crisis in the sector caused in part by low wages.[263]

[254] The UWU further submitted the approach in the Penalty Rates Transitional Decision is apposite, where the Full Bench has determined that the evidence establishes existing minimum wage rates do not properly compensate employees for the value of the work performed.[264] If the variation to the awards is not made until 1 July 2023, the UWU submitted that direct care workers in the aged care sector will continue to perform work for compensation less than the value of the work performed for a period of more than six months.[265]

[255] In relation to s.134(1)(f) - the impact of any exercise of modern award powers on businesses, including productivity, employment costs and regulatory burden the UWU submitted this impact is negligible given the Commonwealth's commitment to funding the interim increase.[266] The UWU therefore concluded s.134(1)(f) is a neutral consideration.[267]

[257] The AWU did not support the timing and phasing-in arrangements proposed by the Commonwealth.[269]

[258] The AWU submitted that enterprise bargaining in the industry has already stalled whilst employers wait for the Commission to confirm the quantum and timing of the wage increases.[270]

[259] The AWU submitted a number of considerations of the modern awards objective will be undermined by unnecessarily delaying the wage increase. In particular, the need to take into account relative living standards and the needs of the low paid, the need to promote social inclusion through increased workplace participation, the need to achieve gender quality in the workplace and the need to encourage collective bargaining.[271]

[260] The AWU submitted that the object of promoting collective bargaining has already been significantly undermined by the Commonwealth's proposed timing of the wage increases, with the last of the increases proposed to be implemented nearly 18 months from the date of these submissions. The AWU provided correspondence indicating an employer is delaying bargaining pending further details of these proceedings being known, including government funding arrangements.[272] The AWU submitted that stalled collective bargaining in the aged care industry, an industry where bargaining is already extremely difficult, means the need to encourage collective bargaining should be given significant weight, and on this basis the Commonwealth's suggested timing and phasing-in should be rejected.[273]

[261] The AWU submitted that the need to encourage collective bargaining would be best satisfied by a single interim increase of 15 per cent, earlier than that proposed by the Commonwealth.[274]

[262] The AWU claimed the Commonwealth's submissions of 16 December 2022 modifies the position set out in their submissions of 29 August 2022, whereby the Commonwealth committed 'to provide funding to support any increase to award wages made by the Commission.' The AWU supports this earlier position and submitted the Commonwealth's 16 December 2022 submission regarding the proposed timing and phasing-in of the increases should be given no weight.[275]

[263] The AWU further submitted that given the Commonwealth's earlier commitment to fund any increase awarded by the Commission, it is difficult to see how its concern about the impact to business were the interim increase to be implemented earlier than it proposes, can be sustained. The AWU submitted that the consideration of the likely impact of the exercise of modern award powers on business (s.134(1)(h)) is a neutral consideration in respect of the timing and phasing-in of the interim increase.[276]

[264] The AWU submitted that the principles arising from the Penalty Rates Transitional Decision do not lead to a conclusion that the phasing-in of the proposed interim increase is appropriate, instead submitting that the statutory framework and modern awards objective supports awarding the interim increased without any phasing-in arrangements.[277]

[265] Regarding 'fairness', the AWU submitted that regard should be had to both employers and employees, and pointed to the Joint Statement, where representatives of employers and employees concurred that there should not be phasing-in of the proposed interim increase.[278] The AWU submitted that awarding the proposed increase in full without phasing-in would result in fairness to both employers and employees.[279]

[266] The AWU submitted that the Commonwealth's submissions in respect of Application by Independent Education Union of Australia-New South Wales/Australian Capital Territory (130N-NSW),[280] do not establish that the phasing-in proposed by the Commonwealth is warranted.[281] The AWU submitted that the Commonwealth has had ample time to prepare for the outcome of these proceedings, and further, the extent of the proposed increase is less than the 25 per cent utilised in the economic modelling undertaken by Treasury, contained in the Commonwealth's submissions of 29 August 2022.[282]

[267] The AWU submitted the Commonwealth has not provided cogent evidence as to why its proposed phasing-in of the increase is manageable, but awarding the full increase without phasing-in is not.[283]

[270] The Joint Employer's noted that the Commission's discretion to depart the default operative date set by s.166(1)(a).[288]

[271] The Joint Employers submitted the sector has little capacity to pay the interim increases in the absence of Commonwealth funding. It is therefore fair and necessary for the operation of the interim increases to be aligned to the Commonwealth's funding commitment timetable.[289]

[272] The Joint Employers submitted phasing-in is an accepted approach to introducing increases to wages where appropriate to carefully balance the application of the modern awards objective.[290]

[273] The Joint Employers cited Penalty Rates Transitional Decision[291] in which the Commission identified 3 categories of considerations relevant to deciding on transitional arrangements, being, the statutory a framework provided (in particular ss.134(1)(a), 134(1)(f) and 134(1)(g)), the substantive decision itself as to the proposed variation, and fairness.[292] The Joint Employers submitted that aligning the operation of the interim increases to the Commonwealth's funding fairly and reasonably balances the tension within these considerations.[293]

[274] The Joint Employers submitted de-linking operation and funding would disturb the careful balance the Full Bench should seek as it would materially weigh against s.134(1)(f) by materially and detrimentally impacting business in the sector.[294]

[275] Further, the Joint Employers submitted that, although it will disappoint employers and employees, they 'cannot oppose' the Commonwealth's phasing-in approach, and such an approach would be appropriate and consistent with the summary of the relevant principles set out at [976]-[990] of the Stage 1 decision.[295] Whilst an earlier single stage funding commitment would have been welcome, the contribution of the Commonwealth must be acknowledged especially in the current economic and budgetary environment.[296]

[276] In respect of s.134(1)(f) the Joint Employers submitted the 'likely' impact on business is fundamentally conditioned by Commonwealth funding.

[277] The Joint Employers restated their position, as summarised by the Full Bench at paragraph [1066] of the Stage 1 decision:

[279] The Joint Employers submitted that this accords with the Commission's observations that the extent of Commonwealth funding is plainly relevant to the impact of any increase in employment costs on the employers.[299]

[280] The Joint Employers submitted that this issue 'looms large' in the context of the operation of the interim increase and that if the increases are introduced without funding, the impact on business will be materially negative and would weigh heavily against them.[300]

[281] As such the Joint Employers submitted s.134(1)(f) 'weighs heavily in favour of aligning the operation of the interim increase with the Commonwealth's funding timetable.'[301]

[282] Regarding regulatory burden, the Joint Employers submitted the funding approach may introduce additional regulatory burden even with full and on-going funding, at least initially in home care settings, as any change in service pricing will require the client to agree to the change. This may result in significant risk of operators being unable to recover the increased costs arising from the rise in wages.[302]

[283] The Joint Employers noted that security of tenure provisions in the User Rights Principles 2014 mean home care operators cannot simply bring their home care package agreement to an end if the client does not agree to a change in prices under the package. The Joint Employers submitted that these circumstances result in significant risk of operators being unable to recover the increased costs arising from the rise in wages and stress the importance of communication and lead-up time should the Commonwealth remain with the approach of paying the additional funding into home care packages rather than directly to operators.[303]

[284] Assuming a 1 July 2023 operative date, the Joint Employers submitted that operators would require information regarding the actual increase in funding to home care packages and the new pay rates for employees by 1 April 2023.[304]

[285] Were the Commonwealth to commence communications to operators by this date, the Joint Employers submitted the financial risks for operators relating to clients not agreeing to changes would be mitigated, but not removed.[305]

[286] The Commonwealth reiterated its commitment to provide funding for any increases to award wages made by the Full Bench in this matter.[306]

[287] The Commonwealth submitted that the timing of the Commonwealth's funding commitment is the result of a decision of the Commonwealth Government and that rationale and merits of the Commonwealth's proposed funding commitment are not relevant to the issues before the Full Bench. The Commonwealth submitted that the Full Bench does not need to consider whether it would theoretically be possible for the Commonwealth to fund the full interim increase sooner than proposed, but instead needs to consider what, if any, timing and phasing arrangements are appropriate, given Commonwealth's decision and the statutory considerations.[307]

[288] The Commonwealth submitted that the timing of its funding is not determinative of the Full Bench's decision as to the timing or phasing of the interim increase but does affect the Full Bench's assessment of s.134(1)(f) considering the impact on business.[308]

[289] The Commonwealth reiterated its overall position that it remains committed to providing funding to support any increases to award wages made by the Commission in this matter, including in Stage 3. The details of the Commonwealth's funding commitments in respect of final wage increases determined in Stage 3 would be subject of a further decision of Government.[309]

[290] The Commonwealth reiterated its funding commitment of the interim increase extends to on-costs. The extent to which the specific costs will be covered will be determined through the approach taken.[310]

[291] The Commonwealth confirmed that its funding commitment extends to any decision of the Full Bench regarding increases for Head Chefs/Cooks and RAOs. However, given no decision has yet been made by the Full Bench, the timing of the Commonwealth's funding commitment and any applicable phasing is subject to a future decision of Government.[311]

[292] In response to a proposal from the union parties[312], the Commonwealth reiterated its funding proposal commences on 1 July 2023 and would not extend to funding any backpay.[313]

[293] In an Annexure to the Commonwealth's reply submissions of 10 February 2023, the Commonwealth responded to issues raised regarding Commonwealth's funding decision, in particular those by Prof Eagar in her second supplementary report.[314]

[294] The Commonwealth agreed that, in theory, it may be possible to provide additional funding to the sector relatively quickly.[315] However, the Commonwealth reiterated that it has a responsibility to ensure funding is distributed accurately and appropriately.[316]

[295] The Commonwealth agreed with Prof Eagar that it would be possible to incorporate award increases into the AN-ACC price and states this option is being considered by the Department of Health and Aged Care in consultation with the IHACPA.[317] However, the Commonwealth submitted that it does not follow that this can or should be done immediately.[318]

[296] The Commonwealth agreed with Prof Eagar that, if a change to the AN-ACC set price is used as a funding mechanism, updating the set price would only involve changes to subordinate legislation. However, the Commonwealth submitted there is a significant amount of work required to ensure accuracy if the Commonwealth were to use this funding mechanism.[319]

[297] The Commonwealth made reference to the recently implemented AN-ACC casemix funding model for residential aged care in response to recommendation 120 of the Royal Commission. The Commonwealth submitted this funding model is underpinned by independent pricing and costing advice developed for the Commonwealth Government by IHACPA.[320]

[298] The Commonwealth submitted the IHACPA advice on the interim increase may take several months following a final decision by the Commission in respect of the interim increase. The Commonwealth does not intend to implement an AN-ACC price increase without independent pricing advice from the IHACPA and to do so would be contrary to the design of the new funding model implemented in response to the Royal Commission's Final Report.[321]

[299] The Commonwealth does not agree with Prof Eagar's statement that a reimbursement funding model would be a feasible option for all providers.[322] The Commonwealth submitted that under a reimbursement model residential aged care providers would be required to pay increased wages in advance of receiving the additional funding which may threaten their viability.[323]

[300] The Commonwealth noted Prof Eagar's reference to the COVID-19 Aged Care Support Program as an example of a current reimbursement model being used to deliver aged care funding.[324] The Commonwealth submitted there would be greater administrative complexity for the Commonwealth and providers in operating a similar reimbursement model in the context of increasing wages for existing direct care workers, where additional costs are not easily identifiable and verifiable through receipts and other evidence such as test results, and where the increased wages will be an ongoing cost for an indefinite period of time.[325]

[301] In respect to Prof Eagar's statement regarding timing and other issues for funding wage increase in the home care sector the Commonwealth submitted:

• subsidy payments for approved providers of home care packages are authorised by or under relevant provisions in the Aged Care Act. Commencement on 1 July 2023 should allow for appropriate indexation to occur and the necessary changes to subordinate legislation after a final decision of the Commission on Stage 2.[326]

• the Commonwealth Home Support Programme (CHSP) is largely governed and operated through funding agreements between the Commonwealth and providers, rather than under the Aged Care Act and associated subordinate legislation. Changes to funding provided under the CHSP would need to be facilitated through changes to a large volume of grant agreements.[327] Commencement of 1 July 2023 would allow for these agreements to be re-negotiated.[328]

[305] The HSU referred to the Joint Employers position that the factor in s.134(1)(f)- the likely impact of any exercise of modern award powers on business could be negative, neutral or positive.[331] The HSU submitted that s.134(1)(f) itself, in providing a non-exhaustive list of possible impacts, acknowledges that employment costs are not the only type of impact that the Commission must take into account.[332]

[306] In respect of the Joint Employers submission that, without full and ongoing funding, there will be a materially negative impact on the capacity of operators to viably operate and provide critical services, the HSU submitted that while the suggestion that operators will be unable to provide critical services is a serious one, no evidence has been provided supporting these allegations.[333]

[307] The HSU further submitted there is no suggestion that the interim increase will be unfunded, noting the Commonwealth affirmed its commitment to provide funding for any increases determined by the Full Bench and expressed support for timing and phasing-in the increases.[334]

[308] The HSU submitted that given the commitment from the Commonwealth, the Full Bench should not be persuaded the Commonwealth will refrain from providing funding support for any determination of the Commission.[335]

[309] The HSU submitted that, in the event the Commonwealth were to decline to provide funding in advance of the timeframe it identifies (being that corresponding with a 10 per cent increase from 1 July 2023 and the remaining 5 per cent from 1 July 2024),[336] it does not follow that the impact on business of implementing the interim increases will be materially negative and certainly not universally so. In that event, employers would be required to meet increased costs for about a 3-month period before receiving substantial funding support from the Commonwealth. Thereafter, they would have to accommodate for a gap between the level of funding and wage increase for a 12-month period.[337] As a result, the HSU submitted the Full Bench would not conclude any gap between the interim increase and funding support from the Commonwealth would be materially negative for employers and the Joint Employers have filed no evidence analysing this impact.[338]

[310] Given the absence of such evidence, the HSU submitted the Full Bench should not accept the submission that s.134(1)(f) weighs heavily against an immediate implementation of the interim increase. The HSU further submitted that in any event this consideration does not outweigh the other considerations supporting the immediate implementation of the interim increase, adding that any possible impact of funding decisions upon providers or service provision is a political consideration and not the exercise of the arbitral functions of the Commission.[339]

[311] The HSU notes also the Commonwealth has, in its submissions of 16 December 2022, explained its funding commitment includes funding on-costs[340] and submitted that on the material available, no additional issue arises with respect to the adequacy of the Commonwealth's commitment to fund on-costs.[341]

[312] The HSU submitted that the Joint Employers' apparent suggestion that the HSU, in contending an increase be effective immediately, 'might catch it by surprise' ought not be accepted. The HSU submitted that throughout the proceedings the union parties have advanced their position to have increases implemented in full as soon as possible.[342] The HSU noted this position was also reflected in the Joint Statement, in which both union and employer parties agreed.[343]

[313] The HSU submitted that although various employers have made clear their position is that the Commonwealth must provide funding to aged care employers from the operative date of any increase, all relevant parties agree the interim increase should commence as soon as possible and should not be phased in over time.[344]

[314] In respect of the Joint Employers' submission that the interim increase may introduce additional regulatory burden in the home care sector,[345] the HSU submitted there is no evidence before the Full Bench that demonstrates that any increase in award wages will require a change to the pricing of services to home care clients.[346] The HSU submitted that the Joint Employer's description of a circumstance where clients would be unwilling to agree to price increases despite an increase in funding to packages is speculative and unsupported by evidence as to the terms of existing packages.[347]

[315] The HSU submitted home care operators would have some experience in managing the implementation of increases to award wages, given it ordinarily occurs annually. Furthermore, the HSU submitted it is unclear what 'regulatory burden' is said to arise which would be relevant to s.134(1)(f).[348]

[316] The HSU referred to the second supplementary Eagar report, filed by the HSU on 20 January 2023. The HSU noted that Prof Eagar expresses her expert opinion that it is feasible to fund any increases prior to 1 July 2023,[349] explains the mechanisms by which such funding may be distributed[350] and provides a description of previous Commonwealth experience implementing additional payments before the end of financial year.[351]

[317] The HSU submitted that the Full Bench should accept Prof Eagar's evidence and should not accept the Joint Employers' submissions in this respect. The HSU submitted that implementing the reimbursement approach described by Prof Eagar does not necessarily require an increase in the price paid by consumers, nor would employers incur an additional regulatory burden.[352]

[318] The HSU submitted a variation to award rates of pay would not, in and of itself, give rise to the regulatory burden foreseen by the Joint Employers. Any burden imposed is as a result of any separate funding arrangements, contractual arrangements and accountability measures that might exist. The HSU submitted that the regulatory burdens to which s.134(1)(f) is directed are those which are a consequence of the exercise of modern award powers, rather than regulatory burdens that arise from the implementation of government funding or regulatory arrangements.[353]

[319] The HSU submitted that the Joint Employers do not bring any evidence in relation to the proportion of service prices that wages represent, or the profitability of home care employers, that illustrates the degree to which the interim increase would impact upon the employers were it to be unfunded for a short period, then partially funded for a period, and therefore the Full Bench should give little weight to this submission.

[320] The HSU submitted that the Joint Employers' submission that without Commonwealth funding the aged care sector would have very little capacity to pay the interim increase is not supported by cogent evidence and should not be accepted.[354] The HSU noted that the Commonwealth has committed to provide funding support, that any period where there is a gap between that support and the level of increase will be finite, and that without evidence there is no basis to understanding the extent to which such a period would impact the operations of employees across the entire industry.[355]

[321] The HSU submitted that there is little evidence before the Full Bench in relation to the adequacy of funding beyond general statements to the effect that the industry relies on Government funding.[356] With reference to the StewartBrown's Aged Care Financial Performance Survey Industry Report (StewartBrown Survey Report) the HSU noted the data in the report is drawn from aged care providers who nominate themselves as participants in the survey and the report does not purport be a comprehensive or representative survey of providers.[357] The HSU submitted that the StewartBrown Survey Report should be given little weight, particularly in the absence of evidence from its authors as to the methodology and purposes of the report or method of verifying its information.[358]

[322] The HSU referred to the suggestion from ANMF that the Full Bench might order that the interim increase come into effect at the date of determination, but order that the operation of the variation be deferred for a period of weeks, after which the variation would apply retrospectively.[359] The HSU submitted its primary position is that such a deferral is not necessary or appropriate and that the interim increase can be applied from the date of the determination.[360] Presently, it is unclear why a period of adjustment would be required in the case of a variation providing for a simple increase of pay. The HSU distinguished the present matter to that in Re Australian Workers' Union[361] in which a period of adjustment of three months (6 months from the original decision) was found to be appropriate. The HSU noted that that decision concerned the imposition of a floor of minimum earnings for piece rates workers. The effect of that variation required changes to work practices and working arrangements for some employers at least who did not have appropriate processes in place for recording hours of work and supervising pieceworkers.[362]

[323] The HSU agreed with the submissions of ANMF,[363] that the regulatory burden referred to by the Commonwealth, which is said to arise from accountability mechanisms it proposes to implement in association with the additional funding, is not relevant for the purposes of s.134(1)(f). The HSU submitted that if the Commonwealth proposes to change or enhance accountability processes in association with the provision of additional funding, that is a matter which arises from those funding mechanisms not the interim increase, and any such burden is not therefore an impact of the exercise of modern award powers by the Commission for the purposes of s.134(1)(f).[364]

[331] The ANMF reiterated its previous position that, in the absence of probative evidential support, the Full Bench cannot be satisfied that increases sought by the Unions would have a 'detrimental impact on the viability of aged care providers'.[372]

[332] The ANMF noted the Joint Employers say it is 'speculative' whether any party would seek to have the interim increase apply prior to Commonwealth funding. Should the Joint Employers seek to rely on additional evidence concerning capacity to pay, the ANMF submitted it would object for the following reasons:

It was not 'speculative' that the Unions sought to have the increases implemented as early as possible. The ANMF has reiterated the Full Bench has no probative evidence to make findings regarding business impact.

The Joint Employers are seemingly calling for findings about capacity to pay. They should have submitted evidence about this on 20 January 2023.

The Commission directed 'evidence in reply' be filed by 09 February 2023. Evidence from the Joint Employers regarding capacity to pay does not constitute evidence in reply, as it is not replying to any evidence.

4. If Joint Employers filed evidence on capacity to pay on the appropriate date of 20 January 2023, that would have allowed the Unions to contemplate whether to call their own responsive evidence, by 09 February 2023. Currently, there is no provision in the timetable for such evidence. This unfairly prejudices the ANMF as it will not be able to fairly consider whether it needs to call for responsive evidence.[373]

[333] In response to the Joint Employers' position that the 'likely impact on business is...conditioned by Commonwealth funding',[374] the ANMF reiterated there has been no probative evidence demonstrating the extent of the impact on business.[375] The Full Bench would not find that varying the award before Commonwealth funding commences would be 'materially negative',[376] and would 'weigh heavily'[377] against that outcome, or 'weighs heavily'[378] in favour of aligning the interim increase with Commonwealth funding.[379]

[334] In reply to the Joint Employer's position that any approach to funding may introduce a regulatory burden in home care settings,[380] the ANMF submitted this depends on the terms of contracts with consumers and there are none in evidence.[381]

[335] With respect to the 'security of tenure' issue identified by the Joint Employers[382] the ANMF submitted it is not clear how delaying the wage increase will impact this.[383]

[336] The ANMF submitted there is no evidence supporting the Joint Employer's submission with respect to how much 'lead time'[384] is required. The ANMF submit that operators have known since 17 November 2020 that a 25 per cent wage increase was sought and in that time they have had the opportunity to engage in planning and modelling.[385]

[337] With respect to timing and implementation, the ANMF submitted that the Joint Employers[386] and the HSU[387] provided statements of principles with little difference. The ANMF adopts the position of the HSU rather than that of the Joint Employers.[388]

[338] Contrary to the Joint Employers, the ANMF submitted that aligning the increases with the Commonwealth's funding proposal, would not be the preferable application of these principles. The ANMF submitted that this because the current wage settings currently and historically very significantly undercompensated aged care employees for the work that they do, having regard to work value. Further, given the interim nature of the wage increase, even after it is implemented, employees will be undercompensated having regard to work value.[389]

[339] The ANMF submitted that aged-care employees have been subsidising employers, the Commonwealth and subsidising the taxpayer, or some combination of these three, and that this subsidy will continue, given the increase proposed is interim_._[390]

[340] The ANMF submitted that the Joint Employers' submissions are to the effect that employees should continue to be undercompensated and continue to subsidise the profit margins for the employers, until the proper compensation for aged care employees will not determinately affect aged care employers at all. The ANMF submitted this approach is inconsistent with equity, good conscience and the merits of the matter and would not 'reasonably balance' the interests of both employers and employees_,_ but subordinate the interests of aged-care employees to those of their employers.[391]

[341] In response to the Joint Employers[392], the ANMF submitted that:

The employers have had adequate time to prepare, given they have known about these applications for more than two years;

The increase is moderate, in the context of the extent of historical undervaluation. The fact of it being an 'interim increase' phases the increase necessary to eliminate under-compensation and there is no need for any further phasing;

[349] The Joint Employers noted that all of the union parties, via various formulations, have asked for the Full Bench to divert from the Commonwealth's proposed funding timetable and instead sought for the 15 per cent interim wage increase to come into effect immediately.[404]

[350] The Joint Employers submitted that if the timing and phasing of the interim increase aligns with the Commonwealth's funding proposal, this would satisfy s.134.[405] The Joint Employers further contended that should the Full Bench depart from the Commonwealth's funding proposal and require industry to pay unfunded wage increases, careful consideration of the balance of s.134 is required. [406]

[351] The Joint Employers submitted that absent Commonwealth funding 'the outcome for many employers will be the imposition of further losses and deficits and the undermining of normal and prudent financial operations; introducing further erosion to already challenged financial stability.'[407] The Joint Employers added that the relevance of this is amplified by industry's role in providing services to a vulnerable group within the community.[408]

[352] The Joint Employers submitted that the Commission should take into consideration a variety of factors when determining whether to depart from the Commonwealth's funding proposal, including the:

(a) extent of over award payments paid whether at common law or through enterprise agreements;

(b) extent to which employers absorb increases to minimum wages in the relevant awards into these over award payments;

(c) diverse financial position of various operators; and

(d) general financial state of the age care industry.[409]

[353] In relation to these factors, the Joint Employers relied on the evidence of witnesses Grant Corderoy of StewartBrown, Johannes Brockhaus of Buckland Aged Care Services, Michelle Jenkins of Community Vision Australia and James Shaw of Royal Freemasons' Benevolent Institution, filed with their submissions in reply of 9 February 2023.[410]

[354] The Joint Employers submitted that it should be uncontroversial that the aged care industry is only sustainable on the basis of government funding and that the primary provider of this funding is the Commonwealth government. The Joint Employers noted that operators in the industry do run a business in the normal sense but acknowledge the purpose rather than profit motivated nature of the industry.[411]

[355] The Joint Employers relied on the evidence of Grant Corderoy wherein he states that 'the aged care sector is experiencing significant financial and sustainability and viability concerns,'[412] and submitted that the findings of the StewartBrown Aged Care Financial Performance Survey Industry Report of September 2022 ('StewartBrown Survey Report (September 2022)') should raise concerns in regards to s. 134(1)(f) and the setting of fair and reasonable minimum safety net for both employees and employers.[413] In particular, the Joint Employers relied on the following excerpt of the report:[414]

[357] The Joint Employers submitted that the Commission's consideration of the timing and phasing of the interim wage increase must commence with the understanding that without funding, operating costs will be materially impacted in an already challenged financial context.[420]

[358] The Joint Employers noted that it is unknown what proportion of the interim wage increase will be passed on to employees receiving above award wages and what will be absorbed into existing enterprise agreements, citing s.206 of the FW Act.[421]

[359] The Joint Employers submitted that the Commonwealth's funding proposal 'at least implicitly' operates on the basis that all direct aged care employees will receive the 15 per cent interim wage increase on award rates. The Joint Employers submitted it is unclear if there will be additional funding for an increase above this based on the use of average labour costs and individual circumstances of operators.[422]

[360] The Joint Employers submitted that actual amounts of additional funding to cover on-costs of the increase will impact on the outcome and is a significant concern of operators. The Joint Employers submitted that although there is no certainty, the evidence filed demonstrates that all operators will pay the 15 per cent increase on award rates from the from the additional funding. However, some operators are concerned that they may not be able to afford much of an increase for those on above award rates, whilst others will have a preference, if the funding is available, to pass on the entire 15 per cent increase even if there may not be a legal requirement to do so.[423]

[361] The Joint Employers noted that there does not appear to be evidence available on how many employees are covered by enterprise agreements, not covered by enterprise agreements but otherwise receiving over award payments or are only paid minimum award rates.[424] Nonetheless, the Joint Employers submitted that the industry is seen as being award reliant despite the majority of the lay witness evidence being provided in the enterprise agreement coverage context.[425] Appendix A to the Joint Employers' submissions in reply provided an analysis of award vs enterprise agreement coverage of the lay witnesses heard in these proceedings.

[362] The Joint Employers referred to the evidence of Ms Anna-Marie Wade as it relates to the NSWNMA and HSU NSW Enterprise Agreement 2017-2020.[426] The Joint Employers submitted Ms Wade's evidence aligns with the witness evidence filed with their reply submissions and that:

(a) Nurses are likely to be paid well above minimum award rates in an enterprise agreement such that many employers covered by those agreements could legally absorb the whole 15 per cent increase; and

(b) Aged care workers are likely to be paid marginally above minimum award rates in enterprise agreements thus requiring an employer to pass on most of the interim wage increase.[427]

[363] The Joint Employers submitted that it would be reasonable for the Commission to conclude that some employers will have a legal right to absorb some or potentially all of the interim increase on award rates for nurses and some, but unlikely all of that increase, for care workers into enterprise agreement payments. Although some employers may want to be able to pay more to these employees.

[364] The Joint Employers submitted that it should be taken from the lay evidence filed with its reply submissions that some operators will be financially compelled to absorb the interim increase where they can, some, while facing increased deficits will try to pass on the entire increase despite no legal obligation to do so and some may pass on the full increase only when it is fully funded.

[365] The Joint Employers submitted that the evidence shows that if compelled to pay all or a portion of the 15 per cent interim increase without funding, operators will incur losses. Pointing to the financial position of specific operators, the Joint Employers submitted that some operators will experience increased deficits and a further denuding of limited historical reserves while others may be able to cover the losses by surpluses from other business operations outside of residential aged care or home care, but will nevertheless suffer impairments to their overall financial stability.[428]

[366] The Joint Employers submitted that employers will respond in a variety of ways in the absence of funding for the interim wage increase with some operators opting to absorb the costs and reducing the losses they suffer, while others that may not have this capacity may be tipped over the edge in terms of financial stability.[429]

[367] The Joint Employers concluded that they support the interim wage increase on the basis that its operation is aligned with the additional Commonwealth funding as proposed by the Commonwealth.[430] The Joint Employers submitted that only this approach ensures employers do not face unfunded losses in so doing renders the considerations of s.134(1)(f) to be neutral. The Joint Employers submitted that any other approach would drive the consideration of s.134(1)(f) to be materially against the Unions and be sufficient to persuade the Full Bench against it.

[374] Grant Corderoy gave evidence about his role as Senior Partner with StewartBrown, Chartered Accountants[439]and his experience and involvement in the aged care sector in particular.[440] He outlined the establishment of the StewartBrown Aged Care Financial Performance Survey (StewartBrown Survey Report) which is published quarterly.[441] The StewartBrown Survey Report is designed for each participant organisation to compare and benchmark their operating performance through a number of financial and non-financial measures.[442] Mr Corderoy outlined the operation of the StewartBrown Survey Report.[443]

[375] Using the data from the StewartBrown Survey Report (September 2022), Mr Corderoy made projections regarding the financial sustainability and viability of the aged care sector.[444] Mr Corderoy stated that, should the interim increase be adopted in line with the timeline of the Commonwealth's funding commitment, there should be no economic impact on the sector.[445] If the interim increase is adopted earlier and without Commonwealth funding, Mr Corderoy predicts there will be a significant economic impact on the aged care sector.[446]

[376] Mr Corderoy's cross examination covered the operation and purpose of the StewartBrown Survey Reports and the 2020, 2021 and 2022 Financial Year Reports.[447] He responded to questions about the September 2022 and September 2021 Survey Reports, as well as home care across the 2020, 2021 and 2022 Survey Reports.[448]

[377] He confirmed the purpose of the StewartBrown Survey Report is for operators to use expense-based metrics to compare their performance to that of other operators.[449] Mr Corderoy stated StewartBrown does not advise operators of potential changes that could be made, but only presents the data and responds to questions about data.[450] Mr Corderoy responded to questions about the revenue and expenditure measures for direct care across 2020, 2021 and 2022.[451] He confirmed in 2021 and 2020 with respect to direct care there was a surplus of $13.63 per bed per day.[452] The revenue being received in direct care was in part subsiding the losses that were derived from indirect care and accommodation costs.[453] In 2022, the outcome on a per bed per day basis with respect to direct care also delivered a surplus, albeit a smaller one than results in 2021 and 2022.[454] Mr Corderoy attributes this to a variance in government grants provided due to the COVID-19 pandemic.[455]

[378] Mr Corderoy addressed the StewartBrown Survey Report (September 2022).[456] He confirmed his position that issues relating to attraction and retention of staff are critically important and should be addressed as a matter of urgency.[457] He stated he believed the interim increase would assist in retention, but doubted it would assist in attraction.[458] He stated the interim increase was but one component required to address staffing issues in the sector.[459]

[379] Mr Corderoy addressed the September 2021 and September 2022 reports,[460] confirming that with respect to direct care the overall operating result went down from $6.76 to 11 cents per bed per day as a surplus.[461] Further, there was an increase in revenue during this period, which was offset by an increase in costs.[462]

[380] Mr Corderoy responded to questions about home care across the 2020, 2021 and 2022 Survey Reports.[463] Mr Corderoy confirmed home care operators continue to derive a surplus on a per client per day basis.[464] Further, Mr Corderoy answered questions about 'Home Care Revenue Utilisation'.[465] He confirmed that revenue utilisation, that is the services actually provided, as a percentage of funding received from the Commonwealth, remains less than 90 per cent.[466]

[381] During re-examination by the Joint Employers, Mr Corderoy was taken to his oral evidence regarding attraction and retention of staff and arrangements regarding unspent home care funds.[467]

[389] The ANMF submitted that Mr Coderoy's evidence does not meet the standards of evidence.[481]The Full Bench can accept Mr Corderoy has 'specialised knowledge' in accountancy.[482] However, Mr Corderoy's evidence goes beyond accountancy in his attempt to provide expertise of a statistician and an economist.[483] The Full Bench cannot accept that the views Mr Corderoy expresses are representative, nor can the Full Bench accept his prognostications of what effect funding changes will be on the industry. [484]

[390] The ANMF submitted that the StewartBrown Survey Report (Sept 2022) proleptically deals with this criticism. The authors of the survey accept that there are differences between their survey group and the sector as a whole,[485] and the ANMF submitted that the survey should not be accepted as representative of the sector.[486]

[391] The ANMF submitted that the Full Bench has insufficient information regarding the background work undertaken prior to the reporting of the survey results.[487] For example, the survey excludes 'outliers' but does not provide a clear indication of what constitutes an 'outlier'.[488]

[392] The ANMF submitted the purpose of the StewartBrown Survey Reports is to produce a set of results participating providers can use to benchmark their facility against a similar comparator.[489] The survey deliberately excludes providers whose results may not be useful for benchmarking, for example recently acquired facilities.[490] Accordingly, the results do not amount to a representative, sector-wide survey.[491]

[393] The ANMF submitted there is insufficient information provided about the reasoning behind the 'data cleaning' process involved in the StewartBrown Survey Reports.[492] The ANMF submitted the Full Bench would need further detail to be satisfied the report meets the rules for expert evidence.[493]

[394] The ANMF submitted the bottom-line figures given by Mr Corderoy of the impact of any unfunded wage increases were not supported by any calculations.[494] These figures are unproven and should not be accepted. [495]

[395] The Full Bench should afford little weight to the analyses of StewartBrown and the statement of Mr Corderoy.[496]

[396] The ANMF also submitted the Full Bench should give very little weight to the statements of Mr Brockhaus, Mr Shaw and Ms Jenkins.[497]

[397] The ANMF submitted that:

[398] The Joint Employers submitted the Full Bench should not accept the arguments of the ANMF and the HSU that the weight of the reply evidence should be adversely impacted by the purported non-compliance with the directions of the Commission.[499] The Joint Employers rejected this and/or any resulting prejudice to the Unions.[500]

[399] The Joint Employers submitted their submissions dated 9 February 2023 complied with directions and that their reply evidence fits within the nature of 'reply', being that it goes to the context and consequence of the Unions' position that the 15 per cent interim increase should be paid immediately.[501]

[400] The Joint Employers rejected the position of the ANMF that they were prejudiced by not being able to challenge the reply evidence.[502] The Unions had equal opportunity to file reply evidence and, had they done so, the Joint Employers would have been impacted by the same 3-day timetable between the filing of evidence and the hearing. The Joint Employers noted the ANMF declined the opportunity to cross examine the witnesses. [503]

[401] The Joint Employers submitted any assertion that Mr Corderoy does not have sufficient 'specialised knowledge' should be rejected.[504] The Commission has previously recognised that Mr Corderoy has specialised knowledge within the context of the aged care Sector.[505]

[402] The Joint Employers submitted that given the HSU contended little weight should be put on the $1.2 billion quoted by Mr Corderoy, they should have taken the opportunity to put this to Mr Corderoy during cross examination.[506]

[403] In response to the Unions' challenge of the weight attached to the lay witness evidence, the Joint Employers submitted that the Unions declined the opportunity to cross examine Mr Brockhaus, Ms Jenkins and Mr Shaw. It is improper to seek to discredit the evidence in a submission, especially when all were available for cross-examination.[507]

[404] The Joint Employers submitted that each witness gave evidence based on their specific experience as CEOs or CFOs and were well placed to provide evidence to the Full Bench about the financial status of their businesses, the evidence was filed in compliance with the directions and the Commissions should have full regard to it.[508]

[405] Paragraphs [976]-[990] of the Stage 1 decision set out the relevant legislative provisions and the approach taken to the phasing-in of Commission decisions in other cases.

[406] The Full Bench stated that s.166 of the FW Act creates a presumption that a determination varying modern award minimum wages comes into operation on 1 July in the next financial year after it is made but to displace this presumption the Commission need only be satisfied that it is 'appropriate' to specify a different operative date.[509]

[407] The Full Bench considered that in determining the operative date of a determination under Part 2-3, the Commission must exercise its power in a manner which is 'fair and just' (as required by s.577(a)) and must take into account the objectives of the FW Act and 'equity, good conscience and the merits of the matter' (s.578).[510]

[408] The Full Bench held that fairness is 'plainly a relevant consideration', given that the modern awards objective speaks of a 'fair and relevant safety net' and the minimum wages objective is the establishment and maintenance of a 'safety net of fair minimum wages'. The Full Bench considered that fairness is to be assessed from the perspective of both employees and employers affected by the variation determination.[511]

[409] Paragraphs [986]-[989] set out the observations by the Full Bench in the Penalty Rates - Transitional Decision about matters relevant to the determination of the transitional arrangements to implement the Penalty Rates Decision and the application of these observations in a number of subsequent Full Bench decisions. Parties were invited to comment on the appropriateness of those principles and their application to the current proceedings.[512]

[410] In our Statement and Directions of 10 February 2023 we expressed our provisional view that the interim increase established by the Stage 1 decision should apply from 30 June 2023.

[411] The Commonwealth supported the interim increase applying no earlier than 1 July 2023 in order to make the necessary and proper adjustments to funding mechanisms, the Joint Employers say timing should be dependent on funding and each of the Unions seeks the increase apply in full as soon as possible.

[412] In the Stage 1 decision the Full Bench said:

[413] We have decided that the interim increase should be paid, in full, from 30 June 2023 and should not be subject to any phasing-in and issued a Decision to that effect on 21 February 2023.

[414] We acknowledge the submissions made by the Joint Employers in relation to capacity to pay outside Commonwealth funding increases and the related evidence of various employers. We have also considered their submissions in relation to phasing-in as an approach to balancing the modern awards objective. While we acknowledge that phasing-in may be a valid approach to increases in particular circumstances, there is no decision rule that this is the approach to be utilised in all cases. Whether phasing-in is appropriate is a matter to be determined based on the particular circumstances before the Commission.

[415] We have considered the advice of the Commonwealth as to how it intends to fund the increase - with a 10 per cent increase in funding provided from 1 July 2023 and a further 5 per cent from 1 July 2024. While we acknowledge that the impact of the interim increase on employers will be ameliorated by the Commonwealth decision with respect to funding, we are not convinced that the Commonwealth proposal as to phasing-in of the funding of the increase should be determinative of our decision with respect to the timing of the interim increase. Further, we note the Commonwealth's acceptance of this.

[416] We acknowledge the evidence of the Joint Employers in relation to the impact of the increase if it is not phased-in. While we accept that there may be some impact if the Commonwealth maintains its position in relation to funding the interim increase, the evidence before us does not allow us to conclude that the employers cannot support 5 per cent of the increase for a period of 12 months (beyond which, on the Commonwealth proposal, the second part of its funding will come into effect).

[417] Balanced against these considerations are the clear findings that existing minimum wages in the Awards do not properly compensate direct care workers in residential or in-home aged care settings, for the value of the work performed. We have also had regard to the Commonwealth submission in these proceedings, pointing to the findings in the Stage 1 decision, that work in the aged care sector has been undervalued because of gender-based assumptions and that there have been historical barriers to the assessment of work value in female dominated industries. We consider that the skills of direct care workers in the aged care sector have been "hidden" for the predominant reason that the vast majority of workers are women and that there are compelling reasons to recognise this by flowing an interim wage increase to direct care workers from the earliest possible date, having regard to the need to give notice to employers of the increases.

[418] This is also consistent with the recent amendments to the FW Act relating to matters relevant to this case, including the promotion of job security and gender equality, eliminating gender-based undervaluation of work, promoting the full economic participation of women and addressing gender-based pay gaps. To delay the interim increases would be inconsistent with these objectives.

[419] We reiterate what the Full Bench said in the Stage 1 decision, that the 15 per cent increase is interim in nature with the extent of any final increase in rates of pay not yet determined and not to be determined until Stage 3. It may be that an increase beyond this interim increase is justified following the finalisation of Stage 3. To phase-in the interim increase of 15 per cent over a period of up to 1 year as proposed by the Joint Employers could result either in multiple increases being necessitated in the second year as a result of the Stage 3 decision or a more extensive delay beyond the 12 months from the first of the interim increases to the final increase in satisfaction of the claims.

[420] In all of the circumstances, we consider that it is fair and reasonable that the interim increase should come into effect on 30 June 2023. This date will ensure no confusion in relation to increases from the Annual Wage Review, which will, in all likelihood, take effect from 1 July 2023. We are also satisfied that it is appropriate that the interim increase not apply until 30 June 2023. While it is correct that, should we consider it reasonable to do so, we could apply the interim increase from an earlier date, we consider it prudent to ensure fair notice to employers of the date of effect of the increase to enable employers to make the necessary arrangements for the payment of the increase.

[422] In the Stage 1 decision, the Full Bench noted that as the Commonwealth is the principal funder in the aged care sector, absent additional Commonwealth funding the cost to business of increasing aged care sector minimum wages is likely to be substantial, depending on the quantum and the phasing.

[423] During the course of closing oral argument, counsel for the Commonwealth stated the funding support it provided would mitigate the impact on employers of any determination arising from these proceedings, but the extent of that mitigation will depend on decisions made by the Australian Government after the Commission has come to a concluded or preliminary view about the Applications. Counsel for the Commonwealth was not in a position to comment upon whether the funding provided would cover all of the employment costs flowing from any increase awarded.[515]

[424] The Full Bench considered that the extent to which the Commonwealth provides funding was plainly relevant to its assessment of whether a variation to minimum wages in the Awards is necessary to achieve the modern awards objective, in particular the extent of funding bears on the question of whether such a variation provides a 'fair and relevant...safety net' and upon the considerations in s.134(1)(f). The Full Bench determined that as the extent of Commonwealth funding was unknown, it was unable to reach a concluded view on its consideration of s.134(1)(f).[516]

[425] Our determination that the interim increase should come into effect on 30 June 2023, does not fully align with the Commonwealth's proposed funding commitment. Consequently, many employers will likely be responsible for 5% of the increase until the Commonwealth provides full funding. We consider that this increase in employment costs weighs against the interim increase. However, we do not consider there to be sufficient evidence to ascertain the extent and impact of these increased costs and to conclude there is a material negative impact on business. While we accept the Joint Employers' submission that there will likely be some initial transitional impact in the Home Care sector, we are not satisfied there is sufficient evidence to conclude that the regulatory burden on employers will be increased by the interim increase. As indicated in the Stage 1 decision, we do not consider the interim increase itself to affect productivity.

[438] The Full Bench expressed the provisional view that s.134(1)(b) weighs against the variation of the relevant Awards to give effect to the interim increase.[529]

[439] The Commonwealth accepts the provisional view and does not make any further submissions in respect of s.134(1)(b).[530]

[440] The HSU submitted it does not follow from a finding that the variations would not encourage collective bargaining, that the factor necessarily weighs against variations being made.[531] If the Full Bench had found that the variations would create a disincentive to collective bargaining, this would weigh against the variations being made. However, in circumstances where the finding is that the variations will have no real impact on bargaining, the HSU submitted this is more correctly considered a neutral consideration.[532]

[441] With respect to s.134(1)(b) the ANMF accepts that there is a complexity of factors which may contribute to decision making about whether or not to bargain and that it is difficult to predict the effect of increasing minimum wages on collective bargaining but disagrees with the Full Bench.[533] Even where amending the award would not positively encourage bargaining, the ANMF submitted that this consideration would be neutral and would not weigh against an increase.[534]

[442] The UWU disagrees with the Full Bench's provisional view that consideration of the need to promote collective bargaining weighs against awarding the increase.[535] The UWU submitted that the Commission does not specifically address the ANMF's submission that the increase in minimum wage rates would increase incentives or the necessity to negotiate enterprise-specific trade-offs and productivity benefits.[536]

[443] The UWU submitted that although considerations of s.134(1)(b) must be finely balanced, the Full Bench gives 'too short shrift' to the ANMF's submission.[537] The UWU submits that a finding that improvement in minimum rates of pay with concomitant improvements in funding will provide more scope for industrial parties operating in the sector to engage in collective bargaining is not speculative and is entirely consistent with the evidence before the Full Bench.[538] The UWU submits this finding should be made and that this tips the balance in respect to the s.134(1)(b) in support of awarding the interim increase.[539]

[444] The Joint Employers did not make specific submissions regarding s.134(1)(b).

[445] We are not persuaded to alter the provisional view that increasing minimum wages will encourage collective bargaining. The observations of the Expert Panel with which the Full Bench in the Stage 1 decision agreed, that it is very difficult to predict the effect increasing minimum wages will have on collective bargaining in the aged care sector, were acknowledged by the ANMF. We confirm our agreement with these observations. We are, however, persuaded that the need to encourage collective bargaining is more appropriately treated as a neutral consideration, rather than as a consideration weighing against the interim increase.

Aged Care Award 2010 [2023] FWCFB 93 (18 May 2023)

At a glance

Court

Decision date

Source

Judgment (774 paragraphs)

Aged Care Award 2010 [2023] FWCFB 93 (18 May 2023)

Legislation Cited (6)

Cases Cited (2)