Annual Wage Review 2021-22 [2022] FWCFB 3500 | Case summary

[2022] FWCFB 3500

Annual Wage Review 2021-22 [2022] FWCFB 3500 | Case summary | Zoe

[13]

[1] The Fair Work Act 2009 (Cth) (Act) requires that each financial year the Commission, constituted by an Expert Panel for annual wage reviews (Panel), conduct and complete a review of the national minimum wage (NMW), modern award minimum wages and make a NMW order (the Review).[1]

[2] The NMW order applies to award/agreement free employees[2] and is dealt with in Division 4 of Part 2-6 of the Act.[3] The NMW order sets both the NMW[4] and special NMWs which apply to employees who are juniors; to whom training arrangements apply; or who have a disability and must set the casual loading for award/agreement free employees.[5] An award/agreement free employee cannot be paid less than the rate of pay specified in the NMW order.

[3] The making of a NMW order and the review and variation of modern award minimum wages are separate, but related, functions. They are related because they both form part of the 'safety net' (see s.3(b)) and s.285(3) of the Act) provide that in exercising its powers to set, vary or revoke modern award minimum wages, the Panel 'must take into account the rate of the national minimum wage that it proposes to set in the [R]eview'. It follows from s.285(3) that as part of the decision-making process in a Review the Panel must first form a view about the rate of the NMW it proposes to set (taking into account the statutory considerations relevant to that discrete task) and then take that proposed NMW rate into account (along with the other relevant statutory considerations) in exercising its powers to set, vary or revoke modern award minimum wage rates.

[4] The Panel must conduct the Review within the legislative framework of the Act, particularly the object of the Act in s.3, the modern awards objective in s.134(1) and the minimum wages objective in s.284(1). The Panel's task is to consider the relevant statutory considerations in the context of the prevailing economic and social circumstances in arriving at its decision in a Review.

[5] In considering the modern awards objective, the Commission must ensure that modern awards, together with the National Employment Standards, provide a 'fair and relevant minimum safety net of terms and conditions', taking into account the particular considerations identified in s.134(1)(a)-(h). The minimum wages objective provides that the Commission 'must establish and maintain a safety net of fair minimum wages' taking into account the considerations identified in s.284(1)(a)-(e). These statutory objectives are very broadly expressed and do not necessarily exhaust the matters which the Panel might properly consider to be relevant. The range of such matters 'must be determined by implication from the subject-matter, scope and purpose' of the Act.[6]

[6] The minimum wages objective and the object of the Act apply to the review and making of a NMW order.[7] But the modern awards objective is not relevant to the review and making of a NMW order,[8] as the making of such an order does not involve the performance or exercise of modern award powers.

[7] The statutory tasks in ss 134 and 284 involve an 'evaluative exercise' which is informed by the considerations in s.134(1)(a)-(h) and s.284(1)(a)-(e).

[8] As the Panel has observed in previous Review decisions, there is a degree of overlap between the various considerations which the Panel must take into account[9] and a degree of tension is evident between some of these considerations. No particular primacy is attached to any of these considerations.[10] Further, the weight to be attributed to a particular statutory consideration may vary from year to year depending on the social and economic context in a particular Review. It is this complexity that has led the Panel to reject a mechanistic or decision-rule approach to wage fixation.[11]

[9] The general matters the Panel must take into account in performing its functions contain some common elements. In past Review decisions, the Panel has grouped the matters of direct relevance to the Review into three broad categories:

• economic;[12]

• social;[13] and

• collective bargaining.[14]

[10] In the current Review the Australian Catholic Council for Employment Relations (ACCER) submitted that if the NMW order 'is set at such a level where persons fall into disadvantage or poverty, then it does not answer the statutory description contained in s 284 of the FW Act',[15] that is, 'a safety net of fair minimum wages'.

[11] ACCER contends that the NMW and the C13 to C10 wage rates do not presently constitute 'a safety net of fair minimum wages'. The short point advanced by ACCER is that 'to answer that statutory command in s 284, the NMW must be increased sufficiently to lift working people out of poverty'[16] and that the failure to make such an order arising for this Review would amount to a jurisdictional error.[17]

[12] During the course of the public consultations, ACCER's counsel clarified the proposition advanced by ACCER, as being that to comply with the statutory discretion in s 284 that the NMW order should be set at the level at which full-time employees with one or 2 children are above the 60 per cent of median income poverty line. And, any order arising from the Review which did not achieve that result would be affected by jurisdictional error.[18]

[13] It was put to counsel that this would require an increase of over 40 per cent to the NMW, which is significantly above ACCER's proposal.[19] In fact, for a single-earner couple with 2 children, an increase of more than 50 per cent is needed in the NMW for disposable income for this household type to reach the 60 per cent median income poverty line.

[14] ACCER's counsel accepted that ACCER's proposal for a 6.5 per cent increase in the NMW would not lift these employees out of poverty and hence, were we to accept ACCER's construction argument, we would fall into jurisdictional error even if we were to grant an increase of the magnitude sought by ACCER.

[15] ACCER has advanced similar propositions in previous Reviews. In the Annual Wage Review 2017-18 (2017-18 Review) proceedings ACCER contended that the Panel's 'primary obligation' is to set a safety net wage that will provide a decent standard of living[20] and, further, that the 'operational objective' of minimum wage setting under the Act is that:

[19]

[18] As the Panel has stated in numerous previous Review decisions, fairness in this context includes the perspective of employees and employers,[24] and the Act requires the Panel to take into account all of the relevant statutory considerations.[25]

[19] In the Annual Wage Review 2019-20 (2019-20 Review) decision the Full Bench considered the legislative framework in detail, including a consideration of what the Panel can and can't do in a Review.[26] The Panel adopted those observations in the Annual Wage Review 2020-21 (2020-21 Review).[27] We also adopt those observations.

[20] The Act also sets out some important procedural fairness requirements for the Review. The Panel must ensure that all persons and bodies (referred to collectively as parties) are given a reasonable opportunity to make and reply to written submissions (s.289(1)). The timetable for the Review and all of the submissions and research reports were published on the Commission's website to ensure that all parties had a reasonable opportunity to participate. The Panel has considered all the material received from parties, the information in the Statistical Report - Annual Wage Review 2021-22 (Statistical report) and the research referred to in the Research reference list in making its decision.

[21] As was the case last year, the Review timetable was extended to allow parties to provide comment on the most recent available data. The Australian Bureau of Statistics (ABS) March Quarter 2022 National Accounts were released on 1 June 2022 and interested parties filed submissions in respect of these data on 3 June and 8 June 2022. In a Statement published on 30 May 2022, the Australian Government was granted leave to lodge a new submission to the Review, by 4pm on Friday 3 June 2022.[28]

[22] As a practical matter the Review decision had to be published sometime before 30 June 2022 to allow sufficient time for draft variation determinations to be published and for interested parties to submit corrections or other amendments to the draft determinations. Given these constraints, our decision has not sought to canvass all of the issues raised in the submissions. We have focussed on the issues which the Act requires that we take into account.

[48]

(v) Inflation

[42] The most significant difference since the time of the last Review has been the increase in the Consumer Price Index (CPI). The CPI increased by 2.1 per cent in the March quarter 2022 to be 5.1 per cent higher over the year, the highest annual increase since the introduction of the Goods and Services Tax (GST). Underlying inflation as measured by the trimmed mean increased by 1.4 per cent in the quarter and 3.7 per cent over the year, the highest since 2009.[45] Inflation is significantly higher than at the time of the last Review, where annual growth in the CPI and the trimmed mean were both 1.1 per cent (Chart 7).[46]

[43] The main contributions to the sharp increase in inflation in the quarter were increases in new dwelling purchases by owner occupiers (5.7 per cent), due to rising construction costs and fewer grant payments, and Automotive fuel (11.0 per cent), driven by the Russian invasion of Ukraine. Over the year, new dwelling purchases by owner occupiers increased by 5.7 per cent and Automotive fuel increased by 35.1 per cent. Together, these items accounted for around one-third of the quarterly CPI increase and over one-quarter of the annual CPI increase.[47]

[44] These increases in Automotive fuel are captured in the CPI in the March quarter 2022. The ABS shows that the average price of unleaded petrol was $1.83 per litre in the quarter, up from $1.64 per litre in the December quarter 2021.[48] The Budget announced that the fuel excise and excise-equivalent customs duty rate that applies to petrol and diesel will be halved for 6 months.[49] This commenced from 30 March 2022 and therefore any effect on the CPI would be after the March quarter 2022.

[45] The RBA commented that the sources of inflation broadened in the March quarter 2022 from durable goods and new dwellings to also include groceries. Strong demand is also enabling firms to pass on increases in input costs,[50] and retailers in the RBA's liaison program have been more willing to accept price increases from their suppliers due to the broad-based cost increases they have faced.[51]

[46] Another measure that the ABS produces that is relevant to this Review is the living cost index (LCI) for employee households. This index increased by 1.7 per cent in the March quarter to be 3.8 per cent higher over the year. This was the highest annual increase since the September quarter 2011. An information note published by Commission staff for last year's Review explained that a significant driver of changes in the LCI since the pandemic has been a fall in mortgage interest as a result of the RBA lowering the cash rate during the period. Mortgage interest is not considered in the calculation of the CPI, while it is included as part of the LCI. The information note also showed that low-paid employees are less likely to own a home or currently be paying off a mortgage.[52] It would then be expected that any increases to mortgage interest, as forecast by the RBA,[53] will lead to higher increases in the LCI for employee households than the CPI.

[61]

[56] The studies included in the review discussed the work of Georgiadis and Franco Gavonel (2021), Campos-Vazquez and Esquivel (2021) and Clemens and Strain (2021). These were also considered by Ai Group.

[57] The first study referred to was prepared for the Low Pay Commission (LPC) and considers the effects of the National Living Wage (NLW), COVID-19 and Brexit on care homes in England. Georgiadis and Franco Gavonel (2021) found that on average, NLW increases in April 2020 and April 2021 had a positive and significant effect on wages growth in care homes, but no significant effect on employment and hours.[69] The authors argue that these effects could be explained by other offsets to the NLW, such as a reduction in employees' absenteeism and training, and the deterioration of quality of care.[70]

[58] Campos-Vazquez and Esquivel (2021) consider the effect of minimum wage increases in Mexico following a program introduced in 2019 that doubled the minimum wage in municipalities that shared a border with the United States. By 2021, the minimum wage was 51 per cent higher on the northern border than in the rest of the country.[71] The authors did not find any significant effect on employment following the doubling of the minimum wage but found that the increase raised workers earnings, especially at the bottom of the wage distribution.[72]

[59] The Clemens and Strain (2021) study differentiated between the effects of large and small wage increases and between short and medium run effects based on US state and federal minimum wage policy over the past decade. The authors argued that the time period used provides a suitable opportunity to study the medium-run effects of both moderate and historically large minimum wage changes.[73] Their results found that relatively large minimum wage increases had substantial, negative effects on employment among individuals with low levels of experience and education, while small minimum wage increases had only modest effects.[74] Their results also suggest that the medium-run effects of large minimum wage increases are larger and more negative than their short-run effects.[75]

[60] In its reply submission Ai Group argued that most of the material relied upon by the ACTU was 'irrelevant to the Australian economy'[76] and that the results from Georgiadis and Franco Gavonel (2021) is unlikely to have 'relevance or implications for the entire Australian economy', noting that the health care sector in Australia has seen a higher increase in the WPI compared with other industries.[77] In reference to the conclusion made by Clemens and Strain (2021) that large minimum wage increases have negative effects on employment among individuals with low levels of experience and education, Ai Group argued that '[g]iven that most of the occupations reliant on minimum wage increases in Australia are also classified as 'less qualified occupations', a 5.5% increase in minimum wages would have a significant negative impact on employment levels in these occupations.'[78]

[61] The Australian Government's submission of 1 April 2022 also provided a summary of Australian and international studies on the employment effects of minimum wages. Although much of the literature was dated and had been addressed in previous Reviews,[79] reference was made to recent work published by Cribb et al. (2021) commissioned by the LPC.

[62] Cribb et al. (2021) estimate the effect of the introduction of the NLW in the UK in 2016 and subsequent increases up to 2019.[80] The Australian Government submitted that the study found that workers had experienced 'positive wage effects' from the increases in the NLW and commented that '[r]ecent LPC commissioned studies have found no statistically significant employment effects for workers in areas with higher exposure to the minimum wage following the NLW increases between 2016 and 2019.'[81]

[63] The RBA noted that '[e]mployment is forecast to grow strongly during 2022, consistent with the ongoing strength in leading indicators of labour demand, before moderating thereafter in line with activity.'[82] Labour force participation is 'expected to be sustained at historically high levels over the forecast period, supported by the cyclical strength in labour market conditions and the longer-term trend toward increased participation among females and older Australians' and 'the unemployment rate is forecast to decline to around 3½ per cent in early 2023 - the lowest level since 1974 - and remain around this level thereafter.'[83]

[64] The RBA added that measures of labour underutilisation 'are also forecast to decline to their lowest level in many years as firms increase staff hours to meet demand', while 'the reopening of the border could, over time, help to alleviate labour shortages in some industries, while also adding to demand in the economy'.[84]

[65] We agree with the RBA's assessment and remain of the view that moderate and regular increases in minimum wages do not result in significant disemployment effects. The growth in job advertisements has largely been among the low skilled who will benefit the most from an increase in the NMW and modern award minimum wages.[85]

[96]

[103] As mentioned in Chapter 1, the Panel's task in a Review is to review the NMW, modern award minimum wages and to make a NMW order.

[104] Both the minimum wages objective and the modern awards objective require that we take into account, among other considerations, 'relative living standards and the needs of the low paid'.[114]

[105] As mentioned in Chapter 2.2, the Panel has consistently adopted a threshold of two-thirds of median adult full-time ordinary earnings as the benchmark used to identify the 'low paid'.

[106] Using ABS data for May 2021, earnings below $22.20 per hour are considered to be 'low paid'; if using HILDA survey data the threshold is $22.56 per hour.[115] The Australian Government's submission of April 1 2022 provided an estimate of the number of low-paid award-reliant employees as at May 2021 using a pay threshold of below $22.20 per hour, which was between the C11 modern minimum award rate ($21.92) and the C10 rate ($23.09) as at May 2021.[116]

[107] Workers paid at the current NMW rate ($20.33 per hour) and at award classification levels below the C10 rate ($23.67 per hour) are 'low paid' within the meaning of s.134(1)(a) and s.284(1)(c) of the Act.

[108] The C10 classification is the minimum award rate set under the Manufacturing and Associated Industries and Occupations Award 2020 (the Manufacturing Award 2020) (and predecessor awards) that has traditionally been used as a benchmark for setting minimum wages across awards. Under the Manufacturing Award 2020, workers at the C10 classification are those with recognised trade certificate, Certificate III in Engineering - Mechanical Trade, or Certificate III in Engineering - Fabrication Trade, or Certificate III in Engineering - Electrical/Electronic Trade, or equivalent.[117]

[109] The current NMW rate of $20.33 per hour is equivalent to the base rates (or lowest pay points) in 43 of the 121 modern awards. For convenience these modern award base rates are referred to as the C14 rate. The wage rates of workers in the other pay point classifications in these 43 awards, as well as the base wage rates in the remaining 78 modern awards, are all above the NMW rate.[118]

[110] Analysis by the Australian Government in its 1 April 2022 submission using the HILDA survey data shows that in 2020 just over half (55.2 per cent) of low-paid workers were female and that low-paid work tends to be concentrated among younger workers.[119] Over half (52.4 per cent) of low-paid workers were aged under 30, with 13.4 per cent aged between 15 and 19 years, and around a quarter (24.2 per cent) in the 20-to-24-year-old age cohort.[120] Some 53.9 per cent of low-paid workers worked part-time hours and 56.9 per cent were on casual contracts.[121]

[111] The vast majority of Australian workers have their pay set by one of three different methods: awards, enterprise agreements and individual arrangements.

[112] Chart 2.1 in the Australian Government's submission of 1 April 2022 shows that:

2,659,400 (23 per cent) of employees had their pay set by awards;

805,200 award reliant employees were 'low paid', including 88,900 award reliant employees paid the NMW rate; and

• Up to 184,000 employees in total (1.6 per cent of employees) are paid the NMW rate[122] comprising: 88,900 award-reliant employees; 79,200 employees on individual agreements; and 15,900 employees covered by enterprise agreements.[123]

[113] The Panel's decision also affects some employees covered by enterprise agreements or individual pay-setting arrangements.

[114] Using data from the WAD, the Australian Government's submission of 1 April 2022 submitted that 94,354 employees on federal enterprise agreements have wages directly linked to Review decisions.[124] This estimate includes the number of employees covered by agreements current as at 31 December 2021 with a clause which states that the entirety of the Review decision will be applied in full and automatically to wages.

[115] Some employees on individual arrangements have their wages set above the relevant award but are influenced by Review decisions, though there is some uncertainty about the nature and extent of the impact of Review increases.[125]

[116] A 2013 survey of non-public sector award-reliant organisations asked whether they passed on the Annual Wage Review 2011-12 decision of a 2.9 per cent increase to minimum wages to any of their employees on over-award arrangements. Some 24 per cent of respondents passed on the increase to more than half of their employees on over-award arrangements, 6 per cent passed on the increase to half of these employees and 70 per cent did not pass on the adjustment.[126]

[117] A more recent paper by Bishop and Cassidy (2019) suggests that 'around 12 per cent of all wage changes in [enterprise agreements] and 8 per cent of all wage changes in individual arrangements ... are influenced by award decisions.'[127]

[118]

[147] The 2022-23 Budget made several other announcements regarding changes to support businesses and to households. As the Panel has previously stated, it does not take into account proposed changes that have yet to be legislated. Two proposals that have been legislated and received Royal Assent are the increase to the low and middle income tax offset (LMITO) and the cost of living payment.[146]

[148] We have previously discussed and considered the LMITO.[147] The LMITO was introduced for the 2018-19 financial year and is paid as a lump sum after the lodging of income tax returns. The 2019-20 Budget announced that the LMITO would be extended for the 2019-20, 2020-21 and 2021-22 financial years. The Budget also announced an increase to the LMITO: the minimum offset amount would increase to $255 (up from $200), with the rate increasing by 7.5 cents per dollar (up from 3 cents) to the new maximum level of $1080 (up from $530), before phasing out at 3 cents per dollar (up from 1.5 cents). This higher LMITO replaced the initial offset amounts for the 2018-19 financial year and thereafter.

[149] In the 2020-21 Review decision, the Panel accepted the submission of the ACTU that the retention of the LMITO for the next financial year means no change in the net position for impacted workers relative to the current state.[148]

[150] In the 2022-23 Budget, the Australian Government announced an increase of $420 to the LMITO for the 2021-22 financial year, paid from 1 July 2022, thereby increasing the maximum payment from $1080 to $1500.[149]

[151] For the 2022-23 year, the LMITO provided an offset of $675 for those whose personal income is less than $37 000, increasing to $1500 for incomes from $37 000 to less than $48 000 at a rate of 7.5 cents per dollar. This includes the $420 Cost of living tax offset. The maximum LMITO of $1500 applied to incomes between $48 000 and $90 000. For incomes above $90 000, the LMITO phased out at a rate of 3 cents per dollar. The LMITO worked in conjunction with the low income tax offset (LITO), which applied to incomes of $37 000 or less. The maximum LITO is $700.

[152] All LMITO recipients will benefit from the $420 increase except those who do not require the full offset to reduce their tax liability to zero. All other features of the current LMITO remain unchanged. The fact that the maximum LMITO applies to those earning between $48 001 and $90 000 means that this additional offset is likely to benefit middle-income earners more than the low paid.

[153] Also announced in the Budget and since legislated is a one-off cost of living payment of $250 made in April 2022 to eligible recipients to assist with higher cost of living pressures.[150] Those receiving the one-off payment are those receiving payments such as the age pension, disability support pension, parenting payment, carer payment, JobSeeker payment and youth allowance. These recipients are less likely to be working and therefore the benefit to low-paid workers of these payments is likely to be small.

[154] Consistent with the position taken in past Review decisions we have taken into account the 0.5 percentage point increase in the SG rate, the removal of the $450 SG threshold and the 2022-23 Budget measures mentioned above in determining the level of increases in minimum wages in this Review, but we have not applied a direct, quantifiable discount to the minimum wage increases. These SG changes and Budget measures are moderating factors in our consideration of the adjustment to minimum wages and consequently the increase in the NMW and modern award minimum wages we have determined in this Review are lower than they would have been absent these factors.

[155] It is convenient to deal here with a submission advanced by Ai Group in support of its proposed 'modest wage increase of 2.5 per cent':

[146]

[178] Further, the trimmed mean or underlying rate of inflation understates the impact of cost of living increases on low-paid workers. The non-discretionary components of the CPI increased by 6.6 per cent over the year to the March quarter 2022 and these increased costs will particularly impact low-income households and many low-paid workers.

[179] We accept the need for moderation in order to constrain the inflationary pressures arising from our decision. The SG rate and threshold changes, and the 2022-23 Budget measures are also moderating factors. That said, we are conscious that the low paid are particularly vulnerable in the context of rising inflation. Further, given the sharp rise in the cost of living since last year's Review, the increases awarded last year have resulted in a fall in the real value of the NMW and modern award minimum wages.

[180] Taking all the relevant considerations into account have led us to award an increase of $40 to the NMW, which amounts to an increase of 5.2 per cent. The NMW will be $812.60 per week or $21.38 per hour. The hourly rate has been calculated by dividing the weekly rate by 38, on the basis of a 38-hour week for a full-time employee. This level of increase will protect the real value of the wages of the lowest-paid workers.

[181] Given the strength of the labour market and the relatively small number of employees paid at the NMW rate (184,000 employees or 1.6 per cent of all employees) we do not think that such an increase will have any material impact on 'the performance and competitiveness of the national economy' (s.284(1)(a)).

[182] The proposed NMW and our assessment of all the relevant considerations have also led us to increase modern award minimum wages.

[183] We propose to provide a proportionately higher increase to low-paid employees. As mentioned earlier, workers paid at classification levels below the C10 rate ($23.67 per hour) are 'low paid' within the meaning of s.134(1)(a) and s.284(1)(e) of the Act and the NMW rate is equivalent to the base rates (or lowest pay points) in 43 of the 121 modern awards;[171] commonly referred to as the C14 rate.

[184] As to the form of the adjustment, we note since the Annual Wage Review 2010-11 decision, adjustments to the NMW and modern award minimum wages have been by uniform percentage increases. In the decade prior to 2011 most adjustments to award wages were by 'flat dollar' amounts, as such increases provided a greater relative benefit to low-paid employees. But, flat dollar increases also compress wage relativities and reduce the incentive for skill acquisitions; these considerations led the Panel to move away from flat dollar adjustments.

[185] During the course of the public consultations on 18 May 2022, the Panel sought the views of the parties in respect of the proposals before us which advocate a flat dollar increase or a variation on that theme, including a percentage increase with a minimum adjustment. Specific mention was made of the impact on award classification relativities of flat dollar increase. In response Ai Group said:

[156]

[201] Section 286(2) provides that if the Commission 'is satisfied that there are exceptional circumstances justifying why a variation determination should not come into operation until a later day' [emphasis added] the Commission may specify that later day as the day on which the variation determination comes into operation. If the Commission does so, the variation determination comes into operation on that later day (s.286(3)).

[202] No party contests the capacity of the Commission, to the extent justified by exceptional circumstances, to delay the variation of modern award minimum wages on an award-by-award basis. That said, the expression 'exceptional circumstances' is to be interpreted in the context of Part 2-6 and a strong case must be made out in order to warrant the deferral of an increase in minimum wages.[179]

[203] In the 2019-20 Review, the majority of the Panel decided to increase modern award minimum wages in 3 groups based on industry clusters. Depending on the modern award and the industry cluster it was allocated, the increases to modern award minimum wages occurred on either 1 July 2020, 1 November 2020 or 1 February 2021.

[204] Using the ABS series Weekly Payroll Jobs and Wages in Australia and other data, the majority separated the 19 industries (according to the Australian and New Zealand Standard Industrial Classification) into 3 clusters based on the impact of the COVID-19 pandemic at the time.[180] The separation in these clusters was also supported by data on business expectations of how COVID-19 would adversely impact them over the next 2 months,[181] GVA and profits.[182]

[205] The modern awards in Group 1 covered industries which were less affected by the pandemic than those covered in Groups 2 and 3. These included modern awards applying to 'frontline' health workers, teachers and childcare workers and employees engaged in other essential services. The majority was not satisfied that there were exceptional circumstances justifying the variation determinations in respect of these modern awards coming into operation on a day later than 1 July 2020. [183] The modern awards in Group 2 covered industries adversely impacted by the pandemic, but not to the same extent as the industries covered by the Group 3 awards. The modern awards in Group 3 covered industries which were most adversely affected by the pandemic. The majority was satisfied that there were exceptional circumstances justifying the variation determinations in respect of modern awards in Groups 2 and 3 coming into operation on a later date. [184]

[206] As part of the research program for last year's Review, Professor Jeff Borland conducted a series of reports assessing the economic effects of the COVID-19 pandemic (Borland reports). Included in the research was consideration of whether the industry clusters identified in the 2019-20 Review remained relevant a year later. Professor Borland derived a different set of classifications based on the experiences of industries: fully recovered; almost recovered; and lagging recovery.

[207] The Panel decided that the increase should apply from 1 July 2021 for the majority of awards. A delayed increase was awarded for the following modern awards and modern enterprise awards that came into operation on 1 November 2021:

Air Pilots Award 2020

Aircraft Cabin Crew Award 2020

Airline Operations - Ground Staff Award 2020

Airport Employees Award 2020

Airservices Australia Enterprise Award 2016

Alpine Resorts Award 2020

Amusement, Events and Recreation Award 2020

Dry Cleaning and Laundry Industry Award 2020

Fitness Industry Award 2020

Hair and Beauty Industry Award 2010

Hospitality Industry (General) Award 2020

Live Performance Award 2020

Mannequins and Models Award 2020

Marine Tourism and Charter Vessels Award 2020

Nursery Award 2020

Racing Clubs Events Award 2020

Racing Industry Ground Maintenance Award 2020

Registered and Licensed Clubs Award 2020

Restaurant Industry Award 2020

Sporting Organisations Award 2020

Travelling Shows Award 2020

Wine Industry Award 2020.

[208] The variation determinations in respect of the General Retail Industry Award 2020 came into effect on 1 September 2021.

[209] Since the last Review, the Australian economy has been impacted by restrictions during the second half of 2021, predominantly in New South Wales and Victoria, and higher case numbers in early 2022 due to the Omicron variant affecting all states and territories, leading to an increase in the number of people in isolation and unavailable to work. However, the majority of the eligible population has since received at least 2 doses of a vaccine and the risk of further lockdowns is lower due to a changed approach from governments, including reduced isolation restrictions and fewer restrictions on business operations.

[210] Severe floods impacted parts of New South Wales and Queensland in early 2022. According to the Australian Government, these are expected to reduce GDP growth by around ½ a percentage point in the March quarter 2022, with the effect mainly being in the Mining, Agriculture, Accommodation and food services, Retail trade and Construction industries. This will be partly offset by replacing and rebuilding infrastructure and goods over time. The impact on the labour market is likely to be through fewer hours worked.[185]

[211] The Australian Government has provided support to households and businesses impacted by the floods in New South Wales and Queensland in early 2022. This includes:[186]

$2.2 billion to households for income support, temporary accommodation and social services;

$665.0 million to businesses and farmers for repairs, new equipment and support services; and

$588.6 million for community clean-up and recovery, including $300 million from the Emergency Response Fund for recovery and post-disaster resilience initiatives.

[212] An information note undertaken by staff of the Commission was published for this Review that included an assessment by Professor Borland of industry conditions using the most recent data.[187] We return to the data in the information note and Professor Borland's assessment shortly.

[213] A number of employer parties submitted that exceptional circumstances justified delayed operative dates for particular awards.

[214] Ai Group stated that domestic and international air travel and tourism have not recovered from the impacts of the pandemic,[188] and that this is further supported by the conclusion in the information note from Professor Borland.[189] Ai Group submitted that economic conditions remain difficult in Accommodation and food services, with gross value added, payroll jobs, profits, income from sales, and the number of temporary visa holders remaining below pre-pandemic levels, while average labour costs per hour increased between December 2019 and December 2021.[190]

[215] In its submission regarding the National Accounts for the March quarter 2022, Ai Group maintained that a delayed operative date for Accommodation and food services is needed with employment and the number of hours worked lower than in February 2020.[191]

[216] Ai Group argued that the higher job vacancy rate than before the pandemic is 'not necessarily a sign of industry health',[192] submitting that:

[158]

[217] Ai Group also stated that higher vacancy rates are indicative of structural issues around skill shortages in Australia, which have been exacerbated by the closure to international borders, particularly affecting Retail trade and Arts and recreation services, that have higher numbers of part-time, casual and award-reliant workers.

[218] ACCI stated that businesses in customer facing services industries, particularly Accommodation and food services, Arts and recreation services and Retail trade, as well as tourism-related businesses in the Transport sector were again affected by the most by COVID-related disruptions.[194] ACCI argued that there is a 'clear case for exceptional circumstances' for these businesses, and that the current situation for these industries and the outlook is 'far worse than it was at the time the Panel made its decision in 2021'.[195]

[219] For the transport sector, ACCI stated that while international borders were reopened, it will take time for businesses to return to full capacity and return to profitability.[196] ACCI also submitted that the price of jet fuel has more than doubled in the past 12 months, leading to higher airfare costs, which will further stagnate international and domestic travel.[197]

[220] For Accommodation and food services and Arts and recreation services, ACCI stated that both these sectors were most affected by the COVID-related lockdowns, have yet to fully recover, with gross value added and employment remaining below pre-pandemic levels, and are most at risk to future COVID outbreaks.[198] ACCI also stated that these industries are highly award-reliant and that increases to award wages on 1 July risks 'compromising the viability and recovery of some businesses'.[199]

[221] ACCI recommended that the Panel adopt a similar approach to the last Review, delaying the commencement of the wage increase for specific award classifications to no earlier than 1 November 2022.[200] ACCI submitted that the information note on industry analysis 'reinforces ACCI's assessment that we face a multispeed economy'.[201]

[222] ACCI were concerned with the data on job vacancies, submitting that:

[161]

[224] ACCI concluded that data on payroll jobs and employment and the updates to business performance indicators shows that 'the case for exceptional circumstances continues to exist for accommodation and food services, tourism related transport and arts and events subsectors'.[204]

[225] ABI provided analysis during different subperiods of the pandemic and submitted that the data support delaying the operative dates for some industries as there is variation in performance. It added that employment growth has yet to resume its pre-pandemic pace, with the labour market constrained by a slow return of skilled migrants and other working visa holders.[205]

[226] The National Retail Association (NRA) agreed with ACCI, Ai Group and ABI and submitted that that the operative date for any variation determination made in this Review for the Restaurant Award or the Hospitality Award should be deferred to 1 November 2022.[206] NRA submitted that employers covered by the Restaurant and Hospitality Awards 'are currently experiencing a labour shortage crisis' which has coincided with high input costs, so that these exceptional circumstances justify deferring the operative date of any variation determination for the Restaurant and Hospitality Awards.[207]

[227] Australian Chamber-Tourism supported Professor Borland's recommendation that the Transport, postal and warehousing industry remain in the 'lagging recovery' classification[208] and submitted that 'circumstances exist again that warrant the deferral of any variation determination arising from this Review for these awards, and that a delay until no earlier than 1 November 2022 is justified.'[209] However, Australian Chamber-Tourism argued that the Accommodation and food services industry should remain in the 'lagging recovery' sector and disagreed with the use of job vacancies as an indicator of economic recovery. Australian Chamber-Tourism commented that '[h]igh job vacancies are a constraint on businesses ability to operate at full capacity and should be viewed as a factor likely to slow the recovery of an industry sector. The Panel should not interpret high job vacancy rates as the sign of a strong recovery or an indication that businesses in the sector are performing well.'[210]

[228] ABI also commented that 'the slow return to Australia of skilled migrants and other visa holders with work rights such as working holiday makers and international students' had 'severely constrained' the labour market. [211] However, noting that there were a range of opposing data to indicate 'tacit support for both a larger and a smaller increase' in the NMW, ABI referred to 'record job vacancy data' and 'widespread reports of labour and skills shortages' as reasons for supporting a 'larger increase' in the NMW.[212]

[229] R&CA submitted that any increase should take effect from 12 months after the date that the previous increase took effect.[213]

[230] The ACTU contended that any deferral in operative dates was not warranted and submitted that 'whilst there are differences between industry performance shown in the information note (and some inconsistencies in the data relating to some industries), that in itself is insufficient to satisfy the Panel that there are exceptional circumstances' and that '[t]here is a diminishing basis for attributing all facets of differential industry performance to the COVID-19 Pandemic, as Professor Borland's conclusion to the information note acknowledges'.[214]

[231] The ACTU further submitted that:

[178]

[247] We turn first to the NMW order. As mentioned in Chapter 3, very few employees have their wage set by the NMW order and there are no data as to the industries in which they work. The NMW order only applies to 'award/agreement free employees' (see s.294). Section 12 defines an award/agreement free employee to mean 'a national system employee to whom neither a modern award nor an enterprise agreement applies'. The coverage of the Miscellaneous Award 2020 (the Miscellaneous Award) means that there are very few (if any) employees whose wage rate is set at the NMW by the NMW order. It follows that very few employers would face additional complexity arising from different operative dates for the NMW order and any variations to modern award minimum wages because very few employees are covered by (and paid at the rates specified in) the NMW order.[220]

[248] The adjustment set by the NMW order arising from last year's Review decision operated from 1 July 2021.

[249] We are not satisfied that there are 'exceptional circumstances' such as to justify the adjustments set by a NMW order taking effect on a day later than 1 July 2022. The NMW order will come into operation on 1 July 2022.

[250] We now turn to the date of operation of the determinations varying modern award minimum wages.

[251] Professor Borland's categorisation of industry sectors into 'fully recovered'; 'almost recovered' and 'lagging recovery', and the data on which that categorisation is based, is relevant to our assessment of whether, in respect of a particular modern award, there are exceptional circumstances such as to warrant a delayed operative date. But, as we noted in last years' Review decision, the categorisation by industry sectors is likely to mask significant variation at the modern award level.[221] Transport, postal and warehousing illustrates that point.

[252] Further, the period of time between successive Review increases in a particular modern award is also relevant to our assessment of exceptional circumstances. As we said in last years' Review decision, in response to Ai Group's submission that the delayed operative dates in the previous years' Review was an 'exceptional circumstance' warranting a delayed increase the following year:

[184]

[259] We are satisfied that there are exceptional circumstances justifying a delayed variation determinations in respect of the Accommodation and food services sector (with the exception of the Fast Food Industry Award 2010). The Alpine Resorts Award 2020 is also aligned with this sector and was the subject of a deferred operative date in last year's Review. The combination of factors applying to these awards, the material set out in the information note and the operative date arising from last years' Review, is exceptional and justifies a delay until 1 October 2022.

[260] In respect of the remaining modern awards we are not persuaded that there are exceptional circumstances such as to warrant a delayed operative date in the variation determinations arising from this Review. We acknowledge that an operative date of 1 July 2022 will mean that businesses covered by some of these modern awards will face 2 minimum wage increases within a 12-month period. But those businesses have had the benefit of the delayed operative date arising from the 2020-21 Review. The timing issue is not, of itself, sufficient to warrant a finding of exceptional circumstances. To determine otherwise would create a self-perpetuating mechanism whereby the exception became the rule. We have considered the submissions advanced in respect of the remaining modern awards and the data in the information note, and we are not persuaded that a case has been made out in respect of these modern awards.

[261] In reviewing modern award minimum wages, we are also required to review the minimum wages in modern enterprise awards and state reference public sector modern awards.[228] In the 2019-20 Review decision, the majority allocated the modern enterprise awards and state reference public sector modern awards to the 3 'clusters' based on their alignment with the modern awards in the 3 groups.[229] We have decided to follow the same approach this year.

[262] Save for the Airservices Australia Enterprise Award 2016, the variation determinations in respect of all other modern enterprise awards and state reference public sector awards to give effect to our decision will operate from 1 July 2022. The variation determination in respect of the Airservices Australia Enterprise Award 2016 will take effect on 1 October 2022.

[186]

[263] The Panel is required to review and may make one or more determinations varying wages in a number of transitional instruments as part of the Review.

[264] Transitional instruments preserved by the Transitional Act include: Transitional APCSs; State reference transitional instruments and Division 2B State awards preserved by operation of the Fair Work (Transitional Provisions and Consequential Amendments) Regulations 2009; and transitional pay equity orders created by the Transitional Act.[230] These instruments may be considered as part of the Panel's review.[231] Transitional APCSs and State reference transitional awards operate until the Commission makes an order to terminate them,[232] or they terminate pursuant to legislative provisions.[233]

[265] The content and coverage of most transitional instruments was discussed in the Annual Wage Review 2009-10 (2009-10 Review) decision,[234] and in Fair Work Australia's Research Report 6/2010.[235] Further background in relation to these instruments was provided in the Annual Wage Review 2016-17 Preliminary decision.[236]

[266] Most transitional instruments have been terminated or have ceased to operate. However, some continue to operate subject to the conclusion of the modernisation process. These instruments include, but are not limited to:

• transitional instruments that cover employees also covered by enterprise instruments;[237]

• transitional instruments that cover employees also covered by State reference public sector transitional awards which have not been terminated by the Commission or replaced by a State reference public sector modern award;[238] and

• transitional instruments that were not terminated as part of the termination of modernisable instruments process which commenced in 2010.[239]

[267] For convenience, we shall refer to transitional instruments that we are required to review in this Review and that remain in operation as 'relevant transitional instruments'.

[268] In the Annual Wage Review (2016-17) Review decision, the Panel concluded that the Act did not authorise the Panel to terminate transitional instruments in the course of conduct of the Review,[240] and in the 2020 Review decision, the Panel expressly stated that it did not propose to terminate any transitional instruments.[241]

[269] The ACTU, ACCI and Ai Group submitted that the approach taken by the Panel in previous Reviews should be maintained, such that the rates in relevant transitional instruments be increased consistently with any increase determined for modern award minimum wages.[242]

[270] Consistent with these submissions, we have decided that the wage rates in relevant transitional instruments will be varied by the same percentage amount we have determined shall apply to modern award minimum wages.

[187]

[271] In the 2021-22 Review, Keolis Downer, Transdev Australasia Pty Ltd (Transdev), Busways North West Pty Limited (Busways) and Transit Systems West Services Pty Ltd and its related entities (Transit Systems) (collectively, the Employer parties) have made submissions that the Panel should take account of the wage increases already provided to their 'transferring employees' under copied State awards.[243]

[272] Copied State awards apply in relation to employees of non-national system State public sector employers who transfer their employment to a national system employer as part of a transfer of business (transferring employees).

[273] The Employer parties commenced employing transferring employees on or around the following dates:

Transit Systems - 1 July 2018

Keolis Downer - 31 October 2021

Busways - January 2022, and

Transdev - 4 April 2022.

[274] Transit Systems has also made an application seeking that the Commission retrospectively vary or revoke determinations made in the 2018-19 and 2019-20 Review decisions so that the minimum wage increases from those Reviews do not apply to copied State awards applying to Transit Systems. Only Transit Systems is affected by previous annual wage review determinations varying copied State awards, as the copied State awards covering Keolis Downer, Busways and Transdev came into operation after 1 July 2021.

[275] The Australian Rail Tram and Bus Industry Union (ARTBIU), the Australian Manufacturing Workers' Union (AMWU) and the Australian Services Union (ASU) (collectively, the Unions) oppose the Employer parties' submissions.[244]

[276] On 25 May 2022, the Commission published a Statement[245] and Background Paper prepared by staff of the Commission outlining the legislative framework that applies to copied State awards in an annual wage review and posing some questions to the parties (Background Paper). The Employer parties and the Unions lodged submissions and a short hearing was held before Commissioner Hampton on 3 June 2022. We have reviewed the transcript of that hearing, the Statement published by the Commissioner on 6 June 2022 and the documents referred to in that Statement.

[277] The Explanatory Memorandum for the Fair Work Amendment (Transfer of Business) Bill 2012 (EM) outlines the scheme of the transfer of business regime in Part 6-3A of the Act as follows:

[191]

(1) In an annual wage review, the FWC may make a determination varying terms of a Division 2B State award relating to wages.

(2) For that purpose, Division 3 of Part 2-6 of the FW Act (other than section 292) applies to terms of a Division 2B State award relating to wages in the same way as it applies to a modern award.'

[279] As modified by s.768BY, item 20 in Schedule 9 to the Transitional Act has effect in relation to a transferring employee as if a reference to a 'Division 2B State award' is a reference to a 'copied State award for the transferring employee'.[248] Accordingly, the Panel is required to review and, if appropriate, may make one or more determinations varying wages in copied State awards in an annual wage review.

[280] As the submissions of the Employer parties and Unions address the treatment of particular copied State awards in this Review and in previous Reviews, we have included a more detailed overview of the statutory framework applying to copied State awards and how copied State awards have been dealt with in previous Reviews, at Appendix 5 of this decision.

6.2 Transit Systems' application to vary or revoke previous Review determinations adjusting wages in copied State awards

[281] In this Review, Transit Systems has applied to the Commission to retrospectively vary or revoke determinations made in the 2018-19 and 2019-20 Reviews so they do not apply to copied State awards applying to Transit Systems. These copied State awards are derived from the following 3 awards made by the Industrial Relations Commission of New South Wales (IRCNSW or NSWIRC) as in force at 1 July 2018:

State Transit Authority Bus Operations Enterprise (State) Award 2018 (the 2018 Bus Operations Award)

State Transit Authority Senior and Salaried Officers' Enterprise (State) Award 2018 (the 2018 Senior and Salaried Officers Award), and

State Transit Authority Bus Engineering and Maintenance Enterprise (State) Award 2018 (the 2018 Bus Engineering and Maintenance Award).

[282] Copied State awards derived from the 2018 Bus Operations Award and the 2018 Senior and Salaried Officers Award currently apply to Transit Systems' transferring employees.[249]

[283] Transit Systems' application is in the following terms:

[196]

[284] The Unions observe that the Commission's former 'tiered approach' to applying annual wage review increases to copied State awards had regard to wage increases under 'state minimum wage decisions', whereas Transit Systems is proposing the Commission apply a similar approach having regard to wage increases provided for under the terms of its copied State awards.[250]

[285] We note the effect of applying the 'tiered system' as proposed (further or in the alternative) by Transit Systems would be that wage rates in copied State awards applying to its transferring employees would not be increased as a result of the 2018-19 and 2019-20 Review decisions.[251]

[286] Transit Systems' application follows the recent Federal Court decision in Australian Rail, Tram and Bus Industry Union v Transit Systems West Services Pty Ltd[252] (ARTBIU v Transit Systems). In brief:

A transfer of business occurred between the NSW State Transit Authority and Transit Systems where from 1 July 2018, Transit Systems employed transferring employees who had been covered by the 2018 Bus Operations Award.

The parties were in dispute as to how the Commission's 2017-18, 2018-19, 2019-20 and 2020-21 Review decisions operated (if at all) in light of cl.15 of the 2018 Bus Operations Award (and copied State awards derived from that Award).

Since 1 July 2018, Transit Systems had increased the wages of the transferring employees in accordance with the pay increases in cl.15.1 but did not flow-on any increases from annual wage review decisions. Clause 15.1 provided for wage increases of 2.5 per cent from the first full pay period commencing on or after on 1 January 2018, 2019 and 2020.

• The ARTBIU submitted that Transit Systems was bound by the Commission's annual wage review determinations to pass on the Review increases in minimum wage rates to the employees covered by the copied State awards derived from the 2018 Bus Operations Award.[253]

• Transit Systems counter-argued that cl.15.1 reflected the agreed wage increases that transferring employees would receive and cl.15.2 operated to exclude any wage increases beyond those prescribed in cl.15.1.[254] Clause 15.2 provided:

[221]

[307] It follows that the Commission cannot under s.603 vary or revoke a decision made under Part 2-6 of the Act.[288]

[308] As related earlier, Transit Systems contends s.603(1) is the source of the Commission's power to vary or revoke previous annual review wage determinations adjusting wages in copied State awards.[289] Transit Systems further contends that a decision to vary wages in copied State awards is not a decision made under Part 2-6 of the Act, but rather a decision made under item 20(1) of Schedule 9 to the Transitional Act; and consequently the s.603(3)(d) exclusion from variation under s.603(1) does not apply.[290]

[309] Neither Transit Systems nor any other party proposes that, apart from s.603, there is any other possible source of power for the Commission to vary the determinations concerned.

[310] Transit Systems also submits that the Commission 'has always identified Item 20(1) of Schedule 9 as the source of its power to make determinations varying copied State awards in relation to wages' and that this is 'a matter of objective fact' 'evident from a plain reading of the FWC's 2018-19 and 2019-2020 Review decisions'[291] [footnotes omitted].

[311] Dealing with that submission first, we do not draw the same conclusion from those Review decisions and in any case we do not think that conclusion would necessarily determine the point at issue.

[312] Item 20(2) of Schedule 9 to the Transitional Act, as applied by s.768BY of the Act, provides that, in an annual wage review, for the purpose of making a determination varying terms of a copied State award relating to wages, 'Division 3 of Part 2-6 of the Act ... applies to terms of a copied State award ... relating to wages in the same way as it applies to a modern award' [emphasis added].

[313] In our view, when the Panel makes a determination varying wages in a copied State award in an annual wage review, that is a decision made 'under' the Act for the purposes of s.603(1) of the Act and 'under' Division 3 of Part 2-6 of the Act for the purposes of s.603(3)(d) of the Act. It follows that the Commission cannot vary or revoke such a determination under s.603(1) of the Act.

[314] We agree with Transit Systems that with the introduction of Part 6-3A of the Act, the legislature did not extend s.603(3) to decisions made under the Transitional Act.[292] We observe that the legislature also did not extend s.603(1) to decisions made under the Transitional Act.

[315] Transit Systems' contentions appear self-defeating. If a decision to vary wages in copied State awards was a decision made under item 20(1) of Schedule 9 to the Transitional Act for the purposes of s.603(3)(d), then it would also be a decision made under the Transitional Act and not made under the Act for the purposes of s.603(1). It would follow that s.603(1) did not apply on its terms.

[316] Having regard to the Unions' submissions as outlined earlier, we consider our reading of s.603 is also to be preferred as giving a more coherent operation to the legislative scheme.

[317] In any case, even if we had discretion to vary or revoke determinations made in the 2018-19 and 2019-20 Review decisions as sought in Transit Systems' applications, in the circumstances we would decline to do so.

[318] As submitted by the Unions, the effect of the applications, if granted, would be to reduce existing employment entitlements and entitlements to backpay for some transferring employees.[293] As Rares J observed in ARTBIU v Transit Systems, Transit Systems could have applied, but did not apply, to the Commission to exercise its discretion to vary the impact of its annual wage review determination on the copied State awards or to take account of wage increases provided for in the copied State awards in another way.[294]

[319] On 2 December 2021, Rares J made declarations as to the correct rates of pay for employees of Transit Systems covered by copied State awards derived from the 2018 Bus Operations Award.[295] As we understand it, these rates of pay give effect to the Court's view as to the appropriate offsetting of wage increases under cl.15.1 of the Award and the increases from the 2018-19, 2019-20 and 2020-21 Reviews. As the Unions submit, the logic of the Court's judgment also applies to copied State awards derived from the 2018 Senior and Salaried Officers Award and the 2018 Bus Engineering and Maintenance Award.[296]

[320] The Unions also submit that granting Transit Systems' applications would give it 'an enormous collateral advantage' in bargaining for an enterprise agreement to replace the copied State awards.[297] Transit Systems on the other hand considers the 'last two' annual wage review increases to the wage rates in its copied State awards 'have been a real impediment to effective enterprise bargaining.'[298]

[321] Transit Systems submits that:

[232]

[330] Copied State awards derived from the following State awards are in operation and apply to Keolis Downer's, Transdev's and Busways' transferring employees:

State Transit Authority Senior and Salaried Officers' Enterprise (State) Award 2021 (the 2021 Senior and Salaried Officers Award), and

State Transit Authority Bus Engineering and Maintenance Enterprise (State) Award 2020 (the 2020 Bus Engineering and Maintenance Award).76

[331] Copied State awards derived from the State Transit Authority Bus Operations Enterprise (State) Award 2021 (the 2021 Bus Operations Award) F also apply to Transdev's and Busways' transferring employees. [311]

[332] In 2022, these copied State awards conferred wage increases on transferring employees as follows:

• 2021 Senior and Salaried Officers Award - cl.10.1 relevantly provides for a wage increase of 2.04 per cent[312] from the first full pay period commencing on or after on 1 January 2022, with cl.10.2 providing that this is 'in substitution of any State Wages decisions. Any arbitrated safety net adjustment may be offset against any equivalent amount in the rates of pay received by Employees covered under this Award.'

• 2020 Bus Engineering and Maintenance Award - cl.58.3 relevantly provides for a wage increase of 2.04 per cent[313] from 1 April 2022, with cl.58.5 providing that this is 'in substitution of any State Wage Case decisions. Any arbitrated safety net adjustments may be offset against any equivalent amount in rates of pay received by Employees.'

• 2021 Bus Operations Award - cl.15.1 relevantly provides for a wage increase of 2.04 per cent[314] from the first full pay period commencing on or after on 1 January 2022, with cl.15.2 providing that this is 'in substitution of any State Wages decisions. Any arbitrated safety net adjustments may be offset against any equivalent amount in the rates of pay received by Employees covered under this Award.'[315]

[333] The copied State awards do not provide further wage increases beyond the above dates.

[334] Keolis Downer submits that to prevent double-dipping, transferring employees who have received pay increases in 2022 under the above terms of the 2021 Senior and Salaried Officers Award and the 2020 Bus Engineering and Maintenance Award should be excluded from any minimum wage increase awarded in the 2021-22 Review.[316]

[335] Keolis Downer submits that ss.284(1)(a) 'the performance and competitiveness of the national economy, including productivity, business competitiveness and viability, inflation and employment growth' and (c) 'relative living standards and the needs of the low paid' are relevant.[317]

[336] Keolis Downer submits that copied State awards are not in practice 'minimum wage' instruments and so are not comparable to modern awards.[318] Keolis Downer contends that the copied State awards already ensure beneficial living standards for the transferring employees by setting 'fair and reasonable conditions of employment for employees'[319] with built-in wage increases.

[337] Keolis Downer submits that any increase to copied State awards would go 'far beyond the FW Act objectives and the application of section 284 of the FW Act',[320] and 'clearly, there exists the risk of double dipping':[321]

[338] Keolis Downer submits that the wage rates in copied State awards 'far exceed the minimum wage rates set by the [Commission] for comparable employees in conformity with section 284 of FW Act' to the significant benefit of employees.[322] A further increase to the wage rates in copied State awards would lead to a further disparity between Keolis Downer and other national system employers.[323]

[339] Keolis Downer submits that 'employees will not lose future increases to their safety net and will remain significantly better off than had they been covered by the relevant modern award and subject to the Annual Wage Review decision.'[324]

[340] Keolis Downer refers to the object of the Act at s.3(f) and submits the Commission should not provide any additional wage increases as this would risk 'de-emphasising enterprise level collective bargaining'[325] and:

[234]

[341] Keolis Downer also submits that its transferring employees are likely to be entitled to future wage increases from 2023 onwards pursuant to enterprise agreements it expects to implement in the immediate future.[327]

[342] Busways contends that the Panel should not apply any 2021-22 Review increase to its copied State awards as transferring employees have already had the benefit of the increases awarded by the IRCNSW that commenced on or after 1 January 2022 and before 1 July 2022.[328]

[343] Busways submits that the Panel must consider the objective of achieving fairness from both the perspective of both employees and employers,[329] and that ss.284(1)(a) and (c) are relevant to the Commission's task.[330] With regard to s.284(1)(a), Busways submits that in a transfer of business under Part 6-3A of the Act, typical contractual terms may constrain the new employer from being able to take steps to ameliorate unplanned additional labour costs arising from Review decisions, and this effect 'is heightened for many businesses in the current high inflationary economic period'.[331] With regard to s.284(1)(c), Busways submit that this 'requires a comparison of the living standards of workers reliant on minimum wages with those of other groups that are deemed to be relevant', and the Panel should focus especially on non-managerial workers.[332]

[344] Busways has provided tables showing the percentage difference between weekly wage rates for workers under the lowest classification in its copied State awards and the current national median equivalised disposable household income.[333] Busways submits that these tables should satisfy the Panel that 'workers covered by the Busways copied State awards receive wages which allow for a living standard which is equivalent to or better than the average Australian worker.'[334]

[345] Busways submits that if an increase in minimum wages were to be applied to its copied State awards, its transferring employees would receive 2 wage increases in a period of 6 months or less, resulting in double-dipping.[335] Busways submits that the Panel should also consider the compounding effects of such increases,[336] and says that absorbing wage increases built into copied State awards would not address this. [337]

[346] Busways submits that '[t]o further apply a wage increase to these employees is to provide the employees with a windfall gain above that which was determined as "fair and reasonable wages" for 2022 by the NSWIRC',[338] and 'this action inherently assumes that the wages set by the NSWIRC for the Relevant Awards in 2022 are not an appropriate safety net.'[339] Busways submits that such an assumption could not be drawn without assessing the work value of the services performed by the relevant employees; and 'grappling with why the wages under the Relevant Awards are not a fair and relevant safety net when they already substantially exceed the wages contained in the modern award covering exactly the same work.'[340]

[347] Busways submits that the copied State awards applying to it 'contain wage rates that were determined under a different jurisdiction where the wage rates were not intended to be a minimum safety net, but rather, were intended to create fair and reasonable conditions of employment.'[341] Busways further contends that the approach to setting and increasing wages in NSW State awards is different to the national minimum wage setting approach as:

• NSW State awards are largely determined by the IRCNSW by consent between the parties (particularly in circumstances where the award applies to a single employer) and enterprise specific awards tend to be 'paid rates awards' rather than 'minimum wage awards',[342] and

• there is no general overriding minimum wage decision made by the IRCNSW that automatically affects all NSW State awards. Since 2010, all adjustments to awards ordered as part of State Wage Cases have been made only to minimum wage awards and the 3 copied State awards were not subject to the NSW State Wage Case but were subject to their own specific wage rate increases.[343]

[348] Busways submits that 'the wages contained in the 3 Busways copied State awards are already between 16.8% and 52.24% higher than the equivalent modern award rates'.[344] Given this, Busways 'does not accept that it is possible to "top-up" a shortfall in this scenario'[345] and to do so would not only deviate from the purpose of the Review, but would be contrary to the objectives of the Fair Work Act and the minimum wages objective.'[346] [footnotes omitted]

[349] If the Panel were to see value in increasing wages in copied State awards, contrary to the Employer parties' submissions, Busways submits that any wages so increased should not exceed the corresponding modern award rate,[347] or if not, the Panel should revert to the tiered-approach adopted prior to the 2017-18 Review decision.[348]

[350] Busways also submits that the Panel should consider the object in s.3(f) and the requirement in s.577(d) of the Act.[349]

[351] Busways submits that terms and conditions in State awards transfer to the national system for a finite period of up to 5 years, with the intention of encouraging parties in the interim to seek to bargain for an enterprise agreement.[350] However, Busways argues that if wages under the 3 copied State awards already 'leapfrogged equivalent arrangements in similar business/industries ... any incentive to Busways to bargain will be dissolved.'[351]

[352] Busways submits that it has already commenced bargaining with the ARTBIU for an enterprise agreement to replace the 2021 Bus Operations Award[352] and it intends to bargain with the other 2 workforces this year so 'there is every likelihood that enterprise agreements will be in place ... by the end of 2022.'[353] To the extent that enterprise agreements are not agreed before the next Review (and so employees experience 18 months without a pay rise), Busways submits that the Unions may then argue that the IRCNSW's determination of 'fair and reasonable wages' in the copied State awards is no longer current, [354] and can make submissions to that Review about the appropriate way to address any financial detriment suffered by employees.[355]

[353] Transdev submits that that the Commission should not apply any increase to its copied State awards in the 2021-22 Review as the transferring employees have already had the benefit of the increases awarded by the IRCNSW that commenced on or after 1 January 2022 and before 1 July 2022.[356]

[354] Should that submission not be accepted, Transdev submits that any Review increase should be limited to the difference between the annual wage review increase and the increases already provided for in the copied State awards, i.e. the 'top-up' approach.[357]

[355] In addition to ss.284(1)(a) and (c), Transdev submits that s.284(1) 'the principle of equal remuneration for work of equal or comparable value' is relevant to its submission.

[356] Transdev submits that any Review increase would have a direct impact on the profitability of its business as it would have to pass on 2 wage increases to approximately 1,232 transferring employees[358] and it is concerned about the compounding effect of these increases.[359] Transdev submits that the increased labour cost may disincentivise national system employers from employing State public sector employees in circumstances where there will be a transfer of business. Transdev further submits that the application of Review increases to copied State awards that already contain a wage increase in respect of the same period will impact those businesses' profitability and will have 'a negative impact on the performance and competitiveness of the national economy, particularly business competitiveness and viability.'[360]

[357] Transdev submits that as transferring employees have or will already receive the benefit of wage increases made as 'fair and reasonable conditions of employment' by the IRCNSW its position is consistent with ensuring relative living standards of transferring employees.[361] Transdev further submits that as its copied State awards do not contain future wage increases, if the tiered approach is applied transferring employees would not be deprived of Review increases in the future.[362]

[358] Transdev submits that should any Review increase apply to its copied State awards, the wage rates in the copied State awards will exceed 'the rates for equivalent work under the equivalent modern awards, creating a difference in minimum rates for the same work' (as well as the rates for equivalent work under State Awards which continue to apply to State public sector employees in respect of the same work. [363]

[359] Transdev notes that, since providing its initial submission, it has made an enterprise agreement with employees covered by the 2021 Bus Operations Award but this has not yet been approved.[364] Transdev has also commenced discussions to bargain for enterprise agreements which, if made, would replace the 2020 Bus Engineering and Maintenance Award and the 2021 Senior and Salaried Officers Award.[365]

[360] The Unions submit the tiered approach to adjusting wage rates in copied State awards is inappropriate[366] and modern award wage increases should be flowed-on to copied State awards. However, the Unions 'accept that wage increases that have occurred in this financial year should be taken [into] account to avoid any double dipping.'[367] Accordingly, wages should be 'topped up' to 'the difference between those internal increases (which were subject to the NSW Government's 2.5% cap regardless of merit considerations, and were in most cases actually lower) and whatever is awarded by the Commission, in order to avoid windfall bargains for the operators.'[368]

[361] The Unions contend 'this is a highly conservative approach, rather than anything resembling an ambit claim':[369]

[241]

[374] Part 6-3A of the Act is directed to ensuring that where there is a transfer of business from a non-national system employer that is a State public sector employer to a national system employer, transferring employees continue to enjoy the terms and conditions of employment to which they were entitled with the State public sector employer.[388] Even where a copied State instrument ceases to apply to an employee through the effluxion of time and a modern award instead covers the employee, the Commission may make a take-home pay order to remedy any resulting reduction in take-home pay.[389]

[375] The intent of the legislative scheme is to preserve transferring employees' terms and conditions in the State industrial instrument with the non-national system employer, in their new employment under the national system.

[376] In the course of these proceedings, much has been made of the different nature of awards made under the NSW industrial relations system and modern awards; and we think correctly so. The IRCNSW's statutory functions of 'setting fair and reasonable conditions of employment for employees'[390] is different to our objectives in an annual wage review and in particular pursuant to the minimum wages objective in s.284 ('establishing and maintaining a safety net of fair minimum wages') the modern awards objective in s.134 (ensuring that 'modern awards, together with the National Employment Standards, provide a fair and relevant minimum safety net of terms and conditions') and s.3(b) of the Act ('ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions').

[377] We agree that the copied State Awards concerned bear some characteristics of enterprise agreements as a result of the NSW disputes-based system. The copied State awards are derived from State awards made by consent by the State Transit Authority and its workforces and include agreed annual wage increases applied over a specified period (although as the Unions point out, the negotiated wage outcomes were subject to a State government wages cap).

[378] The evidence before us is that the current wage rates in the copied State awards applying to Keolis Downer, Busways and Transdev and their transferring employees are already significantly higher than the corresponding modern award rates. We also observe that the statutory underpinning for wage rates in copied State awards is the NMW[391] rather than modern award rates.

[379] Relevant to this Review, the wage clauses in the 2021 Senior and Salaried Officers Award, the 2020 Bus Engineering and Maintenance Award and the 2021 Bus Operations Award each conferred agreed wage increases that commenced on or after 1 January 2022 (in cll.10.1, 58.1 and 15.1 respectively).

[380] Further, each of those wage clauses contains an 'offsetting' clause in similar terms to that considered in ARTBIU v Transit Systems (in cll.10.2, 58.3 and 15.2 respectively). In ARTBIU v Transit Systems, Rares J observed that the offsetting clause in cl.15.2 of the 2018 Bus Operations Award could be understood as seeking to provide that the parties to the Award intended that the wage increases contained in cl 15.1 were to be in substitution for any variation of minimum wages that would otherwise be payable pursuant to annual wage review decisions that the IRCNSW might decide to adopt.[392]

[381] The Act does not compel us to vary the wage rates in copied State awards. The Panel has discretion to vary some or all wages in copied State awards in the context of a Review and in exercising that discretion will be guided by the applicable statutory considerations and the requirement under s.577 that the Commission perform its functions and exercise its powers in a manner that is fair and just.

[382] The parties have variously addressed ss.284(1)(a), (c) and (d) and ss.3(a)(b) and (f) of the Act in their submissions, as well as the modern awards objective and the requirements in ss.577 and 578 of the Act.

[383] We first observe that s.284(1)(d) is not relevant to this matter; it is directed to gendered differences in remuneration.[393]

[384] In relation to s.284(1)(a) - 'the performance and competitiveness of the national economy, including productivity, business competitiveness and viability, inflation and employment growth' - the Panel has previously observed:

[243]

[385] As related earlier, Keolis Downer, Busways and Transdev submit that s.284(1)(a) is relevant, and note generally the impacts on profitability of their own and other businesses nationally that are covered by copied State awards, should annual wage review increases be applied to copied State awards which also provide wage increases in respect of the same period. Transdev also notes the potential for such annual wage review increases to 'disincentivise national system employers from employing State public sector employees' in circumstances of a transfer of business. The Unions observe as a general proposition that wage increases matching both inflation and productivity growth are sustainable without placing upward pressure on headline inflation and would allow workers to maintain existing living standards and get a fair share of national prosperity.

[386] We have earlier discussed the requirement in s.284(1)(c) that we take into account 'relative living standards and the needs of the low paid.' The Unions have pointed to 2 classifications in the 2021 Bus Operations Award that are below the Panel's benchmark for who is 'low paid', and other classifications that are not far above this.[395] The Unions submit that classifications in the 2020 Bus Engineering and Maintenance Award are similarly placed, and the majority of Clerk classifications in the 2021 Senior and Salaried Officers Award are also not much above the benchmark.

[387] We observe that the majority of adult classifications in the copied State awards have wage rates above the low-paid benchmark. However, there are some classifications that, although above the new NMW (other than the weekly apprentice rates specified in the 2020 Bus Engineering and Maintenance Award), fall below the low-paid benchmark. We have taken this into account in reaching our view.

[388] The objects in s.3 of the Act include 'ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions' (s.3(b)) and 'achieving productivity and fairness through an emphasis on enterprise-level collective bargaining' (s.3(f)) [emphasis added]. Our discussion above regarding the character of the 'consent' State Awards with which we are concerned and recent wage increases conferred under those State Awards is relevant to considerations of fairness.

[389] In respect of s.3(f), the parties have provided information on the status of enterprise bargaining to replace the copied State awards and made submissions on the impact on the bargaining of annual wage review wage increases.

[390] We note Keolis Downer's, Busways', Transdev's and the Unions' material as to the progress of enterprise bargaining negotiations. As we are considering potential wage increases on an enterprise basis, while we cannot predict the precise impact of our decision on collective bargaining, [396] we observe as a general proposition that an upward adjustment to wage rates in these copied State awards may act as a disincentive to bargaining, in circumstances where the employers are already paying above modern award rates of pay.[397]

[391] In view of the above matters and the particular circumstances evident here, we are satisfied that the current wage rates in the copied State awards applying to Keolis Downer, Busways and Transdev provide a safety net of fair minimum wages. Accordingly, having regard to the NMW order in this Review and the relevant statutory considerations (including in ss.3, 577 and 578), we consider that the Review increase to modern award minimum wages should not be applied to the copied State awards applying to Keolis Downer, Busways and Transdev, and their transferring employees on this occasion.

[392] Nor do we consider the 'top up' approach proposed by the Unions is appropriate in the circumstances. Part 6-3A is directed to preserving the employment terms and conditions of the transferring employees as they would have been in the absence of the transfer of business to a national system employer, subject, of course, to the Commission's obligation to maintain a safety net of fair minimum wages. Had the transferring work and the transferring employees remained with the old State employer, the transferring employees would have received - as they have - a 2.04 per cent wage increase in January or April of this year. They would not have received any further increases under the State Awards and we do not consider any further adjustments to their wages fair or appropriate in all the circumstances.

[393] Finally, we note that none of the copied State awards contain 'built-in' wage increases beyond this Review cycle. That is something the Panel can properly take into account in the 2022-23 Review if the copied State awards are not replaced by enterprise agreements or otherwise cease to apply in the interim.

(i) Copied State awards applying to Transit Systems

[394] As related earlier, copied State awards derived from the 2018 Bus Operations Award and the 2018 Senior and Salaried Officers Award currently apply to Transit Systems' transferring employees.[398]

[395] The wages clause in the 2018 Bus Operations Award was described earlier. Clause 10.1 in the 2018 Senior and Salaried Officers Award relevantly provided for wage increases of 2.5 per cent from the first full pay period commencing on or after on 1 January 2018, 2019 and 2020, with cl.10.2 providing that this is 'in substitution of any State Wages decisions. Any arbitrated safety net adjustment may be offset against any equivalent amount in the rates of pay received by employees covered under this Award.'

[396] Transit Systems submits that if the variations or revocations it has sought in relation to copied State awards derived from the 2018 Bus Operations Award and the 2018 Senior and Salaried Officers Award are not granted, no increase should be awarded to these copied State awards. However, if the variations or revocations sought are granted, any increased wage rates in any classification level in its copied State awards should not exceed the rate of pay for the same work under the relevant modern award.[399]

[397] Transit Systems submits the object in s.3 of the Act and in particular ss.3(a), (b) and (f) are relevant to this matter.[400] Those provisions were extracted earlier.

[398] Transit Systems submits that the 2018-19, 2019-20 and 2020-21 Review decisions 'have resulted in windfall gains for employees amounting to approximately $3.5 million.'[401] It submits that 'this was the very kind of situation that the Commission had always intended to avoid when it developed the tiered methodology'[402] and that:

[261]

[409] We have set out relevant considerations in our earlier discussion about the copied State awards applying to Keolis Downer, Busways and Transdev. Our earlier observations about the statutory considerations applying to the Panel's task, the legislative intent of Part 6-3A of the Act and the different character of 'consent' State awards under the NSW industrial relations system also apply here.

[410] We also observe that the majority of adult classifications in the copied State awards applying to Transit Systems have wage rates above the low-paid benchmark, there are some classifications in the copied State awards that, although above the new NMW, fall below the low-paid benchmark. We have taken this into account in reaching our view.

[411] However, there are some key differences in the circumstances of Transit Systems' copied State awards.

[412] In particular, the wage clauses in Transit Systems' copied State awards do not provide for any agreed wage increases in 2021-22. The final wage increases prescribed by the 2018 Bus Operations Award and the 2018 Senior and Salaried Officers Award had effect from the first full pay period commencing on or after 1 January 2020.

[413] We take this to indicate that the wages arrangement agreed between the parties - including the increases to wage rates and the offsetting arrangements - have concluded.

[414] As has been noted, the intended[420] offsetting arrangements did not override the Commission's determinations in the 2018-19, 2019-20 and 2020-21 Reviews, that varied all copied State awards including those applying to Transit Systems. Transit Systems submits this has resulted in windfall gains for its transferring employees.

[415] On 2 December 2021, Rares J made declarations as to the correct rates of pay for employees of Transit Systems covered by copied State awards derived from the 2018 Bus Operations Award.[421] Accordingly, the issue of the correct application of the offsetting clauses in the copied State awards applying to Transit Systems has been dealt with by the Court.

[416] We have already found in this decision that the Commission does not have power to retrospectively vary or revoke the annual wage review determinations varying wages in the Transit Systems' copied State awards and noted that in any event, we would decline to exercise any such discretion to do so. Those reasons are also pertinent here: it could be said that Transit Systems is further seeking to adjust the outcomes of the previous Review determinations in this Review, in a way different to that decided by the Federal Court and in circumstances where it failed to raise its concerns with the Commission during the 2018-19, 2019-20 and 2020-21 Reviews.

[417] However, we note that in this Review other considerations apply to our decision as to whether or not to award any increase to wage rates in Transit Systems' copied State awards.

[418] We reiterate that the statutory underpinning for wage rates in copied State awards is the NMW rather than modern award rates. The evidence before us is that the current wage rates in the copied State awards applying to Transit Systems are higher than the corresponding modern award rates and are also higher than rates payable under Keolis Downer, Busways and Transdev copied State awards. In his affidavit, Mr Sinclair states:

[265]

[420] Transit Systems addresses the cumulative (uncosted) impacts of the Review decisions on its business. In support of its position against any further Review increase, Transit Systems contends that the 'last two' annual wage review increases to the wage rates in its copied State awards 'are a real impediment to effective enterprise bargaining'[424] and '[i]f there was to be another increase this year, the difference between the minimum rates payable by Transit Systems to its employees and our competitors to their employees will be greater again.'[425]

[421] We note Transit Systems' and the Unions' material as to the progress of enterprise bargaining negotiations.

[422] Again, while we cannot predict the precise impact of our decision on collective bargaining, we observe as a general proposition that an upward adjustment to wage rates in these copied State awards could act as a disincentive to bargaining, in circumstances where employers are already paying above modern award rates of pay.

[423] We have decided against adjusting wage rates in the copied State awards applying to Keolis Downer, Busways and Transdev, for reasons including our satisfaction that the wage rates in their copied State awards provide a safety net of fair minimum wages.

[424] In view of all the above matters, we are also satisfied that the current wage rates in the copied State awards applying to Transit Systems provide a safety net of fair minimum wages.

[425] Accordingly, having regard to the NMW determined in this Review and the relevant statutory considerations (including in ss.3, 577 and 578), we consider that the Review increase to modern award minimum wages should not be applied to the copied State awards derived from the 2018 Bus Operations Award and the 2018 Senior and Salaried Officers Award applying to Transit Systems and its transferring employees.

(ii) Other copied State awards and our determination

[426] As set out above, we have decided that the copied State awards applying to:

Keolis Downer, Busways and Transdev, and their transferring employees (derived from the 2021 Senior and Salaried Officers Award, the 2020 Bus Engineering and Maintenance Award and the 2021 Bus Operations Award), and

Transit Systems and its transferring employees (derived from the 2018 Bus Operations Award and the 2018 Senior and Salaried Officers Award) (together, the excepted copied State awards)

[267]

[427] We now turn to the wage rates in other copied State awards.

[428] As related earlier, Part 6-3A is directed to preserving the employment terms and conditions of the transferring employees as they would have been in the absence of the transfer of business to a national system employer, subject, of course, to the Commission's obligation to maintain a safety net of fair minimum wages.

[429] In the ordinary course, copied State awards operate for a 5-year period. In reviewing and adjusting wages in copied State awards in an annual wage review, the Commission is required to ensure that a safety net of fair minimum wages is maintained. In circumstances where copied State awards do not themselves provide for the maintenance of wages for their term of operation (such as, for example, by specifying annual percentage wage increases), it will be appropriate for the Commission to consider applying wage increases determined in the Review process to them.

[430] There is no information before the Panel that any copied State awards other than the excepted copied State awards, appropriately maintain a safety net of fair minimum wages.

[431] Since the 2017-18 Review, the Commission's approach to copied State awards has been that annual wage review adjustments 'should generally apply to copied State awards, subject to a different outcome being determined in respect of particular copied State awards. In other words, rather than seeking to apply a tiered approach as a decision rule to mitigate "double dipping" we propose to address any "double dipping" on a case by case basis.'[426]

[432] No other interested parties have raised concerns about 'double-dipping' or applied to the Commission for a different outcome in respect of any copied State awards (other than the excepted copied State awards).

[433] Accordingly, in the circumstances of this Review and for the reasons given earlier in this decision in relation to modern award minimum wages, we have decided that the wage rates in copied State awards other than the excepted copied State awards will be increased by the same percentage amount we have determined shall apply to modern award minimum wages.

[434] Our determination in this Review is that the wages in all copied State awards, other than the excepted copied State awards, are increased by 4.6 per cent, subject to a minimum increase of $40 per week, from the first full pay period on or after 1 July 2022.

[435] We note the Commission is not required to publish the rates of the wages in copied State awards as so varied.

[269]

[436] We note that none of the copied State awards applying to the Employer parties appear to provide for wage increases after 1 July 2022. Therefore, adjustments to wage rates in these copied State awards may not raise the same concerns in future reviews.

[437] ACCI and ABI propose the Commission adopt a new approach to adjusting wages in copied State awards. They submit the Panel should only apply the Review decision to copied State awards on a case-by-case basis, following submissions by parties.[427] ABI submits that to the extent that the Commission wishes to adopt a default approach to increasing copied State award wage rates, it should only seek to increase such wages to align with modern award rates.[428]

[438] ABI submits that the current default approach of applying the Review increases to all copied State awards has a disproportionately negative impact on NSW businesses.[429] ABI submits that NSW has been 'the biggest divestor of state assets by total value over the past five to ten years, divesting an estimated $19.54 billion in assets between 2014 and 2019 alone', and that this trend is likely to continue.[430] ABI submits that 'it is reasonable to conclude that the current lion's share of copied State awards in operation apply to businesses operating in NSW.'[431]

[439] ABI submits that it would be unfair to force the businesses covered by the relevant copied State awards to provide 2 wage increases - one imposed by the IRCNSW and the other through annual wage review decisions.[432] Further, the Panel should consider the compounding effect of wage increases, where 'the monetary cost of the two increases is greater than their combined sum had they been applied at the same time.'[433] ABI submits that it is 'particularly unfair on businesses which, as a result of standard contractual terms surrounding the sale of a state asset, are often legally constrained from taking measures to ameliorate unplanned labour cost increases.'[434]

[440] ABI also submits that the NSW-based awards provide employees with 16 to 52 per cent more remuneration than the relevant modern awards would for the same work, which 'is of fundamental importance when it comes to the Commission exercising a discretion to vary a minimum payment safety net.'[435] Accordingly, ABI submits that the Panel's current approach fails to properly take into consideration the jurisdictional differences that exist in the setting of federal and State award wage rates.[436]

[441] ABI submits that the Commission's current approach (since the 2017-18 Review decision) has placed an 'unrealistic expectation' on employers to be aware of and understand the history and the interaction between copied State awards and Review decisions.[437]

[442] Similarly, ACCI submits that the Commission's current approach 'places the entire burden and obligation onto those covered by copied State awards to have to argue the case year by year in order to avoid potentially being subjected a double wage increase hit':[438]

[272]

[448] This Section sets out the outcome and other relevant matters to the Review.

[449] The national minimum wage order will contain:

(a) A national minimum wage of $812.60 per week or $21.38 per hour;

(b) Two special national minimum wages for award/agreement free employees with disability: for employees with disability whose productivity is not affected, a minimum wage of $812.60 per week or $21.38 per hour based on a 38-hour week, and for employees whose productivity is affected, an assessment under the supported wage system, subject to a minimum payment fixed under the Supported Wage System (SWS) Schedule;

(c) Wages provisions for award/agreement free junior employees based on the percentages for juniors in the Miscellaneous Award 2020 applied to the national minimum wage;

(d) The apprentice wage provisions and the National Training Wage Schedule in the Miscellaneous Award 2020 for award/agreement free employees to whom training arrangements apply, incorporated by reference, and a provision providing transitional arrangements for first year award/agreement free adult apprentices engaged before 1 July 2014; and

(e) A casual loading of 25 per cent for award/agreement free employees.

[450] The NMW order will operate from 1 July 2022.

[451] Modern award minimum wages will be increased by 4.6 per cent subject to a minimum increase for adult award classifications of $40 per week. This figure is based on a 38-hour week for a full-time employee, consistent with s.62 of the Act.

[452] Modern award minimum wages which are to be increased by $40 increase per week and $1.05 per hour (on the basis of a 38-hour week) will be adjusted using the same approach as used in the 2009-10 Review.[445] The Commission will seek further feedback from the relevant parties on a small number of awards where the award is silent on the method of calculation for a flat dollar increase and the approach used in the 2009-10 Review cannot be replicated.[446]

[453] The default or usual position is that variations to modern award minimum wages arising from a Review operate from 1 July in the financial year following the Review.

[454] The variation determinations in respect of the following awards will operate from 1 October 2022:

Aircraft Cabin Crew Award 2020

Airline Operations - Ground Staff Award 2020

Air Pilots Award 2020

Airport Employees Award 2020

Airservices Australia Enterprise Award 2016

Alpine Resorts Award 2020

Hospitality Industry (General) Award 2020

Marine Tourism and Charter Vessels Award 2020

Registered and Licensed Clubs Award 2020

Restaurant Industry Award 2020.

[455] The variation determinations in respect of all other modern awards, modern enterprise awards and State reference public sector awards will operate from 1 July 2022.

[456] The Panel is required to review and may make one or more determinations varying wages in relevant transitional instruments as part of the Review.

[457] Our determination in this Review is that the wages in all relevant transitional instruments are increased by 4.6 per cent subject to a minimum increase of $40 per week on the basis of a 38-hour week. This determination comes into operation on 1 July 2022 and takes effect in relation to a particular employee on the start of the employee's first full pay period on or after 1 July 2022.

[458] The Commission is not required to publish the rates of the wages in the relevant transitional instruments as so varied.

[459] With regard to copied State awards, our determination in this Review is that the wages in all copied State awards, other than the excepted copied State awards, are increased by 4.6 per cent, subject to a minimum increase of $40 per week on the basis of a 38-hour week. This determination comes into operation on 1 July 2022 and takes effect in relation to a particular employee on the start of the employee's first full pay period on or after 1 July 2022.

[460] The Commission is not required to publish the rates of the wages in the relevant copied State awards as so varied.

[461] We wish to express our appreciation to the parties who participated in the Review for their contributions and to the staff of the Commission for their assistance.

[298]

[1] The Panel received submissions from the Australian Government, most state governments, parties that represent the interests of employers and employees, and other bodies. Proposals with respect to the NMW and modern award minimum wages were once again highly polarised. Several parties proposed substantial increases to the NMW and modern award minimum wages, while employer groups ranged from no increase at all to the NMW and modern award minimum wages; increases of between 2.5 and 3 per cent and an approach that had regard to the underlying rate of inflation.

[2] The Australian Government and some state governments did not propose a quantum increase to the NMW and modern award minimum wages.[447]

[3] The Australian Government initially submitted that the Review decision should support the economy and labour market while balancing improving living standards and the viability of businesses.[4] In a later submission the Australian Government recommended that the Panel 'ensures that the real wages of Australia's low-paid workers do not go backwards'.[449] The New South Wales Government also advised an approach that is balanced and sensitive to the economic and labour market conditions.[450] The Queensland Government proposed an increase that is 'fair and reasonable'.[451] The Government of South Australia recommended a 'fair and balanced approach'.[452] The Government of Western Australia suggested the Panel should continue to adopt a balanced approach and award a meaningful increase.[453]

[4] The Victorian Government proposed a 3.5 per cent increase to the NMW and modern award minimum wages.[454]

[5] The Australian Catholic Council for Employment Relations (ACCER) submitted a 6.5 per cent increase to the NMW and a minimum of 6.5 per cent increase to the C13 to C10 rates.[455]

[6] The ACTU proposed a uniform increase of 5 per cent to the NMW and modern award minimum wages.[456] This was supported by the ASU and SDA.[457] This was revised up to 5.5 per cent in the ACTU's submission in reply.[458]

[7] ACCI and NRA proposed an increase to the NMW and modern award minimum wages of up to 3 per cent.[459] ACCI supported deferring increases to modern awards relevant to aviation and tourism, accommodation and food services and arts and recreation.[460] NRA submitted a deferred operative date for the Restaurant and Hospitality Awards to 1 November 2022.[461] ABI recommended an increase of between 2.5 and 3 per cent and a deferred increase to in modern awards consistent with the 2020-21 Review.[462] Ai Group proposed an increase of 2.5 per cent to the NMW and modern award minimum wages and also supported a deferral of increases to modern awards in the aviation and tourism, accommodation and food services, arts and recreation services, and retail trade sectors consistent with 2020-21 Review.[463] The South Australian Wine Industry Association (SAWIA) proposed that if an increase is granted, it should be no higher than 2 per cent.[464]

[8] The ARA recommended an increase equal to the underlying rate of inflation (as measured by the trimmed mean).[465]

[9] MGA recommended no increase, however, proposed that if an increase is granted then it should be 0.5 per cent.[466] R&CA proposed no increase be granted but that any increase should take effect 12 months after the previous increase.[467]

[10] The Australian Council of Social Service (ACOSS) recommended that the Panel increase real minimum wages and that decisions on the levels of minimum wages be informed based on a benchmark of 60 per cent of full-time median wages.[468]

[11] The AMWU proposed an increase of $45 per week to the NMW, with a staged process to 60 per cent of full-time median weekly earnings by 2025.[469] Similarly, Adam Bandt MP also recommended that the NMW reach 60 per cent of the median wage.[470]

[362]

[1] Prior to December 2012, the Act only preserved an employee's employment terms and conditions in the circumstances of a transfer of business, when the transfer was between 2 national system employers.[473]

[2] The Fair Work Amendment (Transfer of Business) Act 2012 (Cth) inserted Part 6-3A into the Act with effect from 5 December 2012.

[3] Part 6-3A of the Act largely reflects the transfer of business provisions in Part 2-8 of the Act. It provides for the transfer of certain terms and conditions of employment when there is a transfer of business from a non-national system employer that is a State public sector employer[474] (called 'the old State employer') to a national system employer (called 'the new employer').[475] Part 6-3A applies where there is a transfer of business from a State public sector employer in New South Wales (NSW), Queensland, South Australia, Tasmania or Western Australia to a national system employer.

[4] There is a transfer of business between the old State employer and the new employer if the following requirements are satisfied:

the employment of a person who is a public sector employee of the old State employer has terminated

within 3 months after the termination, the person becomes employed by the new employer

the person performs the same, or substantially the same, work (the 'transferring work') for the new employer as they performed for the old State employer, and

• there is a connection between the old State employer and the new employer as described in ss.768AD(2)-(4) (in broad terms, where the old State employer transfers assets or outsources work to the new employer, or the new employer is an associated entity of the old State employer).[476]

[5] A transfer of business involves the 'transfer of employment' of one or more employees of the old State employer to the new employer. Each of those employees is a 'transferring employee'.[477]

[6] The Explanatory Memorandum for the Fair Work Amendment (Transfer of Business) Bill 2012 (EM) outlines the scheme of the Bill as follows:

[367]

[9] There are 2 types of copied State instrument - a 'copied State award' and a 'copied State employment agreement'.[481] A copied State award copies the terms of a State award[482] that covered the transferring employee and the old State employer immediately before the termination of the employee's employment with the old State employer.[483] The copied State award is taken to come into operation immediately after the 'termination time' - the start of the day the employment of the employee is terminated by the old State employer[484] - and to include the same terms as were in the original State award immediately before the termination time.[485]

[10] Generally, the copied State award covers the transferring employee and the new employer in relation to the transferring work from the employee's 're-employment time'.[486] The copied State award will apply to the transferring employee/new employer (and be enforceable by them) if the copied State award covers the employee/new employer and is in operation, no other provision of the Act has the effect that the copied State award does not apply, and immediately before the employee's termination time, the employee/old State employer would have been required to comply with the terms of the original State award or have been entitled to enforce it.[487]

[11] While a copied State award for a transferring employee is in operation and covers the employee, or an employer (whether the new employer or another national system employer) or another person in relation to the employee, a modern award will not cover any of them in relation to the employee.[488]

[12] A copied State award can be terminated only in limited circumstances,[489] but will cease to cover the transferring employee if, after the employee's re-employment time, an enterprise agreement starts to cover the employee in relation to the transferring work.[490]

[13] Unless terminated earlier, a copied State award ceases to operate at the end of 5 years (the default period), starting on the day the employee's termination time occurred.[491] After that time, the transferring employee generally reverts to the fair work instruments that apply at the new employer's workplace.[492]

[14] Where a copied State award ceases to operate through effluxion of time and as a result a modern award applies to the transferring employee, this is not intended to result in a reduction in take-home pay of the employee.21F[493] Where an employee does suffer a reduction in take-home pay as a result, the Commission may make a take-home pay order to remedy this.22F[494] The take-home pay order will continue to apply to the employee for so long as the modern award continues to cover the employee.23F[495]

[15] Section 768AW of the Act specifies the circumstances in which the Commission may vary a copied State instrument (including a copied State award):

Annual Wage Review 2021-22 [2022] FWCFB 3500 (15 June 2022)

At a glance

Court

Decision date

Source

Judgment (727 paragraphs)

Annual Wage Review 2021-22 [2022] FWCFB 3500 (15 June 2022)

Legislation Cited (9)

Cases Cited (6)