[1] On 27 April 2010 Mr Bjoern Fischer (the applicant) made an application to FWA for an order remedying a reduction in take home pay, under Schedule 5, Part 3 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (the Transitional Act).

[2] The Transitional Act relevantly provides:

8 Part 10A award modernisation process is not intended to result in reduction in take-home pay

(1) The Part 10A award modernisation process is not intended to result in a reduction in the take-home pay of employees or outworkers.

(2) An employee's or outworker's take-home pay is the pay an employee or outworker actually receives:

(a) including wages and incentive-based payments, and additional amounts such as allowances and overtime; but

(b) disregarding the effect of any deductions that are made as permitted by section 324 of the FW Act.

Note: Deductions permitted by section 324 of the FW Act may (for example) include deductions under salary sacrificing arrangements.

(3) An employee suffers a modernisation-related reduction in take-home pay if, and only if:

(a) a modern award made in the Part 10A award modernisation process starts to apply to the employee when the award comes into operation; and

(b) the employee is employed in the same position as (or a position that is comparable to) the position he or she was employed in immediately before the modern award came into operation; and

(c) the amount of the employee's take-home pay for working particular hours or for a particular quantity of work after the modern award comes into operation is less than what would have been the employee's take-home pay for those hours or that quantity of work immediately before the award came into operation; and

(d) that reduction in the employee's take-home pay is attributable to the Part 10A award modernisation process."

[3] Only if there has been a 'modernisation-related reduction in take-home pay' can a take home pay order be made.

[4] The explanatory memorandum accompanying the Transitional Act states at paragraph 197 that:

"The scope for take-home pay orders is tightly constrained. The intention is that orders can only be made where:

• There is an actual reduction in take home pay - if award rates decrease, but an employee's pay does not decline (because pay is maintained by their employer) and order can not apply;

• award modernisation is the operative or immediate reason for a reduction in take home pay."

[5] The applicant works as a security guard for Glad Security Pty Ltd. (the respondent). Prior to award modernisation he was employed under a NAPSA and Pay Scale derived from the Security Industry (State) Award (NSW). He is now covered by the Security Services Industry Award 2010.

[6] The applicant submitted that on 15 February 2010 the respondent introduced a new roster and changed his rate of pay 'to the minimum as set out under the new award'. His average hourly rate of pay was reduced from $23.61 per hour to $17.46.

[7] The respondent submitted that the rate of $23.61 previously paid to the applicant was an agreed flat hourly rate payable for all hours worked under an 84 hour fortnightly roster cycle. This incorporated overtime, weekend penalty rates and shift loadings. The respondent has now introduced a 76 hour fortnight. The respondent submitted that the rate of $17.46 is the base hourly rate of pay in the modern award. The applicant would receive any applicable penalty rates and shift loadings on top of this rate. In practice these have relatively little relevance for the applicant, as he works permanent day shift - and wishes to continue to do so.

[8] Has the applicant suffered a 'modernisation-related reduction in take-home'? The first criterion in Item 8 (3) of the Transitional Act is met: a modern award applying to the applicant has come into operation. Secondly, he is still employed in the same position as he was prior to the award coming into operation. It is slightly less clear whether the third criterion, set out in Item 8 (3) (c) is met. His rostered hours have been reduced from 84 to 76 a fortnight. That in itself is not necessarily conclusive. If one removes the effect of the reduction in the number of hours it is still the case that his hourly remuneration has been reduced. Thus it does appear that he has suffered some reduction in take home pay for the same 'quantity of work'. The key issue is whether this reduction is attributable to the award modernisation process. In other words, is award modernisation 'the operative or immediate reason' for any reduction in take home pay?

[9] On any reasonable construction, for award modernisation to be 'the operative or immediate reason' the reduction in take home pay must be attributable to a reduction in relevant award entitlements between the 'old' award and the modern award. As already noted, the applicant is a permanent day worker. Has the modern award reduced the entitlements for such an employee?

[10] Under the Security Industry (State) Award (NSW) the applicant was classified as a grade 3 employee. Under the modern award he is classified as a Security Officer Level 3 (though he is actually paid by the respondent at a rate equivalent to a Security Officer Level 4). The minimum wage rate under the modern award for a Level 3 employee is actually 3.8 per cent higher than the equivalent rate under the relevant pay scale that applied prior to modernisation. A similar increase also applies at Level 4. Nor has there been any reduction in overtime rates of pay or shift loadings.

[11] Prior to the recent changes introduced by the respondent, the applicant enjoyed a significant 'over award' element in his pay; in particular he received the benefit of a rate of pay that had been 'loaded up' to compensate for penalty payments that he was not entitled to under the award, as he only worked day shifts. The respondent has made a decision the effect of which is to reduce at least part of this over award element, together with a reduction in total rostered hours. The subsequent reduction in take home pay can not be attributed to the award modernisation process as referred to in Item 8 (3) (d). The applicant has not suffered a 'modernisation-related reduction in take-home pay'. Accordingly his application is dismissed.

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