Professional Engineers & Professional Scientists (Private Industry) (State) Award [2005] NSWIRComm 402

Award - variation to an award - special case - 2005 State Wage Case increase - operative date not agreed - lagging award - delays in the flow of State Wage Case increases - variation made - special case made out - retrospective operative date refused - further delay in variation refused - prospective operative date awarded CATCHWORDS:

Re Pastoral Industry (State) Award 2001 104 IR 168 State Wage Case - August 1997 (1997) 73 IR 200 State Wage Case - June 1998 (1998) 79 IR 416 State Wage Case 1999 (1999) 88 IR 363 State Wage Case 2000 (2000) 97 IR 93 CASES CITED: State Wage Case 2001 (2001) 104 IR 438 State Wage Case 2003 (2003) 121 IR 446 2004 State Wage Case (2004) 132 IR 190 2005 State Wage Case (2005) 142 IR 337

HEARING DATES: 11/01/2005 EXTEMPORE JUDGMENT DATE: 11/01/2005

APPLICANT: Ms Alison Bathe

Association of Professional Engineers, Scientists and Managers, Australia

Mr Stephen Loehr Australian Business Industrial

Mr Michael Cooper Employers' First and Australian Mines and Metals Association

• 5 - 00INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES

CORAM: Walton J, Vice-President Schmidt J Murphy C

PROFESSIONAL ENGINEERS & PROFESSIONAL SCIENTISTS (PRIVATE INDUSTRY) (STATE) AWARD Application by The Association of Professional Engineers, Scientists and Managers, Australia (NSW Branch) for variation re State Wage Case 2005

JUDGMENT OF THE COMMISSION EX-TEMPORE [2005] NSWIRComm 402

1 These proceedings were commenced in July 2005, by an application filed by the Association of Professional Engineers, Scientists and Managers ('APESMA'), to vary the Professional Engineers and Professional Scientists (Private Industry) (State) Award to give effect to the 2004 and 2005 State Wage Case decisions. While the parties to the award were able to agree upon the variation to give effect to the 2004 State Wage Case decision (see State Wage Case 2004 (2004) 132 IR 190), they were unable to reach agreement as to the date of effect of the variation to the award, which would flow from the 2005 State Wage Case decision (see State Wage Case 2005 (2005) 142 IR 337). 2 Consequently, in August 2005, Schmidt J referred the application to the President as a Special Case, pursuant to s 193 of the Industrial Relations Act 1996 ('the Act'). 3 The variation to the award which gave effect to the 2004 State Wage Case operated from the first pay period to commence on or after 16 August 2005. APESMA seeks an operative date for the 2005 State Wage Case variation of 16 August 2005. The employer parties to the award, consented to the award being varied, but proposed an operative date of 16 August 2006. 4 Principle 8 of the Commission's Wage fixing principles provides:

8. State Wage Case Adjustments In accordance with the State Wage Case 2005 decision awards may, on application, be varied to include a State Wage Case adjustment of $17.00 per week, subject to the following: (a) The operative date will be no earlier than the date of the variation to the award. (b) That at least twelve months have elapsed since the rates in the award were increased in accordance with the State Wage Case 2004 decision. (c) In awards where the variation for a safety net adjustment arising from the 1999, 2000, 2001, 2002, 2003, 2004 or 2005 State Wage Case decisions is by consent and does not result in an increase in the wage rates actually paid to employees or increase the wage costs for any employer, any applicable 12 months' delay between variations may be waived. (d) At the time when the award is to be varied to insert the State Wage Case adjustment (or a proportionate amount in the cases of part-time and casual employees, juniors, trainees, apprentices, employees on a probationary rate, employees on a supported wage or with permits under s125 of the Act), each union party to the award will be required to give a specific commitment as to the absorption of the increase. In particular, the union commitments will involve the acceptance of absorption of the adjustment to the extent of: (i) any equivalent overaward payments, and/or (ii) award wage increases since 29 May 1991 other than safety net, State Wage Case, and minimum rates adjustments. (e) The following clause must be inserted in the award: 'The rates of pay in this award include the adjustments payable under the State Wage Case 2005 . These adjustments may be offset against: (i) any equivalent overaward payments, and/or (ii) award wage increases since 29 May 1991 other than safety net, State Wage Case, and minimum rates adjustments.' The above clause will replace the offsetting clause inserted into awards pursuant to the Principles determined in the State Wage Case 2004 decision. (f) By consent of all parties to an award, where the minimum rates adjustment has been completed, award rates may be expressed as hourly rates as well as weekly rates. In the absence of consent, a claim that award rates be so expressed may be determined by arbitration. (g) The State Wage Case adjustment will only be available where the rates in the award have not been increased, other than by safety net or State Wage Case adjustments, or as a result of the application of the Minimum Rates Adjustment principle, since 29 May 1991. 5 The Special Case principle provides:

10. Special Case Except for the flow on of test case provisions, any claim for increases in wages and salaries, or changes in conditions in awards, other than those allowed elsewhere in the principles, will be processed as a special case before a Full Bench of the Commission, unless otherwise allocated by the President. This principle does not apply to applications for awards consented to by the parties, which will be dealt with in the terms of the Act, or to enterprise arrangements, which will be dealt with in accordance with the Enterprise Arrangements principle. 6 There was no doubt that the Full Bench could grant the operative date sought by APESMA, or some other date, in the exercise of the Commission's discretion, having regard to the requirements of the Act. Relevantly s 10 requires that awards fix 'fair and reasonable conditions of employment for employees' and in the case of the variation of an award after its nominal term has expired, s 17(3)(d) permits variation if the Commission considers that it is not contrary to the public interest to do so. 7 The principles which apply in Special Cases are well settled. The onus falls on the applicant (see Re Pastoral Industry (State) Award 2001 104 IR 168 at [73]), who must demonstrate matters of the kind discussed in Re Operational Ambulance Officers (State) Award (2001) 113 IR 384 at [166]:

166 In order to satisfy the requirement for a special case, the applicant must demonstrate that the case has "special attributes" or is "out of the ordinary" so as to take it outside the restrictions which may otherwise apply under the wage fixing principles. In Re Social and Community Services Employees (State) Award [2001] NSWIRComm 274 , a Full Bench stated (at [24]): Thus it can be seen, ... that strict compliance with the wage fixing principles generally or with the work value principle and structural efficiency considerations in particular is not required where as here a case is advanced as a special case. In saying that we should not be taken to mean that such considerations will necessarily be excluded from the special case. As much is clear from the Crown Employees case. It is however appropriate to observe ... that the present Special Case principle unlike its 1990 predecessor does not require that cases be considered "in accordance with the structural efficiency and other relevant principles". It requires, as was said in the Transport Industry case, that special attributes exist which warrant approval by the Commission despite the restrictive considerations imposed generally by the principles of wage fixation and that is the essential basis upon which the Commission will approach the determination of the present application.

(See also Re Health and Community Employees Psychologists (State) Award [2001] NSWIRComm 302; Re Corrections Health Service Nurses (State) Award (No 2) [2001] NSWIRComm 58; Metal, Engineering and Associated Industries Award 1998 - AIRC Print T4991, 29 December 2000 for discussion of special case principle). 8 APESMA relied upon a survey undertaken by the Australian Institute of Management, AIM National Salary Survey 2005: Large Companies and the 2005 Chandler Macleod Market Salary Survey, to demonstrate that while many employees covered by the award received overaward payments, some employees were paid only the minimum award rates. There was no dispute amongst the parties, that this was, in fact, the case. They also agreed that the 2005 State Wage Case increase would be absorbed into overaward payments and that therefore, the application only affected employees who received minimum award rates of pay in their employment. 9 To satisfy the onus which fell upon it in the proceedings, APESMA relied upon the history of the award, which showed that since 1997, there had been considerable delay in State Wage Case increases flowing into the award. The 1997 and 1998 State Wage Case increases took effect in March 2000; the 1999 State Wage Case in August 2000; the 2000 State Wage Case in December 2001; the 2001 State Wage Case in June 2002; the 2002 State Wage Case in June 2003; the 2003 State Wage Case 2003 in June 2004 and the 2004 State Wage Case in August 2005. 10 The case advanced was that the award was a 'lagging award', as discussed in various State Wage case decisions. Employers had benefited from delays in the introduction of State Wage Case increases and employees had suffered as a result. Given the impending enactment of new federal legislation, which would have the effect of removing the award from the State Industrial system for corporate employers, employees paid the minimum award rates faced great uncertainty and potentially, further disadvantage, if the union's claim were not granted, 11 The case advanced by Australian Business Industrial and supported by Employers' First was that the award was not a 'lagging award' and that foreshadowed changes to the federal industrial relations system were irrelevant to the claims here advanced. The Union had accordingly not met the onus which fell upon it in these proceedings. 12 The concept of a lagging award emerged in the State Wage Case decisions, after a concern expressed in the State Wage Case - August 1997 (1997) 73 IR 200 decision, that some awards had not been varied to give effect to earlier State Wage Case decisions. Mechanisms were put in place to ensure that these problems were addressed. In the State Wage Case - June 1998 (1998) 79 IR 416 decision it was observed at p 440:

The parties were agreed that there should be no general order made on this occasion. That approach flowed from some difficulties which were said to have arisen for particular parties from the terms of the general order made in the State Wage Case - August 1997 and from the fact of three different amounts of wage increase flowing from the decision in this case.

In the State Wage Case - August 1997 the Full Bench rejected the approach urged by all parties, except the Crown, that there should be no general order, given a concern that implementation of increases introduced in earlier State Wage Cases to ensure that low paid workers in particular achieved wage increases of $24 per week between May 1991 and March 1996 had not been entirely successful.

It now appears to be the case that the position of the 54 awards identified as not having received the benefit of the three $8 safety net adjustments has been addressed. We are concerned, however, that these awards or others which cover low paid workers are not again overlooked. Accordingly, while we are prepared to accede to the position advanced by the parties, that the increases which we award should be inserted into awards upon application, rather than by way of general order, we direct the Registrar to provide a Report not later than 31 October 1998 to his Honour the President, as to the progress of award variation to give effect to our decision in this case. The position of any awards lagging behind will then be addressed, if necessary by the Commission acting of its own motion. 13 The matter was revisited in the State Wage Case 1999 (NSW) (1999) 88 IR 363 decision, where it was said at p 395:

The exception mentioned is the case of lagging awards. In the State Wage Case August 1997 at 223, the State Wage bench dealt with the position of some 218 awards (later amended to 54 awards), which were lagging behind, with over half not having received the benefit of three outstanding $8 safety net adjustments and with some awards having increases of $34 outstanding. The Commission determined that these outstanding increases should be phased in by agreement or, in the absence of agreement, by decision of a single member of the Commission. The submission that the principles should prescribe a mandatory phase-in mechanism of 18 months was rejected. The parties later gave attention to the position of these awards so that the difficulties were addressed. In the State Wage Case June 1998 (at 440) it was held: `It now appears to be the case that the position of the 54 awards identified as not having received the benefit of the three $8 safety net adjustments has been addressed. We are concerned, however, that these awards or others which cover low paid workers are not again overlooked. Accordingly, while we are prepared to accede to the position advanced by the parties, that the increases which we award should be inserted into awards upon application, rather than by way of general order, we direct the Registrar to provide a Report not later than 31 October 1998 to his Honour the President, as to the progress of award variation to give effect to our decision in this case. The position of any awards lagging behind will then be addressed, if necessary by the Commission acting of its own motion.'

Some 225 of the Commission's awards have been varied on application to give effect to the increases available under the State Wage Case June 1998 . It appears to follow that there are some awards again lagging behind. This is a matter of great concern to the Commission, given past experience that it is frequently awards covering low paid workers which are overlooked when the Commission accedes to the request of parties that increases available under State Wage Cases not be made available by way of general order.

As to such awards the Commission has determined to take two steps. The first is that at all future State Wage Case hearings the parties will be required to identify any awards which have not been varied to give effect to increases available under the previous State Wage Case so that the situation as to such awards can be considered and addressed. The second is that we have decided that, as was the approach adopted in the State Wage Case August 1997 , outstanding increases available under the State Wage Case June 1998 should be phased-in by agreement or, in the absence of agreement, by decision of a single member of the Commission. The requirement that increases available from this decision not be inserted into an award until 12 months after the 1998 increase has been inserted will not strictly apply to these awards, but will be a matter to be dealt with either by agreement of the parties or by decision of the Commission. The aim is to introduce at the appropriate time wage increases to which employees are entitled, but without affecting employment or business viability. 14 Consideration of these matters was deferred in the State Wage Case 2000 (2000) 97 IR 93, so that the impact of the s 19 Award Review process could be understood. In the State Wage Case 2001 (2001) 104 IR 438, it was concluded as to these awards at p 473:

129 It is apparent that the principles and procedures put in place by this Commission in successive State Wage Case decisions since 1997 to remedy the non-application of State Wage Case adjustments in awards under this Act have not been fully effective. Whether this situation arises from the failure of parties to make relevant applications or the principle not being given full effect is, to some extent, beside the point. What is important is that the principle was created to ameliorate the difficulties occasioned to low paid workers as a result of the non-adjustment of awards in accordance with State Wage Case decisions. These awards typically provide actual rates of pay.

130 In these circumstances, it is appropriate for the Commission to continue to fashion the provisions of Principle 8 so as to rectify lagging awards in the New South Wales system which by their nature (in not being merely minimum rates awards) require special attention for the low paid.

131 In these circumstances, Principle 8(c) of the federal principles is not appropriate and provides far too restrictive an approach to remedy the problem we have identified, and particularly so when regard is had to the history of the provisions in this jurisdiction. Whilst we can understand that the parties may not have looked to the special case principle as a means of dealing with these difficulties, we consider that, given the history of lagging awards, any requirement being imposed on the parties of this nature might serve only to aggravate rather than remedy the situation.

132 We propose, therefore, to amend Principle 8(g) so as to provide adequate scope to deal with the special class of awards which have lagged with respect to State Wage Case adjustments. We refer in this respect to awards which have more than one outstanding safety net adjustment or awards which, by dint of a delinquent approach to earlier applications, have been unable to access in a reasonable and timely way safety net adjustments, due to the operation of Principle 8(b). We emphasise that the grant of any such application is not automatic and may attract, in the ordinary course, phasing-in principles. Furthermore, we emphasise that the amendment to Principle 8(g) we propose to make is designed to deal with the special circumstances we have identified in this decision and not to provide for any abridgment of the twelve month provision arising in Principle 8(b) in the ordinary course.

133 In order to ensure the effective operation of Principle 8(g) we also intend to adopt a procedure by which applications arising under Principle 8(g) may be dealt with by the Commission. Accordingly, we direct that any application for a safety net adjustment which relies upon Principle 8(g) should be made no later than 1 August 2001. Further, such applications should specify: 1. that the application as pressed in whole or in part upon the basis of the operation of Principle 8(g); and 2. whether the award is or has been the subject of s19 proceedings.

134 Furthermore, the application should be accompanied by correspondence to the Industrial Registrar identifying that the application is made upon this basis.

135 Such applications will be listed before a member of this Full Bench, Walton J, Vice-President, after 1 August 2001. It will be expected that the Commission would then consider the applications in the light of any s19 proceedings (although we envisage that any s19 proceedings which are extant will take into account revised Principle 8(g)). We would expect that the parties before us will appear in the proceedings before his Honour with a view to indicating at that time the outcome of their researches as to whether there remain lagging awards other than those which have been the subject of an application in accordance with the abovementioned procedure. By this means, we expect the parties will provide the information as to lagging awards earlier sought by Full Benches in the State Wage Case 1999 and State Wage Case 2000 at that time .

136 Accordingly, we propose to amend Principle 8(g) as follows: (g) Increases arising from previous State Wage Cases may be phased-in upon application and where circumstances justify it, whether as part of the application of the increases arising from the State Wage Case 2001 or otherwise. 15 The matter was again dealt with in Re State Wage Case 2002 (2002) 114 IR 81 at p 106:

72 In our view, no proper basis has been established for the retention of Principles 8(g) and (h). Upon the material before us, it would appear that the principles have essentially served their purpose. Any residual issue (such as may exist) should be dealt with in special case proceedings. 73 Successive Full Benches in State Wage Case proceedings have sought the assistance of the parties as to the position of 'lagging awards'. The Commission has been consistently deprived of that information which was vital to a proper assessment of the extent of any lag in the introduction of State Wage Case adjustments in awards (see, for example, State Wage Case 2001 at [126]).

74 In order to properly deal with that question in future State Wage Case proceedings, we intend to issue directions which shall have the effect of providing the requisite information and ascertaining plainly whether any issue of that kind may properly be ventilated in State Wage Case proceedings.

75 In the result we direct: 1. The Industrial Registrar shall prepare a list of awards which, as at 31 December 2002, are: (a) awards which have not received the wage adjustment arising from this decision; or (b) awards which have not received a State Wage Case adjustment for a period exceeding 18 months ("the list"). 2. The Industrial Registrar to provide the list to the parties to these proceedings by 3 February 2003. 3. The parties shall confer as to the list and identify from that list those awards which are eligible for a wage adjustment pursuant to this decision together with any other awards (not appearing in the list) which fall within the categories described in direction 1 (and which are eligible for a wage adjustment pursuant to this decision). Those conferences shall occur on or before 3 March 2003; 4. The Labour Council shall provide to the Industrial Registrar and serve on the other parties to these proceedings on or before 17 March 2003, the list of awards arising from the operation of direction 3. If there be any dispute as to the inclusion of an award, a notation to that effect shall appear in the list. The Labour Council shall also provide to the Industrial Registrar and serve on the other parties to these proceedings a submission indicating whether any applications had been made with respect to the awards appearing on the list produced pursuant to this direction (and any matter number assigned to such application).

5. The Industrial Registrar shall provide the lists and submission referred to in directions 1 and 4 to the President, on or before 24 March 2003.

76 We do not expect that any State Wage Case proceedings in 2003 will deal with any issue concerning lagging awards or the 12 month rule (in so far as that matter remains relevant) unless the list described in direction 4 was supplied to the Industrial Registrar by the date specified in that direction.

16 In the State Wage Case 2003 (2003) 121 IR 446, it was observed at p 463:

60 The list prepared by the Industrial Registrar included 557 awards. In response to that document the Labor Council undertook a survey of its affiliates as to the status of awards shown on the list. The Labor Council then filed a document titled "SWC 2002 - Lagging Awards" which recorded the results of the survey and provided further relevant information regarding the awards on the list.

61 As earlier mentioned, the survey conducted by the Labor Council ultimately demonstrated that 13 awards had not received a wage adjustment by 26 March 2003. It will be evident that this number of awards was considerably less than the list prepared by the Registrar. Mr Gadiel explained this differential by reference to the 'absorption principle', that is, a large number of awards appearing in the Registrar's list did not attract the State Wage Case 2002 adjustment because of the operation of that principle.

62 In his oral submissions, Mr McDonald for Employers First contended that the Labor Council's list did not understate the extent of lagging awards and, further, that the explanation given for the limited number of awards identified by the Labor Council was accurate. He also submitted that the number of awards not in receipt of the State Wage Case 2002 increase was small.

63 On the material before us, we do not consider that there presently exists any lag in the introduction of State Wage Case adjustments for awards as would warrant any variation to the Principles or the making of directions, in that respect, akin to orders made in the State Wage Case 2002 . Where a particular concern arises as to a 'lagging award' in the future it may be considered in accordance with the Special Case Principle.

64 In any event, if any party seeks a variation to the Principles regarding 'lagging awards' or the '12 months rule' (to the extent applicable), they should take the following steps: 1. A communication in writing should be sent to the Industrial Registrar (with service of such notice upon the parties to the proceedings) by 1 March 2004. That notice should specify the variation to the Principle proposed; 2. By 1 April 2004, that party should file and serve contentions in support of the proposed variation. 17 It is apparent that 'lagging awards' dealt with in the various State Wage Case decisions, were not confined to awards applying to the low paid, or to awards providing for actual rates of pay. The latter would not be possible, of course, given that s 406 of the Act provides that award conditions only fix minimum entitlements. It follows that even an award such as this, applying as it does to highly educated professionals, contains the rates which some employees are actually paid, while others receive overaward payments. 18 In the 2004 State Wage Case decision, it was noted, at p 208, that :

81 In the 2002 State Wage Case (2002) 114 IR 81, a General Order pressed by the Labor Council was refused, the Full Bench concluding (at [64]) that: The last time a general order was made in State Wage Case proceedings was in 1997: State Wage Case - August 1997 (1997) 73 IR 200. Since that time, in successive State Wage Cases, the parties have agreed that any increase should be inserted into awards by way of application and not general order. There are good reasons why this has been the case: comity with the federal decision; administrative problems associated with the making of a general order in relation to the adjustment of a diverse range of allowances in many awards; the desirability of leaving control of award variations in the hands of the parties; the administrative difficulties associated with keeping track of whether and when unions have given the necessary undertaking in relation to absorption, especially in relation to awards with more than one union party and the operation of the principle providing a 12 month gap between State Wage Case adjustments ("12 month rule": see Principle 8(b) of the State Wage Case 2001). We are also mindful that the parties indicated that the problem of 'lagging awards' had been substantially ameliorated by the operation of Principle 8(g) of the 2001 State Wage Case decision and that all eligible awards had received the wage adjustment arising from that decision. 19 The award history shows that this award was not one of these identified in 2003, as not having received the 2002 State Wage Case increase, nor was the award dealt with in s 19 Award Review process, also designed to deal with such awards. 20 The 2002 State Wage Case was given on 31 May 2002. It was then envisaged that awards which had not received the 2002 State Wage Case increase by the following December, would be identified and processed under the mechanism then established. This award did not receive the 2002 State Wage Case increase until June 2003, more than twelve months after the 2002 State Wage Case decision was given. The award history suggests that while this award was the subject of an agreement between the award parties, to ameliorate the delay in the 1997 and 1998 State Wage Case increases flowing into the award, since 2000, State Wage Case increases have consistently been delayed for periods of over a year, despite the steps taken in the 2003 State Wage Case decision, designed to deal with awards in a position such as this. The result was that the 2004 State Wage Case increase, available when the decision was given in July 2004, was not agreed to take effect until August 2005. Now the introduction of the 2005 State Wage Case adjustment is resisted for another 12 months, a total delay of some 13 months since that decision was given. 21 We are well satisfied that the parties' continuing inability to properly attend to this award and the employees to whom it applies, cannot continue unaltered into the future. It appears that the mechanisms which the Commission introduced from time to time, to encourage parties to deal with these difficulties, have been quite ineffectual in this award. The result is that for those award employees in receipt of only minimum award rates, they have since 1997 continually had to wait for periods of over a year, before State Wage Case adjustments have flowed to them. 22 We accept that this has had no impact on those employees who have had the good fortune to be able to negotiate over award payments - in some cases considerably over the award minima. Even though this award applies to a group of professional employees, it is apparent from the parties' agreement that there are employees who receive only the minimum award rates, that not all such employees, are in that advantageous position. 23 It follows that employers covered by this award have benefited considerably from the continuing delays in the flow on of State Wage Case increases to minimum award rates of pay. We are well satisfied that it is entirely unconscionable that they continue to have access to that benefit, simply by refusing to agree on any mechanisms which would have the result which the State Wage Benches have repeatedly tried to ensure since 1997 - that these delays are phased out, by agreement between the award parties. To permit that situation to continue, particularly having regard to the employers' attitude that there should be a further 12 month delay before the 2005 State Wage Case increase flows into the award, would be to fail to ensure that this award fixes fair and reasonable conditions of employment for those in receipt of award minimum rates. 24 We are satisfied, in those circumstances, that the applicant has made out the onus which falls upon it in this case, particularly given the parties' failure in 2003 to deal with the award under the mechanism established in the 2003 State Wage Case decision or the subsequent s 19 award review process. The combination of ongoing delay and failure to take necessary and available steps to address that problem, provides a proper basis for the finding of a special case in this instance. We have concluded that the award should be varied to give effect to this decision, with an operative date as from today's date. That date is some four months after the 2005 State Wage Case decision was given, effecting an element of phase-in of the increase. It is a date consistent with the provision made in Principle 8(a), and a date which appropriately draws attention, yet again, to the necessity for award parties to ensure that they are prompt in the applications which they make, to vary awards to give effect to State Wage Case decisions. Orders 25 For the reasons given, we order the variation of the award in terms of the amended application, as agreed, but with an operative date of the first pay period to commence on or after 1 November 2004.

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