State Wage Case 2004 [2004] NSWIRComm 148

Mr M Gadiel for the Labor Council of New South Wales and Mr A Rorris for the South Coast Labor Council Mr P Ginters, counsel for the Australian Services Union of New South Wales Mr T McDonald for the Employers First and the Australian Retailers Association, New South Wales Division Mr D Grozier for Australian Business Industrial, the Furniture Industry Association (Management Services) and the Housing Industry (Industrial Relations) Association LEGAL REPRESENTATIVES: Mr R Marshall for the Local Government and Shires Associations New South Wales Mr JV Murphy, counsel for the Minister of Industrial Relations and the Public Employment Office Mrs V Paul for the Australian Industry Group, New South Wales Roads and Traffic Authority, Motor Traders Association of New South Wales, Association of Independent Schools of New South Wales and State Chamber of Commerce (New South Wales)

JUDGMENT: - 44 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES FULL BENCH CORAM: Walton J, Vice-President Schmidt J Boland J Grayson DP O'Neill C Bishop C

STATE WAGE CASE 2004 Summons to Show Cause - Commission on its own initiative pursuant to Part 3 of Chapter 2 of the Industrial Relations Act 1996.

REASONS FOR DECISION OF THE COMMISSION [2004] NSWIRComm 148

1 On 5 May 2004, the Commission issued a summons to show cause why, after considering the decision of the Australian Industrial Relations Commission ('the AIRC') in the Safety Net Review - Wages, May 2004 Case, Print PR002004 ('the National decision'), the Commission should not take such action pursuant to Part 3 of Chapter 2 of the Industrial Relations Act 1996 ('the Act'), as it may deem proper.

2 Sections 50 and 52 of the Act provide: 50 Adoption of National decisions

(1) As soon as practicable after the making of a National decision, a Full Bench of the Commission must give consideration to the decision and, unless satisfied that it is not consistent with the objects of this Act or that there are other good reasons for not doing so, must adopt the principles or provisions of the National decision for the purposes of awards and other matters under this Act. (2) A Full Bench of the Commission is to give consideration to the National decision either on application or on its own initiative. (3) The principles or provisions of a National decision may be adopted: (a) wholly or partly and with or without modification, and (b) generally for all awards or other matters under this Act or only for particular awards or other matters under this Act. (4) The principles or provisions of a National decision so adopted may be varied by a Full Bench of the Commission, whether or not another National decision is made.

52 Variation of awards and other orders on adoption of National decisions or making of State decisions A Full Bench of the Commission may, when adopting the principles or provisions of a National decision or making a State decision, make or vary awards, or make other orders, to the extent necessary to give effect to its decision.

A National decision is a decision of a Full Bench of the Australian Industrial Relations Commission that generally affects, or is likely to generally affect, the conditions of employment of employees in New South Wales who are subject to its jurisdiction.

4 On 10 May directions for the conduct of the proceedings were given by the President, Justice Wright. Further directions were given by the Vice-President, Justice Walton, on 14 May. The hearing proceeded in Wollongong on 25 May. In opening the proceedings, the Vice-President announced: In opening these proceedings we observe that we once again sit in the City of Wollongong in recognition of its importance and the Illawarra region's significance to the economy and citizenship of our State.

5 At the hearing the parties relied upon various documentary evidence. The position of all parties, apart from the Australian Services Union of New South Wales ('ASU'), was that there were no issues which they wished to pursue, apart from the question of the adjustment of rates of pay and the terms of the Order to be made. The position of the ASU was that there should be an amendment to Principle 8(g) of the Commission's Wage Fixing principles.

6 At the conclusion of the hearing, the Full Bench announced that: We have decided to grant an increase in rates of pay by the amount of $19.00 and will adjust relevant allowances by 3.5 per cent in State Awards, in accordance with the provisions of s50 of the Act, having given consideration to the National decision.

Such an adjustment in rates of pay and allowances will only be available upon application and in accordance with the Orders and Principles which we shall publish in due course with our reasons for decision.

The May 2004 Safety Net Review Wages decision of the Australian Industrial Relations Commission

8 By its decision the AIRC increased the federal minimum wage by $19.00 to $467.40 per week. It explained the task which fell to it to perform at [258]: Sections 88A, 88B and 90 of the Act require the Commission to balance a number of competing interests. The Commission is not concerned purely with the need to provide fair minimum standards for employees in the context of living standards generally prevailing in the Australian community and the needs of the low paid, the Commission must also have regard to economic factors, including levels of productivity and inflation, and the desirability of attaining a high level of employment and the state of the national economy and the likely effects on the national economy of any award or order particularly any effects on inflation and the level of employment.

9 The claim advanced by the Australian Council of Trade Unions ('ACTU') sought a $26.60 flat dollar adjustment in safety net award rates of pay, with commensurate adjustments in wage related allowances. All employer parties and intervenors opposed the claim, with increases of no more than $10.00 per week in award rates up to and including the level of the tradesperson's rate in the Metal, Engineering and Associated Industries Award being proposed or in some cases, $10.00 per week in all award rates. The Commonwealth Government supported the first proposal. The position of all State and Territory Governments supported a $20.00 per week increase in all award rates.

10 The AIRC gave detailed attention to evidence led as to growth in Gross Domestic Product, private investment and imports, a decline in exports, inflation (down to 2.4 per cent in December 2003 from 3 per cent in December 2004) and unemployment, down to 5.6 per cent in December 2003, coupled with growth in full time employment and productivity, with profits remaining at high levels. It concluded at [102] and [107]: [102] In summary, it can be seen that the Australian economy is expected to continue to perform strongly throughout the 2003-04 financial year with gross domestic product forecast to increase by 3¾ per cent compared with the 3¼ per cent earlier budget estimate. Household consumption is forecast to grow at a slightly higher rate than in 2002-03 whilst total business investment is anticipated to grow at a slower rate than in the previous year, albeit at a healthy 7 per cent. Net exports are forecast to make a negative contribution to growth. The labour market is forecast to grow and unemployment to again fall. The CPI is expected to record a financial year average of 2¼ per cent increase, a reduction on the 3.1 per cent increase in the previous year. Earnings growth will be in line with last year's outcome. …

[107] Australia's immediate economic outlook is positive with support coming from both a strengthening domestic market and an improvement in the international economy which should obviate some earlier concerns that our growth rate may not be sustainable. There is every reason to believe that there will be further strength in the labour market with employment numbers on the increase and the favourably low levels of unemployment at least maintained.

11 The AIRC also considered competing submissions about the costs of the claim, observing at [123] and [124]: [123] Reliable economy-wide data on the indirect costs of safety net adjustments is hard to find. In previous safety net reviews the Commission has not relied too heavily on surveys like those which ACCI and NMI advanced in this case. Data from the Award and Agreement Coverage Survey 1999 (AACS), discussed in the Safety Net Review - Wages May 2000 decision (the May 2000 decision), suggest that flow of safety net adjustments to employees in receipt of overaward payments or paid pursuant to certified agreements is limited.

[124] In relation to the second issue, whether the gross or the net cost should be given greater weight, we think that both estimates are relevant. We approach the assessment in this case on the basis that if granted in full the ACTU claim would lead to an increase in aggregate labour costs of no less than 0.1 per cent in net terms and no less than 0.4 per cent in gross terms. The actual cost is likely to be more but it is not possible to be more precise about the issue.

12 In dealing with evidence of wage movements, the AIRC observed at [130]: [130] Although we have considered all of the historical material, it seems to us that the indicators for the latest year are the most relevant. Each year for the last seven years the Commission has adjusted the safety net of minimum wages in light of the submissions and the data available at the time of the hearing. While it is helpful to some extent to compare increases in award rates with increases in other measures over the longer-term, it would not be appropriate, under that guise, to reopen past decisions. For similar reasons it would not be appropriate to place too much weight on average award increases expressed in percentages. Each safety net adjustment since 1997 has been a flat dollar adjustment rather than a percentage. On some occasions the increase has been higher at the lower classification levels although on one occasion the increase was lower at the lower levels and higher at the higher levels. The overall effect of these adjustments has been that wages at the lower classification levels have increased more in percentage terms than wages at the middle and higher levels. The ACTU has consistently sought flat dollar adjustments in recent years and again in this case. In the circumstances we think it would be inappropriate to pay too much attention to the average increase in award rates. It is also important to point out that in several safety net review decisions the Commission has emphasised that changes in relativities brought about by flat adjustments cannot form the basis for future claims.

13 The AIRC also noted that the evidence showed that the incidence of award reliant employees in the workforce was declining, with those remaining being most heavily concentrated in three areas - accommodation, cafes and restaurants; retail trade and health and community services. It considered competing evidence in relation to the relationship between productivity and award coverage. It was concluded at [167] that: Having regard to the range of material in respect of the economic performance of the most award-reliant industry sectors, we are unable to discern any negative impact from the safety net adjustments which have been awarded in recent years.

14 The AIRC also examined evidence as to various research undertaken in relation to matters such as the economic effects of its Safety Net decisions, as well as experiences in New Zealand and Western Australia and the effect of wages upon the demand for labour. It was concluded at [235] to [236]: [235] We repeat what the Commission said in relation to the effect of safety net adjustments on employment in the May 2003 decision: "[177] Various parties have submitted that the employment effects of safety net adjustments should weigh more heavily in the Commission's deliberations. That submission would obviously be assisted by high quality research into those effects. Some degree of consultation, and hopefully agreement, between the major parties and interveners as to the scope, content and technical specification of any such research would enhance the value of the results."

[236] The material to which we have been referred does not undermine the conclusion expressed by the Commission in the May 2003 decision that there is a continuing controversy amongst academics and researchers about the employment effects of minimum wage improvements. There is nothing before us to indicate that the controversy has been resolved. We endorse the view expressed in that decision that: "[161] . . . Taking all of the research into account, it has not been established that moderate increases in the wages of the low paid, of themselves, will diminish aggregate employment outcomes, although some studies suggest that some negative effects might occur for employees receiving the minimum wage."

15 In coming to a figure of $19.00, the AIRC observed at [324] to [325]: [324] We affirm the Commission's view, stated in the Safety Net Review - Wages May 2002 decision (the May 2002 decision) and repeated in last year's decision, that in the normal course of reviewing the safety net the Commission should seek to maintain a safety net of fair minimum wages for all employees. We are not persuaded that a departure from that course is warranted on this occasion on economic, equity or other grounds. We have decided not to cap the adjustment. Since no party sought a percentage adjustment we have determined to award a dollar amount at all classification levels. Last year a number of factors, including the persistent drought and the need to consider the needs of the low paid, led the Commission to award a two-tier increase of $17 and $15. On this occasion we see no need for a reduction in the dollar increase at any level.

[325] Several parties, in particular the Commonwealth, submitted that the ACTU claim ignores the requirement for the Commission to establish a genuine award safety net and encourage workplace bargaining. As the Commonwealth pointed out, in a previous decision the Commission has recognised that increases in award wages have the potential to influence the speed at which agreement-making is taken up. This is a factor to be taken into account in assessing the parties' proposals. On the other hand, no one would suggest that all employees are capable of bargaining. Bargaining is not a practical possibility for employees who have no bargaining power. It is to be inferred from the statutory scheme that the award safety net should be adjusted with the interests of these employees in mind. Furthermore, the safety net adjustments in recent years have been accompanied by a steady growth in the number of employees covered by agreements. As we have noted elsewhere, data from the May 2002 EEH Survey show that 20.5 per cent of employees, or about 1.6 million employees, were award-reliant in May 2002, the corresponding figure from the May 2000 survey, was 23.2 per cent.

16 The AIRC also considered a small number of proposed alterations to its Principles, which were rejected. It concluded that except where permitted by the Principles established, the increase will be available from a date no earlier than 12 months after the increases provided in the May 2003 Safety Net decision.

17 The parties advanced the following cases in written submissions and orally.

18 The Labor Council relied upon economic evidence referred to in the National decision, to support the submission that the New South Wales economy was well placed to absorb an increase of $19.00 in award wages, without negative effects. Reference was also made to the speech made by the Treasurer, the Hon Michael Egan MLC, when delivering the State Mini Budget to the Legislative Assembly on 6 April 2004, as well as statements made in the Federal Budget, released on 11 May 2004, in relation to forecast economic growth. Reliance was also placed upon the statement of the Reserve Bank of Australia of 5 May 2004, in relation to the economy and Australia's export outlook.

19 It followed, so it was submitted, that there was no good reason why the wage increase awarded in the National decision should not flow to award covered employees in New South Wales. The Labor Council would have preferred the amount claimed by the ACTU in the National Wage Case proceedings, $26.60, but acknowledged the 'imperatives' of s 50 of the Act and submitted that the $19.00 Safety Net adjustment awarded by the AIRC, should be made available in New South Wales by the State Wage Bench, consistently with the objects of the Act.

20 It was also submitted that work related allowances should be increased by 3.5 per cent, to reflect the safety net adjustment. This was submitted to be consistent with past practice, of relating the increase to the C10 classification in the Metal, Engineering and Associated Industries (State) Award. The result of the increase would be to lift the Award Classification rate to $467.40 per week, that being the lowest rate for a full time adult employee under a New South Wales award.

21 Otherwise, only minor modifications were proposed to the principles, to reflect current circumstances. At the hearing it was clarified that the parties had, in fact, reached agreement as to those changes.

22 A General Order pursuant to s 52 of the Act was proposed to give effect to the decision, in order to ensure that increases in wages and allowances were received by workers in a timely manner and to reduce administrative burdens upon the parties and the Commission. It was submitted that the Order should take effect two months after this decision, in order to permit unions to make applications to vary awards, where particular issues arose for consideration, including complexity, timing, calculation of allowances and counterpart awards. Any awards which raised questions of complexity in their variation, should also be referred to the parties by the Industrial Registrar, by way of notice to the award parties, which would then require the parties to make an application in relation to such awards. The Order should also have regard to principle 8(b), which requires that 12 months must elapse since the 2003 State Wage Case increase flowed into an award, before the 2004 adjustment takes effect.

23 The Labor Council also reported that its investigations had revealed that there may again be a number of lagging awards, but noted that unions were attempting to deal with this outside the State Wage Case proceedings. It was proposed to monitor this situation over the next 12 months and to make an application to deal with this issue in the 2005 State Wage Case, if it became necessary.

24 The amendment sought to Principle 8(g) was: "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 or where the rates of pay set by an award have been increased under the Special Case Principle because it has been found that the award did not operate as to provide for an adequate safety net since 29 May 1991."

Alternatively, the ASU submits that principle 8(g) should be amended to read as follows:

"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 Adjustments, or as a result of the application of the Minimum Rates Adjustment, since 29 May 1991 or in the case of the Social and Community Services Employee's (State) Award since 6 December 2003."

25 The italicised words in each case broadly indicate the modifications sought to the current principle.

26 It was submitted that the amendment was required to deal with the peculiar circumstances of the Social and Community Services Employees (State) Award ('the SACS Award'). It was contended that this Award was of relatively recent origin, having been made in May 1991, in order to provide a safety net of wages and conditions for some of the lowest paid workers in the State.

27 It was argued that employers had used the current principle to oppose State Wage Case increases flowing to the SACS Award, forcing the ASU to continually and annually make Special Case applications, in order to access State Wage Case increases. This was argued to have been unintended under the current principle.

28 The SACS Award had been varied by consent in accordance with State Wage Case decisions, between May 1991 and November 2001. Two further State Wage Case adjustments in December 2002 and October 2003, had been opposed, but had flowed on as the result of arbitrated decisions of Full Benches in Special case applications. (See Re Social and Community Welfare Service (State) Award (Unreported, 6 December 2002, Wright J, President, Grayson DP and McLeay C) and Re Social and Community Welfare Services Employees (State) Award [2003] NSWIRComm 332.

29 This had followed a November 2001 arbitration before another Full Bench in Special Case proceedings, where a review of the Award had been conducted. (See Re Social and Community Welfare Service (State) Award (2002) 113 IR 119. The Bench had adopted a cautious approach to the claims advanced, given the Award's shortcomings; the parties' failure to improve award conditions since its first making and cost considerations. The Bench had also given consideration to a need to ensure that rates and conditions did not 'continually lag behind general standards'.

30 It was argued that the subsequent refusal of employers to consent to State Wage adjustments in 2002 and 2003, had led to the real possibility that the Award would again lag behind general standards and fail to properly provide for the employees which it covered. The Full Bench had acknowledged this problem in its November 2001 decision (at [306]) and the same observations were made in the December 2002 Special Case decision (at 16 -17).

31 It was submitted that the purpose of Principle 8(g) was to ensure that awards which had been 'specially' varied above the safety net, were not granted safety net increases. This Award was not in that position. While there would, understandably, be a natural reluctance to create exceptions, there was a sound basis for doing so in this case. It would ensure that the underlying objective inherent in the principles, the maintenance of an adequate and appropriate safety net, was achieved in this industry, like in others.

32 As to the issue of standing raised by Employers First in supplementary submissions, it was argued that the ASU had appeared in the proceedings in response to the summons issued by the Commission, which commenced the proceedings pursuant to s 50 of the Act. Section 51 did not impinge on the ASU's right to appear in the proceedings.

33 In any event, the principles adopted by the Commission would directly affect the ASU's ability to pursue claims on behalf of its members. It was a party to numerous awards made by the Commission. In particular, the SACS Award would be affected by the principles established. The ASU was entitled to be heard as to that matter. To suggest otherwise, would be to deny the ASU natural justice and would run counter to the intent of the Commission in issuing the summons which initiated the proceedings. Reliance was also placed upon the approach adopted to a claim advanced by the Transport Worker's Union in the State Wage Case - June 1998 (1998) 79 IR 416.

34 Here, the ASU application was said to be much narrower and consistent with the reasoning of the Special Case Full Bench in relation to the SACS Award in 2001, as well as the underlying purpose of principle 8(g), to ensure that the Award was brought into line with the safety net of awards generally.

35 The alternative was argued to be to permit employers to frustrate that purpose annually, by requiring the ASU to make a Special Case application to flow on State Wage Case increases. This, of itself, undermined the purpose of the Special Case principle.

36 We observe at this point that at the hearing the other parties were not called upon by the Bench to further respond to these submissions.

37 While concerned and disappointed that the AIRC had not adopted the employers' submission that there should be an adjustment of only $10.00 per week, tied to productivity oriented award variations and having a similar preferred position in this case, the requirements of s 50 of the Act were recognised in the submissions advanced. The submissions advanced for Australian Business Industrial ('ABI'), were relied upon in relation to the need to consider the public interest, as required by s 146(2) of the Act.

38 The General Order proposed by the Labor Council was opposed. The submissions advanced by employers in the State Wage Case 2002 (2002) 114 IR 81 at [38], where a similar application was refused, were relied upon. The Commission there refused the application and it was submitted, should do so again now.

39 If a $19.00 increase was awarded, the Labor Council's submissions on the Award Classification Rate, adjustment of allowances and specific amendments to the Wage Fixing Principles were agreed. In relation to the wording of principle 5(b), a minor difference in wording proposed by Employers First, was accepted by the Labor Council at the hearing, as earlier noted.

40 As to the application made by the ASU, in written submissions it was submitted that the issue raised had already been dealt with. Concerns as to the operation of principle 8(g) had been raised with the Industrial Registrar by the Labor Council in March 2004, in accordance with the Commission's Practice Direction 8A. The major industrial parties had, as a result, discussed the issue, with the result that the Labor Council had advised the Registrar that, after consultation with its affiliates, it proposed to withdraw its application to amend principle 8(g).

41 The fundamental change now proposed by the ASU was submitted to have been brought too late. It ignored the operation of Practice Direction 8A and was inconsistent with the requirements of s 50 of the Act. It followed that the application should not be countenanced in these proceedings. The ASU was a Labor Council affiliate. The Labor Council was a State Peak Council for employees under the Act, with a special role for representing the interests of unions in proceedings such as this. Section 51(2) gave it the sole right to make applications for a State decision on behalf of employees.

42 It followed that the ASU had no standing to make the application which it pressed. Under the scheme of the Act it would be illogical for the ASU, with its sectional interests, to be permitted to press a claim affecting employees across the State, whom it had no right to represent. While it might be arguable that s 50(2), dealing with the adoption of a National decision, was not formally delineated in this way, given the effect of the orders sought, generally affecting the conditions of employees across the State, the Commission should not entertain an application for amendment of the principles, not made or supported by any Peak Council.

43 It was also relevant that the ASU would not be prejudiced if its application could not be prosecuted. It could seek the consent of the relevant employers to a wage increase under the 2004 State Wage Case decision. At the hearing it was also revealed that in negotiations ongoing before the Commission as the result of orders made by the Full Bench in the 2003 Special Case proceedings, Employers First had indicated that it would not oppose State Wage Case increases flowing to the SACS Award in 2004.

44 In the written submissions it was noted that, in the absence of agreement, a Special Case application could be pursued. The ASU had been successful in pursing such an application in 2001, 2002 and 2003, with the result that increases well beyond those available under State Wage decisions had been achieved.

45 In any event, it was submitted that the ASU could not establish good reasons for the change sought to the Principles. This was particularly so, given the need for comity and consistency between State and National Wage Case decisions, implicit in s 50 of the Act. The application raised considerations only relevant to the SACS Award. This was a proper matter for the Special Case principle and not amendment of principle 8(g).

46 ABI did not oppose the granting of the $19.00 increase awarded by the AIRC, although noting that it was cautious about the decision reached. The AIRC had been optimistic about Australia's future economic outlook. ABI did not share this level of optimism. There were concerns about the underperformance of areas of the New South Wales economy and whether this underperformance would continue in the future.

47 It was submitted that, while the New South Wales economy accounted for about one third of the Australian economy, there were some indications that it might not perform as well as the rest of the Australian economy in 2004/05. Growth in New South Wales final demand in the last three quarters of 2003 was lower than the rest of Australia (0.8 per cent compared to 1.5 per cent). New South Wales retail trade turnover fell 1.1 per cent in the March 2004 quarter, while rising by 1.2 per cent elsewhere in Australia. This was the fifth consecutive quarter where growth in New South Wales had been lower than elsewhere.

48 Housing construction was now in a downward part of its cycle, although the downturn was expected to be lower in New South Wales than elsewhere. While there had been strong growth in employment, New South Wales had not benefited fully from the surge in full time employment. In April, the unemployment rate in New South Wales was 5.4 per cent and the Australian rate, 5.6 per cent. Trend data suggested that New South Wales full time employment growth had become weaker than that in the rest of Australia. Job ads were not running at high levels.

49 Wages growth in New South Wales had been similar to elsewhere in Australia. Underlying inflation was assessed to be 2 per cent and the outlook for the Australian dollar uncertain. It was concluded that the New South Wales economy had been experiencing slower growth in the last 12 months than elsewhere and that there were reasons to believe that the New South Wales growth in Gross State Product was likely to be lower than the forecast 3.5 per cent for Australia in 2004/05. There were indications that the New South Wales economy would continue to underperform, compared to the rest of Australia.

50 ABI did not, however, take the view that any reason had been established for this Commission not following the National decision on this occasion, particularly given that New South Wales is a 'major economy'.

51 AIG reiterated the submissions which it had advanced in the National Wage case, as to the need for any increase to be at a moderate level of $10.00 or week, for various economic reasons, but recognised the effect of s 50 of the Act and thus did not object in these proceedings, to the adoption of the $19.00 increase awarded by the AIRC.

52 It also opposed the General Order sought by the Labor Council and the claim advanced by the ASU.

Local Government and Shires Associations of New South Wales

53 The flow-on of the increases awarded by the AIRC was supported, consistently with s 50 of the Act. Otherwise, the submissions of Employers First were supported, including the opposition to the making of any General Order and the amendment to the principles proposed by the ASU.

Minister for Industrial Relations and Public Employment Office

54 The Minister sought the flow on of the $19.00 increase awarded by the AIRC, with consequential adjustments to allowances and the principles. Before the AIRC the joint submission of all State and Territory governments had been that a $20.00 increase was warranted and economically sustainable. At the hearing it was noted that the Minister had welcomed the AIRC decision when given and 'saw it as a responsible and meaningful way to assist all lower paid workers'.

55 In written submissions it was accepted that: 94. Given the generally favourable economic conditions, and lack of evidence to suggest any negative impact from the 2003 safety net adjustments, the decision of the AIRC to award an increase gives appropriate emphasis to the needs of the low paid and is economically responsible, sustainable and justified.

95. Given that the increase can be absorbed by the New South Wales economy, because the performance of the state's economy is so similar to the Australian economy, broadly exhibiting the same strengths and weaknesses, and in the interests of comity between wage outcomes in this jurisdiction and the Federal jurisdiction, the AIRC decision must now be applied in the New South Wales jurisdiction.

96. The position of the Minister and the PEO in these proceedings is that this Commission should adopt in full the increases emanating from the AIRC decision and apply them to New South Wales awards.

56 Reference was made to the various economic indicators which the AIRC had take into account, including the growth of the national economy; that economic conditions generally indicated that a significant increase in the minimum wage is sustainable; and that the evidence that past safety net adjustments had a significant negative effect on employment were unconvincing.

57 The New South Wales economy was also reviewed in detail, with an expectation of strong growth in 2003/04, as there was a recovery from the worst impacts of the drought and as global growth accelerated. An increase of 3.5 per cent was expected and with performance generally being accepted to be the same as the Australian economy, so that the AIRC's decision flowing to State awards could be absorbed.

58 New South Wales State Final Demand had grown by 5.1 per cent in 2002/03, with 5.4 per cent growth nationally. Such demand was expected to remain robust in 2003/04, despite a modest downturn in housing investment, given growth in household consumption. Business investment had grown by 10 per cent in 2002/03, with another positive result in 2003/04 expected, despite a weakening in non-residential construction. The good performance of the New South Wales and Australian economies in the preceding 10 years was submitted to be largely attributable to the rapid rise in labour productivity.

59 There had been a recovery in the tourist industry, with revenue from accommodation and employment having recovered from earlier declines. The Sydney Consumer Price Index had risen less than the increase for all capital cities, with annual inflation dropping to 2 per cent. The New South Wales Wage Cost Index had, however, risen by 3.5 per cent in 2002/03 and by the December quarter had risen to 4.1 per cent, compared to the national figure of 3.6 per cent. Unemployment had fallen to 5.1 per cent for males for two months at the end of 2003, figures only reached twice before since 1982. The female unemployment rate had fallen more slowly, although there had also been a shift from part time to full time employment.

60 The economic impact of the increase upon the New South Wales Government was submitted to be small and the flow-on of the National decision was urged, consistently with the objects of the Act and the provisions of s 10, which required the making of awards fixing fair and reasonable conditions of employment.

61 We are satisfied that the AIRC's Safety Net decision is a National decision which the Commission is required to consider, in accordance with the provisions of s 50 of the Act.

62 Section 50(1) requires the Commission to adopt the principles of a National decision, unless the Commission is satisfied that it is not consistent with the objects of the Act, or that there are other good reasons for not doing so. Having regard to the quantum of, and the reasons for, the increase awarded by the AIRC, we are satisfied that the increase arising from the National decision is consistent with the objects of the Act and that there are no good reasons for departing from the amount of the increase determined by the AIRC.

63 The AIRC concluded that the Australia economy was strong and may be expected to remain so until 2005. The evidence led in these proceedings is consistent with that conclusion and showed that the New South Wales economy continues to broadly reflect the strengths and weaknesses of the national economy. Whilst some aspects of the economic performance of the New South Wales economy has been softer than the Australian economy during 2002-03 and 2003-04 (due, for example, to the more significant impact of the drought in this State) the New South Wales economy is expected to grow strongly in 2003-04. Overall, the economic performance of New South Wales is and is expected in the immediate future to remain strong, making the increase awarded by the AIRC, which it described as sizeable, also sustainable in New South Wales. In coming to this conclusion we have, of course, had regard to the submissions advanced by both the employers and the Minister and the detailed economic material upon which they relied.

64 Notably, while employers maintained reservations about the amount of the increase awarded by the AIRC, their concern was not such that there was any real opposition to a flow-on of the increases to those employed under New South Wales awards. The Minister strongly urged its adoption, having regard to the strength of the State economy.

65 The parties' position, apart from the ASU, was that earlier departures by other State Wage benches from the principles established by the AIRC should continue, subject to minor (and consistent) modifications. We are satisfied that there are good reasons for those departures from the National decision to be maintained. We are also otherwise satisfied that the alterations to the principles agreed by the major industrial parties should be adopted.

66 We turn to the ASU application in relation to principle 8(g). We are satisfied that the ASU had standing to make the claim advanced, having regard to the way in which these proceedings were commenced, their purpose and the impact which the principles which we establish will have upon any award proceedings to which the ASU is a party. Nevertheless, the fact that none of the major industrial parties (including State Peak Councils), nor the Minister, supported the amendment proposed, was a matter to which the Commission should give considerable weight, having regard to the fact that they represented other parties across the State likely to be affected by the claim advanced.

67 We are well satisfied that no good reason was established for the modification to the principles proposed, establishing as it did a further significant departure from the principles established by the AIRC in the National decision. This conclusion flows inevitably from a consideration of how principle 8(g) came to take its current form and how it and other of the principles have operated, in the context of the SACS Award.

68 In the 2001 State Wage Case (2001) 104 IR 438, consideration was given to the provisions of Principle 8(g). The Bench there observed at [68]: 68 In the State Wage Case 2001 , the Commission modified the operation of the 12 months rule in the case of lagging awards by introducing Principles 8(g) and (h). The Full Bench stated: No party to these proceedings squarely addressed the requirements for information as to lagging awards required by the Commission in the State Wage Case 1999 and State Wage Case 2000 . The Labor Council did undertake some limited research which revealed, in its submission, the continued existence of lagging awards. However, it conceded that the research was not exhaustive. Further, the material supplied did not provide relevant information as to why the awards in question had so lagged.

The awards identified by the Labor Council were in miscellaneous industries with the greatest concentration lying in the transport industry and in relation to musicians. It would appear that some of the awards are subject to s19 proceedings which are extant. In other cases, s19 proceedings have been completed with respect to the subject awards.

It should also be noted that the AWU contended that Principle 8(g) did not effectively remedy the position of lagging awards or the problem of delayed access to safety net adjustments as the provisions of Principle 8(g) had been construed as applying only in circumstances where there was more than one outstanding safety net adjustment in relation to a particular award: Re Pastoral Employees (State) Award (unreported, Grayson DP, 14 December 2000).

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.

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.

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.

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.

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:

that the application as pressed in whole or in part upon the basis of the operation of Principle 8(g); and

whether the award is or has been the subject of s19 proceedings.

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

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 .

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. 69 In the 2002 State Wage Case decision, the Bench referred to these observations and noted at [69] to [72]: 69 In the latter part of 2001, there were proceedings before Walton J, Vice-President and Full Benches of this Commission to hear applications brought pursuant to the aforementioned procedures. The Vice-President dealt with consent matters (whether the matter ultimately proceeded under Principle 8(g) or otherwise). The Full Benches dealt with arbitrated proceedings. Judgment was delivered in all such matters.

70 We recite this history at some length in order to demonstrate the inadequacy of the contentions by the Labor Council in support of the retention of Principles 8(g) and (h) (albeit in an amended form) in this matter. Mr Lennon contended that there remained difficulties with the operation of the 12 months rule. He essentially relied in this respect upon a 'survey' of affiliates. That survey and the accompanying submissions did not, however, identify the name of any award (it merely gave a numerical indication of the awards purportedly lagging at a particular time). Nor did the Labor Council specify whether or not the surveyed awards had been dealt with under the aforementioned Principle 8(g) procedures.

71 Thus, the Commission was not advised as to whether the retention of the principle would, in fact, be utilised to revisit matters already dealt with by the Commission, even in arbitrated proceedings. In one sense, the amended Principles 8(g) and (h) sought by the Labor Council, merely aggravated this issue by suggesting, without apparent reason, a threshold date of 30 November.

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. 70 In the State Wage Case 2003 (2003) 121 IR 446 the Full Bench noted the evidence that there were only 13 awards which had not received the 2002 State Wage Case increase by 26 March 2003. At [63] to [64] it was concluded: 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.

71 The Special Case procedure about which the ASU makes complaint in relation to the SACS Award, must be considered against that background, as well as the adoption in the State Wage Case - August 1997 (1997) 73 IR 200, of the Award Classification Review rate, which continues in the principles which we adopt in these proceedings. That rate was established because the Commission was then concerned that some 218 awards had been identified as not having received increases available as early as the 1994 State Wage Case decision. The parties then agreed upon a mechanism to address these awards, thereafter called 'lagging awards'. At 221, the State Wage Bench observed: The parties have now agreed upon a mechanism to address this situation. The Commission is satisfied that what is proposed is capable of producing early review of these awards, which is clearly required. Such a review is one way in which the needs of low paid workers can be addressed in New South Wales. The mechanism, however, requires parties to the identified awards to actually take the step of making the necessary applications to address perceived defects in the awards. If that does not occur, other steps may be required to be taken in future.

72 The evidence in these proceedings showed that Glynn J made the SACS Award in arbitrated first award proceedings in 1991, in the expectation that the parties would thereafter co-operate with each other, so that over time, the award would be further improved, to achieve 'standards generally accepted in industry'. While State Wage Case increases thereafter flowed to employees covered by the new award, the process Glynn J envisaged was not put in train by the award parties.

73 In 2001, the Special Case Bench described the application before it as 'the first and only significant attempt since the award was made to seek the general improvements envisaged at the time it was made'. (at [15]). It was concluded (at [306]) that the 'award does not operate as an adequate safety net'. The result was that further steps were taken 'aimed at bringing this award in line with general standards but not to complete that process in these proceedings' (at [307]). A modest extension to the classification structure and rates of pay was awarded, involving a two-step increase over 15 months. The Bench also required the parties to embark on a further review of the Award, with a programme for a further report fixed.

74 In 2002, the flow-on of the State Wage Case increase was opposed by some, but not all, employers. The Full Bench concluded (at 16) that the Award no longer provided 'an adequate safety net for those employed under it, particularly those at the lower levels of the salary structure'. The State Wage Case increases were awarded and again, the parties were directed to pursue their ongoing review of the Award, with the Bench noting (at 17) that 'further wage adjustments must inevitably feature significantly in that review'.

75 In 2003, the State Wage Case increase was again opposed by some employers. Yet again the parties had not concluded their review of the Award. The Bench took the view that it was arguable that principle 8(g) did not preclude the increase and, that a Special Case had again been made out, amongst other things because the Award had still not been adjusted to general industry standards; the Award did not provide an effective safety net as to wages and salaries; and, was at risk of becoming a lagging award. (See [19])

76 The 2003 State Wage Case increase was awarded and the Full Bench delegated to Commissioner McLeay, the task of managing the further review of the Award. Those proceedings are continuing. It appears on the material before us that there will be no opposition to the flow-on of the 2004 State Wage Case increase to the SACS Award and that there will be either a further negotiated, or arbitrated, review of the Award in those ongoing proceedings, directed at ensuring that the Award provides general industry standards and an effective safety net as to wages and salaries.

77 That situation made clear that the amendment to principle 8(g) advanced by the ASU could not be granted. As explained at the hearing by Mr Ginters of counsel appearing for the ASU, the ASU envisaged that: ... if at the end of the review process, be it by consent or by arbitration, the result is that the SAC's award establishes an adequate safety net of, in particular, wages or salaries, then by virtue of this application that would not prevent my client thereafter receiving automatic State Wage Case increases so as to ensure that safety net which is ultimately achieved is maintained by wage increases that are granted by in futuro State Wage Case determinations.

78 Given the history of the Commission's Wage Fixing principles and their utilisation by the parties to the SACS Award over the lengthy period of time during which they have failed to conclude the process envisaged in the proceedings before Glynn J in 1991, there can simply be no proper basis upon which such an outcome could be granted. If granted, it could entirely set at nought ongoing efforts by the Commission to bring this award up to date, a process which should be properly concluded in the proceedings currently on foot. Thereafter, the question of the application of State Wage Case increases to the SACS Award, must be determined in the same way as in relation to other of the Commission's awards, including in Special case proceedings, if required.

79 This examination of the history of the SACS award, nevertheless highlights, in a timely way, the ongoing role which the Award Classification Rate has to play in New South Wales. Consistently with the objects of the Act, it is of ongoing importance that all industrial parties pay proper attention to the awards to which they and their members are party, to ensure that they continue to provide fair and reasonable conditions of employment and do not become 'lagging awards'. We note the undertaking of the Labor Council to assist in that process.

80 We are satisfied that no General Order should be made on this occasion, no good reason for such a departure from the National decision having been established. The Commission made a General Order in the 1997 State Wage case, upon application of the Minister. It was opposed by other parties, but awarded, at a time of concern in relation to the existence of a large number of lagging awards. Such an order was opposed by all parties in the 1998 State Wage case, given difficulties which had flowed for the parties from the earlier order.

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. 82 We are satisfied that these conclusions remain applicable and that the mechanism proposed by the Labor Council on this occasion would not reduce, but may in fact, add to, the administrative burden falling upon the parties and the Industrial Registrar in identifying and dealing with the awards which should properly be varied to give effect to the conclusions which we have reached.

83 Accordingly, awards will be varied to give effect to this decision, upon application.

(1) Pursuant to s 50 of the Industrial Relations Act 1996, the Full Bench of the Industrial Relations Commission of New South Wales orders, for the purpose of awards and other matters under the Act, the adoption, partly and with modifications as contained in this decision and reasons of the Full Bench, of the principles and provisions of the National decision of 5 May 2004.

(2) Pursuant to order 1, the Commission orders that the Commission's Wage Fixing Principles shall be as set out in Annexure B. (3) Pursuant to s 52 of the Act, the Commission orders that awards which do not contain wage increases awarded since 29 May 1991, other than safety net, State Wage Case and minimum rates adjustments, may be varied in accordance with the Commission's Wage Fixing Principles upon application to include a State Wage Case adjustment of $19.00 per week. At the hearing of any such application, the Commission may, in its discretion, award the whole or part of the amounts referred to in the Principles or determine that no amount should be awarded.

(4) Pursuant to s 52 of the Act, the Commission orders that the following rates may be increased by 3.5 per cent upon application in accordance with the Commission's Wage Fixing Principles: (i) existing allowances which relate to work or conditions which have not changed, including shift allowances expressed as monetary amounts and service increments; and (ii) junior rates expressed as monetary amounts. Counterpart awards should be adjusted by the same amount as their federal award counterparts.

(5) These orders shall operate on and from today until further order of the Commission.

Annexure A - Appearances at the Hearing Ø Mr M Gadiel for the Labor Council of New South Wales and Mr A Rorris for the South Coast Labor Council Ø Mr P Ginters, counsel for the Australian Services Union of New South Wales Ø Mr T McDonald for the Employers First and the Australian Retailers Association, New Wales South Wales Division Ø Mr D Grozier for Australian Business Industrial the Furniture Industry Association (Management Services) and the Housing Industry (Industrial Relations) Association Ø Mr R Marshall for the Local Government and Shires Associations New South Wales Ø Mr JV Murphy, counsel for the Minister for Industrial Relations and the Public Employment Office Ø Mrs V Paul for the Australian Industry Group, New South Wales Roads and Traffic Authority, Motor Traders Association of New South Wales, the Association of Independent Schools of New South Wales and State Chamber of Commerce (New South Wales)

Annexure B - Wage Fixing Principles INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES STATE WAGE CASE 2004 WAGE FIXING PRINCIPLES

These principles have been developed with the aim of providing for their period of operation, a framework under which all concerned - employers, workers and their unions, governments and tribunals - can co-operate to ensure that measures to meet the competitive requirements of enterprises and industry are positively examined and implemented in the interests of management, workers and, ultimately, Australian and New South Wales society. In exercising its powers and obligations under the Industrial Relations Act 1996 ('the Act'), the Commission will continue to apply structural efficiency considerations including minimum rates adjustment provisions. Movements in wages and conditions must fall within the following principles.

2. When an Award may be Varied or Another Award Made Without the Claim Requiring Consideration as a Special Case In the following circumstances an award may, on application, be varied or another award made without the application requiring consideration as a special case:

(a) to include previous State Wage Case increases in accordance with Principle 3;

(b) to incorporate test case standards in accordance with Principle 4;

(c) to adjust allowances and service increments in accordance with Principle 5;

(d) to adjust wages pursuant to work value changes in accordance with Principle 6;

(e) where the application is consented to by the parties it will be dealt with in terms of the Act;

(f) to adjust wages for the State Wage Case 2004 in accordance with Principle 8;

(g) to approve of an enterprise arrangement reached in accordance with Principle 11; and

(h) to adjust wages pursuant to an application claiming that work has been undervalued on a gender basis in accordance with Principle 14.

Previous State Wage Case Increases Applications for increases available under previous State Wage Case decisions will be determined in accordance with the relevant principles contained in those decisions.

Test Case Standards Test case standards established and/or revised by a Full Bench of the Commission may be incorporated into an award in accordance with the Act. Where disagreement exists as to whether a claim involves a test case standard, those asserting that it does must make an application for a special case.

Adjustment of Allowances and Service Increments (a) Existing allowances which constitute a reimbursement of expenses incurred may be adjusted from time to time where appropriate to reflect relevant changes in the level of such expenses.

(b) Existing allowances which relate to work or conditions which have not changed, including shift allowances expressed as monetary amounts and service increments, may be increased by 3.5 per cent for the State Wage Case 2004 adjustment.

Counterpart State awards should be adjusted by the same amount as their federal counterpart. (c) Existing allowances for which an increase is claimed because of changes in the work or conditions will be determined in accordance with the relevant provisions of the Work Value Changes principle of these principles. (d) New allowances to compensate for the reimbursement of expenses incurred may be awarded where appropriate having regard to such expenses. (e) Where changes in the work have occurred or new work and conditions have arisen, the question of a new allowance, if any, will be determined in accordance with the relevant principles of these principles. The relevant principles in this context may be Work Value Changes or First Award and Extension to an Existing Award.

(f) New service increments may only be awarded to compensate for changes in the work and/or conditions and will be determined in accordance with the relevant provisions of the Work Value Changes principle of these principles.

Work Value Changes (a) Changes in work value may arise from changes in the nature of the work, skill and responsibility required or the conditions under which work is performed. Changes in work by themselves may not lead to a change in wage rates. The strict test for an alteration in wage rates is that the change in the nature of the work should constitute such a significant net addition to work requirements as to warrant the creation of a new classification or upgrading to a higher classification.

In addition to meeting this test a party making a work value application will need to justify any change to wage relativities that might result not only within the relevant internal award structure but also against external classifications to which that structure is related. There must be no likelihood of wage leapfrogging arising out of changes in relative position.

These are the only circumstances in which rates may be altered on the ground of work value and the altered rates may be applied only to employees whose work has changed in accordance with this principle. (b) In applying the Work Value Changes principle, the Commission will have regard to the need for any alterations to wage relativities between awards to be based on skill, responsibility and the conditions under which work is performed. (c) Where new or changed work justifying a higher rate is performed only from time to time by persons covered by a particular classification, or where it is performed only by some of the persons covered by the classification, such new or changed work should be compensated by a special allowance which is payable only when the new or changed work is performed by a particular employee and not by increasing the rate for the classification as a whole. (d) The time from which work value changes in an award should be measured is the date of operation of the second structural efficiency adjustment allowable under the State Wage Case 1989 . (e) Care should be exercised to ensure that changes which were or should have been taken into account in any previous work value adjustments or in a structural efficiency exercise are not included in any work evaluation under this Principle. (f) Where the tests specified in (a) are met, an assessment will have to be made as to how that alteration should be measured in money terms. Such assessment will normally be based on the previous work requirements, the wage previously fixed for the work and the nature and extent of the change in work. (g) The expression ' the conditions under which the work is performed ' relates to the environment in which the work is done. (h) The Commission will guard against contrived classifications and over-classification of jobs. (i) Any changes in the nature of the work, skill and responsibility required or the conditions under which the work is performed, taken into account in assessing an increase under any other principle of these principles, will not be taken into account under this principle.

Standard Hours In approving any application to reduce the standard hours to 38 per week, the Commission will satisfy itself that the cost impact is minimised. Claims for reduction in standard weekly hours below 38 will not be allowed.

State Wage Case Adjustments In accordance with the State Wage Case 2004 decision awards may, on application, be varied to include a State Wage Case adjustment of $19.00 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 2003 decision. (c) In awards where the variation for a safety net adjustment arising from the 1999, 2000, 2001, 2002, 2003 or 2004 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 2004 . These adjustments may be offset against:

(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 2003 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.

Award Review Classification Rate The Award Review Classification Rate of $467.40 shall be the rate below which no full-time adult employee (excluding trainees, apprentices and employees on a supported wage or on a probationary rate) should be paid under the relevant award. Where a classification in an award is below the Award Review Classification Rate the following process will apply on application:

(a) The award will be listed for a mention at which the parties will report as to: (i) how the Award Review Classification Rate will be achieved, or

(ii) whether the award is obsolete. The Commission may direct the parties to confer in order to set a program for an updating of the award to reflect the Award Review Classification Rate. (b) If the parties to the award do not appear at this mention, the Commission shall request the parties to the award to show cause why the award should not be considered obsolete, and rescinded under s17(3) of the Act. (c) Where no agreement is reached with respect to (a) above, the Commission shall re-list the matter in order to conciliate the issues in dispute. (d) If the attempt at conciliation is unsuccessful the Commission shall arbitrate any outstanding issue.

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.

Enterprise Arrangements (a) The Commission may approve of enterprise arrangements reached in accordance with this principle and the provisions of the Act. (b) Industrial unions of employees and industrial unions of employers, or industrial unions of employees and employers, or employees and employers may negotiate enterprise arrangements which, subject to the following provisions, shall prevail over the provision of any award or order of the Commission that deals with the same matters in so far as they purport to apply to parties bound by the arrangements, provided that where the arrangement is between employees and an employer a majority of employees affected by the arrangement genuinely agree. (c) An enterprise arrangement shall be an agreed arrangement for an enterprise, or discrete section of an enterprise, being a business, undertaking or project, involving parties set out in paragraph (b). (d) Enterprise arrangements shall be for a fixed term and there shall be no further adjustments of wages or other conditions of employment during this term other than where contained in the arrangement itself. Subject to the terms of the arrangement, however, such arrangement shall continue in force until varied or rescinded in accordance with the Act. (e) For the purposes of seeking the approval of the Commission, and in accordance with the provisions of the Act, a party shall file with the Industrial Registrar an application to the Commission to either: (i) vary an award in accordance with the Act; or

(ii) make a new award in accordance with the Act. (f) On a hearing for the approval of an enterprise arrangement, the Commission will consider in addition to the industrial merits of the case under the State Wage Case principles: (i) ensuring the arrangement does not involve a reduction in ordinary time earnings and does not depart from Commission standards of hours of work, annual leave with pay or long service leave with pay; and

(ii) whether the proposed award or variation is consistent with the continuing implementation at enterprise level of structural efficiency considerations. (g) The Commission is available to assist the parties to negotiations for an enterprise arrangement by means of conciliation and, in accordance with these principles and the Act, by means of arbitration. If any party to such negotiations seeks arbitration of a matter relating to an enterprise arrangement such arbitration shall be as a last resort. (h) Enterprise arrangements entered into directly between employees and employers shall be processed as follows, subject to the Commission being satisfied in a particular case that departure from these requirements is justified: (i) All employees will be provided with the current prescriptions (e.g. award, industrial agreement or enterprise agreement) that apply at the place of work. (ii) The arrangement shall be committed to writing and signed by the employer, or the employer's duly authorised representative, with whom agreement was reached. (iii) Before any arrangement is signed and processed in accordance with this principle, details of such arrangement shall be forwarded in writing to the union or unions with members in that enterprise affected by the changes and the employer association, if any, of which the employer is a member. (iv) A union or employer association may, within 14 days thereof, notify the employer in writing of any objection to the proposed arrangements, including the reasons for such objection and in such circumstances the parties are to confer in an effort to resolve the issue. (v) Where an arrangement is objected to by a union or employer association and the objection is not resolved, an employer may make application to the Commission to vary an award or create a new award to give effect to the arrangement. (vi) A union and/or employer association shall not unreasonably withhold consent to the arrangements agreed upon by the parties. (vii) If no party objects to the arrangement, then a consent application shall be made to the Commission to have the matter approved in accordance with paragraph (e) of this principle. (viii) Such arrangement once approved shall be displayed on a notice board at each enterprise affected.

Superannuation (a) An application to make or to vary a minimum rates or paid rates award which: (i) seeks a greater quantum of employer contributions than required by the Superannuation Guarantee (Administration) Act 1992 (Cth) ('the SGA Act'); or (ii) seeks employer contributions to be paid in respect of a category of employee in respect of which the SGA Act does not require contributions to be paid; shall be referred to a Full Bench for consideration as a special case, unless otherwise allocated by the President. Exceptions to this process are applications which fall within the Enterprise Arrangements and First Awards and Extensions to Existing Awards principles. (b) If an application is made that does not fall within paragraph (a), the Commission will, subject to paragraph (c): (i) make or vary an award by inserting a clause stating: 'Superannuation Legislation - The subject of superannuation is dealt with extensively by federal legislation including the Superannuation Guarantee (Administration) Act 1992 (Cth) , the Superannuation Industry (Supervision) Act 1993 (Cth); the Superannuation (Resolution of Complaints) Act 1993 (Cth) and s124 of the Industrial Relations Act 1996. This legislation, as varied from time to time, governs the superannuation rights and obligations of the parties'. (ii) if appropriate, ensure that the award contains specification of an employee's earnings (eg 'ordinary time earnings') which, for the purposes of the SGA Act, will operate to provide a 'notional earnings base', and (iii) if the award is to continue to prescribe a 'flat dollar' amount of employer contribution, ensure that appropriate amounts are inserted so as to give effect to the levels of contribution required from time to time under the SGA Act. (c) The Commission may award provisions which differ from those in paragraph (b): (i) by consent; or (ii) in the absence of consent, by arbitration, provided the Commission is satisfied that there are particular factors warranting the awarding of different provisions. Such factors may include: (A) the wishes of the parties; (B) the nature of the particular industry or enterprise; (C) the history of the existing award provisions; (D) relevant decisions of the Commission establishing superannuation principles; and (E) relevant statutory provisions. (d) Before any different provisions are awarded under paragraph (c), either by consent or arbitration, the Commission must be satisfied, on expert evidence, that the award to be made will not contain requirements that would result in an employer not meeting the requirements imposed by the SGA Act. (e) Subject to s124 of the Act, any specification of a fund will carry with it the obligation for an employer to pay contributions at such intervals as are required by the fund.

(f) In determining applications as to specification of fund, the Commission will, as appropriate: (i) ensure that any fund specified by it is one into which payment will meet the employer's obligations under the SGA Act; (ii) have regard to the Superannuation Industry (Supervision) Act 1993 (Cth) ('the Supervision Act') which provides for the prudent management of certain superannuation funds and for their supervision by the Insurance and Superannuation Commissioner. In particular, the requirement with respect to equal representation of employers and members on what are called 'standard employer-sponsored funds' (Pt 9 of the Supervision Act) should be noted; (iii) have regard to previous decisions of the Commission with respect to the specification of a fund or funds; and

(iv) have regard to relevant statutory provisions. (g) Due to the variety of existing award superannuation provisions and the impact and complexity of the SGA Act, all applications to the Commission may not be capable of being dealt with in accordance with the approach set out above. In any such case it may be appropriate for the application to be dealt with as a special case.

First Award and Extension to an Existing Award Any first award or an extension to an existing award must be consistent with the Commission's obligations under Part 1 Chapter 2 of the Act.

In determining the content of a first award the Commission will have particular regard to:

(a) relevant wage rates in other awards, provided the rates have been adjusted for previous State Wage Case decisions and are consistent with the decision of the State Wage Case 1989 ;

(b) the need for any alterations to wage relativities between awards to be based on skill, responsibility and the conditions under which the work is performed;

(c) for conditions of employment, other than wage rates, prima facie the existing conditions of employment;

(d) that the award would comply with the requirements of section 19 of the Act.

Equal Remuneration and Other Conditions (a) Claims may be made in accordance with the requirements of this principle for an alteration in wage rates or other conditions of employment on the basis that the work, skill and responsibility required, or the conditions under which the work is performed, have been undervalued on a gender basis.

(b) The assessment of the work, skill and responsibility required under this principle is to be approached on a gender neutral basis and in the absence of assumptions based on gender.

(c) Where the undervaluation is sought to be demonstrated by reference to any comparator awards or classifications, the assessment is not to have regard to factors incorporated in the rates of such other awards which do not reflect the value of work, such as labour market attraction or retention rates or productivity factors.

(d) The application of any formula, which is inconsistent with proper consideration of the value of the work performed, is inappropriate to the implementation of this principle.

(e) The assessment of wage rates and other conditions of employment under this principle is to have regard to the history of the award concerned.

(f) Any change in wage relativities which may result from any adjustments under this principle, not only within the award in question but also against external classifications to which the award structure is related, must occur in such a way as to ensure there is no likelihood of wage leapfrogging arising out of changes in relative positions.

(g) In applying this principle, the Commission will ensure that any alternative to wage relativities is based upon the work, skill and responsibility required, including the conditions under which the work is performed.

(h) Where the requirements of this principle have been satisfied, an assessment shall be made as to how the undervaluation should be addressed in money terms or by other changes in conditions of employment, such as reclassification of the work, establishment of new career paths or changes in incremental scales. Such assessments will reflect the wages and conditions of employment previously fixed for the work and the nature and extent of the undervaluation established.

(i) Any changes made to the award as the result of this assessment may be phased in and any increase in wages may be absorbed in individual employees' overaward payments.

(j) Care should be taken to ensure that work, skill and responsibility which have been taken into account in any previous work value adjustment or structural efficiency exercises are not again considered under this principle, except to the extent of any undervaluation established.

(k) Where undervaluation is established only in respect of some persons covered by a particular classification, the undervaluation may be addressed by the creation of a new classification and not by increasing the rates for the classification as a whole.

(l) The expression 'the conditions under which the work is performed' has the same meaning as in Principle 6, Work Value Change.

(m) The Commission will guard against contrived classification and over classification of jobs. It will also consider: (i) the state of the economy of New South Wales and the likely effect of its decision on the economy;

(ii) the likely effect of its decision on the industry and/or the employers affected by the decision; and

(iii) the likely effect of its decision on employment. (n) Claims under this principle will be processed before a Full Bench of the Commission, unless otherwise allocated by the President.

(o) Equal remuneration shall not be achieved by reducing any current wage rates or other conditions of employment.

Economic incapacity Any employer or group of employers bound by an award may apply to, temporarily or otherwise, reduce, postpone and/or phase in the application of any increase in labour costs determined under the principles on the ground of very serious or extreme economic adversity. The merit of such an application shall be determined in the light of the particular circumstances of each case and any material relating thereto shall be vigorously tested. Significant unemployment or other serious consequences for the employees and employers concerned are significant factors to be taken into account in assessing the merit of any application. Such an application shall be processed according to the Special Case principle.

Any decision to temporarily reduce or postpone an increase will be subject to a further review, the date of which will be determined by the Commission at the time it decides any application under this principle.

These principles will operate until further order of the Commission.

INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES FULL BENCH CORAM: Walton J, Vice-President Schmidt J Boland J Grayson DP O'Neill C Bishop C

STATE WAGE CASE 2004 Summons to Show Cause - Commission on its own initiative pursuant to Part 3 of Chapter 2 of the Industrial Relations Act 1996.

1 On 5 May 2004, the Commission issued a summons to show cause why, after considering the decision of the Australian Industrial Relations Commission ('the AIRC') in the Safety Net Review - Wages, May 2004 Case, Print PR002004 ('the National decision'), the Commission should not take such action pursuant to Part 3 of Chapter 2 of the Industrial Relations Act 1996 ('the Act'), as it may deem proper.

2 The hearing proceeded on 25 May, when the Commission announced that: We have decided to grant an increase in rates of pay of the amount of $19.00 and will adjust relevant allowances by 3.5 per cent in State Awards, in accordance with the provisions of s 50 of the Act having given consideration to the National decision.

Such an adjustment in rates of pay and allowances will only be available upon application and in accordance with the Orders and Principles which we shall publish in due course with our reasons for decision.

3 We now publish our reasons for that decision, as well as making orders pursuant to ss 50 and 52 of the Act, to give effect to our decision. The principles which we adopt are set out in Annexure B of our decision.

4 Increases of $19.00 per week in rates of pay and 3.5 per cent in allowances are available upon application, in accordance with our decision.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.