State Wage Case 2005 [2005] NSWIRComm 213

CORAM: Wright J President; Walton J Vice-President; Harrison DP; Sams DP; Boland J; Tabbaa C

State Wage Case - Summons to show cause - Awards - National decision - Whether national decision should be implemented in New South Wales - Economic considerations - National economy - State economy - Submissions of the parties - Decision issued and orders made on 20 June 2005 - Reasons for decision now issued - Adoption of National decision - Wage-Fixing Principles issued. CATCHWORDS:

Industrial Relations Act 1996 Part 3 of Chapter 2 Supreme Court Rules 1970 LEGISLATION CITED: Superannuation Guarantee (Administration) Act 1992 (Cth) Superannuation Industry (Supervision) Act 1993 (Cth) Superannuation (Resolution of Complaints) Act 1993 (Cth)

Safety Net Review - Wages, June 2005 Case (Print PR002005) State Wage Case 1989 (1989) 30 IR 107 CASES CITED: State Wage Case 2003 (2003) 121 IR 446 State Wage Case 2004 (2004) 132 IR 190 State Wage Case 2005 (Statement and Orders) [2005] NSWIRComm 212

Mr M Thistlethwaite with Ms A Hughes for the Labor Council of New South Wales Mr T McDonald for the Employers First™ and affiliated organisations including Clubs NSW, Hotel and Motel Accommodation Association of New South Wales, Hotels Association New South Wales Branch, Master Builders' Association of New South Wales and the Bricklayers Federation of New South Wales Mr D Grozier with Ms A Smith for Australian Business Industrial and its affiliates and for the Catholic Commission for Employee Relations, Australian Nursing Home and Extended Care Association New South Wales, Furnishing Industry Association of Australia New South Wales Limited, Professional Hairdressers' Association, and Funeral Directors' Association of New South Wales Limited Mr J V Murphy of counsel for the Minister for Industrial Relations and the Public Employment Office LEGAL REPRESENTATIVES: Mr D Hargraves for the Australian Industry Group, New South Wales Branch Mr D Gillan for the Restaurant & Catering Association (NSW) Mr R Nassif for the Local Government and Shires Associations of NSW Mr S Brown for the NSW Road Transport Association Inc. Ms J Owen for the Australian Retailers Association

CORAM: Wright J, President Walton J, Vice President Harrison DP Sams DP Boland J Tabbaa C

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

1 At the conclusion of proceedings on 20 June 2005 in the State Wage Case 2005 (Statement and Orders) [2005] NSWIRComm 212 the Full Bench gave the following decision: 1 On 7 June 2005, the Commission issued a summons to show cause why, after considering the decision of the Australian Industrial Relations Commission in the Safety Net Review - Wages, June 2005 Case , Print PR002005 ('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 On 8 June 2005 the President made directions as to the conduct of the proceedings and fixed the hearing today. 3 We have today heard submissions from the Labor Council of New South Wales, the major employer organisations, the Public Employment Office and the Minister for Industrial Relations. Apart from a formal submission by the Restaurants and Catering Association (NSW), no party opposed the adoption of the National decision. We have accordingly decided to adopt that course in light of the practical unanimity of the parties, we have also decided to announce our decision today. 4 We have decided to grant an increase in rates of pay in the amount of $17 per week and will adjust relevant allowances by 3 percent in State awards, in accordance with the provisions of s 50 of the Act having given consideration to the National decision. 5 Such an adjustment in rates of pay and allowances will only be available upon application and in accordance with the Orders and Principles to which reference will now be made. 6 The Commission makes the following orders: 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 the decision and reasons of the Full Bench, of the Principles and provisions of the National decision of 7 June 2005.

2. Pursuant to order 1, the Commission orders that the Commission's Wage Fixing Principles shall be as set out in annexure D to the Labor Council's submissions (Exhibit 1 in the proceedings [see now Annexure B to these Reasons for Decision]).

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 $17 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 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. 7 The Full Bench will publish its reasons for decision in due course. Subject to the delivery of those reasons, these proceedings are now concluded. 2 What follows are the reasons for that decision.

3 By its decision of 7 June 2005 [Print PR002005], the Australian Industrial Relations Commission (AIRC or Australian Commission) rejected the Australian Council of Trade Unions (ACTU) claim for an increase of $26.60 per week in all award rates and instead made an adjustment to the safety net of $17 per week. The adjustment was an increase of 3.6 per cent in the minimum wage, taking it to $484.40 per week. 4 The ACTU's claim was supported by the Disability Employment Action Centre (DEAC) and the National Council on Intellectual Disability (NCID). The Australian Catholic Commission for Employment Relations (ACCER) supported an increase of $26.60 in the minimum wage with the adjustment of other award rates of pay, to ensure those in the lower paid classifications were the primary beneficiaries. 5 The Australian Council of Social Service (ACOSS) did not support an outcome of a particular amount, but submitted that there was no evidence before the Australian Commission that recent minimum wage increases had weakened employment growth. 6 The States of New South Wales, Queensland, South Australia, Tasmania, Victoria and Western Australia and the Australian Capital Territory and Northern Territory supported an increase of $20 per week in all award rates of pay, submitting that a $20 increase in all award rates of pay was fair and reasonable and was justified in terms of both the current economic context and the immediate economic outlook. 7 The Minister for Employment and Workplace Relations on behalf of the Commonwealth submitted that the Australian Commission should reject the ACTU's claim. The Commonwealth supported an increase of $11 per week to classification levels C14 to C10 in the Metal, Engineering and Associated Industries Award 1998 (the Metal Industries Award) with no increase in award rates above that level. 8 The Australian Chamber of Commerce and Industry (ACCI) also submitted that the Australian Commission should reject the ACTU's claim and instead grant an increase of $10 per week in award rates equivalent to classification levels C14 to C10 in the Metal Industries Award. 9 The Australian Industry Group and the Engineering Employers Association, South Australia (jointly Ai Group) submitted that a safety net adjustment of $11 per week in all award rates would assist the low paid while not damaging the economy. 10 The Victorian Automobile Chamber of Commerce, the Motor Traders' Association of New South Wales, the Motor Trades Associations of South Australia, Queensland and Western Australia, the Australian Capital Territory and the Northern Territory generally supported the submissions of ACCI and other employers. The National Farmers' Federation (NFF) supported an increase of no more than $10 per week in the federal minimum wage. 11 Following its usual thorough analysis of the material submitted by the parties on the Australian economy, the Australian Commission concluded at [148]-[156]: 148 The world economy recorded strong growth in 2004 and conditions are expected to remain favourable notwithstanding a slowing of growth in the early part of 2005. The pattern of growth across countries is expected to be more unbalanced than previously anticipated. 149 The slower growth which the Australian economy experienced in the second half of 2004 and a further slowing anticipated for 2005-06, is a reflection of the rebalancing required due to the previously very high levels of domestic demand, in particular, household consumption and dwelling investment. In the period ahead, solid growth should occur, particularly as business investment unlocks capacity constraints on the supply side leading to the slower than anticipated turnaround in export volumes. However, it may be that turnaround is not as sharp as previously anticipated. 150 The drought persists, particularly in western New South Wales and Queensland, and this may call into question the Treasury assumption that average seasonal conditions will prevail in 2005-06. 151 The labour market has recorded solid growth when measured by the number of persons employed, particularly full-time, and the unemployment rate which has been at a 28-year low since December 2004. Whilst employment is forecast to grow at a slower rate in 2005-06, we do not anticipate any real deterioration in the labour market which will remain robust. 152 The parties opposing the ACTU's claim have warned of the adverse effects of award wages increasing in the absence of productivity growth with potential consequences for lower unemployment and investment and higher inflation. In response, the ACTU has argued that there is no evidence that a pay rise of the order sought by the ACTU will have adverse economic effects. We deal with this issue later in our decision. 153 Whilst there are indications that the inflation rate will edge up slightly in the forecast period, it is expected to remain within the RBA's target range of 2-3 per cent. There is no evidence before us of a generalised acceleration of wage increases in the economy, notwithstanding that pressure may be exerted in pockets where skill shortages exist. Growth in award wages constitutes a relatively small proportion of earnings growth and so far as we are aware neither the RBA nor the Treasurer has suggested that growth in award wages is linked in a significant way to any potential for inflationary earnings growth. There is no evidence of second-round effects of higher oil prices and as a net exporter of energy Australia stands to benefit if oil prices do rise in the future. The fall back in productivity growth from the high levels reached in the 1990s to negative growth in December 2004 is a basis for concern, especially if productivity continues to fall. Whilst weaker productivity growth would be expected with rising employment growth, some pressure may be exerted on real unit labour costs. 154 On the material before us, the WPI has shown no material increase beyond that recorded in previous periods, although the Budget forecasts are for an outcome of 4 per cent for 2005-06. On all measures, profits remain strong and expectations are for strong investment in the forecast period. 155 Economic settings are undergoing change and that as a consequence, growth in GDP will remain at more subdued levels for the remainder of 2004-05 and in 2005-06. These levels are, however, acceptable by historical standards and are not entirely unexpected or unwelcome. 156 We have had regard to the present uncertainties and risks which might affect the overall performance of the Australian economy. These must be weighed against a number of strong economic indicators. As the Commission has concluded in previous decisions, we think it is inappropriate, in assessing the capacity to meet our statutory obligations of addressing the needs of the low paid, to assess the economic risks on the basis of a worst case outcome but have taken all material into account when determining the present claim. 12 We note, in particular, the summary of the States and Territories' economic outlook for 2004-05 at [45]: Table 2: State and Territory Economic Data VIC NSW QLD SA TAS NT ACT WA % % % % % % % % Gross State Product 3.725 3.0 4.25 2.5 3.2 0.4 3.0 4.5 Consumer Price Index 2.5 2.75 2.25 2.5 2.5 1.4 2.0 2.0 Employment Growth 1.5 1.25 4.0 1.25 2.5 0.75 2.25 Unemployment Rate 5.75 5.5 5.5 6.3 5.2 Labour Price Index 3.5 3.75 4.0 3.3 3.5

13 In relation to the effects of safety net adjustments on employment the Australian Commission stated at [280]: The material brought to the Commission's attention does not establish an empirical basis for affording greater importance to concerns about employment effects than to other considerations to which we must have regard. Having considered the material, our assessment is that, under current economic conditions, the adjustment we have decided on of itself, will do little or nothing to diminish job prospects. 14 On the link between award coverage and productivity growth and enterprise bargaining and productivity, the Australian Commission stated at [327] and [330]: There is no cogent evidence before us that award coverage per se inhibits productivity growth. The increase in productivity in the award-reliant sectors relied on by the ACTU and welcomed by the Commonwealth tells us nothing about causation. Nor is there any measure of the extent to which productivity has increased as a result of the shift to enterprise bargaining. … In determining the appropriate safety net adjustment to be granted, we are satisfied that we have not exercised our award variation powers in a way which fails to encourage enterprise bargaining. We agree with the States and Territories that the claim by the Commonwealth that safety net adjustments discourage productivity pivots on assertions that such adjustments act as a disincentive to bargaining. If safety net adjustments do not discourage bargaining, there is really no case to be answered in relation to productivity. We see no sound basis to depart from the conclusion in the May 2004 decision that " There is no necessary association between award coverage, safety net adjustments and productivity growth ". 15 In reaching its decision on the ACTU's claim the Australian Commission stated at [394]: [I]t is important to bear in mind that the Commission is not at large to decide on whatever outcome it thinks fit. While the Commission does have a discretion, the discretion must be exercised within the requirements of the Act. 16 The Australian Commission then referred to the principal object of the Workplace Relations Act 1996 (Cth) and ss 88A and 88B and stated further at [398]-[399]: The opening words of section 88B(2) refer to a safety net of wages, not to a single minimum wage, which is maintained by the Commission. The statutory concept of the safety net is not, therefore, confined to a single minimum wage. And the idea of maintenance has at its heart the requirement to ensure that the safety net of award rates is kept in good repair … … it is important to mention that s.90 of the Act requires the Commission to take the public interest into account and, for that purpose, to have regard to the objects of the Act, and in particular the objects of Part VI, the state of the national economy and the likely effects on the national economy of any award or order that the Commission is proposing to make with special reference to likely effects on the level of employment and on inflation. Section 90 gives an added dimension to the Commission's task, requiring a careful consideration of the effects of its decision on the national economy. 17 At [400] the Australian Commission noted that in dealing with an application to keep the safety net of minimum rates in good repair, the Commission is required by s 88B(2)(a) of the Commonwealth Act to have regard to living standards generally prevailing in the Australian community. This requirement invited a comparison between the rates of pay in the AIRC's awards and rates of pay generally. It was found that: Between May 1996 and May 2004 average weekly earnings of full-time adults increased by $277.10 per week or 41 per cent. In the same period the minimum wage, the rate for the C14 classification level, increased by $118 per week or 34 per cent. The award wage for a tradesperson, the rate for the C10 classification, increased by $120 per week or 27 per cent. Wages at the higher classification levels have increased by proportionately lesser amounts. 18 Section 88B(2)(b) of the Commonwealth statute requires the Australian Commission to have regard to economic factors including levels of productivity and inflation and the desirability of attaining a high level of employment. In relation to productivity and inflation the AIRC found at [407] that: [B]etween the June quarter 1996 and the December quarter 2004, GDP [Gross Domestic Product] per hour worked in the market sector increased by 24.3 per cent. In other words, productivity grew by nearly 25 per cent over that 8½-year period, which is remarkable, particularly during a period of strong employment growth. In the last two-quarters, however, annual productivity growth has been weaker. Despite the fact that the productivity figures show some volatility and are subject to revision, the lack of growth in the last 12 months is cause for concern. With regard to inflation, leaving aside one-off effects related to the introduction of the GST, the economy has performed well. The CPI increased by 23.1 per cent between June 1996 and March 2005 and was within the RBA's [Reserve Bank of Australia] target range of 2 to 3 per cent per year for all but a few quarters. 19 On employment, the Australian Commission noted at [408] that: Between June 1996 and March 2005 employment increased by 19 per cent. In the same period the number of unemployed decreased by 26 per cent. In December 1996 unemployment was 8.6 per cent. In December 2004 it was 5.1 per cent, at what has been described as the lowest level in 28 years. 20 Further, the Australian Commission observed at [410]: In light of the growth in employment over the last eight years and the fact that employment has declined to its lowest level in 28 years, it would be difficult to accept that the Commission's safety net adjustments have been excessive even if employment was the only matter the Commission had to take into account in maintaining the safety net. Of course employment is not the only matter we are required to consider. While it has been pointed out in previous decisions that there is a likelihood of some negative employment effects from safety net adjustments, this risk must be balanced against other factors such as the potential benefit to award-reliant employees, estimated by some to number 1.6 million, in the context of the Commission's obligation to ensure that a safety net of fair minimum wages and conditions is maintained. Acknowledgment of the need to balance these matters does not mean that the Commission prefers the interests of those in employment to those who are unemployed or under-employed. On the case advanced by the opponents of the ACTU's claim, any increase in the safety net, including of course the increase they advanced, will have negative employment effects. It must be accepted that their proposals involve a balance of considerations, just as the ACTU's claim does. The Commission's task is to find the right balance. 21 On economic growth and the profit/wages share of total factor income, the Australian Commission found at [411]: Economic growth, as measured by increases in GDP, has been strong in recent years. Between June 1996 and December 2004 GDP increased by 35.2 per cent in real terms. In the same period shares of total factor income have altered. The profit share of the corporate sector has increased from 34.4 per cent in June 1996 to 37.4 per cent in June 2004 - around 10 per cent. When Gross Mixed Income is added to the profits of the corporate sector the share has not increased as much - from 45.5 per cent to 46.9 per cent. The share going to wages, however, has decreased in the same period from 54.5 to 53.1 per cent. The shift in shares from wages to profits since 1996 is undeniable and significant. On the other hand, no party has submitted that there is an imbalance in the shares which poses a threat to economic stability. 22 In respect of the needs of the low paid, a matter the Australian Commission is required have regard to, the Australian Commission found: · There have been significant increases in award rates at the lower classification levels since 1996 and employees who have been dependent on safety net adjustments at those levels have also had increases in real wages. · While it is clear that low-paid employees who are not in poverty may nevertheless have needs which we should take into account, the research tends to indicate that the safety net is, by and large, an effective one so far as the low paid are concerned. On the limited data available, it might be concluded that without the adjustments of recent years the number of full-time award-reliant employees in poverty would be significantly greater. · There continued to be a lack of reliable data on the needs of the low paid. Despite requests for data concerning the proportion of the workforce to which the safety net adjustments applied in 1997 and in 2004 data concerning the proportion of the workforce to which the minimum wage adjustment applied in 1997 and 2004, the Commonwealth was unable to provide the information. 23 The Australian Commission referred to the submissions of the Commonwealth and employers that if safety net adjustments are too high they remove or detract from the incentive to bargain. Whilst the Australian Commission accepted that excessive increases in minimum wages could discourage bargaining, the evidence suggested that the safety net adjustments over recent years had not been inconsistent with the continued growth of bargaining in the industries in which award reliance was relatively high. 24 In finding that the ACTU's claim was excessive, the Australian Commission stated at [421]: It is clear that there has been a slowing of GDP growth in 2004-05 and that in recent quarters productivity growth has been disappointing. Persistent drought conditions and the threat they pose to growth are also matters for concern. While the economic fundamentals appear solid, in our view a lower increase is appropriate this year than last. In reaching that conclusion we have also taken into account the benefits to low-paid employees of changes in the tax and government transfer regimes which occurred during 2004 and which have been foreshadowed in the Budget for 2005-06. We note, however, that while tax reductions will undoubtedly assist low-paid employees in absolute terms, their living standards may not increase greatly in relative terms when all of the changes in taxation and government benefits are taken into account. 25 In relation to the Commonwealth's proposed increase of $11, the Australian Commission observed at [423] that the implementation of the Commonwealth's proposal would result in a reduction in spending power for all award-reliant employees and a significant further reduction in the minimum wage relative to average weekly earnings. 26 A change was sought by ACCI to the Australian Commission's Statement of Principles. The change related to the provision of a later date of operation of any safety net wage increase for Victorian employers. The change has no relevance for this Commission's Principles. 27 Implementation of the safety net adjustment was made subject to the following conditions: (a) the increase will be fully absorbable against all above-award payments;

(b) except where permitted by the Statement of Principles, the increase will be available from a date no earlier than 12 months after the increases provided for in the May 2004 decision in the award in question;

(c) the commencement of award variations to give effect to this decision will be no earlier than the date on which the award is varied, with phasing-in of increases permissible where circumstances justify it. Any application for phasing-in will be subject to Principle 10;

(d) by consent of all parties, and 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; and

(e) allowances which relate to work or conditions which have not changed and service increments are to be varied; the method of adjustment is to be consistent with the Furnishing and Glass Industries Allowances decision (Print M9675). Submissions of the Parties

28 The appearances entered in these proceedings are set out in Annexure B. Similar to the position taken by the parties in the 2003 and 2004 State Wage Cases, the Commission on this occasion was asked by the Labor Council of New South Wales, supported by the Public Employment Office and Minister for Industrial Relations, to adopt the increase granted by the Australian Commission. None of the employer State Peak Councils opposed that application, although reservations were expressed by each of them about the economic impact of the increase given what they considered to be underperformance in the New South Wales economy and/or the prospect of a slowing national economy. Further, no party sought changes to the Commission's Wage Fixing Principles other than those necessary to reflect the National decision. 29 As we observed in the State Wage Case 2003 (2003) 121 IR 446 at [28] the consensus of non-opposition by employer parties "albeit slightly qualified, must carry with it significant weight in any consideration as to the appropriateness of adopting the National decision." On this occasion complete consensus is lacking because of the position taken by the Restaurant & Catering Association (NSW). However, in the absence of any submissions by that organisation as to the grounds and reasons for its opposition to a flow on of the National decision, no weight can be given to its position. 30 It was further observed in the State Wage Case 2003 decision that regardless of the employer parties' consensus, in exercising its functions under the Act the Commission must take into account the public interest and for that purpose, pursuant to s 146(2) of the Act, must have regard to the state of the economy of New South Wales and the likely effects of its decision on that economy. That continues to be the case in 2005.

Labor Council of New South Wales 31 Mr M Thistlethwaite and Ms A Hughes appeared for the Labor Council of New South Wales. The Council's submissions, as with the other major parties, were advanced in writing and orally. After reviewing in detail the National decision, Mr Thistlethwaite made submissions regarding the state of the New South Wales and national economies. He drew on material from the New South Wales Treasurer's recent Budget Speech to Parliament and the New South Wales Budget Papers 2005-2006 as well as evidence tendered before the Australian Commission. 32 The Labor Council contended that the New South Wales and national economies were resilient and able to afford in increase of $17 to award wages without any undue effect on unemployment, inflation, trade and economic growth. Further, it was submitted that in granting a $17 increase to award wages the Australian Commission took adequate account of the downside risks highlighted in the submissions of the employer parties. 33 The Labor Council submitted that the economic position of New South Wales was as strong as the national economy and there was no good reason not to flow the wage increases as provided for in the National Decision to State Award employees in New South Wales. 34 Mr Thistlethwaite further submitted: It is the submission of the Labor Council that the AIRC, in awarding a flat increase to award rates of $17.00 per week gave adequate consideration to the needs of low paid workers and the effect of the increases on the Australian economy. Whilst the Labor Council would have preferred the AIRC to have granted the full amount of the ACTU's claim, that is a $26.60 per week increase in award wage rates with a commensurate increase in wage-related allowances, the Labor Council acknowledges the imperatives of Section 50 of the NSW Industrial Relation Act, 1996 and therefore submits that the Commission should make available the Safety Net Adjustments awarded by the AIRC in the National Decision.

The Labor Council contends that awarding Safety Net Adjustments is consistent with the Objects of the Act, particularly with Objects (a), (b) and (e), contained within Section 3 of the IR Act.

Work related allowances, including shift allowances, allowances relating to work or conditions, and service increments, should be increased by 3.0% to reflect the safety net adjustment. This figure has been derived, consistent with previous practice, by calculating the safety net increase as a percentage of the C10 classification of the Metal, Engineering and Associated Industries (State) Award, which currently sits at $561.20. An increase of $17.00 per week in award rates and a commensurate increase in allowances of 3.0% meets the objects of the IR Act by assisting to provide a fair and just industrial relations framework whilst still taking into account the effect on employment and unemployment levels. In support of the Claim for the flow-on of the $17.00 in NSW the Labor Council has filed a written statement from a minimum award wage worker. The increase will have the effect of lifting the Award Review Classification Rate to $484.40, constituting the lowest rate a full-time adult employee may be paid under a NSW award. The Labor Council is not proposing any changes to the State Wage Case Principles as determined in the State Wage Case - 2004 except for minor modifications to reflect the current circumstances. 35 The statement referred to by Mr Thistlethwaite was an affidavit of Louise Maree Hermann. Ms Hermann worked as a shop assistant on a part time basis, 13.5 to 18 hours per week under the Shop Employees (State) Award. Her hourly rate of pay was $13.84 and with penalties and loadings she received a gross weekly wage of about $200-$210. Ms Hermann supported a disabled husband and two young sons. 36 Ms Hermann described the difficulties of managing a household budget on her income and the restrictions that imposed on her family's quality of life. Ms Hermann was not required for cross-examination. 37 The Labor Council proposed that any increase awarded by the Commission in these proceedings be included in awards in New South Wales by way of variation on application by a party to each Award, pursuant to s 17 of the Act. 38 In relation to lagging awards, the Labor Council said that it had again discussed this issue with its affiliates. It appeared to the Council there were very few awards in this category, however unions were attempting to deal with this issue outside the State Wage Case. Mr Thistlethwaite said it was the intention of the Labor Council to continue to monitor the implementation of State Wage Case adjustments in all awards over the next 12 months and should the Labor Council feel it necessary, an application might be brought in the next State Wage Case.

Minister for Industrial Relations and Public Employment Office 39 Mr J V Murphy of counsel appeared for the Minister for Industrial Relations and the Public Employment Office. The Minister and the PEO proposed that the Commission make those orders that were necessary to flow on the wage increases contained in the decision of the Australian Commission. 40 Mr Murphy referred to the position put by the State and Territory Governments to the Australian Commission, which included: · An increase of $20 in weekly award rates of pay, which was sustainable in the context of both the current state of the economy and within the short to medium outlook.

· The economic situation or outlook was not so positive as to warrant a $26.60 weekly increase sought by the ACTU.

· Economic forecasts up to 2005-06 remain consistent with the conditions recently experienced. In the case of profits and employment the prospects are overwhelmingly positive with the highest level of profits since 1990 and lowest unemployment in 27 years. In overall terms the consistency with which the national economy has performed would justify the expectation that the optimism in the economic performance identified in 2004 is generally consistent with the economic forecast for 2005 and 2006.

· There was no necessary link between award coverage, increases in minimum wages and productivity growth. · A $20 increase in award wages would not adversely impact on jobs growth or unemployment.

· There was no economic justification for the AIRC not granting a meaningful safety net adjustment. It was not equitable for the lowest paid Australians to be denied an increase in wages simply because of perceived uncertainties in the economic outlook. 41 Mr Murphy reviewed in detail the New South Wales economy and its outlook. In summarising that review Mr Murphy submitted: Growth of the New South Wales economy is estimated to have matched the growth of the Australian economy in 2004-05. In 2005-06 the NSW economy may slightly under perform the rest of Australia due to the impact of the drought which seems to be worse in NSW than in the other states. Dwelling construction in NSW may also be a little softer in NSW than in the rest of the country because the NSW population is growing at only half the rate as the rest of Australia. However, an upturn in the dwelling construction cycle is expected to occur sooner in NSW than in some other States. 42 In concluding his submissions Mr Murphy stated: In determining the safety net adjustment the AIRC gave particular weight to the aggregate effects of an increase on the economy and importantly, the effects at the sectoral and enterprise level. The AIRC noted that any economic effect of a safety net adjustment will depend upon a number of factors including its magnitude, the general economic context and any monetary and fiscal policy response. In assessing the likely economic impact, the AIRC reviewed the performance of the Australian economy in light of the $19 increase in award rates provided in the May 2004 decision. The AIRC was correct to be cautious when assessing the likely impact on employment of safety net increases. Given the complex range of factors acting on employment, it is not possible to draw specific conclusions. In its May 2003 decision the Commission noted the continuing controversy about the employment effects of minimum wage improvements. The Commission indicated there was no current evidence to suggest such controversy has been resolved. After considering the material, the AIRC believed under current economic conditions the proposed adjustment 'will do little or nothing to diminish job prospects'. In general, since the safety net adjustment of May 2004, the AIRC observed of the Australian economy that:

· the non-farm economy has remained strong; · productivity increased at satisfactory levels given the increase in employment; · aggregate labour market performance was good, with reasonable employment growth; · there has been a continuing reduction in unemployment; · wage growth overall remained moderate; and · the rate of inflation is within the Reserve Bank of Australia's target range. Given the economic fundamentals appear solid and the lack of evidence to suggest any negative impact from the 2004 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. The AIRC noted that consumer price increases during the twelve months since its last safety net adjustment cannot be ignored. It further noted that to increase the minimum wage at the same percentage rate as ordinary time earnings have increased throughout 2004 would require an increase of approximately $19 per week. The AIRC stated that, while the economic fundamentals appear solid in light of a slowing of GDP growth in 2004-05 and persistent drought conditions, it was of the view that a lower increase than last year was appropriate. In reaching its decision the AIRC recognised changes in the tax and government transfer regimes would benefit low paid employees in absolute terms but would not greatly increase their standard of living in relative terms. 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. 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.

Employers First™ 43 Mr T McDonald appeared for Employers First™ and its affiliated organisations including Clubs NSW, Hotel and Motel Accommodation Association of New South Wales, Hotels Association New South Wales Branch, Master Builders Association of New South Wales, and the Bricklayers Federation of New South Wales. Mr McDonald sought to rely on an affidavit of Raymond Bennett, an economist and Director and Treasurer of Employers First™. Mr Bennett deposed that he had read the Expert Witness Code of Conduct, Schedule K, of the Supreme Court Rules 1970 and agreed to be bound by the Code. Mr Bennett was not required for cross-examination. 44 Mr Bennett's affidavit was extensive and provided a wide range of information and opinion on the state of the Australian and New South Wales economies and their outlook. Mr McDonald submitted that Mr Bennett's evidence was suggestive of a cautious approach to the flow-on of the increases awarded by the Australian Commission having regard to what was said to be the lesser economic performance of the New South Wales economy (compared to the other States) and future risks to this economic performance. 45 Mr McDonald referred in particular to Mr Bennett's evidence regarding the New South Wales economy (references deleted): 45. There have been many positives for business in NSW over the last fourteen years. The State's GDP growth has, along with the rest of Australia, experienced the longest period of economic growth for forty years. Every year, employment has substantially increased, as has business investment and profitability, while new businesses have come onto the market at a record rate. In common with the rest of the country this good economic performance has been accompanied by a significant reduction in State debt and more responsible fiscal management. However, NSW has seriously lagged behind the performances of WA, Victoria, Queensland and even Tasmania and SA. This situation is likely to continue as demonstrated in the figures in Table 3. Table 3 Economic Performance - State Budget 2005-2006 2003-04 2004-05 2005-06 (for) Gross State Product2.02.02.75 Wage Price Index 3.83.53.75 Employment growth 1.41.251.25 Unemployment5.65.255.25 Source: NSW State Budget Papers, 2005-2006

46. Clearly the government in NSW is not expecting a return to the growth rates of the 1990s for at least twelve months. The concerns of the State Government are echoed by the ANZ Bank economists. These ANZ economists argue the NSW economy 'struggled again in 2003-2004, posting disappointing growth of just 2%, well below the Australian aggregate of 4.0%. This was the third consecutive year that economic growth in Australia's largest state failed to match the national pace'. The growth figures for 2004-2005 are no better and one is forced to agree with the view NSW is pulling the rest of Australia back. 47. The State Budget Statements have a section that identifies the risk to the budget and this is attached in the appendices. These risks include the following.

· Global inflation does not increase and global growth remains strong, with stresses in the world economy will not cause problems. · Capacity restraints will be manageable. · Interest rates will not substantially increase. · The housing cycle will stabilise. · Business investment will continue to expand. · There are no changes in Federal government policy. · Unexpected domestic economy changes - such as wage increases - are minimised. 48. The NSW Budget Statements 2005-06 make the point that in 2004-05 GDP grew by only 2 per cent. 'Growth in consumer spending eased during 2004-2005. The downturn in dwelling construction reduced the demand for household goods, and falling house valuations did not assist, while high mortgage debt, higher interest rates and rising petrol process. Partially offsetting these factors, consumer spending was boosted by the strong Australian dollar, flat or falling international prices, and lower tariffs on motor vehicles'. 49. The NSW Treasury Corporation update on NSW uses the National Accounts for March to also identify concerns about progress in NSW. This update identifies that in the March quarter in NSW, final Demand fell by 0.1 per cent, it was 2.5 per cent over a twelve month period. This was due to a fall in total private sector demand and a slower growth in public sector demand."

46 Mr McDonald submitted: On this occasion, we do not submit that the requirements of s.50 are a barrier to the flow-on of the increases awarded by the AIRC. We remain concerned, however, with the matters raised in the evidence of Mr Bennett, and submit that a cautious and conservative approach to wage outcomes is appropriate in the operation of the State Wage Fixing Principles. 47 Mr McDonald did not oppose the amendments proposed by the Labor Council to the Commission's Wage Fixing Principles.

Australian Business Industrial and Others 48 Mr D Grozier appeared for ABI and its affiliates as well as the Catholic Commission for Employment Relations ("CCER"), Australian Nursing Home and Extended Care Association New South Wales, Furnishing Industry Association of Australia New South Wales Limited, Professional Hairdressers' Association, and the Funeral Directors' Association of New South Wales Limited. Mr Grozier referred to the economic evidence tendered by Employers First™ and accordingly did not make additional detailed economic submissions. He did submit, however, having regard to the amount of increase and the relative underperformance of the NSW economy that ABI was cautious about not opposing the adoption of the increases available under the National Decision. Nonetheless, ABI submitted that overall there were insufficient reasons for not adopting the National Decision. Mr Grozier tendered a draft set of orders that were consistent with those proposed by the Labor Council. 49 Mr Grozier referred to the CCER's written submissions as follows: CCER shares the view with ACCER [Australian Catholic Commission for Employment Relations] that it would have been preferable for the AIRC to have granted the full amount of the ACTU's claim, being a $26.60 per week increase in award rates of pay plus a commensurate increase in wage-related allowances. However, like ACCER, CCER believes that the increase should have been directed at those who are the most in need, being those at lower paid classifications. CCER notes with particular concern the submission by ACCER that the proposed increased of $26.60 was still insufficient to provide a fair minimum rate of pay for award-only employees at lower paid classifications. In spite of this concern, CCER supports the flow-on to all NSW state awards of the increases awarded by the AIRC in the 2005 Safety Net Review decision.

Australian Industry Group 50 Mr D Hargraves appeared for the Ai Group. Mr Hargraves referred to his organisation's position before the Australian Commission as one of opposition to the ACTU's claim but one that supported a moderate increase of $11.00 per week to apply to all award rates of pay, subject to the principle of absorption. 51 Mr Hargraves submitted that: [T]he economy was slowing and interest rates had recently risen. If the adjustment awarded was too high it would harm the very people that the safety net review process is intended to benefit - that is, the low paid. An excessive safety net adjustment would:

· Reduce the employment security of low paid workers; · Reduce the international competitiveness of Australian companies; · Increase inflationary pressures; and · Increase the risk of further rises in interest rates for mortgages, credit cards and other loans, which would have a particularly harsh impact upon the low paid. Ai Group views the increases awarded by the AIRC in the 2005 Safety Net Review Case as high, having regard to state of the New South Wales Economy and for the reasons set out above. Nevertheless, Ai Group recognises the effect of S50 of the Industrial Relations Act 1996 regarding the following of the National decision and it does not object to this Commission, in this matter, adopting the wage increases awarded in the National Decision.

52 Ms J Owen for the Australian Retailers' Association supported the adoption of the National decision. Other Employer Bodies 53 The NSW Road Transport Association Inc. filed a written statement to the effect that it did not oppose the flow on of the National decision to State awards. Similarly, the Local Government and Shires Associations of NSW indicated that they did not oppose the orders sought by the Labor Council. Reasons for adopting National Decision

54 We are satisfied that the Australian Commission's Safety Net Review-Wages June 2005 is a "National decision" as defined by s 48 of the Act which the Commission is required to consider in accordance with the provisions of s 50. 55 Section 50(1) of the Act requires us to adopt the National decision unless we are satisfied that it is inconsistent with the objects of this Act or that there are other good reasons for not doing so. Having regard to the quantum of and reasons for the Australian Commission's decision, the adjustment in wages arising from the National decision is not inconsistent with the objects of the Act. 56 Whilst all of the major employer parties expressed some reservation about the size of the increase flowing from the National decision in light of what they regarded as underperformance of the State economy, the threat posed by the continuing drought and the uncertainty of the outlook for the national economy, no party contended that there were good economic or other reasons for not adopting the National decision. This was essentially the position put to the Commission in both the 2003 and 2004 State Wage Cases when the Full Benches passed on the increases granted federally. No party asserted the adoption of these increases had caused harm to the State economy. In the absence of any good reasons for not doing so, the Commission is bound by the statute to adopt the principles or provisions of the National decision. 57 Our own assessment of the economic material, independent of the views expressed by the parties, served to confirm that no good reason exists for declining to adopt the National decision. We fully concur with the Australian Commission's assessment of the national economy and we consider the New South Wales and Australian economies, broadly speaking, are exhibiting the same strengths and weaknesses. 58 We consider the increase of $17.00 per week strikes the right balance between such competing considerations as the state of the economy, employment and inflation and the needs of those who rely on award rates of pay. In this regard we note what the Australian Commission said at [421]: It is clear that there has been a slowing of GDP growth in 2004-05 and that in recent quarters productivity growth has been disappointing. Persistent drought conditions and the threat they pose to growth are also matters for concern. While the economic fundamentals appear solid, in our view a lower increase is appropriate this year than last. In reaching that conclusion we have also taken into account the benefits to low-paid employees of changes in the tax and government transfer regimes which occurred during 2004 and which have been foreshadowed in the Budget for 2005-06. We note, however, that while tax reductions will undoubtedly assist low-paid employees in absolute terms, their living standards may not increase greatly in relative terms when all of the changes in taxation and government benefits are taken into account. The Principles

59 There were no differences between the parties as to the terms of the Wage Fixing Principles. Whilst the Principles we determine differ in a number of respects from those determined by the Australian Commission, we consider that there are good reasons for the modifications that have previously been adopted and retained. The Principles we adopt are set out in Annexure B.

Appearances at the Hearing Mr M Thistlethwaite with Ms A Hughes for the Labor Council of New South Wales

Mr T McDonald for Employers First™ and affiliated organisations including Clubs NSW, Hotel and Motel Accommodation Association of New South Wales, Hotels Association New South Wales Branch, Master Builders' Association of New South Wales and the Bricklayers Federation of New South Wales

Mr D Grozier with Ms A Smith for Australian Business Industrial and its affiliates and for the Catholic Commission for Employee Relations, Australian Nursing Home and Extended Care Association New South Wales, Furnishing Industry Association of Australia New South Wales Limited, Professional Hairdressers' Association, and Funeral Directors' Association of New South Wales Limited

Mr J V Murphy , counsel for the Minister for Industrial Relations and the Public Employment Office

Mr D Hargraves for the Australian Industry Group, New South Wales Branch

Mr D Gillan for the Restaurant & Catering Association (NSW)

Mr R Nassif for the Local Government and Shires Associations of NSW

Mr S Brown for the NSW Road Transport Association Inc.

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.

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 2005 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 ---3.0 per cent for the State Wage Case 2005 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 classification 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 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:

(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. 9. Award Review Classification Rate The Award Review Classification Rate of $484.40 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 s 17(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.

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. 11. 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. 12. 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 (e.g. '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.

13. 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.

14. 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 under-valuations 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 adjustments 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. 15. 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 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. ______________________________________

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.