State Wage Case 2005 [2005] NSWIRComm 213

State Wage Case 2005 [2005] NSWIRComm 213 - NSWIRComm 2005 case summary — Zoe

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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.

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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

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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;

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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.

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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.

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· 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:

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· 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.

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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

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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

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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.

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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

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(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.

At a glance

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Before

Source

Judgment (104 paragraphs)

Legislation Cited (4)

Cases Cited (4)

Cited By (4)