State Wage Case 2006 [2006] NSWIRComm 67

CATCHWORDS: State Wage Case - Application by State peak council for employees for a State Decision seeking increase in rates of pay in accordance with Commission's wage fixing principles - Notices of motion by federal Minister for Employment and Workplace Relations and State peak councils for employers to adjourn the application until after the first wage determination of the Australian Fair Pay Commission or after the first wage determination of the Australian Industrial Relations Commission under the Workplace Relations Amendment (Work Choices) Act 2005 (Cth) - Consideration of implications of the Work Choices legislation for the operation of the Industrial Relations Act 1996 - Constitutional challenge to Work Choices legislation - Whether decision of Australian Industrial Relations Commission under Work Choices legislation in respect of minimum wages could be regarded as a National decision under the Industrial Relations Act - Comity - Divergence of purpose between Work Choices legislation and Industrial Relations Act - Applications to adjourn refused - Directions made for hearing of application for State decision

Industrial Relations Act 1996 LEGISLATION CITED: Workplace Relations Act 1996 (Cth) Workplace Relations Amendment (Work Choices) Act 2005 (Cth)

Butler v Attorney-General for the State of Victoria (1961) 106 CLR 268 Pastoral Industry (State) Award, Re (2001) 104 IR 168 Shop Employees (State) Award, Re [2006] NSWIRComm 5 State of Western Australia v Commonwealth; The Wororra Peoples and another v State of Western Australia; Biljabu and others v State of Western Australia (1995) 183 CLR 373 State Wage Case - August 1997, Re (1997) 73 IR 200 CASES CITED: State Wage Case 1999, Re (NSW) (1999) 88 IR 363 State Wage Case 2001, Re (2001) 104 IR 438 State Wage Case 2002, Re (2002) 114 IR 81 State Wage Case 2005, Re (2005) 142 IR 337 State Wage Case 2006 - Orders of the Full Bench, Re [2006] NSWIRComm 46 State Wage Case 2006, Re [2005] NSWIRComm 482 State Wage Case August 1989; Minimum Rates Adjustment (1990) 35 IR 183

APPLICANT Mr M Thistlethwaite with Ms A Hughes Unions NSW

RESPONDENTS Mr R S Warren of counsel Australian Business Industrial and affiliated associations Australian Industry Group, New South Wales Branch Employers First and affiliated associations and Australian Retailers Association

Mr G McKay Catholic Commission for Employment Relations LEGAL REPRESENTATIVES: Ms D Talbot Local Government and Shires Association

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

Mr A Baumgartner Motor Traders' Association of New South Wales

INTERVENOR Mr R M Goot AM, SC Minister for Employment and Workplace Relations

JUDGMENT: INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES

CORAM: Wright J, President Walton J, Vice President Harrison DP Boland J Bishop C Stanton C

Application by Unions NSW for a State Decision under section 51 of the Industrial Relations Act 1996

1 On 10 November 2005, Unions NSW made application under s 51 of the Industrial Relations Act 1996 for a "State Decision". The application sought to initiate a State Wage Case in which the applicant, the State peak council for employees, sought the following: (a) a 4% increase in rates of pay in certain awards in accordance with the State Wage Fixing Principles; (b) 4% increase in existing allowances which relate to work or conditions which have not changed, including shift allowances expressed as monetary amounts and service increments in certain awards in accordance with the State Wage Fixing Principles; (c) the variations apply to respective awards 12 months from the date of increases to wages and allowances made under the State Wage Case 2005 (2005) 142 IR 337 . 2 The grounds in support of the application were that: (1) The Industrial Relations Commission has jurisdiction to grant the variations sought under section 51 of the Industrial Relations Act 1996.

(2) The application is consistent with the objects of the Industrial Relations Act 1996 , particularly the objects contained in section 3 (a), (e) and (h).

(3) Section 50 (1) of the Industrial Relations Act 1996 states: "As soon as practicable after the making of a national decision, a Full Bench of the Commission must give consideration to the decision and, unless satisfied that it is not consistent with the objects of this Act or that there are other good reasons for not doing so, must adopt the principles or provisions of the National decision for the purpose of awards or other matters under this Act."

(4) In recent years the Industrial Relations Commission has acted on its own initiative to give consideration to respective National decisions. In each case the Industrial Relations Commission has adopted the wage increases in the National decision in New South Wales.

(5) On 2 November 2005 the Minister for Workplace Relations tabled the Workplace Relations Amendment (Workchoices) Bill 2005 (Workchoices Bill) in the federal parliament.

(6) National decisions have to date been determined by a Full Bench of the Australian Industrial Relations Commission (AIRC).

(7) The Workchoices Bill proposes to establish a new body, to be known as the Australian Fair Pay Commission (AFPC). The Workchoices Bill proposes that the AIRC will no longer conduct national decisions and wage reviews are proposed to be conducted by the AFPC. The Workchoices Bill does not prescribe a time frame for the conduct of wage reviews and the AFPC is not obliged to conduct a wage review in 2006.

(8) Recent State Wage Case decisions have made variations to awards available to industrial parties in New South Wales upon application on and from about June each year. This ensures wages and allowances are available to be reviewed annually and maintains the real value of wages and allowances in awards, particularly for the low paid in New South Wales. The State Wage Case 2005 (2005) 142 IR 337 was decided on 30 June 2005.

(9) Unions NSW on behalf of affiliated unions seeks the making of a State Wage Case Decision 2006 to ensure the maintenance of the real value of wages and allowances in New South Wales awards.

(10) Such other grounds and reasons as the Commission deems appropriate. 3 Initially, the application was listed for directions before Wright J, President on 29 November and 20 December 2005. On the latter date, Unions NSW sought the following directions: 1. That Unions NSW file and serve on all parties and intervenors, written submissions and any evidence in support of the application by 4.00pm on 17 March 2006. 2. That the Minister for Industrial Relations, the Public Employment Office and any intervenors file and serve on all parties and intervenors written submissions and any evidence by 4.00pm on 31 March 2006. 3. That all Employer Parties, file and serve on all parties and intervenors written submissions and any evidence by 4.00pm on 7 April 2006. 4. That Unions NSW file and serve on all parties and intervenors, written submissions and any evidence in reply by 4.00 pm on 3 May 2006. 5. That the matter be listed for hearing in the week beginning 15 May 2006. 4 A limited right to be heard was provided to Mr R Goot of senior counsel appearing for the Commonwealth, who argued that because of: (a) the enactment of relevant parts of the Workplace Relations Amendment (Work Choices) Act 2005;

(b) the consequent establishment of the Australian Fair Pay Commission;

(c) the fact that that body will make a determination in terms of its statutory mandate in the third quarter of 2006; and

(d) the currently reserved decision of the Full Bench of the Australian Industrial Relations Commission (AIRC) as to whether it should vacate the preliminary directions made in respect of the ACTU's application before it,

no direction should be made by the Commission. 5 In his Honour's decision on the application for directions (Re State Wage Case 2006, [2005] NSWIRComm 482), Wright J noted that: (1) Most of the employer interests supported the approach to the Commonwealth and stressed the unusual set of circumstances that arose in relation to the application and that it would be therefore inappropriate to make any decision without the Commission being in full possession of all relevant information, including the decision of the Full Bench of the AIRC which was likely to be delivered by Christmas; (2) The Catholic Commission for Employment Relations (CCER) and the Local Government Shires Associations (LGSA), whilst recognising that it was important for the Commission to have all relevant information available to it, were concerned that these proceedings should occur in the usual orderly way; (3) The Minister for Industrial Relations and the Public Employment Office stressed the need, in the light of the new circumstances presented by the impending federal legislation, to have some certainty in wage fixing for those persons who would not be covered by federal awards and the prima facie right of an applicant for proceedings to be heard and to have them heard in an orderly way. 6 At [18]-[19] of the decision Wright J determined that: 18 The Commission should, therefore, take an appropriately cautious and incremental approach in determining what directions, if any, should be made today. This inevitably involves a very fine balance of the competing considerations, but also a recognition that the major industrial parties in this jurisdiction should be able to prepare for 2006 with some expectation as to what might occur in these proceedings. 19 It seems to me that the appropriate balance would be achieved if the majority of the directions sought by the Labor Council was made, but with an appropriate safeguard built into those directions to ensure that they can be reviewed by the Full Bench early in the New Year, if it is appropriate to do so. 7 In the result, his Honour made directions 1 to 4 as sought by the applicant, stating also that: I also intend, subject to hearing from the parties, to set the matter down before the Full Bench at 9.15am on Tuesday 14 February 2006, and grant liberty to apply to any party (and for this purpose only, the word "party" includes the Commonwealth) to seek variations to those directions, provided documents setting out the variations sought in the form of notices of motion or any other suitable document, and short submissions in support thereof, are filed and served by 12 noon on 7 February 2006. 8 On 21 December 2005 a Full Bench of the Australian Industrial Relations Commission (the Australian Commission) decided that certain provisional directions it had made on 17 November 2005 relating to the preparation of its annual Safety Net Review be vacated and adjourned until the Australian Fair Pay Commission (AFPC) had made its first wage-setting determination in the Spring of 2006: PR966840 - Safety Net Review 2005 at [13]. 9 In its decision the Australian Commission noted that the Workplace Relations Amendment (Work Choices) Act 2005 (Work Choices Act) was passed by the Australian Parliament on 8 December 2005; schedule 1A to the legislation, which dealt with the establishment and operation of the AFPC, commenced to operate on 14 December 2005 and that the rest of the Work Choices legislation would come into operation in March 2006 on a day to be announced. The Australian Commission further noted that until the remainder of that legislation comes into operation its jurisdiction, in so far as the present application was concerned, remained unaffected.

10 At [4] the Australian Commission observed: [4] When the Work Choices legislation is fully operative the Commission will no longer have responsibility for the fixation of a minimum wages safety net. The function of establishing and maintaining a safety net of fair minimum wages and conditions of employment will disappear. It will be replaced by a system in which minimum wages are set having regard to the capacity for the unemployed and low paid to obtain and remain in employment, employment and competitiveness across the economy, providing a safety net for the low paid and providing minimum wages for minors, trainees and employees with disabilities that ensure they are competitive in the labour market. These wage-setting functions will be carried out in part by the AFPC and in part by the Commission. The AFPC's wage-setting powers will apply to most employees, including in particular employees of constitutional corporations. The Commission will have responsibility to fix minimum wages for a residual group of employees covered by Federal awards who are not within the jurisdiction of the AFPC. This group will be comprised of employees of employers said not to be subject to the Commonwealth's direct legislative competence. Employees in this group are referred to as transitional employees. 11 At [9]-[10] the Full Bench stated: [9] It is clear that after the commencement of the legislation, expected to be in March 2006, the Commission's minimum wage decisions will affect transitional employees only. It is also clear that in exercising its functions of fixing minimum wages for transitional employees the Commission's discretion will be circumscribed. Section 8 of Schedule 13 to the Work Choices legislation is as follows: (1) The Commission must perform its functions under this Schedule in a way that furthers the objects of this Schedule. (2) In performing its functions under this Schedule, the Commission must ensure that minimum safety net entitlements are maintained for wages and other specified monetary entitlements, having regard to: (a) the desirability of high levels of productivity, low inflation, creation of jobs and high levels of employment; and

(b) the principle that the wages and other monetary entitlements of transitional employees should not place them at a disadvantage compared with the entitlements of employees (within the meaning of subsection 4AA(1)); and

(c) the principle that the costs to transitional employers of wages and other monetary entitlements should not place them at a competitive disadvantage in relation to employers (within the meaning of subsection 4AB(1)). (3) In having regard to the factors referred to in paragraph (2)(a), the Commission must have regard to: (a) wage-setting decisions of the AFPC; and

(b) in particular, any statements by the AFPC about the effect of wage increases on productivity, inflation and levels of employment. (4) In performing its functions under this Schedule, the Commission must have regard to: (a) the desirability of its decisions being consistent with wage-setting decisions of the AFPC; and

(b) the importance of providing minimum safety net entitlements that act as an incentive to bargaining at the workplace level. [10] Under this section the Commission will be obliged, among other things, to have regard to the principle that the wages of transitional employees should be competitive with the wages of employees covered by the wage setting functions of the AFPC. The Commission will also be required to have regard to the wage-setting decisions of the AFPC and any relevant economic statements by that body. In light of these provisions we accept the Commonwealth's submission that under the new arrangements the AFPC will be the body primarily responsible for the fixation of minimum wages for employees covered by the Federal system.

12 In its decision, the Australian Commission also referred to developments in State industrial jurisdictions: [12] We were told at the hearing on 16 November that applications have been lodged in a number of State industrial jurisdictions for increases in minimum award rates. The manner in which those applications are determined may in due course have some relevance to the fixation of minimum rates for transitional employees in the Federal system. While the coverage of the State industrial jurisdictions may be reduced as a result of the Work Choices legislation, that legislation, including the part governing the establishment and operation of the AFPC, does not apply to the jurisdiction State industrial authorities may lawfully exercise after the Work Choices legislation commences to operate. The existence of the State applications, however, does not provide any justification for this Commission to reject the Commonwealth's adjournment proposal.

13 In a notice of motion filed on 7 February 2006, the three State peak councils for employers (Employers First, Australian Business Industrial and the Australian Industry Group) sought a revocation of the directions made by the President on 20 December 2005 and that the matter be adjourned until such time as the Australian Commission delivered its decision in any Safety Net Review following the determination of the AFPC. The Motor Traders' Association of NSW supported the position of the major employers. The Local Government Association, the Shires Association of NSW and the CCER maintained their earlier position and submitted the Full Bench should confirm the directions made on 20 December 2005. 14 The federal Minister for Employment and Workplace Relations also moved the Commission to set aside the directions and to adjourn the application of Unions NSW "until after the first wage determination of the Australian Fair Pay Commission" (AFPC) (it should be noted that the original application of the Commonwealth to intervene on a limited basis was withdrawn and replaced by an application, subsequently granted, by the federal Minister).

15 The federal Minister's submissions in support of an adjournment of the application may be summarised as follows: (1) From the commencement of the changes in the Work Choices Act, State tribunals will cease to have jurisdiction with respect to minimum wage setting for employees in the new federal system. For example, minimum rates of pay for employees of constitutional corporations will be exclusively determined by the AFPC. The minimum rates of pay of employees who are covered by federal awards, but who are not within the jurisdiction of the AFPC, will remain within the jurisdiction of the Australian Commission for a period of up to five years. This includes a large number of employees of unincorporated businesses who otherwise would have been subject to the State jurisdiction. (2) On 21 December 2005 the Australian Commission adjourned the safety net review proceedings until after the first wage determination of the AFPC and vacated the provisional directions previously made by it. The Australian Commission recognised that the AFPC was now the body primarily responsible for the fixation of minimum wages for employees covered by the federal system. (3) To proceed with the application at this time could have the effect of undermining the benefits of what has been a longstanding national approach to the setting of the minimum wages. There is the distinct potential for inconsistent and inequitable treatment and outcomes in the setting of the minimum wages for employees employed by unincorporated employers in the New South Wales jurisdiction (as determined by the NSW Commission), and those of employees within the federal jurisdiction. This could occur if the NSW Commission were to grant a wage increase before and inconsistent with the federal determinations. (4) To proceed with the application could place in jeopardy the jobs of those employees within the NSW Commission's jurisdiction who are award-reliant, by increasing the cost of employing these workers compared with their counterparts in other jurisdictions. A larger and/or earlier, increase in award rates in NSW than that which may occur federally, would place businesses in the NSW Commission's jurisdiction at a competitive disadvantage to NSW businesses in the federal jurisdiction. This would be contrary to the Objects of the Act, in particular the objects: (a) to provide a framework for the conduct of industrial relations that is fair and just; and (b) to promote efficiency and productivity in the economy of the State. (5) To proceed with the application at this time could create potential inconsistencies between the minimum rates outcomes determined in the NSW jurisdiction and those outcomes which may be determined in other states and territories. (6) Were the NSW Commission to proceed with the application ahead of the federal determinations, many unincorporated businesses affected by the decision are unlikely to be fully aware of the way they will have been disadvantaged in a competitive sense by any increase for their employees granted ahead of, and unrelated to, any possible increase under the federal determinations. In these circumstances, it would be appropriate for the NSW Commission to await the federal determinations before making its own wage determination. (7) To adopt the approach proposed by the Minister would also be consistent with the policy implemented by the NSW Commission and other State tribunals for many years. This policy is reflected in previous determinations in which the NSW Commission has followed the Australian Commission's decisions, and suggested that a departure would be wrong in the absence of a good reason (particularly where there is no suggestion that the decision is economically or conceptually flawed). (8) The practice of adopting the safety net adjustment outcome awarded by the Australian Commission is enshrined in the Act. Section 50 of the Act requires the NSW Commission to consider the safety net adjustment of the Australian Commission, and adopt such a decision unless there are good reasons for not doing so or, to adopt the approach of the Australian Commission were contrary to the objects in the Industrial Relations Act. (9) Similarly, Section 50 of the Act encourages the NSW Commission to follow the AIRC's decision of 21 December 2005 to adjourn the applications of the Federal Unions. The Minister submits that the 21 December 2005 Federal Decision is a "national decision" for the purposes of section 48 of the Act. In any event, the clear legislative intent of section 50 of the Act is that the normal course will be to adopt the approach of the Australian Commission, here reflected in the Federal Decision.

(10) There is no good reason for the NSW Commission not to adopt the approach of the Australian Commission. If the NSW Commission is concerned about the lapse of time since the Australian Commission's 2005 Safety Net Review decision, then it should be remembered that the Australian Government has stated publicly that the AFPC is expected to take into account the time that has elapsed since the Australian Commission's 2005 Safety Net Review when making its determination. Submissions of State Peak Councils of Employers 16 The contentions of the State peak councils of employers, represented by Mr R S Warren of counsel, in support of an adjournment may be summarised as follows: (1) Irrespective of the differing federal statutory framework now in place, there remains a strong and sound history of this Commission adopting an approach of comity with National Decisions of the Australian Industrial Relations Commission (see Re State Wage Case August 1989; Re Minimum Rates Adjustment ; (1990) 35 IR 183 at 193, 194 and State Wage Case - August 1997 (1997) 73 IR 200 at 220, 221). (2) The approach of comity has, to the extent deemed necessary and desirable by this Commission, ensured that wages and conditions across New South Wales have remained consistent and economically competitive both within the State and across state borders. (3) Employers should not be put to any disadvantage, and thus jeopardise employment opportunities, by the adoption of a premature application to increase wage rates for State Award employees, prior to a National Decision which decision will effect the wage rates of other employees in the State. (4) Adjourning the application by Unions NSW would be neither inconsistent with the objects of the Act, nor prejudicial to employment in New South Wales. (5) Adjourning the application by Unions NSW would be consistent with the statutory scheme of Part 3 of Chapter 2 of the Act, in so far as it would afford this Commission the opportunity to then give full consideration to the adoption or otherwise of the National Decision, and the affect that National Decision will have on the future of industrial relations in the State. Submissions of Unions NSW

17 Unions NSW opposed the orders sought by the federal Minister and major employers. Mr M Thistlethwaite contended as follows: (1) Any decision by the Australian Commission would not be a "National decision" within the meaning of s 48 of the Industrial Relations Act because any decision of that body would not generally affect or be likely to generally affect the conditions of employment of employees in New South Wales who are subject to its jurisdiction. (2) There was no evidence to support the assertions of the major employers that employers would be economically disadvantaged in New South Wales if the Commission were to proceed without a decision of the Australian Commission. (3) Low paid workers in New South Wales would be significantly disadvantaged by the inherent delay that would occur if the Commission were to accept the submissions of the federal Minister and major employers. (4) Any submissions in relation to the need for comity were more appropriately to be put in any substantive proceedings on the application. Submissions of NSW Minister

18 Mr J V Murphy of counsel appeared for the Minister for Industrial Relations and the Public Employment Office. Mr Murphy expressed his clients' opposition to the applications for adjournment. He submitted: (1) None of the objects of the Industrial Relations Act would be served by granting the applications of the federal Minister or the major employers. (2) The Commission's statutory mandate is to set wages that are fair and reasonable. (3) This Commission proceeds by way of arbitration whereby outcomes are determined by a fair and balanced assessment of the competing positions of the parties supported by evidence and tested by those taking a contrary position. That is not the approach to be taken by the AFPC. (4) These proceedings are about the interests of low paid workers and the Minister has regularly and invariably urged this Commission in past years to not lose sight of the interests of low paid employees. (5) The AFPC cannot be said to be independent of government. (6) This Commission has demonstrated in the past it will not blindly follow the decisions of the Australian Commission. (7) Submissions as to comity ought be reserved for the substantive proceedings. (8) Low paid workers will be prejudiced by the delay proposed by the federal Minister and major employers.

19 At the conclusion of the hearing of the notices of motion on 14 February 2006 the Full Bench made the following orders (see Re State Wage Case 2006 - Orders of the Full Bench [2006] NSWIRComm 46): 1. On the application of its Senior Counsel the Commission revokes the limited right of intervention granted on 20 December 2005 to the Commonwealth. 2. In place thereof, the Commission grants to the federal Minister for Employment and Workplace Relations the limited right to intervene he seeks today; that is, to advance the application set out in his amended notice of motion filed in court today. 3. The Commission reserves its decision on the applications made today. 4. Until that decision is delivered the directions made by the Commission on 20 December 2005 remain in full force and effect. The statutory scheme

20 Part 3 of Chapter 2 of the Act deals with National and State decisions. Section 48 defines a National decision as "a decision of a Full Bench of the Australian Industrial Relations Commission that generally affects, or is likely to generally affect, the conditions of employment of employees in New South Wales who are subject to its jurisdiction." 21 Section 49 defines a State decision as "a decision of a Full Bench of the Commission that generally affects, or is likely to generally affect, the conditions of employment of employees in New South Wales who are subject to its jurisdiction." Section 50 of the Act provides for the adoption by this Commission of National decisions in prescribed circumstances. The section is in the following terms: 50 Adoption of National decisions (1) As soon as practicable after the making of a National decision, a Full Bench of the Commission must give consideration to the decision and, unless satisfied that it is not consistent with the objects of this Act or that there are other good reasons for not doing so, must adopt the principles or provisions of the National decision for the purposes of awards and other matters under this Act. (2) A Full Bench of the Commission is to give consideration to the National decision either on application or on its own initiative. (3) The principles or provisions of a National decision may be adopted: (a) wholly or partly and with or without modification, and

(b) generally for all awards or other matters under this Act or only for particular awards or other matters under this Act. (4) The principles or provisions of a National decision so adopted may be varied by a Full Bench of the Commission, whether or not another National decision is made. 22 Section 51 of the Act provides: 51 Making of State decisions (1) A Full Bench of the Commission may, if satisfied that it is consistent with the objects of this Act and that there are good reasons for doing so, make a State decision setting principles or provisions for the purposes of awards and other matters under this Act. (2) A Full Bench of the Commission may make a State decision only on the application of a State peak council or on its own initiative. (3) A State decision may apply generally to all awards or other matters under this Act or only to particular awards or other matters under this Act. (4) The principles or provisions of a State decision may be varied by a Full Bench of the Commission. 23 As the Full Bench observed in State Wage Case - August 1997 (1997) 73 IR 200 at 220-221 (emphasis added): New South Wales industrial tribunals have over the years reflected in State Wage Case decisions the principles and orders made by the AIRC with careful adherence. This course has been taken although from time to time the New South Wales tribunal has doubted the soundness of the federal approach in the context of the New South Wales award system. That is not to say that there were not departures, some dictated by the requirements of legislation and others which took particular account of the views of the industrial parties in New South Wales . That close adherence to the federal decisions not only followed from the legislation under which the State tribunals acted, but also from the recognition that Australia had become one indivisible economy and that the AIRC was the pre-eminent tribunal with the authority to set wage rates and lead policy within that economy. Further, there was during the period a general coincidence of legislative purpose between the Australian and New South Wales legislation . It is possible that the two tribunals might, because of differing statute bases, have diverged to the extent that the federal and State obligations cannot be reconciled in the terms of reflected tribunal decisions. We do not consider that such a position has been reached at present.

24 The passage we have quoted from the 1997 State Wage Case confirms the long-established practice of this Commission in adopting the federal approach to the setting of minimum, or in more recent times, safety net wages in awards and the reasons why that has been so. This Commission must not depart from that practice "unless satisfied that it is not consistent with the objects of this Act or that there are other good reasons for not doing so": s 50. 25 But the passage quoted above also notes the differing statutory bases for the operation of the two tribunals. In the same case at 208 the Full Bench observed: The diverging path upon which the two systems were set some years ago clearly continues.

Over time, this diverging path has gradually eroded a significant basis for strict adherence by this Commission to federal decisions: general coincidence of legislative purpose. This has been noted in various decisions scrutinising the underlying basis of decisions of the Australian Commission and its award-making power, including State Wage Case 1999 (NSW) (1999) 88 IR 363 at 389; Re Pastoral Industry (State) Award (2001) 104 IR 168 at pages 172-179 (where the Full Bench noted that the difference between the two schemes was "stark" and that this Commission's "award making powers under the Act are, at this point in time, considerably broader than those of the AIRC pursuant to the WR Act and are substantially directed to considerably different purposes"); and State Wage Case 2001 (2001) 104 IR 438 at [69]-[70]. 26 In the period since the Full Bench decision in the 1997 State Wage Case there was no issue that the national wage cases and safety net review decisions of the Australian Commission were national decisions in that they were decisions of a Full Bench of the Australian Industrial Relations Commission that generally affected, or were likely to generally affect, the conditions of employment of employees in New South Wales who were subject to its jurisdiction: s 48. Whether a decision of a Full Bench of the Australian Commission in relation to the fixing of wages for transitional employees under the Work Choices Act is a national decision for the purpose of s 48 is now called into question and we shall deal with that issue shortly. Work Choices Act 27 Before dealing with that issue, however, it is necessary to say something about the operation of the Work Choices Act, noting in the course of doing so that its constitutional validity has been challenged in the High Court by most of the States and Territories and a number of union organisations. Tentative hearing dates have been set for 8 to 12 May 2006: State of New South Wales & Ors v Commonwealth (AKA Workplace Relations Challenge) [2006] HCATrans 24 (8 February 2006). 28 The Work Choices Act amends the Workplace Relations Act 1996 (Cth). Schedule 1 of the Work Choices Act sets out the main amendments and within Schedule 1 is a further schedule, Schedule 15, which is relevant to the matters here under consideration. Schedule 15 is titled "Transitional treatment of State employment agreements and State awards". 29 Whatever uncertainties surround the actual operation of the amended Act, one thing is clear: it will not exclude the operation of the State jurisdictions with respect to certain employers not covered by a Federal instrument, including where the employer is not a constitutional corporation. 30 The amended Act proposes that State awards and agreements will be preserved in two ways: first, in their current form as New South Wales laws as to certain employers and, second, to the extent it applies to constitutional corporations, from the commencement of operation of the amendments a State award will be known as a "notional agreement preserving State awards", with the operation of these notional agreements being governed by federal law. As the Full Bench noted in Re Shop Employees (State) Award [2006] NSWIRComm 5: The State award or State agreement will still be in existence under State law but the purported effect of the amendments to the WRA [ Workplace Relations Act ] is to render the State awards and agreements inoperative under State law as to certain employees (by virtue of s 109 of the Constitution and relevant provisions of the amended WRA) and to, in effect, give them a new identity as a transitional arrangement, under federal law. 20 In so far as notional agreements preserving State awards are concerned, the transitional period is up to three years during which the notional agreement may be converted into a certified agreement or Australian Workplace Agreement. In the event the notional agreement is not converted, it is proposed that eventually federal awards will be rationalised along industry sector lines. Once these rationalised federal awards come into operation, any notional agreement that has not been converted will cease to operate where the federal award applies to an employee's employment previously regulated by the notional agreement. 31 The terms of the notional agreement will be the terms of the State Award as at the date of the commencement of Schedule 1 (presumably some time in March or April 2006) subject to any prohibited content, which will be void, and the inclusion of model dispute resolution provisions. Moreover, even though the actual terms of the notional agreement might allow a State Industrial Authority to perform a function or exercise a power, the Authority is prohibited (to the extent of any inconsistency) from doing so. 32 It is also relevant to note that Schedule 13 of the Work Choices Act provides certain transitional arrangements for non-constitutional corporations ("transitional employers") who are covered by federal awards at the commencement date of the Work Choices Act, thereby enabling those employers to remain respondents to those awards for a transitional period of five years. The AFPC will not have power to determine wages and employment conditions for employees of these transitional employers and that function will continue to be performed by the Australian Commission, albeit largely circumscribed by a requirement to, in effect, follow the AFPC's lead, as will be explained in more detail shortly. 33 Thus, to summarise the relevant position regarding the Work Choices Act and its purported effect on State awards: (1) The Work Choices Act is subject to a wide-ranging challenge to its constitutional validity. This legislation thus remains an area of considerable uncertainty and this observation represents a possible qualification to subparagraphs (2) to (4) and (6) hereunder. (2) Federal Parliament intends the amended Workplace Relations Act will operate to the exclusion (with certain exceptions) of the New South Wales industrial jurisdiction in its application to employers and employees who fall within the general constitutional coverage of the amended Workplace Relations Act. (3) New South Wales State awards will continue in existence under State law after the commencement date of the Work Choices Act but the effect of the federal amendments may be to render the State awards inoperative under State law (by virtue of s 109 of the Constitution and relevant provisions of the amended Workplace Relations Act ) as to certain employers and their employees who fall within the general constitutional coverage of the amended Workplace Relations Act. (4) In respect of those employers who fall within the general constitutional coverage of the amended Workplace Relations Act and who are covered by State awards as at the commencement date of the Work Choices Act, the relevant State awards will be given a new identity as transitional arrangements under federal law to be known as a 'notional agreements preserving state awards'. (5) New South Wales State awards will continue to have day-to-day relevance and application to employers and employees who are subject to such awards and who fall outside the coverage of the amended Workplace Relations Act . (6) The Australian Commission will continue to set the minimum wages and employment conditions for employees of transitional employers subject to an obligation on the Australian Commission to have regard to the desirability of its decisions being consistent with wage-setting decisions of the AFPC.

34 As the federal Minister and major employers contended in these proceedings, there are good reasons why this Commission has followed the federal decisions in the fixing of minimum award wages. These reasons are touched upon in the 1997 State Wage Case decision. There are obvious benefits for employers in having minimum wages move in a consistent and uniform way, especially for those that operate across State and Territory boundaries and for those whose workforce may be covered by a mix of federal and State industrial instruments. Comity, therefore, has been a particularly significant guiding principle in considering National decisions as well, of course, as the statutory requirement to adopt the principles or provisions of a National decision unless satisfied that it is not consistent with the objects of this Act or that there are other good reasons for not doing so. 35 In the 1997 State Wage Case the Full Bench observed that in the period 1940 to 1996, there was "a general coincidence of legislative purpose between the Australian and New South Wales legislation." This coincidence of purpose has also been an important consideration for this Commission; it underpinned the Commission's respect for the National decisions and served to contribute to the Commission's confidence that the National decisions were consistent with the objects of the State Act. As we have already noted, this coincidence of purpose has been gradually eroded. We have now reached the point where there must be real doubt that the Commission's 1997 observation any longer holds true. 36 Firstly, whereas one of the objects of the Workplace Relations Act was to provide the means to "ensure the maintenance of an effective award safety net of fair and enforceable minimum wages and conditions of employment" (s 3 (d)(ii)), the new provision introduced by the Work Choices Act (s 3(g)) is to: [E]nsure that awards provide minimum safety net entitlements for award-reliant employees which are consistent with Australian Fair Pay Commission decisions and which avoid creating disincentives to bargain at the workplace level. 37 A new s 7J of the Workplace Relations Act will prescribe the AFPC's wage-setting parameters: The objective of the AFPC in performing its wage-setting function is to promote the economic prosperity of the people of Australia having regard to the following: (a) the capacity for the unemployed and low paid to obtain and remain in employment; (b) employment and competitiveness across the economy; (c) providing a safety net for the low paid; (d) providing minimum wages for junior employees, and employees to whom training arrangements apply and employees with disabilities that ensure those employees are competitive in the labour market. 38 This may be contrasted with the provisions of the Workplace Relations Act (such provisions to be superseded by the Work Choices Act upon its commencement), which imposed an obligation on the Australian Commission (pursuant to s 88B(2)) to ensure that a safety net of fair minimum wages and conditions of employment was established and maintained having regard to the following: (a) the need to provide fair minimum standards for employees in the context of living standards generally prevailing in the Australian community; (b) economic factors, including levels of productivity and inflation, and the desirability of attaining a high level of employment; (c) when adjusting the safety net, the needs of the low paid.

By way of further contrast, under the Industrial Relations Act, if the Commission is to make an award or order that sets conditions of employment, it must do so by setting fair and reasonable conditions of employment for employees: (s 10). This requirement applies to decisions made under ss 50 and 51 of the Act. 39 Whilst one of the AFPC's wage-setting parameters is to provide a safety net for the low paid, absent from the Work Choices Act is any requirement for the AFPC to have regard to questions of fairness in its wage-setting function for the low paid, or to the needs of the low paid, or to fair minimum standards for employees in the context of living standards generally prevailing in the Australian community. Fairness has been a centrally important notion in the federal and New South Wales systems of industrial regulation throughout their history. It was submitted for the federal Minister that fairness was implicit in the AFPC's wage-setting parameters. But it is difficult to overlook the fact that, unlike the relevant former provisions in the Workplace Relations Act, the amendments in the Work Choices Act have no express reference to fixing safety net wages for the low paid according to either the hitherto fundamentally important criterion of fairness or to the needs of the low paid. There does not seem to be any proper basis to conclude that an implication of the kind proposed by the Minister is available and there appears to have been a deliberate omission by the federal legislature of a criterion based on fairness. On the other hand, an important consideration in State Wage Case proceedings has consistently been "the situation of employees in low paid work": State Wage Case 2001 (2001) 104 IR 438 at [86]; State Wage Case 2002 (2002) 114 IR 81 at [62].

40 Secondly, whilst the Australian Commission will continue to have the responsibility for setting minimum award wages for employees described as "transitional employees", it will be required to do so by having regard to wage-setting decisions of the AFPC and, in particular, any statements by the AFPC about the effect of wage increases on productivity, inflation and levels of employment. It is apparent from the Work Choices Act that there will be an obligation on the Australian Commission to have regard to the desirability of its decisions being consistent with wage-setting decisions of the AFPC. We consider the practical effect of the Work Choices Act will be that there will be little, if any, scope for the Australian Commission to act independently of the AFPC in fixing minimum wages for transitional employees and fairness will not be a mandatory consideration, if a consideration at all. That observation is not made in any critical sense but simply to highlight the difference in purpose between the federal legislation and the Industrial Relations Act.

41 In the Work Choices Act, the emphasis in wage setting has clearly shifted from the fixing of fair minimum wages for those in employment to more of a focus on wage levels that, according to the legislation, will increase the capacity for the unemployed to obtain employment and for the low paid to remain in employment (regardless of whether their minimum wage is fair) in the interests of promoting employment and competitiveness across the economy.

42 Whilst the New South Wales statute requires the Commission to take into account the public interest in the exercise of its functions and, for that purpose, it must have regard to the state of the economy of New South Wales and the likely effect of its decisions on that economy (s 146(2)), its functions do not extend, for instance, to the speculative realm of job creation for the unemployed by slowing the rate of increase of minimum wages for the low paid or by not increasing minimum wages. The Commission's statutory mandate is to set award wages that are fair and reasonable for the work to be done. 43 Thirdly, any deliberations of the AFPC cannot be initiated by any person or organisation representing the low paid. There will be no public hearings and a union body will have no automatic right to have its views considered. Rather, the AFPC will initiate any consideration relating to minimum wages on its "own motion" at a time of its choosing and will consult only those it chooses to consult, or only those it is required to consult as prescribed in any Regulation. There is no statutory requirement for the AFPC to review minimum wages annually or within any regularised timeframe. Any consequential consideration by the Australian Commission would necessarily have to follow the timing of the AFPC's deliberation. This represents a significant departure from the regular annual reviews of minimum wages that have occurred over the past decade at least, which has provided this Commission with the opportunity of reviewing issues such as the maintenance of the real value of the wages of the low paid.

44 In these circumstances, given there is no statutory requirement for the Australian Commission to set minimum award wages that are fair and which have regard to the needs of the low paid, and given a statutory regime that does not subject minimum wages to regular reviews on the application of organisations that represent the low paid, it is difficult to envisage how a National decision could be said to be consistent with the first object of the Industrial Relations Act, set out in s 3, namely: (a) to provide a framework for the conduct of industrial relations that is fair and just

45 Based on the foregoing considerations, which point to divergent purposes in so far as wage fixing is concerned under the respective statutes, the strength of the contention that comity should be maintained is significantly weakened. It was submitted, nevertheless, by the federal Minister that we should await the decision of the AFPC in Spring 2006, and by the major employers that we should await the subsequent decision of the Australian Commission, before proceeding to hear and determine the present application by Unions NSW. Of course, a decision of the AFPC has no statutory relevance for this Commission and it is only a "National decision" of the Australian Commission that we are required to consider under s 50 of the Act. 46 We have no better indication from the federal Minister than that any decision by the AFPC will be some time in Spring this year. Conceivably then, a decision could be as early as September and as late as November 2006. In those circumstances it would be unlikely that the Australian Commission would be in a position to issue a decision in relation to transitional employees before the end of 2006 and probably not until the first half of 2007. That would mean, on the major employers' submission, we should adjourn the application by Unions NSW for about 12 months, leaving a gap of nearly two years between the last State Wage Case decision in 2005 and any decision that might be made by us regarding the latest application by Unions NSW. As the President observed in his 20 December decision at [16]: [A]n important consideration is that, provided parties are given a proper opportunity to be heard, an applicant for an award (or even for a State decision such as the present application) has a right to have its application heard, within the constraints of other Commission business, in an orderly way. 47 The divergence between the changes that have been brought about by the Work Choices Act on the one hand and the Industrial Relations Act on the other, in terms of the respective frameworks for setting minimum award wages, seems reasonably clear. There exists, therefore, the distinct possibility that, even if it were to await a decision of the Australian Commission, this Commission would not be satisfied that any decision of the Australian Commission was consistent with the objects of the Industrial Relations Act pursuant to s 50 or that there were other good reasons for not adopting the decision of the Australian Commission. Accordingly, we consider the balance of convenience lies in favour of dealing with the application by Unions NSW in a timely and orderly way, thus avoiding any injustice that might be caused by what would be an inordinate delay that ultimately may prove to have been unjustifiable. 48 We turn to a more fundamental consideration, namely, the terms of s 48 of the Industrial Relations Act. As we have stated, that section defines a National decision as "a decision of a Full Bench of the Australian Industrial Relations Commission that generally affects, or is likely to generally affect, the conditions of employment of employees in New South Wales who are subject to its jurisdiction" (our emphasis). 49 The outcomes in national wage cases and more latterly, safety net reviews, conducted annually by the Australian Commission have flowed generally into its awards, thereby increasing the minimum rates of pay in those awards for the relevant occupational classifications. No issue has arisen that the decisions of Full Benches of the Australian Commission in those annual cases generally affected the conditions of employment (i.e., wages in this case) of employees in New South Wales who were subject to the Australian Commission's jurisdiction. 50 Subject to questions of constitutional validity that are now before the High Court, the AFPC has purportedly taken over the Australian Commission's function in setting the federal minimum wage and award classification wages (and other matters that constitute the Australian Fair Pay and Conditions Standard - see new Part VA of the Workplace Relations Act), except in relation to employees covered by federal awards who are employed by non-constitutional corporations. Importantly, however, federal awards and the employers subject to their coverage, regardless of whether they are constitutional corporations, remain within the Australian Commission's jurisdiction. 51 Any decision fixing safety net wages for "transitional employees" (that is, employees of non-constitutional corporations whose terms and conditions of employment are regulated by federal awards) will only affect a minority proportion of employees in New South Wales subject to the jurisdiction of the Australian Commission. The majority of employees subject to awards of the Australian Commission will have their minimum wages determined by the AFPC. So much was not in dispute in the proceedings before us. A decision of a Full Bench of the Australian Commission that affects only a minority of employees subject to its awards cannot be said to generally affect, or be likely to generally affect, the conditions of employment of employees in New South Wales subject to the Australian Commission's jurisdiction. 52 In other words, subject to the validity of the Work Choices Act in respect of, inter alia, the powers and functions of the AFPC, a decision of the Australian Commission in relation to award classification wages for transitional employees who are subject to the coverage of a federal award will not be a "National decision" for the purpose of Pt 3 of Ch 2 of the Industrial Relations Act. 53 It was submitted by senior counsel for the federal Minister that even if a decision of the Australian Commission in relation to award classification wages for transitional employees was not a "National decision" for the purposes of s 48, the clear legislative intent of s 50 was that the normal course would be to adopt the approach of the Australian Commission. We do not consider that follows. If there is no national decision there is nothing to adopt in so far as the statute that governs this Commission is concerned. In any event, for the reasons we earlier articulated relating to the different legislative purposes that have now emerged, we may well not be inclined to follow a decision of the Australian Commission that in all likelihood will simply flow on a decision of the AFPC. 54 The application by Unions NSW in these proceedings is for the making of a State decision pursuant to s 51 of the Industrial Relations Act. Section 49 of that Act, as we have noted, defines a State decision as "a decision of a Full Bench of the Commission that generally affects, or is likely to generally affect, the conditions of employment of employees in New South Wales who are subject to its jurisdiction." The question arises whether in light of the changes to the federal legislation and its impact on the operation of the industrial laws of New South Wales, any decision of a Full Bench of this Commission relating to movements in award wages can be said to be "a decision of a Full Bench of the Commission that generally affects, or is likely to generally affect, the conditions of employment of employees in New South Wales who are subject to its jurisdiction." 55 As we have already noted, the purported effect of s 7C of the Workplace Relations Act is that the Workplace Relations Act would operate to the exclusion (with certain exceptions) of present and future industrial jurisdictions in their application to employers and employees who fall within the general constitutional coverage of the amended Workplace Relations Act. Assuming the constitutional validity of the Work Choices Act, the operation of the Industrial Relations Act, as a State industrial law, may then be reduced by virtue of s 109 of the Constitution and, where they are relevant, the provisions of the Workplace Relations Act, including s 152. 56 Section 109 of the Constitution provides: When a law of a State is inconsistent with a law of the Commonwealth, the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid. 57 In their text "Australian Constitutional Law & Theory" (Tony Blackshield and George Williams, The Federation Press, 3rd Edition, 2002) the learned authors commented on the meaning of "invalid" for State law at 370: For practical or "operative" purposes the State law yields to the Commonwealth law, but remains a valid law of the Parliament which enacted it. The practical significance of this will become apparent if, at some later date, the overriding Commonwealth law ceases to operate. For example, suppose that a Commonwealth law was enacted in 1984 and repealed in 1990. An inconsistent State law lying dormant from 1984 will automatically be reactivated in 1990. Throughout the period of this ouster by an overriding Commonwealth law it has remained valid in the positivist sense, though inoperative. Once the bar to its practical operation is removed, there is no reason why it should not resume its normal legislative effect. 58 In Butler v Attorney-General for the State of Victoria (1961) 106 CLR 268, the High Court held that "invalid" in s 109 meant "inoperative". At 274 Fullagar J stated: It is on the facts so far stated that the first question arises. That question is whether ss 4, 7, 9 and 10 of the Victorian Preference Act acquired the force of law when the Commonwealth Act ceased to have the force of law. It is quite clear, in my opinion, that this question must be answered in the affirmative. The Victorian Act was not unconstitutional. It was a valid law of the State, and it was fully operative as a law of the State from 21st March 1944 to 27th August 1945. On the latter date it ceased to operate as such a law. But that was not because of any inherent vice. It was merely because the "field" was temporarily occupied by valid Commonwealth legislation. It remained on the statute book and was never repealed by the State Parliament. When the Commonwealth legislation expired, the only obstacle to its operation as a valid law of the State was removed, and it resumed the full force and effect which it had had before 27th August 1945. As Latham C.J. pointed out in Carter v. Egg and Egg Pulp Marketing Board (Vict.) (1942) 66 CLR 557, at p 573, the word "invalid" in s 109 cannot mean that a State law affected by s 109 becomes ultra vires in whole or in part. The word must be regarded as meaning "inoperative". His Honour added: "If the Commonwealth law were repealed, the State law would again become operative" (1942) 66 CLR 557, at p 573.

See also State of Western Australia v Commonwealth; The Wororra Peoples & Another v State of Western Australia; Teddy Biljabu and Others v State of Western Australia (1995) 183 CLR 373 at 464-465. 59 Whilst it remains on the statute books, the Industrial Relations Act will remain a valid law of the New South Wales Parliament. However, whilst the amended Workplace Relations Act applies (assuming its validity) the Industrial Relations Act will be inoperative to the extent it is inconsistent with the federal law. 60 It follows that there is no impediment to this Commission continuing to exercise its wage fixing powers under the Industrial Relations Act except that the operation of any decision relating to the setting of minimum wages for employees of constitutional corporations would be, in effect, suspended. There would seem to be no issue, however, about the Commission's continuing jurisdiction to fix wages in respect of those employees of employers that do not fall within the constitutional coverage of the amended Workplace Relations Act but who do fall within this Commission's jurisdiction. 61 This brings us back to s 51 of the Industrial Relations Act and to the question of whether it can be said, in light of the amendments to the Workplace Relations Act, that any decision we might make in respect of the application by Unions NSW in these proceedings may be a State decision in that it would be "a decision of a Full Bench of the Commission that generally affects, or is likely to generally affect, the conditions of employment of employees in New South Wales who are subject to its jurisdiction." 62 To put it another way: if one accepts the assumption the amended Workplace Relations Act will, upon commencement significantly render inoperative the effect of the Industrial Relations Act, including the power of the Commission to set fair and reasonable wages for employees of constitutional corporations (such employees making up the majority of employees who are subject to the Commission's jurisdiction), can it be said a decision of the Commission in relation to minimum award wages will generally affect, or be likely to generally affect, the conditions of employment of employees in New South Wales subject to the Commission's jurisdiction? 63 In dealing with that question, we consider that the proper approach to ss 49 and 51 of the Industrial Relations Act would be to regard the Commission's jurisdiction to make a State decision, as having been suspended but only to the extent of any inconsistency. In other words, in relation to those employees of constitutional corporations that will be removed to the coverage of the Workplace Relations Act upon commencement of the Work Choices Act, the Commission's jurisdiction to make a State decision will not operate - it would be in suspension. To that extent, such employees should not be regarded as being within the Commission's jurisdiction for the purposes of ss 49 and 51. 64 The consequence of this approach is that, whatever the ultimate effect of the Work Choices Act, the exercise of the Commission's jurisdiction in making a decision under s 51 would generally affect or be likely to generally affect the conditions of employment of employees in New South Wales subject to its jurisdiction. Accordingly, such a decision will be a State decision within the meaning of the Industrial Relations Act. If the Work Choices Act was found to be invalid, or was later rescinded, inconsistency would cease or, perhaps more correctly, would never have arisen. The operation of the Industrial Relations Act would thereupon revive to its full extent and any future State decision would return to its prior coverage. Directions

65 We confirm the directions made by the President on 20 December 2005 subject to providing the parties with additional time given the hearing dates we have fixed. The directions are as follows: 1. That Unions NSW file and serve on all parties and intervenors, written submissions and any evidence in support of the application by 4.00pm on 31 March 2006. 2. That the Minister for Industrial Relations, the Public Employment Office and any intervenors file and serve on all parties and intervenors written submissions and any evidence by 4.00pm on 13 April 2006. 3. That all Employer Parties, file and serve on all parties and intervenors written submissions and any evidence by 4.00pm on 21 April 2006. 4. That Unions NSW file and serve on all parties and intervenors, written submissions and any evidence in reply by 4.00 pm on 17 May 2006. 66 The hearing of the application by Unions NSW for a State decision will commence at 10.00 am on 5 June 2006. The following days have been set aside to hear the application: 6, 7, 14, 15, 16, 20, 21, 22, 23 June 2006.

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