AIRCFB 922
Workplace Relations Act 1996
s.576H—Commission may vary modern awards
Australian Municipal, Administrative, Clerical and Services Union
CLERKS—PRIVATE SECTOR AWARD 2010
JUSTICE GIUDICE, PRESIDENT
MELBOURNE, 16 NOVEMBER 2009
 This decision concerns an application by the Australian Municipal, Administrative, Clerical and Services Union (ASU) to vary the Clerks—Private Sector Award 2010 1 by deleting cl.17 Exemption rate. The award in question is a modern award made during the priority stage of the award modernisation process being conducted by the Commission in accordance with Part 10A of the Workplace Relations Act 1996.
 The award is due to come into effect on 1 January 2010. From that date the award will replace a number of awards and Notional Agreements Preserving State Awards (NAPSAs) which currently apply to clerical employment across Australia.
 Clause 17 is in the following terms:
“17.1 Except as to the provisions of:
• clause 14—Redundancy;
• clause 24—Superannuation;
• clause 30—Annual leave;
• clause 31—Personal/carer’s leave and companionate leave;
• clause 32—Public holidays; and
• clause 33—Community service leave
this award will not apply to employees employed by the week who are in receipt of a weekly wage in excess of 15% above the Level 5 wage rate in clause 16; provided that the wage is not inclusive of overtime payments and/or shift allowances due to the employee under this award.
17.2 The exemption rate will be calculated in multiples of one dollar, amounts of less than $0.50 being taken to the lower multiple and amounts of $0.50 or more being taken to the higher multiple.”
 The highest rate in the award is $740.00 per week. Therefore employees on at least $851.00 per week are exempt from the remaining award provisions.
 In handing down our decision in relation to this award on 19 December 2008 we said:
“ Extensive submissions were made about the content of the exposure draft for this award. The ASU identified a number of areas of disadvantage for current and future employees. Employers identified a number of areas which they contended limited existing flexibilities and increased costs for employers. Particular submissions were made in support of the classification structure, hours, and flexibilities contained in the NSW clerical NAPSA especially given the very large proportion of clerical employees covered by that instrument.
 The approach we have adopted is to have regard to the range of existing provisions, acknowledging that there will be some positive and negative changes for both employers and employees. Further, it is appropriate to consider the overall package of award minimum obligations in assessing the impact.
 A number of changes to the exposure draft have been made as a result of these considerations. We have decided to include an exemption provision in line with the NSW NAPSA clause in recognition of the longstanding and widespread use of the concept in federal clerical awards and in NAPSAs.
 We confirm our view that a case has not been made out for an annualised salaries or a salary packaging clause. As we have indicated above we have decided to include an exemption rate in the award. We note the availability of annualised salary and salary packaging either as part of the contract of employment, other agreements, or with respect to overaward benefits.” 2
 On 2 May 2009 the Minister for Employment and Workplace Relations (the Minister) varied the award modernisation request to include the following new paragraph 2(f):
“2. The creation of modern awards is not intended to:
(f) exempt or have the effect of exempting employees who are not high income employees, from modern award coverage or application, unless there is a history of exempting employees from coverage across a wide range of pre-reform awards and NAPSAs in the relevant industry or occupation.”
 In the Minister’s covering letter to the President regarding this variation she said:
“I note the Commission’s comments in the 3 April 2009 decision about award exemption clauses. The request now reflects more clearly the Government’s intention that the creation of modern awards should not exempt, or have the effect of exempting from the safety net provided by modern awards, employees other than those expressly listed in the request. Employees who are not high income employees should be protected by a complete and comprehensive modern award safety net of basic entitlements unless there is a history of exempting employees from coverage across a wide range of pre-reform awards and NAPSAs in the relevant industry or occupation. For example, the Clerks – Private Sector Award 2010 exempts employees employed by the week from certain provisions of the modern award (for example, over time pay, shift and other allowances). The Government considers that this award should not seek to exclude basic award conditions for employees who should be protected by a complete and comprehensive safety net, through both modern awards and the National Employment Standards (NES), given that there is not a history of exemption from these provisions in a wide range of awards and NAPSAs.”
 Exemption provisions are clauses expressed in a variety of ways which provide that certain clauses of the award do not apply to particular classes of employees. They are most common in instruments covering “white collar” employment. In some cases they are expressed to exclude the application of particular clauses of the award and in other cases they specify the particular clauses which do apply. The range of matters excluded varies but usually includes clauses dealing with hours of work and overtime. The class of employee to which the exemption provision applies is commonly defined by reference to a particular wage or salary level or a margin above the relevant classification rate. In some cases the right of an employer to remunerate above the exemption provision is not subject to employee agreement. In other cases agreement is required.
 The ASU submits that the effect of inserting an exemption provision into the Clerks—Private Sector Award 2010 is to exclude certain employees who are not high income employees from most award provisions.
 Employers submit that the exemption provision provides flexibility, particularly in relation to senior employees who tend to be employed to perform the duties of a role rather than the more traditional requirement of spending particular periods of time at work.
 In the Clerks (Breweries) Consolidated Award case a Full Bench of the Commission reviewed the nature of exemption provisions. The decision includes the following passage:
 Exemption clauses operate to exclude certain employees from some or all of the terms of an award. We agree with the Commonwealth’s view that the function of these provisions is to determine the scope of award coverage - in effect, which employees are covered by an award. Viewed in this way exemption clauses are ‘allowable’ as they are incidental to one or more of the matters in s.89A(2) and necessary for the effective operation of the award.
 The scope and nature of exemption clauses varies from award to award. In some awards, including the Award in this case, the clause excludes anyone above the exemption rate from all of the provisions in the award. In other awards the exemption clause operates to exclude relevant employees from only some parts of the award. For example, in the Business Equipment Industry-Technical Service-Award 1999 employees earning more than $37,686 per annum are excluded from a range of award provisions including several allowances and the hours of work, overtime, shift work and public holiday penalty rate clauses.
 Exemption rates are sometimes expressed as a percentage of a wage level. The Clerical and Administrative Staff (International Freight Forwarding & Customs Clearing Industry) Award 1992 exempts from some clauses in the award ‘any clerical employee in receipt of a rate of pay which exceeds by 20% or more’ the rate of pay at the highest award classification. Similarly, the Clerks (Vehicle Industry-Repair Services and Retail) Award 1985 does not apply to any employee who receives an amount of 33 and 1/3 percent or more in excess of the highest award rate.
 In other awards, such as the Award before us, the exemption rate is expressed as a flat dollar amount. For instance the Macquarie Bank Award 1999 does ‘not apply to employees who are in receipt of actual weekly remuneration of $629.00 or more’ (compared to the highest weekly wage rate in that award of $518). The Ampol Clerical Employees’ Award 1996 does not apply ‘to any employee receiving a salary for work in ordinary hours that is greater then the highest total of the minimum rates prescribed by this award or any related enterprise agreement.’
 In some cases holders of certain executive positions are excluded from award coverage. For example, in the Journalists (Metropolitan Daily Newspapers) Award 1991, the Assistant Editor, News Editor, Chief Sub-Editor and Bureau Chief (Canberra) of the Daily Telegraph are exempted from all clauses of the Award.
 The rationale behind the insertion of exemption clauses is not always clear because to a significant extent they have been inserted by consent. Some general observations can be made on the basis of the decided cases. In his report to a Full Bench in Alcoa of Australia Ltd v Federated Clerks Union of Australia Munro J refers to the ‘notion of an exemption rate as the point of demarcation between a subordinate employee and a staff or managerial level employee.’
‘Before giving particular consideration to the decision of the Commissioner to delete the exemption clause we would point to the fact that it relates to employment in a service type industry where the ordinary award entitlements are difficult to monitor due to the exigent nature of the work and the itinerancy which is, so frequently, associated with its performance. Servicing work may be required suddenly and in a situation of urgency in a place where a cessation of work depends upon the completion of the job rather then upon returning to the place of employment and signing off for the day. The employers is frequently in no position to monitor the time worked by the employee in such circumstances; nor can practical application be given to award provisions such as meal breaks, mixed functions, call backs and the like.
In all these circumstances, the exemption clause, in concept, permits a bargain to be struck for an additional remuneration to compensate for such penalties and other award payments which would otherwise apply, were those penalties and payments not foregone . . .
 CUB characterised the exemption rate in the Award before us as permitting ‘a notional agreement to be made which comprehends a package of benefits substantially different from the terms and conditions contained in the award.’
 An exemption provision may also reflect a desire to separate management from other employees on, among other things, confidentiality grounds. We note that in its written submission in the proceedings before us Tooheys Limited and Castlemaine Tooheys Limited characterised the role of an exemption clause as providing a means of excluding employees who carry out professional and managerial roles from award coverage. It was argued that the degree of accountability and responsibility of such employees was quite different to employees who only carry out administrative or clerical duties.
 There are also instances where exemption clauses were related to union membership agreements. Union acceptance of an exemption from award coverage was linked to an employer acceptance of an obligation to strongly encourage union membership for employees classified below the cut off exemption rate.” 3
 The Australian Federation of Employers and Industries (AFEI) referred to Australian Bureau of Statistics (ABS) data indicating the following incidence of clerical employment throughout Australia: 4
% Share of National Clerical Occupation
 According to the AFEI, awards and NAPSAs which contain exemption provisions have application to two thirds of clerical employees nationally.
 Exemption provisions are contained in the common rule clerical NAPSAs applying in New South Wales, Queensland, Western Australia, Australian Capital Territory and Tasmania. In addition, annual salaries clauses which provide for the non-application of certain award provisions when annual salaries of a certain level are paid are contained in various other clerical instruments. A clause of one type or another is contained in the following current instruments:
New South Wales
Australian Capital Territory
Pre reform Awards
 Although exemption provisions in many of the instruments were commonly inserted and maintained by consent, there has been some history of arbitration. In 1985 a Full Bench of the Commission overturned a decision to delete an exemption provision in the Business Equipment Industry (Technical Service) Award. Coldham J and Paine C said:
“With all respect to this expression of view the existence of the exemption clause is not to be considered along with the maintenance of records and the benefit to the employer of being spared that obligation. The vital consideration in our view is the concept of a notional bargain made between the employer and the employee per medium of the exemption clause. If the exemption clause is removed the award provisions previously exempted thereby would commence to operate with respect to the previously exempt employee. In order to avoid double counting for the entitlement to payments hitherto precluded by the notional bargain questions of possible adjustment to the overaward salaries paid in this minimum rates award would need to be considered. It is not so much the exemption clause itself (and leastwise any benefits given thereby with respect to the recording of the industry since the inception of the award and the effect upon them if the exemption clause were deleted from the subject Award.
Of course an award is a regulatory instrument but that is not to say that it is therefore designed to apply to and regulate the working conditions of the very people who are excluded by its terms from the operation of certain of its provisions. To cut out of the award the vital exemption provision is in our view calculated to put its operation in a state of imbalance. In this context we refer again to the notional bargain which the exemption clause permits and to the range of consequences generated by its deletion.
Also, we find ourselves unable to associate with the statement that the exemption clause is an anachronism. To the extent that it forms a crucial part of the subject Award, and we consider that it does, it is no more out-of-date nor out of harmony with conditions in the industry where it operates than the award itself. It is the Award itself which must be considered. If the exemption clause is to go the whole subject of the Award must also be reviewed in concept.” 28
 In 1993 a Full Bench of the Industrial Relations Commission of New South Wales upheld an appeal against the deletion of the exemption rate from the Clerks’ (State) Award, one of the awards replaced by the modern award subject to the application before us. The Full Bench said:
“The exemption clause has been demonstrated to have been a feature of this important award, other clerks’ awards and the federal clerks’ award over a significant number of years. Reviews are currently being conducted before Glynn J. as previously described. Whatever was intended by Glynn J. to be the effect of the proviso ordered in her judgment and set out previously, there is no doubt about the way in which the Clerks’ union saw the order apply, namely, that those clerks who were receiving salaries over and above the exemption rate would continue to receive those salaries as well as all of the overtime and other penalties from the moment that the exemption clause was no longer applied to them. The review of the award and the rates, classification and the structural changes necessary to bring this award to a modern instrument must involve a question whether there should or should not be an exemption clause in the award.
The review of the award in the terms of the wage fixation principles must necessarily be impeded by the decision made by Glynn J. particularly with respect to the working out of that decision. If the correct working of the decision of Glynn J. was that suggested by Mr Gallagher, the wages actually paid would, by the effect of the order, be translated into award rates to which all the incidence of the award would apply. Such a result would by implication change at law the salary levels of those persons working overtime and receiving wages above the exemption level. The remarkable disparity between the actual rates paid under this award and the award rates has not been explained except in broad terms of market forces. An inference is available that the existence of the exemption clause within the award may well have increased the level of overaward payments. The whole clerks’ industry in the terms of the Clerks’ Award and the application of the award terms can only be properly dealt with in a comprehensive review and it was inappropriate to change the award fundamentally in the manner that Glynn J. did by removing the exemption clause in the case as a narrow issue.” 29
 The Queensland NAPSA, Clerical Employees Award State 2002, contains a clause whereby employees employed prior to October 2002 on a rate above the highest rate in the award at the time are exempt from a number of award provisions. The same employment arrangement is available for employees engaged after October 2002 if there is mutual agreement in writing.
 During the award simplification process a Full Bench of this Commission granted an application to delete the exemption clause in the Clerks (Breweries) Consolidated Award and permitted the parties to develop an alternative provision. The Bench said:
 It is clear from this review of provisions and authorities that various tribunals including this Commission have identified an ongoing role for appropriately flexible employment arrangements for clerical employment which can involve the payment of additional or aggregate amounts instead of weekly payments of base rates plus overtime payments. There has been recognition that the terms of relevant instruments need to be looked at in their totality in order to formulate appropriate terms and alternative payment arrangements. There has been a trend towards such mechanisms being available by written agreement rather than unilaterally.
 We note that classifications and rates of pay in existing awards covering clerical employment vary markedly. In formulating the modern award we had regard to the totality of the provisions.
 Clerical employment occurs in most enterprises. In some cases, such as capital city corporate office work, significant overaward arrangements apply. In other areas, such as in small businesses in regional and country areas, overaward arrangements are not the norm. The minimum rates in the award need to be formulated for all situations. Clerical employees often play a key support role to more senior employees and management as well as providing an important interface with external customers and clients. The need for flexible working arrangements to meet the needs of the business is probably more important in the modern business world where operating hours no longer conform to a standard nine to five pattern. A number of modern awards reflect the need for flexible working hours in particular areas of employment by not providing for ordinary weekly hours and overtime arrangements.
 The New South Wales NAPSA, Clerical and Administrative Employees (State) Award, contains an exemption provision whereby employees who are paid a weekly wage in excess of 15% above the wage rate set for the highest grade in the award (equivalent to $845.14) are exempt from a number of award provisions. The exemption rate in the Clerks—Private Sector Award 2010 is $851.00 per week.
 The dilemma faced by us in formulating the terms of the modern award is the widely divergent provisions in clerical instruments and in particular the existence of exemption or annual salaries provisions in clerical awards and NAPSAs in New South Wales, Queensland, Australian Capital Territory, Western Australia and Tasmania. Inserting or omitting an exemption provision will have an impact where the resultant provision is not consistent with the terms of the current instrument. We considered that adopting a provision which reflected the terms of the instrument applying widely in the largest state, where similar provisions of one sort or another apply in four of the six states and one of the two territories, was consistent with our approach in award modernisation of generally adopting appropriate minimum provisions applying to the critical mass of relevant employees.
 We also note the clear intent of the change to the Minister’s request and the submission made in her letter to the Commission regarding her view of the test to be applied and the incidence of exemption provisions in current instruments. In this connection we also consider that it is relevant that, for the first time, the legislation determines that an award will not apply to persons who reach a certain level of income.
 In all of the circumstances we consider that the exemption provision should be removed but that flexible working arrangements should be available with respect to clerical employment and that these should be subject to appropriate safeguards and processes to ensure that employees clearly understand and agree to any arrangements which may differ from base award entitlements. We propose to delete the exemption provision in cl.17. However, we propose to insert an annualised salaries clause. The wording of the clause is in line with clauses in some other modern awards. It provides for an alternative way to remunerate employees, safeguards against disadvantage and a formal process to establish and maintain the annualised salary arrangement. The clause will read as follows:
“17. Annualised Salaries
17.1 Annual salary instead of award provisions
(a) An employer may pay an employee an annual salary in satisfaction of any or all of the following provisions of the award:
(i) clause 16—Minimum weekly wages;
(ii) clause 19—Allowances;
(iii) clauses 27, 28 and 29—Overtime and penalty rates; and
(iv) clause 30.3—Annual leave loading.
(b) Where an annual salary is paid the employer must advise the employee in writing of the annual salary that is payable and which of the provisions of this award will be satisfied by payment of the annual salary.
17.2 Annual salary not to disadvantage employees
(a) The annual salary must be no less than the amount the employee would have received under this award for the work performed over the year for which the salary is paid (or if the employment ceases earlier over such lesser period as has been worked).
(b) The annual salary of the employee must be reviewed by the employer at least annually to ensure that the compensation is appropriate having regard to the award provisions which are satisfied by the payment of the annual salary.
17.3 Base rate of pay for employees on annual salary arrangements
For the purposes of the NES, the base rate of pay of an employee receiving an annual salary under this clause comprises the portion of the annual salary equivalent to the relevant rate of pay in cl.16—Minimum weekly wages and excludes any incentive-based payments, bonuses, loadings, monetary allowances, overtime and penalties.”
 Given the incidence of arrangements under existing exemption and annualised salaries provisions in clerical NAPSAs we propose to insert a transitional provision to the effect that existing arrangements pursuant to an exemption or annualised salaries clause may continue to apply, instead of an arrangement under cl.17, until 30 June 2010.
BY THE COMMISSION:
2  AIRCFB 1000.
3 Print S6443, 26 May 2000.
4 ABS 6291.0.55.003 E-08 Feb Qtr 2009.
28 Print G1261, 18 December 1985 at p.3.
29 Employers Fed of NSW & Ors v Federated Clerks Union,  NSWIRComm 32 at p.20.
30 Print S6443, 26 May 2000.
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