[2013] FWCFB 6266 [Note: a correction has been issued to this document]

FAIR WORK COMMISSION

DECISION

Fair Work (Transitional Provisions and Consequential Amendments) Act 2009
Sch. 5, Item 6 - Review of all modern awards (other than modern enterprise and State PS awards) after first 2 years

VICE PRESIDENT WATSON SENIOR DEPUTY PRESIDENT ACTON DEPUTY PRESIDENT GOOLEY

SYDNEY, 2 SEPTEMBER 2013

Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 - Transitional Review - annual leave provisions in particular modern awards - modern awards objective - Fair Work Act 2009 - Schedule 5, Item 6.

CONTENTS	Paragraph
Decision of Senior Deputy President Acton and Deputy President Gooley
Introduction	[1]
Legislative context	[5]
Consideration of the claims	[9]
(a) Cashing out of annual leave	[11]
(b) Requirement to take annual leave	[51]
(c) Additional one twelfth payment	[82]
(d) Leave loading provision	[103]
(e) Leave loading calculation	[109]
(f) Leave loading on advanced leave	[126]
(g) Leave loading on termination	[129]
(h) Payment for a period of annual leave	[141]
(i) Definition of a shiftworker	[156]
(j) Other claims	[181]
Conclusion	[189]
Decision of Vice President Watson	[195]

Abbreviations

AAA	Accommodation Association of Australia
ABI	Australian Business Industrial
AIRC	Australian Industrial Relations Commission
FW Act	Fair Work Act 2009 (Cth)
ACTU	Australian Council of Trade Unions
AMWU	“Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU)
ANF	Australian Nursing Federation
AFEI	Australian Federation of Employers and Industries
Ai Group	The Australian Industry Group
APESMA	The Association of Professional Engineers, Scientists and Managers, Australia
ARA	Australian Retailers Association
ASIAL	Australian Security Industry Association Ltd
ASU	Australian Municipal, Administrative, Clerical and Services Union
AWU	Australian Workers’ Union
Banks	Australia and New Zealand Banking Group Limited, Commonwealth Bank of Australia Limited, Westpac Banking Corporation Limited and GE Capital Finance Australasia Pty Ltd
BIAQ	Baking Industry Association Queensland - Union of Employers
BSCAA	Building Services Contractors Association of Australia, New South Wales Division
CEPU	Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia
CFMEU	Construction, Forestry, Mining and Energy Union
FSU	Finance Sector Union of Australia
FWA	Fair Work Australia
FWC	Fair Work Commission
HBIA	Hair and Beauty Industry Association
HIA	Housing Industry Association
Law Firms	Allens Linklaters (formerly Allens Arthur Robinson), Allen & Overy, Arnold Bloch Liebler, Ashurst Australia, Baker & McKenzie, Clayton Utz, Corrs Chambers Westgarth, Davies Collison Cave, Dibbs Barker, Herbert Smith Freehills, Gilbert + Tobin, Hall & Wilcox, Herbert Geer, King & Wood Mallesons, Lander & Rogers, Maddocks, K&L Gates (formerly Middletons), Minter Ellison, Norton Rose Fullbright, Piper Alderman, and Russell Kennedy
MBA	Master Builders Australia Limited
MUA	The Maritime Union of Australia
MPMSAA	The Master Plumbers’ and Mechanical Services Association of Australia
NES	National Employment Standards
NESA	National Employment Services Association
NRA	National Retail Association Ltd
NSW Local Government Union	New South Wales Local Government, Clerical, Administrative, Energy, Airlines & Utilities Union
PGA	The Pharmacy Guild of Australia
SDAEA	Shop, Distributive and Allied Employees Association
SAWIAI	South Australian Wine Industry Association Incorporated
TCFUA	Textile, Clothing and Footwear Union of Australia
Transitional Provisions Act	Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth)
Transitional Review	Modern Awards Review 2012
TWU	Transport Workers’ Union of Australia
WALGA	Western Australian Local Government Association
WCRA	Waste Contractors & Recyclers Association of NSW
WR Act	Workplace Relations Act 1996 (Cth)

DECISION OF SENIOR DEPUTY PRESIDENT ACTON AND DEPUTY PRESIDENT GOOLEY.

INTRODUCTION

[1] The Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (Transitional Provisions Act) provides that the Fair Work Commission (FWC) 1 must conduct a review of all modern awards2 as soon as practicable after 1 January 2012 (the Transitional Review).

[2] This decision deals with applications to vary various matters associated with annual leave in various modern awards. The applications have been referred to this Full Bench as part of the Transitional Review.

[3] Directions in relation to these proceedings were issued directing parties to file outlines of submissions and any evidence on which the parties sought to rely, within given timeframes.

[4] Hearings were held, before the Full Bench, in Melbourne, with video links to Adelaide, Canberra and Sydney, on 22 April 2013 and 17 June 2013.

LEGISLATIVE CONTEXT

[5] The legislative context for the Transitional Review was comprehensively dealt with in a decision of a Full Bench of Fair Work Australia (FWA) on 29 June 2012 (the June 2012 Full Bench decision). 3 A useful summary of the legislative context was provided in a decision of a Full Bench of the FWC on 15 March 2013 (the March 2013 Full Bench decision)4 as follows:

“[5] The principal legislative provision in respect of the Transitional Review is Item 6 of Schedule 5 to the Transitional Provisions Act:

‘6 Review of all modern awards (other than modern enterprise awards and State reference public sector modern awards) after first 2 years

(1) As soon as practicable after the second anniversary of the FW (safety net provisions) commencement day, FWA must conduct a review of all modern awards, other than modern enterprise awards and State reference public sector modern awards.

Note: The review required by this item is in addition to the annual wage reviews and 4 yearly reviews of modern awards that FWA is required to conduct under the FW Act.

(2) In the review, FWA must consider whether the modern awards:

(a) achieve the modern awards objective; and

(b) are operating effectively, without anomalies or technical problems arising from the Part 10A award modernisation process.

(2A) The review must be such that each modern award is reviewed in its own right. However, this does not prevent FWA from reviewing 2 or more modern awards at the same time.

(3) FWA may make a determination varying any of the modern awards in any way that FWA considers appropriate to remedy any issues identified in the review.

Note: Any variation of a modern award must comply with the requirements of the FW Act relating to the content of modern awards (see Subdivision A of Division 3 of Part 2-3 of the FW Act).

(4) The modern awards objective applies to FWA making a variation under this item, and the minimum wages objective also applies if the variation relates to modern award minimum wages.

(5) FWA may advise persons or bodies about the review in any way FWA considers appropriate.

(6) Section 625 of the FW Act (which deals with delegation by the President of functions and powers of FWA) has effect as if subsection (2) of that section included a reference to FWA’s powers under subitem (5).’

[6] Subitem 6(1) provides that the Commission must conduct a review of all modern awards (other than modern enterprise awards and State reference public sector modern awards) as soon as practicable after 1 January 2012 (being the second anniversary of the Fair Work (Safety Net Provisions) Act commencement day).

[7] At the outset it is important to note that the Transitional Review contemplated in Item 6 is quite separate from, and narrower in scope than, the 4 yearly reviews of modern awards provided for in s.156 of the Fair Work Act 2009 (Cth) (the Act). The scope of the Transitional Review was a matter of contention in the June 2012 Full Bench proceeding.

[8] The June 2012 Full Bench decision construed Item 6 according to its terms, having regard to the context and legislative purpose. Part of that context was the award modernisation process conducted by the former Australian Industrial Relations Commission under Part 10A of the Workplace Relations Act 1996 (Cth) (the WR Act). We deal with the award modernisation process in section 2 of this decision.

[9] The June 2012 Full Bench decision observed that two points about this historical context were particularly relevant:

‘The first is that awards made as a result of the award modernisation process are now deemed to be modern awards for the purposes of the FW Act (see Item 4 of Schedule 5 of the Transitional Provisions Act). Implicit in this is a legislative acceptance that the terms of the existing modern awards are consistent with the modern awards objective. The second point to observe is that the considerations specified in the legislative test applied by the Tribunal in the Part 10A process is, in a number of important respects, identical or similar to the modern awards objective which now appears in s.136...’

[10] The June 2012 Full Bench decided that two other textual considerations were also relevant. The first is that subitem 6(2)(b) of Schedule 5 directs specific attention to whether modern awards ‘are operating effectively, without anomalies or technical problems arising from the Part 10A award modernisation process.’ No such legislative direction is reflected in the provisions which deal with the 4 yearly review of modern awards (s.156 of the Act).

[11] The second textual consideration is that, Item 6 does not prescribe how the Commission is to be constituted for the purpose of conducting the Transitional Review. This may be contrasted with the 4 yearly reviews provided in s.156 and the award modernisation process under Part 10A of the WR Act, both of which are to be conducted by a Full Bench. The fact that the Transitional Review of a modern award may be conducted by a single member also suggests that the legislature contemplated that the Transitional Review would be more confined in scope that the 4 yearly reviews in s.156.

[12] These considerations led the June 2012 Full Bench to conclude as follows:

‘[91] It is important to recognise that we are dealing with a system in transition. Item 6 of Schedule 5 forms part of transitional legislation which is intended to facilitate the movement from the WR Act to the FW Act. The Review is a “one off” process required by the transitional provisions and is being conducted a relatively short time after the completion of the award modernisation process. The transitional arrangements in modern awards continue to operate until 1 July 2014. The fact that the transition to modern awards is still occurring militates against the adoption of broad changes to modern awards as part of the Review. Such changes are more appropriately dealt with in the 4 year review, after the transition process has completed. In this context it is particularly relevant to note that s.134(1)(g) of the modern awards objective requires the Tribunal to take into account:

“the need to ensure a simple, easy to understand, stable and sustainable modern award system for Australia...”

[99] To summarise, we reject the proposition that the Review involves a fresh assessment of modern awards unencumbered by previous Tribunal authority. It seems to us that the Review is intended to be narrower in scope than the 4 yearly reviews provided in s.156 of the FW Act. In the context of this Review the Tribunal is unlikely to revisit issues considered as part of the Part 10A award modernisation process unless there are cogent reasons for doing so, such as a significant change in circumstances which warrants a different outcome. Having said that we do not propose to adopt a “high threshold” for the making of variation determinations in the Review, as proposed by the Australian Government and others.

[100] The adoption of expressions such as a “high threshold” or “a heavy onus” do not assist to illuminate the Review process. In the Review we must review each modern award in its own right and give consideration to the matters set out in subitem 6(2). In considering those matters we will deal with the submissions and evidence on their merits, subject to the constraints identified in paragraph [99] above.’

[13] We now return to Item 6 of Schedule 5.

[14] Under subitem 6(3) the Commission has a broad discretion to vary any of the modern awards in any way it considers necessary to remedy any issues identified in the Transitional Review. However, subitem 6(4) provides that in making such a variation the Commission must take into account the modern awards objective in s.134 of the Act, and, if varying modern award minimum wages, the minimum wages objective in s.284.

[15] The modern awards objective is set out in s.134 of the Act:

‘134 The modern awards objective

What is the modern awards objective?

(1) FWA must ensure that modern awards, together with the National Employment Standards, provide a fair and relevant minimum safety net of terms and conditions, taking into account:

(a) relative living standards and the needs of the low paid; and

(b) the need to encourage collective bargaining; and

(c) the need to promote social inclusion through increased workforce participation; and

(d) the need to promote flexible modern work practices and the efficient and productive performance of work; and

(e) the principle of equal remuneration for work of equal or comparable value; and

(f) the likely impact of any exercise of modern award powers on business, including on productivity, employment costs and the regulatory burden; and

(g) the need to ensure a simple, easy to understand, stable and sustainable modern award system for Australia that avoids unnecessary overlap of modern awards; and

(h) the likely impact of any exercise of modern award powers on employment growth, inflation and the sustainability, performance and competitiveness of the national economy.

This is the modern awards objective.’

[16] Any variation of a modern award arising from the Transitional Review must also comply with the provisions of the Act which deal with the content of modern awards (see ss.136–155 of the Act). To the extent that any application seeks to alter the coverage of a modern award, then the requirements set out in ss.162–164 within Division 6 of Part 2-3 of the Act are relevant. Similarly Division 3 of Part 2-1 will be relevant if an application seeks to alter the relationship between a modern award and the National Employment Standards (NES).

[17] Section 138 of the Act, dealing with the content of modern awards, is also relevant and is a factor to be considered in any variation to a modern award arising from the Transitional Review.

[18] In conducting the Transitional Review the Commission is able to exercise its usual procedural powers, contained in Division 3 of Part 5-1 of the Act. Section 577 and 578 are also relevant to the conduct of the Transitional Review.” [Endnotes omitted]

[6] A decision of a Full Bench of the FWC on 15 April 2013 (the April 2013 Full Bench decision), 5 added to this summary as follows:

“[10] In considering the legislative context we note that one of the authorities referred to in the proceedings purports to summarise the views expressed in the June 2012 Transitional Review decision. In AMWU v Australian Business Industrial [[2013] FWCFB 580] a Full Bench expressed the approach to the Transitional Review in these terms:

‘Where an evidentiary case has been presented, direct submissions have been made and the tribunal has made a determination about the relevant award provisions on the basis of that material, cogent reasons will need to be advanced for departing from the award provision.’

[11] In our view, this statement does not accurately reflect the approach adopted by the June 2012 Full Bench decision. The relevant passage from the June 2012 Full Bench decision states that in the context of the Transitional Review:

‘the Tribunal is unlikely to revisit issues considered as part of the Part 10A award modernisation process unless there are cogent reasons for doing so, such as a significant change in circumstances which warrants a different outcome.’ [emphasis added]

[12] The approach posited by the June 2012 Full Bench decision is not qualified by reference to those instances ‘where an evidentiary case has been presented’. The reason for such an omission is that evidentiary cases were rarely presented in the Part 10A award modernisation process. To adopt such a precondition to the requirement to establish cogent reasons for a particular variation materially changes the intent of the June 2012 Full Bench decision.” [Endnotes omitted]

[7] The opportunity afforded by the Transitional Review was succinctly put in the March 2013 Full Bench decision as follows:

“[204] The Transitional Review is an opportunity to consider how modern awards are being applied in practice with a view to considering whether they continue to meet the modern award objective. In our assessment of these claims we have considered whether the General Retail Award 2010 and the Fast Food Industry Award 2010 achieve the modern awards objective in s.134 and whether they are operating effectively, without anomalies or technical problems arising from the award modernisation process.”

[8] The March 2013 Full Bench decision also said the following about evidence in the Transitional Review:

“[118] In assessing the evidence in these matters we have also been mindful of the approach adopted by the Full Bench in Victorian Employers’ Chamber of Commerce and Industry [[2012] FWAFB 6913]. Although in a different statutory context, the following observation is apposite to our task:

‘[13] In National Retail Association Limited ((2010) 199 IR 258) a Full Bench upheld a decision of Vice President Watson rejecting an application under s.157(1) on the basis that there was insufficient evidence to establish that the variation sought was necessary to achieve the modern awards objective.

[14] That is also the case with the evidence here. Although the rules of evidence do not apply to Fair Work Australia that means only that there is less constraint on Fair Work Australia, than exists in the Courts, on the range of evidence that it may admit. The Tribunal nevertheless requires evidence (or uncontested submission - R v Commonwealth Conciliation and Arbitration Commission and Others; Ex parte The Melbourne and Metropolitan Tramways Board (1965) 113 CLR 228 at 243 (per Barwick CJ) and 252 (per Menzies J)) sufficient to allow it to make any jurisdictional findings that condition the exercise of power sought in the originating application.’

[119] The need to advance probative evidence in support of an application to vary a modern award is particularly important in the context of the Transitional Review. The Transitional Review does not involve a fresh assessment of modern awards unencumbered by previous Tribunal authority, and, as we set out in section 2 of this decision, many of the aspects of the applications before us were the subject of consideration by the AIRC in the award modernisation process. It is also important to recognise that we are dealing with a system in transition. The transitional arrangements in modern awards continue to operate until 1 July 2014. The fact that the transition to modern awards is still occurring militates against the adoption of broad changes to modern awards as part of the Transitional Review. Such changes are more appropriately dealt with in the 4 year review, after the transition process has completed. As we have indicated the Transitional Review is narrower in scope than the 4 yearly reviews provided in s.156 of the Act and, as the June 2012 Full Bench stated, in the context of the Transitional Review:

‘...the Tribunal is unlikely to revisit issues considered as part of the Part 10A award modernisation process unless there are cogent reasons for doing so, such as a significant change in circumstances which warrants a different outcome [[2012] FWAFB 5600 at [99]]’.” [Endnotes omitted]

CONSIDERATION OF THE CLAIMS

[9] Below we summarise the claims before us in respect of each relevant modern award. So far as is possible, we have organised the claims according to the type of amendment proposed. The types of amendment proposed were:

(a) Cashing out of annual leave,

(b) Requirement to take annual leave,

(c) Additional one twelfth payment,

(d) Leave loading provision,

(e) Leave loading calculation,

(f) Leave loading on advanced leave,

(g) Leave loading on termination,

(h) Payment for a period of annual leave,

(i) Definition of a shiftworker, and

(j) Other claims

[10] We turn then to deal with the claims before us.

(a) Cashing out of annual leave

(i) The claims

Ai Group proposal - AM2012/221

[11] The Australian Industry Group’s (Ai Group) application was made with reference to the Manufacturing and Associated Industries and Occupations Award 2010 6 (Manufacturing Award). However, Ai Group seeks a review of flexibility arrangements in all modern awards and the inclusion of its proposed variation in all those awards.

[12] The Award flexibility term in the Manufacturing Award is as follows:

7. Award flexibility

7.1 Notwithstanding any other provision of this award, an employer and an individual employee may agree to vary the application of certain terms of this award to meet the genuine individual needs of the employer and the individual employee. The terms the employer and the individual employee may agree to vary the application of are those concerning:

(a) arrangements for when work is performed;

(b) overtime rates;

(c) penalty rates;

(d) allowances; and

(e) leave loading.

7.2 The employer and the individual employee must have genuinely made the agreement without coercion or duress.

7.3 The agreement between the employer and the individual employee must:

(a) be confined to a variation in the application of one or more of the terms listed in clause 7.1; and

(b) result in the employee being better off overall than the employee would have been if no individual flexibility agreement had been agreed to.

7.4 The agreement between the employer and the individual employee must also:

(a) be in writing, name the parties to the agreement and be signed by the employer and the individual employee and, if the employee is under 18 years of age, the employee’s parent or guardian;

(b) state each term of this award that the employer and the individual employee have agreed to vary;

(c) detail how the application of each term has been varied by agreement between the employer and the individual employee;

(d) detail how the agreement results in the individual employee being better off overall in relation to the individual employee’s terms and conditions of employment; and

(e) state the date the agreement commences to operate.

7.5 The employer must give the individual employee a copy of the agreement and keep the agreement as a time and wages record.

7.6 Except as provided in clause 7.4(a) the agreement must not require the approval or consent of a person other than the employer and the individual employee.

7.7 An employer seeking to enter into an agreement must provide a written proposal to the employee. Where the employee’s understanding of written English is limited the employer must take measures, including translation into an appropriate language, to ensure the employee understands the proposal.

7.8 The agreement may be terminated:

(a) by the employer or the individual employee giving four weeks’ notice of termination, in writing, to the other party and the agreement ceasing to operate at the end of the notice period; or

(b) at any time, by written agreement between the employer and the individual employee.

7.9 The right to make an agreement pursuant to this clause is in addition to, and is not intended to otherwise affect, any provision for an agreement between an employer and an individual employee contained in any other term of this award.”

[13] The Ai Group’s proposal is to delete the word “and” after paragraph (d) in clause 7.1, and add the following new clauses:

“(f) arrangements for taking leave; and

(g) cashing out of paid annual leave, subject to the conditions in subclause 41.11(b).”

[14] The Ai Group’s proposal also includes an ancillary amendment to the annual leave clause in all modern awards. The example given in their application is that clause 41 of the Manufacturing Award be varied by inserting a new clause 41.11 as follows:

“41.11 Cashing out of annual leave

(a) The employer and the employee must not agree to the employee cashing out a particular amount of the employee’s accrued paid annual leave.

(b) An employer and an employee may agree to an individual flexibility arrangement in accordance with clause 7 of this award, varying the effect of paragraph 41.11(a) subject to the following conditions:

(i) Paid annual leave must not be cashed out if the cashing out would result in the employee’s remaining accrued entitlement to paid annual leave being less than four weeks; and

(ii) Each cashing out of a particular amount of paid annual leave must be by a separate agreement in writing between the employer and the employee; and

(iii) The employee must be paid at least the full amount that would have been payable to the employee had the employee taken the leave that the employee has forgone.”

BIAQ proposal

[15] The Baking Industry Association Queensland - Union of Employers (BIAQ) propose the following awards be varied to include a “cashing out of annual leave” clause:

● Fast Food Industry Award 2010 7 - AM2012/179

● General Retail Industry Award 2010 8 - AM2012/177

● Food, Beverage and Tobacco Manufacturing Award 2010 9 - AM2012/178

● Restaurant Industry Award 2010 10 - AM2012/180

[16] The variation BIAQ seeks is as follows:

“X Cashing out of annual leave

(a) An employer and an employee may agree to the employee cashing out a particular amount of the employee’s accrued paid annual leave.

(b) The employer and the employee must not agree to the employee cashing out an amount of paid annual leave if the agreement would result in the employee’s remaining accrued entitlement to paid annual/eave being less than 4 weeks.

(c) Each agreement to cash out a particular amount of paid annual leave must be a separate agreement in writing.

(d) The employer must pay the employee at least the full amount that would have been payable to the employee had the employee taken the leave that the employee has forgone.”

Aquaculture Industry Award 2010 11 - AM2012/181

[17] The Huon Aquaculture Group Pty Ltd propose that the Seafood Processing Award 2010 12 cashing out clause be included in the Aquaculture Industry Award 2010 as follows:

“22.6 Cashing out of annual leave

(a) An employee and an employer can agree to cash out any accrued annual leave of the employee provided that does not result in the employee’s remaining accrued entitlement to paid annual leave being less than four weeks; and

(b) Upon agreement being reached for each cashing out of a particular amount of paid annual leave then that agreement must be recorded by a separate agreement in writing between the employer and the employee; and

(c) The employee must be paid at least the full agreed amount that would have been payable to the employee had the employee taken the leave that the employee has foregone.”

Banking, Finance and Insurance Award 2010 13 - AM2012/256

[18] The Australia and New Zealand Banking Group Limited and others (Banks) propose that the annual leave clause in the Banking, Finance and Insurance Award 2010 be varied to insert the following clause:

“24.6 Cashing out of annual leave

(a) An employee and an employer can agree to cash out any accrued annual leave of the employee provided that does not result in the employee’s remaining accrued entitlement to paid annual leave being less than four weeks; and

(b) Upon agreement being reached for each cashing out of a particular amount of paid annual leave then that agreement must be recorded by a separate agreement in writing between the employer and the employee; and

(c) The employee must be paid at least the full agreed amount that would have been payable to the employee had the employee taken the leave that the employee has foregone.”

Building and Construction General On-site Award 2010 14 - AM2012/228

[19] The Housing Industry Association (HIA) propose that the Building and Construction General On-site Award 2010 be varied to include a “cashing out of annual leave” clause as follows:

“38.4 Cashing out of annual leave

An employer and employee may agree to the cashing out of paid annual leave by an employee provided:

(a) the cashing out would not result in the employee’s remaining accrued entitlement to paid annual leave being less than 4 weeks; and

(b) each cashing out of a particular amount of paid annual leave is by a separate agreement in writing between the employer and the employee; and

(c) in cashing out the paid annual leave, the employee is paid at least the full amount that would have been payable to the employee had the employee taken the leave that the employee has forgone.”

General Retail Industry Award 2010 15 - AM2012/8 and AM2012/245

[20] The National Retail Association Ltd (NRA) and the Australian Retailers Association (ARA) propose the following “cashing out of annual leave” clause be inserted into the General Retail Industry Award 2010:

“32.6 Cashing out of Annual Leave

(a) An employer and an employee may agree to the employee cashing out a particular amount of the employee’s accrued paid annual leave.

(b) The employer and the employee must not agree to the employee cashing out an amount of paid annual leave if the agreement would result in the employee’s remaining accrued entitlement to paid annual leave being less than 4 weeks.

(c) Each agreement to cash out a particular amount of paid annual leave must be a separate agreement in writing.

(d) The employer must pay the employee at least the full amount that would have been payable to the employee had the employee taken the leave that the employee has forgone.”

Hair and Beauty Industry Award 2010 16 - AM2012/172

[21] The Hair and Beauty Industry Association (HBIA) seeks to vary clause 33 of the Hair and Beauty Industry Award 2010 to insert a new clause for “cashing out of annual leave” as follows:

“33.6 Cashing out annual leave

(a) An employer and an employee may agree to the employee cashing out a particular amount of the employee’s accrued paid annual leave.

(b) The employer and the employee must not agree to the employee cashing out an amount of paid annual leave if the agreement would result in the employee’s remaining accrued entitlement to paid annual leave being less than 4 weeks.

(c) Each agreement to cash out a particular amount of paid annual leave must be a separate agreement in writing.

(d) The employer must pay the employee at least the full amount that would have been payable to the employee had the employee taken the leave that the employee has forgone.”

Hospitality Industry (General) Award 2010 17 - AM2012/204

[22] The Accommodation Association of Australia (AAA) propose the insertion of a cashing out of annual leave clause in the Hospitality Industry (General) Award 2010 as follows:

“34.5 Cashing out of paid annual leave

Paid annual leave may be cashed out by an employee provided that the following circumstances are met:

(a) the employee and employer must make a separate agreement in writing to cash out each amount of paid annual leave;

(b) a balance of no less than four weeks’ annual leave must remain; and

(c) the particular amount of paid annual leave cashed out must be at least the full amount that would have been payable to the employee had the employee taken the annual leave foregone.”

Labour Market Assistance Industry Award 2010 18 - AM2012/35

[23] The National Employment Services Association (NESA) propose the following clause be inserted into the Labour Market Assistance Industry Award 2010:

“25.5 Cashing out annual leave

(a) An employer and an employee may agree in writing to the cashing out of paid annual leave to a maximum of two weeks per year.

(b) The terms of the agreement must require that:

(i) paid annual leave must not be cashed out if the cashing out would result in the employee’s remaining accrued entitlement to paid annual leave being less than 4 weeks; and.

(ii) each cashing out of a particular amount of paid annual leave must be by a separate agreement in writing between the employer and the employee; and

(iii) the employee must be paid at least the full amount that would have been payable to the employee had the employee taken the leave that the employee has forgone.”

Pharmacy Industry Award 2010 19 - AM2012/36

[24] The Pharmacy Guild of Australia (PGA) propose the following clause be inserted into the annual leave clause of the Pharmacy Industry Award 2010:

“29.6 Cashing out of annual leave

(a) An employee and an employer may agree to cash out any accrued annual leave of the employee provided that does not result in the employee’s remaining accrued entitlement to paid annual leave being less than four weeks; and

(b) Upon agreement being reached for each cashing out of a particular amount of paid annual leave then that agreement must be recorded by a separate agreement in writing between the employer and the employee; and

(c) The employee must be paid at least the full agreed amount that would have been payable to the employee had the employee taken the leave that the employee has foregone.”

Plumbing and Fire Sprinklers Award 2010 20 - AM2012/202

[25] The Master Plumbers’ and Mechanical Services Association of Australia (MPMSAA) propose that the following clause be inserted into the Plumbing and Fire Sprinklers Award 2010:

“34.5 In accordance with the NES, the employer and an employee may agree in writing to cash out a particular amount of accrued paid annual/eave provided that the employee retains at least four (4) weeks of annual leave. Cashed out leave will be paid at the amount that would have been payable to the employee had the employee taken the leave.”

Waste Management Award 2010 21 - AM2012/216

[26] The Waste Contractors & Recyclers Association of NSW (WCRA) seeks to insert a “cashing out of annual leave” clause in the Waste Management Award 2010 as follows:

“33.3 Cashing out of accrued annual leave

(a) Subject to the provisions of the Fair Work Act 2009 (Cth) and this clause, an employer and an employee may agree to the employee cashing out a particular amount of the employee’s accrued untaken paid annual leave.

(b) Each cashing out of a particular amount of paid annual leave must be by a separate agreement in writing between the employer and the employee.

(c) The employee must be paid at least the full amount that would have been payable to the employee had the employee taken the leave that the employee has forgone.

(d) In any one year period, the particular amount of paid annual leave which may be agreed to be cashed out must not exceed ten (10) days.

(e) The total amount of annual leave must not be cashed out if the cashing out would result in the employee’s remaining accrued entitlement to paid annual leave being less than 4 weeks leave.

(f) Annual leave cannot be cashed out in advance of it being credited to the employee.”

ABI proposal

[27] Australian Business Industrial (ABI) proposed that a “cashing out of annual leave” clause be inserted into the following awards:

● Building and Construction General On-site Award 2010 22 - AM2012/154

● Clerks—Private Sector Award 2010 23 - AM2012/113

● Graphic Arts, Printing and Publishing Award 2010 24 - AM2012/153

● Health Professionals and Support Services Award 2010 25 - AM2012/163

● Joinery and Building Trades Award 2010 26 - AM2012/106

● Nursery Award 2010 27 - AM2012/151

● Vehicle Manufacturing, Repair, Services and Retail Award 2010 28 - AM2012/108

[28] However, this part of the ABI application was withdrawn during the hearing before the Full Bench on 22 April 2013. 29

Legal Services Award 2010 30 - AM2012/145

[29] Allens Linklaters and others (Law Firms) proposed the insertion of a cashing out of annual leave clause in the Legal Services Award 2010. However, this part of their application was withdrawn on 23 April 2013.

Wine Industry Award 2010 31 - AM2012/158

[30] The South Australian Wine Industry Association Incorporated (SAWIAI) proposed an amendment to the annual leave clause in the Wine Industry Award 2010 to include a “cashing out of annual leave” clause. This part of their application was subsequently withdrawn on 24 April 2013.

(ii) Submissions

[31] In support of their proposed variations to the award flexibility clause in modern awards in respect of the cashing out of paid annual leave and ancillary amendments, the Ai Group submitted:

● the limited nature of the model award flexibility clause has led to modern awards not operating effectively as it prevents individual employees and their employers entering into individual flexibility agreements about one of the subject matters which is widely associated with flexible work arrangements and a widely recognised means of assisting employees to balance their work and family/life responsibilities, fails to reflect the legislature’s intent that award-covered employees have access to arrangements for the cashing out of annual leave, and is inconsistent with important objects set out in the Fair Work Act 2009 (Cth) (FW Act);

● the model award flexibility term includes anomalies and technical problems as it was determined prior to relevant provisions of the FW Act being determined, does not include leave, and does not include provisions available to award-free employees;

● the variations are necessary to enable modern awards to achieve the modern awards objective; and

● the above submissions also provide cogent reasons for making the variations sought.

[32] The AI Group referred to evidence that their members often telephone them for advice following queries from employees about cashing out a proportion of their annual leave.

[33] The submissions by employer bodies in support of the other variations seeking a specific cashing out of annual leave clause were that it will:

● allow employees access to an additional option to manage their affairs while appropriately balancing the need for rest and recreation;

● facilitate a consistent approach to cashing out of annual leave regardless of the applicable industrial instrument;

● assist in the management of contingent liabilities;

● mirror a common feature in some other enterprise agreements; and

● achieve the modern awards objective, particularly in respect of modern work practices.

[34] The cashing out of annual leave variations sought were opposed by the Australian Council of Trade Unions (ACTU), the “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU) (AMWU), The Association of Professional Engineers, Scientists and Managers, Australia (APESMA), the Australian Municipal, Administrative, Clerical and Services Union (ASU), The Australian Workers’ Union (AWU), the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU), the Construction, Forestry, Mining and Energy Union (CFMEU), the Finance Sector Union of Australia (FSU), the Shop, Distributive and Allied Employees Association (SDAEA), and the Textile, Clothing and Footwear Union of Australia (TCFUA) on the bases that:

● the industrial merit of annual leave is in its capacity to provide actual recreation time to employees;

● the issue of cashing out of annual leave was considered by the award modernisation Full Bench of the Australian Industrial Relations Commission (AIRC) as part of the Part 10A award modernisation process;

● once an employee reaches the relevant threshold of annual leave accrual, the employee can serially cash out their entitlement without ever taking annual leave;

● cashing out of annual leave is achievable through enterprise bargaining;

● sections 92 and 93 of the FW Act are permissive only;

● no fundamental changes since the modern awards were made warranting the cashing out of annual leave variations have been identified;

● cashing out of annual leave for employees in financial hardship is not an appropriate modern award remedy for the hardship;

● including cashing out of annual leave in the award flexibility term would require that the employee be better off overall because of the inclusion of such a test in the term;

● cashing out of annual leave was not included in the Labour Market Assistance Industry Award 2010 published in December 2009 despite the specific request by NESA to the Full Bench before that modern award was made for such cashing out to be included in it; and

● in determining the award flexibility term the Full Bench of the AIRC specifically recognised that to the extent modern awards include terms about the National Employment Standards (NES) such terms should deal directly with any flexibility issue in relation to the NES entitlement.

(iii) Consideration

[35] The NES deal with annual leave as follows:

“86 Division applies to employees other than casual employees

This Division applies to employees, other than casual employees.

87 Entitlement to annual leave

Amount of leave

(1) For each year of service with his or her employer, an employee is entitled to:

(a) 4 weeks of paid annual leave; or

(b) 5 weeks of paid annual leave, if:

(i) a modern award applies to the employee and defines or describes the employee as a shiftworker for the purposes of the National Employment Standards; or

(ii) an enterprise agreement applies to the employee and defines or describes the employee as a shiftworker for the purposes of the National Employment Standards; or

(iii) the employee qualifies for the shiftworker annual leave entitlement under subsection (3) (this relates to award/agreement free employees).

Note: Section 196 affects whether the FWC may approve an enterprise agreement covering an employee, if the employee is covered by a modern award that is in operation and defines or describes the employee as a shiftworker for the purposes of the National Employment Standards.

Accrual of leave

(2) An employee’s entitlement to paid annual leave accrues progressively during a year of service according to the employee’s ordinary hours of work, and accumulates from year to year.

Note: If an employee’s employment ends during what would otherwise have been a year of service, the employee accrues paid annual leave up to when the employment ends.

Award/agreement free employees who qualify for the shiftworker entitlement

(3) An award/agreement free employee qualifies for the shiftworker annual leave entitlement if:

(a) the employee:

(i) is employed in an enterprise in which shifts are continuously rostered 24 hours a day for 7 days a week; and

(ii) is regularly rostered to work those shifts; and

(iii) regularly works on Sundays and public holidays; or

(b) the employee is in a class of employees prescribed by the regulations as shiftworkers for the purposes of the National Employment Standards.

(4) However, an employee referred to in subsection (3) does not qualify for the shiftworker annual leave entitlement if the employee is in a class of employees prescribed by the regulations as not being qualified for that entitlement.

(5) Without limiting the way in which a class may be described for the purposes of paragraph (3)(b) or subsection (4), the class may be described by reference to one or more of the following:

(a) a particular industry or part of an industry;

(b) a particular kind of work;

(c) a particular type of employment.

88 Taking paid annual leave

(1) Paid annual leave may be taken for a period agreed between an employee and his or her employer.

(2) The employer must not unreasonably refuse to agree to a request by the employee to take paid annual leave.

89 Employee not taken to be on paid annual leave at certain times

Public holidays

(1) If the period during which an employee takes paid annual leave includes a day or part-day that is a public holiday in the place where the employee is based for work purposes, the employee is taken not to be on paid annual leave on that public holiday.

Other periods of leave

(2) If the period during which an employee takes paid annual leave includes a period of any other leave (other than unpaid parental leave) under this Part, or a period of absence from employment under Division 8 (which deals with community service leave), the employee is taken not to be on paid annual leave for the period of that other leave or absence.

90 Payment for annual leave

(1) If, in accordance with this Division, an employee takes a period of paid annual leave, the employer must pay the employee at the employee’s base rate of pay for the employee’s ordinary hours of work in the period.

(2) If, when the employment of an employee ends, the employee has a period of untaken paid annual leave, the employer must pay the employee the amount that would have been payable to the employee had the employee taken that period of leave.

91 Transfer of employment situations that affect entitlement to payment for period of untaken paid annual leave

Transfer of employment situation in which employer may decide not to recognise employee’s service with first employer

(1) Subsection 22(5) does not apply (for the purpose of this Division) to a transfer of employment between non-associated entities in relation to an employee, if the second employer decides not to recognise the employee’s service with the first employer (for the purpose of this Division).

Employee is not entitled to payment for untaken annual leave if service with first employer counts as service with second employer

(2) If subsection 22(5) applies (for the purpose of this Division) to a transfer of employment in relation to an employee, the employee is not entitled to be paid an amount under subsection 90(2) for a period of untaken paid annual leave.

Note: Subsection 22(5) provides that, generally, if there is a transfer of employment, service with the first employer counts as service with the second employer.

92 Paid annual leave must not be cashed out except in accordance with permitted cashing out terms

Paid annual leave must not be cashed out, except in accordance with:

(a) cashing out terms included in a modern award or enterprise agreement under section 93, or

(b) an agreement between an employer and an award/agreement free employee under subsection 94(1).

93 Modern awards and enterprise agreements may include terms relating to cashing out and taking paid annual leave

Terms about cashing out paid annual leave

(1) A modern award or enterprise agreement may include terms providing for the cashing out of paid annual leave by an employee.

(2) The terms must require that:

(a) paid annual leave must not be cashed out if the cashing out would result in the employee’s remaining accrued entitlement to paid annual leave being less than 4 weeks; and

(b) each cashing out of a particular amount of paid annual leave must be by a separate agreement in writing between the employer and the employee; and

(c) the employee must be paid at least the full amount that would have been payable to the employee had the employee taken the leave that the employee has forgone.

Terms about requirements to take paid annual leave

(3) A modern award or enterprise agreement may include terms requiring an employee, or allowing for an employee to be required, to take paid annual leave in particular circumstances, but only if the requirement is reasonable.

Terms about taking paid annual leave

(4) A modern award or enterprise agreement may include terms otherwise dealing with the taking of paid annual leave.

94 Cashing out and taking paid annual leave for award/agreement free employees

Agreements to cash out paid annual leave

(1) An employer and an award/agreement free employee may agree to the employee cashing out a particular amount of the employee’s accrued paid annual leave.

(2) The employer and the employee must not agree to the employee cashing out an amount of paid annual leave if the agreement would result in the employee’s remaining accrued entitlement to paid annual leave being less than 4 weeks.

(3) Each agreement to cash out a particular amount of paid annual leave must be a separate agreement in writing.

(4) The employer must pay the employee at least the full amount that would have been payable to the employee had the employee taken the leave that the employee has forgone.

Requirements to take paid annual leave

(5) An employer may require an award/agreement free employee to take a period of paid annual leave, but only if the requirement is reasonable.

Note: A requirement to take paid annual leave may be reasonable if, for example:

(a) the employee has accrued an excessive amount of paid annual leave; or

(b) the employer’s enterprise is being shut down for a period (for example, between Christmas and New Year).

Agreements about taking paid annual leave

(6) An employer and an award/agreement free employee may agree on when and how paid annual leave may be taken by the employee.

Note: Matters that could be agreed include, for example, the following:

(a) that paid annual leave may be taken in advance of accrual;

(b) that paid annual leave must be taken within a fixed period of time after it is accrued;

(c) the form of application for paid annual leave;

(d) that a specified period of notice must be given before taking paid annual leave.”

[36] The interaction between the NES and modern awards is dealt with in s.55 of the FW Act as follows:

“55 Interaction between the National Employment Standards and a modern award or enterprise agreement

National Employment Standards must not be excluded

(1) A modern award or enterprise agreement must not exclude the National Employment Standards or any provision of the National Employment Standards.

Terms expressly permitted by Part 2-2 or regulations may be included

(2) A modern award or enterprise agreement may include any terms that the award or agreement is expressly permitted to include:

(a) by a provision of Part 2-2 (which deals with the National Employment Standards); or

(b) by regulations made for the purposes of section 127.

Note: In determining what is permitted to be included in a modern award or enterprise agreement by a provision referred to in paragraph (a), any regulations made for the purpose of section 127 that expressly prohibit certain terms must be taken into account.

(3) The National Employment Standards have effect subject to terms included in a modern award or enterprise agreement as referred to in subsection (2).

Note: See also the note to section 63 (which deals with the effect of averaging arrangements).

Ancillary and supplementary terms may be included

(4) A modern award or enterprise agreement may also include the following kinds of terms:

(a) terms that are ancillary or incidental to the operation of an entitlement of an employee under the National Employment Standards;

(b) terms that supplement the National Employment Standards;

but only to the extent that the effect of those terms is not detrimental to an employee in any respect, when compared to the National Employment Standards.

Note 1: Ancillary or incidental terms permitted by paragraph (a) include (for example) terms:

(a) under which, instead of taking paid annual leave at the rate of pay required by section 90, an employee may take twice as much leave at half that rate of pay; or

(b) that specify when payment under section 90 for paid annual leave must be made.

Note 2: Supplementary terms permitted by paragraph (b) include (for example) terms:

(a) that increase the amount of paid annual leave to which an employee is entitled beyond the number of weeks that applies under section 87; or

(b) that provide for an employee to be paid for taking a period of paid annual leave or paid/personal carer’s leave at a rate of pay that is higher than the employee’s base rate of pay (which is the rate required by sections 90 and 99).

Note 3: Terms that would not be permitted by paragraph (a) or (b) include (for example) terms requiring an employee to give more notice of the taking of unpaid parental leave than is required by section 74.

Enterprise agreements may include terms that have the same effect as provisions of the National Employment Standards

(5) An enterprise agreement may include terms that have the same (or substantially the same) effect as provisions of the National Employment Standards, whether or not ancillary or supplementary terms are included as referred to in subsection (4).

Effect of terms that give an employee the same entitlement as under the National Employment Standards

(6) To avoid doubt, if a modern award includes terms permitted by subsection (4), or an enterprise agreement includes terms permitted by subsection (4) or (5), then, to the extent that the terms give an employee an entitlement (the award or agreement entitlement) that is the same as an entitlement (the NES entitlement) of the employee under the National Employment Standards:

(a) those terms operate in parallel with the employee’s NES entitlement, but not so as to give the employee a double benefit; and

(b) the provisions of the National Employment Standards relating to the NES entitlement apply, as a minimum standard, to the award or agreement entitlement.

Note: For example, if the award or agreement entitlement is to 6 weeks of paid annual leave per year, the provisions of the National Employment Standards relating to the accrual and taking of paid annual leave will apply, as a minimum standard, to 4 weeks of that leave.

Terms permitted by subsection (4) or (5) do not contravene subsection (1)

(7) To the extent that a term of a modern award or enterprise agreement is permitted by subsection (4) or (5), the term does not contravene subsection (1).

Note: A term of a modern award has no effect to the extent that it contravenes this section (see section 56). An enterprise agreement that includes a term that contravenes this section must not be approved (see section 186) and a term of an enterprise agreement has no effect to the extent that it contravenes this section (see section 56).”

[37] In its decision associated with the publishing of the modern awards for the priority industries on 19 December 2008 (the December 2008 Full Bench decision), 32 the award modernisation Full Bench considered a number of general issues and standard clauses in respect of modern awards. In respect of annual leave the Full Bench said:

“GENERAL ISSUES AND STANDARD CLAUSES

[11] We deal in this section with a large number of issues of general importance for the content of modern awards and, in particular, the content of standard clauses. We shall not deal with the same issues in later sections of the decision unless it is necessary to do so. Many matters not dealt with in this section are discussed in the context of the industry or occupation concerned in the next section of this decision…

Annual leave

[95] As we noted in our statement of 12 September 2008, it has not been possible to develop a single model clause for annual leave. While some parties have sought greater uniformity in the area, there is a wide range of differing provisions in the awards and NAPSAs that we are dealing with. In many cases the provisions are more generous to employees than the provisions of the NES. Areas in which this can be observed are the quantum of holiday pay, leave loading and the definition of shift worker. In considering what should be included in the modern award on each of these matters we have attempted to identify or formulate a standard entitlement in the area covered by the modern award rather than preserving a range of differing entitlements. This involves a degree of rationalisation at the award level only and will not result in standard provisions across all awards.

[96] There are also some issues concerning the time of taking leave. The time of taking leave is referred to in para. 33 of the consolidated request and s.36(1)(b) of the NES. Section 36(1)(b) reads:

‘36 Modern awards may include certain kinds of provisions

(1) A modern award may include provisions of any of the following kinds:

… …

(b) provisions requiring an employee (or allowing for an employee to be required) to take paid annual leave in particular circumstances;

… …’

[97] The provisions in awards and NAPSAs governing annual close-downs vary significantly. It is preferable that we do not alter provisions which have been specifically developed for particular industries. We have adopted the approach of attempting to identify an industry standard in each case. This means there may be some variation in the close-down provisions.

[98] One issue that has arisen repeatedly, and is provided for in the NES, is the right of an employer to require that an employee take arrears of annual leave. We think that an employer should have the ability to reduce annual leave liability by compelling employees to take annual leave provided appropriate notice is given. While there may be different approaches to this question, in each of the awards there will be some provision which will give the employer the ability to take action to reduce arrears.

[99] A number of employer interests sought provisions for cashing out of annual leave by agreement. Such arrangements are apparently included in many Australian Workplace Agreements (AWAs) and workplace agreements. Should cashing out of annual leave become widespread it would undermine the purpose of annual leave and give rise to questions about the amount of annual leave to be prescribed. We think some caution is appropriate when dealing with this issue at the safety net level. We do not intend to adopt a model provision. Consistent with our approach to annual leave provisions generally we shall be influenced mainly by prevailing industry standards, and the views of the parties, in addressing this issue.

[100] It has also been suggested that if awards do not provide for cashing out of annual leave it will not be legally permissible to make workplace agreements which provide for cashing out. In our opinion cashing out arrangements are an appropriate matter for bargaining. If, when the legislative regime is settled, it is apparent that workplace agreements cannot provide for cashing out of annual leave unless there is a relevant provision in a modern award it may be necessary to revisit the question.” 33

[38] Then in its May 2009 Full Bench statement 34 associated with the releasing of the exposure drafts of the modern awards for the Stage 3 industries, the award modernisation Full Bench said the following in respect of cashing out of annual leave in the exposure draft for the Tourism industry:

“Tourism industry…

[222] We decided not to include in the draft provisions for annualisation of salaries or cashing out of annual leave. Such arrangements are not common in the awards applicable to the alpine resort and snow sports industry. We have also decided not to make any special provision in relation to alpine resorts management boards. We have provisionally decided to include employees who perform hospitality and childcare duties. Nonetheless we would be assisted by further submissions on that matter.” 35

[39] The exposure draft of the Seafood Processing Award 2010 contained a cashing out of annual leave clause in respect of which the award modernisation Full Bench said the following:

“Food, beverages and tobacco industry (manufacturing)…

[90] A Seafood Processing Award 2010 exposure draft has also been developed based on the substantively agreed draft award proposed by numerous seafood organisations representing employers in the seafood processing industry, the AWU and the NUW.” 36

[40] In its September 2009 Full Bench decision 37 associated with the publishing of the modern awards for the Stage 3 industries, the award modernisation Full Bench said the following in respect of cashing out of annual leave in respect of several industries:

“Journalism…

[116] The employers requested that a provision allowing for the cashing out of annual leave be included in the modern award, reflecting the same arrangement as provided for in the Fair Work Act 2009 (Fair Work Act). Journalists receive more than the standard amount of annual leave and tend to accrue large amounts. The cashing out of annual leave is apparently a common request by employees. Nevertheless we have decided not to include a provision for cashing out of annual leave, consistent with our earlier decisions…

Wholesale and retail trade (wholesale) and commercial travellers…

[276] The Commercial Radio Association sought a provision for the cashing-out of annual leave. This position was supported by the media interests. There is no such provision in the current awards or NAPSAs and we have decided not to provide for it. We note that we have adopted the standard motor vehicle allowance in lieu of the rather complicated formula in the exposure draft. Should this give rise to unforeseen difficulties the issue can be reconsidered at a later stage.” 38

[41] The award flexibility term of modern awards was recently considered by a Full Bench of the FWC in Modern Awards Review 2012—Award Flexibility 39 (the 2012 Award Flexibility decision). In the 2012 Award Flexibility decision, the Full Bench traced the background to the award flexibility term in the modern awards prior to its decision. Relevantly, the Full Bench said:

“[16] The AIRC was required to prepare a model flexibility clause as part of the award modernisation process. The objectives of the clause were set out in the Ministerial request of 28 March 2008 and subsequently varied on 18 December 2008 and 2 May 2009…

[18] On 20 June 2008 a Full Bench decision of the AIRC dealt with the matters identified as priority tasks, including the determination of the model flexibility clause. The detailed reasons in support of the draft model clause are set out at paragraphs [155] - [192] of that decision. In the course of its reasons the Full Bench identified the differing views on a number of the features of the proposed clause. The aspects of the Full Bench decision which go to the scope of the clause and a number of ancillary matters are particularly relevant in the context of the applications before us. As to the scope of the proposed model clause the Full Bench said:

‘[166] The next issue concerns the clauses of the award in relation to which agreements might be made under the model clause. The ACTU suggested that we should not specify the types of clauses to which the model clause could apply, leaving that matter for consideration in relation to each model award. We do not think this is a sustainable approach. If it were accepted it would leave open for debate at some future time matters which we are able to decide now and thereby unnecessarily prolong the making of modern awards. Parties are entitled to whatever certainty about the operation of the model provision we can give at this point.

[167] Section 576J(1) provides that a modern award may include terms about a number of matters, as follows:

“576J Matters that may be dealt with by modern awards

General

(1) A modern award may include terms about any of the following matters:

(a) minimum wages (including wage rates for junior employees, employees with a disability and employees to whom training arrangements apply), and:

(i) skill-based classifications and career structures; and

(ii) incentive-based payments, piece rates and bonuses;

Note: Employee with a disability and junior employee are defined in subsection (3).

(b) type of employment, such as full-time employment, casual employment, regular part-time employment and shift work, and the facilitation of flexible working arrangements, particularly for employees with family responsibilities;

(c) arrangements for when work is performed, including hours of work, rostering, notice periods, rest breaks and variations to working hours;

(d) overtime rates;

(e) penalty rates, including for any of the following:

(i) employees working unsocial, irregular or unpredictable hours;

(ii) employees working on weekends or public holidays;

(iii) shift workers;

(f) annualised wage or salary arrangements that:

(i) have regard to the patterns of work in an occupation, industry or enterprise; and

(ii) provide an alternative to the separate payment of wages, or salaries, and other monetary entitlements; and

(iii) include appropriate safeguards to ensure that individual employees are not disadvantaged;

(g) allowances, including for any of the following:

(i) expenses incurred in the course of employment;

(ii) responsibilities or skills that are not taken into account in rates of pay;

(iii) disabilities associated with the performance of particular tasks or work in particular conditions or locations;

(h) leave, leave loadings and arrangements for taking leave;

(i) superannuation;

(j) procedures for consultation, representation and dispute settlement.”

[168] Dealing first with s.576J(1)(a), minimum wages, we note that there is another award matter which deals with flexibility in relation to wages. Pursuant to s.576J(1)(f) awards may include terms about annual wage and salary arrangements, including alternatives to the separate payment of wages or salaries and other monetary entitlements. Award terms made under that paragraph must include appropriate safeguards to ensure that individual employees are not disadvantaged. In light of the fact that separate provision is made for flexibility in relation to the way in which wages, salaries and other monetary entitlements may be paid it is unnecessary to include terms about minimum wages in the model clause. Indeed it may be inappropriate to do so. It is difficult to see how the trading-off of minimum wages against other benefits could meet a genuine need for individual flexibility without at the same time weakening the function of the award as a safety net in an unacceptable way. There does not appear to be any sound basis for including award terms about minimum wages within the operation of the model clause. It follows also that award terms made under s.576J(1)(f), which is itself a flexibility provision, should not be included in the operation of the model flexibility clause either. We should emphasize that by excluding minimum wages from the model clause we obviously do not intend to limit arrangements which increase wages. Our concern is to guard against minimum wages being traded off.

[169] In relation to s.576J(1)(b), type of employment, award terms made under that section may include “the facilitation of flexible working arrangements, particularly for employees with family responsibilities.” Modern award terms about such matters will by definition provide for flexibility in the manner prescribed. For this reason there is no need to include award terms dealing with type of employment in the model clause.

[170] Award terms dealing with arrangements for when work is performed (paragraph (c)), overtime rates (paragraph (d)), penalty rates (paragraph (e)) and allowances (paragraph (g)) should all be brought within the operation of the model clause.

[171] Award terms of the kind described in s.576J(1)(h) require closer consideration. Generally speaking leave matters, although not leave loading, are dealt with in the NES. The interaction between the NES and modern awards is dealt with in cll. 28 to 46 of the Minister’s request. At this stage we would not be prepared to include any of the matters to be dealt with by the NES in the model flexibility clause. There are several reasons.

[172] The first point is that it is not clear what scope there will be for variation in the operation of the NES at the modern award level. Until the NES have been dealt with in the modern award concerned there will necessarily be uncertainty in relation to a number of aspects of their operation. It would not be prudent to make any provision for variation of NES terms at this stage. But there are other cogent reasons for caution. Clause 30 of the request provides that a modern award cannot exclude the NES or any provision of the NES. Clause 31 provides that a modern award may include industry specific detail about matters in the NES. Clause 32 provides that a modern award may supplement the NES in some circumstances. Clause 33 provides that particular types of provisions are able to be included in modern awards even though they might otherwise be inconsistent with the NES. It would seem to follow from these provisions that to the extent that modern awards will include terms about the NES those terms would deal directly with any flexibility issue in relation to the relevant NES entitlement.

[173] Returning to the terms of s.576J(1)(h), and with those considerations in mind, the only matter dealt with in that section which is appropriate for inclusion in the operation of the model clause at this stage is leave loading.

[174] The remaining award matters are superannuation (paragraph (i)) and procedures for consultation, representation and dispute settlement (paragraph (j)). There is a significant degree of uncertainty about the operation of any modern award clause dealing with superannuation and its relationship with relevant legislation. This is not an area in which the scope for flexibility is immediately apparent in any event. Modern award terms dealing with consultation, etc will require to be simple and flexible since they will necessarily have application in a wide range of circumstances. To include such terms in the operation of the model clause would be likely to add complexity and unnecessary regulation rather than increase flexibility. We do not regard either of these matters as appropriate for inclusion in the scope of the model clause.

[175] In summary, the award terms which might be included within the scope of the model flexibility clause are:

• arrangements for when work is performed;

• overtime rates;

• penalty rates;

• allowances; and

• leave loading.

[176] Before leaving the matters to be included in the model clause there is another question to be considered – whether limits should be put on the flexibility available in relation to the particular award terms we have specified. That approach has some attraction in that it would provide some additional protections for employees. The difficulty with the proposal is that the limitations might not be appropriate in all circumstances and their adoption might lead to unfairness to employers and employees in some cases. Bearing in mind that the clause will have the potential to apply in a very broad range of cases it would be undesirable to place limits on what the parties might agree as appropriate to their needs. On balance we think that additional restrictions would be too prescriptive and the other protections the clause will contain should be adequate.’

[19] Three things may be said about the Full Bench’s decision with respect to the scope of the model flexibility clause…

[21] Second, in relation to s.576J(1)(h) - leave, leave loading and arrangements for taking leave, the Full Bench noted that generally speaking leave matters, other than leave loading, are dealt with in the NES. At that stage the Full Bench was not prepared to include any of the matters dealt with in the NES in the model flexibility clause for the reasons stated at paragraph [172] of its decision.

[22] Flexibility in respect of leave and arrangements for taking leave are not before us and are being dealt with by another Full Bench constituted to specifically deal with Transitional Review applications relating to annual leave…

[25] A draft model clause was attached to the Full Bench’s decision of 20 June 2008. In a subsequent statement issued on 12 September 2008 the AIRC slightly modified the model clause:

‘Award Flexibility

[17] With one exception we have not found it necessary to modify the substance of the model award flexibility clause in any of the drafts. To put the intended operation of the clause beyond doubt we have included the words “Notwithstanding any other provision of this award” at the start of the model clause. The draft award flexibility clause in the exposure draft for the textile, clothing, footwear and associated industries contains some modifications directed to the nature of employment in that industry. They deal with translation and time for consideration of proposed agreements.’

[26] The model clause was subsequently modified in December 2008 and 3 April 2009 to take account of submissions from interested parties, amendments to the Ministers Request and legislative change.

[27] The current model clause is in the following terms:

‘7. Award flexibility

7.1 Notwithstanding any other provision of this award, an employer and an individual employee may agree to vary the application of certain terms of this award to meet the genuine individual needs of the employer and the individual employee. The terms the employer and the individual employee may agree to vary the application of are those concerning:

(a) arrangements for when work is performed;

(b) overtime rates;

(c) penalty rates;

(d) allowances; and

(e) leave loading.

7.2 The employer and the individual employee must have genuinely made the agreement without coercion or duress.

7.3 The agreement between the employer and the individual employee must:

(a) be confined to a variation in the application of one or more of the terms listed in clause 7.1; and

(b) result in the employee being better off overall than the employee would have been if no individual flexibility agreement had been agreed to.

7.4 The agreement between the employer and the individual employee must also:

(a) be in writing, name the parties to the agreement and be signed by the employer and the individual employee and, if the employee is under 18 years of age, the employee’s parent or guardian;

(b) state each term of this award that the employer and the individual employee have agreed to vary;

(c) detail how the application of each term has been varied by agreement between the employer and the individual employee;

(d) detail how the agreement results in the individual employee being better off overall in relation to the individual employee’s terms and conditions of employment; and

(e) state the date the agreement commences to operate.

7.5 The employer must give the individual employee a copy of the agreement and keep the agreement as a time and wages record.

7.6 Except as provided in clause 7.4(a) the agreement must not require the approval or consent of a person other than the employer and the individual employee.

7.7 An employer seeking to enter into an agreement must provide a written proposal to the employee. Where the employee’s understanding of written English is limited the employer must take measures, including translation into an appropriate language, to ensure the employee understands the proposal.

7.8 The agreement may be terminated:

(a) by the employer or the individual employee giving four weeks’ notice of termination, in writing, to the other party and the agreement ceasing to operate at the end of the notice period; or

(b) at any time, by written agreement between the employer and the individual employee.

7.9 The right to make an agreement pursuant to this clause is in addition to, and is not intended to otherwise affect, any provision for an agreement between an employer and an individual employee contained in any other term of this award.’

[28] A clause in these terms is in every modern award, as is required by s.144 of the FW Act.

[29] Before leaving the 2008 AIRC Full Bench decision it is important to note that the Full Bench itself stated that it was desirable to review the model flexibility clause after a reasonable period. At paragraph [192] the Full Bench said:

‘The model clause will not commence to operate before 1 January 2010. It is not possible to be certain about the award and legislative environment in which the clause will operate. While it is anticipated that the award modernisation process will have been completed, the content and scope of the awards is yet to be decided. In addition the details of the workplace relations system which will be operating at that time are also uncertain. While the Government has given indications of its policy on many matters the legislative process has barely begun. For a number of reasons, it is obviously desirable that there be a review of the operation of the model flexibility clause after it has been operating for a reasonable period. This review would provide an opportunity to assess whether the clause has achieved its purpose of providing flexibility to meet the genuine individual needs of employers and employees. An important related issue for consideration would be whether the provision has provided sufficient protection from disadvantage for employees. The experience of employers, employees and unions would be extremely helpful in such a review as would the views of the authority responsible for ensuring the observance of modern awards.’...

[40] Modern awards are dealt with in Part 2-3 of Chapter 2 of the FW Act. Section 144(1) provides that each modern award must include a ‘flexibility term’ enabling an employee and his or her employer to agree on an individual flexibility arrangement (an IFA) varying the effect of the award in relation to the employee and the employer. The stated objective of such arrangements is ‘to meet the genuine needs of the employee and employer’.

[41] An IFA has effect in relation to the employee and the employer as if the relevant modern award was varied by the flexibility arrangement. For the purposes of the FW Act the IFA is taken to be a term of the modern award (s.144(2)).” 40 [Endnotes omitted]

[42] Against this background, the April 2013 Full Bench decision went on to consider the applications before it for variation of the award flexibility term. Relevantly, the Full Bench said:

“3.1 Scope

[86] As we have noted, s.144(4) of the FW Act provides that the flexibility term must identify the terms of the modern award the effect of which can be varied by an individual flexibility arrangement. Subclause 7.1 of the model flexibility term provides that the employer and employee may agree to vary the application of award terms concerning:

• arrangements for when work is performed;

• overtime rates;

• penalty rates;

• allowances; and

• leave loading.

[87] A number of applications seek to vary the scope of the model flexibility term…

[91] The Victorian Employers’ Chamber of Commerce and Industry (VECCI) seeks the insertion of two new award terms which may be varied by an IFA, namely minimum shift lengths and ‘preferred hours’ arrangements…

[121] VECCI is seeking to vary clause 7.1 of the Clerks—Private Sector Award 2010 to insert an additional paragraph in the model flexibility term:

‘(c) preferred hours option’…

[123] In our view, VECCI’s application is misconceived. Clause 7.1 provides that the employer and the individual employee may agree to vary the application of ‘certain terms of this award’. The award terms which may be the subject of such an arrangement are then identified as those concerning:

‘(a) arrangements for when work is performed;

(b) overtime rates;

(c) penalty rates;

(d) allowances; and

(e) leave loading.’

[124] There is no award term which concerns ‘preferred hours option’. Hence even if we were minded to grant VECCI’s application, which we are not, it would be ineffective in any event.” 41

[43] Since clause 7.1 of the award flexibility term of modern awards provides that the employer and the individual employee may agree to vary the application of “certain terms of this award”, the Ai Group’s application to vary the award flexibility term in modern awards to include “cashing out of paid annual leave” is dependent on there being a cashing out of paid annual leave clause in the modern awards. As a result, the Ai Group also seeks to include a clause precluding the cashing out of paid annual leave in the modern awards.

[44] However, before us, the merit of modern awards providing for the cashing out of paid annual leave through the award flexibility term as opposed to modern awards containing a specific clause providing for such cashing out, as s.93(1) of the FW Act allows, was not satisfactorily addressed by the Ai Group. Indeed the Ai Group’s submissions in support of their proposed variations were largely concerned with the merits of employers and employees being able to agree on cashing out of paid annual leave.

[45] We, therefore, dismiss the Ai Group’s proposed variations to the award flexibility term in modern awards in respect of cashing out of paid annual leave. We turn to consider the other applications which sought to vary certain modern awards to directly provide for the cashing out of paid annual leave.

[46] A cashing out of paid annual leave clause for modern awards was clearly considered by the award modernisation Full Bench on several occasions. This included after the terms of the NES and their application in respect of award/agreement free employees, and now s.93(2) of the FW Act enabling modern awards to provide for cashing out of paid annual leave, were known to it. Cogent reasons for revisiting the Full Bench’s consideration have not been advanced to us.

[47] There was evidence before us to the effect that some employers have been asked by employees to cash out their paid annual leave and of surveys of employees on the matter. However, the extent to which the respondents to those surveys were representative of employees in the industry was not ascertainable from the survey methodology or results. Further, such evidence and surveys were counterbalanced by the submissions of the unions representing employees opposing such a clause in a modern award. Moreover, the evidence about the benefits of such a clause did not raise a change in circumstances, much less a significant change in circumstances, from when the award modernisation Full Bench considered cashing out of paid annual leave clauses for modern awards.

[48] In addition, mere submissions that the inclusion of a cashing out of paid annual leave clause in modern awards is necessary to achieve the modern awards objective, or submissions repeating particular sub-clauses of s.134(1) of the FW Act and maintaining that a cashing out of paid annual leave clause is consistent with them, are not sufficient to establish that the extant modern awards are not continuing to meet the modern awards objective. Nor are they sufficient to establish that the extant modern awards are not operating effectively, without anomalies or technical problems arising from the Part 10A award modernisation process.

[49] For these reasons, we are not persuaded we should provide for the specific cashing out of annual leave clauses sought before us as part of this Transitional Review. We decline to make the variations sought.

[50] We consider the variations sought in respect of cashing out of paid annual leave may be more appropriate for consideration in the four year review.

(b) Requirement to take annual leave

(i) The claims

AFEI proposal

[51] The Australian Federation of Employers and Industries (AFEI) propose that a “requirement to take annual leave” clause be inserted in the following modern awards:

● Amusement, Events and Recreation Award 2010 42 - (AM2012/231)

● Marine Tourism and Charter Vessels Award 2010 43 - (AM2012/235)

● Social, Community, Home Care and Disability Services Industry Award 2010 44 - (AM2012/232).

[52] They propose the following clause be inserted in the Amusement, Events and Recreation Award 2010 and the Marine Tourism and Charter Vessels Award 2010:

“X Requirement to take annual leave

Notwithstanding s.88 of the Act, if an employer has genuinely tried to reach agreement with an employee as to the timing of taking annual leave, the employer can require the employee to take annual leave by giving not less than four weeks’ notice of the time when such leave is to be taken if:

(a) at the time the direction is given, the employee has eight weeks or more of annual leave accrued; and

(b) the amount of annual leave the employee is directed to take is less than or equal to a quarter of the amount of leave accrued, or

(c) the leave is to be taken due to a full or partial close down of the employer’s operations.”

[53] In the Social, Community, Home Care and Disability Services Industry Award 2010, the AFEI propose the following clause be inserted:

“31.4 An employer may require an employee to take annual leave by giving at least four weeks’ notice in the following circumstances:

(a) as part of a shut down or partial shut-down of its operations; or

(b) where more than eight weeks’ leave is accrued;

(c) For the purposes of paragraph (a) an employee without sufficient accrued leave to maintain their ordinary rate of pay during a period of shut down or partial shut down may be required to take leave without pay for a maximum of four weeks.”

[54] The ASU oppose the variation to the Social, Community, Home Care and Disability Services Industry Award 2010. However, they submit that if the Full Bench is inclined to accept such a variation then the following alternate wording is more appropriate:

“31.4 Requirement to take Annual leave

An employer may require an employee to take a period of annual leave in the following circumstances and subject to the following conditions:

(a) The requirement is reasonable;

(b) The employer has complied with section 88(2) of the Fair Work Act;

(c) The employee has accrued at least eight weeks’ untaken annual leave;

(d) The employer has given the employee at least 28 days’ notice prior to the date the employee is required to commence the leave; and

(e) The employee will retain at least four weeks’ annual leave.”

ABI proposal

[55] ABI seeks to insert an “excessive leave” clause in the following awards:

● Building and Construction General On-site Award 2010 45 - AM2012/154

● Storage Services and Wholesale Award 2010 46 - AM2012/173

[56] ABI propose the following clause be inserted into the above mentioned awards:

“X Excessive leave

If an employer has genuinely tried to reach agreement with an employee as to the timing of taking annual leave, the employer can require the employee to take annual leave by giving not less than four weeks notice of the time when such leave is to be taken if:

(a) at the time the direction is given, the employee has eight weeks or more annual leave accrued; and

(b) the amount of annual leave the employee is directed to take is less than or equal to a quarter of the amount of leave accrued.”

[57] ABI also made similar applications in relation to the Graphic Arts, Printing and Publishing Award 2010 47 (AM2012/153), Joinery and Building Trades Award 201048 (AM2012/106) and the Nursery Award 201049 (AM2012/151). However, ABI withdrew this part of their applications relating to these modern awards in their submission of 18 February 2013.

Banking, Finance and Insurance Award 2010 50 - AM2012/256

[58] The Banks propose an amendment to the “requirement to take leave” clause in the Banking, Finance and Insurance Award 2010. The clause in this modern award currently reads as follows:

“24.5 Requirement to take leave notwithstanding terms of the NES

An employer may require an employee to take annual leave by giving at least four weeks’ notice in the following circumstances:

(a) as part of a close-down of its operations; or

(b) where more than eight weeks’ leave is accrued.”

[59] The Banks propose clause 24.5 be varied as underlined to the following:

“24.5 Requirement to take leave notwithstanding terms of the NES

An employer may require an employee to take annual leave by giving at least four weeks’ notice in the following circumstances:

(a) in the event of a full or partial close-down of its operations; or

(b) where more than four weeks’ leave is accrued (or five weeks in the case of an employee who is a shiftworker for the purposes of the National Employment Standards).”

Cleaning Services Award 2010 51 - AM2012/209

[60] Berkeley Challenge Pty Ltd seeks to vary the Cleaning Services Award 2010 to insert the following new clause:

“29.8 Direction to take excessive annual leave

An employer may require an employee to take a period of paid annual leave but only if the requirement is reasonable, for example, where the employee has accrued an excessive amount of paid annual leave or the employer’s enterprise is being shut down for a period (for example, between Christmas and New Year).

For the purposes of this clause ‘excessive amount of paid annual leave’ means where an employee has 8 or more weeks of accrued but untaken annual leave.

A direction to take annual leave in circumstances where an employee has an excessive amount of annual leave will not be reasonable where the direction would result in the employee retaining less than 4 weeks of annual leave after the direction takes effect.”

Fast Food Industry Award 2010 52 - AM2012/179

[61] The BIAQ propose the Fast Food Industry Award 2010 be varied to include the following clause:

“28.5 Requirement to take leave notwithstanding terms of the NES

An employer may require an employee to take annual leave by giving at least four weeks’ notice in the following circumstances:

(a) as part of a close-down of its operations; or

(b) where more than eight weeks’ leave is accrued.”

Pharmacy Industry Award 2010 53 - AM2012/36

[62] The PGA propose the following clause be inserted into the annual leave clause of the Pharmacy Industry Award 2010:

“29.5 Requirement to take leave notwithstanding terms of the NES

An employer may require an employee to take annual leave by giving at least four weeks’ notice in the following circumstances:

(a) as part of a shut-down of the whole or part of its operations; or

(b) where more than eight weeks’ leave is accrued, provided that at least four weeks leave remains accrued.”

Plumbing and Fire Sprinklers Award 2010 54 - AM2012/202

[63] The MPMSAA seeks to vary the annual leave clause in the Plumbing and Fire Sprinklers Award 2010 to include the following:

“34.4 In accordance with the NES, the employer may direct an employee to take annual leave if the:

(a) employee has accrued more than eight weeks of annual leave;

(b) employee and employer are unable to reach agreement on the taking of the leave;

(c) employer has given the employee at least 28 days’ notice prior to the date the employee is required to commence the leave; and

(d) employee will retain at least four (4) weeks of annual leave.”

[64] The variation was not opposed by the CEPU. However alternative, less conditional wording, was proposed by The Master Plumbers & Mechanical Contractors Association of New South Wales.

Security Services Industry Award 2010 55 - AM2012/122, AM2012/42 and AM2012/32

[65] Several parties seek to vary clause 24.3 of the Security Services Industry Award 2010 regarding the taking of annual leave. The clause in that modern award currently reads as follows:

“24.3 Taking annual leave

Annual leave is to be taken within two years of the entitlement accruing. For the purpose of ensuring accrued annual leave is taken within that period, or because of a temporary or seasonal slowdown in the employer’s business, and in the absence of agreement as provided for in s.88 of the Act, an employer may require an employee to take a period of annual leave from a particular date provided the employee is given at least 28 days’ notice.”

[66] MSS Security Pty Ltd (AM2012/122) propose the following variations as underlined:

“24.3 Taking annual leave

Annual leave is to be taken within two years of the entitlement accruing. For the purpose of ensuring accrued annual leave is taken within that period, or because of a temporary or seasonal slowdown or production days off in the employer’s/client’s business, and in the absence of agreement as provided for in section 33 of the NES, an employer may require an employee to take a period of annual leave from a particular date provided the employee is given at least 28 days notice.”

[67] The United Voice application (AM2012/32) is similar to that of ASIAL except that it does not include the phrase “/client’s” in the proposed clause 24.3(b). United Voice maintain the existing clause 24.3 is ambiguous because it could be construed as allowing an employer to direct the taking of leave on any balance of leave and that is not reasonable.

[68] The Australian Security Industry Association Ltd (ASIAL) (AM2012/43) seeks to vary the clause to the following:

“24.3 Requirement to take leave

(a) An employer may require an employee to take a period of annual leave in the following circumstances and subject to the following conditions:

(i) the requirement is reasonable;

(ii) the employer has given the employee at least 4 weeks’ notice;

(iii) the employee has accrued at least 8 weeks’ untaken annual leave;

(iv) the employee has the right to retain a balance of at least 4 weeks’ annual leave.

(b) An employer may also require an employee to take a period of annual leave if the employer’s/client’s enterprise is being shut down for a period (for example, between Christmas and New Year).”

(ii) Submissions

[69] The submissions in support of the variations concerning a requirement to take annual leave clause included that:

● the award modernisation Full Bench intended to include such a clause in all modern awards and many modern awards contain such clauses;

● the seasonality of certain industries warrants such a clause;

● such a clause is consistent with s.94(5) of the FW Act in respect of award/agreement free employees;

● the clause promotes workplace health and safety and productivity, and would assist in the meeting of family responsibilities, the management of contingent liabilities and fraud risk management;

● some employees refuse to take annual leave;
● the absence of such a clause is anomalous and its inclusion is necessary to achieve the modern awards objective as some previous industrial legislation and pre-reform awards enabled employers to direct employees onto annual leave during a shutdown of operations; and

● some pre-reform awards included such a clause.

[70] The variations were opposed by the ACTU and certain unions on the bases that:

● modern awards already contain a taking of annual leave clause, where there was an industry standard with respect to such a clause in the relevant pre-reform awards;

● parties have demonstrated an ability to agree on an appropriate taking of annual leave clause in enterprise agreements; and

● no cogent reasons, such as a change in circumstances, have been demonstrated for the clauses sought, and no anomalies or technical problems arising from the award modernisation process have been established.

(iii) Consideration

[71] We are not persuaded we should vary the above modern awards as sought in respect of a requirement to take annual leave.

[72] In the December 2008 Full Bench decision, the award modernisation Full Bench said the following in respect of annual leave:

“Annual leave

[95] As we noted in our statement of 12 September 2008, it has not been possible to develop a single model clause for annual leave. While some parties have sought greater uniformity in the area, there is a wide range of differing provisions in the awards and NAPSAs that we are dealing with. In many cases the provisions are more generous to employees than the provisions of the NES. Areas in which this can be observed are the quantum of holiday pay, leave loading and the definition of shift worker. In considering what should be included in the modern award on each of these matters we have attempted to identify or formulate a standard entitlement in the area covered by the modern award rather than preserving a range of differing entitlements. This involves a degree of rationalisation at the award level only and will not result in standard provisions across all awards.

[96] There are also some issues concerning the time of taking leave. The time of taking leave is referred to in para.33 of the consolidated request and s.36(1)(b) of the NES. Section 36(1)(b) reads:

‘36 Modern awards may include certain kinds of provisions

(1) A modern award may include provisions of any of the following kinds:

… …

(b) provisions requiring an employee (or allowing for an employee to be required) to take paid annual leave in particular circumstances;

… …’

[97] The provisions in awards and NAPSAs governing annual close-downs vary significantly. It is preferable that we do not alter provisions which have been specifically developed for particular industries. We have adopted the approach of attempting to identify an industry standard in each case. This means there may be some variation in the close-down provisions.

[98] One issue that has arisen repeatedly, and is provided for in the NES, is the right of an employer to require that an employee take arrears of annual leave. We think that an employer should have the ability to reduce annual leave liability by compelling employees to take annual leave provided appropriate notice is given. While there may be different approaches to this question, in each of the awards there will be some provision which will give the employer the ability to take action to reduce arrears.” 56

[73] It is apparent from this part of the December 2008 Full Bench decision that the award modernisation Full Bench recognised that provisions requiring an employee to take annual leave could be concerned with close downs or reducing arrears of annual leave. It is relevant that in respect of close down the award modernisation Full Bench noted that the provisions in pre-reform awards varied significantly and it adopted the approach of attempting to identify the industry standard for each modern award. In respect of arrears of annual leave it is relevant that not all the modern awards published with the decision contained a clause enabling an employer to require an employee to take arrears of annual leave. Indeed, around 25% of the modern awards have no provision by which an employee can be required to take annual leave.

[74] The variations sought before us concerning a requirement to take annual leave in some instances seek to insert the requirement into a modern award where no such provision currently exists, in other instances where the provision currently exists in a modern award but only for close down or only for arrears of annual leave and in yet other instances where the provision currently exists in a modern award for both.

[75] In these circumstances, we do not think the absence, in whole or in part, of a requirement to take annual leave provision in a particular modern award can be regarded as an anomaly or technical problem arising from the Part 10A award modernisation process.

[76] Nor are we persuaded there is an anomaly or technical problem created by the wording of the taking of annual leave clause in the Security Services Industry Award 2010. The wording is similar to that in some other modern awards and, in our view, clearly sets out the reasonable circumstances in which an employer may direct an employee to take annual leave. Generally, it is not likely to be necessary to take annual leave after 28 days of it accruing in order to ensure it is taken within two years of its accrual.

[77] Those seeking the variations have not established cogent reasons for revisiting the matter in the modern awards in which the variations are sought. The grounds on which they seek the variations do not identify a significant change in circumstances, rather they are largely merits considerations which existed at the time the modern awards were made.

[78] We are satisfied the absence of the variations sought is not preventing the relevant modern awards achieving the modern awards objective or preventing those modern awards from operating effectively, without anomalies or technical problems arising from the Part 10A award modernisation process. We decline to make the variations sought.

[79] The variations sought in respect of the taking of annual leave may be more appropriate for consideration in the four year review.

(iv) Legal Services Award 2010 57 - AM2012/145

[80] The Law Firms, with the consent of the ASU, propose the following clause be inserted in the Legal Services Award 2010:

“35.6 Requirement to take leave notwithstanding terms of the NES

Annual leave is to be taken at a time agreed between the employer and employee. However, an employer may require an employee to take annual leave by giving at least four weeks’ notice in the following circumstances:

(a) as part of a close-down of its operations, or part of its operations, where the request is reasonable; or

(b) where more than eight weeks’ leave is accrued.”

[81] We will make the variation sought to the Legal Services Award 2010 having regard to the grounds submitted for its variation and the requirements of Schedule 5, Item 6 of the Transitional Provisions Act.

(c) Additional one twelfth payment

(i) The claims

ABI proposal

[82] ABI seeks to vary the one twelfth payment provision in the annual leave clause in the following modern awards:

● Asphalt Industry Award 2010 58 - AM2012/92

● Cement and Lime Award 2010 59 - AM2012/94

● Concrete Products Award 2010 60 - AM2012/98

● Premixed Concrete Award 2010 61 - AM2012/91

● Quarrying Award 2010 62 - AM2012/86

[83] The one twelfth payment provision in the annual leave clause of the Asphalt Industry Award 2010 currently reads as follows:

“24.4 Close-down

(a) Where an employer intends temporarily to close (or reduce to nucleus) during the Christmas/New Year period for the purpose, amongst others, of allowing annual leave to the employees concerned or a majority of them, the employer may give those employees one month’s notice in writing of an intention to apply the provisions of this clause.

(b) In the case of any employee employed after notice has been given, notice must be given to that employee on the date they are offered employment.

(c) An employee who has accrued sufficient annual leave at the date of closing in accordance with clause 24.4(a) must be:

(i) given annual leave commencing from the date of closing; and

(ii) paid 1/12th of their ordinary pay for any period of employment between accrual of the employee’s right to the annual leave and the date of closing.

(d) Any employee who has not accrued sufficient annual leave at the date of closing must be:

(i) given leave without pay from the date of closing; and

(ii) paid for any public holiday during such leave for which the employee is entitled to payment.”

[84] Similar provisions are included in the other modern awards that ABI seeks to vary with respect to the one twelfth payment provision.

[85] ABI propose the following variation to clauses (c) and (d) of those awards:

“(c) Where an employee has been given notice pursuant to clause X(a) and the employee has:

(i) accrued sufficient paid annual leave to cover the full period of closing, the employee must take paid annual leave for the full period of closing;

(ii) insufficient accrued annual leave to cover the full period of closing, the employee must take paid annual leave to the full amount accrued and leave without pay for the remaining period of the closing; or

(iii) no accrued annual leave, the employee must take leave without pay for the full period of closing.

(d) Public holidays that fall within the period of close down will be paid as provided for in this award and will not count as a day of annual leave or leave without pay.”

[86] The AWU opposes ABI’s variation in its current terms. It proposes alternate wording to the variations ABI seeks as underlined below:

“X Annual close down

(a) Where an employer intends temporarily to close (or reduce to nucleus) during the Christmas/New Year period the quarry, operation or a section of the quarry or operation for the purpose, amongst others, of allowing annual leave to the employees concerned or a majority of them, the employer must give those employees one month’s notice in writing of an intention to apply the provisions of this clause…

(c) Where an employee has been given notice pursuant to clause X(a) and the employee has:

(i) accrued sufficient paid annual leave to cover the full period of closing the employee must be paid one twelfth of their ordinary pay for the period of the leave;”

Cleaning Services Award 2010 63- AM2012/23

[87] The Building Services Contractors Association of Australia, New South Wales Division (BSCAA) seeks to vary the Cleaning Services Award 2010 in respect of the one twelfth payment provision in its annual leave clause. The clause in that modern award currently reads as follows:

“29.6 Annual close-down

Where the client of an employer in the contract cleaning industry intends temporarily to close or reduce to a nucleus the establishment or a section thereof for the purposes of allowing annual leave to that client employer’s employees the following provisions may apply:

(a) The employer may give in writing to such employees one month’s notice (or in the case of an employee engaged after the giving of such notice, on engagement) of their intention to apply the provisions of this clause.

(b) Any employee given notice under clause 29.6(a) who at the date of closing is entitled to annual leave will be given such leave commencing from the date of the close-down and, in addition, will be paid 1/12th of their ordinary pay for any period of employment after accrual of their right to annual leave and up to but excluding the date of closing.

(c) Any employee given notice under clause 29.6(a) who at the date of close down is not entitled to annual leave will be paid 1/12th of their ordinary pay for the period between engagement and the date of the close-down. Where practicable such an employee will be employed at another of the employer’s sites for the balance of the period of the close down.

(d) For the purposes of accruing annual leave, the next 12 month qualifying period of employment for an employee subject to this clause commences on the date of the close-down.

(e) The close-down period will be limited to four weeks, plus any public holidays that fall during the period of the close down.

(f) All public holidays that fall during a close-down period will be added to the period of paid leave.

(g) In this clause date of closing in relation to each employee means the first day of the employees annual leave pursuant to this clause.”

[88] The BSCAA propose the clause be varied as follows (with no changes to sub clauses (a), (e), (f) and (g)):

“29.6 Annual close-down

Notwithstanding s.88 of the Act, where the client of an employer in the contract cleaning industry intends temporarily to close or reduce to a nucleus the establishment or a section thereof for the purposes of allowing annual leave to that client employer’s employees the following provisions may apply:…

(b) an employee who has accrued sufficient annual leave to cover the period of the close down is allowed annual leave; and

(c) an employee who has not accrued sufficient annual leave to cover part or all of the close down is allowed paid annual leave for the period for which they have accrued leave and is given unpaid leave for the balance of the close down.

(d) any leave taken by an employee as a result of an annual shut down under this clause counts as service by the employee...”

[89] United Voice also made an application in relation to the close down clause (AM2012/33). This part of their application was withdrawn by correspondence of 1 July 2013.

(ii) Submissions

[90] ABI maintained the one twelfth payment in the annual leave clause in the five modern awards it seeks to vary represents a misapplication of the Annual Holidays Act 1944 (NSW) which applied when an employee had insufficient annual leave to cover a close down and when annual leave vested en bloc rather than progressively.

[91] The AWU maintained the ABI sought variation in respect of the one twelfth payment would reduce a rate of payment to employees who are required to access their own annual leave during the period of close down. The AWU’s proposed alternative wording is not as extensive as the one twelfth payment provision currently in, for example, clause 24.4(c)(ii) of the Asphalt Industry Award 2010.

[92] In support of its variations BSCAA submitted the current clause is inconsistent with the NES as it does not comprehend progressive accrual of annual leave.

(iii) Consideration

[93] We observe that clause 24.1 of the Asphalt Industry Award 2010 states that annual leave is provided for in the NES. The NES in respect of annual leave provides for progressive accrual of paid annual leave 64 and, when an employee takes a period of paid annual leave, for payment for the annual leave at the employee’s base rate of pay for the employee’s ordinary hours of work for the period.65

[94] Clause 24.6 of the Asphalt Industry Award 2010 provides as follows:

“24.6 Payment and loading

Before the start of an employee’s annual leave the employer must pay the employee:

(a) instead of the base rate of pay referred to in s.90(1) of the Act, the amount the employee would have earned for working their ordinary hours had they not been on leave; and

(b) an additional loading of 17.5% of the wages prescribed by this award for the ordinary hours of work as performed between Monday and Friday or if they were a shiftworker prior to entering leave, their shift penalty, whichever is greater.”

[95] Clause 24.4(c)(ii) of the Asphalt Industry Award 2010 seems to require that an employee with sufficient accrued annual leave at the date of a close down also receive one twelfth of their ordinary pay for any period of their employment between the employee’s accrual of annual leave and the date of a close down.

[96] As a result, under the Asphalt Industry Award 2010, an employee who has accrued sufficient annual leave at the date of a close down is to receive payment for their annual leave of an amount the employee would have earned for working ordinary hours had they not been on annual leave, annual leave loading and a payment of one twelfth of their ordinary pay for any period of employment between the accrual of the employee’s right to the annual leave and the date of close down.

[97] Similar provisions exist in the other modern awards sought to be varied in respect of the additional one twelfth payment.

[98] The Annual Holidays Act 1944 (NSW) provides for a one twelfth payment. However, it is in very different circumstances, where there is not progressive accrual of annual leave. Relevantly, the Annual Holidays Act 1944 (NSW) provides as follows:

“3 Annual holidays with pay

(1) Except as otherwise provided in this Act, every worker shall at the end of each year of the worker’s employment by an employer become entitled to an annual holiday on ordinary pay. Such annual holiday shall:…

(b) where any such year of employment ends after 30 November 1974, be of four weeks…

4 Holiday pay where holiday is not taken

(1) Where the employment of a worker who has become entitled to one or more annual holidays provided by this Act is terminated, the employer shall be deemed to have given the holiday or holidays (except so much, if any, as has already been taken) to the worker as from the date of termination of the employment, and shall forthwith pay to the worker, in addition to all other amounts due to the worker, the worker’s ordinary pay for the period of the holiday or holidays…

(3)

(a) This subsection applies with respect to every period of employment of a worker by any employer which is less than one year, such period being computed from the date of the commencement of the employment or (where the worker has during the employment become entitled to any annual holiday or holidays under section 3) computed from the date upon which the worker became entitled to that annual holiday, or to the last annual holiday, as the case may be.

(b) Where the employment of any worker by any employer is terminated at the end of a period of employment to which this subsection applies, the employer shall forthwith pay to the worker, in addition to all other amounts due to the worker, an amount:…

(ii) where that period of employment ends after 30 November 1974, equal to one twelfth of the worker’s ordinary pay for that period of employment...

4A Annual close-down

(1)

(a) In this section:

‘Period of employment’ means the period during which a worker is employed by an employer referred to in subsection (2), being a period computed:

(a) where the worker has not during the employment with that employer become entitled to any annual holiday under section 3, from the date of commencement of the employment with that employer, or

(b) where the worker has during the employment with that employer become entitled to any annual holiday or holidays under section 3, from the date upon which the worker last became entitled to an annual holiday,

up to the commencement of the specified period affecting that worker. ‘Specified period’ means the period specified by an employer pursuant to subsection (2).

(b) This section, subsections (2) and (3) excepted, shall apply only to a worker to whom notice has been given pursuant to this section.

(c) Subsections (2) and (3) of section 3 shall not apply to a worker to whom notice has been given pursuant to this section.

(2) Subject to subsection (3), an employer may give notice to a worker employed in any part of the employer’s establishment that, during a period specified when giving that notice, that establishment or part will be temporarily closed (or reduced to a nucleus) for the purposes of giving an annual holiday or leave without pay to the workers to whom such notice has been given.

(3) Notice pursuant to subsection (2):

(a) shall be given to a worker not less than one month before the commencement of the specified period or, in the case of a worker who commences employment less than one month before the commencement of the specified period, on the day the worker commences employment, and

(b) shall not be given by an employer more than once in any calendar year.

(4) Where, immediately before the commencement of the specified period, a worker is not entitled under section 3 to any holiday:

(a) the worker shall be given and shall take leave without pay for the specified period, and

(b) the worker shall, in addition, be paid:

(i) three forty-ninths of the worker’s ordinary pay for the worker’s period of employment where the specified period commences upon or before 30 November 1974, and one twelfth of the worker’s ordinary pay where the specified period commences after that date, and

(ii) the worker’s ordinary pay for any special or public holiday, during the period of the worker’s leave without pay, for which the worker would be entitled to payment under any Act, award or agreement or under the worker’s contract of employment.

(5) Where, immediately before the commencement of the specified period, a worker is under section 3 entitled to a holiday of a duration less than that of the specified period:

(a) the worker shall be given and shall take the whole of that holiday during the specified period,

(b) the worker shall be given and shall take leave without pay for the balance of the specified period, and

(c) the worker shall, in addition, be paid the amounts referred to in subsection (4) (b).

(6) Where, immediately before the commencement of the specified period, a worker is under section 3 entitled to a holiday of a duration not less than that of the specified period:

(a) the worker shall, on and from the commencement of the specified period, be given and shall take the whole of that holiday, or

(b) where the worker and the employer so agree, the worker shall, on and from the commencement of the specified period, be given and shall take part of his or her holiday for a period not less than the specified period and postpone the taking of the balance of his or her holiday until a time to be agreed upon between the worker and the employer.

(7) Where payment has been made to a worker pursuant to subsection (4) or (5) the worker shall be deemed:

(a) to have completed a year of employment for the purposes of this Act immediately before the commencement of the specified period, and

(b) to have been given the whole of the annual holiday to which the worker would be entitled for that year of employment.”

[99] We think the variations proposed in respect of the additional one twelfth payment associated with annual leave for a close down have raised some legitimate questions in circumstances where annual leave is progressively accrued under the NES and s 93 of the FW Act provides that certain requirements must be met in respect of the cashing out of annual leave.

[100] However, not all the modern awards with such a one twelfth payment provision were before us. Other relevant modern awards include the:

• Aquaculture Industry Award 2010 66



• Car Parking Award 2010 67



• Gas Industry Award 2010 68



• Gardening and Landscaping Services Award 2010 69



• Horse and Greyhound Training Award 2010 70



• Miscellaneous Award 2010 71



• Pest Control Industry Award 2010 72



• Racing Clubs Events Award 2010 73



• Racing Industry Ground Maintenance Award 2010 74



• Security Services Industry Award 2010 75



• Silviculture Award 2010 76



• Surveying Award 2010 77

[101] We think it desirable that the matter of the additional one twelfth payment associated with annual leave for a close down be considered in the Transitional Review in the context of all the relevant modern awards.

[102] Accordingly, we propose to give those with an interest in the above modern awards the opportunity to make submissions and be heard in respect of whether we should vary the modern awards containing such an additional one twelfth payment provision in a manner consistent with that proposed by ABI or the BSCAA or otherwise. A notice of listing and directions in that regard are being issue at the same time as this decision.

(d) Leave loading provision

AWU proposal

[103] The AWU seeks to vary the annual leave clause in the following modern awards to provide for annual leave loading:

● Alpine Resorts Award 2010 78 - AM2012/165

● Amusement, Events and Recreation Award 2010 79 - AM2012/166

● Dredging Industry Award 2010 80 - AM2012/167

[104] The variation the AWU seeks is as follows:

“X Payment for period of Annual Leave

An employee taking annual leave must be paid the amount they would have received for working ordinary time hours if they had not been on leave plus a loading of 17.5% of that rate.”

[105] In support of these variations, the AWU submitted that annual leave loading was inadvertently omitted from these modern awards. They pointed out that annual leave loading is provided for in 112 of the 122 modern awards. The Maritime Union of Australia (MUA) supported the AWU application in respect of the Dredging Industry Award 2010.

[106] The proposed variation to the Amusement, Events and Recreation Award 2010 is opposed by the AFEI and Business SA on the basis that the AWU has failed to establish grounds for the variation as required by Item 6, Schedule 5 of the Transitional Provisions Act.

[107] We are not persuaded we should make the variations sought by the AWU. They have not established that without the variations the modern awards are not achieving the modern awards objective. Further, the mere absence of a provision for annual leave loading in these modern awards in question and its inclusion in the vast majority of other modern awards is not sufficient to establish the modern awards are not operating effectively, without anomalies or technical problems arising from the Part 10A award modernisation process. Nor are the references in the Dredging Industry Award 2010 to annual leave loading in its award flexibility clause and in respect of the content of the 25% loading for casual employees sufficient to establish that that modern award is not operating effectively, without anomalies or technical problems arising from the Part 10A award modernisation process because of the absence of a specific provision for annual leave loading in that modern award. We decline to make the variations sought by the AWU.

[108] The variations sought are perhaps more appropriate for consideration in the four year review.

(e) Leave loading calculation

Building and Construction General On-site Award 2010 81 - AM2012/228

[109] The HIA seeks to amend clause 38.2(b) of the Building and Construction General On-site Award 2010 in respect of the payments on which annual leave loading is paid. The clause in that modern award currently reads as follows:

“(b) In addition to the payment prescribed in clause 38.2(a), an employee must receive during a period of annual leave a loading of 17.5% calculated on the rates, loadings and allowances prescribed by:

● clause 19.1(a)—Minimum wages;

● clause 21.2—Industry allowance;

● clause 21.3—Underground allowance;

● clause 20.1—Tool and employee protection allowance;

● clause 24—Living away from home—distant work;

● clause 25—Fares and travel patterns allowance; and

● clause 19.2—Leading hands (if applicable).

This loading will also apply to proportionate leave on lawful termination.”

[110] The HIA propose the following amendment to clause 38.2(b):

“(b) In addition to the payment prescribed in clause 38.2(a), an employee must receive during a period of annual leave a loading of 17.5% calculated on the amount of the annual leave payment referred to in clause 38.2(a).

This loading will also apply to proportionate leave on lawful termination.”

[111] The Master Builders Australia Limited (MBA) supported the intent of the proposed clause however they submit it could be expressed in a clearer manner. They proposed alternate wording as follows:

“In addition to the payment prescribed in clause 38.2(a), an employee must receive during a period of annual leave a loading of 17.5% calculated on the rates, loadings and allowances prescribed by:

● clause 19.1(a) – Minimum wages;

● clause 19.2 – Leading hands loading (if applicable);

● clause 20.1 – Tool and employee protection allowance (if applicable);

● clause 21.1 – Special allowance;

● clause 21.2 – Industry allowance; and

● clause 21.3 – Underground allowance (if applicable).

This loading also applies to proportionate leave on lawful termination.”

[112] The CFMEU initially recognised that the current wording of clause 38.2(b) in the modern award could be interpreted as requiring annual leave loading to be paid on all the rates, loading and allowances prescribed even if an employee is not entitled to them. So, they initially proposed that the phrase “(if applicable)” be added after the prescribed rates, loadings and allowances. They opposed the variations in so far as the variations sought to remove some of the rates, loadings and allowances prescribed.

[113] We are persuaded the absence of a reference to the annual leave loading only being paid on the applicable rates, loadings and allowances prescribed is a relevant anomaly arising from the Part 10A award modernisation process.

[114] We will vary clause 38.2(b) of the modern award by deleting the phrase “rates, loadings and allowances prescribed by” and replacing it with the phrase “following rates, loadings and allowances if such rates, loadings and allowances would have been received by the employee for working ordinary time hours had the employee not been on annual leave” and by deleting the phrase “(if applicable)” after the words “Leading hands”.

[115] We are not persuaded the modern award is not achieving the modern awards objective or otherwise not operating effectively, without anomalies or technical problems arising from the Part 10A award modernisation process because of the breadth of matters it prescribes. We, therefore, decline the other variations sought by the HIA and MBA to clause 38.2(b).

NRA and HBIA proposal

[116] The NRA and HBIA seek to vary the annual leave clause in the following modern awards in respect of the calculation of annual leave loading:

● Fast Food Industry Award 2010 82 - AM2012/240

● General Retail Industry Award 2010 83 - AM2012/8

● Hair and Beauty Industry Award 2010 84 - AM2012/172

[117] The annual leave loading provision in the annual leave clause of the Fast Food Industry Award 2010 is as follows:

“28.3 Annual leave loading

(a) During a period of annual leave an employee will receive a loading calculated on the wage rate prescribed in clause 17—Minimum weekly wages. Annual leave loading is payable on leave accrued.

(b) The loading will be as follows:

(i) Day work

Employees who would have worked on day work only had they not been on leave—17.5% or the relevant weekend penalty rates, whichever is the greater but not both.

(ii) Shiftwork

Employees who would have worked on shiftwork had they not been on leave—a loading of 17.5% or the shift loading (including relevant weekend penalty rates), whichever is the greater but not both.”

[118] Similar provisions are included in the other modern awards sought to be varied.

[119] The NRA propose that clause 28.3 in the Fast Food Industry Award 2010 be replaced with the following:

“28.3 Annual leave loading

During a period of annual leave an employee will receive a 17.5% loading calculated on the wage rate prescribed in clause 17—Minimum weekly wages. Annual leave loading is payable on leave accrued.”

[120] The NRA and HBIA propose the deletion of the phrase “or relevant weekend penalty rates, whichever is the greater but not both” in the equivalent of clause 28.3(b)(i) in the Fast Food Industry Award 2010 in the other two modern awards.

[121] We are not persuaded we should make these variations to the Fast Food Industry Award 2010, the General Retail Industry Award 2010 or the Hair and Beauty Industry Award 2010 concerning the level payment of annual leave loading. That some relevant pre-reform modern awards did not provide for the payment of annual leave loading on the same bases as these modern awards is not sufficient to establish that those modern awards are not achieving the modern awards objective or not operating effectively, without anomalies or technical problems arising from the award modernisation process without the variations sought. We decline to make the variations sought to these modern awards by the NRA and HBIA.

Cleaning Services Award 2010 85 - AM2012/23

[122] The BSCAA seeks to vary clauses 29.3 and 29.4 of the Cleaning Services Award 2010 in respect of the leave loading calculation for part-time employees. Clause 29.3 and 29.4 of that modern award are currently as follows:

“29.3 Definition of ordinary pay

For the purposes of payment of annual leave, an employee’s ordinary pay means remuneration for the employee’s normal weekly number of hours of work calculated at the ordinary time rate of pay and in addition will include:

(a) leading hand allowance;

(b) first aid allowance;

(c) penalty rates paid for shiftwork or rostered ordinary hours of work on Saturday and/or Sunday; and

(d) part-time allowance for part-time employees working shiftwork (Monday to Friday) or rostered ordinary hours on a Saturday and/or a Sunday.

29.4 Payment of annual leave

(a) The terms of the NES prescribe the basis for payment for annual leave, including payment for untaken leave upon the termination of employment. In addition to the terms of the NES, an employer is required to pay an additional leave loading of 17.5% calculated on an employee’s ordinary time rate of pay.

(b) Provided that where the employee would have received a saved or transitional rate of pay, or shift, weekend (Saturday or Sunday), or public holiday penalty payments according to the roster or projected roster, had the employee not been on leave during the relevant period, and such saved, transitional or penalty payments would have entitled to employee to a greater amount than the loading of 17.5% on the rates set out in clause 16—Minimum wages of this award, then such rates will be paid instead of the 17.5% loading.”

[123] The BSCAA seeks to delete clause 29.3(d) and in clause 29.4(b) to add the phrase “or part time loading” after the words “penalty payments” where appearing.

[124] In support of these variations, the BSCAA submitted that historically annual leave loading has not been paid on the part time rate plus the part time loading.

[125] We are not persuaded we should make the variations sought. It has not been established that without the variations sought the Cleaning Services Award 2010 is not achieving the modern awards objective or not operating effectively, without anomalies or technical problems arising from the Part 10A award modernisation process. We decline to make these variations sought by the BSCAA.

(f) Leave loading on advanced leave

Children’s Services Award 2010 86 - AM2012/31

[126] United Voice propose that the last sentence of clause 24.5 of the Children’s Services Award 2010 be deleted so that there is an entitlement to leave loading when leave is taken in advance of its accrual. The clause in that modern award currently reads as follows:

“24.5 Paid leave in advance of accrued entitlement

An employer may allow an employee to take annual leave either wholly or partly in advance before the leave has accrued. Where such leave is paid in advance and the employee leaves the employment before completing the service necessary to account for the leave provided, the employer may deduct the amount of leave paid in advance from any termination payments owing to the employee. No leave loading will be payable in respect of leave taken in advance of accrual.”

[127] We are not persuaded we should make the variation sought. Section 90(2) of the FW Act concerns payments for untaken annual leave on termination of employment and is not relevant to annual leave taken in advance of accrual. The provision in clause 24.3 of the Children’s Services Award 2010 that “[i]n addition to the payment provided for by the NES an employer is required to pay leave loading of 17.5% of that payment” is currently conditioned by the specific provision in clause 24.5 of that modern award that no leave loading is payable in respect of leave taken in advance of accrual.

[128] The fact that some relevant pre-reform awards did not preclude annual leave loading being paid on annual leave taken in advance does not establish that the Children’s Services Award 2010 is not achieving the modern awards objective or not operating effectively, without anomalies or technical problems arising from the Part 10A award modernisation process without the variation to its clause 24.5 sought by United Voice.

(g) Leave loading on termination

Cleaning Services Award 2010 87 - AM2012/33

[129] United Voice propose clause 29.7 of the Children’s Services Award 2010 be amended so as not to contravene the NES. The clause in that modern award currently reads as follows:

“29.7 Payment of accrued annual leave on termination

Where an employee is entitled to payment of untaken annual leave on termination of employment under the terms of the NES, the employer must also pay the employee a loading of 17.5% calculated on an employee’s ordinary time rate of pay. The loading is payable on leave accrued but not taken with respect to completed years of service only.”

[130] United Voice propose that the last sentence of clause 29.7 be deleted with the effect that annual leave loading would be payable on all accrued but untaken annual leave on termination.

Road Transport and Distribution Award 2010 88 - AM2012/195

[131] The Transport Workers’ Union of Australia (TWU) propose that the first paragraph of clause 29.2 of the annual leave clause in the Road Transport and Distribution Award 2010 be amended. The provision currently reads as follows:

“29.2 During a period of annual leave an employee will receive a loading calculated on the minimum wage rate in clause 15 of this award. Annual leave loading payment is payable on leave accrued and taken but it is not payable on leave paid out on termination.”

[132] The TWU propose the clause be varied to the following to allow for payment of leave loading on termination:

“29.2 During a period of annual leave an employee will receive a loading calculated on the minimum wage rate in clause 15 of this award. Annual leave loading payment is payable on leave accrued and taken and on leave paid out on termination.”

NRA, MBA and Western Australian Local Government Association (WALGA) proposals

[133] The NRA, HBIA and WALGA seek to vary the annual leave clause in the following awards to not require the payment of annual leave loading on accrued but untaken annual leave paid out on termination:

● General Retail Industry Award 2010 89 - AM2012/8

● Hair and Beauty Industry Award 2010 90 - AM2012/172

● Local Government Industry Award 2010 91 - AM2012/20

[134] They propose that the following sub-clause be inserted into the annual leave clause of those modern awards:

“X.X Annual leave loading is not applicable to annual leave paid out in lieu on termination.”

Waste Management Award 2010 92 - AM2012/216

[135] The WCRA propose that the first paragraph of the existing clause 33.2 in the Waste Management Award 2010 be varied to add the following underlined words:

“33.2 During a period of annual leave an employee will receive a loading calculated on the rate of wage prescribed in clause 19—Minimum wages of this award. Annual leave loading payment is payable on leave accrued and taken but it is not payable on leave paid out on termination...”

[136] Having reviewed the annual leave clauses of the Cleaning Services Award 2010 and the Road Transport and Distribution Award 2010 in respect of annual leave loading, we are satisfied we should delete the last sentence of clause 29.7 of the Cleaning Services Award 2010 and the phrase “but is not payable” in clause 29.2 of the Road Transport and Distribution Award 2010 and replace the phrase with the word “and”. We will also add the word “annual” before the word “leave” in clause 29.2 of the Road Transport and Distribution Award 2010.

[137] Clause 29.4 of the Cleaning Services Award 2010 and clause 29.2 of the Road Transport and Distribution Award 2010 deal with the payment of annual leave loading during annual leave.

[138] Section 90(2) of the FW Act deals with payment for untaken annual leave when employment ceases, providing as follows:

“(2) If, when the employment of an employee ends, the employee has a period of untaken paid annual leave, the employer must pay the employee the amount that would have been payable to the employee had the employee taken that period of leave.”

[139] Having regard to the provision in s.90(2) of the FW Act and the clauses in those modern awards dealing with payment of annual leave loading during annual leave, we consider the provisions that we propose to delete are preventing those modern awards operating effectively, without anomalies or technical problems arising from the Part 10A award modernisation process. We have come to this view notwithstanding the submissions of Berkeley Challenge Pty Ltd about how the clause came to be included in the Cleaning Services Award 2010. Further, we do not think the reference to “completed years of service only” prevents the anomaly or technical problem. We consider the deletions are appropriate to remedy those anomalies or technical problems.

[140] As a corollary, we are not persuaded we should make the variations sought to the General Retail Industry Award 2010, the Hair and Beauty Industry Award 2010, the Local Government Industry Award 2010 and the Waste Management Award 2010. To vary those modern awards as sought would create anomalies or technical problems having regard to the provisions of s.90(2) of the FW Act and their clauses dealing with payment of annual leave loading during annual leave. We are not satisfied that without the variations sought the modern awards are not achieving the modern awards objective or not operating effectively, without anomalies or technical problems arising from the Part 10A award modernisation process. We decline to make these variations sought by the NRA, HBIA and WALGA.

(h) Payment for a period of annual leave

ABI proposal

[141] ABI propose a variation to the timing of annual leave payments provisions in the following modern awards:

● Asphalt Industry Award 2010 93 - AM2012/92

● Building and Construction General On-site Award 2010 94 - AM2012/154

● Cement and Lime Award 2010 95 - AM2012/94

● Concrete Products Award 2010 96 - AM2012/98

● Food, Beverage and Tobacco Manufacturing Award 2010 97 - AM2012/147

● Graphic Arts, Printing and Publishing Award 2010 98 - AM2012/153

● Joinery and Building Trades Award 2010 99 - AM2012/106

● Manufacturing and Associated Industries and Occupations Award 2010 100 - AM2012/125

● Nursery Award 2010 101 - AM2012/151

● Pharmaceutical Industry Award 2010 102 - AM2012/150

● Premixed Concrete Award 2010 103 - AM2012/91

● Quarrying Award 2010 104 - AM2012/86

● Storage Services and Wholesale Award 2010 105 - AM2012/173

● Vehicle Manufacturing, Repair, Services and Retail Award 2010 106 - AM2012/108

[142] They propose the following amendment to those awards:

“X Payment and loading

(a) Subject to clause X(b) before the start of an employee’s annual leave the employer must pay the employee:

(i) instead of the base rate of pay referred to in s.90(1) of the Act, the amount the employee would have earned for working their normal hours, exclusive of overtime or other penalties or premiums, had they not been on leave; and

(ii) an additional loading of 17.5% of the employee’s minimum weekly rate prescribed in clause 17 - Minimum wages. Shiftworkers receive 17.5% or their shift penalties, whichever is greater.

(b) If an employee is paid by electronic funds transfer the payments arising from clause X(a) may be paid by the employer to the employee on the employee’s usual pay day during the employee’s annual leave.”

[143] ABI also made an application in relation to payment for a period of annual leave in the Road Transport (Long Distance Operations) Award 2010 107 (AM2012/138). This application was withdrawn on 31 January 2013.

[144] ABI’s submissions in support of the above generic variation were that wages are now usually paid by electronic funds transfer, so the rationale for payment for annual leave before the commencement of leave no longer exists and payment in advance places an administrative burden on employers. A survey conducted by ABI of some employers indicated the requirement for payment for annual leave in advance created problems for the business of 19% of the respondents and 39% of the respondents undertook an extra pay run in order to ensure payment for annual leave prior to the commencement of an employee’s annual leave.

[145] We are not persuaded we should make the generic variation sought by ABI. No cogent reasons have been advanced for the variation. Payment of wages by electronic funds transfer was a feature of the industries covered by the modern awards in which the variation is sought, as was prepayment of wages on annual leave, when the modern awards were made.

[146] We are not satisfied the modern awards in question are not achieving the modern awards objective or are not operating effectively, without anomalies or technical problems arising from the Part 10A award modernisation process without the generic variation sought. We decline to make the variation sought.

[147] The generic variation sought may be more appropriate for consideration in the four year review.

Security Services Industry Award 2010 108 - AM2012/32

[148] United Voice propose that the following clause be inserted into clause 24.4 of the Security Services Industry Award 2010:

“(c) To avoid doubt, and subject to clauses 24.4(a) and (b), where an employer utilises averaging arrangements on a roster, full time employees who take a period of annual leave which is less than the full roster period must be paid at the rate of 7.6 hours for each day of annual leave taken.”

[149] In support of this proposed variation, United Voice submitted that 10 and 12 hour shift arrangements result in employees working less than 38 ordinary hours in some weeks and more than 38 ordinary hours in other weeks. Where an employee takes annual leave in a “short” week, a literal application of clause 24.4 results in an anomaly as it entitles the employee to less than 38 hours of payment for the week. The proposed variation ensures an employee has 20 paid days of annual leave per annum, regardless of the roster configuration.

[150] ASIAL opposed the proposed variation on the basis that it is confusing and unnecessary, as clauses 24.4(a) and (b) of the Security Services Industry Award 2010 adequately deal with the situation raised by United Voice. Clauses 24.4(a) and (b) are as follows:

“24.4 Payment for annual leave

Before the start of the employee’s annual leave the employer must pay the employee in respect of the period of such leave the greater of:

(a) the amount the employee would have earned during the period of leave for working their normal hours, exclusive of overtime, had they not been on leave; and

(b) the employee’s ordinary time rate specified in clause 14.1, together with, where applicable, the leading hand allowance, relieving officer’s allowance and first aid allowance prescribed in clause 15.1(a) respectively, plus a loading of 17.5%.”

[151] We are not persuaded on the material before us that clauses 24.4(a) and (b) of the modern award have resulted in an anomaly arising from the Part 10A award modernisation process. Further, the United Voice variation does not deal with the treatment of employees who take a period of annual leave which is more than the “full roster period” where an employer utilises “averaging arrangements” on a roster. It is not apparent that without the variation sought by United Voice the modern award is not achieving the modern awards objective or not operating effectively, without anomalies or technical problems arising from the Part 10A award modernisation process. We decline to make the variation sought by United Voice.

Local Government Industry Award 2010 109 - AM2012/20

[152] The WALGA propose the payment for annual leave clause in the Local Government Industry Award 2010 be varied. The relevant clause in the modern award currently reads as follows:

“25.3 Payment for annual leave

Employees will be paid their minimum weekly rate of pay during periods of annual leave.”

[153] The WALGA propose clause 25.3 be amended to the following:

“25.3 Payment for annual leave

Employees will be paid their hourly ordinary time rate of pay during periods of annual leave for the hours so taken.”

[154] The WALGA sought this variation on the basis that a literal interpretation of clause 25.3 does not allow for less than a week’s pay where the period of annual leave is less than a week. The WALGA did not elaborate on these grounds before us and, arguably, their variation does more than convert a minimum weekly rate of pay to its hourly equivalent.

[155] On the material available to us, we are not persuaded that without the variation sought the modern award is not achieving the modern awards objective or not operating effectively, without anomalies or technical problems arising from the Part 10A award modernisation process. We decline to make the variations sought by the WALGA.

(i) Definition of a shiftworker

Cleaning Services Award 2010 110 - AM2012/23

[156] The BSCAA propose that the definition of a shiftworker in clause 29.2 of the Cleaning Services Award 2010 be varied. The relevant clause in that modern award currently reads as follows:

“29.2 Definition of shiftworker

(a) For the purposes of the NES, a shiftworker is an employee:

(i) who works a roster and who, over the roster cycle, may be rostered to work ordinary shifts on any of the seven days of the week; and

(ii) who is regularly rostered to work on Sundays and public holidays.”

(b) Where an employee with 12 months’ continuous service is engaged for any part of the 12 month period as a shiftworker, that employee must have their annual leave increased by one half day for each month the employee is continuously engaged as a seven day shiftworker, provided that a limit of 10 months in any year will be counted towards the additional leave accrual.”

[157] The BSCAA propose that clause 29.2(a) and (b) be varied to include the word “seven” before “shiftworker”.

[158] The BSCAA seeks this variation to clarify that the definition in clause 29.2 refers to a seven day shiftworker. The variation was opposed by United Voice as unnecessary.

[159] We are not persuaded the proposed variation is necessary. It is not evident that without the variation sought the modern award is not achieving the modern awards objective or not operating effectively, without anomalies or technical problems arising from the Part 10A award modernisation process. We decline to make the variation sought.

Food, Beverage and Tobacco Manufacturing Award 2010 111 - AM2012/178

[160] The BIAQ seeks to vary clause 34.3(a) of the Food, Beverage and Tobacco Manufacturing Award 2010. The relevant clause in that modern award currently reads as follows:

“34.3 Definition of shiftworker

(a) For the purpose of the additional week of annual leave provided for in s.87(1)(b) of the Act, a shiftworker is a seven day shiftworker who is regularly rostered to work on Sundays and public holidays.”

[161] The BIAQ propose that the clause be varied to the following:

“34.3 Definition of shiftworker

(a) For the purpose of the additional week of annual leave provided for in s.87(1)(b) of the Act, a shiftworker is a seven day shiftworker who is regularly rostered to work on Sundays and public holidays, in a business that operates across 24 hours, 7 days a week.”

[162] The BIAQ seeks the variation to make the definition less confusing. The variation was opposed by the AMWU as unnecessary.

[163] We are not persuaded the proposed variation is necessary. It is not evident that without the variation sought the modern award is not achieving the modern awards objective or not operating effectively, without anomalies or technical problems arising from the Part 10A award modernisation process. We decline to make the variation sought.

Local Government Industry Award 2010 112 - AM2012/20

[164] The WALGA seeks to vary the definition of a shiftworker in the Local Government Industry Award 2010. The relevant clause in that modern award currently reads as follows:

“25.2 Shiftworkers for the purposes of the NES

(a) For the purpose of s.87(1)(b) of the Act, a shiftworker is an employee:

(i) who works a roster and who, over the roster cycle, may be rostered to work ordinary shifts on any of the seven days of the week; and

(ii) who is regularly rostered to work on Sundays and public holidays.

(b) Where an employee with 12 months’ continuous service is engaged for part of the 12 monthly period as a shiftworker, that employee must have their annual leave increased by half a day for each month the employee is continuously engaged as a shiftworker.”

[165] The WALGA propose that clause 25.2(a)(i) be amended to the following:

“25.2 Shiftworkers for the purposes of the NES

(a) For the purpose of s.87(1)(b) of the Act, a shiftworker is an employee:

(i) who works under a continuous 24 hour roster and who, over the roster cycle, may be rostered to work ordinary shifts on any of the seven days of the week; and”

[166] In the alternative, the following clause 25.2 is sought:

“25.2 Shiftworkers for the purposes of the NES

For the purpose of the additional week of annual leave provided for in the NES, a shiftworker is a seven day shiftworker who is regularly required to work on Sundays and public holidays in an entity in which shifts are continuously rostered 24 hours a day for seven days a week.”

[167] In support of the proposed variations, it was submitted that the existing definition of “shiftworkers for the purposes of the NES” does not achieve the modern awards objective or provide a fair and reasonable minimum safety net of terms and conditions for the local government industry. This is because the definition has a detrimental effect on flexible modern work practices and results in high employment costs and is not simple and easy to understand. Further, it was submitted the existing definition does not reflect the relevant pre-reform awards and appears to be a drafting error; the entitlement to an additional week of annual leave is usually provided to employees who work a rotating roster system as many other modern awards attest; there are no compelling reasons why the entitlement is not so limited in the Local Government Industry Award 2010; the modern award confers additional entitlements on employees who work ordinary shifts outside of Monday to Friday shifts; the existing definition is confusing and ambiguous, costly and restricts workplace flexibility, productivity and efficiency; and it was not supported by parties’ submissions to the AIRC.

[168] Finally, it was proposed that at the very least clause 25.2 of the modern award should be varied to include the requirements that, in order to qualify for the additional week’s annual leave under the NES, the employee be required to work according to a roster and, over the roster cycle, work rotating shifts where at least some of the shifts involve working ordinary hours that fall outside of 6.00 am to 6.00 pm (i.e. does not include an employee that only works day shifts), on each of the seven calendar days of the week, and regularly on Sundays and public holidays.

[169] Witnesses were presented who gave evidence:

● about arrangements in the local government sectors in Queensland and Tasmania which are not covered by the modern award;

● in respect of local government in New South Wales and who expressed concern that the existing clause 25.2(a) is open to an interpretation that affords employees an extra week of annual leave because they “may” be rostered to work ordinary shifts on “any” of the seven days of the week, as distinct from “actually” being rostered to work ordinary shifts on the seven days of the week;

● that three of the four pre-reform Federal awards that covered local government in Western Australia and the Northern Territory made no provision for an extra week of annual leave for the employees who would now be covered by clause 25.2; and

● that the existing clause 25.2 provides an extra week of annual leave for employees in local government in Victoria who were not previously entitled to it under the Victorian Local Authorities Award 2001. 113

[170] The ASU opposed the variations sought on the grounds that other modern awards contain a relevantly consistent definition with that in clause 25.2(a) of the Local Government Industry Award 2010 and many of the relevant pre-reform awards contained a definition of shiftworker consistent with clause 25.2(a). Further, they submitted it has not been established that the modern award is not meeting the modern awards objective with its current clause 25.2(a), no evidence of the clause being interpreted wrongly has been provided, no estimates of the number of employees who have become entitled to an extra week of annual leave because of the current clause 25.2(a) have been provided and no evidence has been provided that workplace flexibility, productivity and efficiency would improve if the proposed variation were granted.

[171] We are not persuaded we should make the variations sought to clause 25.2(a) of the Local Government Industry Award 2010.

[172] The submissions and evidence about the ambiguity of the existing clause 25.2(a) fail to recognise the word “and” is included between clause 25.2(a)(i) and clause 25.2(a)(ii) meaning that both the requirements in clauses 25.2(a)(i) and (ii) have to be met to qualify for the additional week of annual leave. They also fail to recognise clause 25.2(a)(i) covers employees who can be rostered on any of the seven days of the week, as opposed to employees who can be rostered only on some of the seven days of the week.

[173] It can be accepted that clause 25.2 of the modern award will entitle some employees to an additional week of annual leave who were not previously entitled to the additional week. However, that is not sufficient to establish that the modern award is not meeting the modern awards objective or is not operating effectively, without anomalies or technical problems arising from the Part 10A award modernisation process. Nor are submissions or evidence which in effect just repeat the sub-clauses of s.134(1) of the FW Act or are speculative.

[174] The material before us has not established that without the variations to clause 25.2 sought the Local Government Industry Award 2010 is not achieving the modern awards objective or not operating effectively, without anomalies or technical problems arising from the Part 10A award modernisation process. We decline to make the variations sought to clause 25.2 of the Local Government Industry Award 2010.

Social, Community, Home Care and Disability Services Industry Award 2010 114 - AM2012/232

[175] The AFEI propose that clause 31.2—Quantum of leave in the Social, Community, Home Care and Disability Services Industry Award 2010 be varied. The relevant clause in that modern award currently reads as follows:

“31.2 Quantum of leave

For the purpose of the NES, a shiftworker is an employee who works for more than four ordinary hours on 10 or more weekends and is entitled to an additional week’s annual leave on the same terms and conditions.”

[176] The AFEI propose the following amendment to clause 31.2:

“31.2 Quantum of leave

For the purposes of the additional week of annual leave provided for in the NES, a shiftworker is a seven day shift worker who is regularly rostered to work on Sundays and public holidays in a business in which shifts are continuously rostered 24 hours a day for seven days a week.”

[177] The AFEI submitted the variation sought is necessary because the current definition in clause 31.2 of the modern award is unreasonable and unnecessary, with the critical mass of relevant pre-reform awards limiting the entitlement to an additional week of annual leave for shiftworkers to those engaged on a roster over seven days in a week. The current definition has resulted in significant costs to employers.

[178] The bases advanced by the AFEI for the proposed amendment do not establish that without the variation sought the modern award is not achieving the modern awards objective or is not operating effectively, without anomalies or technical problems arising from the Part 10A award modernisation process. The AFEI has not presented cogent reasons for making the proposed variation, with no change in circumstances being evident from when the modern award was made. The modern award at clause 31.2 sets out a definition of “shiftworker” for the purposes of the NES including the entitlement to an additional week’s paid annual leave in the NES. The modern award is the product of compromise, for example it does not include the additional personal/carer’s leave that was provided for in the pre-reform Social and Community Services - Victoria - Award 2000. 115 We decline to make the variation sought by the AFEI to the Social, Community, Home Care and Disability Services Industry Award 2010.

Nurses Award 2010 116 - AM2012/132

[179] The Australian Nursing Federation (ANF) sought to vary the definition of a shiftworker in clause 31.1(b) of the Nurses Award 2010 for the purposes of annual leave. In correspondence of 14 February 2013 the ANF advised the Full Bench that it no longer wished to pursue that part of their application.

Water Industry Award 2010 117 - AM2012/19

[180] The WALGA made an application to amend the definition of a shiftworker in the annual leave clause of the Water Industry Award 2010. However, this part of their application was withdrawn in correspondence of 4 March 2013.

(j) Other claims

Amusement, Events and Recreation Award 2010 118 - AM2012/231

[181] In addition to their proposal for a “requirement to take annual leave” clause, the AFEI seeks to insert the following clause regarding paid annual leave in advance of accrual into the Amusement, Events and Recreation Award 2010:

“Paid leave in advance of accrued entitlement

By agreement between an employer and an employee, a period of annual leave may be taken in advance of the entitlement accruing. Provided that if leave is taken in advance and the employment terminates before the entitlement has accrued the employer may make a corresponding deduction from any money due to the employee on termination.”

[182] The AFEI, supported by ABI, sought this variation on the basis that it would restore a provision in relevant pre-reform awards in New South Wales and provide consistency with many other modern awards.

[183] We are not persuaded we should make the variation sought. It has not been established that without the variation the modern award is not achieving the modern awards objective or not operating effectively, without anomalies or technical problems arising from the Part 10A award modernisation process. We decline to make this variation sought by the AFEI.

Animal Care and Veterinary Services Award 2010 119 - AM2012/11

[184] Dr Nicole Cheek seeks to vary clause 26 of the Animal Care and Veterinary Services Award 2010 to include additional leave as follows for veterinarians who work on a Sunday or public holidays:

“Veterinarians who work Sunday or Public Holiday shifts exceeding 8 hours will receive an extra 1 hour leave for each such shift.”

[185] Dr Cheek, supported by the Australian Veterinarian Network and Dr Jessica Gillespie, sought this variation having regard to deteriorating working conditions for veterinarians, rising living costs and health issues within the profession.

[186] The application was opposed by the AFEI.

[187] We are not persuaded we should make the variation sought. It has not been established that without the variation the modern award is not achieving the modern awards objective or not operating effectively, without anomalies or technical problems arising from the Part 10A award modernisation process. We decline to make the variation sought by Dr Cheek.

Local Government Industry Award 2010 120 - AM2012/168

[188] The New South Wales Local Government, Clerical, Administrative, Energy, Airlines & Utilities Union (NSW Local Government Union) proposed that a new annual leave clause be inserted into the Local Government Industry Award 2010, but subsequently withdrew their application.

CONCLUSION

[189] In this matter, concerning the Transitional Review of annual leave provisions in respect of various modern awards, we have decided to make the following variations to the respective awards:

• Legal Services Award 2010 [MA000116], by inserting the following clause after clause 35.5:




“35.6 Requirement to take leave notwithstanding terms of the NES

Annual leave is to be taken at a time agreed between the employer and employee. However, an employer may require an employee to take annual leave by giving at least four weeks’ notice in the following circumstances:

(a) as part of a close-down of its operations, or part of its operations, where the request is reasonable; or

(b) where more than eight weeks’ leave is accrued.”

• Building and Construction General On-Site Award 2010 [MA000020], by replacing its clause 38.2(b) with the following:




“(b) In addition to the payment prescribed in clause 38.2(a), an employee must receive during a period of annual leave a loading of 17.5% calculated on the following rates, loadings and allowances if such rates, loadings and allowances would have been received by the employee for working ordinary time hours had the employee not been on annual leave:

• clause 19.1(a)—Minimum wages;



• clause 21.2—Industry allowance;



• clause 21.3—Underground allowance;



• clause 20.1—Tool and employee protection allowance;



• clause 24—Living away from home—distant work;



• clause 25—Fares and travel patterns allowance; and



• clause 19.2—Leading hands.

This loading will also apply to proportionate leave on lawful termination.”

• Cleaning Services Award 2010 [MA000022], by replacing its clause 29.7 with the following:




“29.7 Payment of accrued annual leave on termination

Where an employee is entitled to payment of untaken annual leave on termination of employment under the terms of the NES, the employer must also pay the employee a loading of 17.5% calculated on an employee’s ordinary time rate of pay.”

• Road Transport and Distribution Award 2010 [MA000038], by replacing its clause 29.2 with the following:




“29.2 During a period of annual leave an employee will receive a loading calculated on the minimum wage rate in clause 15 of this award. Annual leave loading payment is payable on annual leave accrued and taken and on annual leave paid out on termination.

The loading is as follows:

(a) Day work

Employees who would have worked on day work only had they not been on annual leave—17.5% or the relevant weekend penalty rates, whichever is the greater but not both.

(b) Shiftwork

Employees who would have worked on shiftwork had they not been on annual leave—a loading of 17.5% or the shift loading (including relevant weekend penalty rates) whichever is the greater but not both.”

[190] We decline to make the other variations before us. At least some of those other variations may be appropriate for consideration in the forthcoming four year review.

[191] That four year review is to commence in 2014 and will be broader in scope than the Transitional Review. It will provide an opportunity for issues to be considered in circumstances where the general transitional provisions relating to relevant modern awards will have been fully implemented and for parties to present, as necessary, cogent evidence in respect of issues.

[192] In respect of the modern awards before us which we have decided to vary, with one exception and setting aside variations sought to those modern awards which have not yet been determined by the FWC as part of the Transitional Review, we are satisfied the variations we will make will remedy the issues preventing those modern awards achieving the modern awards objective and operating effectively, without anomalies or technical problems arising from the Part 10A award modernisation process.

[193] In respect of the modern awards before us which we have declined to vary, with one exception and setting aside the variations sought to those modern awards which have not yet been determined by the FWC as part of the Transitional review, we conclude those modern awards are achieving the modern awards objective and operating effectively, without anomalies or technical problems arising from the Part 10A award modernisation process.

[194] The one exception relates to the additional one twelfth payment associated with annual leave for a close down. We have decided to relist this matter of the additional one twelfth payment in respect of the relevant modern awards before us and other relevant modern awards, so as to provide all those interested with the opportunity to make submissions on the matter as part of the Transitional Review.

DECISION OF VICE PRESIDENT WATSON

[195] While I agree with the variations agreed by the majority, I am unable to join in their decision because I consider that it adopts a constricted test for the review of modern awards that is inconsistent with the provisions of the applicable legislation, resulting in the rejection of variations that are justified on merit grounds because they ensure that the awards achieve the modern awards objective. The 2 year review of awards required to be conducted by Item 6 of Schedule 5 of the Transitional Provisions Act establishes a limited window for the consideration of award variations during the course of the review. However, the approach adopted by the majority interprets this window as having a very slender opening. Neither the legislation, nor Full Bench decisions regarding the 2 year review, provides a justification for imposing such a restrictive interpretation.

[196] In order to explain this position it is necessary to traverse the relevant legislative provisions and the history of award modernisation.

[197] Award modernisation was a process conducted by the Australian Industrial Relations Commission (AIRC) under the terms of Part 10A of the WR Act. Pursuant to that part of the WR Act, the AIRC was required to perform its functions having regard to the factors in s.576B and in accordance with an award modernisation request made by the Minister under s.576C (the Ministerial Request). The s.576B factors included the desirability of reducing the number of awards operating in the workplace relations system. The original Ministerial Request was issued on 28 March 2008 and was varied on eight occasions during the process. The Ministerial Request contained additional objects of the process including that the creation of modern awards was not intended to disadvantage employees or increase costs for employers. The request required the award modernisation process to be completed by 31 December 2009.

[198] As a result of the award modernisation process, approximately 1560 federal and state awards were reviewed over a period of about 18 months and replaced by 122 modern awards. A further 199 applications to vary modern awards were made during this period. It is clear from any review of the process that the objects of rationalising the number of awards and attempting to balance the seemingly inconsistent objects of not disadvantaging employees and not leading to increased costs for employers attracted the vast majority of attention from the parties and the AIRC. It was clearly not practical during the award modernisation process to conduct a comprehensive review of the industrial merit of the terms of the awards. Matters that were not put in issue by the parties were not subject to a merit determination in the conventional sense. Rather, terms were adopted from predecessor awards that minimised adverse changes to employees and employers. As the Full Bench explained on a number of occasions, the general approach was as follows: 121

“[3] In general terms we have considered the applications in line with our general approach in establishing the terms of modern awards. We have had particular regard to the terms of existing instruments. Where there is significant disparity in those terms and conditions we have attached weight to the critical mass of provisions and terms which are clearly supported by arbitrated decisions and industrial merit. We have considered the impact of the provisions based on the information provided by the parties as to current practices.”

[199] It is important to note the limited nature of the task undertaken by the award modernisation Full Bench. Of particular relevance to matters concerning annual leave before this Full Bench, the following statement was made in relation to annual leave in the December 2008 Full Bench decision: 122

“Annual leave

[95] As we noted in our statement of 12 September 2008, it has not been possible to develop a single model clause for annual leave. While some parties have sought greater uniformity in the area, there is a wide range of differing provisions in the awards and NAPSAs that we are dealing with. In many cases the provisions are more generous to employees than the provisions of the NES. Areas in which this can be observed are the quantum of holiday pay, leave loading and the definition of shift worker. In considering what should be included in the modern award on each of these matters we have attempted to identify or formulate a standard entitlement in the area covered by the modern award rather than preserving a range of differing entitlements. This involves a degree of rationalisation at the award level only and will not result in standard provisions across all awards.

[96] There are also some issues concerning the time of taking leave. The time of taking leave is referred to in para.33 of the consolidated request and s.36(1)(b) of the NES. Section 36(1)(b) reads:

“36 Modern awards may include certain kinds of provisions

(1) A modern award may include provisions of any of the following kinds:

… …

(b) provisions requiring an employee (or allowing for an employee to be required) to take paid annual leave in particular circumstances;

… …”

[97] The provisions in awards and NAPSAs governing annual close-downs vary significantly. It is preferable that we do not alter provisions which have been specifically developed for particular industries. We have adopted the approach of attempting to identify an industry standard in each case. This means there may be some variation in the close-down provisions.

[98] One issue that has arisen repeatedly, and is provided for in the NES, is the right of an employer to require that an employee take arrears of annual leave. We think that an employer should have the ability to reduce annual leave liability by compelling employees to take annual leave provided appropriate notice is given. While there may be different approaches to this question, in each of the awards there will be some provision which will give the employer the ability to take action to reduce arrears.

[99] A number of employer interests sought provisions for cashing out of annual leave by agreement. Such arrangements are apparently included in many Australian Workplace Agreements (AWAs) and workplace agreements. Should cashing out of annual leave become widespread it would undermine the purpose of annual leave and give rise to questions about the amount of annual leave to be prescribed. We think some caution is appropriate when dealing with this issue at the safety net level. We do not intend to adopt a model provision. Consistent with our approach to annual leave provisions generally we shall be influenced mainly by prevailing industry standards, and the views of the parties, in addressing this issue.

[100] It has also been suggested that if awards do not provide for cashing out of annual leave it will not be legally permissible to make workplace agreements which provide for cashing out. In our opinion cashing out arrangements are an appropriate matter for bargaining. If, when the legislative regime is settled, it is apparent that workplace agreements cannot provide for cashing out of annual leave unless there is a relevant provision in a modern award it may be necessary to revisit the question.”

[200] Hence the Award Modernisation Full Bench adopted a tentative approach to many issues in the annual leave clauses of modern awards, adopted some general matters of principle and flagged the appropriateness of reviewing the provisions based on the experience of their operation. This is an important part of the background to the matters now before the Commission.

[201] There are broadly three avenues for considering award variations under the Fair Work legislation:

● the variation of awards outside of award reviews under sections 157 or 160 of the Act,

● the variation of awards as part of the 2 year review under item 6 of schedule 5 of the Transitional Act, requiring the Commission to consider whether the awards achieve the modern awards objective, and are operating effectively, and
● the variation of awards as part of the 4 yearly review under s.156 of the Act, required to be conducted as soon as practicable after each fourth anniversary of the commencement of the modern awards on 1 January 2010.

[202] Full Benches of this Commission have considered the provisions of item 6 of Schedule 5 of the Transitional Act regarding the nature of the 2 year review of modern awards. I respectfully adopt and apply those decisions, and in particular the Full Bench decision of 29 June 2012, 123 and the further application and clarification of that decision in the Award Flexibility Full Bench decision of April 2013.124 The following passage from the June 2012 Full Bench decision represents the conclusion of the Full Bench in relation to the approach to be adopted in this review:

“[91] It is important to recognise that we are dealing with a system in transition. Item 6 of Schedule 5 forms part of transitional legislation which is intended to facilitate the movement from the WR Act to the FW Act. The Review is a “one off” process required by the transitional provisions and is being conducted a relatively short time after the completion of the award modernisation process. The transitional arrangements in modern awards continue to operate until 1 July 2014. The fact that the transition to modern awards is still occurring militates against the adoption of broad changes to modern awards as part of the Review. Such changes are more appropriately dealt with in the 4 year review, after the transition process has completed. In this context it is particularly relevant to note that s.134(1)(g) of the modern awards objective requires the Tribunal to take into account:

“the need to ensure a simple, easy to understand, stable and sustainable modern award system for Australia . . .”

[92] Two other textual considerations are also relevant. The first is that subitem 6(2)(b) of Schedule 5 directs specific attention to whether modern awards “are operating effectively, without anomalies or technical problems arising from the Part 10A award modernisation process”. No such legislative direction is reflected in the provisions which deal with the 4 yearly review of modern awards (s.156 of the FW Act).

[93] The second textual consideration is that, as we have noted previously, Item 6 does not prescribe how the Tribunal is to be constituted for the purpose of conducting the Review. This may be contrasted with the 4 yearly reviews provided in s.156 and the award modernisation process under Part 10A of the WR Act, both of which are to be conducted by a Full Bench. The fact that the Review of a modern award may be conducted by a single member also suggests that the legislature contemplated that the Review would be more confined in scope that the 4 yearly reviews in s.156.

[94] The above considerations have led us to conclude that the Review is intended to have a narrower scope than the 4 yearly reviews provided in the FW Act. This conclusion is also supported by the relevant extrinsic material.

[95] The Australian Government submitted that the intent of the Review was made clear in the second reading speech to the Fair Work (Transitional Provisions and Consequential Amendments) Bill 2009 when the Hon. Julia Gillard said:

“the bill provides for Fair Work Australia to conduct a bedding-down review of modern awards after two years of their operation (that is, from 1 January 2012) ahead of the regular four-yearly review cycle. This will allow any necessary refinements to modern awards to be made to ensure they are meeting the modern award objectives and are operating effectively without anomalies or technical problems.

This transitional review will complement the four-yearly reviews of modern awards set out in the substantive Fair Work legislation and will allow any operational difficulties to be identified and remedied swiftly.”

[96] Clauses 213 and 214 of the revised supplementary explanatory memorandum relevant to Item 6, as set out earlier in our decision at paragraph [74], are particularly relevant:

“213. In considering whether modern awards are achieving the modern awards objective, FWA would consider a range of issues, including, for example, the need to encourage collective bargaining and the principle of equal remuneration for work of equal or comparable value.

214. The interim review will enable FWA to examine individual flexibility clauses in modern awards to ensure they are being used for the purpose intended and not to alter industry standards on hours and shift patterns.”

[97] It seems to us that these parts of the explanatory memorandum are somewhat ambivalent about the scope of the Review. On the one hand clause 213 speaks of the Tribunal considering a “range of issues” including the need to encourage collective bargaining and the principle of equal remuneration for work of equal or comparable value. This was relied upon by the AFEI in support of the proposition that a broad review was envisaged. Yet, clause 213 does nothing more than refer to two of the matters identified in the modern awards objective at s.134(1)(b) and (e) of the FW Act. It is also pertinent to note that clause 214 describes the Review as “[t]he interim review”.

[98] For completeness we note that the Australian Government also relied on a speech made by the then Minister for Employment and Workplace Relations to the National Press Club.  In our view reference to material of this type is of no real assistance in arriving at the proper construction of the relevant provisions. The language of the provision and its context are much surer guides to its proper construction.

[99] To summarise, we reject the proposition that the Review involves a fresh assessment of modern awards unencumbered by previous Tribunal authority. It seems to us that the Review is intended to be narrower in scope than the 4 yearly reviews provided in s.156 of the FW Act. In the context of this Review the Tribunal is unlikely to revisit issues considered as part of the Part 10A award modernisation process unless there are cogent reasons for doing so, such as a significant change in circumstances which warrants a different outcome. Having said that we do not propose to adopt a “high threshold” for the making of variation determinations in the Review, as proposed by the Australian Government and others.

[100] The adoption of expressions such as a “high threshold” or “a heavy onus” do not assist to illuminate the Review process. In the Review we must review each modern award in its own right and give consideration to the matters set out in subitem 6(2). In considering those matters we will deal with the submissions and evidence on their merits, subject to the constraints identified in paragraph [99] above.” (references omitted)

[203] As the June 2012 Full Bench decision makes clear, the 4 yearly review is broader than the 2 year review. Equally, the 2 year review was intended to present a broader opportunity to consider award variations than the standard mechanism under s.157 and s.160 that could be utilised at any time. In order to understand the extent of the 2 year review it is important to note the breadth of the general variation power under s.157.

[204] The scope of the standard award variation mechanism under s.157 has been considered by Full Benches and the Federal Court concerning the minimum engagement period for school students working on week-days after hours in the Retail Industry. In October 2010, a Full Bench said the following in relation to an alternative proposition put during the appeal proceedings: 125

“[29] Before concluding we return to the submission made by the ARA, which we referred to earlier, that we should make provision for student casuals to be engaged for less than three hours in specified circumstances. Although it is not necessary to set it out, it should be recorded that the ARA tendered a detailed proposal. No such proposal was ever put to the Vice President. For that reason it would not be appropriate to entertain it in an appeal from the Vice President’s decision, which we have found to be free from error. On the other hand, we cannot see any barrier to the ARA, or any other interested party, making an application to vary the award to deal specifically with the engagement of student casuals. The fate of any such application would of course depend upon the tribunal’s assessment, in the relevant statutory context, of the material and submissions advanced for and against it.”

[205] Arising from that decision a further application was made and subsequently granted pursuant to s.157 of the Act. An appeal against that decision rejected an argument that the incorrect test was applied. The Full Bench stated that the decision under appeal applied “the approach taken to s.134 of the FW Act in the earlier general application, as was endorsed by the Full Bench on appeal.” 126 The matter was further considered by Tracey J of the Federal Court. In relation to s.157 he said:127

“35. The statutory foundation for the exercise of FWA’s power to vary modern awards is to be found in s 157(1) of the Act. The power is discretionary in nature. Its exercise is conditioned upon FWA being satisfied that the variation is “necessary” in order “to achieve the modern awards objective.” That objective is very broadly expressed: FWA must “provide a fair and relevant minimum safety net of terms and conditions” which govern employment in various industries. In determining appropriate terms and conditions regard must be had to matters such as the promotion of social inclusion through increased workforce participation and the need to promote flexible working practices.

36. The sub-section also introduced a temporal requirement. FWA must be satisfied that it is necessary to vary the award at a time falling between the prescribed periodic reviews.

...

44. Was this material reasonably capable of supporting Vice President Watson’s state of satisfaction that it was necessary to vary the Award in the way that he did at the time at which he did? In my view the answer to that question must be: Yes. The evidence established that many secondary school students in Australia wished to and did undertake paid employment in the retail sector after school on weekdays. The three hour minimum engagement requirement did not impede many of them from undertaking such employment. For others, this was a barrier, particularly in areas where retail outlets closed for business less than three hours after the school day had concluded. Many employers had said that they were prepared to engage students who were available for less than three hours should the restriction be varied. Such employment was considered to be beneficial for a variety of reasons including assisting in a smooth transition of students from school to the workforce and affording students, especially those in rural areas and from lower socio economic groups, the opportunity to participate in the workforce. Such considerations were conducive to the achievement of the modern awards objective.

45. This evidence and material, standing alone, was sufficient to support the Vice President’s conclusion. Once this point is reached it is clear that the no evidence ground cannot be made out. The conclusion, however, derives further support from the evidence, heard on the earlier application, that some secondary school students in rural Victoria had lost their after school jobs once the three hour restriction had come into force because their workplaces closed for the day less than three hours after school finished.

46. In reaching my conclusion on this ground I have not overlooked the SDA’s subsidiary contention that a distinction must be drawn between that which is necessary and that which is desirable. That which is necessary must be done. That which is desirable does not carry the same imperative for action. Whilst this distinction may be accepted it must also be acknowledged that reasonable minds may differ as to whether particular action is necessary or merely desirable. It was open to the Vice President to form the opinion that a variation was necessary.

47. The first ground has not been made out.”

[206] As I have noted, the 2 year review is clearly intended to provide a broader avenue for review than the power under s.157. The 2 year review requires the Commission to consider whether the modern awards achieve the modern awards objective and are operating effectively, without anomalies or technical problems arising from the award modernisation process. Just as the power under s.157 is a discretionary power concerning a broadly expressed objective of providing a fair and relevant minimum safety net of terms and conditions, so too is the power under the 2 year review. In my view, and as made clear by the June 2012 Full Bench decision, it is clearly the objective of the legislature that the submissions and evidence are dealt with on their merits subject to the need for cogent reasons when asked to revisit issues considered as part of the award modernisation process. An approach which turns a blind eye to merit of the requisite nature is not consistent with the legislative mandate.

[207] This is made clear by Full Bench decisions dealing with the 2 year review. For example the Full bench dealing with changes to the award flexibility clause expressed its reasons for refining the terms of the standard award flexibility clause as follows: 128

“[211] The variations proposed are necessary to remedy the issues identified in the Transitional Review and to ensure that the model award flexibility term and modern awards are operating effectively, without anomalies or technical problems arising from the award modernisation process. We are also satisfied that the variations proposed are ‘necessary’ (within the meaning of s.138) to achieve the modern awards objective and will ensure that modern awards provide a fair and relevant minimum safety net of terms and conditions having regard to the matters set out at paragraphs 134(1)(a)-(h). In particular, the variations proposed will provide flexible modern work practices and reduce regulatory burden while taking into account the needs of the low paid and making the model flexibility term simpler and easier to understand.”

[208] The Full Bench reviewing provisions regarding apprentice provisions of modern awards also considered whether the current provisions of awards represented a fair and relevant minimum safety net of terms and conditions of employment by reference to the factors in the modern awards objective. In various instances it was found that the provisions should be varied based on fairness, equity and other grounds. It is clear from the decision that the task involved a broad judgement of the type described, without applying a high hurdle that favours the retention of the status quo.

[209] I turn to demonstrate the different outcomes on the matters before this Full Bench arising from the divergent approaches adopted by the Full Bench members. In my view, in addition to the variations supported by the majority, other claims made in relation to annual leave satisfy the merit test that is required to be applied in the 2 year review.

[210] Various applications seek a variation to the modern award provisions regarding the right of an employer to require an employee to take annual leave. For example, the applications by the AFEI and ABI seek the insertion of a clause which provides the employer with the right to direct employees to take annual leave after genuinely trying to reach agreement on the timing of taking leave, where eight weeks or more of leave is accrued, where the amount of leave directed to be taken is no more than a quarter of the accrual and by giving at least four weeks’ notice.

[211] AFEI submits that most employers had the ability to direct staff to take annual leave prior to the introduction of the modern award and such provisions are common in a majority of modern awards. ABI makes similar submissions in relation to the Storage Services and Wholesale Award and the Building and Construction General On-site Award 2010. It submits that the right to direct previously existed under state legislation and as the matter was not addressed during award modernisation, it is not clear why the provisions were omitted from these awards. It submits that the industrial merits are self evident and its benefits include promoting the efficient and productive performance of work, reducing the regulatory burden on business and promoting a simple and stable award system by reducing disputes about the taking of annual leave. A survey of employers conducted by ABI found that 45% of employers had employees with greater than 8 weeks leave accrued, 100% of respondents would consider directing employees to take leave if they had the ability to do so, 77% of respondents would find this beneficial in the management of liabilities and 100% of respondents support the variation to permit an employer to direct the taking of leave exceeding 8 weeks.

[212] The ACTU and various unions opposed the variations. They submit that the purpose of annual leave is to provide rest and recreation when the employees need it, and this may not coincide with the time when it is most convenient or cost effective for the employer to grant it. They say that there is little evidence to support the application.

[213] The award modernisation Full Bench in the passage quoted above said that an employer should have this right and that each of the awards considered in the initial trench of modern awards would have such a provision. Reducing excessive accruals of annual leave is a legitimate and sound business practice. It ensures that annual leave will be taken and the primary purpose of an annual leave entitlement is fulfilled. Health and safety benefits advantage both employees and employers. The ability to direct the taking of leave can be expected to lead to a greater preparedness of employees to apply to take accrued leave at a convenient time. Reducing annual leave accruals has clear financial and productivity benefits for employers.

[214] In the awards under consideration there was no express consideration of this issue during the award modernisation process. The matter was not put in issue by any party. On the test of the Full Bench, cogent reasons are not required, but in any event they clearly exist. The industrial merit of such a provision can hardly be doubted. Inserting the provision removes the anomalous situation whereby the right that had existed has been lost. The variation furthers the modern awards objective in a variety of respects. Failing to address this matter as part of the review undermines the fairness and relevance of the award safety net.

[215] A further example concerns the applications by the AWU for the insertion of an entitlement to annual leave loading in three awards. It submits that 112 of the 122 awards contain an entitlement to annual leave loading and, of the remainder, five contain industry specific superior leave arrangements. It submits that no arguments were put in relation to the inclusion or exclusion of annual leave loading, and that the AIRC did not expressly consider the question of annual leave loading in the three awards, (although there is an inference in relation to one of the awards that it intended to include it). It submits that the insertion of an entitlement to annual leave loading addresses an anomaly arising from the omission and achieves the modern awards objective. The AWU traced the history of consideration of award structures and provisions leading to the making of the three awards. It is clear from this history that broader issues of award coverage occupied most of the attention of the parties. In the case of the Amusement, Events and Recreation Award 2010, all three of the parties’ draft awards contained annual leave loading, as did the overwhelming pattern in pre-existing instruments. For an unexplained reason, leave loading was omitted from the exposure drafts. The AWU submits that this was an oversight rather than a deliberate act.

[216] The employers oppose these variations principally on the basis that the AWU has not demonstrated that the current award terms are not meeting the modern awards objective or are otherwise operating ineffectively.

[217] The AIRC award modernisation Full Bench, in the passage cited above, said that it had attempted to formulate a standard entitlement to matters such as leave loading in the area covered by the modern award rather than preserving a range of differing entitlements. That approach ultimately led to annual leave loading being inserted into all but a handful of awards. In my view, against this clear pattern, the payment of annual leave loading has virtually become a standard award entitlement. The failure of the parties to more specifically raise the issue when loading was omitted from the exposure draft could be subject to criticism, but in my view, it is no reason to perpetuate what is effectively an anomaly and perhaps a mistake. The absence of any express consideration of leave loading in circumstances where it was contained in relevant previous instruments in my view now requires the Commission to consider the merits of including the entitlement as part of the 2 year review.

[218] The modern awards objective requires awards to contain a fair and relevant safety net. No doubt a range of alternative sets of provisions could be said to fit that description and value judgements are necessarily involved. I do not accept the notion advanced by employers in relation to union claims, and unions in relation to employer claims, that conducting a review of the provisions incorporates a hurdle that requires a finding that the existing prescription does not meet the modern awards objective. Such a submission is inconsistent with the approach to the modern awards objective in relation to s.157 and specifically the enunciation of the test by Full Benches and the Federal Court in the retail minimum engagement series of cases. The achievement of the modern awards objective is not a black and white exercise. It requires a broad judgement as to fairness of the relevant provisions. Enhancing fairness and relevance by refining and improving the terms of the award by reference to arguments of fairness such as those advanced by the AWU is consistent with the requirement to conduct a review of the provisions to consider whether the awards are achieving the modern awards objective and are operating effectively.

[219] The submissions of the employers are also inconsistent with various Full Bench decisions dealing with the transitional 2 year review.

[220] The absence of an entitlement to annual leave loading in these awards is unexplained and in my view unfair and unwarranted. The AWU could be criticised for not raising the matter more specifically during the award modernisation process. It has faced up to this and provided an explanation. But any failure on its part should not be a reason to deny its case now when merit is demonstrated. I consider that the AWU has established that the modern awards objective is furthered by the inclusion of an entitlement to annual leave loading in these awards and has made out a case on the merits for its inclusion into the three awards. Turning a blind eye to the intrinsic merit of the applications is not consistent with the obligation to conduct a review of the awards.

[221] A similar conclusion should be reached with regard to the proposals by United Voice and the TWU to provide for payment of annual leave loading on termination of employment. These matters involve issues of consistency with s.90 of the Act. In my view the claims have merit and satisfy the legislative test.

[222] A further example concerns the cashing out of annual leave. This was a matter addressed as part of the award modernisation process in the passage quoted above and, consistent with that approach, in subsequent specific award matters. On any view, cogent reasons would be required in order to lead to a change in the approach of applying caution to the concept of cashing out of annual leave at the award safety net level. Mindful of that limitation, the Ai Group has sought a variation to the standard award flexibility provision in all awards whereby cashing out of annual leave is a permitted matter for an award flexibility agreement provided the conditions applying to award flexibility agreements and additional requirements contained in the annual leave clause are complied with. The additional requirements mirror the requirements for cashing out of annual leave in s.92 and 93 of the Act.

[223] In June 2008, the award modernisation Full Bench considered whether leave and arrangements for taking leave should be included as matters upon which an award flexibility agreement could be made. The Full Bench said: 129

“[171] Award terms of the kind described in s.576J(1)(h) require closer consideration. Generally speaking leave matters, although not leave loading, are dealt with in the NES. The interaction between the NES and modern awards is dealt with in cll. 28 to 46 of the Minister’s request. At this stage we would not be prepared to include any of the matters to be dealt with by the NES in the model flexibility clause. There are several reasons.

[172] The first point is that it is not clear what scope there will be for variation in the operation of the NES at the modern award level. Until the NES have been dealt with in the modern award concerned there will necessarily be uncertainty in relation to a number of aspects of their operation. It would not be prudent to make any provision for variation of NES terms at this stage. But there are other cogent reasons for caution. Clause 30 of the request provides that a modern award cannot exclude the NES or any provision of the NES. Clause 31 provides that a modern award may include industry specific detail about matters in the NES. Clause 32 provides that a modern award may supplement the NES in some circumstances. Clause 33 provides that particular types of provisions are able to be included in modern awards even though they might otherwise be inconsistent with the NES. It would seem to follow from these provisions that to the extent that modern awards will include terms about the NES those terms would deal directly with any flexibility issue in relation to the relevant NES entitlement.

[173] Returning to the terms of s.576J(1)(h), and with those considerations in mind, the only matter dealt with in that section which is appropriate for inclusion in the operation of the model clause at this stage is leave loading.”

[224] The Full Bench contemplated a review of the operation of the award flexibility clause. That review has been undertaken by another Full Bench and certain changes have been made to the clause. The inclusion of annual leave issues was left for this Bench to consider.

[225] The Ai Group submits that there has been a significant change in circumstances since the cautionary approach was adopted some 5 years ago. It submits that expanding the model flexibility clause will provide important flexibility for both employers and employees to enter arrangements such as granting leave in advance, granting personal/carer’s leave in advance, taking leave in a greater number of periods than permitted by the modern award, allowing an employee to take an additional amount of leave and forgoing the equivalent amount of pay, and by further express provision, the cashing out of annual leave.

[226] The Ai Group submits that the cautionary approach to cashing out at the award level adopted by the AIRC in June 2008 should be considered against the subsequent incorporation of safeguards in s93 of the Act as those safeguards were not included in the June 2008 version of the NES. The same safeguards are now contained in the provisions of the Act that permit cashing out of annual leave for award free employees and expressly allow cashing out provisions in awards. Ai Group emphasises the significance of the safeguards as judged by the Full Bench in the Armacell case which relied on those safeguards to approve the cashing out of annual leave in an enterprise agreement.

[227] The Ai Group submits that cashing out is permitted by the legislation for award free employees and via awards, permitted in enterprise agreements as made clear by the Armacell case and permitted in at least one award by agreement with the AWU. It submits that the non-availability of cashing out at the award level represents an anomaly that should be rectified by enabling cashing out under the award flexibility clause incorporating the safeguards in sections, 92, 93, 144, 145 and 344 of the Act together with the safeguards in the standard award flexibility clause.

[228] Various other applications seek a specific facility for cashing out annual leave in awards. For example the Banks submit that cashing out is a regular feature of their existing arrangements for award free and enterprise agreement employees, and that the potential termination of their enterprise awards at the end of 2013 would bring many award covered employees within the scope of the modern award. They seek the variation in the modern award to enable them to continue their longstanding practices that allow employees to have access to an additional option for managing their affairs where that is their preference while appropriately balancing the need for rest and recreation in accordance with safeguards determined by the legislature, facilitate a consistent approach within the banks’ workforces and assist in the appropriate management of contingent liabilities.

[229] The variations concerning cashing out of annual leave are vehemently opposed by various unions and the ACTU. The ACTU is also strongly opposed to the Ai Group’s application to vary the award flexibility clause. The ACTU submits that it cannot be said that all awards are not operating effectively, contain anomalies or do not meet the modern awards objective without the variation it seeks to the award flexibility clause. Some unions oppose the variations because it would remove an incentive for employers to make enterprise agreements. I note in this regard that the concept of retaining inflexibilities in awards to provide a bargaining chip for making enterprise agreements was discredited during the award simplification process from the late 1990s . 130

[230] In my view the plea by many employers for a facility for flexibility in taking annual leave and cashing out of annual leave is a powerful one and directly raises various provisions of the modern awards objective. There is currently an anomaly in the classes of employees who can access such arrangements. Agreement between an employer and a single award covered employee is the only combination not currently permitted to access this flexibility. Award-free employees and agreement-covered employees can negotiate this flexibility. Cashing out of leave can have advantages for employees and employers. If safeguards exist, there can be confidence that the mechanism will not lead to avoidance of the purpose of an annual leave entitlement. The legislature has endorsed the concept of cashing out and established safeguards for its application. The absence of those safeguards was clearly a factor for the cautionary approach of the AIRC in 2008. The reasons for opposition reflect an approach inconsistent with the proper statutory test and Full Bench cases on the scope of this review. If the modern awards objectives can be furthered by providing this additional flexibility and an appropriate merit case is established, the test under this 2 year review is satisfied. In my view such a case has been made out. The more restrictive test advocated by the ACTU, and effectively adopted by the majority, is a re-run of arguments rejected by the June 2012 Full Bench and all but slams the window shut for award reforms arising from the 2 year review.

[231] A further example relates to applications to modify the timing for making annual leave payments. It is proposed by ABI that the traditional obligation to make payment for annual leave in advance of the leave being taken should be modified in the case of an employee paid by electronic fund transfer so that payment is made on the employee’s usual pay day. The change is intended to address the changes in cash management now common in the Australian workforce and remove an administrative burden of requiring employers to run an additional manual pay for employees who take annual leave. I consider that the change furthers the modern awards objectives of reducing employment costs and regulatory burdens without a significant disadvantage to employees. If employees receive their holiday pay on their normal payday, and can access that pay by withdrawals from their bank account, the situation cannot be described as unfair. Such a provision, developed in response to changed circumstances ensures that the award provides a fair and relevant safety net.

[232] The matter has not been considered previously because it has not been raised previously. The contention that the novelty of the proposal undermines the case for its consideration is not consistent with the notion of a review and is a recipe for awards to stagnate despite changes in relevant circumstances. It is only now, with changed practices for cash management combined with an ever-widening spread of EFT payment of wages, that opportunities for efficiencies of this nature become feasible without any real detriment to employees. In my view an appropriate case has been made out for the variation as part of this review.

[233] It is clear from the above that:

● The approach adopted by the AIRC in making modern awards during the award modernisation process was necessarily a limited one. It did not involve a comprehensive review of the merits of each of the terms of the awards consolidated during that process.

● The task of reviewing modern awards in the two year review involves a consideration of whether the awards achieve the modern awards objective and are operating effectively. Authorities dealing with the variation and review of awards make it clear that this involves a broad judgement concerning the fairness and relevance of the minimum safety net of terms and conditions and the specific factors in the modern awards objective. The Commission is required to conduct its review in such a manner.

● A review of the annual leave provisions of various modern awards reveals that some provisions are not achieving the modern awards objective or operating effectively because they are not providing a fair and relevant minimum safety net of terms and conditions taking into account the factors in the modern awards objective. To a large extent, awards and legislation contain provisions of a type sought in this review, but the awards subject to the applications do not.

● The proper application of this approach should lead to award variations concerning the right of an employer to direct employees to take accumulated annual leave, the incorporation of annual leave loading into awards, the payment of annual leave loading on termination of employment, the ability to make an award flexibility agreement with an employee regarding the operation of the annual leave provisions and cashing out of annual leave, and the timing of annual leave payments for employees paid by electronic funds transfer.

[234] I have not dealt exhaustively with all of the applications before the Full Bench because it will be seen that the much stricter approach of the majority has led to them being unsuccessful. Rather, I have demonstrated, by reference to the legislative tests, the history of award modernisation, Full Bench authorities, and examples of claims that I consider are justified on their merits to achieve the modern awards objective, that the restrictive test adopted by the majority is inconsistent with the legislative task of the Commission and cannot be supported.

VICE PRESIDENT WATSON

Appearances:

K Sweatman for Allens Linklaters (formerly Allens Arthur Robinson), Allen & Overy, Arnold Bloch Liebler, Ashurst Australia, Baker & McKenzie, Clayton Utz, Corrs Chambers Westgarth, Davies Collison Cave, Dibbs Barker, Herbert Smith Freehills, Gilbert + Tobin, Hall & Wilcox, Herbert Geer, King & Wood Mallesons, Lander & Rogers, Maddocks, K&L Gates (formerly Middletons), Minter Ellison, Norton Rose Fullbright Australia, Piper Alderman, and Russell Kennedy.

M Tamavakologos with Q. Le for ANZ Banking Group Limited, Commonwealth Bank of Australia Limited, Westpac Banking Corporation Limited and GE Capital Finance Australasia Pty Ltd.

L Izzo Australian Business Industrial.

T Clarke for the Australian Council of Trade Unions.

S Forster for the Australian Federation of Employers and Industry.

M Mead for The Australian Industry Group.

J Nucifora and W. Fridell with M. Rizzo for the Australian Municipal, Administrative, Clerical and Services Union.

Z Angus for The Australian Workers’ Union.

J Moriarty for the “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU).

G Vaccaro and E. MacDougal for Berkeley Challenge Pty Ltd and related entities (collectively known as “the Spotless Group”).

H Wallgren with S. West for Business SA.

A Borg for the Construction, Forestry, Mining and Energy Union.

G McConville for the Finance Sector Union of Australia.

M Adler for the Housing Industry Association Ltd.

A Dansie for State and Northern Territory Local Government Associations.

R Calver with K. Adamcewics for Master Builders Australia Limited.

A Grayson for The Maritime Union of Australia.

S. Kraemer for The Master Plumbers’ and Mechanical Services Association of Australia.

P Maguire for the National Employment Services Association.

S Elliffe for the National Retail Association Ltd.

C Young for New South Wales Local Government Clerical, Administrative, Energy, Airlines & Utilities Union.

M Easton of Counsel with Ms Mark for The Pharmacy Guild of Australia.

D De Martino for Shop, Distributive and Allied Employees Association.

V Wiles for the Textile for Clothing and Footwear Union of Australia.

W Ash for United Voice.

Hearing details

2013.

Melbourne, Adelaide and Sydney (video hearing):

April 22.

2013.

Melbourne, Adelaide, Canberra and Sydney (video hearing):

June 17.

Final written submissions

The Association for Payroll Specialists, 18 June 2013.

Australian Business Industrial, 19 June 2013.

The Master Plumbers’ and Mechanical Services Association of Australia, 26 June 2013.

Business SA, 28 June 2013.

United Voice, 1 July 2013.

 1   Fair Work Australia became the Fair Work Commission on 1 January 2013.

 2   The review does not include modern enterprise awards or State reference public sector modern awards.

 3   Modern Awards Review 2012, [2012] FWAFB 5600.

 4   Modern Awards Review 2012 - Penalty Rates, [2013] FWCFB 1635.

 5   Modern Awards Review 2012 - Award Flexibility, [2013] FWCFB 2170.

 6   MA000010.

 7   MA000003.

 8   MA000004.

 9   MA000073.

 10   MA000119.

 11   MA000114.

 12   MA000068.

 13   MA000019.

 14   MA000020.

 15   MA000004.

 16   MA000005.

 17   MA000009.

 18   MA000099.

 19  MA000012.

 20   MA000036.

 21   MA000043.

 22   MA000020.

 23   MA000002.

 24   MA000026.

 25   MA000027.

 26   MA000029.

 27   MA000033.

 28   MA000089.

 29   Transcript of proceedings in AM2012/106, AM2012/108, AM2012/113, AM2012/151, AM2012/153, AM2012/154 and AM2012/163 regarding Annual Leave, 22 April 2013 at PN279.

 30   MA000116.

 31   MA000090.

 32   Award Modernisation, [2008] AIRCFB 1000.

 33   Ibid.

 34   Award Modernisation, [2009] AIRCFB 450.

 35   Ibid.

 36   Ibid.

 37   Award Modernisation, [2009] AIRCFB 826.

 38   Ibid.

 39   Modern Awards Review 2012 - Award Flexibility, [2013] FWCFB 2170.

 40   Ibid.

 41   Ibid.

 42   MA000080.

 43   MA000093.

 44   MA000100.

 45   MA000020.

 46   MA000084.

 47   MA000026.

 48   MA000029.

 49   MA000033.

 50   MA000019.

 51   MA000022.

 52   MA000003.

 53   MA000012.

 54   MA000036.

 55   MA000016.

 56   Award Modernisation, [2009] AIRCFB 1000.

 57   MA000116.

 58   MA000054.

 59   MA000055.

 60   MA000056.

 61   MA000057.

 62   MA000037.

 63   MA000022.

 64   Fair Work Act 2009 (Cth), s.87(2).

 65   Fair Work Act 2009 (Cth), s.90(1).

 66   MA000114.

 67   MA000095.

 68   MA000061.

 69   MA000101.

 70   MA000008.

 71   MA000104.

 72   MA000097.

 73   MA000013.

 74   MA000014.

 75   MA000016.

 76   MA000040.

 77   MA000066.

 78   MA000092.

 79   MA000080.

 80   MA000085.

 81   MA000020.

 82   MA000003.

 83   MA000004.

 84   MA000005.

 85   MA000022.

 86   MA000120.

 87   MA000022.

 88   MA000038.

 89   MA000004.

 90   MA000005.

 91   MA000112.

 92   MA000043.

 93   MA000054.

 94   MA000020.

 95   MA000055.

 96   MA000056.

 97   MA000073.

 98   MA000026.

 99   MA000029.

 100   MA000010.

 101   MA000033.

 102   MA000069.

 103   MA000057.

 104   MA000037.

 105   MA000084.

 106   MA000089.

 107   MA000039.

 108   MA000016.

 109   MA000112.

 110   MA000022.

 111   MA000073.

 112   MA000112.

 113   AP811556.

 114   MA000100.

 115   AP796561CRV.

 116   MA000034.

 117   MA000113.

 118   MA000080.

 119   MA000118.

 120   MA000112.

 121   Re General Retail Award [2010] FWAFB 305.

 122   [2008] AIRCFB 1000.

 123   [2012] FWAFB 5600.

 124   [2013] FWCFB 2170.

 125   [2010] FWAFB 7838.

 126   [2011] FWAFB 6251 at [16]

 127   Shop, Distributive and Allied Employees Association v National Retail Association (No 2) [2012] FCA 480.

 128   [2013] FWCFB 2170.

 129   [2008] AIRCFB 550.

 130   eg Print S6142

Printed by authority of the Commonwealth Government Printer

<Price code J, PR540905>

ATTACHMENT 1

Matter no.	Modern award title	Award ID
AM2012/165	Alpine Resorts Award 2010	MA000092
AM2012/166	Amusement, Events and Recreation Award 2010	MA000080
AM2012/231	Amusement, Events and Recreation Award 2010	MA000080
AM2012/11	Animal Care and Veterinary Services Award 2010	MA000118
AM2012/181	Aquaculture Industry Award 2010	MA000114
AM2012/92	Asphalt Industry Award 2010	MA000054
AM2012/256	Banking, Finance and Insurance Award 2010	MA000019
AM2012/154	Building and Construction General On-site Award 2010	MA000020
AM2012/228	Building and Construction General On-site Award 2010	MA000020
AM2012/94	Cement and Lime Award 2010	MA000055
AM2012/31	Children's Services Award 2010	MA000120
AM2012/23	Cleaning Services Award 2010	MA000022
AM2012/33	Cleaning Services Award 2010	MA000022
AM2012/209	Cleaning Services Award 2010	MA000022
AM2012/113	Clerks - Private Sector Award 2010	MA000002
AM2012/98	Concrete Products Award 2010	MA000056
AM2012/167	Dredging Industry Award 2010	MA000085
AM2012/179	Fast Food Industry Award 2010	MA000003
AM2012/240	Fast Food Industry Award 2010	MA000003
AM2012/147	Food, Beverage and Tobacco Manufacturing Award 2010	MA000073
AM2012/178	Food, Beverage and Tobacco Manufacturing Award 2010	MA000073
AM2012/8	General Retail Industry Award 2010	MA000004
AM2012/177	General Retail Industry Award 2010	MA000004
AM2012/245	General Retail Industry Award 2010	MA000004
AM2012/153	Graphic Arts, Printing and Publishing Award 2010	MA000026
AM2012/172	Hair and Beauty Industry Award 2010	MA000005
AM2012/163	Health Professionals and Support Services Award 2010	MA000027
AM2012/204	Hospitality Industry (General) Award 2010	MA000009
AM2012/106	Joinery and Building Trades Award 2010	MA000029
AM2012/35	Labour Market Assistance Industry Award 2010	MA000099
AM2012/145	Legal Services Award 2010	MA000116
AM2012/20	Local Government Industry Award 2010	MA000112
AM2012/168	Local Government Industry Award 2010	MA000112
AM2012/221	Manufacturing and Associated Industries and Occupations Award 2010	MA000010
AM2012/125	Manufacturing and Associated Industries and Occupations Award 2010	MA000010
AM2012/235	Marine Tourism and Charter Vessels Award 2010	MA000093
AM2012/151	Nursery Award 2010	MA000033
AM2012/150	Pharmaceutical Industry Award 2010	MA000069
AM2012/36	Pharmacy Industry Award 2010	MA000012
AM2012/202	Plumbing and Fire Sprinklers Award 2010	MA000036
AM2012/91	Premixed Concrete Award 2010	MA000057
AM2012/86	Quarrying Award 2010	MA000037
AM2012/180	Restaurant Industry Award 2010	MA000119
AM2012/195	Road Transport and Distribution Award 2010	MA000038
AM2012/32	Security Services Industry Award 2010	MA000016
AM2012/42	Security Services Industry Award 2010	MA000016
AM2012/122	Security Services Industry Award 2010	MA000016
AM2012/232	Social, Community, Home Care and Disability Services Industry Award 2010	MA000100
AM2012/173	Storage Services and Wholesale Award 2010	MA000084
AM2012/108	Vehicle Manufacturing, Repair, Services and Retail Award 2010	MA000089
AM2012/216	Waste Management Award 2010	MA000043