| FWCFB 4392|
|FAIR WORK COMMISSION|
4 yearly review of modern awards—Annual Leave—Security Services Industry Award 2010
Fair Work Act 2009
s.156 - 4 yearly review of modern awards
JUSTICE ROSS, PRESIDENT
MELBOURNE, 8 JULY 2016
4 yearly review of modern awards - common issue - annual leave - form of the cashing out term to be inserted into the Security Services Industry Award 2010
 On 23 May 2016 the Full Bench issued a decision 1 (the May 2016 decision) dealing with the variation of modern awards in relation to a number of matters regarding paid annual leave.
 On 24 June 2016 the Full Bench issued a decision 2 (the June 2016 decision) which, among other things, settled the final version of the ‘cashing out of annual leave’ model term and the associated template agreement. A copy of the model term and template agreement is set out at Attachment A to this decision.
 In the proceedings which led to the May 2016 decision, MSS Security made submissions regarding the insertion of the cashing out model term into the Security Services Industry Award 2010. MSS Security did not oppose the insertion of a term to facilitate the cashing out of annual leave, but sought to change the wording of two aspects of the draft variation determination. The draft determination published on 30 September 2015 provided as follows:
‘24.11 Cashing out of annual leave
(a) Paid annual leave must not be cashed out except in accordance with this clause.
(b) An employer and an employee may agree to the employee cashing out a particular amount of the employee’s accrued paid annual leave provided that the following requirements are met:
(i) each cashing out of a particular amount of accrued paid annual leave must be by a separate agreement between the employer and the employee which must:
(ii) the employee must be paid at least the full amount that would have been payable to the employee had the employee taken the leave at the time that it is cashed out.
(iii) 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
(iv) employees may not cash out more than two weeks’ accrued annual leave in any 12 month period.’ (emphasis added)
 MSS Security seeks, in effect, the deletion of the underlined words.
 In the May 2016 decision the Full Bench decided that in order to ensure that all interested parties had an opportunity to comment on the MSS Security proposal, the issue would be listed for hearing on 1 July 2016. 3 Directions were subsequently issued for the filing of written submissions and an oral hearing took place on 1 July 2016. Written submissions were filed by:
 This decision deals with the issues raised by MSS Security and the variation of the Security Services Industry Award 2010 to insert a term dealing with the cashing out of annual leave.
2. Submissions and Consideration
 MSS Security is a leading security personnel provider employing more than 5,400 employees across Australia. These employees are covered by the terms of the Security Services Industry Award 2010. About half of the employees of MSS Security have their terms and conditions of employment regulated by enterprise agreements approved under the Fair Work Act 2009 (Cth) and the Security Services Industry Award 2010 applies to those employees who are not covered by an enterprise agreement. The current MSS Security enterprise agreements all contain terms providing for the cashing out of annual leave.
 As noted above, MSS Security seeks to delete certain parts of the clauses 24.11(b)(i) and (ii) of the draft variation determination. The effect of the proposed deletions to clause 24.11(b)(i) would be that an agreement between the employer and the employee to cash out a particular amount of accrued paid annual leave would not have to specify the payment to be made to the employee or the date on which the payment is to be made. In relation to clause 24.11(b)(ii) it is proposed to replace the provision in the draft determination, with the following:
‘(ii) the employee must be paid at least the full amount that would have been payable to the employee for the leave, at the time that it is cashed out.’
 As to clause 24.11(b)(i), the essence of the argument advanced by MSS Security is that the requirement to specify the amount of payment and the date of payment as part of an agreement to cash out annual leave will result in some delays in the finalisation of such an agreement. At paragraphs 23-24 of its written submission, MSS Security states:
‘It would be assumed by the wording of the model clause ‘an employer and an employee may agree to’ suggests that if the amount of the payment needs to form a part of the agreement, it would be necessary to conduct these calculations then seek approval from the employee for the amount prior to processing.
While to do so would not be impossible, it would, however, require additional steps of ‘going back and forth’ and would likely slow the processing of the payment considerably.’
 In a short written submission of 31 January 2016 the Australian Security Industry Association Ltd (ASIAL) supported the draft determination provided by MSS Security and stated:
‘The proposed Draft Determination most appropriately meets the needs of employers and employees in the Security Industry and is, in our opinion, consistent with 134(1)(g) of the Fair Work Act 2009.’
 United Voice opposes the changes proposed by MSS Security and advances the following points:
 For reasons set out below, we do not propose to adopt the proposals advanced by MSS Security.
 The model term sets out the necessary elements of an agreement between an employer and employee to cash out a particular amount of accrued paid annual leave. The amount of the payment to be made and the date of that payment are integral elements of such an agreement. These requirements ensure that the payment made arises from a genuine agreement between the parties and that there is no subsequent dispute as to the amount of the payment or when the payment is to be made.
 We accept that the requirements of the model term may require some ‘going back and forth’ between the employer and employee before an agreement is made and that this may give rise to some delay. But any delay inherent in that process must be balanced against the protective function of the safeguards contained in the model term, which MSS Security seek to remove. It is also relevant to observe that the award term will not apply to those MSS Security employees whose employment is regulated by an enterprise agreement (s.57(1)). Further, MSS Security acknowledged that the administrative issues raised in support of the proposed change were ‘not insurmountable’ 4 and that it would be open to MSS Security to enter into enterprise agreements with those employees to whom the Security Services Industry Award 2010 applies in order to address the administrative issues raised. We would note that any such enterprise agreement will have to pass the ‘better off overall test’ (s.186(2)(d) and s.193) and must not exclude any provision of the NES (s.55(1)).
 It is also important to bear in mind that if an employer and employee agree to cash out an accrued amount of annual leave then the Fair Work Regulations 2009 require, among other things, that the employer make and keep an employee record that sets out:
(i) the rate of payment for the amount of leave that was cashed out; and
(ii) when the payment was made.
(See Reg. 3.36(2)(b))
 Having regard to all of the matters raised, we do not consider it appropriate to vary the draft determination issued by the Commission in the manner proposed by MSS Security. In our view the changes proposed would result in a term which does not ‘provide a fair and relevant minimum safety net of terms and conditions’. Such a term would not achieve the modern awards objective and on that basis should not be included in the Security Services Industry Award 2010 (see ss.134 and 138).
 The proposed change to clause 24.11(b)(ii) affects the payment to be made to the employee for the accrued paid annual leave that is to be ‘cashed out’. The NES prescribes the amount to be paid to the employee, in s.93:
‘(1) A modern award… may include terms providing for the cashing out of paid annual leave by an employee.
(2) The terms must require that…
(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.’
 A modern award must not exclude any provision of the NES (s.55(1)). Terms which are ancillary or supplementary to the NES may be included in a modern award ‘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’ (s.55(4). Clause 24.11(b)(ii) of the draft variation determination and clause 1.2(f) of the model term meet the requirements of s.93(2)(c). The change proposed by MSS Security departs from the terms of s.93(2)(c). The proposed clause would provide that the amount paid to the employee for the accrued paid annual leave is calculated by reference to ‘the time that it is cashed out’. There is some uncertainty as to how such a provision would operate. If it operates such that the amount to be paid to the employee is calculated at the time the employee makes the request to cash out an amount of accrued leave then it may mean that the employee will receive less than the amount required by s.93(2)(c). For these reasons we do not propose to make the change suggested by MSS Security.
 The Security Services Industry Award 2010 will be varied to insert the cashing out model term and the associated schedule containing the template agreement, for the reasons given in the decision of 11 June 2015, 4 yearly review of modern awards—Annual leave . 5 We are satisfied that the variation of this award to incorporate the cashing out model term and the associated schedule is necessary to ensure that the modern award provides a fair and relevant safety net, taking into account the matters in s.134(1)(a)–(h) (insofar as they are relevant.) We are also satisfied that such a variation is consistent with the objects of the Fair Work Act 2009 (Cth).
 A draft variation determination will be published shortly and interested parties will have seven days to comment. The opportunity to comment is not an opportunity to re-agitate the merits of the issues determined in this decision.
The Cashing Out Model Term
1.2 Cashing out of annual leave
(a) Paid annual leave must not be cashed out except in accordance with an agreement under clause 1.2.
(b) Each cashing out of a particular amount of paid annual leave must be the subject of a separate agreement under clause 1.2.
(c) An employer and an employee may agree in writing to the cashing out of a particular amount of accrued paid annual leave by the employee.
(d) An agreement under clause 1.2 must state:
(i) the amount of leave to be cashed out and the payment to be made to the employee for it; and
(ii) the date on which the payment is to be made.
(e) An agreement under clause 1.2 must be signed by the employer and employee and, if the employee is under 18 years of age, by the employee’s parent or guardian.
(f) The payment must not be less than the amount that would have been payable had the employee taken the leave at the time the payment is made.
(g) An agreement must not result in the employee’s remaining accrued entitlement to paid annual leave being less than 4 weeks.
(h) The maximum amount of accrued paid annual leave that may be cashed out in any period of 12 months is 2 weeks.
(i) The employer must keep a copy of any agreement under clause 1.2 as an employee record.
Note 1: Under section 344 of the Fair Work Act, an employer must not exert undue influence or undue pressure on an employee to make, or not make, an agreement under clause 1.2.
Note 2: Under section 345(1) of the Fair Work Act, a person must not knowingly or recklessly make a false or misleading representation about the workplace rights of another person under clause 1.2.
Note 3: An example of the type of agreement required by clause 1.2 is set out at Schedule […]. There is no requirement to use the form of agreement set out at Schedule […].
The Cashing Out Template Agreement
AGREEMENT TO CASH OUT ANNUAL LEAVE
Name of employee: _________________________________________
Name of employer: _________________________________________
The employer and employee agree to the employee cashing out a particular amount of the employee’s accrued paid annual leave:
The amount of leave to be cashed out is: _______ hours/days
The payment to be made to the employee for the leave is: $___________ subject to deduction of income tax/after deduction of income tax (strike out where not applicable)
The payment will be made to the employee on: _______/_______/20_____
Signature of employee: _________________________________________
Date signed: _______/_______/20_____
Name of employer
Signature of employer
Date signed: ___/___/20___
Include if the employee is under 18 years of age:
Name of parent/guardian: _________________________________________
Signature of parent/guardian: ______________________________________
Date signed: _______/_______/20_____
1  FWCFB 3177.
2  FWCFB 3953.
3  FWCFB 3177 at paragraph .
4 Transcript 1 July 2016 at PN 21; PN 27; PN 31.
5  FWCFB 3406 at .
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