[2017] FWCFB 2290

FAIR WORK COMMISSION

STATEMENT

Fair Work Act 2009
s.156 - 4 yearly review of modern awards

4 yearly review of modern awards – Payment of wages
(AM2016/8)

JUSTICE ROSS, PRESIDENT
DEPUTY PRESIDENT BOOTH
DEPUTY PRESIDENT CLANCY
COMMISSIONER CRIBB
COMMISSIONER HUNT

MELBOURNE, 26 APRIL 2017

4 yearly review of modern awards – payment of wages

[1] On 1 December 2016 the Full Bench issued a decision dealing with various ‘payment of wages’ issues in modern awards (the December 2016 decision). The main issues dealt with in the December 2016 decision were:

timing of payment of wages

timing of payment on termination of employment

accrual of wages and other amounts

[2] In respect of the issues outlined above, the Full Bench provided provisional views and model terms and called for further submissions in relation to the finalisation and determination of these issues.

[3] A number of submissions were received from parties and a summary of these submissions was published on 22 March 2017. A further hearing was held on 23 March 2017 before the Full Bench.

[4] At the 23 March hearing it was noted that there appeared to be a measure of agreement between the parties about some important matters of principle. The purpose of this Statement is to identify those potential areas of agreement and to highlight some areas of apparent disagreement.

[5] A further conference has been listed for 10.00 am on 4 May 2017, chaired by the President. The purpose of the conference is to clarify the contents of this Statement and to identify which areas may require arbitration and further award-specific consideration. The 4 May 2017 conference will be transcribed.

Potential areas of agreement

[6] The written submissions suggest that there is the potential for general agreement as to the following matters:

(i) Clarity is important, so that those covered by an award clearly understand their obligations. Parties also generally acknowledged that there are benefits of uniformity, but the circumstances of particular awards may mean that not all elements of common approach are appropriate in that particular award. 1
(ii) As noted in (i) above, while it is generally acknowledged that consistency is desirable, there is also broad support for the proposition that an award by award approach is warranted and that regard should be had to the existing terms of the award, their historical context and the circumstances pertaining to the relevant industry. 2
(iii) There is broad support for the concepts identified in the two provisional model terms. But there also appears to be some matters of detail about which there is a clear disagreement. 3 These are set out below. Further, as the Full Bench advised at the 23 March hearing, there are a number of issues requiring input from parties who were not present at the hearing; for example, on the question of whether casuals should be dealt with differently there was limited input from hospitality and retail employers and unions (other than the SDA).4

Timing of payment of wages

[7] The Full Bench set out a provisional view in respect of a ‘timing of payment of wages’ term in the December 2016 decision. The provisional view is that all modern awards should include a term providing for the method and frequency of payment as well as placing a limit on payment in arrears. The Full Bench also considered that there is utility in establishing a model ‘payment of wages and other amounts’ award term.

[8] The parties appear to be in general agreement that a payment of wages model term should specify:

(i) the duration of pay periods;
(ii) the time between the end of a pay period and when payment is due;
(iii) payment methods, and
(iv) deal with the public holiday/weekend issue. 5

[9] As to issue (ii), the Ai Group raised a concern in relation to how the timing of when payment is due after the end of a pay period would interact with annualised salaries and regular RDO-type systems. The Ai Group indicated that subject to the wording of such a clause, it would support the principle of including an award clause providing the time between the end of a pay period and when payment is due. 6

[10] As to matter (iii) (payment methods), the ACTU sought to exempt casual employees from the option of monthly payment, as their highly variable hours of work make payment in advance problematic. The ACTU submits that removing the option of monthly payment may be the surest method of preventing non-compliance with section 323 of the Fair Work Act 2009 (the Act).⁷^{The ACTU also queried whether payment by cheque remains prevalent in any particular industry. The ACTU noted that s.323(2)(b) of the Act permits payment by cheque, but that this is subject to section 323(3), which would allow a modern award to deal with the issue by prescribing the particular method of payment. This is relied upon in conjunction with s.139 of the Act. The ACTU submitted that the Commission has a choice regarding whether awards provide for payment by cheque to be a permitted method of payment.8} The position of the ACTU received broad support from union parties present at the hearing. ABI and NSW Business Chamber noted their opposition to the ACTU’s position on this issue.⁹

[11] As to issue (iv) (the public holiday/weekend issue) the ACTU submitted that a provision dealing with the issue of when payment is due on a public holiday or weekend day should be included in the model clause relating to that issue after draft clause x.1(a), but expressed concern that section 40A of the Act alters the position expressed in paragraph [44] of the Decision. 10 ABI and NSW Business Chamber also expressed a desire for a note or some other method of dealing with the issue of the treatment of public holidays.11

[12] Ai Group submitted the model terms should not require a pay day or pay period be set. It submitted that in the event of such a requirement being introduced, the model terms should not require employers to reach agreement with employees before changing the pay day or pay period. 12 It submitted employer discretion to alter pay days is essential.13 In response to the Ai Group’s submission, the Full Bench identified that an unfettered right for an employer to change its pay day might visit some unfairness on employees, in particular, where a pay day is changed to a later date.14

Timing of payment on termination of employment

[13] In the December 2016 decision, we confirmed our provisional view 15 that each modern award should provide for the payment of wages and other amounts owing to an employee on termination of employment. Such a term should also prescribe the timeframe within which such termination payments are to be made.

[14] We also confirmed our provisional view that there is utility in common ‘payment on termination’ provision across all 122 modern awards. It was accepted that each modern award is to be reviewed in its own right and there may be sound reasons for departing from a model term in a particular modern award, a case by case assessment is required.

[15] There appears to be broad agreement that there should be clarity around the timing of termination payments, and the amount that must be paid on termination. At the hearing, the Full Bench noted that the latter includes a number of issues (including those relating to long service leave and redundancy) and will require further focus. 16

Accrual of wages and other amounts

[16] There appears to be general agreement that awards should prescribe how wages accrue. Mark Irving and Andrew Stewart submit that ‘wages accrue on a day to day basis’; unless industry circumstances require modification of the default wording, for example, where the circumstances of particular awards mean that wages accrue hourly rather than day to day. 17 This general issue requires further discussion.

PRESIDENT

Issue	Parties
Model clause: payment of wages - general
Consultation with parties prior to inserting model clause where existing pay arrangements exist in an award	AMWU
Not introducing model clause where this would be to detriment of employees	TCFUA, CFMEU (FFPD)
Caution should apply before industry specific terms are replaced by model clause	ABI & NSWBC
In context of award safety net, should not assume uniformity equates with simplicity	ABI & NSWBC
‘One size fits all’ approach to model term not appropriate	SDA
Wording and substance of provisional model term supported	NatRoad
x.1(a) The employer must pay each employee no later than 7 days after the end of each pay period: (i) the employee’s wages for the pay period; and (ii) all other amounts that are due to the employee under this award and the NES for the pay period
Supportive of distinction between pay period and pay day	HIA
Number of days between end of pay period and payment in x.1(a) should be considered on an award by award basis	ACTU
Not opposed to 7 day period in x.1(a)	ABI & NSWBC
Opposed to 7 day period is x.1(a); propose shorter period in specific awards	TCFUA; CFMEU (FFPD); CFMEU (CG)
Inclusion of term providing for frequency of payment	HIA, CFMEU (CG)
Supportive of clarification that payment of wages and all other amounts is required within 7 days	HIA
x.1(a)(i) should be for ‘wages accrued during the pay period’ (or similar)	Irving & Stewart, ACTU
Unclear what is captured by ‘wages’; concerned that this may capture over award payments; rather than ‘wages’, x.1(a)(i) should refer to the payment of ‘all amounts under this award and the NES’	Ai Group; ABI & NSWBC
x.1(a) represents a significant change which has potential to disrupt existing practices such as pay averaging and annualised salaries	Ai Group (opposed by ACTU, which states that it is more desirable from regulatory point of view to have safety net that guards against inadvertent non-compliance with s.323 FW Act)
Model term x.1 should be titled ‘Payment of wages for the pay period’ to avoid overlap with other provisions and entitlements arising elsewhere Further, clause x.1(a)(ii) should be deleted for these reasons, or alternately, reworded to read: ‘(ii) all other amounts that are due and payable to the employee under this award and the NES for the pay period.’	Master Builders Australia
Any consequences for employees occurring when first pay day falls after model term takes effect should be dealt with in context of specific awards in relation to which issue arises	Ai Group
(b) An employee’s pay period may be: (i) one week; (ii) two weeks; or (iii) subject to paragraph (e), one month.
Supportive of flexibility in determining pay cycle	HIA
Clause x.1(b)(iii) should refer to x.1(e) and (f)	ACTU, supported by SDA (opposed by Ai Group)
Consider exempting casuals from option of monthly payment	ACTU, supported by SDA (opposed by HIA and NFF)
x.1(b) opposed, particularly in TCF Award which currently requires weekly payment	TCFUA
Concern about introduction of monthly pay in awards where there is no such existing provision	SDA
(c) The employer must notify each employee in writing of their pay day and pay period.
Requirement for written notification of payday and pay period (x.1(c)) opposed	ABI & NSWBC
Not necessary for every award to provide for setting of regular payday; this would reduce existing flexibilities; requirement in x.1(a) to pay within 7 days of end of pay period sufficient In response to subs from TCFUA, CFMEU (FFPD) and CFMEU (CG), Ai Group submits that its primary position is that awards should not mandate that a pay day or pay period be set, but if Commission sees fit to set these, model clause should permit flexibility for employers seeking to vary pay day/period	Ai Group (opposed by TCFUA; further, ACTU note reluctance for award requirement to set payday at odds with other employer parties’ subs)
Fair and reasonable for employees to have certainty in relation to pay day and pay period; not opposed to x.1(c) on its face but requires greater clarity about when obligation is triggered	TCFUA (relied upon by ACTU)
For notification to have practical benefit, ‘prior to the commencement of the pay period’ or similar should be added to cl. x.1(c)	CFMEU (FFPD)
(d) Subject to paragraph (e), the employer may change an employee’s pay day or pay period after giving 4 weeks’ notice in writing to the employee.
Building Award: already sought to vary cl.31.3 to provide for fortnightly and, if mutually agreeable, monthly pay cycle, and to protect employers when circumstances beyond their control prevent payment on payday	HIA
Changing current strictures surrounding weekly pay to monthly in terms set out in model term is too large a change given current practices in road transport industry	NatRoad
x.1(d) gives employers carte blanche to change pay cycles between weekly and fortnightly provided relevant notice given; changes should be by agreement with majority of employees; TCFUA submit changes should only be made by genuine agreement between employer and employees If current proposed wording is adopted, CFMEU (FFPD) propose that safeguards such as consultation should be built in	CFMEU (FFPD), CFMEU (CG), TCFUA (opposed by ABI & NSWBC), HIA submits determination of pay period legitimately within managerial prerogative Ai Group oppose requirement of agreement/consultation prior to changing pay day or pay period
Imposition of 4-week notice period to change pay day or pay period may be unduly restrictive and impractical; concerns could be remedied by limiting application of cl. x.1(d) to employees’ regular pay day or pay period	Ai Group
(e) An employer may only change from a one week or two week pay period to a one month pay period by agreement with affected employees. If employees in a particular classification were paid monthly prior to [insert date of commencement of this clause], the employer may continue to pay employees in that classification monthly without further agreement.
x.1(e): ‘paid monthly’ should be changed to ‘paid monthly in accordance with this award’	Irving & Stewart, ACTU
Monthly pay cycle by agreement	HIA
x.1(d) and (e) restrict operation of monthly pay; no cogent reason for doing so. If adopted, should include facilitative provision allowing monthly payment by agreement of majority of affected employees	Ai Group (ACTU submit tailoring of model term would seem to address much of these concerns)
Opposed to grandfathering provision in x.1(e) which is also referred to in x.1(a) and (d), but not opposed to balance of x.1(d)	ABI & NSWBC
Reference to ‘particular classifications’ in x.1(e) too narrow	Ai Group, Master Builders Australia
Strongly oppose establishment of monthly pay period; requiring agreement of affected employees an ineffective safeguard	TCFUA
No evidence to support contention that move to monthly pay will disadvantage low paid workers	Ai Group
(f) Where an employee’s pay period is one month, two weeks must be paid in advance and two weeks in arrears.
Monthly pay clause should specify at least two weeks’ wages must be paid in advance, with balance and all other amounts due under award and NES in arrears	Irving & Stewart
Commission shouldn’t impose uniform obligation in x.1(f) relating to payment in arrears	Ai Group
Consider removing clause x.1(f) from model term	Ai Group
Oppose restriction on payment in arrears in x.1(f)	ABI & NSWBC
Requirement to pay 2 weeks in advance and 2 in arrears would make paying casuals impossible	ABI & NSWBC
Inclusion of limitation on payment in arrears	HIA
x.2 Method of payment Payments under clause x.1(a) must be made by electronic funds transfer to the account at a bank or financial institution nominated by the employee, or by cash or cheque.
Inclusion of term providing for method of payment	HIA, CFMEU (CG)
Clause x.2 supported	NatRoad
Consider whether payment by cheque remains prevalent in any particular industry	ACTU (opposed by ABI & NSWBC)
Payment by cheque still common in agriculture industry	NFF
Payment by cheque opposed for TCF and dry cleaning industries: both awards only allow payment by EFT	TCFUA (opposed by ABI & NSWBC)
AI Group: payment by cheque should be retained; if removed from model clause should at least be allowed to continue in those awards that presently allow it ABI & NSWBC submit payment by cheque not obsolete, and specifically contemplated in s.323 FW Act	Ai Group; ABI & NSWBC
Weekends and Public Holidays
Support inclusion of term relating to when pay day falls on weekend and public holiday	ACTU (appropriate location after x.1(a)), SDA, HIA (example wording provides for later payment), Ai Group (support clause providing that payment can be made at a later point), TCFUA submit payment should be before the weekend/public holiday and oppose payment at a later date ABI & NSWBC submit this could be dealt with in a note (Ai Group oppose note) NatRoad: possibility of referencing Acts Interpretation Act; first preference is distinction between ‘days’ and ‘business days’, second preference a reference to s.36(2) Acts Interpretation Act
Unclear whether s.40A FW Act alters position expressed in relation to provision for when pay day falls on weekend/public holiday in Decision	ACTU
Reliance on Acts Interpretation Act not sufficient because employers may not be aware of this Act; nor can Commission rely on continued operation of this Act to ensure awards constitute fair and relevant safety net	Ai Group
Model Clause: Payment on Termination of Employment (a) Subject to paragraph (b), the employer must pay an employee no later than 7 days after the employee’s last day of employment: (i) the employee’s wages for any complete or incomplete pay period up to the end of the employee’s last day of employment; and (ii) all other amounts that are due to the employee under this award and the NES.
Proposed term poses significant administrative burden on employers. Requiring payment within 7 days is more costly than including final payments in usual pay cycle.	Payroll matters (opposed by ACTU, alternate position that 7 day wait should be limited to terminations other than at the initiative of the employer)
Payment on termination should be in accordance with the normal pay cycle. Full Bench’s provisional default term from the 14 October 2016 Statement is more appropriate.	ABI & NSWBC
Support termination payment in normal pay cycle	HIA
Current provisions in modern awards should not be unnecessarily disturbed. The issue should be addressed on an award by award basis. Do not support the 7 day period for payment on termination in awards that already provide for a shorter timeframe.	CFMEU (M&E)
Support model clause being developed to deal with the timing of termination payments and the amount that must be paid. Support the inclusion of such a term in awards that do not currently provide for payment on termination. Support the review of existing clauses dealing with termination.	ACTU (Supported by SDA and TCFUA)
If the model term is included in awards it should be amended to make clear that it operates subject to award clauses authorising deductions from termination payments to reduce the risk of employers being misled into paying an employee more than is necessary should they read the provision in isolation. The model term should be amended to clarify that it only regulates the payment of amounts payable pursuant to the NES or the award.	Ai Group (ACTU, Supported by TCFUA – proposal enables FWC to be involved at an early stage so Commission could, ‘express an opinion’ about the extent to which redundancy pay ought to be reduced were an application made under s.120)
Default clause should reflect potential for wage accrual on an hour by hour basis	Irving & Stewart (Supported by ACTU)
Re: Construction Group awards: Concerned that the use of the terms ‘complete or incomplete pay period’ at clause x.1(a)(i) of the model term may cause confusion.	HIA
Re: Building Award and the Joinery Award: Support the inclusion of the model term. Would remedy requirement that daily hire employees receive termination payments on the same day that they provide notice.	Master Builders Australia
Re: Timber Award: Do not support provisional clause. It removes longstanding right for employees, in all circumstances except summary dismissal, to be paid on termination. Minimum notice period under NES is one week, so under current award provision, where notice is worked, employers would have one week to process final pay.	CFMEU (FFPD)
Re: Black Coal Mining Industry Award 2010: General support for deletion of existing clause 16.7 (payment upon termination of employment) and insertion of new clause 16.7 in accordance with the model clause.	CMIEG
Long Service Leave Provisional term may create a dual obligation for employers with respect to accrued leave payable under some State Long Service Leave Acts and render term otiose. May require employer to pay long service leave entitlements on day of termination and then other monies owing under the award within 7 days.	CFMEU (FFPD) (Opposed by Ai Group because modern awards cannot contain terms dealing with long service leave. Separate payments for LSL and other entitlements should not deter Commission from allowing greater flexibility in relation to termination payments)
(b) The requirement to pay an employee no later than 7 days after the employee’s last day of employment is subject to s.117(2) of the Act and to any order of the Commission in relation to an application under s.120 of the Act. Note 1: Section 117(2) of the Act provides that an employer must not terminate an employee’s employment unless the employer has given the employee the required minimum period of notice or “has paid” to the employee payment instead of giving notice. Note 2: Section 120 of the Act provides that in some circumstances an employer can apply to the Commission to reduce the amount of redundancy pay an employee is entitled to under the NES. In dealing with an application, the Commission could make an order delaying the requirement to make payment until after the Commission makes a decision on the application.
Re: Textile Award and the Dry Cleaning Award: Support the submissions of the ACTU and other union parties in opposing the 7 day waiting period for termination payments. Opposes the AIG’s proposal whereby there would be no requirement for the Commission to make an order relieving an employer of obligations if a s.120 application is made. Inclusion of the note in relation to s.120 could encourage non-genuine s.120 applications to delay the payment of redundancy pay. Note 2: An application under s.120 may not be heard and determined for many months. Where the Commission found against an applicant, the employer retains the obligation to pay the redundancy pay under s.199 but has effectively subverted the beneficial obligation regarding timely payment. The Ai Group proposal would exacerbate this risk.	TCFUA
Important that the proposed clause not undermine the operation of s.120. Model term should be amended so that the obligation arising from the award does not apply in circumstances where s.120 application is made. If the s.120 application is made outside of the 7 days required in the model term, the award obligation should be taken to have never applied. There is currently no limitation on the time for making a s.120 application and awards should not operate to effectively create one. Propose the following alternative clause: “The requirement to pay an employee no later than 7 days after the employee’s last day of employment will not apply, and will be deemed to have never applied, if an employer makes application under s.120 of the Act to have the amount of redundancy pay payable to the employee reduced. In such circumstances any redundancy pay will be payable from a date determined by the Commission, provided that this date is not less than 7 days from the date of the Commission’s decision in relation to the employer’s application.”	ABI & NSWBC
Re: Timber Award: Object to inclusion of reference to s.120 in provisional term. Explicit reference to s.120 may incentivize s.120 applications and provide rogue employers with a clear path to delay or avoid their NES obligations. Unclear what remaining entitlements would be payable within 7 day timeframe if employer made s.120 application.	CFMEU (FFPD)
Re: Road Transport and Distribution Award and the Long Distance Operations Award: Support term proposed by AIG/ABI. Term proposed by FWC is preferable to the current situation under the Transport Awards. If Full Bench considers that employees paid monthly would be prejudiced by this, no objection to limiting Transport Awards so this option not available. The term ‘forthwith’ should be replaced by ‘immediately’ for simplicity.	NatRoad
Instead of ‘the employee’s last day of employment’, suggest ‘the day on which the employee’s employment is terminated’ (first instance) or ‘the day of the termination’ (second and third instances). Aligns the clause with the language used by s.117 of the Act.	Irving & Stewart (Supported by ACTU)
Re: Construction Group awards: s.119 of the Act requires payment of redundancy pay on termination. Any term of a modern award that delayed redundancy payment would be impermissible under s.55 of the Act. Model payment of wages term would require a ‘carve out’ for redundancy under s.119 as well as notice under s.117. The On-site award and Mobile Crane award have idiosyncrasies that need to be considered separately.	CFMEU (CG) (HIA opposes CFMEU proposal to deal with Construction award differently)
Re: Construction Group awards: ‘notes’ unnecessary. The provisions of ss.117, 120 are relevant but should not be specifically included in model term. Seeks to address circumstances that are dealt with in other sections of modern awards. Does not address termination at the initiative of the employee. No uncertainty about s.120 that needs to be addressed.	Master Builders