[2020] FWCFB 810
FAIR WORK COMMISSION

STATEMENT

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

4 yearly review of modern awards
(AM2019/17)

JUSTICE ROSS, PRESIDENT
DEPUTY PRESIDENT CLANCY
COMMISSIONER BISSETT

MELBOURNE, 28 FEBRUARY 2020

4 yearly review of modern awards – finalisation of exposure drafts – improving accessibility across the awards system

[1] Some 2.2 million employees have their pay set by a modern award. 1 Prior to the commencement of modern awards on 1 January 2010 there were 3323 instruments (including State and federal awards) setting pay and conditions across the country. There are now 121 modern awards. Substantially decreasing the number of awards has reduced the incidence of multiple modern awards applying in one enterprise and has made it easier to identify the applicable modern award. In research undertaken by the Commission in 2016, employee and employer organisation participants acknowledged that the modern award system was a ‘vast improvement’ on the previous system.2

[2] The Commission has an obligation under the Fair Work Act 2009 (Cth) (the Act), to ensure that the modern awards, together with the National Employment Standards provide a fair and relevant safety net of terms and conditions taking into account a range of factors that are set out at s. 134(1)(a)-(h). This is the modern awards objective. Prior to 1 January 2018, the Commission was required by the Act to undertake 4 yearly reviews of modern awards. 3 The current Review is nearing completion. The Act requires the Commission to review each modern award in its own right. This has involved an assessment of each award as a whole, to ensure that the modern awards objective is being met.

[3] The Review is the first opportunity for the Commission to thoroughly consider the operation of modern awards since the modernisation process in 2009. 4

[4] The conduct of the Review has been open and transparent. All material considered in the Review has been published on the 4 yearly review website (with the exception of material subject to confidentiality orders). Interested parties registered to receive these materials through the Commission’s subscription services are notified of the publication of any new material.

[5] The Review has included some 62 applications by industrial parties for substantive changes to particular modern awards. For example, the penalty rates case dealt with applications by various employer organisations to vary the penalty rates provisions in a number of awards in the Hospitality and Retail sectors. 5 The penalty rates Full Bench heard evidence and submissions over 39 hearing days. Evidence was given by 143 lay and expert witnesses, of whom 128 were required for cross-examination. Over 5,900 submissions have been received from the principal parties, State and Territory Governments, Church based organisations, political entities and individual employees and employers. The Full Bench decided that the existing Sunday penalty rates in the Hospitality, Fast Food, Retail and Pharmacy Awards did not achieve the modern awards objective, as they did not provide a fair and relevant minimum safety net.6 Sunday and public holiday penalty rates were subsequently reduced in a series of transitional steps with the final reductions due to take effect on 1 July 2020.7

[6] As set out above, the Act required the Commission to review each modern award in its own right. As part of this process, the Commission has redrafted each modern award, publishing exposure drafts a number of times to give interested parties opportunities to engage with the Review. A Full Bench has been constituted to oversee the process for finalising the exposure drafts produced during the Review and the consequent variation of each modern award. On 2 September 2019, the Full Bench published a timetable for the finalisation process. The timetable divides modern awards into 3 tranches. Variation determinations in respect of the 30 awards in Tranche 1 were issued on 25 November 2019 and took effect on 4 February 2020. Final variation determinations for awards in Tranche 2 were issued on 14 February 2020. 8 Draft variation determinations for the Tranche 3 awards were published on 29 January 2020 and will be finalised in accordance with the published timetable. Once the Tranche 3 variation determinations take effect the Review will largely be complete, subject to the finalisation of substantive claims affecting a small number of individual awards and the Payment of Wages common issue proceeding.

[7] Simplifying the language and structure of modern awards has been a central focus of the Review. At the start of the Review, the Commission engaged with small businesses and interested parties to make awards simpler and easier to understand and apply. 9 The objective has been to produce redrafted modern awards that can be read by an employer or employee without needing a history lesson or paid advocate to interpret how the award applies in the workplace.10

[8] Insights gained from our engagement with small businesses about matters such as the format, structure, language and usability 11 of awards has led to the restructure of each of the 121 modern awards being reviewed. The new modern awards structure follows a more logical path from the time of engagement through to termination of employment and redundancy. In addition to restructuring each modern award, the following changes have been made to improve accessibility across the award system12:

1. Standard clauses have been redrafted in plain language. 13

2. A schedule of hourly rates has been included to provide a calculated wage rate rather than a percentage of the hourly rate and avoid the need for employers and employees to make calculations. An example is at Attachment A.

3. A new model provision about how and when employees must be paid outstanding wages and other amounts due when employment ends has been included.

4. The National Training Wage Schedule has been standardised and removed from most modern awards except for the Miscellaneous Award 2010. The Schedule has been incorporated into other awards by reference to the Miscellaneous Award 2010.

5. Award terms that were inconsistent with the National Employment Standard have been removed.

6. All outdated transitional provisions have been removed.

[9] The simplification process has extended the length of some modern awards, as complex clauses are ‘unpacked’ into subclauses and expressed in plain language. The insertion of schedules of hourly rates and examples have also added to the length of some modern awards, while ensuring that information about minimum entitlements is provided in a simple and accessible form.

[10] The following additional award provisions have been inserted into all modern awards following claims by industrial parties during the Review:

1. An entitlement to 5 days’ unpaid leave to deal with family and domestic violence. 14

2. A right to request conversion from casual employment to part-time or full-time employment.

3, A right to request flexible working arrangements in certain circumstances.

4. Three new provisions relating to annual leave which allow employers and employees to more effectively manage their leave; firstly a term allowing employees to cash out annual leave; secondly a term which allows employees to apply for and take leave in advance of the entitlement to leave accruing and thirdly a provision which allows employers to direct employees to take leave in circumstances where they have an excessive leave balance. Template agreements for cashing out annual leave and taking annual leave in advance were included as schedules to each modern award.

5. The provisions about taking time off in lieu of payment for overtime (TOIL) were standardised in the 21 modern awards that had such a term prior to the Review. A TOIL term was also inserted in 92 other modern awards that did not previously provide this flexibility. A template agreement for TOIL was inserted as a schedule to each of the relevant modern awards.

[11] Building on the findings of the small business research, the Commission commenced a plain language project to further simplify the language used in modern awards. The stimulus for the plain language project was the filing of a ‘Plain English Draft’ of the Pharmacy Industry Award 2010 by the Pharmacy Guild of Australia. 15 Arising from a conference of interested parties the Commission established a pilot to produce a plain language exposure draft of the Pharmacy Award. The redrafted award was then subject to user testing and the findings were published on the Commission’s website. 16

[12] A Plain Language Full Bench was established to oversee the plain language project, which included:

  The production of plain language guidelines;

  Redrafting selected awards in plain language;

  Redrafting standard clauses in all modern awards;

  Redrafting the national training wage schedule.

[13] The project prioritised awards with high levels of award reliance and low levels of award compliance, such as the General Retail Award 2010, the Hospitality Industry Award 2010 and the Restaurant Industry Award 2010. Redrafting each of these awards in plain language will make them easier to understand and is likely to lead to increased compliance. Attachment B sets out a list of modern awards that have been extensively re-drafted as part of the plain language project and the modern awards that will be redrafted in plain language during the course of 2020. A timetable for that process will be issued shortly.

[14] The changes made during the Review have made modern awards simpler and easier to understand, which will improve voluntary compliance and accessibility across the modern award system. Four practical examples of the types of drafting changes that have been made during the plain language project are set out at Attachment C. The first example from the Pharmacy Industry Award 2010 illustrates the redrafting of a large ‘chunk’ of text into more manageable subclauses. The second example from the Restaurant Industry Award 2010 illustrates the use of tables to make information more accessible. The third and fourth examples are from the General Retail Industry Award 2010, and deal with meal breaks and reimbursement for travel expenses.

Next Steps

[15] In a decision issued on 20 August 2019 17, the Plain Language Full Bench invited any interested party to identify any term in any modern award that is ambiguous, uncertain or confusing so that the term could be considered for plain language re-drafting. This invitation was repeated in a decision by this Full Bench on 2 September 2019.18 To date, no union, employer organisation or government has sought such a change. The invitation remains open and any party wishing to pursue such a change should email: Chambers.Ross.j@fwc.gov.au.

[16] The 4 yearly review function was repealed with effect from 1 January 2018 meaning that there will not be any more 4 yearly reviews. However, it is open to interested parties to make an application to vary a modern award outside the Review. Such an application may be directed at addressing any perceived complexity in any modern award.

[17] In addition to the steps being taken as part of the Plain Language Project there are two further initiatives which will make modern awards easier to understand and apply; these are:

  the introduction of ‘loaded rates’ into certain awards; and

  the development of short summaries of particular modern awards.

(i) Loaded rates

[18] A ‘loaded rate’ is a rate which is higher than the applicable minimum hourly rate specified in the modern award and is paid for all hours worked instead of certain penalty rates (such as the penalty rates for Saturday and Sunday work).

[19] In a 2013 decision in the Transitional Review a Full Bench 19 dealt with a number of applications to vary penalty rates in 5 modern awards including the Hospitality Award, Fast Food Award and Retail Award. In the course of rejecting those claims, the Full Bench said:

‘… we consider that there is merit in the parties discussing the concept of incorporating loaded rates within the General Retail and Fast Food awards.

Any such loaded rates would need to recognise the application of the existing penalty rates regime and apply fairly across the range of employees and working hours patterns that might be considered as applicable to the concept. Subject to those considerations, our preliminary view is that the establishment of loaded rates within these awards would have the capacity to reduce the complexity of their application, particularly for small businesses.

In order to explore this concept further, the Commission will facilitate some conciliation discussions between the major parties with a view to seeking a degree of consensus. Commissioner Hampton will convene a conference for this purpose in the near future.’ 20

[20] Commissioner Hampton subsequently convened a conference of parties with an interest in the Retail and other awards which were the subject of the earlier proceedings and provided a report to the Full Bench on 13 June 2013. The Commissioner’s report indicated that, at least at that time, there was not a great deal of interest from the major parties in pursuing the insertion of loaded rates into the awards under consideration. The Commissioner concluded his report as follows:

‘Given the attitude of the major parties and the absence of specific proposals, I recommend to the Full Bench that no further action be taken in relation to these particular matters as part of the Modern Award Review 2012.’ 21

[21] In the subsequent 4 yearly review Penalty Rates Decision 22 relating to the hospitality and retail sectors the Full Bench agreed with the view expressed by the Transitional Review Full Bench; that there is merit in considering the insertion of appropriate loaded rates into the relevant awards. The Penalty Rates Full Bench went on to say:

subject to appropriate safeguards, schedules to these awards could be developed which provide that if employee are paid a higher (‘loaded’) rate of pay then they would not be entitled to certain penalty payments. It seems to us that, subject to the inclusion of appropriate safeguards, schedules of ‘loaded rates’ may make awards simpler and easier to understand, consistent with the consideration in s.134(1)(g).

It is also relevant that the businesses covered by the modern awards before us are predominately small businesses. About two-thirds of businesses in the Hospitality sector and over half of the businesses in the Retail Sector are small businesses.

Small businesses face a number of practical impediments to entering into enterprise agreements. This is reflected in the positive correlation between business size and collective agreement making. An increase in business size is associated with an increase in the proportion of employees covered by collective agreements. As demonstrated by…. Chart 3 in the June 2015 ‘4 yearly review of modern awards – Annual leave’ decision, which is reproduced below, as Chart 63.

Chart 63

Proportion of employees with their pay set by method of setting pay and business size—May 2014

Note: Data on method of setting pay by business size exclude owner managers of incorporated businesses.

Schedules of ‘loaded rates’ would allow small businesses to access additional flexibility without the need to enter into an enterprise agreement.

The insertion of ‘loaded rates’ schedules into these modern awards may also have a positive effect on award compliance. 23 (Footnotes omitted)

[22] The Full Bench concluded that it was alive to the potential complexity involved in the task of developing loaded rates and envisioned that it would be an iterative process undertaken in consultation with interested parties.

[23] The penalty rate reductions resulting from the Penalty Rate decision were phased in over time. This phasing process will be complete on 1 July 2020. In the second half of this year the President will convene a conference, on the Commission’s own motion, to consider the insertion of loaded rates in the retail and hospitality awards. It is open to the Commission to vary a modern award on its own motion if a variation is necessary to achieve the modern awards objective. In this context we note that in the Penalty Rates - Transitional Arrangements Decision 24 the Full Bench rejected ACCI’s submission that any further consideration of loaded rates only be instigated on application (by unions or employers) and not on the Commission’s own motion noting that:

‘As the Commission has observed on a number of occasions, modern awards are very different to awards of the past. Modern awards are not made to prevent or settle industrial disputes between particular parties. Rather, modern awards are, in effect, regulatory instruments that set minimum terms and conditions of employment for the employees to whom the modern award applied. Further, the 4 yearly review is to be distinguished from inter parties proceedings; it is conducted on the Commission’s own motion and is not dependent upon an application by an interested party.’ 25

(ii) Summaries of particular modern awards

[24] The Commission’s current change program, What’s Next? is directed at improving access and reducing complexity for Commission users. As part of that change program, and to complement the plain language project, the Commission intends to develop short summaries of the modern awards in the aged care, clerical, retail, hospitality, restaurant and hair and beauty industries. Awards in these industries were selected because they have a high proportion of employees paid at the award rate and have substantial small business coverage. For example, employees in the retail trade, accommodation and food services industries account for one-third of all award-reliant employees, and there are more than 70,000 small businesses in the retail trade sector alone.

[25] The award summaries will be short, accessible documents that set out key award provisions and provide explanations, examples and links to resources. While not legal instruments, they will provide an easy to understand summary of key rights and obligations.

[26] Draft summaries in the selected industries will be released for public comment, in the second half of this year.

PRESIDENT

Printed by authority of the Commonwealth Government Printer

<PR716755>

Attachment A– Calculating rates of pay in modern awards

How much do I have to pay my retail employee?

I have a 17 year old casual Retail Employee Level 1 working on a Saturday. What is her hourly rate?

1 Rates of pay and penalty rates as at 1 February 2020 in the General Retail Industry Award 2010

Attachment B–Examples of redrafted award clauses

1. Pharmacy Industry Award

2. Restaurant Industry Award

3. General Retail Industry Award

4. General Retail Industry Award

Attachment C–Awards redrafted in plain language

The following awards been completely redrafted in plain language:

1. Pharmacy Industry Award 2010

2. Clerks – Private Sector Award 2010

3. Cleaning Services Award 2010

4. Restaurant Industry Award 2010

5. Hospitality Industry (General) Award 2010

6. General Retail Industry Award 2010

7. Security Services Industry Award 2010

The following awards will be redrafted in plain language during the course of 2020. A timetable for this process will be issued shortly.

1. Aged Care Award 2010

2. Children’s Services Award 2010

3. Fast Food Industry Award 2010

4. Social, Community, Home Care and Disability Services Industry Award 2010

5. Hair and Beauty Industry Award 2010

 1   ABS, Employee Earnings and Hours, Australia, May 2018, Catalogue No. 6306.0.

 2   Multiple modern award coverage and the utility of majority clauses report, May 2016.

 3   The Federal Court has described the Commission’s task in conducting the Review in the following way: ‘The terms of s 156(2)(a) require the Commission to review all modern awards every four years. That is the task upon which the Commission was engaged. The statutory task is, in this context, not limited to focusing upon any posited variation as necessary to achieve the modern awards objective, as it is under s 157(1)(a). Rather, it is a review of the modern award as a whole. The review is at large, to ensure that the modern awards objective is being met: that the award, together with the National Employment Standards, provides a fair and relevant minimum safety net of terms and conditions. This is to be achieved by s 138 – terms may and must be included only to the extent necessary to achieve such an objective. See CFMEU v Anglo American Metallurgical Coal Pty Ltd [2017] FCAFC 123.

 4   The Transitional Review of modern awards completed in 2013 was narrower in scope than the 4 yearly review. See [2014] FWCFB 1788 at [19].

 5   Fast Food Industry Award 2010, General Retail Industry Award 2010, Hospitality Industry (General) Award 2010, Pharmacy Industry Award 2010, Registered and Licensed Clubs Award 2010 and the Restaurant Industry Award 2010.

 6   [2017] FWCFB 1001.

 7   [2017] FWCFB 3334.

 8   14 of these awards will come into effect on 13 April 2020. At the request of interested parties, the remaining awards in Tranche 2 will come into effect on 4 May 2020. 6 of the Tranche 2 awards were republished as drafts following the Full Bench decision in AM2016/13.

 9   Sweeney Research, Citizen Co-design with small business owners report, 13 August 2014.

 10   [2015] FWCFB 4658 at [6]-[7].

 11   Sweeney Research, Citizen Co-design with small business owners report, 13 August 2014.

 12   With a limited number of exceptions in modern awards that required an industry specific approach.

 13   The standard clauses are: Award flexibility; Consultation; Dispute Resolution; Termination of Employment; and Redundancy.

 14   Following the commencement of the Fair Work Amendment (Family and Domestic Violence Leave) Act 2018 (Cth) the Commission decided to remove the model term and insert a reference to the new NES entitlement.

 15   Pharmacy Guild of Australian Plain English Draft.

 16   Report from the Plain Language modern awards pilot, April 2016.

 17   [2019] FWCFB 5409 at [24].

 18   [2019] FWCFB 6077 at [14].

 19   [2013] FWCFB 1635.

 20   [2013] FWCFB 1635 at [329]–[331].

 21   [2013] FWC 3712 at [5].

 22   [2017] FWCFB 1001.

 23   [2017] FWCFB 1001 at [2068]-[2072].

 24   [2017] FWCFB 3001.

 25   Ibid at [262].