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AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

Industrial Relations Act 1988 s.113 applications for variation

Metal Trades Industry Association of Australia

METAL INDUSTRY AWARD 1984 - PART I(1) (ODN C No. 01933 of 1974) (C Nos 21197 and 21201 of 1991)

METAL INDUSTRY AWARD, 1984 - PART II - DRAUGHTSMEN, PRODUCTION PLANNERS AND TECHNICAL OFFICERS(2) (ODN C No. 01978 of 1974) (C No. 21200 of 1991)

METAL INDUSTRY AWARD 1984 - PART V - FOREMEN AND SUPERVISORS(3) (ODN C No. 01652 of 1974) (C No. 21199 of 1991)

METAL INDUSTRY (ENGINE DRIVERS' AND FIREMEN'S) AWARD 1984(4) (ODN C No. 02948 of 1984) (C No. 21198 of 1991)

The Australian Chamber of Manufactures (C No. 31719 of 1991)

METAL INDUSTRY AWARD 1984 - PART I (ODN C No. 01933 of 1974)

Various employees Metal industry

JUSTICE MADDERN, PRESIDENT DEPUTY PRESIDENT KEOGH DEPUTY PRESIDENT HANCOCK COMMISSIONER CONNELL COMMISSIONER OLDMEADOW MELBOURNE, 30 OCTOBER 1991

REASONS FOR DECISION

On 13 August 1991 this Full Bench determined(5) that applications by the Metal Trades Industry Association of Australia (MTIA) and The Australian Chamber of Manufactures (ACM) to vary:

. the Metal Industry Award 1984 - Part I;

. the Metal Industry Award, 1984 - Part II - Draughtsmen, Production Planners and Technical Officers;

_______________________________________________________________________________

(1)Print F8925 [M039] (2)Print F5144 [M041] (3)Print F5010 [M177] (4)Print F6757 [M187] (5)Print J8943

2 NATIONAL WAGE CASE OCTOBER 1991 . the Metal Industry Award 1984 - Part V - Foremen and Supervisors; and

. the Metal Industry (Engine Drivers' and Firemen's) Award 1984

(the metal industry awards) should be the vehicle to constitute the review of wage fixation principles foreshadowed in the April 1991 National Wage Case decision.(6) The Commission also asked that those appearing in the proceedings "address the question of whether the Commission should continue to establish principles of wage fixation in National Wage Cases which are intended to be applied generally in proceedings before this Commission and the consequences of a changed approach".(7)

There are a number of issues to be determined in this case. The most important of these are:

. the future of the structural efficiency principle;

. enterprise bargaining;

. the applications to vary the metal industry awards.

THE STRUCTURAL EFFICIENCY PRINCIPLE

In the August 1988 National Wage Case decision,(8) the Commission discontinued the restructuring and efficiency principle and established the structural efficiency principle "to facilitate the type of fundamental review essential to ensure that existing award structures are relevant to modern competitive requirements of industry and in the best interests of both management and workers".

In its April 1991 National Wage Case decision, the Commission analysed the effectiveness to that point of the parties' efforts to implement the structural efficiency principle and pointed to facts which gave it grave concern. These were:

. while "emphasis has been placed on classification restructuring, training and associated issues; other areas have been addressed but with less emphasis", despite the fact that "there is no limitation on the agenda available for structural efficiency exercises";

. ". . . even where parties have made substantial changes to their awards, there seems to have been little real impact at the enterprise level. This is inconsistent with the structural efficiency principle. It was not, and is not, contemplated that award change alone could achieve the purpose of the principle: that change must be applied as necessary at the workplace level in order to achieve real gain"; and

. the minimum rates adjustment process, a prerequisite to the establishment of stable, modernised awards, was not complete. Its completion by the parties was an "essential step towards institutional reform which is a prerequisite to a more flexible system of wage fixation". _______________________________________________________________________________

(6)Print J7400 (7)Print J8943, p.2 (8)Print H4000

NATIONAL WAGE CASE OCTOBER 1991 3

Against this background, the Commission decided to continue the thrust towards the proper implementation of the structural efficiency principle. It prescribed a structured approach which "will not only cause the parties to assess objectively their efforts to date but will focus the attention of management and employees on measures to improve efficiency and productivity at workplace level; it should also encourage an educative process which will be important in any future decentralisation of industrial relations to the workplace level".

Since the April decision, parties to a number of awards have met its requirements and the awards have been varied accordingly. There remains a significant number of awards to which the decision has yet to be applied.

We consider it essential that the steps commenced in 1987 with the restructuring and efficiency principle, and extended through the National Wage Case decisions of 1988, 1989(9) and April 1991 with the structural efficiency principle, be continued. The wage fixation principles determined by this decision will so provide.

ENTERPRISE BARGAINING

In the April National Wage Case decision, we did not establish principles for enterprise bargaining, notwithstanding submissions by most parties and interveners which favoured our doing so. We made it clear that the decision implied no opposition to enterprise bargaining. As we pointed out, National Wage Case decisions since 1987 had encouraged a shift of emphasis in industrial relations toward enterprise-level negotiations directed to raising productivity. The April decision consolidated this process by making available wage increases which were conditional upon the achievement of various measures of structural efficiency. Although we declined to go further, we said:

"There are many large unresolved issues requiring careful attention and further debate . . . The parties and interveners need to clarify their ideas and objectives. It would be inappropriate to endorse any new form of enterprise bargaining until that is done. That conclusion prejudges neither the advisability nor the form of a system which lies beyond the limits of the wage fixation principles determined in this decision."(10)

The submissions again revealed a diversity of opinions and a failure to confront practical problems. Despite this, the parties and interveners once more press us to move toward a more devolved system. Collectively, they have left to us the task of translating a general concept into workable arrangements. There is little prospect, it would seem, that further postponement will lead to more fully developed proposals or to the resolution of points of disagreement. Although the concerns expressed in our April decision have not been allayed, we are satisfied that a further and concerted effort should be made to improve the efficiency of enterprises. In all the circumstances confronting us, we are prepared, on balance, to determine an enterprise bargaining principle. In deciding the best way to proceed, we have taken account of views of the parties and interveners and the need to limit the risks inherent in the approach chosen.

Most parties and interveners support:

_______________________________________________________________________________

(9)Print H9100 (10)Print J7400, p.39

4 NATIONAL WAGE CASE OCTOBER 1991

. the continued implementation of the 1991 National Wage Case decision;

. a greater emphasis on the implementation of structural efficiency at the plant level, i.e. "enterprise bargaining";

. single bargaining units;

. greater use of section 115 and the more flexible application of it, the main test for certification of agreements being the interests of the immediate parties;

. a restricted arbitral role for the Commission, consistent with the emphasis upon enterprise bargaining; and

. the linking of wage increases in the immediate future to productivity improvements and increased efficiency at the enterprise level.

The risks inherent in further devolution are:

. that because of inadequate bargaining mechanisms, bargaining in some instances will fail to capture the expected efficiency gains and will be attended by disputation; and

. that the familiar forces of comparative wage justice and flow-on will assert themselves, giving rise to "community standards" and generating excessive wage outcomes.

The risks are increased by the uncertainties and disagreements which exist as to the appropriate assessment of wage increases negotiated at the enterprise level. Wage increases achieved through enterprise bargaining ought, in our view, to be justified by and commensurate with employees' contributions to enterprise efficiency and productivity. In saying this, we are not expressing an opinion that wage earners have no claim to benefit from the growth of productivity due to other causes, such as the general advance of technology and the growth of the capital stock. It should be recognised, however, that distribution of all of the benefits of productivity growth at the enterprise level would lead to inequity and, ultimately, to a distorted and unsustainable wage structure. Such a situation is compatible with neither a flexible labour market nor industrial peace.

We are also satisfied that a number of factors make it inappropriate for the Commission to arbitrate in cases involving enterprise bargaining. These include: the absence of satisfactory proposals from the parties and interveners as to how "achieved productivity" should be measured and/or distributed; the potential for inequities in systems of enterprise bargaining based on "achieved productivity"; the likelihood that arbitration will aggravate flow-on effects, with attendant industrial disputes; and the possibility that an arbitration will be taken as erecting a standard for enterprise bargaining which may unnecessarily constrain outcomes in other cases. These concerns apply to the distribution of "achieved productivity" by arbitration whether in minimum rates awards or paid rates awards. They indicate, in our view, the difficulty which the Commission would confront in maintaining a rational system of wage fixation if it were to arbitrate on grounds related to "achieved productivity".

In view of the foregoing, we have sought to devise a mechanism which, consistent with the inherent nature of enterprise bargaining:

NATIONAL WAGE CASE OCTOBER 1991 5

. will place the primary responsibility for achieving successful enterprise bargaining results on the direct parties;

. will require parties to abide by mutually agreed outcomes for a set period and to accept an on-going responsibility for reviewing the effectiveness of their agreement and for its renewal or replacement;

. will enable the Commission to have a conciliation role in disputes over enterprise bargaining and a role in testing the substance of agreements reached; and

. will give enterprise bargaining agreements the same legal status as awards.

These objectives have led us to sections 112 and 115 of the Act which allow parties to disputes to bring agreed terms of settlement to the Commission for ratification as consent awards or agreements, respectively. Both sections exclude arbitration by the Commission. But there are important differences - some of them significant for this case. Whereas the Act contains provisions designed to prevent flow of the terms of certified agreements, no such provisions apply to the terms of consent awards. Section 115 provides that certification shall not be contrary to the public interest merely because the agreement is inconsistent with general Full Bench principles. Section 112 makes no such provision. Consent awards made under section 112 need not expire at the end of their specified terms and continue to operate unless there are specific provisions to the contrary. Section 115, by contrast, requires a specified period of operation after which an agreement has no effect, unless renewed. Section 115 agreements, unlike consent awards, cannot be varied during their period of operation.

Having regard to the different provisions of the two sections, we should have preferred, on balance, to confine the enterprise bargaining process to section 115, which has the character of a separate legislative scheme for the negotiated settlements of disputes. However, we are satisfied that, if we were to determine an enterprise bargaining principle applicable only to section 115 agreements, each enterprise bargaining agreement would have to be dealt with by a Full Bench because of the effect of subsections 115(6) and (10). This would be impractical. Obviously, we cannot vary the terms of section 115. Consequently, we have decided to make use of both sections and to specify the requirements for section 112 consent awards so as to achieve consistency in the operation of the two sections for the purpose of ratifying enterprise bargaining agreements. To this end, we will require that a consent award made under section 112, in consequence of the enterprise bargaining principle, must operate for a fixed term and must not continue after its expiry date, unless renewed.

In taking this course, we make it clear that the use of the combination of sections 112 and 115 is not entirely satisfactory. Indeed, we consider that having two sections of the Act with different requirements for the ratification of agreements is neither necessary or desirable.

Enterprise bargaining agreements for which approval is sought may operate in conjunction with the relevant award or awards. Alternatively, there is nothing in the process or the principle which will prevent parties from submitting an agreement (or consent award) that comprehends rates of pay and working conditions and arrangements to the exclusion of a previously relevant award or awards. The alternative is not to be seen as another process to

6 NATIONAL WAGE CASE OCTOBER 1991

convert minimum rates awards to paid rates awards. Any such change would need to be made in accordance with the paid rates awards principle. Moreover, where a new comprehensive agreement or consent award is made to replace an existing award or awards, and it gives effect to a negotiated wage increase, that increase is to be shown separately from standard rates of pay.

In any case coming before the Commission in accordance with the process we determine, the parties will have to satisfy the Commission that the proposed agreement or consent award is within the ambit of a genuine industrial dispute. Similarly, other jurisdictional requirements of the Act - for instance, those of section 106 - must be met.

The Commission is prepared to approve, pursuant to section 112 or section 115 of the Act, enterprise bargaining agreements made between parties bound by minimum rates or paid rates awards, subject to the following requirements:

(a) the parties satisfy the Commission that they have met the structural efficiency principle requirements prescribed in the April 1991 National Wage Case decision;

(b) the agreement is consistent with the continuing implementation at enterprise-level of the structural efficiency principle and any wage increases contained therein are based on the actual implementation of efficiency measures designed to effect real gains in productivity;

(d) the agreement has been negotiated through a single bargaining unit in an enterprise or section of an enterprise. In the case of a single bargaining unit in a section of an enterprise, the parties must demonstrate that the section is discrete: its being treated separately from other sections of the enterprise must not restrict the implementation of the structural efficiency principle and enterprise bargaining in that establishment, or other sections of the enterprise;

(e) where the agreement operates in conjunction with an award or awards, it details the wage increases involved for each classification and all efficiency measures agreed. Alternatively, where an agreement replaces an existing award or awards, it must express the enterprise bargain wage increase as a separate amount from the standard rates of pay and state all efficiency measures agreed;

(f) the agreement provides no further wage or salary increase for its life, except when consistent with a National Wage Case decision;

(g) the agreement does not involve a reduction in ordinary time earnings or departures from Commission standards of hours of work, annual leave with pay or long service leave with pay;

(h) the agreement:

(i) is for a fixed term; and

NATIONAL WAGE CASE OCTOBER 1991 7

(ii) will not continue in force after its expiry date, unless renewed;

(i) the operative date of any wage increase for which an agreement provides is no earlier than the date of approval or certification of the agreement; and

(j) where parties to an enterprise agreement reached through negotiations with a single bargaining unit include employees covered by a State award, an agreement covering those employees is submitted to the relevant State tribunal for approval.

At the time of expiration of an agreement, it is the responsibility of the parties to seek its renewal or replacement.

APPLICATIONS TO VARY THE METAL INDUSTRY AWARDS

There are before us two proposals for the extension of enterprise bargaining in the metal industry. One proposal, made by the MTIA, seeks to give effect to an agreement between the MTIA and the Metal Trades Federation of Unions (MTFU). The other, advanced by the ACM, would require an arbitrated decision. Both proposals envisage the negotiation at the enterprise level of wage increases related to efficiency measures; and both favour the use of award appendices to implement the enterprise agreements. The material difference between them relates to the amount and timing of wage increases: whereas the agreement between the MTIA and the MTFU specifies an increase of up to 2.5 per cent not before 1 November 1991 and another increase of up to 2.0 per cent not before 1 January 1992, the ACM proposal defines neither the level of increase nor the date of operation.

The MTIA proposal has both positive and negative features. Among the former are the following:

. the fact that the proposal is the product of agreement, reflecting significant efforts by the parties to encourage changes at the enterprise-level;

. the fact that it continues the approach adopted by the Commission since 1987;

. the requirement of employee contributions to productivity by way of more exacting work or changed work practices, and the exclusion of payments for greater efficiency which is caused by technological change alone;

. the requirement that gains in productivity, efficiency and flexibility be real and demonstrable;

. the proscription of wage increases based on past productivity increases;

. the expectation of broad agendas in enterprise bargaining;

. the exclusion of reductions "in ordinary time earnings or in national standards such as standard hours, annual leave and long service leave";

8 NATIONAL WAGE CASE OCTOBER 1991

. the stipulation that the agreement will not be used as a precedent to secure similar arrangements or benefits in other awards;

. the requirement that enterprise agreements be recorded and acknowledged by employers, employees and unions, with the documents making explicit the dates of operation, the agreed work changes, wage increases and the parties' commitment not to use the agreement as a precedent in negotiations at any other enterprise or plant;

. the acceptance that the Commission, in the hearings for approval of enterprise agreements, will consider whether agreements are contrary to the public interest; and

. the requirement for negotiations to be conducted strictly in accordance with the procedure for avoidance of industrial disputes in subclause 6(j) of the Metal Industry Award 1984 - Part I.

To be set against these positive features are the size of the wage increases which the agreement allows and the very real risk that such increases will flow on. The likelihood of flow is high, particularly where other unions operate and other awards apply in the establishments concerned. This expectation is amply justified by history; and the potential for flow is accepted, albeit to varying degrees, by most parties and interveners. Both the MTIA and the unions contended that, in this instance, flow might be no bad thing because of the productivity benefits which are secured. Whether this contention is justified will depend upon the preparedness of employers and unions to operate within the formal framework provided by this decision rather than in the overaward area. It will also depend upon the substance of the agreements.

Despite these reservations, we are, on balance, prepared to support the basic thrust of the MTIA/MTFU agreement in the current transitional environment and because of the enterprise bargaining principle we have determined in this decision. However, we do not consider it necessary to vary the metal industry awards to give effect to the agreement. As a matter of formality, we therefore refuse the MTIA applications. We expect that enterprise agreements reached in accordance with it will be presented for ratification under the enterprise bargaining principle.

We have noted that the ACM application to vary is not agreed. Both for this reason and because of the enterprise bargaining principle we are not prepared to grant that application.

OTHER MATTERS

In this part of our decision, we deal with:

. paid rates awards;

. a "third category" award;

. consolidated minimum classification rates and supplementary payments;

. work value;

. review of union coverage and award structures;

NATIONAL WAGE CASE OCTOBER 1991 9

. further proceedings; and

. future adjustments.

Paid rates awards

In the April 1991 National Wage Case decision, we expressed reservations about proposed approaches to the fixation of rates of pay in paid rates awards. In particular, we expressed misgivings about the proposals relating to consideration of market rates.

Some parties attempted to address our reservations in the current proceedings. For example, the Commonwealth made submissions about:

. the need for increased flexibility in paid rates awards to cater for considerations related to the market, skill and responsibility, and recruitment and retention;

. the possibility of fixing salary ranges and occupational or regional loadings;

. market surveys; and

. the scope and integrity of paid rates awards.

Neither the submissions of the Commonwealth, nor those of any other party or intervener, have allayed the concerns raised in the April decision. Because of this and the views of the parties on the need to ensure that labour cost increases are directly related to real gains in productivity, we are not prepared to allow market considerations under the enterprise bargaining principle. If, in the further implementation of the structural efficiency principle, the parties to an award seek to achieve increases not only related to efficiency measures but also based on market considerations, any such claim will be the subject of a special case. We expect that, in such a case, the parties will address the substance of the reservations raised in the April decision. We consider that, until this occurs, minimum rates and paid rates awards should be treated in the same way. We have this view both because of the on-going friction between them - friction which has been exacerbated in recent times and has caused claims of inconsistency of treatment - and because of the nature of the wage system which will operate in the immediate future. This decision means that awards of both types must comply with the general principles, including the principle for enterprise bargaining.

The issue of the integrity of paid rates awards was raised, particularly by the Commonwealth, which put forward as part of its framework for paid rates awards that:

"(iii) parties are required to give commitments to maintain the integrity of the award; and

(iv) if a paid rates award ceases to be a true paid rates award, that award should be converted to a minimum rates award after appropriate hearings."

These propositions represent no more than the clear understanding of the Commission and parties to paid rates awards since the early 1980s. We inadvertently omitted explicit prescriptions to that effect in the April 1991 principles. We shall reinsert the appropriate provisions.

10 NATIONAL WAGE CASE OCTOBER 1991

The scope for performance-based pay within the context of paid rates awards also needs to be considered. We have no problem in accepting the concept of performance-based pay or other types of payment-by-results schemes where performance is directly related to output, nor do we have difficulty with a range of payments, consistent with the external market, wherein there is scope to recognise superior performance. We do, however, have difficulty with arrangements whereby existing paid rates are used as the basis for application of performance-based pay in such a way that the prescribed paid rate is considered appropriate for unsatisfactory performance. Such schemes have come to the Commission's attention.

We understand that the Commonwealth, through the Public Service Commissioner, has approved, at least in principle, performance-based pay schemes in some of its areas of employment. We request the Commonwealth to forward the details of such schemes to the Commission which will, as soon as practicable, convene proceedings wherein the National Wage Case parties and interveners can address this issue further, using the Commonwealth schemes as a starting point.

A "third category" award

The Association of Independent Schools, A.C.T. Incorporated and the National Catholic Committee on Industrial Relations put submissions that the Commission should provide for a third category of award type to be known as "actual rates". Such awards are paid rates for the purpose of wage determination, although some overaward payments exist.

The parties also submitted that the requirement of the February 1989 Review(11) and the August 1989 National Wage Case decisions, for minimum rates awards to be reviewed "to ensure that classification rates and supplementary payments in an award bear a proper relationship to classification rates and supplementary payments in other minimum rates awards", was not intended to apply to awards in professional areas such as teaching.

We do not accept this submission. Nor do we consider that there is any case for a third category of award type. If a paid rates award is found to be associated with overaward benefits (that is, benefits over and above those specified in the award) then the conversion of such a lapsed paid rates award into a minimum rates award will involve a valuation of classifications in it by comparison with similar classifications in other minimum rates awards. A hybrid award will only erode the distinction between minimum rates and paid rates awards and lead to instability in the relationship between minimum rates awards.

Consolidated minimum classification rates and supplementary payments

In these proceedings, some parties and interveners have sought a variation in the current requirement that minimum classification rates and supplementary payments be prescribed in separate clauses. We are prepared to amend the principles so that both may be prescribed, in two clearly indicated amounts, in the one clause. In doing so, we note again the expectation expressed in the August 1989 National Wage Case decision, namely, that supplementary payments may vary in the future on the basis of geographic

_______________________________________________________________________________

(11)Print H8200

NATIONAL WAGE CASE OCTOBER 1991 11

location, industry or the circumstances of individual employers or on some other basis. It is a matter for consideration, after the completion of the minimum rates adjustment process, whether the expectation that supplementary payments may be increased differentially in the future will be revised.

Work value

In the April 1991 National Wage Case decision, the parties and interveners suggested alterations to the work value changes principle. We declined to make any such changes at that time, stating:

"Any future consideration of this principle should have regard to the effect of any change on other principles, such as structural efficiency and paid rates awards, and enterprise bargaining."(12)

A fundamental thrust of the structural efficiency principle has been the minimum rates adjustment process as a prerequisite to the establishment of stable, modernised awards. The Commission decided in the February 1989 Review decision that minimum rates awards would be reviewed "to ensure that classification rates and supplementary payments in an award bear a proper relationship to classification rates and supplementary payments in other minimum rates awards". To ensure that this fundamental purpose of the structural efficiency principle is applied properly, we have decided to amend the work value changes principle. In making a monetary assessment of a change in work value, the Commission will take account, inter alia, of the relativities and integrity of internal award classifications structures and other external classifications to which the structure is related.

Review of union coverage and award structures

Various employer submissions have called upon the Commission to review union coverage and award structures.

In our opinion, any attempt by the Commission to devise and impose a general plan for union representation would go beyond the role envisaged for the Commission by the Act. Accordingly, we do not accede to the proposal that we initiate a review of union coverage.

The general scheme of awards is, however, more properly the subject of the Commission's consideration; and it may be that the present structure of awards exacerbates some of the difficulties and risks identified in our discussion of enterprise bargaining. Consequently, we think that it would be appropriate for the Commission to confer with the National Wage Case parties about proposals as to award structures which have been made in this case. The time and date of a conference will be announced by the President, after consultation with the major parties and interveners, before 30 November 1991.

Further proceedings

The Commission will hold a conference of the parties and interveners on 1 May 1992 to review the operation of this decision. Such a review is necessary because of the background to this decision, the risks associated with the further devolution of the wage system and the Commission's responsibilities under section 90 of the Act. The information required of the parties and interveners for this review will include: _______________________________________________________________________________

(12)Print J7400, p.55

12 NATIONAL WAGE CASE OCTOBER 1991

. the use made of the enterprise bargaining principle and the types of agreements reached;

. the effectiveness of those agreements and the types of efficiency measures implemented;

. the use and effectiveness of single bargaining units;

. the effectiveness of award provisions required by the April 1991 National Wage Case decision (structural efficiency principle); and

. developments in wages (including overaward payments), prices and employment.

Some employer representatives asked us to declare that there would be no further general wage increases by way of National Wage Cases. The ACTU, on the other hand, said that during the present financial year it would seek "a general wage increase for all workers without cost offsets and from a common operative date to achieve at least real wage maintenance by National Wage Case decision".(13)

The outcome of the foreshadowed application will depend upon the material and argument put to the Commission in the relevant proceedings. The information required for the review conference of 1 May 1992 would also be directly relevant. It would be quite wrong to pre-empt such an application by any declaration at this stage - the more so because the interrelation between wage increases negotiated at the enterprise-level and general wage increases has not been adequately argued in proceedings before the Commission.

CONCLUSION

The principles established by this decision are set out in Appendix A and will operate from 1 November 1991. Under those principles, the main avenues for wage changes will be:

(a) the structural efficiency principle determined in the April 1991 National Wage Case decision which provided:

. a maximum increase of 2.5 per cent, subject to satisfying certain requirements; and

. that any claim for increases in excess of those allowable in the August 1989 and April 1991 National Wage Case decisions must be processed as a special case before a Full Bench; and

(b) the enterprise bargaining principle determined in the October 1991 National Wage Case decision and which applies only to agreed matters coming within sections 112 and 115 of the Act.

The Commission is available to assist parties by means of both conciliation and arbitration, in accordance with the relevant provisions of the Act, in matters relating to implementation of the structural efficiency principle determined in the April 1991 National Wage Case decision. In

_______________________________________________________________________________

(13)transcript, p.176

NATIONAL WAGE CASE OCTOBER 1991 13

relation to matters pursued through the enterprise bargaining principle, consistent with sections 112 and 115, the Commission is available to assist the parties through conciliation, but not by formal arbitration.

Applications for adjustments available under previous National Wage Case decisions will be determined in accordance with the principles determined in those cases.

The principles and process which we have determined provide for wage increases linked to measures for promoting efficiency and productivity. Whether the gains in efficiency and productivity are achieved depends primarily upon the direct industrial relations parties and their ability to translate their commitments into appropriate outcomes. Because of the circumstances of this case and the analysis contained in our April decision, we have not in this decision provided a detailed survey of economic indicators. Growth in labour costs, however, will lessen the prospects for both economic recovery and low inflation, unless it is consistent with productivity growth. Both in the short run and in the longer term, the performance of the economy will be significantly affected by the parties' response to the opportunities which this decision provides for them.

BY THE COMMISSION:

PRESIDENT

14 NATIONAL WAGE CASE OCTOBER 1991

APPENDIX A

THE PRINCIPLES

These principles have been developed with the aim of providing, for their period of operation, a framework under which all concerned - employers, workers and their unions, governments and tribunals - can co-operate to ensure that measures to meet the competitive requirements of enterprises are positively examined and implemented in the interests of management, workers and, ultimately, Australian society.

Movements in wages and conditions must fall within the principles which, inter alia, provide for such movements through:

(a) the structural efficiency principle determined in the April 1991 National Wage Case decision which provided:

. a maximum increase of 2.5 per cent, subject to satisfying certain requirements; and

. that any claim for increases in excess of those allowable in the August 1989 and April 1991 National Wage Case decisions must be processed as a special case before a Full Bench; and

(b) the enterprise bargaining principle determined in the October 1991 National Wage Case decision and which applies only to agreed matters coming within sections 112 and 115 of the Act.

In relation to (a) above, the Commission is available to assist the parties by means of conciliation and arbitration in accordance with the relevant provisions of the Act. In relation to (b), and consistent with sections 112 and 115 of the Act, the Commission is available to assist the parties through conciliation, but not arbitration.

In considering whether wages and/or conditions should be awarded or changed for any reason, either by agreement or arbitration, the Commission will guard against contrived arrangements which would circumvent these principles and their aims.

WAGE ADJUSTMENTS

1. Structural efficiency adjustment

(a) There will be allowable under these principles an increase to a maximum of 2.5 per cent in both minimum rates and paid rates awards accessible, on application, from 16 April 1991 but the actual date of operation will be the date on which that award is varied in accordance with the April 1991 National Wage Case decision (Print J7400).

(b) The 2.5 per cent increase shall apply to award wage rates including supplementary payments.

(c) The Commission, after hearing the parties to an award and being satisfied that a proper case has been made, may recommend that overaward payments be increased by the same percentage adjustment.

NATIONAL WAGE CASE OCTOBER 1991 15

Appendix A - contd

(d) No award will be varied to give effect to the National Wage Case decision of 16 April 1991 unless and until it has been varied to give effect to the second structural efficiency adjustment allowable under the 7 August 1989 National Wage Case decision.

2. Minimum rates adjustment

Minimum rates adjustments for minimum rates awards in accordance with the August 1989 and April 1991 National Wage Case decisions shall continue to be allowable and shall be in accordance with the following:

(a) the appropriate adjustments in any award will be applied in no less than four instalments which will become payable at six monthly intervals provided in appropriate cases longer or shorter phasing-in arrangements may be approved or awarded and/or parties may agree that part of a supplementary payment should be based on service;

(b) the second and subsequent instalments of these adjustments will not be automatic and an application to vary the relevant award will be necessary;

(d) the award must contain a definition making it clear that a supplementary payment represents, in effect, a payment in lieu of equivalent overaward payments;

(e) where the existing minimum classification rate in an award exceeds the minimum rate for that classification assessed in accordance with this decision, the excess amount is to be prescribed in a separate clause: that amount will not be subject to adjustment;

(f) acceptance of absorption of these adjustments to the extent of equivalent overaward payments is a prerequisite to their being applied in any award.

SPECIAL CASES

Any claim for increases in wages and salaries or improvements in conditions in minimum rates awards or paid rates awards which exceed those allowable under the previous National Wage Case decisions and the October 1991 National Wage Case decision will be processed as a special case.

A party seeking a special case must make and justify an application pursuant to section 107 of the Act. It will then be a matter for the President to decide whether it should be dealt with by a Full Bench.

ENTERPRISE BARGAINING

16 NATIONAL WAGE CASE OCTOBER 1991

Appendix A - contd

(a) the parties satisfy the Commission that they have met the structural efficiency principle requirements prescribed in the April 1991 National Wage Case decision;

(f) the agreement provides no further wage or salary increase for its life, except when consistent with a National Wage Case decision;

(g) the agreement does not involve a reduction in ordinary time earnings or departures from Commission standards of hours of work, annual leave with pay or long service leave with pay;

(h) the agreement:

(i) is for a fixed term; and

(ii) will not continue in force after its expiry date, unless renewed;

(i) the operative date of any wage increase for which an agreement provides is no earlier than the date of approval or certification of the agreement; and

At the time of expiration of an agreement it is the responsibility of the parties to seek its renewal or replacement.

NATIONAL WAGE CASE OCTOBER 1991 17

Appendix A - contd

ALLOWANCES

1. Existing allowances

(a) Existing allowances which constitute a reimbursement of expenses incurred may be adjusted from time to time where appropriate to reflect the relevant change in the level of such expenses.

(b) Existing allowances which relate to work or conditions which have not changed may be adjusted from time to time to reflect national wage increases, except where a flat money amount has been awarded, provided that shift allowances expressed in awards as money amounts may be adjusted for flat money amount national wage increases.

(c) Existing allowances for which an increase is claimed because of changes in the work or conditions will be determined in accordance with the relevant provisions of the work value changes principle.

2. New allowances

(a) New allowances to compensate for the reimbursement of expenses incurred may be awarded where appropriate having regard to such expenses. (b) No other new allowances shall be created unless changes in work have occurred or new work or conditions have arisen: where changes have occurred or new work and conditions have arisen, the question of a new allowance, if any, shall be determined in accordance with the relevant principle.

The relevant principle in this context may be work value changes or first awards and extensions to existing awards principle.

3. Service increments

(a) Existing service increments may be adjusted to reflect a percentage National Wage Case increase.

(b) New service increments may only be allowed to compensate for changes in the work and/or conditions and will be determined in accordance with the relevant provisions of the work value changes principle.

SUPERANNUATION

(a) Agreements may be certified or consent awards made providing for employer contributions to approved superannuation schemes for employees covered by such agreements or consent awards provided those agreements or consent awards:

(i) operate from a date determined or approved by the Commission; and

(ii) do not involve the equivalent of a wage increase in excess of three per cent of ordinary time earnings of employees.

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Appendix A - contd

(b) Where, following a claim for employer contributions to approved superannuation schemes for employees, the parties are unable to negotiate an agreement consistent with this principle, and conciliation proceedings before the Commission have also failed to achieve such an agreement, the Commission shall, subject to the provisions of the Act, arbitrate on that claim.

(d) For the purposes of this principle, approved superannuation scheme means a scheme approved in accordance with the Commonwealth Operational Standards for Occupational Superannuation Funds.

WORK VALUE CHANGES

(a) Changes in work value may arise from changes in the nature of the work, skill and responsibility required or the conditions under which work is performed. Changes in work by themselves may not lead to a change in wage rates. The strict test for an alteration in wage rates is that the change in the nature of the work should constitute such a significant net addition to work requirements as to warrant the creation of a new classification or upgrading to a higher classification.

These are the only circumstances in which rates may be altered on the ground of work value and the altered rates may be applied only to employees whose work has changed in accordance with this principle.

(b) Where new or changed work justifying a higher rate is performed only from time to time by persons covered by a particular classification or where it is performed only by some of the persons covered by the classification, such new or changed work should be compensated by a special allowance which is payable only when the new or changed work is performed by a particular employee and not by increasing the rate for the classification as a whole.

(c) The time from which work value changes in an award should be measured is, unless extraordinary circumstances can be demonstrated in special case proceedings, the date of operation of the second structural efficiency adjustment allowable under the 7 August 1989 National Wage Case decision.

(d) Care should be exercised to ensure that changes which were or should have been taken into account in any previous work value adjustments or in a structural efficiency exercise are not included in any work evaluation under this principle.

NATIONAL WAGE CASE OCTOBER 1991 19

Appendix A - contd

(e) Where a significant net alteration to work value has been established in accordance with this principle, an assessment will have to be made as to how that alteration should be measured in money terms. Such assessment should normally be based on the previous work requirements, the wage previously fixed for the work and the nature and extent of the change in work. However, the Commission will also take account of the relativities and the integrity of the internal award classification structures and the external classifications to which that structure is related.

(f) The expression "the conditions under which the work is performed" relates to the environment in which the work is done.

(g) The Commission should guard against contrived classifications and overclassification of jobs.

(h) Any changes in the nature of the work, skill and responsibility required or the conditions under which the work is performed, taken into account in assessing an increase under any other principle, shall not be taken into account in any claim under this principle.

PAID RATES AWARDS

(a) Subject to special cases, the Commission will not make a new paid rates award.

(b) Where a new paid rates award is made, that award shall specify the classification prescribed in the relevant minimum rates award on which the actual rate prescribed for the key classification in the paid rates award is calculated.

(c) Commitments will be required from all parties to paid rates awards to the effect that the integrity of those awards will be preserved.

(d) The Commission on each occasion an application is before it for the variation of a paid rates award, will inquire whether the integrity of the award has been preserved.

(e) The Commission may convert into a minimum rates award a paid rates award which fails to maintain itself as a true paid rates award. The conversion of such a lapsed paid rates award into a minimum rates award will involve the valuation of the classifications in it by comparison with similar classifications in other minimum rates awards.

FIRST AWARDS AND EXTENSIONS TO EXISTING AWARDS

(a) In the making of a first award, the long established principles shall apply, i.e. prima facie the main consideration is the existing rates and conditions.

(b) In the extension of an existing award to new work or to award-free work the rates applicable to such work will be assessed by reference to the value of work already covered by the award.

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Appendix A - contd

(c) In awards regulating the employment of workers previously covered by a State award or determination, existing State award rates and conditions prima facie will be the proper award rates and conditions. (d) Where a first award is made it shall contain a minimum rate for each classification of employee covered by it. The total minimum rate determined for each classification will be expressed as a minimum classification rate and a supplementary payment which bear a proper relationship to the rates for relevant classifications in other minimum rates awards. Where an existing State award rate exceeds the amount appropriate to a proper relationship, the excess is to be prescribed in a separate clause. That excess amount will not be subject to adjustment.

CONDITIONS OF EMPLOYMENT

Except for the flow-on of test case provisions, applications for changes in conditions other than those provided elsewhere in the principles will be considered in the light of their cost implication both directly and through flow-on. In respect of any application where the cost impact either directly or through flow-on is, prima facie, not negligible, that application must be processed pursuant to section 107 of the Act.

STANDARD HOURS

In approving any application to reduce standard hours to 38 per week, the Commission should satisfy itself that the cost impact is minimised. Claims for reduction in standard weekly hours below 38 will not be allowed.

ECONOMIC INCAPACITY

Any respondent or group of respondents to an award may apply to reduce and/or postpone the application of any increase in labour costs determined under the principles on the ground of very serious or extreme economic adversity. The merit of such application shall be determined in the light of the particular circumstances of each case and any material relating thereto shall be rigorously tested.

NATIONAL WAGE CASE OCTOBER 1991 21

Appearances:

R.P Boland with P. Murphy and A.C. Evans for the Metal Trades Industry Association of Australia and the Engineering Employers Association, South Australia.

B. Watchorn with C. Milne, D. Grozier and A. Hawkey for The Australian Chamber of Manufactures and the Metal Industries Association Tasmania.

G. Belchamber with D. Cameron and J. Roe for the Metals and Engineering Workers' Union, T. Ferrari for The Federated Miscellaneous Workers Union of Australia, T. Pallas for the National Union of Workers, R. Fowler for The Federated Engine Drivers' and Firemen's Association of Australasia and The Building Workers' Industrial Union of Australia, B. Smith and A. Hart for the Federation of Industrial, Manufacturing and Engineering Employees, L. Benfell for the Electrical Trades Union of Australia and The Plumbers and Gasfitters Employees' Union of Australia and intervening on behalf of the Australian Council of Trade Unions.

G. Giudice of counsel with R.S. Hamilton for the respondent members of the South Australian Employers' Federation, Northern Territory Confederation of Industry and Commerce Inc., Confederation of A.C.T. Industry, Municipal Association of Victoria, Victorian Employers' Chamber of Commerce and Industry, Printing and Allied Trades Employers' Federation of Australia and intervening on behalf of the Confederation of Australian Industry.

L. Tacy with P. Drever and N. Swails for the Minister of State for Industrial Relations on behalf of the Commonwealth (intervening).

D. White for Her Majesty the Queen in right of the State of New South Wales (intervening).

E. Porter for Her Majesty the Queen in right of the State of Queensland (intervening).

S. Wood for Her Majesty the Queen in right of the State of Western Australia (intervening).

D. Smythe and F. Meredith for Her Majesty the Queen in right of the State of South Australia (intervening).

J. McCabe and T. Pearce for Her Majesty the Queen in right of the State of Tasmania (intervening).

J. Woodrow and H. Guilfoyle for the Government of the Australian Capital Territory (intervening).

M. Angwin for the Business Council of Australia (intervening).

N. Kimberley with D. Sinclair, J. Tolley and P. Ryan for the Australian Road Transport Industrial Organization (intervening).

P. Trenwith for the National Farmers' Federation (intervening).

B.D. Purvis for the Australian Wool Selling Brokers Employers Federation (intervening).

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Appearances - contd

S. Amendola of counsel with J. Markham for the Meat and Allied Trades Federation of Australia (intervening).

J. Scutt for the Australian Federation of Business and Professional Women (intervening).

M. Tehan with P.A. Gair for the National Catholic Committee on Industrial Relations (intervening).

J. Casey of counsel for the respondent members of the Association of Independent Schools, A.C.T. Incorporated (intervening).

G.I. Simpson for the Master Builders' - Construction and Housing Association of Australia (intervening).

T. Cleal for the Australian Bankers' Association and the Australian and New Zealand Banking Group Limited, National Australia Bank Limited, Westpac Banking Corporation, Bank of New Zealand, Banque Nationale de Paris, Primary Industry Bank of Australia, R. and I. Bank of Western Australia Limited, State Bank of South Australia and Trust Bank Tasmania (intervening).

G. Smith of counsel for Toyota Motor Corporation Australia Limited, Mitsubishi Motors Australia Limited, Ford Motor Company of Australia Limited, General Motors Holden's Automotive Limited, Holden's Engine Company and Nissan Motor Manufacturing Company of Australia Limited (intervening).

T.P. O'Connell for the Australian Federation of Air Pilots (intervening).

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