Dec 208/96 S Print M9675

AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

Industrial Relations Act 1988

s.113 application for variation

s.107 reference to a Full Bench

Construction, Forestry, Mining and Energy Union

GLASS MERCHANTS AND GLAZING CONTRACTORS

(TASMANIA) AWARD 1976

(ODN C No. 00603 of 1976)

[Print C6877 [G0003]]

(C No. 38542 of 1995)

FURNISHING TRADES AWARD 1981

(ODN C No. 00422 of 1961)

[Print G0770 [F0029]]

(C No. 38543 of 1995)

GLASS MERCHANTS AND GLAZING CONTRACTORS (VICTORIA) CONSOLIDATED AWARD 1988

(ODN C No. 32180 of 1988)

[Print H4634 [G0034]]

(C No. 38545 of 1995)

GLASS MERCHANTS AND GLAZING CONTRACTORS (SOUTH AUSTRALIA)(CONSOLIDATED) AWARD 1984

(ODN C No. 02709 of 1976)

[Print F6568 [G0005]]

(C No. 38546 of 1995)

Various employees Furnishing and glass industries

Allowances - work or condition related allowances - Safety Net Adjustments and Review September 1994 - various employees, furnishing and glass industries - applications by CFMEU to vary allowances to reflect first arbitrated safety net adjustment - adjustment of work or condition related allowances for first SNA not previously determined by Commission - union submitted that allowances formed part of award safety net and that there was a statutory obligation to maintain them at a relevant level - economic impact would be minimal - ACTU submitted that the granting of the applications would result in the consistent treatment of allowances pursuant to all safety net adjustments and if increases not applied there would be erosion over time of real value of allowances - applications opposed by ACM, SA Chamber and TCCI on basis of significant cost implications and inconsistent approach by unions to application of increase - ACCI opposed applications on basis that not every aspect of wage rates should be adjusted each time a SNA is made - Commission of view that work or condition related allowances should be adjusted for first arbitrated safety net adjustment - such allowances form part of the safety net and must be "maintained at a relevant level" - no substantial reason for determining a different outcome in relation to first adjustment to that which applies to second and third adjustments - economic impact not significant - method of adjustment of allowances considered - increases to be aggregated using formula set out in decision - increases to operate prospectively - when aggregate formula used increases to operate from time award varied for third SNA - applications granted.

VICE PRESIDENT ROSS

DEPUTY PRESIDENT HARRISON

COMMISSIONER LAWSON MELBOURNE, 21 MARCH 1996

DECISION

INTRODUCTION

The matters before us have been referred to this Full Bench by the President under s.107 of the Act. The matters referred are applications by the Construction, Forestry, Mining and Energy Union (CFMEU) to vary work or condition related allowances in the four awards to reflect the first $8 per week arbitrated safety net adjustment.

Work or condition related allowances in each of the awards have already been varied, by consent, for the second $8 per week arbitrated safety net adjustment. The allowances in question were increased by an amount equivalent to $8 as a percentage of the base trade rate. This amounted to a 1.88 percent increase.

This is the first occasion in which the Commission has been called upon to arbitrate a claim for the adjustment of work or condition related allowances for the first arbitrated safety net adjustment.

During the course of proceedings on 26 February 1996 it was accepted by all parties that any decision by the Commission in relation to the applications would have implications for awards generally. Accordingly we provided the parties to the 1995 Safety Net Review

proceedings with an opportunity to make a submission in relation to the matters before us. Submissions were subsequently received from the Australian Chamber of Commerce & Industry (ACCI) and the Human Rights & Equal Opportunity Commission (HREOC).

THE PRINCIPLES

The first safety net adjustment refers to the first adjustment received by employees under the award in question pursuant to either the October 1993 Review of Wage Fixing Principles decisions [the October 1993 Review decisions, prints K9700 and K9940] or the September 1994 Safety Net Adjustments and Review decision [the September 1994 Review decision, print L5300] [see the Retail Industry Second Safety Net Adjustment Case, print M0381 at p.4].

In the October 1993 Review decisions the Commission determined that an arbitrated safety net adjustment of $8 per week would be available, on application on an award by award basis, from 1 December 1993. The adjustment was to be applied to the supplementary payment element of the safety net.

In the September 1994 Review decision the Commission decided to extend access to the adjustment awarded in the October 1993 Review decision to those employees who had not achieved an enterprise bargain or an actual increase from the October 1993 safety net adjustment.

The October 1993 Review decisions did not deal with the adjustment of work or condition related allowances to reflect arbitrated safety net adjustments. The relevant wage fixing principle in operation at that time stated:

"Allowances

.... (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. ..." [print K9700 at p.37]

The principle refers to `national wage increases' not arbitrated safety net adjustments and the distinction between these two concepts is noted in the August 1994 Review of Wage Fixing Principles decision [the August 1994 Review decision, print L4700 at p.19].

In the August 1994 Review decision the Commission decided that the issue of adjusting allowances and service increments for monetary safety net increases would be determined in the context of each decision reviewing the award safety net. [Print L4700, p.19]. The Commission also considered that a similar approach was appropriate with respect to the adjustment for monetary safety net increases of weekend penalties expressed as flat dollar amounts. [Print L4700, p.33]

In the September 1994 Review decision the Commission decided that allowances, service increments and weekend penalties expressed as flat dollar amounts were to be adjusted for the second arbitrated safety net adjustment. [Print L5300, p.43]

In the October 1995 Third Safety Net Adjustment and Section 150A Review decision [the Third Safety Net decision Print M5600] the Commission decided that allowances, service increments and weekend penalties expressed as flat dollar amounts should similarly be adjusted for the third $8 per week arbitrated safety net adjustment.

The adjustment of work or condition related allowances for the first $8 per week arbitrated safety net adjustment has not yet been determined by the Commission.

In the August 1994 Review proceedings the ACTU had sought a statement of guidance from the Commission on this issue. The Commission declined to provide such guidance at the time as the issue was being dealt with in separate proceedings concerning the Retail and Wholesale Shop Employees (Australian Capital Territory) Award 1993. At the time of the September 1994 Review decision the decision in the Retail Award matter remained reserved and on that basis the Review Bench declined to determine the issue.

The Retail Award matter was subsequently resolved by consent with the effect that there has not been an arbitrated decision on the issue before us.

This background was set out in the Third Safety Net decision in the following terms:

"In the September 1994 Review decision, with regard to the first $8 per week arbitrated safety net adjustment, the Commission noted [Print L5300, p.43] that a decision was reserved with respect to the Retail and Wholesale Shop Employees(Australian Capital Territory) Award 1993 concerning the alteration for safety net adjustments of weekend penalties expressed as flat dollar amounts. In light of this, the Commission said that it did not propose to determine the issue of adjustment of allowances, service increments and weekend penalties expressed as flat dollar amounts for the first arbitrated safety net adjustment. Ultimately, however, the Retail and Wholesale Shop Employees (Australian Capital Territory) Award 1993 matter was resolved by consent. Accordingly, we have now decided that, where there is disagreement over the adjustment of allowances, service increments and weekend penalties expressed as flat dollar amounts for the first arbitrated safety net adjustment, the party seeking the adjustment must make application pursuant to s.107 of the Act.." [Print M5600, p.77]

THE SUBMISSIONS

Mr Lowe, on behalf of the CFMEU, argued that the applications were consistent with the Commission's statutory obligations. Particular reference was made to the objects of Part VI of the Act. In this regard s.88A(a) states:

"s.88A The objects of this Part are to ensure that:

(a) employees are protected by awards that set fair and enforceable minimum wages and conditions of employment that are maintained at a relevant level..."

Further s.90AA is in the following terms:

"(1) The Commission must perform its functions under this Part and Part VIC in a way that furthers the objects of this Act and, in particular, the objects of this Part and Part VIC.

(2) In performing those functions, the Commission must:

(a) ensure, so far as it can, that the system of awards provides for secure, relevant and consistent wages and conditions of employment; and

(b) have proper regard to the interest of the parties immediately concerned and of the Australian community as a whole."

Mr Lowe submitted that work or condition related allowances formed part of the award safety net and accordingly there was a statutory obligation to maintain them at a relevant level. It was also submitted that it would be neither fair nor consistent to reject the application's in circumstances where work or condition related allowances have been varied for the first $8 arbitrated safety net adjustment, by consent. [eg. the Pilkington's Australia Operations Ltd. Automotive Division Production and Warehousing Award 1993, C No. 38545 of 1995, Print M5987.] It was argued that the provision of consistent award wages and conditions of employment would be undermined if there were different outcomes from consent and arbitrated proceedings.

Finally it was submitted that the economic impact of the variations sought was minimal. In relation to the majority of the allowances provided for in the relevant awards granting the application would only amount to an increase of one or two cents per hour that the particular allowance was applicable. [see Exhibits L2 and M1].

If the Commission were to grant the applications Mr Lowe submitted that the allowances would increase by 1.92 percent. This percentage was calculated by dividing the first safety net adjustment, $8, by the tradespersons rate that applied prior to variation for the first safety net adjustment, ie $417.20, and then multiplying by one hundred. The allowances in question have already been increased by 1.88 percent on the basis of the second safety net adjustment.

The union sought an operative date of either 26 February 1996, being the date on which the applications were heard, or the date of the Commissions decision.

Mr Belchamber, intervening on behalf of the ACTU, supported the CFMEU's submission and made two additional points:

- granting the applications would result in the consistent treatment of allowances pursuant to the first and subsequent arbitrated safety net adjustments; and

- if the flat dollar safety net increases are not applied to allowances then there would be some erosion over time in real value of the allowances.

Mr Belchamber also submitted that in considering the October 1993 Review decisions it should be taken into account that access to the October 1993 adjustment was extended in the September 1994 Review decision [Print L5300, p.19] and the Industrial Relations Reform Act 1994 came into effect in March 1994. [Note: the effect of the March 1994 changes to the legislative framework are discussed in the August 1994 Review decision, Print L4700 at pp.4-6] It was also submitted that the matter of administrative complexity is best addressed on a case by case basis.

The Furnishing Industry Association of Australia (Victoria/Tasmania Division) consented to the unions application on the basis that the cost implications for the furnishing industry would be minimal. Particular reference was made to the fact that the majority of the employers in the industry employ less than 15 employees and accordingly the highest rate of leading hand allowance would only have limited application. [Transcript of 26 February at p.22]

The Association only differed from the CFMEU's position in two respects:

1. The basis for calculating the percentage adjustment. - Mr Mason submitted that if the application was granted then the increase in the allowances for the first and second safety net adjustments should be a total of 3.69%. This percentage was calculated by dividing the sum of the first and second safety net adjustments, ie $16, by the tradespersons rate that applied after it had been varied for the second $8 adjustment, ie $433.20, and then multiplying by one hundred.

2. Operative date - it was submitted that any increase in work or condition related allowances should operate from the date the award is varied for the third safety net adjustment. It was said that it would be `a nightmare for some employers to have movements by such small amounts so close together.' [Transcript of 26 February 1996 at p.22].

Mr Blanksby, on behalf of the Victorian Glass Merchants Association and the South Australian Glass Merchants Association did not oppose the CFMEU's applications and supported the use of the tradespersons rate as the appropriate divisor for calculating the percentage increase. Mr Blanksby also concurred with Furnishing Industry Associations submission with respect to the operative date to apply in the event that the applications were granted.

The Sex Discrimination Commissioner advised that HREOC neither supported nor opposed the applications. However the Commissioner did forward a copy of a study into the payment of allowances and overaward payments in the Victorian Local Government sector, entitled Unrewarded. It was submitted that `the research indicates that where male-dominated occupations receive allowances and female dominated occupations do not (as is the case in the Victorian local government sector), the absorption of pay increases to the men and the payment of a flat dollar amount to the women reduces the pay gap between men and women in that industry'. [see HREOC written submission at p.1]

The applications were opposed by Mr Mason on behalf of the Australian Chamber of Manufactures (ACM), the South Australian Employers Chamber of Commerce and Industry (the S.A. Chamber) and the Tasmanian Chamber of Commerce and Industry (TCCI).

It was submitted that while the amounts involved were `fairly minimal' the flow on implications would result in `fairly significant' cost implications. [Transcript of 19 February 1996 at p.25]. Particular reference was made to the increases sought in the leading hand and first aid allowances.[Transcript of 19 February at p.26] While it was acknowledged that some work or condition related allowances had been varied, by consent, for the first $8 adjustment it was submitted such outcomes should not be imposed on non-consenting parties. Further reference was made to the inconsistency in the unions approach in that the consent position arrived at in relation to the Pilkington's Award had a different arithmetical method for calculating the percentage adjustment from the one sought in these proceedings.

If any adjustment was awarded it was submitted that it should be based on the tradespersons rate and the percentage increase should be that proposed by the Furnishing Industry Association. [Transcript of 19 February 1996 at p.29]

Ms Pugsley, on behalf of the Victorian Employers' Chamber of Commerce and Industry (VECCI) supported the submissions made by Mr Mason on behalf of the ACM, SA Chamber and TCCI.

The Australian Chamber of Commerce and Industry (ACCI) opposed the applications on the basis that the role of safety net increases is such that not every aspect of the wage rates in an award should be adjusted each time a safety net adjustment is made. This proposition was expressed in the following terms in ACCI's written submission:

"ACCI's view is that the basis of centrally determined increases has altered with the change to the role of the award system being that of a `safety net'. Previous centrally determined increases were made on the basis of general economic considerations, and with the intention of distributing national income. The role of `safety net' increases is a different one, described in the Act as providing an underpinning for bargaining. It is not appropriate to assume that this means that every aspect of the wage rates in an award should be adjusted each time a `safety net' adjustments made. Allowances may have no relevance to the low paid not enjoying increases through formal or informal bargaining. A general ruling requiring such adjustments is not appropriate, particularly where this would apply these adjustments to allowances which are not expressly stated to be adjustable for these increases."

In the event that the Commission rejected ACCI's primary submission it was argued that measures should be taken to protect employers from unnecessary administrative complexity. Three particular measures were proposed:

"Firstly, it would be undesirable for an employer to have to adjust allowances by what would be very small amounts in many cases (below ten cents in many instances) each time a safety adjustment were applied to an award. it would be sensible to provide that allowances should not be adjusted for the first and second safety net adjustment until the second, or even the third, safety net adjustment became available, and then to adjust them by the combined amount.

Second, it would be an administratively complex task to adjust allowances retrospectively, and it would in our submission therefore be appropriate to specifically state that there should be no retrospectivity in adjustment. All adjustment should be prospective if made at all.

Third, the issue then arises of how a flat amount safety net increase is converted into a percentage which can be applied to flat work or condition related allowances. It would probably be desirable for the percentage to be obtained on the basis of comparison of the flat amount with one award rate, the tradesperson rate."

DECISION

While we acknowledge the point put by ACCI that not every aspect of the wage rates in an award must be adjusted each time a `safety net adjustment' is made we are nevertheless of the view that work or condition related allowances should be adjusted for the first $8 per week arbitrated safety net adjustment. We have reached this conclusion for three reasons:

1. Under the Industrial Relations Act 1988 the Commission, while having proper regard to the interests of the parties and the wider community, is now required to ensure, so far as possible, that the award system provides for `secure, relevant and consistent wages and conditions of employment' [s.90AA(2)] so that it is an effective safety net `underpinning direct bargaining' [s.88A(b)]. [ref: August 1994 Review decision, Print L4700 at p.4] Existing wages and conditions in the awards of the Commission form the safety net underpinning enterprise bargaining. [ref: September 1994 Review decision, Print L5300 at p.61] Accordingly, work or condition related allowances form part of the award safety net. If flat dollar safety net increases are not applied to such allowances then their real value would erode over time such that they may no longer be `maintained at a relevant level' as required by s.88A(a).

2. The Commission has already determined that work or condition related allowances may be increased for the second and third arbitrated safety net adjustments. There appears to be no substantial economic or other reason for determining a different outcome with respect to the first safety net adjustment.

3. We are satisfied that the economic impact of applying the first safety net adjustment in the manner proposed by the CFMEU will not be significant. The allowances in question are largely related to working under specified conditions or the exercise of particular responsibilities. The adjustment of the disability related allowances will only result in

increases of one or two cents per hour that the disability is encountered. The increases in the allowances which relate to the exercise of particular responsibilities, such as the leading hand or first aid allowances, is more substantial but these allowances generally only apply to a limited number of employees.

The minimal cost impact of granting the union's applications is also acknowledged by the Furnishing Industry Association of Australia (Victoria/Tasmania division) and is implicit in the submissions of other employer organisations in relation to administrative convenience.

In relation to the study forwarded by HREOC entitled Unrewarded we are not satisfied that it is relevant to the matter before us. In the event that pay equity issues arise in relation to the payment of work or condition related allowances these can be addressed by an application for an order pursuant to s.170BC of the Act.

The question of how work or condition related allowances should be adjusted for the first safety net adjustment was a matter of some debate in the proceedings before us.

Mr Lowe, on behalf of the CFMEU argued that each safety net increase should be considered separately:

$8 100

1st adjustment $417.20 x 1 = 1.92 %

$8 100

2nd adjustment $425.20 x 1 = 1.88%

$8 100

3rd adjustment $433.20 x 1 = 1.85%

The amounts of $417.20, $425.20 and $433.20 refer to the tradespersons rate before the rate was increased for the first, second and third safety net adjustments respectively.

Mr Mason, on behalf of ACM and others argued that the increases from the first and second safety net adjustments should be aggregated;:

$16 100

1st & 2nd adjustments $433.20 x 1 = 3.69%

If this proposition was extended to all three safety net adjustments then the relevant percentage increase would be:

$24 100

1st, 2nd & 3rd adjustments $441.20 x 1 = 5.44%

It should be noted that the divisor used in each case, ie $433.20 and $441.20, is the tradespersons rate after the rate was increased for the second and third safety net adjustments respectively.

We accept that the proposition advanced on behalf of the CFMEU is more statistically correct than that put on behalf of the ACM and others but it is also more administratively cumbersome. For the sake of administrative simplicity we have decided to adopt the following course:

1. The increases in work or condition related allowances from the first, second and third safety net adjustments should be aggregated, where possible, using the following formula:

$24 100

1st, 2nd & 3rd adjustments A x 1

Where `A' refers to the relevant key classification rate in the award in question after that rate has been increased for the first safety net adjustment but before it has been increased for the second safety net adjustment.

In this case it is agreed that the key classification rate is the tradespersons rate and therefore the relevant percentage increase would be:

$24 100

$425.20 x 1 = 5.6%

Where, as in this case, the relevant allowances have already been increased for the second safety net adjustment, the increase obtained using the above formula will need to be reduced by the amount of the increase already awarded.

2. Increases in work or condition related allowances from safety net adjustments should operate prospectively. When the aggregate formula set out above is used the increases should operate from no earlier than the time at which the award is varied for the third safety net adjustment. We note that this is consistent with the course proposed by ACCI in its alternative submission.

In our view the course we have adopted provides an appropriate balance between equity and administrative simplicity.

We will grant the applications sought and delegate the settlement of the orders required by this decision to Commissioner Lawson.

BY THE COMMISSION:

VICE PRESIDENT

Appearances:

R. Lowe for the Construction, Forestry, Mining and Energy Union

G. Belchamber for the Australian Council of Trade Unions

M. Mason for Australian Chamber of Manufactures, the Furnishing Industry Association of

Australia, Victoria and Tasmania Division, the South Australian Employers Chamber of

Commerce and Industry and the Tasmanian Chamber of Commerce and Industry

D Blanksby for the Victorian Glass Merchants Association and the South Australian Glass

Merchants Association

C. Pugsley for the Victorian Employers' Chamber of Commerce and Industry

Hearing details:

1996.

Melbourne:

February 26.

Printed by Authority by the Commonwealth Government Printer

<Price Code D>

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