STATEMENT

Fair Work Act 2009
s.157 - FWC may vary etc. modern awards if necessary to achieve modern awards objective

Review of certain C14 rates in modern awards
(C2019/5259)

Review of the rates at the C14 rate in modern awards – introductory rates – referral to a Full Bench.

[1] In the 2018-19 Annual Wage Review proceedings the ACTU and ACBC contended that the Expert Panel should set the C14 rate at a level which lifted certain hypothetical single earner household types above the 60 percent relative poverty line. The Expert Panel rejected that proposal, noting that:

‘the magnitude of the increase required in this Review to lift these household types above the relative poverty line would run a significant risk of disemployment effects and adversely affecting the employment opportunities of low-skilled and young workers.’ 1

[2] In the course of addressing the contention advanced the Expert Panel raised an issue for further examination in the current 4 yearly Review of modern awards. The relevant extract from the 2018-19 AWR decision is as follows:

‘[335] In relation to the 2 remaining household types (single earner couples with 1 or 2 children) both the ACTU and ACBC submit that we should set the C14 rate at a level which lifts these households above the 60 per cent relative poverty line. In each of these households the non-working partner is not seeking work. This submission gives rise to a number of issues.

[336] First, as we have mentioned, in each hypothetical household the wage earner receives the C14 rate. The Department of Jobs and Small Business estimates that around 180 200 employees are paid the adult C14 rate. While not an insignificant number of employees it only represents 1.7 per cent of all employees. Further, the number of employees in households which are the focus of the ACTU and ACBC submissions must logically be less than 180 200.

[337] Regard must also be had to a ‘stepping stone’ effect. Low-paid employment is often temporary and can act as a ‘stepping stone’ to higher-paid work. Almost two-thirds of workers who enter low paid employment leave within one year and most move into higher paid work. The C14 (or NMW) rate of $719.20 per week only features in 45 of the 122 modern awards (details of which are set out in Appendix 1). In 39 of those modern awards it is a transitional rate from which employees progress after a period. For example, the Hospitality Industry (General) Award 2010 provides for an introductory classification at the C14 rate:

‘In respect of all classification streams, introductory level means the level of an employee who enters the industry and who has not demonstrated the competency requirements of level 1. Such an employee will remain at this level for up to three months while the appropriate training for level 1 is undertaken and assessment made to move from the introductory level to level 1. At the end of three months from entry, an employee will move to level 1 other than where agreement has been reached and recorded between the employee and the employer that further training of up to three months is required for the employee to achieve competence for movement to level 1.’

[338] In 8 of those modern awards the transition to a higher rate occurs after 38 hours of induction training. In 18 of those modern awards the transition occurs after 3 months and the remaining 13 modern awards in which the NMW rate is transitional either other periods are specified or the relevant classification appears to be transitional but no particular period is specified.

[339] It follows that, for a proportion of the employees in the households which are the focus of the ACTU and ACBC submissions, the wage earner is likely to be transitioning through the C14 wage rate into a higher classification level.

[340] In the remaining 6 modern awards containing a C14 (or NMW) rate, the related classification is not a transitional level. It is not clear why these 6 modern awards prescribe a rate at this level, which is not a transitional rate. This is an issue which should be the subject of further examination in the current 4 yearly Review of modern awards.

[341] We would also observe that the remaining 77 modern awards only provide for wage rates above the C14 or NMW rate.

[342] These things matter, because it is important to identify with some precision the number of employees who are sought to be the beneficiaries of a particular policy. If it turns out that the number of employees in the household types below the relative poverty line is very small or that they are transitioning to higher-paid jobs then it raises a real question about whether the minimum wage system is the appropriate instrument to address these pockets of disadvantage. As the Panel has observed in the past, ‘increases in minimum wages are a blunt instrument for addressing the needs of the low paid … [and] the tax-transfer system can provide more targeted assistance to low-income households and is a more efficient means of addressing poverty.’’ (Footnotes omitted)

[3] This statement concerns the review of modern awards which have classification rates at the C14 level which are either not transitional rates or where the transition period is not specified.

[4] As noted above, some 45 modern awards include a rate of pay at the C14 (or National Minimum Wage, NMW) rate which is currently $740.80 per week, calculated on the basis of 38 ordinary hours, or $19.49 per hour. Some of those modern awards include multiple classifications at the NMW rate. These 45 modern awards may be divided into 5 categories:

(i) 8 modern awards in which the transition to a higher classification level occurs after 38 hours induction training;

(ii) 18 modern awards in which the transition occurs after 3 months;

(iii) 5 modern awards in which the C14 classification is transitional but a period other than 3 months is specified;

(iv) 8 modern awards in which the C14 classification appears to be transitional but no particular transition period is specified; and

(v) 6 modern awards in which the C14 classification level is not a transitional level.

[5] It is my provisional view that the 14 awards in categories (iv) and (v) be referred to a Full Bench for review. The awards in these categories are set out below:

Category (iv)

•  Cement and Lime Award 2010 (A level 1 employee is paid at the NMW (cl. 14.1) Schedule B.1 describes a level 1 employee as ‘entry level’ and ‘undertaking basic competency training’);

•  Concrete Products Award 2010 (A level 1 employee is paid at the NMW (cl. 15.1). Schedule B.1.1 refers to undertaking the employers induction program refers to the ‘employer’s induction program’);

•  Meat Industry Award 2010 (An MI1 employee is paid at the NMW (cl. 19.1). Schedule B.3.1 refers to an employee at this level ‘undergoing on-the-job training for an initial period of at least three months’);

•  Oil Refining and Manufacturing Award 2010 (A Lubricants/bitumen plants and terminals trainee (level 1) is paid at the NMW (cl. 14.1) Schedule B.1.4 describes this as an employee undergoing the necessary orientation and training to enable safe and efficient performance as an operator);

•  Port Authorities Award 2010 (A level 1 employee is paid at the NMW (cl. 13.1). Schedule B.1 describes an employee at this level as having ‘completed induction’);

•  Quarrying Award 2010 (A grade 1 employee is paid at the NMW (cl 17.) Schedule B describes an employee ‘undertaking training to become competent’);

•  Rail Industry Award 2010 (An Operations level 1 employee is paid at the NMW (cl. 14.1) Schedule A says that employees at this level ‘undertake and successfully complete standard induction training’) and

•  Stevedoring Industry Award 2010 (A Grade 1 employee is paid at the NMW (cl. 13.1). Schedule B describes an employee at this level as someone ‘who is undergoing induction and initial training prior to appointment as a stevedoring employee Grade 2’).

Category (v)

•  Air Pilots Award 2010 (First officers and second pilots of Single engine UTBNI 1360 kg and Single engine 1360 kg-3359 kg are paid at the NMW (Schedule B.1.1). An aerial Application Pilot with less than 1000 hours of flying experience is also paid at the NMW (Schedule D.9.1). It is noted that there additions to salary in B.1.3, B.1.4 and D.9.5 which may mean that employees receive an amount greater than the NMW);

•  Broadcasting, Recorded Entertainment and Cinemas Award 2010 (A Grade 1 employee is paid at the NMW (cl. 14.3). Clause 14.2(a) suggests that there may not be any employees paid at this rate under the award);

•  Dry Cleaning and Laundry Industry Award 2010 (A Dry cleaning employee level 1 is paid at the NMW level (cl. 14.1(a));

•  Funeral Industry Award 2010 (A grade 1 employee is paid at the NMW level (cl. 14.1);

•  Sugar Industry Award 2010 (The C14/L2-milling general operator is paid at the NMW level (cl. 40.1). The BT1 rate (cl. 42.1) applies to ‘new starters’ who undertake a 3 month probation period) and

•  Travelling Shows Award 2010 (A Grade 1 employee is paid at the NMW).

[6] In such a review the Full Bench would consider whether the C14 classifications in each of these awards provides a fair and relevant safety net of terms and conditions. I note that the Cement and Lime Award 2010 and the Quarrying Award 2010 will be amalgamated at the conclusion of the 4 yearly review to become the Cement, Lime and Quarrying Award. Both of the classifications at the NMW rate will remain in the amalgamated awards.

[7] The transitional provisions in cl.26 of Schedule 1 to the Fair Work Act 2009 (the Act) enable the Commission to continue to apply the repealed s.156 of the Act to a review of a modern award conducted as part of the 4 yearly review that had commenced but had not been completed before 1 January 2018. Section 156(2) required the Commission to review all modern awards and empowered the Commission to make determinations varying or revoking modern awards and to make modern awards.

[8] While the 4 yearly reviews of the awards listed in [5] above have not yet been completed, there may be a question as to whether new issues can be dealt with in a continuing review under the transitional arrangements. 2 Whether or not these issues can be dealt with under the transitional arrangements, it seems clear that they can be dealt with in award variation proceedings under s.157 of the Act. Proceedings under s.157 may be brought on the Commission’s initiative.3

[9] The review referred to at [5] to [6] above will be instituted on the Commission’s own motion pursuant to s. 157 of the Act.

[10] Interested parties are invited to comment on the following matters:

1. The provisional view at [5] above.

2. Whether the list of awards identified in categories (iv) and (v) above (at [5]) is an accurate list of the modern awards in each of these categories.

3. In relation to the 8 modern awards listed in category (iv) – i.e. those which do not appear to specify a particular transition period – what transition period does the interested party propose?

4. In relation to the 6 modern awards listed in category (v) – i.e. those in which the C14 classification level is not a transitional level – do the C14 classification levels in these awards provide a fair and relevant safety net? Has there been any work value determination of these classifications?

[11] Submissions should be sent to chambers.ross.j@fwc.gov.au by 4:00 pm Friday 27 September 2019. Each submission should identify the particular modern award(s) in which the party has an interest.

[12] This matter will be subject of a conference held at 4:30pm on Monday 7 October 2019.

PRESIDENT

Printed by authority of the Commonwealth Government Printer

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 1   [2019] FWCFB 3500 at [344]

 2   See [2019] FWCFB 361 at [21]–[23].

 3   Section 157(3)(a).