Dec 110/87 M Print G6800

IN THE AUSTRALIAN CONCILIATION AND ARBITRATION COMMISSION

Conciliation and Arbitration Act 1904

NATIONAL WAGE CASE MARCH 1987

In the matter of an application by The Association of Professional Engineers,

Australia to vary the

Metal Industry Award 1971 - Part III - Professional Engineers(1)

(C No. 2392 of 1986)

And in the matter of an application by The Federated Storemen and Packers

Union of Australia to vary the

Storemen and Packers (Philip Morris Ltd) Award 1978(2)

(C No. 2505 of 1986)

And in the matter of an application by The Manufacturing Grocers' Employees'

Federation of Australia to vary the

Manufacturing Grocers Award 1985(3)

(C No. 2544 of 1986)

in relation to wage rates

And in the matter of an application by The Federated Furnishing Trades Society

of Australasia to vary the

Furnishing Trades Award 1981(4)

(C No. 1862 of 1986)

And in the matter of an application by the Transport Workers' Union of

Australia to vary the

Transport Workers Award 1983(5)

(C No. 1887 of 1986)

And in the matter of an application by The Clothing and Allied Trades Union of

Australia to vary the

Clothing Trades Award 1982(6)

(C No. 4652 of 1986)

_______________________________________________________________________________

(1)Print C1744 [M042]; (1974) 163 CAR 388

(2)Print D7756 [S098]; (1978) 209 CAR 58

(3)Print G0585 [M003]

(4)Print G0770 [F029]

(5)Print F2076 [T140]

(6)Print G0207 [C037]

2 NATIONAL WAGE CASE MARCH 1987

And in the matter of applications by the Printing and Kindred Industries Union

to vary the

Country Printing Award 1959(7)

(C No. 4658 of 1986)

and

Graphic Arts Award 1977(8)

(C No. 4659 of 1986)

And in the matter of applications by the Federated Municipal and Shire Council

Employees Union of Australia to vary the

Cemetery Boards - Western Australian Award 1982(9)

(C No. 4704 of 1986)

and

Municipal Employees (Western Australia) Award 1982(10)

(C No. 4705 of 1986)

and

Local Governing Authorities, Employees (Victoria) Award 1984(11)

(C No. 4706 of 1986)

And in the matter of an application by the Australian Timber Workers' Union of

Australia to vary the

Timber Industry Consolidated Award 1974(12)

and

The Timber Industry Roping-In No. 1 Award 1981(13)

(C No. 6089 of 1986)

in relation to supplementary payments

_______________________________________________________________________________

(7)Print B4414 [C056]; (1969) 130 CAR 654

(8)Print D3516 [G014]; (1977) 194-3 CAR 5

(9)Print F1325 [C153]

(10)Print F1323 [M221]; (1982) 287 CAR 38

(11)Print F7178 [L050]

(12)Print C0487 [T028]; (1974) 163 CAR 115

(13)Print E6061 [T028]; (1981) 255 CAR 671

NATIONAL WAGE CASE MARCH 1987 3

And in the matter of an application by The Manufacturing Grocers' Employees'

Federation of Australia to vary the

Manufacturing Grocers Award 1985

(C No. 1690 of 1985)

in relation to wage rates and conditions of employment on account of national

productivity

And in the matter of a notification of an industrial dispute between

Australian Chamber of Manufactures and Others

and

The Manufacturing Grocers' Employees' Federation of Australia

(C No. 2374 of 1986)

in relation to superannuation

And in the matter of an application by the Confederation of Australian

Industry for a review of the Principles of Wage Fixation

(C No. 2542 of 1986)

MR JUSTICE MADDERN, PRESIDENT

MR JUSTICE LUDEKE

MR DEPUTY PRESIDENT KEOGH

MR JUSTICE BOULTON

COMMISSIONER GRIFFIN

MR COMMISSIONER COX

COMMISSIONER LEARY MELBOURNE, 10 MARCH 1987

DECISION

On 26 June 1986 the Commission adopted Principles of Wage Fixation (Print G3600) which were intended to operate for a period of two years.

That decision noted the serious problems facing the economy and the need for Australia's economic performance to improve markedly and quickly. It emphasised that whether or not the package would work and deliver its promise of better industrial relations and economic performance would depend to a very large extent on the commitment of all - unions, employers, governments and tribunals - to discharge their obligations and responsibilities under the system. Experience shows that without such commitment any orderly system will break down.

Principle 1 of the Wage Fixation Principles then established provided for prima facie adjustment of wages based on movements in the Consumer Price Index (CPI). Other traditional principles governed all other wage and salary adjustments. Principle 3 of the principles dealt with the certification of agreements and the making of consent awards providing for employer contributions to approved superannuation schemes subject to certain conditions. Details of the principles adopted are set out in Print G3600 at pages 75-80.

4 NATIONAL WAGE CASE MARCH 1987

In November 1986 the Australian Council of Trade Unions (ACTU) made an application for a 6.7% increase in wages and salaries based on principle 1 and on 14 November 1986 the Commission decided that a number of matters should be joined to the ACTU application. These matters were:

. a number of applications seeking "supplementary payments" which were the vehicle for the Special Review of the relationship between paid rates and minimum rates awards as envisaged by the National Wage Case decision of 26 June 1986;

. an application by the Confederation of Australian Industry (CAI) to review the Principles of Wage Fixation established by the Commission in its decision of 26 June 1986;

. an application by the CAI to have superannuation "fully considered in the context of a Review of the Principles of Wage Fixation"; and

. a number of applications intended to provide the vehicle for a test case on the removal of the annual leave loading from Federal awards.

All these matters came on for hearing in November 1986. We recorded in our decision of 23 December 1986 that during the hearing:

". . . the ACTU recognized that the economic situation, and in particular the serious deterioration in the balance of payments, would possibly produce under that principle only 'partial indexation'. This could seriously weaken, if not destroy, support for the current system of wage fixation. With that in mind, the ACTU submitted that 'in advance of the current system self-destructing, we have sought as a fall-back or secondary position a modified approach'."

The ACTU's alternative or modified approach was essentially:

". . . a two-tiered system which would include provision for general wage adjustments for all wage and salary earners through National Wage Cases involving two flat increases. It also seeks provision of additional adjustments to wages and conditions, subject to specific principles, with both tiers being subject to a limit or maximum increase determined by the Commission in National Wage Case proceedings." The principles advocated by the CAI in that hearing were also predicated on a two tiered basis with:

". . . a National Wage Case determining a level of wage increase and deciding also whether any proportion of that amount should be distributed as a general increase to all wage and salary earners. The remainder, if any, would become a ceiling for any adjustments awarded under principles included in the second tier."

The Commonwealth also proposed a package:

". . . under which National Wage Cases would determine a general increase for all wage and salary earners with other adjustments, subject to a maximum aggregate labour cost, being determined through a series of second tier principles".

The Australian Council of Professional Associations (ACPA) generally supported the ACTU. The Business Council of Australia (BCA) and the Northern Territory supported the position adopted by the CAI. New South Wales, Victoria, South Australia and Western Australia generally supported the

NATIONAL WAGE CASE MARCH 1987 5

Commonwealth. The attitudes of other parties and interveners are set out in Print G6400 at pages 5 and 6.

In the decision of 23 December 1986 the Commission rejected the ACTU's primary claim for a 6.7% increase because such an increase was "not sustainable in current economic circumstances". It went on to state that notwithstanding differences between the major parties as to the nature and detailed application of their proposals for a two tier system, an attempt should be made to develop principles which would:

". . . govern the operation of a changed system based on the modified approach put forward by the ACTU and the ACPA and the primary position adopted by the Commonwealth and the CAI. Such a changed system should involve the Commission in National Wage Cases fixing a general increase for all wage and salary earners and a ceiling on increases which may result from proceedings under principles established in those cases. In particular, consideration would be given to developments at the industry or enterprise level in relation to more efficient and productive work."

The ACTU proposed that there be discussions on any new system and there was general agreement with this suggestion.

The Commission, "encouraged by the attitudes of the parties in their mutual recognition of the problems" accordingly agreed that further discussions should be held between the parties in an attempt to resolve a number of the issues which must be addressed before any two tier system could be put in place.

To assist the parties in their discussions the Commission decided that it was both necessary and desirable to make some comments on the various propositions put forward for consideration. Those comments are set out in Print G6400 at pages 8-13.

Subsequent to that decision, conferences were conducted on 16 and 28 January 1987 at which the parties discussed the quantum of any general wage adjustment the ceiling which should be prescribed for adjustments under the second tier principles and the content of the principles. The conferences were constructive and, whilst not all differences were resolved, areas of agreement and disagreement were further delineated.

The Commission re-listed the matters for hearing and further submissions were made commencing on 5 February 1987.

The most notable feature of the submissions put to the Commission both before, and since, the 23 December 1986 decision is the similarity in the approach adopted by the major parties. All recognized the serious economic situation and the need for restraint. All supported a two tier system and there was remarkable similarity in the content of the principles they proposed.

The ACTU saw the two tier system, and the principles it proposed, as providing a proper method of ensuring that increases in labour costs are consistent with its view of economic, social and industrial relations goals. In particular, its package would ensure that:

". . . protection is accorded to lower income earners; the system is applied in an equitable way providing equal treatment to all groups; the regulated flexibility inherent in the system provides opportunities to increase Australia's efficiency and productivity; and any change in labour costs, whether they occur in the award or overaward area, in the private or public sector, whether they result from arbitration or consent, fall within the limits determined for each of the first and second tier principles and for the aggregate labour cost outcome".

6 NATIONAL WAGE CASE MARCH 1987

The CAI also saw its two tier system as ensuring that any changes in labour costs, wherever and however occurring, fall within the limits of economic capacity determined in a National Wage Case. It accepted that the proposed package would enable labour costs to be closely monitored and would provide opportunities to increase Australia's efficiency and productivity.

The Commonwealth submitted that "the case for significant changes to the current system is demanded by the adjustment task confronting the Australian economy" which "demands continued restraint in income claims and measures to reallocate resources and to promote improved efficiency and productivity at the industry and local levels". It emphasised that while economic objectives were crucial the system established would need to be equitable and "capable of attracting and retaining the commitment of the participants in the system".

Three major objectives, in the Commonwealth's view, were:

". . . to sustain into the medium term high levels of economic and employment growth, with further reductions in unemployment and increasing real incomes in line with productivity growth over time";

the promotion of a "positive industrial relations climate which is so important to our domestic productivity and performance in overseas markets"; and

". . . the continuation of consultative and co-operative processes in economic policy formulation and in industrial relations . . . The key objective is economic growth in the medium term at high but sustainable levels. Only this can provide the basis for further reductions in unemployment and increase to living standards over time."

THE ECONOMY

There was general agreement among the parties and interveners that the serious economic situation outlined by the Commission in its decision of 26 June 1986 and noted in its decision of 23 December 1986 has persisted. In these decisions the Commission pointed out that four interrelated factors - the substantial depreciation of the exchange rate, the highly adverse balance of payments, the sharp deterioration in the terms of trade and the enormous rise in the external debt - had dominated the economic outlook and imposed the need for severe constraint. Figures now available suggest that the economic situation is now more serious than at the time of the decision of 26 June 1986.

The national debt and the cost of servicing it have continued to rise. The terms of trade have worsened. Interest rates continue to remain high and the level of private investment, which declined in the first three quarters of 1986 compared to the same period a year earlier continues to be discouraging and shows no signs of revival despite a significant recovery in profit share and decline in real unit labour costs since 1982-3. The CPI has climbed further, the figure for the December quarter 1986 standing at nearly 10% above the level a year earlier. While the direct effect of wage increases on the CPI may have been small, the bulk of the increase emanating from the depreciation and from the public sector charges and taxes, the size of the CPI increase is nevertheless uncomfortably large: it is the highest rate since June 1983.

The seriousness of the rise in the CPI becomes more apparent when seen against the background of an average inflation rate among OECD countries of

about one-quarter of the Australian figure. The large margin against the Australian rate adds to the prevailing nervousness in the financial market and the pressure for higher interest rates. Moreover, the gap is not expected to narrow greatly in 1987: the OECD average inflation rate is expected to rise

NATIONAL WAGE CASE MARCH 1987 7

from 2.2% to 3% as against the Australian rate of about 8%. Further, there are no signs of any significant change in the international growth rate to boost the value of Australian exports in the next year or two. The Commonwealth submitted that "The world economy in 1987 will provide a difficult environment for the Australian economy, making it necessary that Australia's improved international competitiveness be maintained."

As might be expected under the prevailing economic constraints, economic growth as measured by Non-farm Gross Domestic Product virtually stood still for the first three quarters of 1986. When adjusted for the terms of trade, a sizeable negative growth rate is shown to have taken place. Employment growth has slowed down and the rate of unemployment has risen to 8.2% from 7.6% in June 1986.

The prevailing uncertainty and lack of confidence in the economy which underlines the economic circumstances briefly outlined must be allayed to halt further decline and to turn the economy around. In this connection, what happens to labour costs is of critical importance.

The seriousness of the external constraints on the economy is recognised by all who made submissions and it is not necessary to comment further on their submissions. The ACTU put it succinctly:

"World economic circumstances have changed; if we do not now adjust to the new situation our balance of payments will continue to worsen and sustainable, non-inflationary growth will prove to be beyond us in the 1990s."

There were no essential differences between the parties and interveners on the nature and magnitude of our economic difficulties nor on the objectives of economic policy and its direction. All emphasised the importance of maintaining international competitiveness, for continued wage restraint, for a revival in private investment, for a restructure of the economy to promote manufacturing exports, and for increased efficiency and productivity. However, differences in degrees of gloom on the future outlook have affected their submissions on the immediate course for wages. As the National Farmers Federation (NFF) put it, "Nobody disputes the fact that wage restraint is needed at the present time. The only question concerns how much restraint is necessary, and/or how much restraint is feasible."

The ACTU placed particular emphasis on the need for a "workable wage fixation system" which is both flexible and capable of maintaining restraint on wages. It saw its proposals as meeting these requirements. It also stressed that wage restraint alone will not solve the problem of inflation.

The CAI, the BCA, the NFF and other employers all argued against any wage increase at least for 1987. The CAI submitted that:

"Australia is deeply marred by economic problems of the most difficult kind. This is a highly perilous time for the Australian community because if wrong decisions are made now, we will be paying for them for many years to come."

The BCA contended that Australia's present economic condition constitutes the greatest threat to our future living standards for fifty years and that the economy "cannot support any labour cost increase over the next twelve months". The BCA also drew attention to the need at least to match the 1987 projected average unit labour cost increase of about 1.5% for some of our main trading partners in order to preserve the competitive gains brought about by the depreciation. On the basis of OECD and Commonwealth forecasts, the NFF calculated that "the objective of maintaining Australia's international

8 NATIONAL WAGE CASE MARCH 1987

competitiveness indicates that scope for increases in labour costs has already been at least fully absorbed in past increases".

The Commonwealth submitted that on currently available figures, hourly earnings in manufacturing in our five major trading partners have grown at an average of about 5% for 1986 and that a similar increase is expected for 1987. These figures, it said, provided a guide for money wages growth in Australia "if we are to achieve a wages outcome broadly in line with that of our major trading partners". In support of its proposal for a two tier wage system and the money values attaching to it, the Commonwealth submitted that its proposal:

". . . should facilitate efforts to improve the efficiency and productivity of Australian industry and assist in protecting low income earners while at the same time delivering a labour cost outcome compatible with economic circumstances".

In response to the economic forebodings of the employers, the ACTU referred to a study prepared by the Office of the Economic Planning Advisory Council (EPAC), which stated that:

". . . Australian industry is currently about 30% more competitive than it was on average over the two decades 1966-1985. Even if unit labour costs were to continue to grow 1.5% per annum faster in Australia than in our trading partners over the next 10 years, we would still retain (at present nominal exchange rates) about three quarters of our recent competitive gains at the end of the period".

The ACTU warned that:

"The objective of immediate equation of our relative unit labour cost performance should not be pursued at the expense of a workable wages system and our capacity to achieve appropriate wages outcomes over the longer term."

Such a risk, it said, "is unnecessary and unjustifiable in view of our current competitiveness as indicated by the EPAC study". The ACTU also submitted that "on the basis of all available material, cost competitiveness is not a problem. Our problem is to derive from our currently competitive position the necessary investment response." So far as wage movements were concerned, the ACTU said the emphasis should be on producing a sustainable wages system:

". . . capable of producing wages outcomes consistent with preserving our competitive position on an ongoing basis, into the medium and longer term, rather than seeking supposed quick fix solutions which put at risk a workable wages system and continuing sustainable wages restraint".

THE WAGE FIXATION SYSTEM

In our considerations we have been impressed both by the shared concern of the parties with Australia's economic prospects and the major parties' determination to make a two tier wages system work.

In the circumstances we are prepared to introduce a two tier system. What such a system involves is the determination in a National Wage Case of a maximum level of increase that can be sustained over a period of time having regard to the broad range of industrial, economic and social factors affecting Australian society. That National Wage Case would also determine what, if any, proportion of that amount should be distributed as a general increase to all wage and salary earners and what proportion would be available for

NATIONAL WAGE CASE MARCH 1987 9

adjustments in wages and salaries in accordance with a series of wage fixation principles. The former is referred to as the first tier and the latter as the second tier.

FIRST TIER

We have decided to award a first tier increase and we discuss the amount of that increase and its date of operation later in our decision. That increase is intended to result in a general wage increase for all wage and salary earners. For the reasons expressed in our decision of 23 December 1986 the increase will be a flat rate adjustment.

We have also been asked by the Commonwealth to consider the awarding of a further first tier increase of a moderate amount to operate not before January 1988. The Commonwealth's submission was clearly predicated on general adherence to the principles in the meantime. This submission was not inconsistent with the ACTU's submission which indicated that it had no objection to the implementation of its claim for a $20.00 first tier increase in two parts.

We have reservations about this aspect of the submissions because of the difficulty of determining that an increase should take place in advance of the time when the increases would have to be paid. Nevertheless, we have allowed for a possible second increase within our overall proposals. The amount of the increase will be considered later in the year after hearing submissions from the parties and interveners. However, we state now that on the basis of our current deliberations as to the maximum increase in labour costs sustainable under the package, the total cost to the wages bill of any such further adjustment will not exceed the equivalent of a 1.5% increase in wages and salaries. Obviously, the effectiveness or otherwise of the package in the meantime will have an important bearing on whether such a further increase continues to be sustainable.

The Commission will call a conference of the National Wage Case parties in October 1987 to discuss the question of a further increase and whether any such increase will take the form of a percentage adjustment or a flat amount. The Commission will arbitrate on all relevant matters should the parties fail to reach agreement.

OTHER INCREASES

There was general agreement that increases in labour costs in the second tier should not exceed an amount to be determined by the Commission and that access to the second tier should be based on a proper case being established on the merits. It was also recognized that the second tier is not intended to justify a universal and equal labour cost increase.

The ACTU argued that the second tier ceiling should average 4%, the Commonwealth argued for 3% and the CAI submitted that there should be no change in labour costs for a period of twelve months.

There was also disagreement as to which principles should be subject to the ceiling on second tier increases. The ACTU and the Commonwealth sought to exclude reductions in hours of work and claims for superannuation whereas the CAI argued that all matters should be included in the second tier.

Both the level of increase available in the second tier and the matters to be covered by the second tier ceiling are considered in detail later in this decision.

10 NATIONAL WAGE CASE MARCH 1987

However we deal, at this point, with the ACTU argument that any claim for an increase in excess of the second tier ceiling and exceptions to any second tier principle should be referred to a national wage bench. This was

opposed by the employers who maintained that no exceptions should be made. Exceptions would be rare but nevertheless they may occur. Consequently we consider that it would be realistic for them to be processed through the Anomalies Conference.

We emphasise that there is a need for genuine flexibility in the operation of the second tier within the limits determined. The results must depend on the facts in particular cases and on the particular circumstances of the industries or enterprises being considered. The Commission does not envisage that second tier increases will be uniformly distributed or that the dates of operation will be the same. Further, we do not envisage retrospective operation of any decision.

Consistent with the submissions put to us, the Commission expects that many matters will be dealt with by negotiation between the parties on an enterprise basis. In accordance with the Commission's statutory responsibility, members of the Commission called upon to determine any matter involving the application of second tier principles will satisfy themselves that conciliation is not likely to lead to a resolution of the claims, before being prepared to arbitrate. Subject only to jurisdictional limitations, the Commission will arbitrate on any or all of the issues that may arise.

In addition, we indicate that if the Commission is required to arbitrate on the merits of increases sought under the principles of the second tier, the Commission will not determine dates of operation before those set out in this decision. In relation to consent awards and agreements, the Commission in fixing the operative date will ensure, so far as is possible, that in the current economic circumstances the economy is not subjected to additional strains. The Commission will also examine agreements and applications for consent awards to ensure that such agreements are justified on their merits.

We emphasise that primary attention should be given to the principle dealing with restructuring and efficiency because of its potential to provide substantial economic benefits for employers, employees and the community as a whole.

COMMITMENT

All parties and interveners supported the concept of commitment to the principles. This is currently expressed in principle 2 - other claims as follows:

"Any claims for improvements in pay and conditions other than those provided by Principle 1 must be processed in accordance with Principles 3 to 12 below. No application for a national wage adjustment to an award will be approved by the Commission unless all the unions concerned in the award give an undertaking that until the next National Wage Case decision they will not pursue any extra claims, award or overaward, except in compliance with the Principles."

The importance of commitment to the principles has already been emphasised in this and previous decisions. For instance in the National Wage Case decision of 4 April 1984 the Commission said:

NATIONAL WAGE CASE MARCH 1987 11

"Furthermore, the existing principles are capable of being adapted to cover cases where a breach of the commitment has occurred. In particular, if during the life of the package the Commission decides that there has been a breach of the commitment it can refuse to grant subsequent national wage increases. Other courses consistent with the principles may also be available to the Commission in particular cases. However, it should be clear that the present system and the Accord will be under serious threat if undertakings are broken in relation to strategic awards, Federal or State."

We re-state that without the commitment of all - unions, employers, governments and tribunals - and their willingness to discharge their obligations and responsibilities, that any orderly system will break down.

The ACTU submitted, as on previous occasions that it supported a collective commitment being given by the ACTU on behalf of all its affiliates and proposed the following wording:

"Any claim for improvements in pay or conditions must be processed consistent with the parameters determined by the National Wage Bench, and the application of the Package of Principles will not occur until the ACTU undertakes on behalf of each of its affiliated unions that for the period of the package they will not pursue any extra claims, award or overaward, except where consistent with the Principles.

The no extra claims commitment shall be reviewed after each first tier

review."

The CAI submitted that the Commission "has already ruled" in the decision of 23 December 1986 "that individual unions should give a commitment", and proposed the following pre-condition to the application of the package:

"Any claim for improvements in pay or conditions must be processed consistent with the parameters determined by the National Wage Bench, and the application of the Package of Principles will not apply to any union which does not provide the following NO-EXTRA CLAIMS commitment.

'It is a term of this Award (arising from the decision of the Australian Conciliation and Arbitration Commission in the National Wage Case 1987 the terms of which are set out in Print No. ) that the unions undertake that for the period of the package they will not pursue any extra claims, award or over-award, except where consistent with the National Wage Case Principles.'

Where this NO-EXTRA CLAIMS commitment is given it shall be inserted into the appropriate award, and renewed after each first tier review."

In addition the CAI and the BCA asked that the Commission state in its decision that industrial action is "contrary to the spirit and intent of the principles and will not be tolerated".

The concept of collective commitment was endorsed by the Commonwealth, in addition to the requirement for "unions to give a commitment to the principles on an individual basis before they become entitled to any increase in wages or improvements in conditions of employment".

The Commonwealth submitted that the system being proposed "is not intended to permit unions to opt in or opt out as they wish" and that "a case does exist for altering the practice of seeking undertakings from individual

12 NATIONAL WAGE CASE MARCH 1987

unions on an award by award basis. Each union should be required to give a commitment on behalf of all of its members under all of the awards to which it is a party".

There was considerable debate on the implications of the ACTU's preference for a collective commitment to be given to the package rather than for a continuation of the present requirement for unions to give individual undertakings on an award by award basis.

It would be appropriate, the Commonwealth submitted, for the Commission to seek from the ACTU "collective commitment that its active support will be forthcoming as a pre-condition to proceeding with its implementation". Should such commitment not be forthcoming it was put that the Commission "will have to review whether the system can be viable".

This submission of the Commonwealth could appear to contemplate the Commission awaiting the outcome of a Special Unions Conference, to be held by the ACTU in March 1987, before deciding whether to implement its decision. It is inappropriate for the Commission to publish its decision subject to conditions on its acceptance suggested by any parties or inteveners. This decision deals with the issues raised in this case, with particular regard to our statutory obligations under section 39(2) of the Act.

Furthermore, the Commission in its decision of 23 June 1986 said:

"The present Principles involve both the collective responsibility of the trade unions through their peak councils and the individual responsibility set out in (the then) Principle 3. This is as it should be."

We continue to expect commitment to the principles to be forthcoming from all parties to the awards of the Commission, both collectively and individually.

The formal commitment required will be in the following terms:

Any claims for improvements in pay and conditions must be processed in accordance with these principles. No adjustments will be approved by the Commission unless a union concerned in an award gives an undertaking that for the period of operation of the package it will not pursue any extra claims, award or overaward, except in compliance with the principles. Where this no extra claims commitment is given it shall be inserted into the appropriate award in the following terms:

"It is a term of this Award (arising from the decision of the Australian Conciliation and Arbitration Commission in the National Wage Case 1987 the terms of which are set out in Print G6800) that the union undertakes that for the period of the package it will not pursue any extra claims, award or overaward, except where consistent with the National Wage Case Principles."

RESTRUCTURING AND EFFICIENCY

The case for significant change to the principles was perhaps nowhere better demonstrated than in the general consensus that the Commission should adopt a principle that would encourage improved efficiency in industry. Although put in different ways, there was recognition that the adjustments that had to be made to the Australian economy could be facilitated by measures which would promote improved efficiency and productivity. The Commonwealth went further: in the Commonwealth's submission, it was crucial for the wage system to adapt in order to accommodate the circumstances facing Australia, as part of broader readjustments to economic policy.

NATIONAL WAGE CASE MARCH 1987 13

The Commonwealth's concern was shared by the ACTU, which drew our attention to a paper recently published by the Australian Manufacturing Council; the Council assessed the state of the manufacturing sector in these terms:

". . . the performance of the manufacturing sector over the past decade has been poor, with low output growth, falling employment, low levels of profitability and investment and inadequate private expenditure on research and development. The sector is fragmented, in terms of geographical spread and size of plant and enterprises, and gives greater attention to process technology rather than to product innovation or the development of new markets.

Consequently considerable attitudinal and structural change within manufacturing enterprises and sectors will be necessary to achieve a more efficient and competitive industry capable of competing in export markets and replacing imports.

Hence it is clear that strategies and policies to foster changes in attitudes, market orientation and capabilities are needed, but the nature of these issues suggests that the effects of such strategies and policies will mostly be medium to longer term."

The Council also gave this outline of the task involved if the necessary change is to be achieved:

"The complexities of the current economic situation and the balance of payments problem have been acknowledged. The Council also recognises that the achievement of successful national economic adjustments and manufacturing industry restructuring will require hard decisions by government, industry and unions. There are no soft options in addressing the challenge of Australia's economic malaise. The decisions to be taken must pursue a consistent long term strategy to increase the contribution which can be made by manufacturing industry."

The ACTU's own views were put without equivocation: it is essential, according to the ACTU:

". . . that wage fixing arrangements recognize and accommodate industry efforts to improve productivity and efficiency at the enterprise or industry level in order to improve our productive base and our competitive performance."

This submission reflects the statement of policy issued jointly by CAI, the BCA and the ACTU on 24 September 1986. Having identified Australia's economic problems and accepted that they cannot be quickly overcome, the joint statement proceeds:

"The parties also acknowledge that to achieve the necessary adjustments to take advantage of the situation requires the co-operation of the workforce and management. The question is not the need for change, but the process by which we achieve that change. The objective is to achieve change through co-operation and consultation, not confrontation, and to increase the prospect of meaningful and satisfying work and the fuller realisation of human potential."

Not all employer organizations shared the ACTU and CAI view that it was desirable to make an addition to the principles of wage fixation. The Australian Wool Selling Brokers Employers Federation (AWSB) expressed grave apprehension and warned that a new principle could produce uncertainty, unreal expectations and consequential dissatisfaction. The Federation insisted that

14 NATIONAL WAGE CASE MARCH 1987

what happens in the workplace is the proper responsibility of management, in proper consultation with its employees in appropriate cases. One of the Federation's concerns was that a new principle should be used to re-evaluate work only after changes in the circumstances of the workplace had been completed. On this latter point, it may not in all cases be reasonable to insist on such a condition, but we consider that no increases should be paid before a restructuring and efficiency exercise is implemented.

We have decided that the positive declaration of purpose by the ACTU and the major employers, with its emphasis on co-operation and consultation, should be given expression by the introduction of a new principle.

Some of the positive changes which we would expect from the application of the principle include:

. there will be an examination of restrictive work and management practices in both the public and private sectors to identify areas of inefficiency and to develop means to overcome them: This objective is the subject of agreement between the ACTU, the BCA and the CAI and we endorse it;

. if improved efficiency and productivity require the introduction or extension of multi-skilling and broad-banding, these will be treated by the parties as an appropriate element in the restructuring exercise;

. similarly, there should be acceptance of the concept that the reduction of demarcation barriers may be essential to the success of an exercise; and

. where new classifications are needed to give effect to the changes which have been introduced, the parties will seek an appropriate award variation.

It will be apparent from the changes we envisage that the responsibility for the successful application of the principle must be borne both by management and the workforce. The Australian Manufacturing Council pointed out that considerable attitudinal and structural change will be necessary; we wish to emphasise that structural change will depend on changes in attitudes by all.

Although there was general acceptance of the need for the new principle, the parties recognized that in its application there could be inappropriate outcomes. We share that concern and repeat the warning given in the decision of 23 December 1986 - the new principle must not provide a vehicle for bogus wage increases or other sham arrangements. The consequences that must be avoided include the following:

. it would be unacceptable for a plant restructuring exercise which was accompanied by labour force adjustments to have as its consequence a levelling-up of rates of pay. This could happen if priority was given to the maintenance of relativities;

. it would also be unacceptable for an agreement to be put forward in purported reliance on the principle in circumstances where there has been no genuine restructuring exercise;

. the objectives of the principle should not be confused with the obligation to fulfil normal work requirements. We do not consider that a restructuring and efficiency exercise is an appropriate description of changes leading to no more than compliance with terms of employment; and

NATIONAL WAGE CASE MARCH 1987 15

. a restructuring and efficiency exercise may identify award classifications that are no longer appropriate, but it would be contrary to the purpose of the principle if obsolete award provisions were retained.

The ACTU expressed the view that the most effective way to formalise the process would be to encourage a national agreement which would establish the framework for enterprise or plant negotiations in a particular industry. If this were not possible, there would be negotiations at enterprise or plant level. We consider that nationally agreed guidelines may assist the proper processing of enterprise based restructuring and efficiency exercises. In our view, it is primarily at the enterprise level that the objectives of this principle will be achieved.

However, should parties be unable to reach agreement on any aspect of an exercise, the Commission will arbitrate the issue; this will apply to questions relating to the value of work as well as any other disputed matters arising in the course of restructuring and efficiency exercises.

Restructuring exercises may involve new or altered tasks for some or all members of the workforce involved. Where relevant the tests provided by the work value principle should be used to assist in assessing the value of those changes. Thereafter those changes will not be taken into account in the processing of any other claim for those workers under the work value principle. We emphasise this point to make it clear that the work value principle will continue to play its established role and will continue to provide for situations in which employees may be affected by significant work changes that are not part of a restructuring exercise.

The work value principle recognizes that the level of an employee's skill and responsibility may change significantly due to changes in the nature of work, justifying a wage increase. The new principle is intended to encourage significant and appreciable improvements in efficiency at the enterprise or plant level which may or may not involve changes in skill and responsibility sufficient to meet the tests of the work value principle.

We recognize that there will be some overlap between these two principles but whichever is used in particular cases, there should be no double-counting and the second tier ceiling should not be exceeded.

On the question of remuneration, three general conditions will apply:

Firstly, there should be no expectation that all employees' remuneration would be adjusted when the work of some only has been affected.

Secondly, it would be inappropriate and contrary to the spirit as well as the objectives of the principle, if increases in remuneration were paid before a restructuring exercise is implemented.

Thirdly, it should be clear that the principle is not intended to operate on the assumption that there must be a return to the employees of benefits commensurate with the value of the changes to the employer.

We stress in relation to the operation of the restructuring and efficiency principle, that the changes must be genuine, be designed to improve efficiency and enhance productivity and generally be consistent with the needs and requirements of the industry or enterprise concerned.

16 NATIONAL WAGE CASE MARCH 1987

The new principle will be in these terms:

(a) Increases in rates of pay or improvements in conditions of employment may be justified as a result of measures implemented to improve efficiency in both the public and private sectors.

(i) Changes to work practices and changes to management practices must be accepted as an integral part of an exercise conducted in accordance with this principle.

(ii) Other initiatives may include action to reduce demarcation barriers, advance multi-skilling, training and re-training, and broad-banding.

(iii) Changes to working patterns may be necessary.

(b) This principle shall be subject to the second tier ceiling.

(c) 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 this principle shall not be taken into account in any claim under the work value changes principle.

WORK VALUE CHANGES

In our decision of 23 December 1986 we said in respect of work value:

"We will not determine whether to allow the existing Work Value principle to operate outside the second-tier ceiling until the possible conflict between the various relevant principles is resolved. That aside, we consider the Principle should be left in its present form and, in particular, we affirm the decision of 26 June 1986 refusing to alter the date from which changes may be measured. As was said on that occasion 'The present provision has operated satisfactorily and no persuasive case has been made to justify its alteration'."

The CAI has proposed the continuation of the existing principle, with any increases being obtained under the principle subject to the second tier ceiling. A similar position was taken by the Commonwealth, New South Wales, Victoria, South Australia, Western Australia, Queensland, Tasmania, Northern Territory, the AWSB and the AFE.

The ACTU proposed changes to the principle, the more important of which were the deletion of:

. the test that change in the nature of work should constitute such a significant net addition to work requirements so as to warrant the creation of a new classification and the replacement of that test with the test, that the change should constitute a significant net addition to work requirements;

. the arbitrary date from which work value change can be measured, replacing it with the time of the last work value adjustment in the award; and

. the current principle 4(g) in light of its operation in the context of the two tier system.

NATIONAL WAGE CASE MARCH 1987 17

Having considered the submissions of the ACTU we have not been convinced that the principle should be altered to the extent suggested. The principle has been in existence in its present form for almost three and a half years, during which it has operated quite satisfactorily, and was subject to review in the National Wage decision of 26 June 1986. It is imperative in the current economic environment that only genuine cases be processed in accordance with the principle. We have decided however that the existing principle 4(g) is no longer necessary in light of the introduction of the principle dealing with Restructuring and Efficiency.

The ACTU also put that any increases flowing from the Work Value principle should be subject to the second tier ceiling, with any claims or agreements seeking higher increases being referred to the National Wage Bench. Victoria also expressed support for providing scope for second tier claims exceeding the ceiling to be dealt with by the National Wage Bench but envisaged such claims being very limited and of an exceptional character. The ACPA stated that work value should be outside the second tier ceiling as the extent of work value change may exceed the limit for individuals or groups.

It may be that the limited and exceptional situation might arise wherein the extent of work value change for particular classifications or groups might have a cost in excess of the second tier ceiling but we consider that the determination of such a situation does not need the attention of the National Wage Bench. There is an existing mechanism within the Anomalies principles quite capable of dealing with this issue. We have decided that any claims falling into this category will be processed under that principle.

Victoria whilst submitting that the existing work value principle should not be altered also submitted that the new system should preclude double counting where work value considerations intrude into a restructuring and efficiency exercise. In such cases the matter should be dealt with in the context of the restructuring and efficiency principle. We agree with this approach, as no double counting of work value changes will be countenanced in the application of the principles.

The amended principle to give effect to this part of our decision will be:

(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 work should constitute such a significant net addition to work requirements as to warrant the creation of a new 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.

However rather than to create a new classification it may be more appropriate in the circumstances of a particular case to fix a new rate for an existing classification or to provide for an allowance which is payable in addition to the existing rate for the classification. In such cases the same strict test must be applied.

(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

10 NATIONAL WAGE CASE MARCH 1987

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 should be measured is the last work value adjustment in the award under consideration but in no case earlier than 1 January 1978. Care should be exercised to ensure that changes which were taken into account in any previous work value adjustments are not included in any work evaluation under this principle.

(d) 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, where appropriate, comparisons may also be made with other wages and work requirements within the award or to wage increases for changed work requirements in the same classification in other awards provided the same changes have occurred.

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

(f) The Commission should guard against contrived classifications and over-classification of jobs.

(g) 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 this principle shall not be taken into account in any claim under the restructuring and efficiency principle.

SUPPLEMENTARY PAYMENTS

In the decision of 23 December 1986, the Commission said it was prepared to consider a principle providing for the inclusion of supplementary payments in minimum rates awards as part of a carefully controlled process to address the position of lower paid workers in the current economic circumstances and to assist in moving towards consistent treatment between minimum rates and paid rates awards.

Supplementary payments were introduced into a number of minimum rates awards by consent during the period before the introduction of the new Wage Fixing Principles in September 1983.

In more recent times, the introduction of supplementary payments into minimum rates awards has been prohibited and this has resulted in different treatment for workers under different minimum rates awards. Furthermore, all employees under paid rates awards have had access to the equitable base provisions of the anomalies principle since 1983 whereas employees covered under minimum rates awards have not had the opportunity to have applications for supplementary payments considered. We recognize the need in current economic circumstances to give positive attention to the position of lower paid workers. In all these circumstances we are prepared to remove the prohibition on granting new supplementary payments.

This conclusion is consistent with the views of the CAI and the ACTU. Both proposed principles to govern the introduction and adjustment of supplementary payments in minimum rates awards as part of the second tier.

NATIONAL WAGE CASE MARCH 1987 19

Those proposals recognized the need for information to be available on the incidence and level of overaward payments in a particular industry or enterprise; for the absorption of existing overaward payments up to the level of the particular supplementary payment agreed or determined; and for there to be a clear understanding and acceptance that supplementary payments may alter relativities. In our view, these requirements are fundamental to the introduction of a principle to govern the inclusion and adjustment of supplementary payments in minimum rates awards as part of the second tier.

However, there is a range of matters in relation to which the ACTU and

CAI proposals differed. For example, the CAI only supported the inclusion of supplementary payments by consent, whereas the ACTU submitted that there should be access to arbitration where the parties to an award failed to reach agreement on the introduction or adjustment of supplementary payments.

In view of the conclusion in the decision of 23 December 1986 that the granting of supplementary payments may prove a more efficacious way of addressing the position of lower paid workers than updating the minimum wage, and although it is desirable that agreement be reached, it is consistent with the general approach we have adopted in relation to the other parts of the two tier package to provide for arbitration in relation to supplementary payments where agreement cannot be achieved.

However, in so providing we emphasise that the granting or adjustment of supplementary payments by the Commission will be subject to strict criteria to ensure that the purpose of supplementary payments is not abused and that such payments may be introduced or increased without significant adverse effects for the industries or enterprises concerned. Further, as supplementary payments are to be part of the second tier, any increase in labour costs resulting from the inclusion or adjustment of supplementary payments will be subject to the second tier ceiling.

There were also differences between the ACTU and the CAI concerning the basis for determination of the appropriate level of supplementary payments in minimum rates awards. As previously stated, both accept that a prime consideration is the incidence and level of overaward payments made to workers covered by the award under review. This has been the recognised basis for the introduction of supplementary payments into Federal awards in the past.

The CAI continued to support this approach whereas the ACTU submitted that regard should also be paid to the level and incidence of overaward payments outside the award concerned.

We do not consider it necessary for investigations to be made of overaward payments for workers covered by other awards. We agree with the ACTU and the CAI that it is necessary to establish actual payments in the award under consideration. We are also prepared to allow the level of supplementary payments to similar classifications of employees in other minimum rates awards to be taken into account both in deciding whether a supplementary payment should be prescribed and to assist in determining the level of any payment that should be made provided that such payment shall not exceed the limit prescribed for the second tier.

In our view, all minimum rates awards of the Commission which contain rates in excess of properly fixed minimum rates, whether by consent or arbitration, should be expressed in terms of a minimum rate plus supplementary payments. There is no reason why a move should not be commenced to achieve this altered format.

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We have given consideration to the question whether specific provision should be made for individual employers to seek exemption from supplementary payments. We have concluded that this is not necessary: the economic incapacity principle adequately covers any such exigency.

The CAI also proposed that the principle provide that, where appropriate, supplementary payments may vary between classifications and geographic locations. It is noted that supplementary payments in some Federal awards vary from one classification to another and according to geographic area. These matters should be considered by the Commission when applications are made for the inclusion or adjustment of supplementary payments in particular awards.

We repeat, if supplementary payments are to achieve their purpose of assisting the position of low paid workers there will need to be a complete and total commitment to the absorption of overaward payments up to the level of the supplementary payment. There must also be an acceptance that the introduction or adjustment of a supplementary payment may lead to relativity changes and should not give rise to claims for the restoration of historical relativities.

We also emphasise our earlier comments that primary attention should be given to the principle dealing with restructuring and efficiency, rather than the supplementary payments principle, because of the potential of the restructuring and efficiency principle to provide substantial economic benefits for employers, employees and the community as a whole.

We provide the following principle to deal with supplementary payments:

For the purposes of this principle, a supplementary payment is a separate amount in a minimum rates award which is in addition to the minimum rate and which together with the minimum rate becomes the award rate below which no employee may be paid.

Whether by consent or arbitration, a supplementary payment may be introduced into a minimum rates award or an existing supplementary payment may be increased only in accordance with the following criteria:

(a) The prime consideration will be the level of actual payments to the employees covered by the award under review. Where relevant the level of supplementary payments made to similar classifications of employees in other minimum rates awards may also be taken into account.

(b) The relevant union or unions must give appropriate commitments regarding the absorption of overaward payments up to the level of the supplementary payment. Supplementary payments do not justify increases to employees already receiving in excess of the minimum rate plus the supplementary payment.

(c) There must be a clear understanding and acceptance by the unions concerned in the award that the introduction or adjustment of supplementary payments may alter relativities of actual rates within the award and with other awards.

(d) Where appropriate, supplementary payments may vary between classifications and geographic areas.

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(e) The date of operation of any supplementary payment will be determined by the Commission.

(f) The introduction or adjustment of supplementary payments will be subject to the second tier ceiling. Existing supplementary payments may be adjusted from time to time according to increases in the first tier, except where a flat money amount has been awarded in a National Wage Case.

ALLOWANCES

There was general agreement that this principle would need to be altered to recognise the operation of the two tier system. Whilst there was some consensus that the basis for the new principle would be the wording of the existing principle suitably amended to accommodate the new two tier requirements the ACTU proposed a more simplified allowance principle.

The Commonwealth submitted that if the adjustment or creation of allowances took place in accordance with second tier principles, such adjustments should be subject to wage cost ceilings but cost reimbursement allowances do not logically fall within the second tier ceiling. Moreover, it is important not to discriminate between awards where all factors are reflected in the wage rates, and those awards where some factors are recognised by allowances. It was further submitted by the Commonwealth that the current provision for adjustment of allowances from time to time to reflect movements in wage rates as a result of national wage adjustments could not apply where first tier adjustments take the form of a flat money amount.

Having considered the submissions of the parties we have amended the existing provisions to reflect the introduction of the two tiered system. It has been necessary to make particular reference in the principle to shift allowances expressed in awards as money amounts.

In respect of service increments the CAI proposed a continuation of the existing provisions, whereas the ACTU suggested wording setting out the position that service increments may be adjusted in accordance with their relationship to wages. The ACTU proposed that changes in work value, the inclusion of supplementary payments, the application of the restructuring and efficiency principle and the removal of anomalies and inequities may be expressed through changes in, or in the introduction of, service increments. Having considered the proposal put by the ACTU we consider that the overall alterations to the principles provide considerable flexibility for adjustments in the second tier and we are not prepared to vary the service increments provisions that have worked satisfactorily.

We have re-drafted the principle in relation to allowances to simplify its form and to make necessary adjustments following the adoption of the two tier system:

Allowances may be adjusted or awarded only in accordance with this principle and the anomalies and inequities principle. Service increments may be adjusted or awarded only in accordance with (c) of this principle.

(a) Existing Allowances

(i) 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.

22 NATIONAL WAGE CASE MARCH 1987

(ii) Existing allowances which relate to work or conditions which have not changed may be adjusted from time to time to reflect the movements in increases under the first tier, except where a flat money amount has been awarded, provided that shift allowances expressed in awards as money amounts may be adjusted.

(iii) 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 or the restructuring and efficiency principle and will be subject to the second tier ceiling.

(b) New Allowances

(i) New allowances to compensate for the reimbursement of expenses incurred may be awarded where appropriate having regard to such expenses.

(ii) No 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, restructuring and efficiency, or first awards and extensions to existing awards principle.

(c) Service Increments

(i) Existing service increments may be adjusted in the manner prescribed in (a)(ii) of this principle.

(ii) 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 and restructuring and efficiency principles.

SUPERANNUATION

In its decision of 23 December 1986 the Commission said in relation to superannuation:

"We are not prepared to grant the application for a moratorium proposed by CAI. That leaves only two options: the existing principle to remain in its current form or, alternatively, superannuation should be subject to arbitration. Further discussion needs to take place on these options. However, any cost increase as a result of the spread of superannuation will be taken into account in determining what increases, if any, are appropriate under the proposed new package."

The differences between the parties on these two options were not resolved during the Anomalies Conference proceedings and further detailed submissions were made in the resumed hearing.

The CAI and other private employers opposed arbitration and supported retention of the existing principle subject to certain additional conditions or rules to achieve what they saw as a clarification of the principle.

NATIONAL WAGE CASE MARCH 1987 23

The ACTU also supported retention of the existing principle but without modification. However, it did outline its views of what it considered might be appropriate additional conditions or rules should we be persuaded that any further clarification of the principle was necessary. The ACTU also made clear its view that industrial action was inevitable unless employers adopted a more receptive attitude towards agreements on superannuation and ancillary matters such as the fund or funds into which new or improved contributions should be paid. If employers persisted with their present attitudes, then the ACTU would prefer a system along the lines proposed by the Commonwealth.

The Commonwealth argued strongly for the need to introduce superannuation "in a more rational and orderly fashion, without the level of disputation seen in recent times, and in a way consistent with current economic circumstances". It proposed that the existing principle should continue to operate subject to the same conditions as at present but, in addition, the Commission should be prepared to arbitrate on a case by case basis where agreements cannot be reached. Any new or improved superannuation contributions flowing from such arbitration should be phased in.

Western Australia and South Australia supported the Commonwealth. New South Wales, Victoria, Queensland and Tasmania opposed arbitration.

We have previously expressed serious concern at the manner in which the existing principle has been used and, in particular, the industrial action which has occurred - and is still occurring - in support of superannuation claims. As we said in our statement of 14 November 1986:

"The number of such instances is, in relative terms, small. However, their effects are not minor: millions of dollars in both wages and company income have been lost, local and export industries have been put at risk and jobs jeopardised."

Not all of this industrial action has been about the actual provision of new or improved superannuation benefits. Much of it has involved disagreement over the funds into which contributions should be paid. We return to this issue later in the decision. At this point, suffice to say that whatever the cause, such industrial action cannot be tolerated and, if it should continue, it has the potential to destroy any new wage fixation package.

We consider that the existing principle should be modified. The Commission will continue to certify agreements or make consent awards. It will also be prepared, as a last resort, to arbitrate on superannuation in instances where negotiations and conciliation are exhausted. In any such arbitration the Commission will award new or improved benefits not exceeding the equivalent of 1.5% of ordinary time earnings, to operate no earlier than 1 January 1988 and no more than a further 1.5% to operate no earlier than 1 January 1989. Ordinary time earnings for an employee in this context means the classification rate, including supplementary payment where relevant, overaward payment and shift loading. Consistent with this change, superannuation matters may be dealt with by individual members of the Commission. The principle will therefore be amended to remove mention of the superannuation Full Bench established in accordance with the 26 June 1986 National Wage Case decision.

We have chosen this course for two reasons. They lie in the nature and intent of the package we have decided to introduce. That package is designed to assist in providing a workable industrial relations and wage fixation environment in order to assist in the achievement of an improved economic situation. The superannuation issue has the potential to destroy those efforts, both industrially and economically. We are not confident that individual parties will not continue to act in the manner that some have

24 NATIONAL WAGE CASE MARCH 1987

already acted, thus causing frustration, poor industrial relations and inevitable disputation. Under the modified approach there can be no excuses for industrial action.

The modified approach will also assist the Commission in achieving an important objective, namely, that new or improved superannuation benefits "are implemented on an orderly and rational basis and are properly phased in, consistent with the state of the economy".

The parties also continued to disagree on whether superannuation should be subject to the second tier ceiling. We consider that the cost of superannuation must be taken into account. If it is not, the restraint dictated by the current economic situation could be quickly eroded. However, if it is included under the second tier ceiling the benefits of increased efficiency and productivity sought to be achieved through the proper application of other second tier principles could be jeopardised. Consequently, we have decided that it should not be included in the second tier but, more appropriately, taken into account in our assessment of the maximum labour cost increases that can be sustained during the life of the new package and from which the first and second tier proportions are derived.

The question of what fund or funds superannuation contributions should be paid into was the subject of detailed submissions by the parties. The CAI submitted, among other things, that:

. where an employer is a party or proposes to become a party to a scheme and such a scheme meets the Commonwealth operational standards, and the employer desires to use that scheme, such a scheme shall prevail;

. where an employer does not wish to contribute to more than one fund that employer shall not be required to do so; and

. in the event of a dispute arising over the choice of superannuation fund, such dispute may be resolved by the conduct of a secret ballot under the auspices of the Commission amongst the employees who are directly affected.

For its part, the ACTU rejected the notion that the employer should have the right to determine the appropriate fund and submitted that, other things being equal, the Commission should express preference for multi-employer or industry-wide superannuation funds "as the dominant form for the growth and spread of superannuation through the workforce" because:

. it was desirable to encourage uniformity within and across industries;

. portability and preservation of benefits to retirement age are enhanced by such funds; and

. administration, investment and insurance can most efficiently be managed on a bulk basis.

The Commonwealth indicated a preference for multi-employer funds that are jointly controlled by equal numbers of representatives of unions and employers rather than union or employer-controlled or based funds.

This has been a vexed issue and, as stated earlier, has been the cause of much of the industrial action that has occurred to date. It cannot be allowed to continue to cause the problems it has and, again as a last resort, the Commission will arbitrate as to the appropriate fund in particular cases.

NATIONAL WAGE CASE MARCH 1987 25

Having said that, it must be emphasised that consistent with the whole thrust of the new package the parties themselves have a responsibility to work together co-operatively to overcome the present difficulties.

Without wishing to prejudge the issue there are a number of comments we consider desirable to make. The first is that any fund which complies with the Commonwealth's Operational Standards for Occupational Superannuation Funds and which has received the appropriate preliminary listing for taxation purposes from the Commissioner for Occupational Superannuation, could be determined as an appropriate fund by the Commission. The second is that it seems reasonable that no employer should be forced to make contributions for its employees to a multiplicity of superannuation funds. The third is that, given the mobility of labour, multi-employer funds controlled jointly by employers and unions may be preferable to individual funds and more likely to fulfil the basic purpose of superannuation for the majority of employees in particular situations. A number of such funds have been developed.

These, and other aspects of this issue, need further consideration by the parties. Both the ACTU and the Commonwealth proposed the convening of a conference of the parties for this purpose. The Commission endorses that approach and will convene such a conference.

There are two other matters requiring comment. The first concerns the treatment of casual workers. The CAI submitted that employers should not be required to make superannuation payments on behalf of a casual worker in respect of any day when that employee works less than the full daily hours. The ACTU argued that appropriate arrangements have already been made in respect of casual workers in a number of areas of industry and there was no reason why this could not continue. We agree that there should be scope for coverage of casual workers. However, because of problems of definition of the term casual in different awards, we consider this matter should be further explored by the parties at the conference previously referred to.

The second matter concerns negotiations which are currently proceeding in a number of areas. A significant number of those are based on interdependent or concurrent reviews of work practices designed to improve efficiency. There is scope under the new principle for those negotiations to continue on that basis. Where they are successfully concluded, the improved work practices cannot be taken into account in any subsequent exercise conducted under the restructuring and efficiency principle. Moreover, in cases where arbitration is required and an employer argues for specified improvements in work practices concurrently, the Commission will, in the absence of agreement on this aspect, arbitrate on the specified improvements sought.

The new principle to give effect to this part of our decision will be:

(a) Pursuant to section 28 of the Act, 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 3% of ordinary time earnings of employees.

26 NATIONAL WAGE CASE MARCH 1987

(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 Conciliation and Arbitration Act arbitrate on that claim.

(c) In any case in which the Commission determines, pursuant to (b) of this principle, that a claim or part thereof should be granted, it shall award no more than 1.5% of ordinary time earnings to operate no earlier than 1 January 1988 and no more than a further 1.5% to operate no earlier than 1 January 1989.

(d) The Commission will not grant retrospective operation for any matters determined in accordance with this principle.

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

STANDARD HOURS

In our 23 December 1986 decision we indicated that this principle should remain in its present form "although we do not rule out a variation to increase standard hours where the parties consent".

The Commonwealth submitted that care must be taken to ensure that changes in work practices that lead to cost offsets for the introduction of shorter hours should not be a consideration for claims under any other principle.

The CAI, in referring to cost offsets when reduced hours are introduced, said:

"We make it clear that in examining cost offsets, award conditions are relevant; there is still a view that award conditions are sacrosanct in this regard and we think the Commission ought to again reiterate that, consistent with its decision in the Snowy Mountains Hydro-Electric Authority, that award conditions may be used to achieve cost offsets in a reduced hours application. This is an important matter."

Due to the nature of this principle and the history of its operation we believe that it should not be subject to the restrictions imposed by the second tier ceiling provided that the cost impact of the shorter working week is minimised.

We have also decided that changes in work practices designed to minimise the cost of introducing shorter hours will not be a consideration for claims under any other principle and we repeat what was said in the decision of 26 June 1986 that "when it comes to offsets existing award standards are not sacrosanct".

Accordingly, the principle will be amended to read as follows:

(a) In dealing with claims for a reduction in standard hours to 38 per week, the cost impact of the shorter week should be minimised. Accordingly the Commission should satisfy itself that as much as possible of the required cost offset is achieved by changes in work practices.

NATIONAL WAGE CASE MARCH 1987 27

(b) Claims for reduction in standard weekly hours below 38, even with full cost offsets, will not be allowed.

(c) Costs associated with the reduction of standard hours to 38 per week will not be subject to the second tier ceiling.

(d) Changes in work practices designed to minimise the cost of introducing shorter hours will not be a consideration for claims under any other principle.

CONDITIONS OF EMPLOYMENT

There was substantial agreement that improvements available under this principle should be subject to the second tier ceiling except for the flow-on of test case provisions. The ACTU raised the question of the application of the Termination, Change and Redundancy Case provisions to the on-site building and construction industry and submitted that the parties in that industry should have scope for consideration under this principle.

We are of the opinion that the flow-on of already decided test case matters such as adoption leave and the termination, change and redundancy provisions should not be subject to the second tier ceiling. All other improvements in conditions of employment not covered elsewhere in the principles should be covered by this principle and be subject to the second tier ceiling. In relation to the building and construction industry, we note that the Full Bench of the Commission in the Termination, Change and Redundancy Case said:

"Our reasoning in these proceedings, other decisions of this Commission and various decisions of other industrial authorities, are also inconsistent with the general severance pay prescription being granted . . . where employees have been engaged for a specific job or contract, to seasonal and/or casual employees, or in cases where provision is contained in the calculation of the wage rates for the itinerant nature of the work."

Any application or claim for a flow-on of the termination, change and redundancy provisions into the building and construction industry will have to be considered on its merits.

The amended principle to give effect to this part of our decision will be:

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 implications both directly and

through flow-on and subject to the second tier ceiling.

ANOMALIES AND INEQUITIES

In the 23 December 1986 decision in relation to this principle we said:

"The ACTU, the CAI and the Commonwealth all agreed that an anomalies principle should remain. However, there was disagreement between the parties as to whether increases under the Anomalies Principle should come within the second tier ceiling. The CAI also proposed a number of changes to restrict the operation of the Principle. Both the Commonwealth and the CAI proposed that the inequities provision should be deleted. This was opposed by the ACTU.

28 NATIONAL WAGE CASE MARCH 1987

In our view, retention of the inequities provision may be inconsistent with the proper operation of the proposed package as we presently see it. We also doubt the continuing need for provision for an equitable base adjustment in relation to the metal industry standard or for the adjustment of paid rates awards to establish an equitable base. We consider that there is a clear case for the other aspects of the Anomalies Principle to remain in their present form."

The parties now agree that anomalies should be subject to the second tier ceiling. Notwithstanding that, in light of our decision that any claim for an increase in excess of that provided through a principle subject to the second tier ceiling should be processed through the Anomalies Conference, there is a need to provide for the handling of the special and extraordinary cases.

The CAI proposed the discontinuation of the inequities principle, the catch-up to the metal industry standard provision and equitable base adjustment for paid rates awards.

The ACTU contended, however, that it was necessary to maintain the catch-up to the metal industry standard provision and the equitable base adjustment for paid rates awards. It submitted that there were a number of claims in the system and that "oversight should not triumph over merit".

It also submitted that the inequities provision which has had an extremely limited application should remain and that the requirement that there be ". . . no good reason for dissimilar rates of pay" contained in the existing principle would prevent inappropriate reliance on second tier increases.

The Commonwealth suggested that catch-up for metal industry standard and equitable base adjustments for paid rates awards should be phased out and that "some scope should exist to progress the matched rates concept under strict conditions".

Victoria submitted that the metal industry standard and equitable base claims should not come under the second tier ceiling. It submitted that parties should be required to lodge their claims within a given time. South Australia supported the view that equitable base provision should remain outside the second tier ceiling. Tasmania argued that it was inappropriate to retain the inequities principle or continue the metal industry catch-up or equitable base provision.

We have decided that all claims before the Anomalies Conference and before Full Benches on reference from that conference should be the subject of the second tier ceiling except for those matters which the Anomalies Conference or a Full Bench determines shall be dealt with under the pre-existing principles. In any such cases, special and extraordinary reasons must be established before this course will be adopted.

It is clear also that equitable base and metals industry standard catch-up claims should be rare and that there is a danger that the inequities provision will operate in a way which is contrary to the intent of the two tier system. We also note the experience of the Commission that some awards that have been subject to proceedings under the equitable base provision may not in fact be true paid rates awards. That provision is available only to true paid rates awards. We have decided not to change the substance of the principle although future claims will be bound by the second tier ceiling. Equitable base and catch-up to the metal industry standard claims will not be considered unless lodged before 1 September 1987.

NATIONAL WAGE CASE MARCH 1987 29

The ACTU also suggested that the procedure should be amended to enable individual members of the Commission to be involved in the operation of this principle. We see merit in this proposal but we have concluded that an amendment to the principle is not required because the procedure can be departed from by agreement and with the President's approval.

The principle will be:

(a) Anomalies

(i) In the resolution of anomalies, the overriding concept is that the Commission must be satisfied that any claim under this principle will not be a vehicle for general improvements in pay and conditions and that the circumstances warranting the improvement are of a special and isolated nature.

(ii) Decisions which are inconsistent with the principles of the Commission applicable at the relevant time should not be followed.

(iii) The doctrines of comparative wage justice and maintenance of relativities should not be relied upon to establish an anomaly because there is nothing rare or special in such situations and because resort to these concepts would destroy the overriding concept of this principle.

(iv) The only exceptions to (iii) are that catch-up for the metal industry standard and adjustment of paid rates awards to establish an equitable base may be processed as anomalies, provided such claims are lodged before 1 September 1987.

(b) Inequities

(i) The resolution of inequities existing where employees performing similar work are paid dissimilar rates of pay without good reason. Such inequities shall be processed through the Anomalies Conference and not otherwise, and shall be subject to all the following conditions:

(1) The work in issue is similar to the other class or classes of work by reference to the nature of the work, the level of skill and responsibility involved and the conditions under which the work is performed.

(2) The classes of work being compared are truly like with like as to all relevant matters and there is no good reason for dissimilar rates of pay.

(3) In addition to similarity of work, there exists some other significant factor which makes the situation inequitable. An historical or geographical nexus between the similar classes of work may not of itself be such a factor.

(4) The rate of pay fixed for the class or classes of work being compared with the work in issue is a reasonable and proper rate of pay for the work and is not vitiated by any reason such as an increase obtained for reasons inconsistent with the principles of the Commission applicable at the relevant time.

30 NATIONAL WAGE CASE MARCH 1987

(5) Rates of pay in minimum rates awards are not to be compared with those in paid rates awards.

(ii) In dealing with inequities, the following overriding considerations shall apply:

(1) The pay increase sought must be justified on the merits.

(2) There must be no likelihood of flow-on.

(3) The economic cost must be negligible.

(4) The increase must be a once-only matter.

(c) Procedure

(i) An anomaly or inequity which is sought to be rectified must be brought to the Anomalies Conference by the peak union councils, namely, the ACTU and the ACPA, or by any union not affiliated with those bodies.

(ii) The matter is first discussed with the employers and other interested parties at the Conference.

(iii) The broad principles for processing the anomaly or inequity raised are:

(1) If there is complete agreement as to the existence of an anomaly or inequity and its resolution, and the President is of the opinion that there is a genuine anomaly or inequity, the President will make the appropriate order to rectify it.

(2) If there is no agreement at all, one of two situations can arise. Either the President will hold that there is no anomaly or inequity falling within the concept of the Conference which would mean an end of the matter as far as the Conference is concerned or on the other hand the President could hold that there was an arguable case which would then go to a Full Bench of the Commission for consideration.

(3) This procedure can be departed from by agreement and with the President's approval.

PAID RATES AWARDS

In our decision of 23 December 1986 we commented as follows on the principles to be applied to paid rates awards:

"Considerable debate took place in relation to the adjustment of paid rates awards. The ACTU argued that the Commission should remove its existing prohibition and allow the fixation of paid rates awards on an on-going basis by reference to the market rates of pay for comparable

employees as part of the second tier. This was a matter of particular importance to the ACPA. CAI sought a continuation of the present principles in relation to paid rates awards.

NATIONAL WAGE CASE MARCH 1987 31

This is a complex area and no satisfactory solution emerged in these proceedings. The Commission has pointed out in other cases the dilemma caused by the adoption of different practices in relation to the fixation of rates in paid rates awards and the significantly different results which have stemmed from those different practices. Primarily the conflict is between the perceived need to preserve internal relativities within organizations and the application of market surveys. Furthermore, there is a diversity of views as to the appropriate market which should be used.

We consider that the parties should further consider these difficulties. Subject to the application of strict tests designed to protect the integrity of paid rates awards, we do not rule out the possibility of allowing the creation of new paid rates awards or the adoption of a principle for adjusting existing paid rates awards. However, any such principle would need to be strictly controlled and subject to the ceiling on second tier wage increases.

We also consider there is merit in the view that all paid rates awards should contain properly assessed and identifiable minimum classification rates and that amounts over and above those rates should be expressed as supplementary payments. This would assist the parties and the Commission to address a number of the real problems of wage and salary fixation which became evident during the Special Review of the relationship between paid rates and minimum rates."

In the proceedings following that decision, the parties and interveners were still wide apart in their attitude to paid rates awards and their adjustment. Two matters of particular concern were the suggestions by CAI that in all paid rates awards there should be identifiable minimum classification rates with amounts over and above those rates expressed as supplementary payments and that such supplementary payments should reflect both classification and regional differences.

Although no party or intervener expressed absolute opposition to either of these propositions the ACTU, the Commonwealth, the Public Service Board (PSB) and a number of the States expressed reservations. In general, they submitted that the proposals in relation to paid rates awards raised important issues which should be the subject of further detailed examination between the parties.

In the 1983 National Wage Case decision, a number of the problems which face the Commission in relation to the adjustment of paid rates awards were referred to and a number of the problems are apparent from an examination of the Commission's decisions in relation to equitable base claims under the anomalies and inequities principle which has existed since that time.

We have no doubt that any adjustment to paid rates awards in addition to first tier adjustments must be covered by the second tier ceiling and we re-affirm our belief, expressed in our earlier decision, that identifiable minimum classification rates and supplementary payments in paid rates awards would assist in alleviating a number of the problems in wage fixation concerning the relationship between paid rates and minimum rates awards discussed in the Special Review set up by the 26 June 1986 National Wage Case decision. We think that this proposition, which was first put forward by CAI, is even more important in the light of our decision to allow the insertion and adjustment of supplementary payments in minimum rates awards either by consent or arbitration.

Nevertheless, we are moved by the genuine concern of the parties to hold conferences to consider:

32 NATIONAL WAGE CASE MARCH 1987

. the removal of the present prohibition on the making of new paid rates awards, other than when first awards are made;

. the method of adjusting paid rates awards, in particular the role of market surveys; and

. the nature of the difficulties envisaged in giving effect to the insertion in paid rates awards of appropriately fixed minimum rates and supplementary payments.

The Commission will convene such a Conference. Pending the outcome, the

existing principle will be as follows:

(a) Except in the case of first awards, the Commission will refrain from making any new paid rates awards. In the making of first awards the conditions as provided in the first awards and extensions to existing awards principle must be complied with.

(b) 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 excluding supplementary payments.

(c) Claims for the adjustment of existing paid rates awards to establish an equitable base should be processed as anomalies through the Anomalies Conference.

We emphasise that part of the principle which provides for the Commission to convert a paid rates award into a minimum rates award where the award is not maintained as a true paid rates award. This provision is important and would be particularly relevant if a union respondent to a paid rates award refused to give the undertaking required by this decision and campaigned for overaward payments.

FIRST AWARDS AND EXTENSIONS TO EXISTING AWARDS

The ACTU submitted that some confusion had arisen over the interpretation of existing rates and conditions in the making of first awards but noted that the position was substantially clarified in the National Wage Case decision of 26 June 1986 (Print G3600, pages 45-47 refer). The CAI argued that a first award being a minimum rates award should not contain rates which are in excess of appropriately determined minimum rates and sought an additional provision within the principles to meet this requirement.

The ACTU submitted that first awards should reflect the minimum rate within other establishments or in the industry, but saw merit in the proposal that first awards be established on the basis of a minimum rate plus supplementary payments.

As we have indicated, there will be conferences of the parties to discuss a number of issues regarding the adoption of the approach whereby all awards would be expressed in terms of properly assessed and identifiable minimum classification rates and that amounts over and above those rates should be expressed as supplementary payments. However, we consider it reasonable to require all first awards to be structured with minimum rates and, where appropriate, supplementary payments. Until otherwise determined, the basis of the identification of minimum rates for classifications will be according to the principle dealing with paid rates awards, namely a valuation

NATIONAL WAGE CASE MARCH 1987 33

of the classifications by comparison with the minimum rates for similar classifications in other minimum rates awards. Any additional amount to be included in the award will be expressed as a supplementary payment and will be subject to appropriate undertakings and commitments from the parties.

We are satisfied that since clarification and amendment to this principle in the decision of 26 June 1986, the principle has operated satisfactorily and we re-affirm the principle and the explanation of its application set out in that decision.

However, we have re-drafted the principle to give effect to the minimum rates and supplementary payments structure and to our decision that, on those occasions where increases occur as a result of the application of this principle, such increases are subject to the second tier ceiling. The new principle will be:

(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.

(c) In awards regulating the employment of workers previously covered by a State award or determination, existing 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. Where the total rate determined for each classification in accordance with (a) and (c) exceed the appropriate minimum rate for that classification, the excess amount shall be prescribed as a supplementary payment. For the purposes of this paragraph, the appropriate minimum rate will be assessed by comparison with similar classifications in other minimum rates awards.

(e) The application of this principle is subject to the second tier ceiling.

ECONOMIC INCAPACITY

The ACTU, consistent with earlier submissions, opposed the inclusion of a provision based on economic incapacity. It argued that such a provision would undermine the consistency of treatment which is an agreed objective of the wage fixation system. It further argued that such a provision could lead

to a decentralised approach to wage fixation based on the assessment of a particular industry or enterprise. The CAI submitted that the present principle should remain unchanged except to make reference to first tier increases in lieu of national wage increases.

The Australian Federation of Employers (AFE) proposed changes to the existing principle which on their face were minor. However, in speaking to its proposal, it made it clear that it saw the test of incapacity as being whether an increase ". . . either . . . would require the shedding of labour, or would damage profitability in such a way as to jeopardise employment in the longer term". It suggested that all - the Commission, employers and unions - should set a long term goal of generating employment and the adoption of its proposed economic incapacity principle would be conducive to this. The overall effect of adoption of this proposal, in our view, would be to over-simplify a serious issue. The existing principle provides an employer

34 NATIONAL WAGE CASE MARCH 1987

with the right to argue incapacity "on the ground of very serious or extreme economic adversity". The variety and combination of factors which could arise in incapacity claims make it unwise to over-simplify this principle in the manner sought by the AFE.

Consistent with our decision of 23 December 1986 we are of the view that the existing principle, amended slightly to take account of the two tiered system, provides adequate scope for an employer to seek exemption from or defer, any labour cost increase otherwise justified within the terms of the package.

The principle which will continue to apply is:

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.

WAGE OUTCOMES

In these proceedings the Commonwealth expressed succinctly the economic predicament Australia faces. It said:

"Correction of the imbalances that have developed in Australia's external accounts is necessary. If this is not done, the economy runs the risk of becoming enmeshed in a vicious circle of exchange rate depreciation, mounting inflation and deepening external imbalances.

This would result in an erosion in overseas and domestic confidence in the economy's future, seriously undermining private investment, economic activity and employment. The current account deficit would eventually be reduced, but at a cost of a deep recession in the economy."

It is against that background that all parties to these proceedings accepted that Australia's current economic performance has to be improved quickly. It is also against this background that a strong case can be argued that the economy should not be asked at this time to absorb increased labour costs. We do not think that such an outcome is feasible, given the immediate needs and expectations of wage and salary earners. Many may already be feeling at least some of the effects of the current situation but equally may be unaware of the immediacy of the economic problems that confront the country. Not to grant an increase, notwithstanding experience of what would follow from an uncontrolled situation, would inevitably, in our view, destroy the immediate possibility of a co-operative community effort to improve

Australia's economic performance. The workforce has a crucial role to play in that effort.

Our task is to provide a framework in which a combination of restraint and sustained effort to improve efficiency and productivity can be achieved.

The principles we have determined provide that framework. For it to be successful, however, we must also make a judgment as to a workable combination of restraint and inducement for sustained effort.

In November 1985 a national wage increase of 3.8% was awarded following a 3.8% increase in the CPI for the first half of that year. In June 1986 a national wage increase of 2.3% was awarded in respect of CPI movements of 4.3% in the second half of 1985. The CPI increased by 9.8% during 1986 and it is not unreasonable to expect further increases over the life of the package.

NATIONAL WAGE CASE MARCH 1987 35

It is true, of course, that earnings have risen faster than award rates during 1986. To what extent the differential element has been due to overaward pay increases on the one hand and to compositional changes and the cashing out of fringe benefits on the other, has not been established. Nevertheless, the burden on wage earners of the movement in the CPI and the built-in lags in wage adjustment cannot be ignored.

The CAI has indicated that the effect of awarding the ACTU claim of $20 plus 4% would result in a 9% increase in Average Weekly Ordinary Time Earnings; while the increase of $10 plus 3% proposed by the Commonwealth would be 5.5%.

The ACTU formula is not sustainable in view of the state of the economy and on the basis of the wage and price increases of our trading partners. However, we believe that it is possible to allow wage and salary earners some relief from the rise in the CPI without placing an undue burden on the economy.

Our decision is in the following terms:

Wage Adjustments

First Tier

(a) There will be a national wage increase of $10.00 per week in award wages and salaries to operate from the first pay period to commence on or after the date of this decision. Junior rates expressed in flat money amounts in awards will be increased proportionately.

(b) The Commission will convene a conference of the parties to the National Wage Case proceedings in October 1987 to consider whether a further increase in the first tier should be awarded during the period of operation of the package. Such an increase, if any, shall not exceed the equivalent of a 1.5% increase in wages and salaries.

Second Tier

(a) No improvements in pay or conditions under the second tier principle will result in an increase in costs exceeding 4% of wages and salaries.

(b) Subject to agreement between the parties concerned, and processing of such agreement in accordance with the appropriate principle, increases not exceeding the 4% ceiling may be approved from a date to be fixed by the Commission.

(c) Failing agreement between the parties concerned, the Commission will arbitrate in accordance with the relevant principle or principles, and, in such cases, the Commission will award no more than 2% to operate from a date no earlier than 1 September 1987 and no more than a further 2% to operate from a date no earlier than 1 July 1988.

(d) The Commission will not award retrospectivity in relation to any second tier increases.

We have endeavoured to construct a workable wage fixation package which is flexible and yet capable of maintaining sufficient restraint on wage costs. This will ensure that the level of increase allowed is such that both the direct and indirect effects of devaluation will not be fed into labour costs

36 NATIONAL WAGE CASE MARCH 1987

and that the adverse terms of trade effects are reflected in the wage outcomes. The wage outcomes are consistent with a slowing down in the rate of inflation and a narrowing of the gap between Australia's inflation rate and that of our major trading partners. In particular, the wage rate increases allowed by our decision for 1987 are not expected to exceed those of our major trading partners during the same period notwithstanding the higher level of inflation in Australia. Moreover, the EPAC study referred to earlier in the decision suggests that the increase we have awarded would make no more than a marginal inroad, if any, into our improved international competitive position.

It should be borne in mind that the effects of the second tier and superannuation will be staggered well into 1988 and beyond. It is also reasonable to suppose that the flexibility underlying the application of the second tier will be accompanied by greater productivity than might otherwise occur. Thus various factors - partial incidence of the second tier, lags in wage adjustment and greater productivity - should minimise the impact on labour costs of the adjustments we have determined.

All these considerations lead us to the conclusion that the labour cost effects of our decision should not inhibit reasonable prospects for the resumption of economic growth and improved employment opportunities.

However, we stress that those results depend not only on proper restraint being exercised by unions but also on the determination of employers not to exceed the increases allowed by the principles. In particular, the growth of overaward payments beyond that countenanced by the principles would damage the prospects of confining labour cost outcomes to the limits determined by our decision. The Commission will monitor the operation of the new system. In addition, and consistent with their stated attitudes in this case, we would expect the peak councils of employers and employees, and the Commonwealth, to do likewise. Any developments that occur which they consider could affect the proper and effective operation of the system should be brought to the attention of the Commission.

Because of both the nature of the principles and the nature of the increases we have determined may flow from those principles, the package will operate until the next review is completed. That review will commence in May 1988.

All matters presently before the Commission however constituted will be subject to the new principles except those matters which are substantially part heard.

NATIONAL WAGE CASE MARCH 1987 37

Appendix A

THE PRINCIPLES

The principles have been developed in the context of general agreement as to the need for restraint and sustained efforts on the part of all concerned - employers, employees and their unions, governments and tribunals - to address the serious economic problems facing Australia. In particular, the package has been introduced to ensure in the current economic circumstances that changes in labour costs are closely monitored; opportunities are provided to increase efficiency and productivity at the industry and enterprise level; and protection is accorded to lower paid workers.

The principles provide that movements in wages and salaries and improvements in conditions - whether they occur in the public sector or private sector, whether they be award or overaward, whether they result from consent or arbitration - must fall within the limits set out in this package.

In considering whether wages and salaries or conditions should be awarded or changed for any reason either by consent or arbitration, the Commission will guard against any contrived arrangement which would circumvent these principles. The Commission will also guard against any principle, subject to the second tier ceiling, being applied in such a way as to become a vehicle for general improvement in wages and conditions.

WAGE ADJUSTMENTS

First Tier

(a) There will be a national wage increase of $10.00 per week in award wages and salaries to operate from the first pay period to commence on or after the date of this decision. Junior rates expressed in flat money amounts in awards will be increased proportionately.

(b) The Commission will convene a conference of the parties to the National Wage Case proceedings in October 1987 to consider whether a further increase in the first tier should be awarded during the period of operation of the package. Such an increase, if any, shall not exceed the equivalent of a 1.5% increase in wages and salaries.

Second Tier

(a) No improvements in pay or conditions under the second tier principle will result in an increase in costs exceeding 4% of wages and salaries.

(b) Subject to agreement between the parties concerned, and processing of such agreement in accordance with the appropriate principle, increases not exceeding the 4% ceiling may be approved from a date to be fixed by the Commission.

(c) Failing agreement between the parties concerned, the Commission will arbitrate in accordance with the relevant principle or principles, and, in such cases, the Commission will award no more than 2% to operate from a date no earlier than 1 September 1987 and no more than a further 2% to operate from a date no earlier than 1 July 1988.

(d) The Commission will not award retrospectivity in relation to any second tier increases.

38 NATIONAL WAGE CASE MARCH 1987

COMMITMENT

Any claims for improvements in pay and conditions must be processed in

accordance with these principles. No adjustments will be approved by the Commission unless a union concerned in an award gives an undertaking that for the period of operation of the package it will not pursue any extra claims, award or overaward, except in compliance with the principles. Where this no extra claims commitment is given it shall be inserted into the appropriate award in the following terms:

"It is a term of this Award (arising from the decision of the Australian Conciliation and Arbitration Commission in the National Wage Case 1987 the terms of which are set out in Print G6800) that the union undertakes that for the period of the package it will not pursue any extra claims, award or overaward, except where consistent with the National Wage Case Principles."

RESTRUCTURING AND EFFICIENCY

(a) Increases in rates of pay or improvements in conditions of employment may be justified as a result of measures implemented to improve efficiency in both the public and private sectors.

(i) Changes to work practices and changes to management practices must be accepted as an integral part of an exercise conducted in accordance with this principle.

(ii) Other initiatives may include action to reduce demarcation barriers, advance multi-skilling, training and re-training, and broad-banding.

(iii) Changes to working patterns may be necessary.

(b) This principle shall be subject to the second tier ceiling.

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

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 work should constitute such a significant net addition to work requirements as to warrant the creation of a new 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.

However rather than to create a new classification it may be more appropriate in the circumstances of a particular case to fix a new rate for an existing classification or to provide for an allowance which is payable in addition to the existing rate for the classification. In such cases the same strict test must be applied.

NATIONAL WAGE CASE MARCH 1987 39

(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 should be measured is the last work value adjustment in the award under consideration but in no case earlier than 1 January 1978. Care should be exercised to ensure that changes which were taken into account in any previous work value adjustments are not included in any work evaluation under this principle.

(d) 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, where appropriate, comparisons may also be made with other wages and work requirements within the award or to wage increases for changed work requirements in the same classification in other awards provided the same changes have occurred.

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

(f) The Commission should guard against contrived classifications and over-classification of jobs.

(g) 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 this principle shall not be taken into account in any claim under the restructuring and efficiency principle.

SUPPLEMENTARY PAYMENTS

For the purposes of this principle, a supplementary payment is a separate amount in a minimum rates award which is in addition to the minimum rate and which together with the minimum rate becomes the award rate below which no employee may be paid.

Whether by consent or arbitration, a supplementary payment may be introduced into a minimum rates award or an existing supplementary payment may be increased only in accordance with the following criteria:

(a) The prime consideration will be the level of actual payments to the employees covered by the award under review. Where relevant the level of supplementary payments made to similar classifications of employees in other minimum rates awards may also be taken into account.

(b) The relevant union or unions must give appropriate commitments regarding the absorption of overaward payments up to the level of the supplementary payment. Supplementary payments do not justify increases to employees already receiving in excess of the minimum rate plus the supplementary payment.

40 NATIONAL WAGE CASE MARCH 1987

(c) There must be a clear understanding and acceptance by the unions concerned in the award that the introduction or adjustment of supplementary payments may alter relativities of actual rates within the award and with other awards.

(d) Where appropriate, supplementary payments may vary between classifications and geographic areas.

(e) The date of operation of any supplementary payment will be determined by the Commission.

(f) The introduction or adjustment of supplementary payments will be subject to the second tier ceiling. Existing supplementary payments may be adjusted from time to time according to increases in the first tier, except where a flat money amount has been awarded in a National Wage Case.

ALLOWANCES

Allowances may be adjusted or awarded only in accordance with this principle and the anomalies and inequities principle. Service increments may be adjusted or awarded only in accordance with (c) of this principle.

(a) Existing Allowances

(i) 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.

(ii) Existing allowances which relate to work or conditions which have not changed may be adjusted from time to time to reflect the movements in increases under the first tier, except where a flat money amount has been awarded, provided that shift allowances expressed in awards as money amounts may be adjusted.

(iii) 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 or the restructuring and efficiency principle and will be subject to the second tier ceiling.

(b) New Allowances

(i) New allowances to compensate for the reimbursement of expenses incurred may be awarded where appropriate having regard to such expenses.

(ii) No 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, restructuring and efficiency, or first awards and extensions to existing awards principle.

NATIONAL WAGE CASE MARCH 1987 41

(c) Service Increments

(i) Existing service increments may be adjusted in the manner prescribed in (a)(ii) of this principle.

(ii) 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 and restructuring and efficiency principles.

SUPERANNUATION

(a) Pursuant to section 28 of the Act, 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 3% of ordinary time earnings of employees.

(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 Conciliation and Arbitration Act arbitrate on that claim.

(c) In any case in which the Commission determines, pursuant to (b) of this principle, that a claim or part thereof should be granted, it shall award no more than 1.5% of ordinary time earnings to operate no earlier than 1 January 1988 and no more than a further 1.5% to operate no earlier than 1 January 1989.

(d) The Commission will not grant retrospective operation for any matters determined in accordance with this principle.

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

STANDARD HOURS

(a) In dealing with claims for a reduction in standard hours to 38 per week, the cost impact of the shorter week should be minimised. Accordingly the Commission should satisfy itself that as much as possible of the required cost offset is achieved by changes in work practices.

(b) Claims for reduction in standard weekly hours below 38, even with full cost offsets, will not be allowed.

(c) Costs associated with the reduction of standard hours to 38 per week will not be subject to the second tier ceiling.

(d) Changes in work practices designed to minimise the cost of introducing shorter hours will not be a consideration for claims under any other principle.

42 NATIONAL WAGE CASE MARCH 1987

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 implications both directly and through flow-on and subject to the second tier ceiling.

ANOMALIES AND INEQUITIES

(a) Anomalies

(i) In the resolution of anomalies, the overriding concept is that the Commission must be satisfied that any claim under this principle will not be a vehicle for general improvements in pay and conditions and that the circumstances warranting the improvement are of a special and isolated nature.

(ii) Decisions which are inconsistent with the principles of the Commission applicable at the relevant time should not be followed.

(iii) The doctrines of comparative wage justice and maintenance of relativities should not be relied upon to establish an anomaly because there is nothing rare or special in such situations and because resort to these concepts would destroy the overriding concept of this principle.

(iv) The only exceptions to (iii) are that catch-up for the metal industry standard and adjustment of paid rates awards to establish an equitable base may be processed as anomalies provided such claims are lodged before 1 September 1987.

(b) Inequities

(i) The resolution of inequities existing where employees performing similar work are paid dissimilar rates of pay without good reason. Such inequities shall be processed through the Anomalies Conference and not otherwise, and shall be subject to all the following conditions:

(1) The work in issue is similar to the other class or classes of work by reference to the nature of the work, the level of skill and responsibility involved and the conditions under which the work is performed.

(2) The classes of work being compared are truly like with like as to all relevant matters and there is no good reason for dissimilar rates of pay.

(3) In addition to similarity of work, there exists some other significant factor which makes the situation inequitable. An historical or geographical nexus between the similar classes of work may not of itself be such a factor.

(4) The rate of pay fixed for the class or classes of work being compared with the work in issue is a reasonable and proper rate of pay for the work and is not vitiated by any reason such as an increase obtained for reasons inconsistent with the principles of the Commission applicable at the relevant time.

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(5) Rates of pay in minimum rates awards are not to be compared with those in paid rates awards.

(ii) In dealing with inequities, the following overriding considerations shall apply:

(1) The pay increase sought must be justified on the merits.

(2) There must be no likelihood of flow-on.

(3) The economic cost must be negligible.

(4) The increase must be a once-only matter.

(c) Procedure

(i) An anomaly or inequity which is sought to be rectified must be brought to the Anomalies Conference by the peak union councils, namely, the ACTU and the ACPA, or by any union not affiliated with those bodies.

(ii) The matter is first discussed with the employers and other interested parties at the Conference.

(iii) The broad principles for processing the anomaly or inequity raised are:

(1) If there is complete agreement as to the existence of an anomaly or inequity and its resolution, and the President is of the opinion that there is a genuine anomaly or inequity, the President will make the appropriate order to rectify it.

(2) If there is no agreement at all, one of two situations can arise. Either the President will hold that there is no anomaly or inequity falling within the concept of the Conference which would mean an end of the matter as far as the Conference is concerned or on the other hand the President could hold that there was an arguable case which would then go to a Full Bench of the Commission for consideration.

(3) This procedure can be departed from by agreement and with the President's approval.

PAID RATES AWARDS

(a) Except in the case of first awards, the Commission will refrain from making any new paid rates awards. In the making of first awards the conditions as provided in the first awards and extensions to existing awards principle must be complied with.

(b) 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 excluding supplementary payments.

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(c) Claims for the adjustment of existing paid rates awards to establish an equitable base should be processed as anomalies through the Anomalies Conference.

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.

(c) In awards regulating the employment of workers previously covered by a State award or determination, existing 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. Where the total rate determined for each classification in accordance with (a) and (c) exceeds the appropriate minimum rate for that classification, the excess amount shall be prescribed as a supplementary payment. For the purposes of this paragraph, the appropriate minimum rate will be assessed by comparison with similar classifications in other minimum rates awards.

(e) The application of this principle is subject to the second tier ceiling.

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.

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Appearances:

J. Marsh of the Australian Council of Trade Unions with W. Kelty, I. Watson,

B. Eames, I. Hodgson, B. McCarney, L. Kyriacou, K. McGrath, Ms J. O'Keefe, E. Snell and T.W. Smith for The Federated Storemen and Packers Union of Australia, The Manufacturing Grocers' Employees' Federation of Australia, Federated Municipal and Shire Council Employees Union of Australia, Transport Workers' Union of Australia, The Federated Furnishing Trades Society of Australasia, Clothing and Allied Trades Union of Australia, Printing and Kindred Industries Union and the Australian Timber Workers' Union.

D Spratt with S. Green and S. Bondy for the Australian Council of Professional Associations and the Association of Professional Engineers, Australia.

C. Polites for the Confederation of Australian Industry with G. Smith, E. Callander, K. Klineberg and R. Sinclair for the Australian Chamber of Manufactures, Philip Morris Ltd., Victorian Employers Federation, Confederation of Western Australian Industry, Confederation of A.C.T. Industry, Retail Traders Association of New South Wales, Northern Territory Confederation of Industry and Commerce Incorporated, Victorian Automobile Chamber of Commerce, Motor Traders Association of New South Wales, South Australian Automobile Chamber of Commerce, South Australian Employers Federation, Tasmanian Chamber of Industries, Chamber of Commerce and Industry of South Australia Incorporated, Australian Road Transport Industrial Organisation, New South Wales division of the Australian Confederation of Apparel Manufactures, Clothing Industries Division of the Queensland Confederation of Industry, Chamber of Manufactures of New South Wales, Printing and Allied Trades Employers Federation of Australia, Graphic Arts and Services Association of Australia, Metal Trades Industry Association of Australia, Karratta Cemetery Board, Pinnaroo Valley Memorial Park, Municipal Association of Victoria, Victorian Water and Sewerage Authorities Association, Timber Trade Industrial Association, Victorian Timber Merchants Association, Victorian Sawmillers Association, Tasmanian Sawmillers Industrial Association, Timber Merchants Association of South Australia, Softwood Holdings Ltd. and Newspaper Publishers Association.

R. Boland with C. Edwards and A.W. Andrews for the Metal Trades Industry Association of Australia and Metal Industries Association, South Australia.

R. Merkel Q.C. with G. Moore and D. Staindl of Counsel and B. Yates for the Minister of State for Employment and Industrial Relations on behalf of the Commonwealth (intervening).

M. Moore of Counsel with D. White for Her Majesty the Queen in Right of the State of New South Wales (intervening).

A. Apted for Her Majesty the Queen in Right of the State of Victoria (intervening).

J.W. Johnston with E. Anderson for Her Majesty the Queen in Right of the State of Queensland (intervening).

M. Jarman with M.B. Stevens with D. Challen for Her Majesty the Queen in Right of the State of Tasmania (intervening).

G. Harbord with M.A. Stevens, D. Smythe and M.J. Gallant for Her Majesty the Queen in Right of the State of South Australia (intervening).

G. Bull for Her Majesty the Queen in Right of the State of Western Australia (intevening).

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B. Collins for the Government of the Northern Territory (intervening).

E.R. Cole for the Australian Public Service Board (intervening).

B. Hungerford of Counsel with R. Macleod for the Australian Coal Association (intervening).

R.B. Davis with K. Brown for the Australian Chamber of Commerce (intervening).

S.R. Marshall of Counsel with S.J. Howells for the Federated Municipal and Shire Council Employees Union of Australia, New South Wales Division and the Federated Municipal and Shire Council Employees, Western Australia Branch (Union of Employees) (intervening).

P.X. Houlihan with G. Carmody for the National Farmers Federation (intevening).

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

R. Buchanan of Counsel with W. Ross for the Australian Mines and Metals Association (intervening).

P. Costello of Counsel with M. Kroger for the Australian Federation of Employers (intervening).

G. Woodward with D. McCarty for the Association of Railway Professional Officers (intervening).

M. Sutherland for the Australian Journalists Association (intevening).

D. Smythe for the South Australian Housing Trust (intervening).

R. Wells for the State Electricity Commission of Victoria (intervening).

C. Brown for the State Transport Authority of Victoria (intervening).

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